4. Theoretical research framework

SCM, as we envision, is a novel management philosophy that recognizes that individual businesses no longer compete as solely autonomous units, but rather as supply chains. Therefore, it is an integrated approach to the planning and control of materials, services and information flows that adds value for customers through collaborative relationships among supply chain members. The framework in figure 2 depicts our conceptualization of SCM.

Grounded on a paradigm of strategic management theory emphasizing the devel- opment of collaborative advantage (e.g. Contractor and Lorange 1988, Nielsen 1988, Kanter 1994, Dyer and Singh 1998, Dyer 2000), this framework underscores our premise that a supply chain is composed of a network of interdependent relation- ships developed and fostered through strategic collaboration with the goal of deriv- ing mutual benefits (Miles and Snow 1986, Thorelli 1986, Borys and Jemison 1989, Lado et al. 1997, Ahuja 2000). This framework also draws on the innovative rela- tional view of interorganizational competitive advantage (Dyer and Singh 1998, Lorenzoni and Lipparini 1999, Kale et al. 2000), in contrast to the resource-based view (RBV) of the firm (e.g. Barney 1991, Teece et al. 1997). Although complemen- tary to the RBV, the relational view considers the dyad/network instead of individual firms as the unit of analysis and, thus, provides a more coherent support of our view of SCM.

This framework is developed to guide research efforts and provide insights for managerial practice. To help better understand the framework and the intricacies in relations among the key supply chain initiatives and activities discussed in this paper, the theoretical support for the framework is briefly offered below. Since it is not developed as a research model and due to space limitation, a detailed analysis of relevant literature is omitted. Readers interested in developing empirically testable research models are referred to the selected literature reviewed in the previous sections.

4.1. Driving forces

As shown in figure 2, environmental uncertainty, customer focus and informa-

tion technology are the three key external driving forces instrumental to the development of the notion of SCM. The uncertainty that plagues supply chains can be attributed to three sources: supplier uncertainty, arising from on-time perfor-

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mance, average lateness, and degree of inconsistency; manufacturing uncertainty, arising from process performance, machine breakdown, supply chain performance, etc.; and customer/demand uncertainty, arising from forecasting errors, irregular orders, etc. (Davis 1993). Under conditions of increased uncertainty and the lack of other alternatives, organizations in the value chain are more likely to engage in collective actions in order to stabilize their environment.

The pressure to revitalize manufacturing over the past few decades has been rooted in customers demand for a greater variety of reliable products with short lead-time. The more attention a company pays to researching its customer base to identify customer needs, the more rewarding the exchange transaction in supply chain will be for the company (Carson et al. 1998). Since customer expectations are dynamic in nature, an organization needs to reassess them regularly to align and refine their customer focus and adjust its supply chain strategy accordingly (Takeuchi and Quelch 1983, Shepetuk 1991).

Research has revealed information technology as an effective means of promot- ing collaboration between collections of firms, such as groups of suppliers and customers organized into networks. More than ever before, todays information technology is permeating the supply chain at every point, transforming the way exchange-related activities are performed and the nature of the linkages between them (Palmer and Griffith 1998). Information technology is found to enhance supply chain efficiency by providing real-time information regarding product avail- ability, inventory level, shipment status, and production requirements (Radstaak and Ketelaar 1998). It also has vast potential to facilitate collaborative planning among supply chain partners by sharing information on demand forecasts and production schedules that dictate supply chain activities (Karoway 1997). Furthermore, infor- mation technology can effectively link customer demand information to upstream supply chain functions and subsequently pull (demand-driven) supply chain operations (Min and Galle 1999).

4.2. Strategic purchasing and other supply chain initiatives

Numerous studies point out that the importance of supply management has

grown in prominence since purchasing has become more strategic in nature (Burt and Soukup 1985, Cousins 1992, Lamming 1993, Ellram and Carr 1994, Nishigushi 1994, Carr and Pearson 1999). Carr and Smeltzer (1999) have shown that firms with strategic purchasing are more likely to be able to impact communication, cooperative relationships, and the responsiveness of suppliers. Kraljic (1983) notes that strategic purchasing focus is critical for communication throughout the supply chain. More specifically, it has been found that information sources are related to the buyers strategic behaviour (Spekman et al. 1995). Furthermore, Cox (1996) has presented a model of procurement management that emphasizes the importance of strategic purchasing and relationships communication.

