The Internet Encyclopedia (Volume 3)

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366 SUPPLYCHAINMANAGEMENT

Enterprise Resource Planning Integration

B2B Link Information Sharing through EDI

Suppliers

Manufacturers

Wholesalers/

Distributors Retailers

Customers

Product Flow POS Data Link B2C Link

Figure 1: Example of an information-enabled supply chain.

of consumer items) stage in the supply chain. Obviously,

power in the supply chain has a key bearing on the strate-

gic positioning of each link in the chain.

The remainder of this chapter is organized as fol-

lows. In the next section, we describe the key strategic

and tactical issues in SCM. This is followed by a discus-

sion of mechanisms for coordinating stages in the supply

chain. The third and final section focuses on describing

the significant impact of information technology on SCM

practices.

STRATEGIC AND TACTICAL

ISSUES IN SCM

A holistic supply chain comprises multiple processes for

suppliers, manufacturers, and distributors. Each process

employs a distinct focus and a related dimension of ex-

cellence. Key issues in managing an entire supply chain

relate to (a) analyzing product strategies, (b) network

design and the related sourcing strategy employed, and

(c) a strategic and tactical analysis of decisions in logis-

tics, manufacturing, distribution, and after-sale service. It

is our view that by analyzing product demand character-

istics and the supply chain’s capabilities, and crafting a fit

between them, an individual manager can ensure that the

specific process strategy employed does not create disso-

nance in the entire supply chain.

Product Strategies

SCM has evolved from process reengineering efforts to co-

ordinate and integrate production planning at the factory

level to initiatives that expand the scope of strategic fit be-

yond a single enterprise (Chopra & Meindl, 2001). Positive

results from intra-functional efforts extended the SCM

philosophy throughout the enterprise. Process improve-

ments at the firm level highlighted the need for suppliers

and customers of supply chain managed firms to adopt

the SCM philosophy. A supply chain is only as strong as its

weakest link. How the chain defines strength is at the core

of a supply chain’s strategy and, therefore, its design. Is

strength anchored in efficiency, responsiveness, or both?

Achieving a tight fit between the competitive strate-

gies of supply chain members and the supply chain itself

is gained by evaluating the characteristics of the prod-

ucts serviced by the chain. “The root cause of the prob-

lems plaguing many supply chains is a mismatch between

the type of product and the type of supply chain” (Fisher,

1997, p.105). Critical product attributes are (a) the de-

mand pattern, (b) the life cycle, (c) the variety of offer-

ings, and (d) the product delivery strategy. Fisher (1997)

categorized a product as being either functional (basic,

predictable, long-lived, low profit margin) or innovative

(differentiated, volatile, short-lived, high profit margin).

Furthermore, using the product life-cycle argument, in-

novative products (if successful) will eventually evolve to

become functional products. The types of supply chain

needed to service these two categories of products effec-

tively are distinct. An efficient or low-cost supply chain

is more appropriate for a functional product, whereas a

responsive or customer attuned supply chain fits an inno-

vative product better. Obviously, a spectrum of chain vari-

eties exists between the end points of responsiveness and

efficiency, hence most tailored supply chains are hybrids

that target responsiveness requirements for each product

serviced while exploiting commonalities in servicing all

products to gain economies of scope. Thus, the strategic

position of a supply chain balances customer satisfaction

demands and the firm’s need for cost minimization.

Information technologies enable both efficient and re-

sponsive supply chains because they have the potential

to provide immediate and accurate demand and order

status information. Efficiency gains via information tech-

nologies are gleaned from decreased transactional costs

resulting from order automation and easier access to in-

formation needed by chain members. Likewise, respon-

siveness gains can be obtained by a quicker response to

customer orders. Hence, in practice, it seems to have be-

come standard for all supply chains to use some form of

information technology to enable not only a more efficient

physical flow of their products but also to simultaneously

improve their market mediation capability.

Network Design

Network decisions in a supply chain focus on facility func-

tion, facility location, capacity, and sourcing and distribu-

tion (Chopra & Meindl, 2001). In general, network design