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DAY 1 - 19th Sept '08
8.00 am - 9.30 am
Registrations & Tea/Coffee
9.30 am - 9.45 am
Welcome note, by the Chairman followed by lamp lighting ceremony.
9.45 am - 10.45 am
Keynote : Living Supply Chains: harnessing human behaviour to drive supply chain performance ever higher.
Speaker:Dr.John Gattorna, Adjunct Professor, Macquarie Graduate School of Management
10.45 am - 11.15 am
Tea Break
11.15 am - 1.00 pm
Workshop : Conducting a Dynamic Alignment diagnostic on your corporate supply chains.
Resource Person: Dr.John Gattorna, Adjunct Professor, Macquarie Graduate School of Management.
1.00 pm - 1.45 pm
Lunch
1.45 pm - 3.45 pm
Functional Breakout Track
Session 1 - Express, Aircargo & Logistics1.45 pm - 2.45
pm Express Services - Emerging Role in the Indian Air Cargo Industry
Speakers:Mr. Yogendra Sharma, Chief Executive Officer, Adani Logistics Ltd.Mr. Rajeev K. Sinha, Vice President, Reliance Logistics.Mr. Gary G. Girotti, Vice President, Transportation Practice,CHAINalytics Session 2 - Transportation & Rail Operations1.45 pm - 2.15
pm The Growing Role of IT in shaping the future of Logistics Industry in India.
Speaker:Mr. Sumeet Nadkar, Head-Logistic SBU , Kale Consultants Ltd.
2.15 pm - 2.45
pm
Transportation Challenges in the Retail industry
Speaker:Mr. V.V.Rao, COO - Movement Vertical, Future Logistics Solutions Ltd. 2.45 pm - 3.45
pm Rail Operation and the Strategic value of Inland container depots in India
Speakers:Mr. Mahendra Puri, Chief Executive Officer, Hind Terminals Pvt.Ltd.Mr. Sanjiv Garg, Executive Director (PP&D), Rail Vikas Nigam LimitedMr. Amitabha Chaudhuri, Managing Director, APL IndiaLinx Session 3 - Supply Chain1.45 pm - 2.15
pm Development in China Supply Chain
Speaker:Mr. Mark Millar, Director of Strategic Business Development, UPS Supply Chain Solutions, Asia Pacific 2.15 pm - 3.45
pm Building an efficient and cost effective Supply Chain Network within India and from India.
Mr. Jasjit Sethi, Chief Executive Officer, TCI Supply Chain SolutionsMr. Rajesh Goel, VP - Planning & SupplyChain (West Asia), Samsonite South Asia Pvt Ltd.Mr. Ashok Kumar, Vice President – Supply Chain, Frito Lays Division, PepsiCo India Holdings Pvt. Ltd.Mr. VG Ramakrishnan, Director - Automotive and Transportation Practice, Frost & Sullivan. 3.45 pm - 4.00
pm Tea Break
4.00 pm - 4.25 pm
IT in Logistics & Supply Chain- Leveraging IT for Improving Efficiency in Logistics
Speaker:Mr. Sunil Wahi, Director - Supply Chain Logistics, Oracle APAC 4.25 pm - 4.45 Theme : Logistics Scenario in India -
pm Existing TrendsSpeaker:Mr. Craig Grossgart, Vice President - India, DHL Express Pvt. Ltd. 4.45 pm - 6.35
pm CEO's Round Table - Exploring the Supply Chain & Logistics innovations required to propel India into the Global Map.
-Mr. Jacques Creeten, Vice President - India, FedEx ExpressMr. Craig Grossgart, Vice President - India, DHL Express Pvt.LtdMr. Percy Avari, Country Manager, Aramex India.Mr. Sudhir Rangnekar, Managing Director & Group CEO, Sical Logistics Ltd.Mr. Paul Bradley, President, Arshiya InternationalMr. Samar Nath, Managing Director, APL Logistics Ltd. 7 pm onwards
Express Logistics & Supply Chain Awards 2008
TOP DAY 2 - 20th Sept '088.00 am - 9.30
am Registrations & Networking Tea/Coffee
9.30 am - 10.15 am
Theme - Supply Chain Leadership
Speaker :Mr. Alan G Waller, Vice-President for Supply Chain Innovation, Solving International, United Kingdom.
10.15 am - 11.00 am
Theme - "Building a Logistics/Supply Chain Hub - The Singapore Experience"
Speaker:Professor Hum Sin Hoon, Executive Dean, National University of Singapore.
11.00 am - 11.30 am
Tea Break
11.30 am - 1.00 pm
Functional Breakout Tracks
Session 1 - Panel Discussion : Ports & Shipping11.30 am - 1.00
pm Theme: Transforming face of the Maritime
Sector : Capturing the Emerging Global
Trends in Ports & Shipping.Speakers:Mr. Suren Vakil, Managing Director, BMT Consultants IndiaCapt. Sandeep Mehta, Chief Executive Officer, Mundra Port & SEZ Ltd.Mr. Philip Littlejohn, Managing Director, Gujarat Pipavav Port Ltd.Capt. Deepak Tewari, Chief Executive Officer & Managing Director, MSC Agency (India) Pvt Ltd.Mr. Anil Radhakrishnan, Director - Commercial, APL India Session 2 11.30 am - 1.00
pm
Theme: Chemicals, Oil & Gas Supply Chain
Speakers:Mr. M. Prabhakaran, SVP - Supply Chain ( Petrolium Business Division), Reliance Industries Ltd.Mr. Avinash Parihar, Head - Strategic Sourcing & Procurement Lanxess India Private LimitedMr. N.K Mitra, Director - Offshore, ONGC Ltd. Session 311.30 am - 1.00
pm Electronics Supply Chain
Speakers: Mr. Sudhir Goel, Chief Officer - Supply Chain, Acer India Pvt. Ltd.Mr. Harry Lagad, Director of Logistics, Asia Pacific, Nokia. 1.00 pm - 1.45
pm Lunch
1.45 pm - 2.45 pm
Concurrent Sessions
Session 1 - Retail Supply Chain1.45 am - 2.45
pm Managing the New Supply Chain & Logistics Challenges created by India's Retail boom.
Speaker:Mr. Lionel Stanton, Chief Operating Officer, Future Logistics Solutions Ltd., Future Group Session 2 - Pharma Supply Chain1.45 pm - 2.45
pm Evaluating best logistics practices in India's Pharmaceutical Industry
Speakers:Mr. K. P Gopala Krishnan, Vice President - Supply Chain, Dr. Reddy's Laboratories Ltd.Mr. A Jagannatha Reddy, Vice President - Supply Chain Management, Matrix Laboratories Ltd.Mr. G. Subramani, Vice President - Supply Chain, Torrent Pharmaceuticals Ltd. Session 3 - Auto Supply ChainSpeaker:Mr. Sudhir Gupta, Vice President - Supply Chain Management, Tata Auto Comp Systems Ltd.Mr. D.K. Sethi, General Manager - Supply Chain, Maruti Suzuki India Ltd. 2.45 pm - 3.15
pm Tea Break
3.15 pm - 4.30 pm
CEO's Round Table - Market Consolidations, Mergers & Acquisitions - "Strategies for success in the Indian Logistics Sector."
Mr. Nigel Goode, CEO - Logistics, Writer CorporationMr. Pawan Jain, Chairman & MD, Safexpress Pvt. Ltd.Mr. Kurt E. Breinlinger, Managing Director - South Asia Area, Panalpina World Transport (India) Pvt. Ltd.Mr. Volkmar Mueller, Managing Director, Kuehne + Nagel Pvt. Ltd.Mr. Shankar Chatterjee, Managing Director, India & South Asia, Bertling LogisticsMr. Devdip Purkayastha, Vice President - Strategy & Business Development, DHL Express, South AsiaMr. Yogesh Dhingra, COO, Blue Dart Express Ltd.4.30 pm - 4.45
pm Closing Remarks by Chairman
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Supply Chain Management | Company Activities & Management | Investigations | Operations | Trends & Events
LOGISTICS AND SUPPLY CHAIN MANAGEMENT APPLICATIONS WITHIN A GLOBAL CONTEXT: AN OVERVIEW
By Schoenherr, Tobias
Publication: Journal of Business Logistics
Date: Wednesday, July 1 2009 You are viewing page 1
INTRODUCTION
In a time of accelerating competitive pressures, a global playing field, and rising customer expectations,
companies are faced with a constant quest to streamline their flow of goods and services (Manuj and
Mentzer 2008; Wagner and Bode 2008). An effective means to gain efficiencies
and eliminate non-value added steps in this environment is to focus on logistics and supply chain
management (L&SCM) (Miller and de Mata 2008). While research investigating L&SCM practices in the
U.S. has been proliferating, studies focusing on companies and environments overseas have also gained
attention. Nevertheless, the latter studies have been scattered and often possessed lower visibility; many
of these articles have appeared in non-disciplinary or non-mainstream journals. The Journal of Business
Logistics is a noteworthy exception, with the publication of this Special Issue on logistics and supply chain
management applications within a global context, as well as special sections (Gammelgaard 2006, 2008)
and manuscripts in prior issues (Bhatnagar, Jayaram, and Phua 2003; Chiou, Wu, and Hsu 2002).
This paper provides a large-scale and structured review of published L&SCM work within a global context.
Given the large number of articles in this area, such a review is overdue. Many papers in the past only
provided a brief overview or snapshot of L&SCM in a specific country, region, continent, or the world
overall (Gammelgaard 2006). In contrast, the present study integrates prior research into an overriding
framework, providing structure and orientation. Similar country-specific efforts have recently been made
by Zhao, Flynn, and Roth (2006, 2007), who synthesized research studies addressing operations
management-related issues in China, and Gubi, Arlbjorn, and Johansen (2003), who reviewed doctoral
dissertations in logistics and supply chain management in Scandinavia. Also noteworthy is the
international logistics section of the annotated bibliography covering L&SCM-related dissertations (Stock
and Broadus 2006).
The sample was drawn from ABI/INFORM's Global database, which includes almost 1,800 journal titles.
While we restricted ourselves to peer-reviewed publications, we did not limit our search to purely
academic or mainstream L&SCM journals. The inclusion of non-disciplinary or practitioner journals
enabled us to provide a holistic overview of the field and identify valuable studies that might have
otherwise been overlooked.
The overview presented in this paper offers a starting point for any researcher, graduate student, faculty
member or practitioner wanting to explore L&SCM applications within a global context. Common themes
are identified and representative studies are highlighted; manuscripts are also summarized by country.
Academics and practitioners wanting to delve deeper into global L&SCM can therefore use this review as
a compendium providing an overview of global L&SCM themes investigated, as well as countries studied.
The article is also meant to motivate and inspire this exciting area of international L&SCM research
(Davis-Sramek and Fugate 2007; Stock 2007), which has become even more important in today's
competitive environment (Friedman 2005; Monczka, Handfield, Giunipero, and Patterson 2009). Some of
the most interesting works within this field are highlighted. Academics and practitioners can use this
review as a starting point for the identification of relevant and useful references for their particular
research project or management task. For example, practitioners interested in utilizing third-party logistics
overseas can refer to the particular theme section below to ascertain what has been covered in the
academic press. While this paper provides a comprehensive account of peer-reviewed articles, it also
offers valuable insight to practitioners.
The remainder of this paper is organized as follows. In Section 2 the methodology used to select and
review the articles is described, followed by Section 3 which discusses the time distribution of the articles,
as well as the preferred journal outlets. Section 4 presents the predominant themes into which most
articles can be classified, and lists illustrative topics and references. Section 5 provides an overview of the
countries studied, and Section 6 discusses the results. A summary and avenues for future research are
offered in the last section.
METHODOLOGY
ProQuest's ABI/INFORM Global database, which includes almost 1,800 titles in business, finance and
economics, was used to collect a comprehensive set of papers covering L&SCM within a global context.
We consciously did not restrict our review to a set of specific journals in the field and were thus able to
also capture findings in lesser-known and potentially non-disciplinary journals. A preliminary search and
assessment of the results led us to this method - a significant number of papers would have been
overlooked if we just focused on the mainstream journals.
The database was searched for peer-reviewed articles ("scholarly journals, including peer-reviewed" as
specified by the database) that contained either the term "logistics" or "supply chain management" in their
citation or abstract. The query resulted in a total of 7,634 manuscripts that were published since the year
2000; we restricted our search to this timeframe to make the study more manageable. Initially, the
citations of all records were read and articles that seemed to have some global application were selected.
We chose this manual approach of reading each title, since the specification of an additional keyword,
such as "global" or a certain country, would have overlooked some potentially important articles. To
illustrate, the inclusion of the additional term "global" or "international" in the search resulted in less than
one-third of our sample (2,266 records). Studies that would have been overlooked with this approach
included Price's (2006) model for logistics management in a post-soviet central Asian transitional
economy, van Bodegraven's (2001) overview of the state of logistics in Cuba, and Zhu and Sarkis's
(2004) investigation on green supply chain management practices in Chinese manufacturing firms. This
step of the process was conducted by an international graduate student majoring in Supply Chain
Management at a university in the Midwestern U.S., and it resulted in a total of 809 articles.
Next, the author reviewed the abstracts of the 809 records to ensure their topicality and relevance for the
review. If a confident assessment could not be made based on the abstract, the full article was reviewed.
Eighty-three records were removed since they were either merely a book review or dealt with logistics in
an unrelated context. For example, "logistics" was used to describe the statistical procedure of "logistic"
regression, or the term was used to refer to the general "logistics" of implementing an initiative or
campaign (i.e., not in the context of L&SCM). The remaining 726 records constituted the sample for this
research and were further examined by the author. This involved a more thorough study of the abstracts
and/or the full manuscripts, in order to derive common themes and classify the papers into categories.
The full-text version of a paper was reviewed if the abstract provided only limited information, or if the
paper seemed to be particularly relevant for the review. This led to the review of approximately 250
papers in full-text. Basic information, such as the year of publication and the journal title, was recorded for
each article. The major focus of this review was the identification of overriding themes across the sample.
An initial classification scheme was developed based on categories established in previous work by Stock
and Broadus (2006), Carter and Ellram (2003), Croom, Romano, and Giannakis (2000), and
Rungtusanatham et al. (2003). The scheme was adapted as we continued our review of the articles, so as
to most accurately reflect the complexity of the sample, while at the same time ensuring parsimony. The
ultimate outcome was a framework illustrating how the identified themes fit together. In developing this
structure, we received guidance from related efforts in Defee and Stank (2005), Gunasekaran and Ngai
(2005), and Giannakis and Croom (2004). The following sections describe the analyses and discuss the
findings; illustrative references are cited where appropriate.
TIME DISTRIBUTION OF ARTICLES AND JOURNAL TITLES
Time Distribution of Articles
We limited our research to articles since the year 2000 to make the study more manageable. The subset
of 7,634 articles represented about two-thirds of the total 12,068 L&SCM manuscripts retrieved by the
database query. Out of the 7,634 records, a total of 726 studies were identified as being set in an
international context. We felt that this subset of articles since 2000 would provide us with a good overview
of the recent developments in international L&SCM.
The number of publications per year is graphically presented in Figure 1 . There has been a rising interest
in global L&SCM, as indicated by the upward trend. The number of articles published has continuously
increased since 2000, except for 2004 which experienced a slight downturn. At the time of data collection,
only eight months of records were available for 2008. However, even with this limited dataset, the outlook
is promising - the steady increase in global L&SCM studies continues. If we extrapolate the 2008 count
over the entire year, the estimated total would be 165 articles, an almost 50 % increase from 2007.
Overall, this is a very encouraging pattern for global L&SCM and is consistent with conclusions in Stock
and Broadus (2006).
IMAGE GRAPH1
FIGURE 1
TIME DISTRIBUTION OF ARTICLES
Whether specific themes dominated certain years was examined next. Reviews of doctoral dissertations
published in the logistics and supply chain field suggested that some topics are more thoroughly
investigated in some years versus others (Stock and Broadus 2006). The identification of dominant topics
in certain years can help to distinguish what themes interested and moved writers at that time, what topics
were exciting to them, and where they thought a contribution could be made. It is also a reflection of the
direction that journal editors chose and what they regarded as most important. Overall, the emphasis of a
certain topic in a certain year can serve as a proxy to describe the field of L&SCM at that time, indicating
what was considered important.
While some slight differences in emphases existed over the years, as described below, no overall
predominant topics or patterns were detected. However, consistent themes investigated over the years
were opportunities and challenges in global L&SCM (Sheth and Sharma 2006) and the description of
L&SCM practices in certain countries or regions of the world (Chow et al. 2008; Sohal, Power, and
Terziovski 2002a, 2002b; Van Bodegraven 2001). Frequently discussed topics also included third-party
logistics (3PL's) (Gol and Çatay 2007; Lai, Li, Wang, and Zhao 2008; Van Laarhoven, Berglund, and
Peters 2000) and the potential of information technology (IT) for advancing global L&SCM (Ketikidis et al.
2008; Motwani, Madan, and Gunasekaran 2000).
A follow-up analysis examined whether specific countries or regions of the world dominated certain years.
Overall, no countries emerged that received significantly more coverage in one year versus another.
Consistent frequent coverage over the years was observed especially in China, India, the U.K., the U.S.,
Australia and Europe.
Journal Titles
A total of 222 journal titles were represented in our dataset. Journals that contained 10 or more
manuscripts dealing with global L&SCM issues are summarized in Table 1. Forty-three journals had
between nine and three entries, 33 titles had two entries, and 131 journals, which is over half of the total
number included in the dataset, were represented only once. The highest count of articles received the
International Journal of Physical Distribution and Logistics Management (67 manuscripts), followed by
Supply Chain Management: An International Journal (5 1 manuscripts) and Maritime Economics &
Logistics (38 manuscripts). The Journal of Business Logistics occupied rank 7 with 1 7 manuscripts.
However, when comparing our frequency table to the top five most useful journals for U.S. logistics
educators, as determined by Gibson and Hanna (2005), JBL occupied rank one. The same rank is
achieved when only considering what some of the top business school programs in L&SCM consider their
highly respected publications (Davis-Sramek and Fugate 2007).
IMAGE TABLE2
TABLE 1
JOURNAL TITLES WITH TEN OR MORE ENTRIES
The titles with the highest counts were further examined to identify any predominant themes that may
have received special attention in a particular journal. The International Journal of Physical Distribution
and Logistics Management (IJPDLM) was the most frequent outlet with 67 articles. Primary topics
investigated were third-party logistics (Huo et al. 2008; Sohail and Al-Abdali 2005; Wang et al. 2006),
characteristics of the logistics industry in various countries (Goh and Ling 2003; Sankaran 2000), reverse
logistics (Wu and Cheng 2006), supply chain management practices (Chin et al. 2004; Sahay and Mohan
2003), and sourcing (Åkesson, Jonsson, and EdaniusHållas 2007; Giunipero and Flint 2001). Two articles
are particularly noteworthy for this review since their theme also focused on a comparison of international
L&SCM research. First, Arlbjorn, Jonsson, and Johansen' s (2008) empirical study of Nordic research in
L&SCM provides an analysis of paradigms within L&SCM in Denmark, Finland, Iceland, Norway, and
Sweden. The article identified differences across countries and institutions, and characterized Nordic
L&SCM research. And second, Halldórsson, Larson, and Poist's (2008) comparison of Scandinavian and
American supply chain management perspectives offers insight into differences and similarities between
Scandinavian and American perspectives on SCM. The study thus provides further motivation to study
L&SCM issues in a global context. Countries or regions covered in three or more IJPDLM articles
included Australia, China, Europe, Germany, Saudi Arabia, and the U.S. Most articles were published in
the years 2000, 2001 and 2003 (10 or more articles per year), suggesting an international focus
especially in the earlier years of our review period.