Strategic purchasing is considered pertinent to supply base reduction since the latter compromises the leveraging ability of the buying firms and, therefore requires a totally different management style (Cousins 1999). Many firms with strategic pur- chasing focus are reducing the number of primary suppliers and allocating a majority of the purchased material to a single source (Manoocheri 1984, Hahn et al. 1986, Spekman 1988, Pilling and Zhang 1992, Kekre et al. 1995). Strategic purchasing also has a proactive and long-term focus (Pearson et al. 1996). Firms that conduct long- term planning and consider purchasing to be strategic are more likely to build long-

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term cooperation relationships with their key suppliers (Carr and Pearson 1999). A cooperative or close relationship refers to the process of working together, over an extended period of time, for the benefit of both firms (Landeros and Monczka 1989, Cooper and Ellram 1993). Moreover, a short-term oriented adversarial buyer supplier relationship is not consistent with the long-term corporate level strategic planning (Watts et al. 1992).

As suppliers have a lasting effect on the performance of the entire supply chain, one of the fundamental responsibilities of the purchasing functions is the appropriate selection of suppliers (Mandal and Deshmukh 1994, Choi and Hartley 1996, Carr and Pearson 1999). The supplier selection decision affects activities such as inventory management, production planning and control, and product quality (Narasimhan 1983). Traditional sourcing protocol relied heavily on the suppliers ability to meet cost targets. Other criteria, such as quality, on-time delivery, and uninterrupted supply, however, have become increasingly critical because suppliers failures on these dimensions have more serious adverse effects on the buyers operations (Ellram 1990). Therefore, the nature of supplier selection decision made by the purchasing function is now more strategic and based on long-term criteria rather than cost-based alone (Watts and Hahn 1993).

Supplier certification involves higher levels of trust and communication and leads to improved quality and lower costs (Grieco 1989). Strategic purchasing function is responsible for positively motivating as well as evaluating suppliers for maximum performance (Browning et al. 1983, Giunipero 1990). Supplier certification supports greater joint action between buyer and supplier by providing a mechanism for screening a suppliers motivation and capabilities (Carr and Ittner 1992, Ellram and Siferd 1998). Therefore, it is expected that as the strategic nature of the purchas- ing function increases, more sophisticated supplier certification procedures will be developed and practised (Monczka and Morgan 1992).

Supplier involvement is a critical element of strategic buyersupplier relationship because many researchers have demonstrated that supplier involvement can provide multiple benefits such as reduced cost and improved quality of purchased materials, reduced product development time, and improved access to and application of tech- nology (Ragatz et al. 1997, 2002, Swink 1999, Shin et al. 2000, Primo and Amundson 2002). Since one of the primary goals of the purchasing function is recognizing or creating sources of competitive advantage, and improving new product development processes is an important source of competitive advantage (Capon et al. 1990, Droge et al. 1994), enhanced supplier integration through strategic purchasing is expected to improve firms performance in new product development and other strategic initiatives.

Cross-functional teams contribute to the success of supplier selection, product design (Burt 1989), total quality initiatives (Burt and Doyle 1993, Ellram and Pearson 1993), and improvised communication. Moreover, cross-functional teams have been proved very effective in meeting the challenges of successful supplier integration for new product development (Ragatz et al. 1997). Therefore, due to its wide-ranging benefits, strategic purchasing is believed to promote an increased usage of cross-functional teams.

SCM is built on a foundation of trust and commitment (Lee and Billington 1992, Kumar 1996). Trust contributes significantly to the long-term stability of the buyersupplier relationship (Handfield and Bechtel 2002). Committed partners also dedicate resources to sustaining and furthering the goals of this relationship.

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Thus, buyersupplier relationships enforced by strategic purchasing and based on trust and commitment foster sharing of information ranging from R&D to product design and production plan. With higher levels of trust and commitment, relationship partners share a common vision of the future, recognizing that their long-term success is only as strong as their weakest supply chain link.

