248 INTEGRATED QUALITY MANAGEMENT
stantial savings in costs. The concept of SCM is largely based on the
Transaction Cost Economics (TCE) as a reaction to the neo-classical
economic model, which suggests that all parties have the necessary in-
formation to be able to make rational choices within the exchange
process (Loader, 1996). It is clear that this information is not (always)
available in practice, a situation that creates transaction costs.
Economists largely ignored the original insights of Coase until the
late 1960s and early 1970s, when the work of Williamson was published
(Williamson, 1975, 1979; Williamson and Winter, 1993). Hereby, the
cost-determining attributes of individual transactions are outlined as their
frequency, the environmental uncertainty surrounding them and the
specificity of the assets required to consummate them. However, there
is still no clear definition of transaction costs (Loader, 1996). Major is-
sues include:
- lack of definition of the concept of transaction costs (Williamson,
1979) - the costs of running the economic system (Arrow, 1969)
- the resource inputs involved in transacting—defining, protecting,
and enforcing the property rights to goods (North, 1989) - resource losses due to lack of information (Dahlman, 1979)
Building relationships within the chain reduces uncertainty and trans-
action costs on the one hand and creates an access to economies of scale
by bypassing traditional market arrangements on the other hand. In this
way the cooperative behavior in relationships between channel members
creates an opportunity for higher profits, attainable by the channel as a
whole (Arndt, 1979).
In the U.S., Efficient Consumer Response (ECR) is the more com-
mon term for SCM. However, ECR goes further in that it combines both
supply- and demand-side elements. ECR originated from discussions in
the American food and beverage industry in 1992, which involved food
producers, retail chains and industry organizations (FMI, 1993). The pur-
pose of ECR is to increase the efficiency and effectiveness of the entire
food chain by the integration of marketing and logistic decisions and op-
timal coordination between the different links throughout the chain. The
ultimate goal is to maximize consumer satisfaction by a maximally per-
forming chain (Corstjens and Corstjens, 1995; Buxbaum, 1995). It has
been estimated that the application of ECR in the U.S. will lead to as
much as $30 billion in total savings to the food industry (Van der Laan,
1994; Molpus, 1994).