The journal with the second highest count of 51 papers, Supply Chain Management: An International
Journal (SCMJJ), focused primarily on the description of specific supply chains, such as the supply chain
for potatoes in Vietnam (Batt 2003), textiles in Turkey (Cetindamar, Çatay, and Basmaci 2005), or the
motor industry in Taiwan (Yeh 2005). Several articles covered supply chain practices in specific countries,
including Brazil (McCormack, Ladeira, and de Oliveira 2008), Botswana (Msimangira 2003), New Zealand
(Basnet et al. 2003) and Pakistan (Bhutta, Rana, and Asad 2007). Countries that served as the setting in
three or more manuscripts were China, India, U.K., U.S., and Vietnam. Most articles appeared in 2003
(15 manuscripts), followed by the year 2005 (9 manuscripts); together these two years account for almost
half of the total SCM.IJ subsample, indicating international themes especially being sought during these
periods.
Maritime Economics & Logistics (MEL) followed in rank three with a total of 38 manuscripts. Over half of
the articles related to some aspect of maritime port logistics, management, performance or selection
(Bichou and Bell 2007; Ugboma, Ugboma, and Ogwude 2006; Van Niekerk 2005). Noteworthy for our
review is the publication of a special issue focusing on maritime logistics and global supply chains
(Panayides 2006). The settings most frequently investigated were Europe and India. While most articles
were published in 2007 and 2006, no global L&SCM issues were covered in the years 2000, 2001, 2002
and 2004. Thus, the publication of the articles was skewed toward recent years, and suggests that the
focus on international L&SCM issues in MEL is a recent phenomenon.
Transportation Research Part E: Logistics & Transportation Review (TRPE) was represented with a count
of 30 manuscripts and focused primarily on the investigation of transportation modes. As such, almost
half of the articles involved air transportation, airport logistics or airport performance (Matsumoto 2007;
Pathomsiri et al. 2008). Other articles discussed issues related to rail (Chiara, Deflorio, and Spione 2008;
Jensen and Stelling 2007), barge (Miljkovic et al. 2000) and road transportation (Haughton 2008). The
geographical focus rested on Europe, Taiwan and the U.S. Articles were fairly evenly distributed over the
years.
Manuscripts in the International Journal of Production Economics (IJPE) focused on logistics in various
countries, such as Bulgaria (Dimitrov 2005), Italy (Bran et al. 2008; Perona et al. 2001) and Poland
(KisperskaMoron 2005), as well as on reverse logistics (Gonzalez- Torre, Adenso-Diaz, and Artiba 2004;
Wang, Yao, and Huang 2007). Poland and Italy were the countries most commonly addressed. Most of
the 23 publications in our IJPE sample occurred in 2007 and 2008, indicating that, in recent years, the
journal focused increasingly on global L&SCM topics.
Common themes investigated in the International Journal of Operations & Production Management
(IJOPM), which had a total of 20 manuscripts in our sample, included buyer-supplier relationships (Wasti,
Kozan, and Kuman 2006; Zirpoli and Caputo 2002) and green supply chain management (Zhu, Sarkis,
and Geng 2005). Australia, China and Germany were the focus in more than two IJOPM papers.
Publication counts were level across the years.
A total of 17 manuscripts were published in the Journal of Business Logistics (JBL). Articles within this
subset covered logistics practices in various countries, such as Cuba (Van Bodegraven 2001) and
Kazakhstan (Price 2006), and the integration of logistics and marketing (Ellinger, Daugherty, and Keller
2000; Mollenkopf, Gibson, and Ozanne 2000). Noteworthy are the special issues on European L&SCM
research (Gammelgaard 2006, 2008) and the international logistics section of the annotated bibliography
covering L&SCM-related dissertations (Stock and Broadus 2006). While no predominant country or region
of the world was investigated, most articles in JBL appeared in 2006 and 2008. Contributing to this
skewed representation are the two special issues and the special sections noted above.
The International Journal of Automotive Technology and Management (IJATM) primarily dealt with
buyersupplier relationships (Chañaron 2004; Filho et al. 2003) and supply chain practices in various
countries including China (Pagano 2003), Brazil and Spain (Pires and Cardoza 2007). Brazil was the
country most often investigated, and most of the 13 IJATM manuscripts appeared in 2001.
While JBL occupies rank 7 in our frequency table above, better rankings are achieved when considering
the impact and the relative count. For example, when comparing the five most useful journals for U.S.
logistics educators, as determined by Gibson and Hanna (2005), against Table 1, JBL received rank one.
In addition, we compared our count of global L&SCM articles in each journal to the total number of papers
published since 2000 in the respective outlet. With this approach JBL held rank four, with approximately
10.2 % of its articles covering global L&SCM topics. The journals MEL, IJPDLM and SCM.IJ received
rank 1 (21.5 %), 2 (18.1 %) and 3 (14.7 %), respectively. The emergence of these journals as the largest
publishers of global L&SCM articles is consistent with their editorial statements and stated subject
coverage; outlets that received a high article count in Table 1 focus specifically on international supply
chain and/or logistics issues.
COMMON THEMES
Using the approach outlined in the methodology section, 11 overriding themes were identified. These
themes were grouped into five categories, constituting the framework employed in this analysis (Figure 2).
As such, we classified articles into groups that primarily dealt with (1) internal L&SCM factors (human
resource issues and practices of L&SCM), (2) logistics (third-party logistics and logistics
design/infrastructure), (3) L&SCM enablers (information technology and buyer-supplier relationships), (4)
the environment (risk/uncertainty, reforms and political developments, and examples as to how
environmental variables can impact the management of supply chains), and (5) external pressures
(competitiveness, green L&SCM and reverse logistics). The remainder of this section briefly introduces
each of these themes, while illustrative topics and references are provided in Table 2. This table can be
used by academics as a starting point for delving into the realm of L&SCM applications within a global
context. The overview provides also a good introduction for practitioners and managers to what academic
research has covered in the field of global L&SCM. Practitioners can use this review as a starting point for
the identification of relevant and useful references for their particular task. A more detailed list of studies
for each theme, that seemed to be especially relevant to global L&SCM research, including specific
managerial implications, can be obtained from the author upon request.
IMAGE ILLUSTRATION3
FIGURE 2
FRAMEWORK FOR THE ANALYSIS OF GLOBAL L&SCM LITERATURE
Internal factors. Human resources (HR) are often a crucial component of a company's success. This is
also true within the context of international L&SCM. HR issues were covered in a variety of ways, with a
primary focus on the importance of appropriate skills for effectively managing global L&SCM. The second
theme, specific L&SCM practices and applications, was described in a number of different settings. Often
this included the identification of best practices, and a specific process or group of processes that have
been classified as the best method for conducting an action in the specific geographic region or country.
Logistics. Third-party logistics (3PL's), which refers to the outsourcing of all or much of a company's
logistics operations to a specialized company, received wide attention, especially in China. Articles dealt
with how information technology can benefit 3PL's by strengthening their competitive advantage or by
better coordination of supply chain networks. Logistics design/infrastructure, the second theme in this
category, enables the efficient and effective flow and storage of goods, services, and related information
between the point of origin and the point of consumption. Several articles in our sample covered aspects
of logistics design and infrastructure, as well as their evolution in a transforming world.
Enabler. Information technology (IT), which manages the flow of data within and between organizations,
was often described as a key success factor and enabler for global L&SCM (Motwani, Madan, and
Gunasekaran 2000; Savitskie 2007). It is therefore not surprising to see several studies discussing this
theme. While some authors covered the use of IT on a global level (Closs and Xu 2000; Reyes,
Raisinghani, and Singh 2002; Spanos, Ponis, and Tatsiopoulos 2007), most studies dealt with IT in a
country-specific setting. The increasing importance of supply chain management goes hand-in-hand with
the second theme in this category: the heightened significance of good buyer-supplier relationships. This
refers to the quality of interaction between buyers and suppliers, as well as the associated benefits and
drawbacks. Relationships can vary from an arm's length, antagonistic and hostile approach at the one
extreme, to a collaborative and mutually-beneficial partnership or alliance at the other extreme. Such
relationship aspects were investigated in numerous manuscripts, especially within the context of the
manufacturing and automotive supply chains.
Environment. Risk and uncertainty in global L&SCM, which refer to the probability and severity of a supply
disruption occurring, have been central topics of investigation. Continuing globalization, the focus of firms
on their core competencies, the associated outsourcing or offshoring of many products and services, and
longer, more complex and multi-country supply chains have all added to the heightened risk and
uncertainty present. The second theme in this category, reforms, political developments, and changing
regulations, which include the revision of a country's regulatory, legislative, financial, or economic
systems, has also had significant impact on global L&SCM. Our sample provides evidence with several
articles that primarily focused on India and China. In addition, several studies highlighted industry-specific
or product-specific supply chains in a particular country. Often, broader concepts were illustrated with the
focus on one particular example.
External pressures. International L&SCM can be a key prerequisite for global competitiveness (Prasad
and Sounderpandian 2003), which is the ability to continuously add value in an increasingly faster-
changing environment. Within our sample, the importance of this theme was illustrated in a variety of
contexts. Green L&SCM, which can be defined as the integrated and environmentally conscious flow of
products through the supply chain, including reverse logistics (Zhu, Sarkis, and Geng 2005), was
described as one of the key trends and challenges for companies worldwide, and represents the second
theme in this category.
IMAGE TABLE4
TABLE 2
ILLUSTRATIVE STUDIES ACROSS THE COMMON THEMES
IMAGE TABLE5
TABLE 2
ILLUSTRATIVE STUDIES ACROSS THE COMMON THEMES
IMAGE TABLE6
TABLE 2
ILLUSTRATIVE STUDIES ACROSS THE COMMON THEMES
COUNTRIES INVESTIGATED
While many articles in our sample dealt with L&SCM on a global level, most manuscripts had a focus on a
particular country. Table 3 presents the countries or regions that provided the context in five or more
articles.
IMAGE TABLE7
TABLE 3
COUNTRIES OR REGIONS WITH FIVE OR MORE MENTIONS
The popularity of China is not surprising due to the country's recent economic reforms and opening (Jiang
and Prater 2002). It provides a formidable environment to explore the changes occurring and to suggest
effective management approaches. China was therefore also the subject of two recent articles reviewing
decision sciences research in China (Zhao, Flynn, and Roth 2006, 2007). Within the Chinese context,
logistics outsourcing and 3PL's were frequently dealt with (Hong, Chin, and Liu 2004), as was the role of
IT in facilitating L&SCM (Cai, Jun, and Yang 2006). Additional studies covered the country's
developments in logistics (Goh and Ling 2003; Hong and Liu 2007) and supply chain management (Jiang
2002; Pagano 2003). Due to the popularity of China as a source of supply for foreign companies,
purchasing issues were discussed (Campbell, Hexter, and Yin 2004; Nassimbeni and Sartor 2006). China
was also noted as a large market for the sale of imported products, which, however, may be challenged
by transportation problems (Ta, Choo, and Sum 2000).
The U.K. and the U.S. followed China in frequency of articles. Many manuscripts focusing on the U.K.
centered on buyer-supplier relationships (Robson and Rawnsley 2001) and IT (Smart 2005), or described
a particular supply chain, such as the supply chains for red meat (Zokaei and Simons 2006), clothing
(Adewole 2005) and agri-food (Hingley 2005). Research in the U.S. environment focused on 3PL's
(Gibson and Cook 2001; Lieb and Bentz 2004; Lieb and Butner 2007), air transportation (Adrangi,
Chatrath, and Raffiee 2001) and quality aspects of L&SCM (Bandyopadhyay 2005). Taiwan was the
context for studies dealing with postponement (Chiou, Wu, and Hsu 2002), IT for logistics (Lin 2006), and
logistics services (Lu 2000). Manuscripts with a European setting explored primarily 3PL's (Lemoine and
Dagnaes 2003) and issues related to maritime transportation (Trajillo and Tovar 2006). Several studies
set in Australia focused on IT (Sohal, Power, and Terziovski 2002a) and quick response practices (Perry
and Sohal 2001) or provided the Australian perspective on supply chain issues (Rexha and Miyamoto
2000). India was the last country that received coverage in more than 20 articles of our sample,
discussing L&SCM in the country's context (Gupta and Nehra 2002; Sahay and Mohan 2003); IT was
again a focus (Rahman 2004).
Other countries or regions investigated included the Arctic (Somanathan, Flynn, and Szymanski 2007),
Argentina (Carranza, Maltz, and Antun 2002), Austria (Madlener and Bachhiesl 2007), Barbados
(Ramcharan and Dey 2005), Botswana (Msimangira 2003), Bulgaria (Dimitrov 2005), Chile (Singer and
Donoso 2007), Cuba (Van Bodegraven, 2001), Denmark (Christiansen, Rohde, and HaId. 2003), Dubai
(Jacobs and Hall 2007), Estonia (Elenurm 2007), Finland (Kaynak and Eronen 2003), France (Guffond
and Leconte 2000), Ghana and Guatemala (Bossert, Bowser, and Amenyah 2007), Greece (Kotsifaki et
al. 2007), Hungary (Demeter, Gelei, and Jenei 2006), Ireland (Huber and Sweeney 2007), Kazakhstan
(Price 2006), Kuwait (Khalfan and Alshawaf 2003), Laos (Banomyong and Beresford 2001), Lithuania
(Pasukeviciute and Roe 2005), Malaysia (Sohail and Sohal 2003), Mexico (Haytko, Kent, and Hausman
2007), Nigeria (Ugboma, Ugboma, and Ogwude 2006), Norway (Dauzère-Pérès et al. 2007), Pakistan
(Bhutta, Rana, and Asad 2007), Panama (Vasquez 2003), Portugal (Barros 2003), Russia (Toppinen et
al. 2007), Saudi Arabia (Falah, Zairi, and Ahmed 2003), Sudan (Beamon and Kotleba 2006), Sweden
(Olhager and Selldin 2004), Thailand (Boon-itt and Paul 2006), Trinidad and Tobago (Chowdary 2005),
the United Arab Emirates (Sohail et al. 2005), and Uganda (Kimbowa 2000). Some studies also
compared countries or regions in terms of their L&SCM practices. As such, Zailani and Rajagopal (2005)
compared the U.S. with East Asia, Kaufmann and Carter (2006) compared the U.S. with Germany, Lemke
et al. (2000) compared Germany with the U.K., and Burcher, Lee, and Sohail (2007) compared the U.K.
with Australia. The above listing of countries investigated illustrates the diversity and multitude of settings
in which global L&SCM has been studied.
DISCUSSION
This study provided a large-scale and structured review of published L&SCM work within a global context.
It represents the first comprehensive review of published academic research in global L&SCM. Articles
were analyzed according to their publication year and outlet, common themes, and countries or regions
investigated.
Tracking the number of manuscripts published per year since 2000 revealed an almost steady upward
trend. A slight decrease was observed in 2004, but otherwise, interest continued to grow. As with any
evolving field of research, the standards and expectations have risen. While the "low-hanging fruit" may
have been picked, such as the basic description of supply chain issues, current and future research in
global L&SCM demands a more structured and less exploratory approach, employing more sophisticated
analysis methods. While some articles reviewed already used more advanced and powerful statistical
techniques, including structural equation modeling and path analysis, the call for the increased use of
these methods in L&SCM remains (Carter and Ellram 2003; Davis-Sramek and Fugate 2007; Mentzer
and Kahn 1995). This is particularly true in international L&SCM studies, which have mostly been
descriptive. This observation is understandable, especially in lesser-researched countries and regions of
the world, given that most research develops from exploratory to more confirmatory approaches.
Nevertheless, the most advanced appropriate statistical technique that can be applied should be used.
Topics dealt with consistently over the years included opportunities and challenges for global L&SCM,
description of practices, use of IT for L&SCM, and issues associated with 3PL's. While some topics were
more often covered in some years versus others, no dominant pattern could be identified over the years.
This shows not only that the field of L&SCM has been consistent with its topic coverage, but also that no
completely new or "hot" topic has emerged in the last eight years that spurred a significant focus in any
particular year. This, in turn, can be indicative of the relatively mature field of L&SCM, characterized by a
long history of research (Kent and Flint 1997) as well as established frameworks, constructs and
predictions (Davis-Sramek and Fugate 2007; Mentzer and Kahn 1995). It can also be explained by a
rationale given in Pannirselvam et al.'s (1999) review of operations management studies, attributing it to,
on the one hand, the pressure to publish by junior faculty, and on the other hand, the risk associated with
exploring new topics or methodologies. Nevertheless, significant discoveries, although sometimes
incremental, were made by the articles reviewed. The above observation must also be seen against the
potential long review cycles of academic journals, as well as the often considerable time lag from
manuscript acceptance to publication.
The most frequently used outlet for global L&SCM research was IJPDLM with 67 manuscripts; about
every tenth article in our sample appeared in this publication. The journals SCM.TJ, MEL, TRPE, IJOPM
and IJPE followed in frequency. With 17 manuscripts the Journal of Business Logistics occupied rank
seven. However, JBL achieved rank 1 when we compared Table 1 to the five most useful journals for U.S.
logistics educators, as determined by Gibson and Hanna (2005), and rank 4 when we considered the total
number of papers published per journal since 2000.
In our review of the 726 records, some clear and predominant themes emerged into which most articles
could be classified. A framework was developed, linking these themes and putting them into perspective.
Illustrative issues covered and associated references were provided to demonstrate the wide array of
angles and settings from which a particular topic was researched.
The first group, internal factors, consisted of human resource issues and practices of L&SCM. Articles
covering HR-related topics stressed the importance of an appropriate skill set for logistics managers in
both industrialized and developing countries. The only constant in the field of L&SCM is change, so
keeping current with developments and tools is crucial to remain competitive. The hiring of logistics
personnel should therefore not be taken lightly, due to their importance of managing the flow of products.
This becomes especially crucial as firms move toward just-intime environments, and as supply chains
become longer and span multiple countries. This significance led to the development of focused curricula
at universities all over the world, and tailored teaching approaches and case studies for global L&SCM
were developed. A variety of articles in the review touched on these issues. Additional research in this
area is however still warranted, since the management of global L&SCM is becoming increasingly
complex in a world that is becoming smaller and smaller.
The second theme in this group dealt with L&SCM practices, which were often described based on
unique characteristics given by a specific country setting. These studies illustrated that global L&SCM is a
diverse and multifaceted area in which no one approach fits all countries. Global logistics managers
therefore must consider individual country or culture characteristics that may influence the management
of their supply chain. It is often not sufficient to just be "book-smart", but what is needed is also the
"street-smarts" in order to manage global logistics most effectively. An approach that works perfectly in
one country may lead to a considerable failure in another country, depending on the unique national
settings and characteristics, such as business culture, context, and infrastructure. Future research should
therefore continue to explore and update specific national L&SCM settings.
A second group of articles, which were labeled as dealing with logistics, included the themes of third-party
logistics and the issue of logistics design and infrastructure. Overall, third-party logistics received the
highest attention. This is consistent with the desire of companies to focus on their core competencies and
to outsource noncore activities such as transportation. Additional factors contributing to the interest in
3PL's are globalization, increasing competition and the shift toward just-in-time environments, which all
demand exceptional logistics performance. In these settings 3PL's are often best suited to deal with the
challenges of global L&SCM. Most often these specialized firms can manage the flow of products more
efficiently than a manufacturing company itself. This is accentuated in global L&SCM due to a firm's
potential unfamiliarity with country-specific requirements and procedures. As such, research on 3PL's in
China was especially prevalent. Global connectivity, coordination and information exchange via IT was
also frequently mentioned as a key facilitator. The field of 3PL's and even 4PLs is expected to grow, so
future research is encouraged to continue investigating this area.
Logistics design and infrastructure issues dealt with the ongoing transformation of global L&SCM,
especially in developing and emerging nations. Country- or region-specific peculiarities are therefore
crucial to be considered. The design and the infrastructure of logistics systems can differ quite
significantly between countries, stressing the importance to be familiar with local idiosyncrasies. Special
care should be taken especially when supply chains span various contexts, such as "Western" and
"Eastern" settings. However, these environments are increasingly becoming more similar, or at least
easier to integrate by supply chain professionals. Nevertheless, future research is needed to continue
exploring location-specific differences in logistics design, operation and infrastructure.