Researchers also note that the strategic nature of purchasing reflects its integra- tive role (Freeman and Cavinato 1990, Gadde and Hakansson 1993, Ellram and Carr 1994). The conceptual re-description of purchasing as integration of internal and external exchange functions, therefore, illustrates that it is conducive and instru- mental to supply network coordination and enterprise-wide logistics integration. Similar to the three SCM external driving forces, strategic purchasing serves as an internal driving force for supply management.

4.3. Supply chain initiatives and supply chain performance

It is evident from prior research that superior buyersupplier relationships lead

to improved performance of both supplier and buyer. For example, supply base reduction has been found to provide multiple benefits including better time-based and cost-based performance (Russell and Krajewski 1992, Kekre et al. 1995, Bozarth et al. 1998, De Toni and Nassimbeni 1999, Shin et al. 2000). Studies have illustrated that higher levels of trust and commitment evident in long-term relationships improve the firms performance (Noordewier et al. 1990, Jones et al. 1997, Handfield and Nichols 1999, Hoyt and Huq 2000). Numerous articles also point to the importance of communication in the elimination of waste as well as in the improvement of suppliers performance (e.g. Lamming 1996, Krause and Ellram 1997, Lengnick-Hall 1998, Krause 1999, Lewis 2000). Cross-functional teams have been identified as important contributors to the success of supplier selection (Burt 1989) and supply chain performance (Burt and Doyle 1993, Ellram and Pearson 1993). Supplier involvement has also been found to provide multiple benefits such as reduced cost and improved quality of purchased materials, reduced product development time, and improved access to and application of technology (e.g. Bonaccorsi and Lipparini 1994, Ragatz et al. 1997, 2002, Swink 1999, Shin et al. 2000, Primo and Amundson 2002).

In addition, supplier performance is a key determinant of a buying firms com- petitiveness (Noordewier et al. 1990). Extant research has also demonstrated that supplier performance is one of the determining factors for the companys operational performance (Baxter et al. 1989, Davis 1993). Thus, this framework suggests a mediating role of supplier performance in facilitating the link between strategic purchasing guided supply management and buyer performance.

5. Conclusion

The growing importance of SCM has engendered a myriad of disjointed research dispersed across many disciplines. In this paper, we have synthesized the large and fragmented body of knowledge into three streams of approach including (1) strategic purchasing/supply management, (2) logistics integration and (3) supply network coordination.

Based on our careful assessment, it has become clear that most supply chain literature has focused on the importance of one or a limited few elements of supply chains. Consequently, it should be noted that understanding the true dynamics of SCM is far more complex than most of these studies have shown.

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Our review should convince readers that both academic researchers and practitioners are far from mastering SCM. In fact, some authors have recently asserted that while SCM is a sound concept, turning idea into practice is by no means an easy task and, thus, it has so far received more lip service than accomplishment, except in a few leading-edge companies (Leenders et al. 2002). The complex network of interrelated activities in supply chains makes it challenging for managers to describe and com- prehend how those activities are related and how they influence each other.

The scientific development of a coherent SCM discipline requires advancements in the development of theoretical models to further enhance our understanding of supply chain phenomena. Our analysis confirms that the area is devoid of clear theory. In particular, the relative importance and interrelationships of various supply chain initiatives and constructs as well as the direct or mediating effects of these activities and constructs on supply chain performance have been hardly explored and, thus, are not well understood. The research framework proposed in this study provides a well-grounded and robust basis for theoretical development of alternative models, allowing researchers to test the validity of and relationships among the various supply chain initiatives along with their impact on supply chain performance, and ultimately to create a coherent theory of SCM.

In addition, readers will not fail to notice that most of the literature on supply chain performance is often limited to a particular aspect of performance measures (e.g. financial or operational), and those who consider multiple aspects frequently focus on the performance of only the focal firm (i.e. buyer or supplier). It is hoped that future research efforts will investigate this profoundly complex and yet extre- mely important issue, attending to the complexity brought about by the large number of related and interdependent supply chain activities, compounded by the fact that the effects of certain actions are separated from their cause both in time and place.

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