transition from a ‘stand alone’ organization to supply chain partner.
Stevens^9 has identified four stages in this transformation process:
1 The baseline organization.This organization operates the classical system
of management, with the motivation of profit maximization and a high
level of functional specialization. The company cannot adapt quickly to
changes in the consumer market and has a low ability to exploit mate-
rials flow or market information.
2 The functionally integrated company.This organization has begun to erode
the hierarchical structure and short-term financial focus by concentrat-
ing on customer service criteria and sales order processing. The major
competitive advantage of this organization is in the distribution effi-
ciency of the system and the collaboration between the sales function
and the distribution function.
3 The internally integrated company. This organization has continued to
restructure and align the activities of manufacturing and purchasing to
create a systems approach to customer service. The company has
reduced the number of administrative functions required and operates
effective interfaces between departments to optimize information
exchange and hence the overall performance of the company.The plan-
ning horizon has also extended from the short term to the medium
term and involves a limited interaction with suppliers. At this point the
organizational structure may become product focused and involve a
high level of cross-functional management.
4 The externally integrated company. This organizational state involves the
externalization of the alignment process and the integration of the supply
base with the demands of the consumer in a transparent system of mate-
rials and information exchange. The company seeks deliberately to
manage the interfaces between companies to generate a flexible and
responsive system of long-term collaboration. At this point the company
has completed the restructuring of its internal supply chain and has rec-
ognized the importance of external supply-chain management strategies
and the need to synchronize the supply process. The company operates
internal cross-functional management structures, which may be product
related, and typically develop supplier networking groups.
Figure 3.3 illustrates these four stages to supply chain integration.
If supply chain integration can be made a reality, then the poten-
tial impact on the final market can be significant. The point of
supply chain management, it must be remembered, is not just to
seek out efficiencies and cost reduction opportunities, but rather to
The supplier and alliance market domain 169