The third group of themes, enabler, encompassed information technology and buyer-supplier
relationships. Information technology has certainly been a significant facilitator in making dealings across
the supply chain more efficient and effective. The same extent of global L&SCM would most likely not
have been possible without the help of IT. Several studies therefore informed about the current status and
future direction of IT infrastructure in emerging nations, which are quick to catch up, enabling even
greater levels of transformation and coordination in global L&SCM. The importance of IT for global
L&SCM is therefore expected to grow. Exciting research areas continue to emerge, such as cloud
computing and Software as a Service, offering considerable potential for future research. Of particular
concern in future endeavors should also be the security of data exchanged and stored online.
Buyer-supplier relationships, the second theme in this group, were investigated in a variety of countries
and contexts. Relevant for global L&SCM are especially articles highlighting differences that exist in
buyer-supplier relationships across countries. As such, ethical standards, viewpoints and relationship
approaches may differ. It is therefore crucial to obtain an understanding of the peculiarities of buyer-
supplier relationships in each country of one's supply chain, to then most appropriately address the
issues. This becomes especially important when suppliers overseas are providers of critical products - the
relationship then needs to be managed even more cautiously in these instances. Future research
opportunities abound. For example the investigation of best practices on how to deal with overseas
suppliers most effectively, considering their unique culture and context, continues to be of interest,
especially as more and more purchasing spend is coming from international sources. The type of
relationship pursued, and possible changes over time, offers also a promising avenue. While we have
seen a move from antagonistic and rather hostile relationships between buyers and suppliers in the
1980's to more collaborative and partnership approaches in the 1990's, conversations of the author with
international sourcing managers suggest now a move to a position between these two extremes.
Companies experienced suppliers, with whom a more relational approach was pursued, as becoming too
complacent and not offering many new innovations any more. The introduction of a bit more competition
therefore seemed warranted. How this issue manifests itself in various cultural and country-specific
contexts promises to be an exciting avenue for future research.
Three themes were included in the group of environmental aspects. First, the theme of risk and
uncertainty in global L&SCM is a constant companion of the field due to its very nature. Having longer
supply chains spanning multiple countries and continents provides more opportunities for failure, and
logistical challenges can increase exponentially. Firms should therefore consider very carefully whether
they want to engage in international L&SCM, and if yes, what options are the least risky. As an example,
Schoenherr, Tummala, and Harrison (2008) described the process used by a U.S. manufacturing
company in determining the best offshoring choice, which was influenced by varying degrees of logistics
and supply chain risks. This risk evaluation can be integrated into a comprehensive risk management
process, which the authors proposed in a follow-up paper (Tummala and Schoenherr 2009). Increased
risk and uncertainty, as well as the desire for greater responsiveness, can even drive a company to bring
back previously offshored functions to the home country. Future research investigating these
developments is encouraged.
The second theme in the group deals with the environment covered reforms, political developments, and
changes to a country's regulatory, legislative, financial and economic systems, as well as its subsequent
impact on L&SCM. In most cases these changes favored international L&SCM through deregulation and
the further opening of markets. Logistics and supply chain managers need to be aware of these changes,
as well as their likelihood of occurrence in the future, in order to respond appropriately and take
advantage of them, if possible. Countries most affected by such developments include China, India, and
many Eastern European nations, which have, to some extent also based on these reforms, become more
attractive for global L&SCM. Future developments need to be monitored closely though, since, for
example, some analysts predict the salaries for engineers in India and China to reach parity with U.S.
wages; the attractiveness for involving these countries in L&SCM may thus shift.
The third theme included a variety of supply chain examples set in a particular country. These studies
often highlighted country-specific peculiarities of the particular supply chain, and offered valuable insight
for managers contemplating similar endeavors. At the same time, these studies provided unique insight
into the local realities, business environments, infrastructure, and other relevant L&SCM aspects. An
examination of these manuscripts stressed that L&SCM approaches need to be adapted and tailored to a
country's specific context.
The last group in our framework, external pressures, comprised the themes of competitiveness and green
L&SCM and reverse logistics. Studies in the first theme included illustrations of how global L&SCM can
lead to increased competitiveness and supply chain advantage. As such, these papers provided an
overview of the competitive landscape in select countries, or compared suppliers from different countries
against key competitive dimensions. The findings also demonstrated the attractiveness of certain markets
for global L&SCM, and offered useful information for managers wanting to use global L&SCM for their
advantage. Overall, these manuscripts motivated and made a strong case for global L&SCM. Future
research is however needed, due to the dynamic environment of L&SCM and the constantly shifting
playing field. What was a competitive advantage today may not be so tomorrow.
The last theme covered green and reverse logistics, a key trend in global L&SCM. This was described not
only in developed countries, but also in emerging nations. While some of these initiatives were
implemented on a voluntary basis, most often the efforts were driven by regulatory, competitive or
marketing pressures. A particular aspect of green L&SCM, reverse logistics, was also the focus of a
variety of papers. This initiative was however again driven primarily by regulatory requirements on reuse
and recycling. It is hoped that green behavior becomes the standard for doing business, and that no
external pressures are necessary to promote this conduct any more. Future research is definitely needed
on this evolving theme.
A wide variety of countries and regions were investigated, with China being the most popular. The U.K.,
the U.S. and Europe followed. Other countries frequently studied included Taiwan, Australia and India.
Also intriguing were studies from lesser-researched countries, such as Laos, Sudan, and Lithuania. An
additional analysis revealed that while some countries received consistent high coverage over the years,
no countries emerged that would indicate a significant higher research interest in one year versus
another.
CONCLUSION
For this study we reviewed 726 academic research papers that dealt with logistics and supply chain
management applications within a global context. Insights and analyses were provided to the articles'
publication year and outlet, common themes, and countries or regions investigated. The study makes
several contributions to L&SCM. It offered the first known comprehensive review of published academic
research in global L&SCM. Rather than limiting ourselves to the mainstream logistics and supply chain
management journals, we included all of the almost 1 ,800 journal titles in ABI/INFORM in our search.
Some very intriguing, relevant and valuable articles were detected, which would have been overlooked if
the traditional approach for literature reviews, i.e., focusing only on some key disciplinary journals, was
followed. One of our goals was to offer a broad synopsis of the global L&SCM field, without limiting
ourselves to certain outlets.
Academic Implications
The overview presented in this paper offers a valuable starting point for researchers, graduate students or
faculty members delving into the realm of L&SCM applications within à global context. It represents a
considerable amount of preliminary effort and sets the stage for this Special Issue. The most
representative articles were highlighted and streams of research were identified. It is our hope that the
current article serves as an inspiration and motivation to continue this fascinating area of research. It is
also meant to draw attention to the wide array of global L&SCM studies conducted, their settings and
viewpoints. Especially refreshing were reports from lesser-researched countries, providing motivation for
scholars to continue investigating these and not-yet covered regions and countries. Several articles were
sometimes the first scholarly report about L&SCM issues in these countries. It was interesting to read how
common L&SCM concepts are adapted to country- and culture-specific contexts. Similar as in Zhao,
Flynn, and Roth (2006), it is our hope that the present review will stimulate rigorous and high-quality
L&SCM research on a global scale. Of particular interest should be comparison studies of countries and
cultures across the various facets of L&SCM, as well as the impact of national culture and context. While
a few of these exist, as highlighted above, additional research is needed to more fully explain differences
or similarities in L&SCM practices and applications across countries and cultures.
This article is also meant to draw attention to non-disciplinary or lesser-known journals, such as the
International Journal of Automotive Technology and Management, which may provide useful information
as well. The frequency with which L&SCM manuscripts are published in such outlets demonstrates the
increasingly crossdisciplinary nature of L&SCM research, and should serve as an impetus to further this
trend. At the same time, this published research should serve as a useful building block for informing
current and future research. The large amount of exploratory work already conducted is a foundation for
more rigorous and sophisticated research, both in topics and in methods. An analysis of articles published
in the Journal of Business Logistics already reveals this trend (Davis-Sramek and Fugate 2007).
Managerial Implications
The current paper provides an introduction for practitioners and managers to what academic research has
covered in the field of global L&SCM. It is our hope that practitioners use this review as a starting point for
the identification of relevant and useful references for their particular task. For example, a company
representative interested in utilizing 3PL's overseas can refer to the particular theme section in the
manuscript to see what has been reported in that regard. The manager can then select relevant articles
for further study. Most of the cited references also provide managerial insights, so this review could be a
starting point for practitioners to learn more about a particular L&SCM topic or practice in a certain
country or region of the world. Overall, it is our hope that this study motivates practitioners to explore also
more academically-inclined outlets, in addition to professional trade publications. The illustrative issues
listed in Table 2 demonstrate the often very relevant and applicable managerial implications.
Opportunities for Future Research and Limitations
There are a multitude of opportunities to extend the presented research. One worthwhile avenue to
pursue is the investigation of methodologies utilized in international L&SCM research. In a review of 108
articles published in the Journal of Business Logistics between 1999 and 2004, Frankel, Naslug, and
Bolumole (2005) classified papers based on the methodology used. One of their findings included the
increasing rigor of research approaches, especially the conduct of case studies, and the growing use of
the Internet for data collection. Methodologies used in supply chain management's foundational
disciplines-purchasing, operations management, logistics, and marketing channel management-were also
studied by Frankel et al. (2008). The authors call for the incorporation of theories, methods and measures
that embrace supply chain management's extended levels, leading to a more robust perspective of SCM.
These studies motivate the investigation of methodologies used in international L&SCM. While a fairly
similar development over the years can be expected, i.e., increasing rigor, a preliminary look at the
methods used in our sample suggests that the field of global L&SCM research is still in the more
exploratory stages in terms of method usage. The primary methodology employed was the single or
multiple case study approach, which was applied in about one-third of the papers. This is, however, not
surprising, especially in some of the underresearched countries, where concepts first have to be defined
via case studies before they can be tested with large-scale surveys. A closer look at this issue presents
an exciting avenue for future research.
Certain limitations exist that, however, provide opportunities for future research. We felt that, through our
search and selection approach, we were able to capture most articles dealing with L&SCM in a global
context. First, a search was conducted in the ABI/INFORM database for all peer-reviewed articles
containing the keywords "logistics" or "supply chain management," followed by the manual selection of all
articles containing a global or country-specific mention in their citation. We believe that if these conditions
are fulfilled, the article places an emphasis on L&SCM within a global or country-specific context,
therefore being relevant for our review. However, applicable articles might have been overlooked that did
not contain these keywords in their citation or abstract, and that did not possess the global qualifier in
their title. In addition, while the set of 1,800 journals in the database represents a fairly large sample, not
all journals can possibly be included. Nevertheless, we feel that even with the omission of a few records
not produced with the search, we were able to capture the work in global L&SCM over the last eight years
well, due to our large sample size. Future studies could focus on a more narrow set of journals, and
comparisons to our findings could be made. The focus on just a limited set of journals will enable a more
focused and detailed examination of the article sample, which will naturally be much smaller and therefore
more manageable. Of particular interest should be the investigation of the various theoretical domains
that have been chosen over the years and across countries, such as transaction cost economics or the
resource-based view of the firm. It should be seen that similar theoretical foundations are being used
across countries.
A further limitation is that the classification into themes was conducted by the single author of this study,
resulting in the inability to assess inter-rater reliability. This study also restricted its search to articles that
appeared after December 31, 1999. This was an attempt to make the study more manageable. It will be
interesting to look at the first third of the L&SCM articles produced by the search. A future study could
conduct this additional analysis and provide insight into the early years of global L&SCM.
SIDEBAR
This paper reviews 726 academic research studies covering logistics and supply chain management
(L&SCM) applications within a global context. Articles are analyzed according to their publication year and
outlet, common themes, and countries or regions investigated. The sample was drawn from the
ABI/INFORM Global database, which includes almost 1,800 journal titles. The review offers a starting
point for researchers, graduate students, faculty members or practitioners examining international L&SCM
applications. The article also draws attention to the wide array of global L&SCM studies conducted, their
settings and viewpoints. Additionally, this paper highlights some of the most interesting works and draws
attention to lesser-researched countries and regions of the world. The overview also provides an
introduction for practitioners and managers to what academic research has covered in the area of global
L&SCM. Practitioners can use this review as a starting point for the identification of relevant and useful
references for their particular task.
Key Words: Global context; Literature review; Logistics; Supply chain management
FOOTNOTE
NOTES
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AUTHOR_AFFILIATION
by
Tobias Schoenherr
Michigan State University
AUTHOR_AFFILIATION
ABOUT THE AUTHOR
Tobias Schoenherr (Ph.D. Indiana University) joined the Eli Broad College of Business at Michigan State
University as an Assistant Professor of Supply Chain Management in fall 2008. In addition to his Ph.D.,
he holds a Diplom-Betriebswirt (FH) from the European School of Business in Germany, and a B. &. and
M. B. in Operations Management and Decision Sciences from Indiana University, Bloomington. He has
taught at Indiana University, Eastern Michigan University, the International Graduate School of Business
(Zagreb, Croatia), and the Central European University (Budapest, Hungary). Tobias' research focus is on
global supply chain management and sourcing, and his articles have appeared in the Journal of
Operations Management, Journal of Supply Chain Management, International Journal of Operations and
Production Management, OMEGA-The International Journal of Management Science, Business Horizons,
Journal of Purchasing and Supply Management, and others (for recent publications please visit
https://www.bus.msu.edu/supplvchain/faculty.cfm?facultyid=:748). Tobias is a member of the Council of
Supply Chain Management Professionals (CSCMP).
Contact author: Tobias Schoenherr, E-mail: [email protected]
In addition, make sure to read these articles:
Supply Chain Management and Its Impact on Purchasing.
Relationship between supply chain quality management practices and their effects...
A review of simulation studies on supply chain management.
Affiliation of authors in transportation and logistics academic journals: a rea...
THE CONTEXT-SPECIFIC BENEFIT OF USE OF ACTIVITY-BASED COSTING WITH SUPPLY
CHAIN ...
Antecedents and outcomes of supply chain effectiveness: an exploratory investiga...
Antecedents and Outcomes of Supply Chain Effectiveness: An Exploratory Investiga...
More Related Topics:
TopicsSupply Chain Management, Company Activities & Management, Investigations, Operations, Trends & Events Geographies
Supply Chain Management and Its Impact on Purchasing.
By Tan, Keah Choon
Publication: Journal of Supply Chain Management
Date: Friday, September 22 2000 You are viewing page 1
The term "supply chain management" has been used to denote the integration of logistics and physical
distribution activities by wholesalers and retailers and manufacturers' efforts to effectively integrate
purchasing and supply with other functions in the firm. The concept is still evolving.
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There is no generally accepted definition of supply chain management or general understanding of how
supply chain management impacts organizational characteristics and practices. This article presents
exploratory findings from a comprehensive survey regarding supply chain management. The objectives of
this study were to study the impact of supply chain management on purchasing practices, to further define
and develop the supply chain model from various perspectives, and to identify problems associated with
supply chain management, particularly from the purchasing perspective.
INTRODUCTION
The term supply chain management (SCM) was initially used in wholesaling and retailing to describe the
integration of logistics and physical distribution functions with the goal of reducing delivery leadtimes.
Manufacturers and service providers have used the same term to describe integration and partnership
efforts with first- and second- tier suppliers to reduce Cost and improve quality and delivery timing. Terms
such as integrated purchasing strategy, integrated logistics, supplier integration, value chain
management, supply base management, strategic supplier alliances, lean production, Just-In-Time (JIT)
logistics, and supply chain synchronization have been used in the literature to address certain elements
or stages of this new management philosophy (see, for instance, Tan et al. (1998) and La Londe and
Masters (1994)). SCM services are offered by various transportation companies, SCM courses and
programs are offered by a number of universities, and a number of articles on SCM have appeared in
business and academic publications.
Despite the popularity of the term, there exists no practical, explicit, widely accepted description of SCM
or its activities. Conceptually, SCM includes all value-adding activities from the extraction of raw materials
through the transformation processes and through delivery to the end user. SCM spans organizational
boundaries and treats the organizations within the value chain as a unified virtual business entity (Scott
and Westbrook 1991; New and Payne 1995). Baatz (1995) further expanded SCM to include recycling or
reuse activities. However, in the SCM literature, there has been little discussion on identifying supply
chain participants, which processes are integrated, or how to successfully manage supply chains
(Lambert et al. 1998).
This exploratory research had the overall objectives of describing supply chains and identifying current
practices and problems associated with supply chain management. To achieve these goals, a group of
senior supply and materials management professionals from manufacturing industries in the United
States was surveyed. The survey investigated the breadth of SCM, the impact of SCM on a wide variety
of purchasing practices and firm characteristics, and the operating problems specifically related to SCM.
Based on the research findings, a clearer picture of SCM practice emerged, with implications for both
practitioners and researchers.
The following section reviews the SCM literature. Subsequent sections present the research
methodology, demographic characteristics of the respondents, a working description of industrial supply
chains, organizational and purchasing strategies and their relationship to SCM, a description of SCM
problems, supplier issues and their relationship to SCM, and, finally, the managerial implications of the
results. Future research directions are suggested and discussed.
THE SUPPLY CHAIN MANAGEMENT LITERATURE
The intense global competition of the past decade has led many organizations to create cooperative,
mutually beneficial partnerships with suppliers, distributors, retailers, and other firms within the supply
chain. The objective of those partnerships has been to offer lower-cost, higher-quality products and
services with greater design flexibility. The partnerships are particularly critical in JIT manufacturing where
there is little inventory to cushion production, scheduling, and usage problems. Manufacturers and service
organizations have experimented with strategic partnerships with suppliers and transportation and
warehousing providers. Manufacturers have utilized supplier strengths and technologies to support new
product development efforts (Morgan and Monczka 1995) and have drastically reduced supply bases to a
handful of certified suppliers (Inman and Hubler 1992). Retailers have seamlessly integrated their logistics
functions with transportation partners to achieve direct store deliveries or cross-doc king without the need
for incoming inspections (St. Onge 1996).
Supply chain management has been used to denote these attempts to integrate and partner with
suppliers and to integrate logistics functions and transportation providers to efficiently and effectively
manage the value chain. More recently, SCM has focused on integration, customer satisfaction, and
business results. Most of the recent literature on SCM focuses on manufacturers' attempts to integrate
processes and form alliances with suppliers to more efficiently and effectively manage the purchasing and
supply function. Carter et al. (2000) forecast that supplier selection will increasingly be based on strategic
contribution to the supply chain and will extend beyond first-tier suppliers.
The SCM philosophy expands the internally focused integrating activities of logistics by bringing multiple
organizations along the supply chain together with the common goals of efficiency and end-customer
satisfaction (Harwick 1997). SCM creates a virtual organization of independent entities to efficiently and
effectively manage the movement and transformation of materials, components, products, and services
along the supply chain until final delivery to the end user. Thus, SCM integrates a number of key
functions, including purchasing, demand management, distribution planning, quality management,
manufacturing planning, and materials management, throughout the supply chain.
The short-term objective of SCM is primarily to increase productivity and reduce inventory and cycle time.
Its long-term strategic goal is to increase customer satisfaction, market share, and profits for all members
of the virtual organization. To realize these objectives, all strategic partners must recognize that the
purchasing function, with its boundary-spanning activities, is a crucial link between the sources of supply
and the organization. Early involvement of suppliers in product design, for instance, allows manufacturers
to develop alternative solutions; to select the best and most affordable components, materials, and
technologies; and to receive help in design assessment (Burt and Soukup 1985). Supplier involvement in
product and process design and continuous improvement activities has been shown to have a positive
impact on competitive advantage and performance (McGinnis and Vallopra 1999; Vonderembse and
Tracey 1999). In general, SCM seeks improved performance through elimination of waste and bet ter use
of internal and external supplier capabilities and technologies (Morgan and Monczka 1996).
The retailing industry has focused on different aspects of SCM, namely, location, transportation, and
logistics issues. Indeed, the origin of supply chain management can be traced back to efforts to better
manage the transportation and logistics functions (Fisher 1997; Lamb 1995; Whiteoak 1994; Turner 1993;
MacDonald 1991; Stock and Lambert 1987). The wholesaling and retailing industries incorporate a
logistics focus within their strategic decisions. SCM would allow channel members to compete as a
unified entity instead of just pushing inventories down the supply chain to end customers. Thus, the
benefits of vertical integration could be obtained by coordinating the logistics functions of independent
firms in the chain (La Londe and Masters 1994). In this respect, SCM is synonymous with integrated
logistics systems that control the movement of goods from the suppliers to end customers without waste
(Ellram 1991).
Integrated logistics systems seek to manage inventories through close relationships with suppliers and
transportation, distribution, and delivery services. A goal is to replace inventory with frequent
communication and sophisticated information systems to provide visibility and coordination. In this way,
merchandise can be replenished quickly in small lot size and arrive where and when it is needed
(Handfield 1994; Shapiro et al 1993). Firms that use advanced process technology to increase flexibility
and involve manufacturing managers in strategic decisionmaking alter the role of logistics in firm success
(Tracey 1998). Quick, frequent, and accurate information transfer among members of the supply chain
can counteract the distortion of information (known as the bullwhip effect) as it passes up the supply chain
from the end customer (Metters 1997). A supply chain can reduce overall inventory while maximizing
customer service by efficiently redistributing stock within the supply chain using effective postponem ent
and speculation strategies (Pagh and Cooper 1998; Davis 1993; Scott and Westbrook 1991).
Despite its importance, theoretical development, and popularity in the business and academic press,
there is little empirical research that clearly defines SCM and its impact on the firm and its trading
partners. This research addresses these issues, with particular attention paid to the purchasing function
and its role in SCM.
RESEARCH METHODOLOGY
To gauge the current understanding and use of supply chain management practices, a survey was
designed and sent to 1,500 randomly selected U.S. purchasing and materials managers from the National
Association of Purchasing Management (NAPM) membership list. A review of the supply chain
management and related literature revealed a number of commonly cited practices and concerns
associated with SCM, which were incorporated into the survey. The survey included sections regarding
SCM strategies, supply and materials management, operations, information technology and sharing, and
customer service/distribution. Additionally, a number of potential SCM concerns or problems were also
identified and included in the survey. These concerns included cooperation and trust among supply chain
members, information-sharing capability, competition, and geographical proximity between supply chain
members. The survey instrument also included a number of general questions regarding SCM and its
relationship to various elements with in the firm.
For many of the survey questions, respondents were asked to indicate, using a five-point Likert scale
(where 1 = low and 5 = high), the importance, impact, or success of the various SCM practices, issues,
and terms. Tables III through VI contain summary information of actual questions asked in the survey. A
number of other questions required simple yes or no answers, and several demographic questions were
also included in the questionnaire.
The survey instrument was pretested for content validity using 30 purchasing managers. Where
necessary, questions were reworded, added, or discarded to improve validity and clarity. The pretest
questionnaires were not used for subsequent analyses. The revised survey instrument was then sent to
1,500 supply and materials managers of U.S. manufacturing companies, using a modified version of
Dillman's (1978) total design method. Firms represented by these individuals were from Standard
Industrial Classification codes 20 to 39 (manufacturing firms). Care was taken to delete multiple listings
for firms with more than one NAPM member listing. Two complete survey mailings, with one reminder
postcard after the first mailing, resulted in 101 usable returned surveys. The 6.7 percent response rate
was considered reasonable, given the subject's complexity and the length of the survey.
To investigate the possibility of non-response bias in the data, a test for statistically significant differences
in the responses of early and late waves of returned surveys was performed (Armstrong and Overton
1977; Lambert and Harrington 1990). The last wave of surveys received were considered to be
representative of non-respondents. The sample was split into two groups on the basis of early and late
survey return times and t-tests were performed on the responses of the two groups. The groups
represented the first 74 and last 27 responses of the 101 responses received. The t-tests yielded no
statistically significant differences among the survey items tested. These results suggest that non-
response bias did not significantly impact this study.
Finally, because much of the data presented in the tables was generated using scaled responses, it was
deemed necessary to test for internal consistency. Table VII contains this information. Cronbach-Alpha
tests were performed on the scaled data shown in the tables. Based on the coefficient values, the
measures tested were deemed reliable for this type of exploratory research (Nunnally 1978).
RESPONDENT FIRM DEMOGRAPHICS
General demographic information of the respondent firms is presented in Table I. Most of the firms were
either final product or component manufacturers with regional U.S. or global market coverage. A large
percentage of the respondents (over 78 percent) stated they practiced some form of supply chain
management, based on the definition provided in the survey (shown in Table I). A wide range of firm sizes
was represented in the sample as indicated by number of employees and annual sales. Tables II through
VI summarize the SCM practices and concerns of the 79 respondents whose firms practiced some form
of SCM.
A DESCRIPTION OF RESPONDENTS' SUPPLY CHAINS
To explore the breadth of respondents' supply chain practices, respondents actively practicing supply
chain management were asked to describe the various participants in their supply chains. The findings
are summarized in Table II. Respondents were shown a schematic of an extensive supply chain
encompassing raw material extractors, raw material manufacturers, component manufacturers, final
product manufacturers, wholesalers, retailers, final consumers, physical distribution, and product
recycling. They were instructed to circle the elements included in their SCM efforts.
Based on the responses to this question, a picture of the respondents' supply chains emerged. Supply
chain breadth varied widely, from a single-firm logistics view (12.7 percent said their supply chain
included just their firm or their firm and transportation/distribution services only) to a fully developed effort
including multiple tiers of both suppliers and customers and physical distribution services (17.7 percent
indicated a fully developed supply chain both upstream and downstream of the responding firm). Over 31
percent of the respondents indicated their supply chain practices concentrated only on the incoming
supply side, while only 10.2 percent indicated an outgoing distribution side supply chain concentration.
Over 40 percent of the respondents stated their SCM efforts were balanced, to include some level of SCM
development in both the supply and distribution sides of the firm. Over 25 percent of the respondents
included the final consumer in their SCM efforts, and 19 percent indicated an emphasis on recycling
throughout their supply chain.
Based on these results, it appeared that most of the firms were not attempting to integrate broadly the
efforts of their supply chain members, preferring instead to localize partnership efforts to include first-tier
suppliers and/or first-tier customers and immediate distribution services or customers. It was somewhat
surprising that only one-quarter of the respondents included contact
STRATEGIC ELEMENTS OF SUPPLY CHAIN MANAGEMENT
Table III presents a number of organizational and purchasing department strategies and their importance
to successful SCM. Respondents were asked to signify the importance of a number of purchasing-
oriented strategic activities, based on a five-point Likert scale response (1 = low importance and 5 = high
importance).
Organizational strategies viewed by the respondents as being important determinants of SCM success
were:
* Reducing response time across the supply chain
* Increasing trust among supply chain members
* Improving activity integration across the supply chain and searching for new ways to integrate these
activities
* Establishing more frequent contact among supply chain members
* Increasing the firm's JIT capabilities
Thus, important SCM strategies involve speed, trust, and activity integration across the supply chain's
members. Evidently, instituting JIT practices was seen as a means of incorporating these strategies into
the firm. Other organizational strategies deemed important to the firm were, for the most part, concerned
with communication capabilities and sharing information among supply chain members. Strategies seen
as significantly less important to the respondents were extending supply chains beyond first-tier
participants and creating interorganizational SCM teams.
With respect to strategic activities in purchasing, respondents considered on-time delivery of materials
directly to points of use and communicating the firm's future strategic needs to suppliers as important to
successful SCM. The respondents assigned a moderate level of importance to aiding suppliers to
increase their JIT capabilities and participating in the sourcing decisions of the firm's suppliers.
Significantly less important was requiring suppliers to locate closer to the firm.
Thus, when considering the relationship between strategic activities and SCM success, respondents
clearly are interested in the integration of buyer-supplier activities, improving trust among supply chain
members, and creating a more responsive supply chain. Improving JIT capabilities both within the firm
and among suppliers is evidently seen as one way to improve supply chain responsiveness. Interestingly,
the lack of importance in extending the supply chain beyond first-tier members is once again highlighted
in the findings.
PROBLEMS AND CONCERNS IN SUPPLY CHAIN MANAGEMENT
Table IV reports on a number of potential problem areas that prevented the respondent firms from
achieving their supply chain management objectives. These problem areas were cited in many of the
articles reviewed for this research project, as well as identified through conversations with a number of
practitioners. Respondents practicing SCM were asked to assess the severity of each of the potential
problems with respect to their firms, based on a five-point Likert scale (1 = low severity and 5 = high
severity). Based on the mean responses, none of the potential problems surfaced as being extremely
severe; all were judged to be moderately to less-than-moderately severe. Problems concerning
information systems, information sharing, cooperation, and trust appeared to be the most troublesome.
SUPPLIER ISSUES IN SUPPLY CHAIN MANAGEMENT
Reducing or reevaluating the supply base is commonly mentioned in the JIT and SCM literature as a
means of creating closer, interdependent buyer-supplier relationships. Thus, exploring the recent changes
in the supply base of the respondents could provide some insights into the value of these activities
relative to the practice of SCM. (Indeed, a number of respondents were only concerned with this aspect of
SCM, as reported in Table II.) Information regarding these issues appears in Table V.
For the prior three-year period, the respondents practicing SCM experienced an increase in outsourcing
activity of over 13 percent. During the same time period, the respondents increased the number of
"distinguished" and "key" suppliers by 13.5 percent and 8.7 percent, respectively. Definitions of these
terms were provided in the survey and are shown in Table V. In short, distinguished and key suppliers
were described as having more strategic value and better quality systems than general or provisional
suppliers. Expenditures with these suppliers increased by nearly 15 percent and 9 percent, respectively.
The number of "general" and "provisional" suppliers (also defined in the survey and in Table V) decreased
by over 3 percent, and the purchase dollars attributed to these suppliers declined similarly.
Another issue is the supplier management methods used to ensure supplier conformance to
specifications. Respondents were asked to assess, on a five-point Likert scale, the importance of a
number of supplier conformance issues. Items found to be most important included ensuring that:
* Suppliers' purchases adequately conformed to their (the respondent firm's) purchase specifications
* Suppliers investigated nonconformance causes and took corrective actions
* Suppliers implemented quality policies
* Suppliers established and documented their quality systems
* Suppliers maintained adequate inspection and testing equipment
Performance evaluation and selection criteria for the distinguished and key suppliers were addressed in
the survey When periodically evaluating existing suppliers, respondents practicing SCM placed a high
level of importance on product quality, customer service, on-time delivery, response time, and delivery
flexibility. Criteria such as product price, communication capabilities, and supplier certification were seen
as significantly less important to this group. When selecting distinguished and key suppliers, respondents
placed a high level of importance on the ability to meet due dates, the commitment to quality, suppliers'
technical expertise, the commitment to continuous improvement, and product prices.
Based on this survey, it appears that firms practicing SCM are actively increasing their purchasing activity
with distinguished and key suppliers, while decreasing the use of general and provisional suppliers.
Additionally, they are strongly committed to ensuring that suppliers conform to their quality requirements.
Quality and customer service issues are seen as the most important supplier selection and evaluation
concerns.
STRATEGIC ALLIANCE AND SUPPLIER CERTIFICATION PROGRAMS
Concerted, formal efforts to create strategic alliances with a firm's best suppliers and to certify their quality
capabilities frequently have been cited as crucial to the ongoing success of SCM programs. Information
about these efforts appears in Table VI.
Most of the respondents practicing SCM (over 60 percent) stated they did have a formal partnership or
strategic alliance program. Over the past three years, there has been an average increase of over 22
percent in the number of strategic alliances created with suppliers. Because instituting partnership
programs creates an expectation of increased supplier performance, questions about performance were
included in the survey Based on the responses, the partnerships had met with moderate-to-high success
on all of the performance measures (see Table VI).
Supplier certification programs were also common among the respondents practicing SCM. The vast
majority (nearly 76 percent) stated that they required suppliers to be certified. The most popular
certifications were ISO 9000 certification (65 percent of the respondents) and the respondent's own
certification program (approximately 58 percent).
A number of important supplier issues emerged from this study. The respondents utilized an increasing
number of distinguished or key suppliers; outsourced more frequently over time; developed strategic
alliance and supplier certification programs; involved their personnel in their suppliers' quality
improvement and purchasing practices; and selected and evaluated suppliers based on quality, customer
service, and flexibility.
CONCLUSIONS
This study endeavored to identify current supply chain management issues and practices for
manufacturing firms operating in the United States. One of the important contributions of this study is the
revelation of the limited reach of supply chain management activities. Many responding firms
concentrated their SCM efforts primarily on the supply side. Further, only one-fourth of the respondents
included end product user needs in their SCM practices. This is seen as a potential weakness in current
supply chain management practice. A number of organizational and purchasing department strategies
were also identified as key contributors to SCM success. These included strategies to increase trust, the
integration of activities, and communication among supply chain members.
This study also identified a number of supplier issues related to SCM. Firms practicing SCM are
outsourcing more today than in the past and are using suppliers that are capable of providing a strategic
benefit to the firm in terms of product quality, delivery response, and flexibility. As a result, second-tier
supplier capabilities and conformance has become an extremely important issue. The implication is that
purchasing managers should take an active role in identifying first- and second-tier supplier linkages and
become involved in the management of these relationships. With respect to supplier selection and
evaluation, this study supported a number of earlier research findings that quality, customer service, and
delivery criteria are more important than product price.
Finally, a large number of the respondents practicing SCM are forming strategic alliances with suppliers, a
practice that has increased significantly in recent years. In tandem with this practice, firms are requiring
suppliers to become certified, using either ISO 9000 standards or company-specific standards. These
practices are thought to increase cooperation, communication, and quality, and to reduce total costs.
LIMITATIONS OF THE RESEARCH
This exploratory study attempted to identify the current understanding of supply chain management. Like
other exploratory studies, this study has its limitations. The random sample of respondents was obtained
from the NAPM membership list. Thus, the results are generalizable to the general population of
companies only to the extent that the NAPM membership list reflects the population of all U.S. firms.
Furthermore, much of the reported data are based on management perceptions, which may not
adequately reflect actual practice.
Future research efforts on this topic area should include suppliers' perspectives, distribution issues, and
customer interaction issues. Furthermore, respondents from functions other than purchasing could also
offer valuable insights on SCM. Specifically, production managers could offer a different perspective on
quality conformance, distribution, and customer satisfaction issues. Finally, transportation services play a
key role in successful supply chain management and should be included in the development of a more
complete SCM model.
Joel D. Wisner is an associate professor of management at the University of Nevada in Las Vegas,
Nevada.
Keah Choon Tan is an assistant professor of operations management at the University of Nevada in Las
Vegas, Nevada.
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Tully, S. "Purchasing's New Muscle," Fortune, (20), 1995, p. 76.
Turner, J.R. "Integrated Supply Chain Management: What's Wrong with This Picture?" Industrial
Engineering, (25:12), 1993, pp. 52-55.
Vonderembse, M.A. and M. Tracey. "The Impact of Supplier Selection Criteria and Supplier Involvement
on Manufacturing Performance," The Journal of Supply Chain Management, (35:3), Summer 1999, pp.
33-39.
Whiteoak, P. "The Realities of Quick Response in the Grocery Sector: A Supplier Viewpoint," International
Journal of Physical Distribution and Logistics Management, (24:10), 1994, pp. 33-39.
1 2 3 4 5 6 7 8 9 10 Next Page In addition, make sure to read these articles:
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has been little discussion on identifying supply chain participants, which processes are integrated, or how
to successfully manage supply chains (Lambert et al. 1998).
This exploratory research had the overall objectives of describing supply chains and identifying current
practices and problems associated with supply chain management. To achieve these goals, a group of
senior supply and materials management professionals from manufacturing industries in the United
States was surveyed. The survey investigated the breadth of SCM, the impact of SCM on a wide variety
of purchasing practices and firm characteristics, and the operating problems specifically related to SCM.
Based on the research findings, a clearer picture of SCM practice emerged, with implications for both
practitioners and researchers.
The following section reviews the SCM literature. Subsequent sections present the research
methodology, demographic characteristics of the respondents, a working description of industrial supply
chains, organizational and purchasing strategies and their relationship to SCM, a description of SCM
problems, supplier issues and their relationship to SCM, and, finally, the managerial implications of the
results. Future research directions are suggested and discussed.
THE SUPPLY CHAIN MANAGEMENT LITERATURE
The intense global competition of the past decade has led many organizations to create cooperative,
mutually beneficial partnerships with suppliers, distributors, retailers, and other firms within the supply
chain. The objective of those partnerships has been to offer lower-cost, higher-quality products and
services with greater design flexibility. The partnerships are particularly critical in JIT manufacturing where
there is little inventory to cushion production, scheduling, and usage problems. Manufacturers and service
organizations have experimented with strategic partnerships with suppliers and transportation and
warehousing providers. Manufacturers have utilized supplier strengths and technologies to support new
product development efforts (Morgan and Monczka 1995) and have drastically reduced supply bases to a
handful of certified suppliers (Inman and Hubler 1992). Retailers have seamlessly integrated their logistics
functions with transportation partners to achieve direct store deliveries or cross-doc king without the need
for incoming inspections (St. Onge 1996).
Supply chain management has been used to denote these attempts to integrate and partner with
suppliers and to integrate logistics functions and transportation providers to efficiently and effectively
manage the value chain. More recently, SCM has focused on integration, customer satisfaction, and
business results. Most of the recent literature on SCM focuses on manufacturers' attempts to integrate
processes and form alliances with suppliers to more efficiently and effectively manage the purchasing and
supply function. Carter et al. (2000) forecast that supplier selection will increasingly be based on strategic
contribution to the supply chain and will extend beyond first-tier suppliers.
The SCM philosophy expands the internally focused integrating activities of logistics by bringing multiple
organizations along the supply chain together with the common goals of efficiency and end-customer
satisfaction (Harwick 1997). SCM creates a virtual organization of independent entities to efficiently and
effectively manage the movement and transformation of materials, components, products, and services
along the supply chain until final delivery to the end user. Thus, SCM integrates a number of key
functions, including purchasing, demand management, distribution planning, quality management,
manufacturing planning, and materials management, throughout the supply chain.
The short-term objective of SCM is primarily to increase productivity and reduce inventory and cycle time.
Its long-term strategic goal is to increase customer satisfaction, market share, and profits for all members
of the virtual organization. To realize these objectives, all strategic partners must recognize that the
purchasing function, with its boundary-spanning activities, is a crucial link between the sources of supply
and the organization. Early involvement of suppliers in product design, for instance, allows manufacturers
to develop alternative solutions; to select the best and most affordable components, materials, and
technologies; and to receive help in design assessment (Burt and Soukup 1985). Supplier involvement in
product and process design and continuous improvement activities has been shown to have a positive
impact on competitive advantage and performance (McGinnis and Vallopra 1999; Vonderembse and
Tracey 1999). In general, SCM seeks improved performance through elimination of waste and bet ter use
of internal and external supplier capabilities and technologies (Morgan and Monczka 1996).
The retailing industry has focused on different aspects of SCM, namely, location, transportation, and
logistics issues. Indeed, the origin of supply chain management can be traced back to efforts to better
manage the transportation and logistics functions (Fisher 1997; Lamb 1995; Whiteoak 1994; Turner 1993;
MacDonald 1991; Stock and Lambert 1987). The wholesaling and retailing industries incorporate a
logistics focus within their strategic decisions. SCM would allow channel members to compete as a
unified entity instead of just pushing inventories down the supply chain to end customers. Thus, the
benefits of vertical integration could be obtained by coordinating the logistics functions of independent
firms in the chain (La Londe and Masters 1994). In this respect, SCM is synonymous with integrated
logistics systems that control the movement of goods from the suppliers to end customers without waste
(Ellram 1991).
Integrated logistics systems seek to manage inventories through close relationships with suppliers and
transportation, distribution, and delivery services. A goal is to replace inventory with frequent
communication and sophisticated information systems to provide visibility and coordination. In this way,
merchandise can be replenished quickly in small lot size and arrive where and when it is needed
(Handfield 1994; Shapiro et al 1993). Firms that use advanced process technology to increase flexibility
and involve manufacturing managers in strategic decisionmaking alter the role of logistics in firm success
(Tracey 1998). Quick, frequent, and accurate information transfer among members of the supply chain
can counteract the distortion of information (known as the bullwhip effect) as it passes up the supply chain
from the end customer (Metters 1997). A supply chain can reduce overall inventory while maximizing
customer service by efficiently redistributing stock within the supply chain using effective postponem ent
and speculation strategies (Pagh and Cooper 1998; Davis 1993; Scott and Westbrook 1991).
Despite its importance, theoretical development, and popularity in the business and academic press,
there is little empirical research that clearly defines SCM and its impact on the firm and its trading
partners. This research addresses these issues, with particular attention paid to the purchasing function
and its role in SCM.
RESEARCH METHODOLOGY
To gauge the current understanding and use of supply chain management practices, a survey was
designed and sent to 1,500 randomly selected U.S. purchasing and materials managers from the National
Association of Purchasing Management (NAPM) membership list. A review of the supply chain
management and related literature revealed a number of commonly cited practices and concerns
associated with SCM, which were incorporated into the survey. The survey included sections regarding
SCM strategies, supply and materials management, operations, information technology and sharing, and
customer service/distribution. Additionally, a number of potential SCM concerns or problems were also
identified and included in the survey. These concerns included cooperation and trust among supply chain
members, information-sharing capability, competition, and geographical proximity between supply chain
members. The survey instrument also included a number of general questions regarding SCM and its
relationship to various elements with in the firm.
For many of the survey questions, respondents were asked to indicate, using a five-point Likert scale
(where 1 = low and 5 = high), the importance, impact, or success of the various SCM practices, issues,
and terms. Tables III through VI contain summary information of actual questions asked in the survey. A
number of other questions required simple yes or no answers, and several demographic questions were
also included in the questionnaire.
The survey instrument was pretested for content validity using 30 purchasing managers. Where
necessary, questions were reworded, added, or discarded to improve validity and clarity. The pretest
questionnaires were not used for subsequent analyses. The revised survey instrument was then sent to
1,500 supply and materials managers of U.S. manufacturing companies, using a modified version of
Dillman's (1978) total design method. Firms represented by these individuals were from Standard
Industrial Classification codes 20 to 39 (manufacturing firms). Care was taken to delete multiple listings
for firms with more than one NAPM member listing. Two complete survey mailings, with one reminder
postcard after the first mailing, resulted in 101 usable returned surveys. The 6.7 percent response rate
was considered reasonable, given the subject's complexity and the length of the survey.
To investigate the possibility of non-response bias in the data, a test for statistically significant differences
in the responses of early and late waves of returned surveys was performed (Armstrong and Overton
1977; Lambert and Harrington 1990). The last wave of surveys received were considered to be
representative of non-respondents. The sample was split into two groups on the basis of early and late
survey return times and t-tests were performed on the responses of the two groups. The groups
represented the first 74 and last 27 responses of the 101 responses received. The t-tests yielded no
statistically significant differences among the survey items tested. These results suggest that non-
response bias did not significantly impact this study.
Finally, because much of the data presented in the tables was generated using scaled responses, it was
deemed necessary to test for internal consistency. Table VII contains this information. Cronbach-Alpha
tests were performed on the scaled data shown in the tables. Based on the coefficient values, the
measures tested were deemed reliable for this type of exploratory research (Nunnally 1978).
RESPONDENT FIRM DEMOGRAPHICS
General demographic information of the respondent firms is presented in Table I. Most of the firms were
either final product or component manufacturers with regional U.S. or global market coverage. A large
percentage of the respondents (over 78 percent) stated they practiced some form of supply chain
management, based on the definition provided in the survey (shown in Table I). A wide range of firm sizes
was represented in the sample as indicated by number of employees and annual sales. Tables II through
VI summarize the SCM practices and concerns of the 79 respondents whose firms practiced some form
of SCM.
A DESCRIPTION OF RESPONDENTS' SUPPLY CHAINS
To explore the breadth of respondents' supply chain practices, respondents actively practicing supply
chain management were asked to describe the various participants in their supply chains. The findings
are summarized in Table II. Respondents were shown a schematic of an extensive supply chain
encompassing raw material extractors, raw material manufacturers, component manufacturers, final
product manufacturers, wholesalers, retailers, final consumers, physical distribution, and product
recycling. They were instructed to circle the elements included in their SCM efforts.
Based on the responses to this question, a picture of the respondents' supply chains emerged. Supply
chain breadth varied widely, from a single-firm logistics view (12.7 percent said their supply chain
included just their firm or their firm and transportation/distribution services only) to a fully developed effort
including multiple tiers of both suppliers and customers and physical distribution services (17.7 percent
indicated a fully developed supply chain both upstream and downstream of the responding firm). Over 31
percent of the respondents indicated their supply chain practices concentrated only on the incoming
supply side, while only 10.2 percent indicated an outgoing distribution side supply chain concentration.
Over 40 percent of the respondents stated their SCM efforts were balanced, to include some level of SCM
development in both the supply and distribution sides of the firm. Over 25 percent of the respondents
included the final consumer in their SCM efforts, and 19 percent indicated an emphasis on recycling
throughout their supply chain.
Based on these results, it appeared that most of the firms were not attempting to integrate broadly the
efforts of their supply chain members, preferring instead to localize partnership efforts to include first-tier
suppliers and/or first-tier customers and immediate distribution services or customers. It was somewhat
surprising that only one-quarter of the respondents included contact
STRATEGIC ELEMENTS OF SUPPLY CHAIN MANAGEMENT
Table III presents a number of organizational and purchasing department strategies and their importance
to successful SCM. Respondents were asked to signify the importance of a number of purchasing-
oriented strategic activities, based on a five-point Likert scale response (1 = low importance and 5 = high
importance).
Organizational strategies viewed by the respondents as being important determinants of SCM success
were:
* Reducing response time across the supply chain
* Increasing trust among supply chain members
* Improving activity integration across the supply chain and searching for new ways to integrate these
activities
* Establishing more frequent contact among supply chain members
* Increasing the firm's JIT capabilities
Thus, important SCM strategies involve speed, trust, and activity integration across the supply chain's
members. Evidently, instituting JIT practices was seen as a means of incorporating these strategies into
the firm. Other organizational strategies deemed important to the firm were, for the most part, concerned
with communication capabilities and sharing information among supply chain members. Strategies seen
as significantly less important to the respondents were extending supply chains beyond first-tier
participants and creating interorganizational SCM teams.
With respect to strategic activities in purchasing, respondents considered on-time delivery of materials
directly to points of use and communicating the firm's future strategic needs to suppliers as important to
successful SCM. The respondents assigned a moderate level of importance to aiding suppliers to
increase their JIT capabilities and participating in the sourcing decisions of the firm's suppliers.
Significantly less important was requiring suppliers to locate closer to the firm.
Thus, when considering the relationship between strategic activities and SCM success, respondents
clearly are interested in the integration of buyer-supplier activities, improving trust among supply chain
members, and creating a more responsive supply chain. Improving JIT capabilities both within the firm
and among suppliers is evidently seen as one way to improve supply chain responsiveness. Interestingly,
the lack of importance in extending the supply chain beyond first-tier members is once again highlighted
in the findings.
PROBLEMS AND CONCERNS IN SUPPLY CHAIN MANAGEMENT
Table IV reports on a number of potential problem areas that prevented the respondent firms from
achieving their supply chain management objectives. These problem areas were cited in many of the
articles reviewed for this research project, as well as identified through conversations with a number of
practitioners. Respondents practicing SCM were asked to assess the severity of each of the potential
problems with respect to their firms, based on a five-point Likert scale (1 = low severity and 5 = high
severity). Based on the mean responses, none of the potential problems surfaced as being extremely
severe; all were judged to be moderately to less-than-moderately severe. Problems concerning
information systems, information sharing, cooperation, and trust appeared to be the most troublesome.
SUPPLIER ISSUES IN SUPPLY CHAIN MANAGEMENT
Reducing or reevaluating the supply base is commonly mentioned in the JIT and SCM literature as a
means of creating closer, interdependent buyer-supplier relationships. Thus, exploring the recent changes
in the supply base of the respondents could provide some insights into the value of these activities
relative to the practice of SCM. (Indeed, a number of respondents were only concerned with this aspect of
SCM, as reported in Table II.) Information regarding these issues appears in Table V.
For the prior three-year period, the respondents practicing SCM experienced an increase in outsourcing
activity of over 13 percent. During the same time period, the respondents increased the number of
"distinguished" and "key" suppliers by 13.5 percent and 8.7 percent, respectively. Definitions of these
terms were provided in the survey and are shown in Table V. In short, distinguished and key suppliers
were described as having more strategic value and better quality systems than general or provisional
suppliers. Expenditures with these suppliers increased by nearly 15 percent and 9 percent, respectively.
The number of "general" and "provisional" suppliers (also defined in the survey and in Table V) decreased
by over 3 percent, and the purchase dollars attributed to these suppliers declined similarly.
Another issue is the supplier management methods used to ensure supplier conformance to
specifications. Respondents were asked to assess, on a five-point Likert scale, the importance of a
number of supplier conformance issues. Items found to be most important included ensuring that:
* Suppliers' purchases adequately conformed to their (the respondent firm's) purchase specifications
* Suppliers investigated nonconformance causes and took corrective actions
* Suppliers implemented quality policies
* Suppliers established and documented their quality systems
* Suppliers maintained adequate inspection and testing equipment
Performance evaluation and selection criteria for the distinguished and key suppliers were addressed in
the survey When periodically evaluating existing suppliers, respondents practicing SCM placed a high
level of importance on product quality, customer service, on-time delivery, response time, and delivery
flexibility. Criteria such as product price, communication capabilities, and supplier certification were seen
as significantly less important to this group. When selecting distinguished and key suppliers, respondents
placed a high level of importance on the ability to meet due dates, the commitment to quality, suppliers'
technical expertise, the commitment to continuous improvement, and product prices.
Based on this survey, it appears that firms practicing SCM are actively increasing their purchasing activity
with distinguished and key suppliers, while decreasing the use of general and provisional suppliers.
Additionally, they are strongly committed to ensuring that suppliers conform to their quality requirements.
Quality and customer service issues are seen as the most important supplier selection and evaluation
concerns.
STRATEGIC ALLIANCE AND SUPPLIER CERTIFICATION PROGRAMS
Concerted, formal efforts to create strategic alliances with a firm's best suppliers and to certify their quality
capabilities frequently have been cited as crucial to the ongoing success of SCM programs. Information
about these efforts appears in Table VI.
Most of the respondents practicing SCM (over 60 percent) stated they did have a formal partnership or
strategic alliance program. Over the past three years, there has been an average increase of over 22
percent in the number of strategic alliances created with suppliers. Because instituting partnership
programs creates an expectation of increased supplier performance, questions about performance were
included in the survey Based on the responses, the partnerships had met with moderate-to-high success
on all of the performance measures (see Table VI).
Supplier certification programs were also common among the respondents practicing SCM. The vast
majority (nearly 76 percent) stated that they required suppliers to be certified. The most popular
certifications were ISO 9000 certification (65 percent of the respondents) and the respondent's own
certification program (approximately 58 percent).
A number of important supplier issues emerged from this study. The respondents utilized an increasing
number of distinguished or key suppliers; outsourced more frequently over time; developed strategic
alliance and supplier certification programs; involved their personnel in their suppliers' quality
improvement and purchasing practices; and selected and evaluated suppliers based on quality, customer
service, and flexibility.
CONCLUSIONS
This study endeavored to identify current supply chain management issues and practices for
manufacturing firms operating in the United States. One of the important contributions of this study is the
revelation of the limited reach of supply chain management activities. Many responding firms
concentrated their SCM efforts primarily on the supply side. Further, only one-fourth of the respondents
included end product user needs in their SCM practices. This is seen as a potential weakness in current
supply chain management practice. A number of organizational and purchasing department strategies
were also identified as key contributors to SCM success. These included strategies to increase trust, the
integration of activities, and communication among supply chain members.
This study also identified a number of supplier issues related to SCM. Firms practicing SCM are
outsourcing more today than in the past and are using suppliers that are capable of providing a strategic
benefit to the firm in terms of product quality, delivery response, and flexibility. As a result, second-tier
supplier capabilities and conformance has become an extremely important issue. The implication is that
purchasing managers should take an active role in identifying first- and second-tier supplier linkages and
become involved in the management of these relationships. With respect to supplier selection and
evaluation, this study supported a number of earlier research findings that quality, customer service, and
delivery criteria are more important than product price.
Finally, a large number of the respondents practicing SCM are forming strategic alliances with suppliers, a
practice that has increased significantly in recent years. In tandem with this practice, firms are requiring
suppliers to become certified, using either ISO 9000 standards or company-specific standards. These
practices are thought to increase cooperation, communication, and quality, and to reduce total costs.
LIMITATIONS OF THE RESEARCH
This exploratory study attempted to identify the current understanding of supply chain management. Like
other exploratory studies, this study has its limitations. The random sample of respondents was obtained
from the NAPM membership list. Thus, the results are generalizable to the general population of
companies only to the extent that the NAPM membership list reflects the population of all U.S. firms.
Furthermore, much of the reported data are based on management perceptions, which may not
adequately reflect actual practice.
Future research efforts on this topic area should include suppliers' perspectives, distribution issues, and
customer interaction issues. Furthermore, respondents from functions other than purchasing could also
offer valuable insights on SCM. Specifically, production managers could offer a different perspective on
quality conformance, distribution, and customer satisfaction issues. Finally, transportation services play a
key role in successful supply chain management and should be included in the development of a more
complete SCM model.
Joel D. Wisner is an associate professor of management at the University of Nevada in Las Vegas,
Nevada.
Keah Choon Tan is an assistant professor of operations management at the University of Nevada in Las
Vegas, Nevada.
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Previous Page 1 2 3 4 5 6 7 8 9 10 Next Page In addition, make sure to read these articles:
Internet Technology Use Across the Food Industry Supply Chain.
Supply chain management: practices, concerns, and performance issues.
PRODUCT RETURNS PROCESSING: AN EXAMINATION OF PRACTICES OF
MANUFACTURERS, WHOLES...
The Fresh Produce Supply Chain: The Restructuring Continues
Defective Medicines Reaching Patients
Business-to-Business Online Purchasing: Suppliers' Impact on Buyers' Adoption a...
CIM 2003 is much more than a shop window
More Related Topics:
Relationship between supply chain quality management practices and their effects on organisational performance.
By Azar, Adel,Kahnali, Reza Ahmadi,Taghavi, Allahvirdi
Publication: Singapore Management Review
Date: Friday, January 1 2010
Abstract
In today's global market place, the traditional approaches to supply chain management increasingly prove
to be ineffective. This paper investigates the relationship between supply chain quality management
practices, as well as the direct and indirect effects of these practices on
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firm performance. A conceptual model was developed and tested through path analysis using the cross-
section data collected from automotive industry in Iran. The findings support the relationship between
supply chain quality management practices and the positive effect of these practices on organisational
performance, suggesting that organisational performance could be enhanced through improved supply
chain quality management.
Key Words: Quality management; Supply chain management; Organisational performance
**********
In today's global market place, competition among firms hinges critically on their supply chain (Wipple and
Frankle, 2000); supply chains have thus attracted considerable attention among managers. On the other
hand, traditional approaches to managing supply chain have proved inefficient (Kanji and Wong, 1999;
Flynn and Flynn, 2005). Therefore, quality is held to be a key strategic variable not only within the single
firm, but also across the supply chain (Forker et al, 1997; Romano and Vinelli, 2001; Kannan and Tan,
2005; Sila et al, 2006; Kaynak and Hartly, 2007).
Quality management practices have been extensively investigated at firm level (Ahire et al, 1996; Flynn et
al, 1994; Saraph et al, 1989), and several studies have also examined the relationship between quality
management practices and organisational performance (Dow et al, 1999; Kaynak, 2003; Samson and
Terziovski, 1999). However, the issue of quality management has not been sufficiently investigated in
supply chain, specifically in west Asian countries.
This study, hence, attempts to identify the potential relationship between supply chain quality
management (SCQM) practices, and the direct and indirect effects of SCQM practices on the
performance of automotive companies in Iran, based on the data obtained from 150 firms and analysed. It
contributes to the literature by extending the examination of QM into the supply chain. It provides
guidance for the effective management of the supply chain, through allocation of resources to improve
practices that
Method | Mathematics | Science & Technology | Radio Frequency Identification | Commercial & Industrial Electronics | Electronics
DESIGN THE SIX SIGMA SUPPLY CHAIN
By Culey, Sean
Publication: Supply Chain Europe
Date: Monday, September 1 2008 You are viewing page 1
HEADNOTE
Sean Culey, Managing Director of sevencs limited, describes how the 'six sigma' statistical approach, as
used in manufacturing, should be applied to supply chain operations as well.
If the question "What is your supply chain?" were asked of 100
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business leaders, the replies would vary from the expected "raw materials Inward to goods outward" to
the more forward thinking organization that would describe an extended chain from the "suppliers'
supplier to the customers' customer." However, all of the answers would describe a similar and
recognizable set of business processes.
Ask the same group of people the question "What Is Six Sigma?" and answers could vary from "Is it a
classically trained boy band?" to a more informed "Something complicated and probably expensive,
Invented in Japan, that we might use to improve our business" through to any master black belts present,
who will give a complete and Informed description. In layman's terms, the knowledgeable response would
normally describe a set of statistically valid measurements of business processes, first Introduced by
Motorola, which provide the opportunity to systematically Improve business processes by eliminating
defects and reducing variation.
Much academic study has been undertaken to show the complex algebra that goes towards designing a
Six Sigma Supply Chain (SSSC), but the majority of companies have been unable to get anywhere close
to implementing It as they have not had the capability or spare resource to measure their supply chain in
enough detail, or define what excellence would be for them. Six Sigma has the ultimate goal of achieving
3.4 defects per million objects (DPMO) - which is another way of saying you have to get to six Standard
Deviations from the 'mean' or 'perfect' before you have a problem. It requires constant monitoring,
analysis and refinement to ensure that this target Is met. It Is not enough to be able to claim that on one
occasion a company delivered On Time In Full (OTIF) or manufactured a complete process run with
minimal defects. To claim to be Six Sigma this has to recur consistently - it Is the process, much more
than the product, that Is being measured.
The five steps making up Six Sigma are known as DMAIC - Discover, Measure, Analyse, Improve and
Control. Increasingly, an 'R' is being added for Realize - although many would contend that focusing on
any financial gains that result from putting Six Sigma Into practice is counter productive and that these
gains are merely a by-product of a good process Improvement programme and should be expected. A
number of global manufacturing companies, Including GE, Honeywell and Toyota, have refined Six Sigma
over the years for their own use, but the fundamental principles survive intact.
Measuring the Supply Chain
The Introduction of RFID (Radio Frequency Identification) and Its Increasingly rapid uptake by global
Industry has given companies the ability to measure their supply chain performance somewhat more
easily. More importantly, the information received via RFID Is real time, and it has demonstrated that the
majority of companies are not even achieving One Sigma! As a result, there Is still some considerable
way to go In the design of the true SSSC In the real world - however easy It may appear in theoretical
studies undertaken in university environments.
Shai Verma, RFID practice leader for IBM Canada, and Venkat Krishnamurthy Chief Technology Officer
at OATSystems, an RFID software company and a partner of IBM, made a presentation at RFID Journal
LIVE! Canada. The focus was on how RFID could be used as a tool to measure supply chain efficiency.
Using RFID data supplied by one retailer to one of OAT's customers, Verma and Krishnamurthy found
that the retailer's ability to comply with a promotional plan was 0.5 Sigma. Even getting to Four Sigma
would have resulted In a 20% Increase In sales.
The supply chain, as any professional recognizes, is a complex succession of dependent business
processes. Six Sigma devotees would declare that it is a prerequisite that each of these processes meet
Six Sigma requirements to achieve the optimum benefit, resulting In the Holy Grail of an SSSC - where
OTIF orders are consistently being delivered to the customer - and eventually realizing the financial
benefits of introducing the Six Sigma methodology. This is a costly exercise both In terms of training staff
to the various required standards of the Six Sigma disciplines and the potential pain points that must be
addressed to change the business to work to Six Sigma principles.
Varying supply lead times from the wide number of different suppliers and business processes (both
internal and external) are, perhaps, the principal determining factors In influencing the performance of the
supply chain. As the number of business partners and suppliers Increase in number, so too Is the
likelihood of one or more being below par - and thus the possibility of a breakdown In the overall ability to
deliver to the customer's expectations.
A supply chain is only as strong as its weakest link. If the customer believes that It cannot rely on the
supplier then they may go elsewhere. If the supplier suspects that their service falls below acceptable
standards then they may overcompensate by holding additional stock, overstating demand or expected
delivery dates to give buffer time, or using unnecessarily expensive logistics to receive raw materials or
deliver finished goods. All of these factors lead to a level of predictability In the supply chain but are costly
and Inefficient and can be 'leaned' out. Applying Six Sigma principles to the Individual process areas
provides quantitative evidence enabling management to Improve towards a lesser number of defects and,
ultimately, to eliminate the majority.
The process of manufacturing contains many of the elements Involved throughout the extended supply
chain. In many cases, the manufacturing process lies at the heart of the supply chain, regardless of
whether this is outsourced or in-house. The Six Sigma methodology was developed to prevent defects
occurring during production and, thus, it is reasonable to arrive at the conclusion that Six Sigma tools and
techniques could have application throughout the wider supply chain. Any breakdown in the making of an
item Is analogous to the failure of a particular element of the supply chain network, however small.
This requires review and potentially the redesign of processes to achieve lead time compression and
OTIF order fulfilment and Six Sigma takes a statistical approach to this through all of the five DMAIC
stages, but most particularly during the "Analyse" phase. If we were to take a relatively simple supply
chain with a supplier of raw materials, a raw materials Inward process, internal handling and outbound
logistics, then using the statistical capabilities afforded by Six Sigma it Is possible to afford supply chain
managers the ability to determine, for example, the optimum number of pallets that will be produced in
any one day and thus the number of vehicles that will be needed in each manufacturing location to deliver
those pallets to the customer.
There are, of course, many different elements to supply chains, but this is a logical course of events that
could be broadened to cover the extended supply chain. However, It must be remembered that for each
additional element more variables are Introduced that require analysis and which, exponentially, Increase
the likelihood of a reduced capability to achieve the SSSC aim of minimal defects.
Six Sigma Application in the Supply Chain
Six Sigma, with its champions, master black belts, black belts and green belts, Is geared to cascade its
concepts throughout an organization, and this approach is equally applicable in the supply chain
environment. Roles and responsibilities are defined; top down and bottom up change processes are
developed to enable the business area to respond more effectively, and there are detailed statistics
readily available to justify decisions. However, one of the potential weaknesses of an SSSC lies in Its very
reliance on detailed statistical outcomes. Strict adherence to the mathematical principles can mean, In
theory, that there is a weak link In the chain. Mathematics is a precise science; economics and the theory
of supply and demand are not, and It could be argued that combining the two could be mutually exclusive
and result in confusion.
One of the disadvantages of Six Sigma Is that it lacks a fundamental methodology for recognizing and
leveraging competitive advantage In terms of strategic or operational opportunities that may arise.
Furthermore, its mathematical basis and structure do not allow for the "human factor," thus It can miss the
high priority prospects in favour of the "quick wins."
Six Sigma has i?-built tools that speak to the "Voice of the Customer" and the "Voice of the Process," but
nothing that recognizes the openings that can occur and help a company to understand the state of the
Industry In which the business operates, the current state of the economy (recession, Inflation etc.) or the
company's position at any given moment. There is, therefore, the classic divergence of theory and
practice, where theory assumes a perfect world and practice tells the seasoned professional that In
certain circumstances it Is better to take another approach.
Readers who are familiar with the work of the Supply Chain Council, its SCOR methodology and Lean
practices, will be aware that there are many similarities with Six Sigma. By judicious application of these
three practices, the advantages of Six Sigma Itself become apparent as Its rigour and structure
complement the other practices and negate the potential disadvantages it has when It is used In isolation.
Six Sigma is statistically analytical in its approach, so applying it everywhere across the supply chain is
not realistic. However, by combining with SCOR, specific areas to focus on can be determined together
with the metrics to measure the success of the exercise. Additionally Lean practices can also be applied
in areas where Six Slgma's overly statistical approach is not appropriate. The combined application of the
three, through experienced practitioners, means that the right technique is selected at the right time. This
selective application of the techniques means that the qualitative approaches of SCOR can be applied to
the quantitative tools contained within Six Sigma and Lean to derive a synergistic benefit far greater than
if one approach alone is selected and applied, wholeheartedly, across an entire supply chain.
Furthermore, unless a company has total control over its suppliers, their suppliers, Its customers and their
customers, any company wishing to Introduce an SSSC can only do so Internally - thus It cannot impose
Six Sigma practices across every tier and echelon in the extended supply chain. This means that the
business can only, in reality, get Its own house in order and effectively manage its supply chain from raw
materials Inwards to finished goods outwards. The benefits it obtains as a consequence may be sufficient
to encourage companies in the extended supply chain to adopt similar business processes, at the least,
thus gradually Improving the Integrated whole.
It Is realistic to define an SSSC as one that has been designed to deliver finished products to the
customer within the time specified as the delivery date with as few defects as possible - at the lowest cost
achievable. Thus, the SCOR defined metric of Perfect Order Fulfilment (On Time, In Full, Perfect Quality,
Correct Documentation) could be defined as the Six Sigma success metric.
It has been argued (specifically In the IEEE Transactions of Automation Science of 2004 by Garg,
Narahari and Vlswandham) that there are two sets of design problems that are most common In
proposing an SSSC: generic design problems including
* allocation of process means
* allocation of process variances
* allocation of customer windows and concrete design problems, including
* due date setting
* choice of customers
* Inventory allocation
* capacity planning
* vendor selection
* logistics providers
* choice of logistic methods.
Because these problems can arise at any level of the design of the SSSC, each sub-process must be
addressed individually In the design strategy. By concentrating on each sub-process and applying Six
Sigma statistical and mathematical formulae to each element it should be possible to achieve optimum
delivery to meet the 3.4 DPMO standard.
Moving Closer to Six Sigma?
Possibly the most Important question that arises from all of the above would be whether or not Six Sigma
tools and techniques have a place outside the manufacturing environment and in the wider context of the
design of the supply chain as a whole? The answer to this has to be a categorical yes; with the caveat
that they are used judiciously and that they are not suitable for use across the extended supply chain - as
there is unlikely to be sufficient control to ensure continuous and contiguous practices.
Companies that wish to move towards an SSSC should determine what their success criteria are
(lowering Inventory or improving pick accuracy being two obvious and easily measured examples) and
put checks in place to ensure that they have ascertained the correct metrics for measuring success. If the
right metrics are in place then it is possible to examine performance, then change the process and
measure it again.
Using a combination of methodologies may be more practical than using a standalone Six Sigma
approach. For example, the SCOR competitive advantage analysis can be utilized to determine where
focus should be placed in an organization. Six Sigma can then be applied to that specific area. This
reduces the cost of the exercise as well as producing measurable benefits as the part of the supply chain
that is under scrutiny is readily Identifiable.
Embracing the philosophy of Six Sigma, or continual process improvement, is not easy. It requires a
constant re-examinatlon of what a company is doing wrong, then correcting it. However, the results can
be transformational; after Motorola embraced Six Sigma manufacturing, the company said that it saved
$16 billion per year! Given that the majority of supply chain processes are only at 0.5 Sigma today, the
savings for large companies could be even greater for companies that adopt the Six Sigma approach in
their supply chain.
The following methodology combination is recommended to achieve optimal results: Six Sigma is
primarily applicable to processes that are quantitatively measured - and within the organization's control -
and thus should not be used in isolation in the design of the supply chain. Other methods that are
designed for the extended supply chain, such as Lean and SCOR, should be used in conjunction with Six
Sigma to widen the area of focus outside of the organization.
Use SCOR's "Analyse" approaches to define the primary areas of focus, the metrics that should be used
to define success and the level at which success will be achieved via their Competitive Advantage Matrix.
Use SCOR or Lean to Improve areas that are Qualitative and thus not appropriate for statistical analysis.
When using Six Sigma, aim to reach the optimal level for the organization, rather than the six sigma ideal.
Use the following calculation to decide when that optimal level has been reached: Benefit = Value - Cost.
And once the cost of Implementing Six Sigma Is greater than the additional value gained (when the law of
diminishing returns kicks in) then the optimal level is reached and it is an appropriate time to move onto
the next improvement area.
SIDEBAR
A supply chain is only as strong as its weakest link. If the customer believes that it cannot rely on the
supplier, then they may go elsewhere.
SIDEBAR
Mathematics is a precise science; economics and the theory of supply and demand are not, and it could
be argued that combining the two could be mutually exclusive and result in confusion.
SIDEBAR
For more information
www.sevencs.co.uk
1 2 3 4 5 6 Next Page In addition, make sure to read these articles:
Supply Chain Management: Monitoring Partnering Contracts
Green Habits of Supply Chain Managers
Uncovering Supply Chain's Hidden Taxes
Following the Thread: Industry Cluster Theory, the New England Cotton Textiles I...
E-business and supply chain management: An overview and framework
Wichita NAPM Learns About Cessna Supply Chain Integration
Supply Chain Management Research and Production and Operations Management: Revie...
Sponsored Results
Access America Transport
You are viewing page 2
HEADNOTE
Sean Culey, Managing Director of sevencs limited, describes how the 'six sigma' statistical
approach, as used in manufacturing, should be applied to supply chain operations as well.
If the question "What is your supply chain?" were asked of 100
Ads by Google
New Business Opportunity
Run Your Own Energy Saving Business Complete Start-Up Pack from $14k
www.Enigin.net/BusinessOpportunity
Starting a Biz near DC?
Let the Fairfax County Economic Development Authority help!
www.FairfaxCountyEDA.org
Disaster Plan Template
Option To Download Selected Pages Worldwide License. Save 20%!
www.E-Janco.com/BusinessContinuity
business leaders, the replies would vary from the expected "raw materials Inward to goods
outward" to the more forward thinking organization that would describe an extended chain from
the "suppliers' supplier to the customers' customer." However, all of the answers would describe
a similar and recognizable set of business processes.
Ask the same group of people the question "What Is Six Sigma?" and answers could vary from "Is
it a classically trained boy band?" to a more informed "Something complicated and probably
expensive, Invented in Japan, that we might use to improve our business" through to any master
black belts present, who will give a complete and Informed description. In layman's terms, the
knowledgeable response would normally describe a set of statistically valid measurements of
business processes, first Introduced by Motorola, which provide the opportunity to systematically
Improve business processes by eliminating defects and reducing variation.
Much academic study has been undertaken to show the complex algebra that goes towards
designing a Six Sigma Supply Chain (SSSC), but the majority of companies have been unable to
get anywhere close to implementing It as they have not had the capability or spare resource to
measure their supply chain in enough detail, or define what excellence would be for them. Six
Sigma has the ultimate goal of achieving 3.4 defects per million objects (DPMO) - which is
another way of saying you have to get to six Standard Deviations from the 'mean' or 'perfect'
before you have a problem. It requires constant monitoring, analysis and refinement to ensure
that this target Is met. It Is not enough to be able to claim that on one occasion a company
delivered On Time In Full (OTIF) or manufactured a complete process run with minimal defects.
To claim to be Six Sigma this has to recur consistently - it Is the process, much more than the
product, that Is being measured.
The five steps making up Six Sigma are known as DMAIC - Discover, Measure, Analyse, Improve
and Control. Increasingly, an 'R' is being added for Realize - although many would contend that
focusing on any financial gains that result from putting Six Sigma Into practice is counter
productive and that these gains are merely a by-product of a good process Improvement
programme and should be expected. A number of global manufacturing companies, Including
GE, Honeywell and Toyota, have refined Six Sigma over the years for their own use, but the
fundamental principles survive intact.
Measuring the Supply Chain
The Introduction of RFID
(Radio Frequency Identification) and Its Increasingly rapid uptake by global Industry has given
companies the ability to measure their supply chain performance somewhat more easily. More
importantly, the information received via RFID Is real time, and it has demonstrated that the
majority of companies are not even achieving One Sigma! As a result, there Is still some
considerable way to go In the design of the true SSSC In the real world - however easy It may
appear in theoretical studies undertaken in university environments.
Shai Verma, RFID practice leader for IBM Canada, and Venkat Krishnamurthy Chief Technology
Officer at OATSystems, an RFID software company and a partner of IBM, made a presentation at
RFID Journal LIVE! Canada. The focus was on how RFID could be used as a tool to measure
supply chain efficiency.
Using RFID data supplied by one retailer to one of OAT's customers, Verma and Krishnamurthy
found that the retailer's ability to comply with a promotional plan was 0.5 Sigma. Even getting to
Four Sigma would have resulted In a 20% Increase In sales.
The supply chain, as any professional recognizes, is a complex succession of dependent
business processes. Six Sigma devotees would declare that it is a prerequisite that each of these
processes meet Six Sigma requirements to achieve the optimum benefit, resulting In the Holy
Grail of an SSSC - where OTIF orders are consistently being delivered to the customer - and
eventually realizing the financial benefits of introducing the Six Sigma methodology. This is a
costly exercise both In terms of training staff to the various required standards of the Six Sigma
disciplines and the potential pain points that must be addressed to change the business to work
to Six Sigma principles.
Varying supply lead times from the wide number of different suppliers and business processes
(both internal and external) are, perhaps, the principal determining factors In influencing the
performance of the supply chain. As the number of business partners and suppliers Increase in
number, so too Is the likelihood of one or more being below par - and thus the possibility of a
breakdown In the overall ability to deliver to the customer's expectations.
A supply chain is only as strong as its weakest link. If the customer believes that It cannot rely on
the supplier then they may go elsewhere. If the supplier suspects that their service falls below
acceptable standards then they may overcompensate by holding additional stock, overstating
demand or expected delivery dates to give buffer time, or using unnecessarily expensive logistics
to receive raw materials or deliver finished goods. All of these factors lead to a level of
predictability In the supply chain but are costly and Inefficient and can be 'leaned' out. Applying
Six Sigma principles to the Individual process areas provides quantitative evidence enabling
management to Improve towards a lesser number of defects and, ultimately, to eliminate the
majority.
The process of manufacturing contains many of the elements Involved throughout the extended
supply chain. In many cases, the manufacturing process lies at the heart of the supply chain,
regardless of whether this is outsourced or in-house. The Six Sigma methodology was developed
to prevent defects occurring during production and, thus, it is reasonable to arrive at the
conclusion that Six Sigma tools and techniques could have application throughout the wider
supply chain. Any breakdown in the making of an item Is analogous to the failure of a particular
element of the supply chain network, however small.
This requires review and potentially the redesign of processes to achieve lead time compression
and OTIF order fulfilment and Six Sigma takes a statistical approach to this through all of the five
DMAIC stages, but most particularly during the "Analyse" phase. If we were to take a relatively
simple supply chain with a supplier of raw materials, a raw materials Inward process, internal
handling and outbound logistics, then using the statistical capabilities afforded by Six Sigma it Is
possible to afford supply chain managers the ability to determine, for example, the optimum
number of pallets that will be produced in any one day and thus the number of vehicles that will
be needed in each manufacturing location to deliver those pallets to the customer.
There are, of course, many different elements to supply chains, but this is a logical course of
events that could be broadened to cover the extended supply chain. However, It must be
remembered that for each additional element more variables are Introduced that require analysis
and which, exponentially, Increase the likelihood of a reduced capability to achieve the SSSC aim
of minimal defects.
Six Sigma Application in the Supply Chain
Six Sigma, with its champions, master black belts, black belts and green belts, Is geared to
cascade its concepts throughout an organization, and this approach is equally applicable in the
supply chain environment. Roles and responsibilities are defined; top down and bottom up
change processes are developed to enable the business area to respond more effectively, and
there are detailed statistics readily available to justify decisions. However, one of the potential
weaknesses of an SSSC lies in Its very reliance on detailed statistical outcomes. Strict adherence
to the mathematical principles can mean, In theory, that there is a weak link In the chain.
Mathematics is a precise science; economics and the theory of supply and demand are not, and
It could be argued that combining the two could be mutually exclusive and result in confusion.
One of the disadvantages of Six Sigma Is that it lacks a fundamental methodology for recognizing
and leveraging competitive advantage In terms of strategic or operational opportunities that may
arise. Furthermore, its mathematical basis and structure do not allow for the "human factor," thus
It can miss the high priority prospects in favour of the "quick wins."
Six Sigma has i?-built tools that speak to the "Voice of the Customer" and the "Voice of the
Process," but nothing that recognizes the openings that can occur and help a company to
understand the state of the Industry In which the business operates, the current state of the
economy (recession, Inflation etc.) or the company's position at any given moment. There is,
therefore, the classic divergence of theory and practice, where theory assumes a perfect world
and practice tells the seasoned professional that In certain circumstances it Is better to take
another approach.
Readers who are familiar with the work of the Supply Chain Council, its SCOR methodology and
Lean practices, will be aware that there are many similarities with Six Sigma. By judicious
application of these three practices, the advantages of Six Sigma Itself become apparent as Its
rigour and structure complement the other practices and negate the potential disadvantages it
has when It is used In isolation.
Six Sigma is statistically analytical in its approach, so applying it everywhere across the supply
chain is not realistic. However, by combining with SCOR, specific areas to focus on can be
determined together with the metrics to measure the success of the exercise. Additionally Lean
practices can also be applied in areas where Six Slgma's overly statistical approach is not
appropriate. The combined application of the three, through experienced practitioners, means
that the right technique is selected at the right time. This selective application of the techniques
means that the qualitative approaches of SCOR can be applied to the quantitative tools contained
within Six Sigma and Lean to derive a synergistic benefit far greater than if one approach alone is
selected and applied, wholeheartedly, across an entire supply chain.
Furthermore, unless a company has total control over its suppliers, their suppliers, Its customers
and their customers, any company wishing to Introduce an SSSC can only do so Internally - thus
It cannot impose Six Sigma practices across every tier and echelon in the extended supply chain.
This means that the business can only, in reality, get Its own house in order and effectively
manage its supply chain from raw materials Inwards to finished goods outwards. The benefits it
obtains as a consequence may be sufficient to encourage companies in the extended supply
chain to adopt similar business processes, at the least, thus gradually Improving the Integrated
whole.
It Is realistic to define an SSSC as one that has been designed to deliver finished products to the
customer within the time specified as the delivery date with as few defects as possible - at the
lowest cost achievable. Thus, the SCOR defined metric of Perfect Order Fulfilment (On Time, In
Full, Perfect Quality, Correct Documentation) could be defined as the Six Sigma success metric.
It has been argued (specifically In the IEEE Transactions of Automation Science of 2004 by Garg,
Narahari and Vlswandham) that there are two sets of design problems that are most common In
proposing an SSSC: generic design problems including
* allocation of process means
* allocation of process variances
* allocation of customer windows and concrete design problems, including
* due date setting
* choice of customers
* Inventory allocation
* capacity planning
* vendor selection
* logistics providers
* choice of logistic methods.
Because these problems can arise at any level of the design of the SSSC, each sub-process
must be addressed individually In the design strategy. By concentrating on each sub-process and
applying Six Sigma statistical and mathematical formulae to each element it should be possible to
achieve optimum delivery to meet the 3.4 DPMO standard.
Moving Closer to Six Sigma?
Possibly the most Important question that arises from all of the above would be whether or not
Six Sigma tools and techniques have a place outside the manufacturing environment and in the
wider context of the design of the supply chain as a whole? The answer to this has to be a
categorical yes; with the caveat that they are used judiciously and that they are not suitable for
use across the extended supply chain - as there is unlikely to be sufficient control to ensure
continuous and contiguous practices.
Companies that wish to move towards an SSSC should determine what their success criteria are
(lowering Inventory or improving pick accuracy being two obvious and easily measured
examples) and put checks in place to ensure that they have ascertained the correct metrics for
measuring success. If the right metrics are in place then it is possible to examine performance,
then change the process and measure it again.
Using a combination of methodologies may be more practical than using a standalone Six Sigma
approach. For example, the SCOR competitive advantage analysis can be utilized to determine
where focus should be placed in an organization. Six Sigma can then be applied to that specific
area. This reduces the cost of the exercise as well as producing measurable benefits as the part
of the supply chain that is under scrutiny is readily Identifiable.
Embracing the philosophy of Six Sigma, or continual process improvement, is not easy. It
requires a constant re-examinatlon of what a company is doing wrong, then correcting it.
However, the results can be transformational; after Motorola embraced Six Sigma manufacturing,
the company said that it saved $16 billion per year! Given that the majority of supply chain
processes are only at 0.5 Sigma today, the savings for large companies could be even greater for
companies that adopt the Six Sigma approach in their supply chain.
The following methodology combination is recommended to achieve optimal results: Six Sigma is
primarily applicable to processes that are quantitatively measured - and within the organization's
control - and thus should not be used in isolation in the design of the supply chain. Other methods
that are designed for the extended supply chain, such as Lean and SCOR, should be used in
conjunction with Six Sigma to widen the area of focus outside of the organization.
Use SCOR's "Analyse" approaches to define the primary areas of focus, the metrics that should
be used to define success and the level at which success will be achieved via their Competitive
Advantage Matrix. Use SCOR or Lean to Improve areas that are Qualitative and thus not
appropriate for statistical analysis.
When using Six Sigma, aim to reach the optimal level for the organization, rather than the six
sigma ideal. Use the following calculation to decide when that optimal level has been reached:
Benefit = Value - Cost. And once the cost of Implementing Six Sigma Is greater than the
additional value gained (when the law of diminishing returns kicks in) then the optimal level is
reached and it is an appropriate time to move onto the next improvement area.
SIDEBAR
A supply chain is only as strong as its weakest link. If the customer believes that it cannot rely on
the supplier, then they may go elsewhere.
SIDEBAR
Mathematics is a precise science; economics and the theory of supply and demand are not, and it
could be argued that combining the two could be mutually exclusive and result in confusion.
SIDEBAR
For more information
www.sevencs.co.uk Previous Page 1 2 3 4 5 6 Next Page
In addition, make sure to read these articles: You are viewing page 3
HEADNOTE
Sean Culey, Managing Director of sevencs limited, describes how the 'six sigma' statistical
approach, as used in manufacturing, should be applied to supply chain operations as well.
If the question "What is your supply chain?" were asked of 100
Ads by Google
New Business Opportunity
Run Your Own Energy Saving Business Complete Start-Up Pack from $14k
www.Enigin.net/BusinessOpportunity
Starting a Biz near DC?
Let the Fairfax County Economic Development Authority help!
www.FairfaxCountyEDA.org
Disaster Plan Template
Option To Download Selected Pages Worldwide License. Save 20%!
www.E-Janco.com/BusinessContinuity
business leaders, the replies would vary from the expected "raw materials Inward to goods
outward" to the more forward thinking organization that would describe an extended chain from
the "suppliers' supplier to the customers' customer." However, all of the answers would describe
a similar and recognizable set of business processes.
Ask the same group of people the question "What Is Six Sigma?" and answers could vary from "Is
it a classically trained boy band?" to a more informed "Something complicated and probably
expensive, Invented in Japan, that we might use to improve our business" through to any master
black belts present, who will give a complete and Informed description. In layman's terms, the
knowledgeable response would normally describe a set of statistically valid measurements of
business processes, first Introduced by Motorola, which provide the opportunity to systematically
Improve business processes by eliminating defects and reducing variation.
Much academic study has been undertaken to show the complex algebra that goes towards
designing a Six Sigma Supply Chain (SSSC), but the majority of companies have been unable to
get anywhere close to implementing It as they have not had the capability or spare resource to
measure their supply chain in enough detail, or define what excellence would be for them. Six
Sigma has the ultimate goal of achieving 3.4 defects per million objects (DPMO) - which is
another way of saying you have to get to six Standard Deviations from the 'mean' or 'perfect'
before you have a problem. It requires constant monitoring, analysis and refinement to ensure
that this target Is met. It Is not enough to be able to claim that on one occasion a company
delivered On Time In Full (OTIF) or manufactured a complete process run with minimal defects.
To claim to be Six Sigma this has to recur consistently - it Is the process, much more than the
product, that Is being measured.
The five steps making up Six Sigma are known as DMAIC - Discover, Measure, Analyse, Improve
and Control. Increasingly, an 'R' is being added for Realize - although many would contend that
focusing on any financial gains that result from putting Six Sigma Into practice is counter
productive and that these gains are merely a by-product of a good process Improvement
programme and should be expected. A number of global manufacturing companies, Including
GE, Honeywell and Toyota, have refined Six Sigma over the years for their own use, but the
fundamental principles survive intact.
Measuring the Supply Chain
The Introduction of RFID
(Radio Frequency Identification) and Its Increasingly rapid uptake by global Industry has given
companies the ability to measure their supply chain performance somewhat more easily. More
importantly, the information received via RFID Is real time, and it has demonstrated that the
majority of companies are not even achieving One Sigma! As a result, there Is still some
considerable way to go In the design of the true SSSC In the real world - however easy It may
appear in theoretical studies undertaken in university environments.
Shai Verma, RFID practice leader for IBM Canada, and Venkat Krishnamurthy Chief Technology
Officer at OATSystems, an RFID software company and a partner of IBM, made a presentation at
RFID Journal LIVE! Canada. The focus was on how RFID could be used as a tool to measure
supply chain efficiency.
Using RFID data supplied by one retailer to one of OAT's customers, Verma and Krishnamurthy
found that the retailer's ability to comply with a promotional plan was 0.5 Sigma. Even getting to
Four Sigma would have resulted In a 20% Increase In sales.
The supply chain, as any professional recognizes, is a complex succession of dependent
business processes. Six Sigma devotees would declare that it is a prerequisite that each of these
processes meet Six Sigma requirements to achieve the optimum benefit, resulting In the Holy
Grail of an SSSC - where OTIF orders are consistently being delivered to the customer - and
eventually realizing the financial benefits of introducing the Six Sigma methodology. This is a
costly exercise both In terms of training staff to the various required standards of the Six Sigma
disciplines and the potential pain points that must be addressed to change the business to work
to Six Sigma principles.
Varying supply lead times from the wide number of different suppliers and business processes
(both internal and external) are, perhaps, the principal determining factors In influencing the
performance of the supply chain. As the number of business partners and suppliers Increase in
number, so too Is the likelihood of one or more being below par - and thus the possibility of a
breakdown In the overall ability to deliver to the customer's expectations.
A supply chain is only as strong as its weakest link. If the customer believes that It cannot rely on
the supplier then they may go elsewhere. If the supplier suspects that their service falls below
acceptable standards then they may overcompensate by holding additional stock, overstating
demand or expected delivery dates to give buffer time, or using unnecessarily expensive logistics
to receive raw materials or deliver finished goods. All of these factors lead to a level of
predictability In the supply chain but are costly and Inefficient and can be 'leaned' out. Applying
Six Sigma principles to the Individual process areas provides quantitative evidence enabling
management to Improve towards a lesser number of defects and, ultimately, to eliminate the
majority.
The process of manufacturing contains many of the elements Involved throughout the extended
supply chain. In many cases, the manufacturing process lies at the heart of the supply chain,
regardless of whether this is outsourced or in-house. The Six Sigma methodology was developed
to prevent defects occurring during production and, thus, it is reasonable to arrive at the
conclusion that Six Sigma tools and techniques could have application throughout the wider
supply chain. Any breakdown in the making of an item Is analogous to the failure of a particular
element of the supply chain network, however small.
This requires review and potentially the redesign of processes to achieve lead time compression
and OTIF order fulfilment and Six Sigma takes a statistical approach to this through all of the five
DMAIC stages, but most particularly during the "Analyse" phase. If we were to take a relatively
simple supply chain with a supplier of raw materials, a raw materials Inward process, internal
handling and outbound logistics, then using the statistical capabilities afforded by Six Sigma it Is
possible to afford supply chain managers the ability to determine, for example, the optimum
number of pallets that will be produced in any one day and thus the number of vehicles that will
be needed in each manufacturing location to deliver those pallets to the customer.
There are, of course, many different elements to supply chains, but this is a logical course of
events that could be broadened to cover the extended supply chain. However, It must be
remembered that for each additional element more variables are Introduced that require analysis
and which, exponentially, Increase the likelihood of a reduced capability to achieve the SSSC aim
of minimal defects.
Six Sigma Application in the Supply Chain
Six Sigma, with its champions, master black belts, black belts and green belts, Is geared to
cascade its concepts throughout an organization, and this approach is equally applicable in the
supply chain environment. Roles and responsibilities are defined; top down and bottom up
change processes are developed to enable the business area to respond more effectively, and
there are detailed statistics readily available to justify decisions. However, one of the potential
weaknesses of an SSSC lies in Its very reliance on detailed statistical outcomes. Strict adherence
to the mathematical principles can mean, In theory, that there is a weak link In the chain.
Mathematics is a precise science; economics and the theory of supply and demand are not, and
It could be argued that combining the two could be mutually exclusive and result in confusion.
One of the disadvantages of Six Sigma Is that it lacks a fundamental methodology for recognizing
and leveraging competitive advantage In terms of strategic or operational opportunities that may
arise. Furthermore, its mathematical basis and structure do not allow for the "human factor," thus
It can miss the high priority prospects in favour of the "quick wins."
Six Sigma has i?-built tools that speak to the "Voice of the Customer" and the "Voice of the
Process," but nothing that recognizes the openings that can occur and help a company to
understand the state of the Industry In which the business operates, the current state of the
economy (recession, Inflation etc.) or the company's position at any given moment. There is,
therefore, the classic divergence of theory and practice, where theory assumes a perfect world
and practice tells the seasoned professional that In certain circumstances it Is better to take
another approach.
Readers who are familiar with the work of the Supply Chain Council, its SCOR methodology and
Lean practices, will be aware that there are many similarities with Six Sigma. By judicious
application of these three practices, the advantages of Six Sigma Itself become apparent as Its
rigour and structure complement the other practices and negate the potential disadvantages it
has when It is used In isolation.
Six Sigma is statistically analytical in its approach, so applying it everywhere across the supply
chain is not realistic. However, by combining with SCOR, specific areas to focus on can be
determined together with the metrics to measure the success of the exercise. Additionally Lean
practices can also be applied in areas where Six Slgma's overly statistical approach is not
appropriate. The combined application of the three, through experienced practitioners, means
that the right technique is selected at the right time. This selective application of the techniques
means that the qualitative approaches of SCOR can be applied to the quantitative tools contained
within Six Sigma and Lean to derive a synergistic benefit far greater than if one approach alone is
selected and applied, wholeheartedly, across an entire supply chain.
Furthermore, unless a company has total control over its suppliers, their suppliers, Its customers
and their customers, any company wishing to Introduce an SSSC can only do so Internally - thus
It cannot impose Six Sigma practices across every tier and echelon in the extended supply chain.
This means that the business can only, in reality, get Its own house in order and effectively
manage its supply chain from raw materials Inwards to finished goods outwards. The benefits it
obtains as a consequence may be sufficient to encourage companies in the extended supply
chain to adopt similar business processes, at the least, thus gradually Improving the Integrated
whole.
It Is realistic to define an SSSC as one that has been designed to deliver finished products to the
customer within the time specified as the delivery date with as few defects as possible - at the
lowest cost achievable. Thus, the SCOR defined metric of Perfect Order Fulfilment (On Time, In
Full, Perfect Quality, Correct Documentation) could be defined as the Six Sigma success metric.
It has been argued (specifically In the IEEE Transactions of Automation Science of 2004 by Garg,
Narahari and Vlswandham) that there are two sets of design problems that are most common In
proposing an SSSC: generic design problems including
* allocation of process means
* allocation of process variances
* allocation of customer windows and concrete design problems, including
* due date setting
* choice of customers
* Inventory allocation
* capacity planning
* vendor selection
* logistics providers
* choice of logistic methods.
Because these problems can arise at any level of the design of the SSSC, each sub-process
must be addressed individually In the design strategy. By concentrating on each sub-process and
applying Six Sigma statistical and mathematical formulae to each element it should be possible to
achieve optimum delivery to meet the 3.4 DPMO standard.
Moving Closer to Six Sigma?
Possibly the most Important question that arises from all of the above would be whether or not
Six Sigma tools and techniques have a place outside the manufacturing environment and in the
wider context of the design of the supply chain as a whole? The answer to this has to be a
categorical yes; with the caveat that they are used judiciously and that they are not suitable for
use across the extended supply chain - as there is unlikely to be sufficient control to ensure
continuous and contiguous practices.
Companies that wish to move towards an SSSC should determine what their success criteria are
(lowering Inventory or improving pick accuracy being two obvious and easily measured
examples) and put checks in place to ensure that they have ascertained the correct metrics for
measuring success. If the right metrics are in place then it is possible to examine performance,
then change the process and measure it again.
Using a combination of methodologies may be more practical than using a standalone Six Sigma
approach. For example, the SCOR competitive advantage analysis can be utilized to determine
where focus should be placed in an organization. Six Sigma can then be applied to that specific
area. This reduces the cost of the exercise as well as producing measurable benefits as the part
of the supply chain that is under scrutiny is readily Identifiable.
Embracing the philosophy of Six Sigma, or continual process improvement, is not easy. It
requires a constant re-examinatlon of what a company is doing wrong, then correcting it.
However, the results can be transformational; after Motorola embraced Six Sigma manufacturing,
the company said that it saved $16 billion per year! Given that the majority of supply chain
processes are only at 0.5 Sigma today, the savings for large companies could be even greater for
companies that adopt the Six Sigma approach in their supply chain.
The following methodology combination is recommended to achieve optimal results: Six Sigma is
primarily applicable to processes that are quantitatively measured - and within the organization's
control - and thus should not be used in isolation in the design of the supply chain. Other methods
that are designed for the extended supply chain, such as Lean and SCOR, should be used in
conjunction with Six Sigma to widen the area of focus outside of the organization.
Use SCOR's "Analyse" approaches to define the primary areas of focus, the metrics that should
be used to define success and the level at which success will be achieved via their Competitive
Advantage Matrix. Use SCOR or Lean to Improve areas that are Qualitative and thus not
appropriate for statistical analysis.
When using Six Sigma, aim to reach the optimal level for the organization, rather than the six
sigma ideal. Use the following calculation to decide when that optimal level has been reached:
Benefit = Value - Cost. And once the cost of Implementing Six Sigma Is greater than the
additional value gained (when the law of diminishing returns kicks in) then the optimal level is
reached and it is an appropriate time to move onto the next improvement area.
SIDEBAR
A supply chain is only as strong as its weakest link. If the customer believes that it cannot rely on
the supplier, then they may go elsewhere.
SIDEBAR
Mathematics is a precise science; economics and the theory of supply and demand are not, and it
could be argued that combining the two could be mutually exclusive and result in confusion.
SIDEBAR
For more information
www.sevencs.co.uk Previous Page 1 2 3 4 5 6 Next
You are viewing page 4
HEADNOTE
Sean Culey, Managing Director of sevencs limited, describes how the 'six sigma' statistical
approach, as used in manufacturing, should be applied to supply chain operations as well.
If the question "What is your supply chain?" were asked of 100
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Option To Download Selected Pages Worldwide License. Save 20%!
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business leaders, the replies would vary from the expected "raw materials Inward to goods
outward" to the more forward thinking organization that would describe an extended chain from
the "suppliers' supplier to the customers' customer." However, all of the answers would describe
a similar and recognizable set of business processes.
Ask the same group of people the question "What Is Six Sigma?" and answers could vary from "Is
it a classically trained boy band?" to a more informed "Something complicated and probably
expensive, Invented in Japan, that we might use to improve our business" through to any master
black belts present, who will give a complete and Informed description. In layman's terms, the
knowledgeable response would normally describe a set of statistically valid measurements of
business processes, first Introduced by Motorola, which provide the opportunity to systematically
Improve business processes by eliminating defects and reducing variation.
Much academic study has been undertaken to show the complex algebra that goes towards
designing a Six Sigma Supply Chain (SSSC), but the majority of companies have been unable to
get anywhere close to implementing It as they have not had the capability or spare resource to
measure their supply chain in enough detail, or define what excellence would be for them. Six
Sigma has the ultimate goal of achieving 3.4 defects per million objects (DPMO) - which is
another way of saying you have to get to six Standard Deviations from the 'mean' or 'perfect'
before you have a problem. It requires constant monitoring, analysis and refinement to ensure
that this target Is met. It Is not enough to be able to claim that on one occasion a company
delivered On Time In Full (OTIF) or manufactured a complete process run with minimal defects.
To claim to be Six Sigma this has to recur consistently - it Is the process, much more than the
product, that Is being measured.
The five steps making up Six Sigma are known as DMAIC - Discover, Measure, Analyse, Improve
and Control. Increasingly, an 'R' is being added for Realize - although many would contend that
focusing on any financial gains that result from putting Six Sigma Into practice is counter
productive and that these gains are merely a by-product of a good process Improvement
programme and should be expected. A number of global manufacturing companies, Including
GE, Honeywell and Toyota, have refined Six Sigma over the years for their own use, but the
fundamental principles survive intact.
Measuring the Supply Chain
The Introduction of RFID
(Radio Frequency Identification) and Its Increasingly rapid uptake by global Industry has given
companies the ability to measure their supply chain performance somewhat more easily. More
importantly, the information received via RFID Is real time, and it has demonstrated that the
majority of companies are not even achieving One Sigma! As a result, there Is still some
considerable way to go In the design of the true SSSC In the real world - however easy It may
appear in theoretical studies undertaken in university environments.
Shai Verma, RFID practice leader for IBM Canada, and Venkat Krishnamurthy Chief Technology
Officer at OATSystems, an RFID software company and a partner of IBM, made a presentation at
RFID Journal LIVE! Canada. The focus was on how RFID could be used as a tool to measure
supply chain efficiency.
Using RFID data supplied by one retailer to one of OAT's customers, Verma and Krishnamurthy
found that the retailer's ability to comply with a promotional plan was 0.5 Sigma. Even getting to
Four Sigma would have resulted In a 20% Increase In sales.
The supply chain, as any professional recognizes, is a complex succession of dependent
business processes. Six Sigma devotees would declare that it is a prerequisite that each of these
processes meet Six Sigma requirements to achieve the optimum benefit, resulting In the Holy
Grail of an SSSC - where OTIF orders are consistently being delivered to the customer - and
eventually realizing the financial benefits of introducing the Six Sigma methodology. This is a
costly exercise both In terms of training staff to the various required standards of the Six Sigma
disciplines and the potential pain points that must be addressed to change the business to work
to Six Sigma principles.
Varying supply lead times from the wide number of different suppliers and business processes
(both internal and external) are, perhaps, the principal determining factors In influencing the
performance of the supply chain. As the number of business partners and suppliers Increase in
number, so too Is the likelihood of one or more being below par - and thus the possibility of a
breakdown In the overall ability to deliver to the customer's expectations.
A supply chain is only as strong as its weakest link. If the customer believes that It cannot rely on
the supplier then they may go elsewhere. If the supplier suspects that their service falls below
acceptable standards then they may overcompensate by holding additional stock, overstating
demand or expected delivery dates to give buffer time, or using unnecessarily expensive logistics
to receive raw materials or deliver finished goods. All of these factors lead to a level of
predictability In the supply chain but are costly and Inefficient and can be 'leaned' out. Applying
Six Sigma principles to the Individual process areas provides quantitative evidence enabling
management to Improve towards a lesser number of defects and, ultimately, to eliminate the
majority.
The process of manufacturing contains many of the elements Involved throughout the extended
supply chain. In many cases, the manufacturing process lies at the heart of the supply chain,
regardless of whether this is outsourced or in-house. The Six Sigma methodology was developed
to prevent defects occurring during production and, thus, it is reasonable to arrive at the
conclusion that Six Sigma tools and techniques could have application throughout the wider
supply chain. Any breakdown in the making of an item Is analogous to the failure of a particular
element of the supply chain network, however small.
This requires review and potentially the redesign of processes to achieve lead time compression
and OTIF order fulfilment and Six Sigma takes a statistical approach to this through all of the five
DMAIC stages, but most particularly during the "Analyse" phase. If we were to take a relatively
simple supply chain with a supplier of raw materials, a raw materials Inward process, internal
handling and outbound logistics, then using the statistical capabilities afforded by Six Sigma it Is
possible to afford supply chain managers the ability to determine, for example, the optimum
number of pallets that will be produced in any one day and thus the number of vehicles that will
be needed in each manufacturing location to deliver those pallets to the customer.
There are, of course, many different elements to supply chains, but this is a logical course of
events that could be broadened to cover the extended supply chain. However, It must be
remembered that for each additional element more variables are Introduced that require analysis
and which, exponentially, Increase the likelihood of a reduced capability to achieve the SSSC aim
of minimal defects.
Six Sigma Application in the Supply Chain
Six Sigma, with its champions, master black belts, black belts and green belts, Is geared to
cascade its concepts throughout an organization, and this approach is equally applicable in the
supply chain environment. Roles and responsibilities are defined; top down and bottom up
change processes are developed to enable the business area to respond more effectively, and
there are detailed statistics readily available to justify decisions. However, one of the potential
weaknesses of an SSSC lies in Its very reliance on detailed statistical outcomes. Strict adherence
to the mathematical principles can mean, In theory, that there is a weak link In the chain.
Mathematics is a precise science; economics and the theory of supply and demand are not, and
It could be argued that combining the two could be mutually exclusive and result in confusion.
One of the disadvantages of Six Sigma Is that it lacks a fundamental methodology for recognizing
and leveraging competitive advantage In terms of strategic or operational opportunities that may
arise. Furthermore, its mathematical basis and structure do not allow for the "human factor," thus
It can miss the high priority prospects in favour of the "quick wins."
Six Sigma has i?-built tools that speak to the "Voice of the Customer" and the "Voice of the
Process," but nothing that recognizes the openings that can occur and help a company to
understand the state of the Industry In which the business operates, the current state of the
economy (recession, Inflation etc.) or the company's position at any given moment. There is,
therefore, the classic divergence of theory and practice, where theory assumes a perfect world
and practice tells the seasoned professional that In certain circumstances it Is better to take
another approach.
Readers who are familiar with the work of the Supply Chain Council, its SCOR methodology and
Lean practices, will be aware that there are many similarities with Six Sigma. By judicious
application of these three practices, the advantages of Six Sigma Itself become apparent as Its
rigour and structure complement the other practices and negate the potential disadvantages it
has when It is used In isolation.
Six Sigma is statistically analytical in its approach, so applying it everywhere across the supply
chain is not realistic. However, by combining with SCOR, specific areas to focus on can be
determined together with the metrics to measure the success of the exercise. Additionally Lean
practices can also be applied in areas where Six Slgma's overly statistical approach is not
appropriate. The combined application of the three, through experienced practitioners, means
that the right technique is selected at the right time. This selective application of the techniques
means that the qualitative approaches of SCOR can be applied to the quantitative tools contained
within Six Sigma and Lean to derive a synergistic benefit far greater than if one approach alone is
selected and applied, wholeheartedly, across an entire supply chain.
Furthermore, unless a company has total control over its suppliers, their suppliers, Its customers
and their customers, any company wishing to Introduce an SSSC can only do so Internally - thus
It cannot impose Six Sigma practices across every tier and echelon in the extended supply chain.
This means that the business can only, in reality, get Its own house in order and effectively
manage its supply chain from raw materials Inwards to finished goods outwards. The benefits it
obtains as a consequence may be sufficient to encourage companies in the extended supply
chain to adopt similar business processes, at the least, thus gradually Improving the Integrated
whole.
It Is realistic to define an SSSC as one that has been designed to deliver finished products to the
customer within the time specified as the delivery date with as few defects as possible - at the
lowest cost achievable. Thus, the SCOR defined metric of Perfect Order Fulfilment (On Time, In
Full, Perfect Quality, Correct Documentation) could be defined as the Six Sigma success metric.
It has been argued (specifically In the IEEE Transactions of Automation Science of 2004 by Garg,
Narahari and Vlswandham) that there are two sets of design problems that are most common In
proposing an SSSC: generic design problems including
* allocation of process means
* allocation of process variances
* allocation of customer windows and concrete design problems, including
* due date setting
* choice of customers
* Inventory allocation
* capacity planning
* vendor selection
* logistics providers
* choice of logistic methods.
Because these problems can arise at any level of the design of the SSSC, each sub-process
must be addressed individually In the design strategy. By concentrating on each sub-process and
applying Six Sigma statistical and mathematical formulae to each element it should be possible to
achieve optimum delivery to meet the 3.4 DPMO standard.
Moving Closer to Six Sigma?
Possibly the most Important question that arises from all of the above would be whether or not
Six Sigma tools and techniques have a place outside the manufacturing environment and in the
wider context of the design of the supply chain as a whole? The answer to this has to be a
categorical yes; with the caveat that they are used judiciously and that they are not suitable for
use across the extended supply chain - as there is unlikely to be sufficient control to ensure
continuous and contiguous practices.
Companies that wish to move towards an SSSC should determine what their success criteria are
(lowering Inventory or improving pick accuracy being two obvious and easily measured
examples) and put checks in place to ensure that they have ascertained the correct metrics for
measuring success. If the right metrics are in place then it is possible to examine performance,
then change the process and measure it again.
Using a combination of methodologies may be more practical than using a standalone Six Sigma
approach. For example, the SCOR competitive advantage analysis can be utilized to determine
where focus should be placed in an organization. Six Sigma can then be applied to that specific
area. This reduces the cost of the exercise as well as producing measurable benefits as the part
of the supply chain that is under scrutiny is readily Identifiable.
Embracing the philosophy of Six Sigma, or continual process improvement, is not easy. It
requires a constant re-examinatlon of what a company is doing wrong, then correcting it.
However, the results can be transformational; after Motorola embraced Six Sigma manufacturing,
the company said that it saved $16 billion per year! Given that the majority of supply chain
processes are only at 0.5 Sigma today, the savings for large companies could be even greater for
companies that adopt the Six Sigma approach in their supply chain.
The following methodology combination is recommended to achieve optimal results: Six Sigma is
primarily applicable to processes that are quantitatively measured - and within the organization's
control - and thus should not be used in isolation in the design of the supply chain. Other methods
that are designed for the extended supply chain, such as Lean and SCOR, should be used in
conjunction with Six Sigma to widen the area of focus outside of the organization.
Use SCOR's "Analyse" approaches to define the primary areas of focus, the metrics that should
be used to define success and the level at which success will be achieved via their Competitive
Advantage Matrix. Use SCOR or Lean to Improve areas that are Qualitative and thus not
appropriate for statistical analysis.
When using Six Sigma, aim to reach the optimal level for the organization, rather than the six
sigma ideal. Use the following calculation to decide when that optimal level has been reached:
Benefit = Value - Cost. And once the cost of Implementing Six Sigma Is greater than the
additional value gained (when the law of diminishing returns kicks in) then the optimal level is
reached and it is an appropriate time to move onto the next improvement area.
SIDEBAR
A supply chain is only as strong as its weakest link. If the customer believes that it cannot rely on
the supplier, then they may go elsewhere.
SIDEBAR
Mathematics is a precise science; economics and the theory of supply and demand are not, and it
could be argued that combining the two could be mutually exclusive and result in confusion.
SIDEBAR
For more information
www.sevencs.co.uk Previous Page 1 2 3 4 5 6 Next Page
In addition, make sure to read these articles: You are viewing page 5
HEADNOTE
Sean Culey, Managing Director of sevencs limited, describes how the 'six sigma' statistical
approach, as used in manufacturing, should be applied to supply chain operations as well.
If the question "What is your supply chain?" were asked of 100
Ads by Google
New Business Opportunity
Run Your Own Energy Saving Business Complete Start-Up Pack from $14k
www.Enigin.net/BusinessOpportunity
Starting a Biz near DC?
Let the Fairfax County Economic Development Authority help!
www.FairfaxCountyEDA.org
Disaster Plan Template
Option To Download Selected Pages Worldwide License. Save 20%!
www.E-Janco.com/BusinessContinuity
business leaders, the replies would vary from the expected "raw materials Inward to goods
outward" to the more forward thinking organization that would describe an extended chain from
the "suppliers' supplier to the customers' customer." However, all of the answers would describe
a similar and recognizable set of business processes.
Ask the same group of people the question "What Is Six Sigma?" and answers could vary from "Is
it a classically trained boy band?" to a more informed "Something complicated and probably
expensive, Invented in Japan, that we might use to improve our business" through to any master
black belts present, who will give a complete and Informed description. In layman's terms, the
knowledgeable response would normally describe a set of statistically valid measurements of
business processes, first Introduced by Motorola, which provide the opportunity to systematically
Improve business processes by eliminating defects and reducing variation.
Much academic study has been undertaken to show the complex algebra that goes towards
designing a Six Sigma Supply Chain (SSSC), but the majority of companies have been unable to
get anywhere close to implementing It as they have not had the capability or spare resource to
measure their supply chain in enough detail, or define what excellence would be for them. Six
Sigma has the ultimate goal of achieving 3.4 defects per million objects (DPMO) - which is
another way of saying you have to get to six Standard Deviations from the 'mean' or 'perfect'
before you have a problem. It requires constant monitoring, analysis and refinement to ensure
that this target Is met. It Is not enough to be able to claim that on one occasion a company
delivered On Time In Full (OTIF) or manufactured a complete process run with minimal defects.
To claim to be Six Sigma this has to recur consistently - it Is the process, much more than the
product, that Is being measured.
The five steps making up Six Sigma are known as DMAIC - Discover, Measure, Analyse, Improve
and Control. Increasingly, an 'R' is being added for Realize - although many would contend that
focusing on any financial gains that result from putting Six Sigma Into practice is counter
productive and that these gains are merely a by-product of a good process Improvement
programme and should be expected. A number of global manufacturing companies, Including
GE, Honeywell and Toyota, have refined Six Sigma over the years for their own use, but the
fundamental principles survive intact.
Measuring the Supply Chain
The Introduction of RFID
(Radio Frequency Identification) and Its Increasingly rapid uptake by global Industry has given
companies the ability to measure their supply chain performance somewhat more easily. More
importantly, the information received via RFID Is real time, and it has demonstrated that the
majority of companies are not even achieving One Sigma! As a result, there Is still some
considerable way to go In the design of the true SSSC In the real world - however easy It may
appear in theoretical studies undertaken in university environments.
Shai Verma, RFID practice leader for IBM Canada, and Venkat Krishnamurthy Chief Technology
Officer at OATSystems, an RFID software company and a partner of IBM, made a presentation at
RFID Journal LIVE! Canada. The focus was on how RFID could be used as a tool to measure
supply chain efficiency.
Using RFID data supplied by one retailer to one of OAT's customers, Verma and Krishnamurthy
found that the retailer's ability to comply with a promotional plan was 0.5 Sigma. Even getting to
Four Sigma would have resulted In a 20% Increase In sales.
The supply chain, as any professional recognizes, is a complex succession of dependent
business processes. Six Sigma devotees would declare that it is a prerequisite that each of these
processes meet Six Sigma requirements to achieve the optimum benefit, resulting In the Holy
Grail of an SSSC - where OTIF orders are consistently being delivered to the customer - and
eventually realizing the financial benefits of introducing the Six Sigma methodology. This is a
costly exercise both In terms of training staff to the various required standards of the Six Sigma
disciplines and the potential pain points that must be addressed to change the business to work
to Six Sigma principles.
Varying supply lead times from the wide number of different suppliers and business processes
(both internal and external) are, perhaps, the principal determining factors In influencing the
performance of the supply chain. As the number of business partners and suppliers Increase in
number, so too Is the likelihood of one or more being below par - and thus the possibility of a
breakdown In the overall ability to deliver to the customer's expectations.
A supply chain is only as strong as its weakest link. If the customer believes that It cannot rely on
the supplier then they may go elsewhere. If the supplier suspects that their service falls below
acceptable standards then they may overcompensate by holding additional stock, overstating
demand or expected delivery dates to give buffer time, or using unnecessarily expensive logistics
to receive raw materials or deliver finished goods. All of these factors lead to a level of
predictability In the supply chain but are costly and Inefficient and can be 'leaned' out. Applying
Six Sigma principles to the Individual process areas provides quantitative evidence enabling
management to Improve towards a lesser number of defects and, ultimately, to eliminate the
majority.
The process of manufacturing contains many of the elements Involved throughout the extended
supply chain. In many cases, the manufacturing process lies at the heart of the supply chain,
regardless of whether this is outsourced or in-house. The Six Sigma methodology was developed
to prevent defects occurring during production and, thus, it is reasonable to arrive at the
conclusion that Six Sigma tools and techniques could have application throughout the wider
supply chain. Any breakdown in the making of an item Is analogous to the failure of a particular
element of the supply chain network, however small.
This requires review and potentially the redesign of processes to achieve lead time compression
and OTIF order fulfilment and Six Sigma takes a statistical approach to this through all of the five
DMAIC stages, but most particularly during the "Analyse" phase. If we were to take a relatively
simple supply chain with a supplier of raw materials, a raw materials Inward process, internal
handling and outbound logistics, then using the statistical capabilities afforded by Six Sigma it Is
possible to afford supply chain managers the ability to determine, for example, the optimum
number of pallets that will be produced in any one day and thus the number of vehicles that will
be needed in each manufacturing location to deliver those pallets to the customer.
There are, of course, many different elements to supply chains, but this is a logical course of
events that could be broadened to cover the extended supply chain. However, It must be
remembered that for each additional element more variables are Introduced that require analysis
and which, exponentially, Increase the likelihood of a reduced capability to achieve the SSSC aim
of minimal defects.
Six Sigma Application in the Supply Chain
Six Sigma, with its champions, master black belts, black belts and green belts, Is geared to
cascade its concepts throughout an organization, and this approach is equally applicable in the
supply chain environment. Roles and responsibilities are defined; top down and bottom up
change processes are developed to enable the business area to respond more effectively, and
there are detailed statistics readily available to justify decisions. However, one of the potential
weaknesses of an SSSC lies in Its very reliance on detailed statistical outcomes. Strict adherence
to the mathematical principles can mean, In theory, that there is a weak link In the chain.
Mathematics is a precise science; economics and the theory of supply and demand are not, and
It could be argued that combining the two could be mutually exclusive and result in confusion.
One of the disadvantages of Six Sigma Is that it lacks a fundamental methodology for recognizing
and leveraging competitive advantage In terms of strategic or operational opportunities that may
arise. Furthermore, its mathematical basis and structure do not allow for the "human factor," thus
It can miss the high priority prospects in favour of the "quick wins."
Six Sigma has i?-built tools that speak to the "Voice of the Customer" and the "Voice of the
Process," but nothing that recognizes the openings that can occur and help a company to
understand the state of the Industry In which the business operates, the current state of the
economy (recession, Inflation etc.) or the company's position at any given moment. There is,
therefore, the classic divergence of theory and practice, where theory assumes a perfect world
and practice tells the seasoned professional that In certain circumstances it Is better to take
another approach.
Readers who are familiar with the work of the Supply Chain Council, its SCOR methodology and
Lean practices, will be aware that there are many similarities with Six Sigma. By judicious
application of these three practices, the advantages of Six Sigma Itself become apparent as Its
rigour and structure complement the other practices and negate the potential disadvantages it
has when It is used In isolation.
Six Sigma is statistically analytical in its approach, so applying it everywhere across the supply
chain is not realistic. However, by combining with SCOR, specific areas to focus on can be
determined together with the metrics to measure the success of the exercise. Additionally Lean
practices can also be applied in areas where Six Slgma's overly statistical approach is not
appropriate. The combined application of the three, through experienced practitioners, means
that the right technique is selected at the right time. This selective application of the techniques
means that the qualitative approaches of SCOR can be applied to the quantitative tools contained
within Six Sigma and Lean to derive a synergistic benefit far greater than if one approach alone is
selected and applied, wholeheartedly, across an entire supply chain.
Furthermore, unless a company has total control over its suppliers, their suppliers, Its customers
and their customers, any company wishing to Introduce an SSSC can only do so Internally - thus
It cannot impose Six Sigma practices across every tier and echelon in the extended supply chain.
This means that the business can only, in reality, get Its own house in order and effectively
manage its supply chain from raw materials Inwards to finished goods outwards. The benefits it
obtains as a consequence may be sufficient to encourage companies in the extended supply
chain to adopt similar business processes, at the least, thus gradually Improving the Integrated
whole.
It Is realistic to define an SSSC as one that has been designed to deliver finished products to the
customer within the time specified as the delivery date with as few defects as possible - at the
lowest cost achievable. Thus, the SCOR defined metric of Perfect Order Fulfilment (On Time, In
Full, Perfect Quality, Correct Documentation) could be defined as the Six Sigma success metric.
It has been argued (specifically In the IEEE Transactions of Automation Science of 2004 by Garg,
Narahari and Vlswandham) that there are two sets of design problems that are most common In
proposing an SSSC: generic design problems including
* allocation of process means
* allocation of process variances
* allocation of customer windows and concrete design problems, including
* due date setting
* choice of customers
* Inventory allocation
* capacity planning
* vendor selection
* logistics providers
* choice of logistic methods.
Because these problems can arise at any level of the design of the SSSC, each sub-process
must be addressed individually In the design strategy. By concentrating on each sub-process and
applying Six Sigma statistical and mathematical formulae to each element it should be possible to
achieve optimum delivery to meet the 3.4 DPMO standard.
Moving Closer to Six Sigma?
Possibly the most Important question that arises from all of the above would be whether or not
Six Sigma tools and techniques have a place outside the manufacturing environment and in the
wider context of the design of the supply chain as a whole? The answer to this has to be a
categorical yes; with the caveat that they are used judiciously and that they are not suitable for
use across the extended supply chain - as there is unlikely to be sufficient control to ensure
continuous and contiguous practices.
Companies that wish to move towards an SSSC should determine what their success criteria are
(lowering Inventory or improving pick accuracy being two obvious and easily measured
examples) and put checks in place to ensure that they have ascertained the correct metrics for
measuring success. If the right metrics are in place then it is possible to examine performance,
then change the process and measure it again.
Using a combination of methodologies may be more practical than using a standalone Six Sigma
approach. For example, the SCOR competitive advantage analysis can be utilized to determine
where focus should be placed in an organization. Six Sigma can then be applied to that specific
area. This reduces the cost of the exercise as well as producing measurable benefits as the part
of the supply chain that is under scrutiny is readily Identifiable.
Embracing the philosophy of Six Sigma, or continual process improvement, is not easy. It
requires a constant re-examinatlon of what a company is doing wrong, then correcting it.
However, the results can be transformational; after Motorola embraced Six Sigma manufacturing,
the company said that it saved $16 billion per year! Given that the majority of supply chain
processes are only at 0.5 Sigma today, the savings for large companies could be even greater for
companies that adopt the Six Sigma approach in their supply chain.
The following methodology combination is recommended to achieve optimal results: Six Sigma is
primarily applicable to processes that are quantitatively measured - and within the organization's
control - and thus should not be used in isolation in the design of the supply chain. Other methods
that are designed for the extended supply chain, such as Lean and SCOR, should be used in
conjunction with Six Sigma to widen the area of focus outside of the organization.
Use SCOR's "Analyse" approaches to define the primary areas of focus, the metrics that should
be used to define success and the level at which success will be achieved via their Competitive
Advantage Matrix. Use SCOR or Lean to Improve areas that are Qualitative and thus not
appropriate for statistical analysis.
When using Six Sigma, aim to reach the optimal level for the organization, rather than the six
sigma ideal. Use the following calculation to decide when that optimal level has been reached:
Benefit = Value - Cost. And once the cost of Implementing Six Sigma Is greater than the
additional value gained (when the law of diminishing returns kicks in) then the optimal level is
reached and it is an appropriate time to move onto the next improvement area.
SIDEBAR
A supply chain is only as strong as its weakest link. If the customer believes that it cannot rely on
the supplier, then they may go elsewhere.
SIDEBAR
Mathematics is a precise science; economics and the theory of supply and demand are not, and it
could be argued that combining the two could be mutually exclusive and result in confusion.
SIDEBAR
For more information
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