Chapter 16SUPPLY CHAIN PROCESS INTEGRATION AND A LOOK
TOWARDS THE FUTURE For those for whom integration is not happening, the future is bleak and getting darker. 1 There is a lot of value that is trapped between the processes trading partners use to transact business, and when companies work together, they can unlock that value and share its benefits. 2 LEARNING OB1ECTIVES After completing this chapter, you should be able to: Discuss and compare internal and external process integration. Discuss the requirements for achieving process integration. Describe the barriers to internal and external process integration, and what can be done to overcome them. nderstand the importance of performance measurements in achieving internal and external process integration. nderstand why it is important to align supply chain strategies with internal process strategies. !ist and describe the eight "ey supply chain processes, and how trading partners integrate these processes. Discuss a number of the latest trends in the areas of process management and process integration. CHAPTER OUTLINE #ntroduction Achieving #nternal $rocess #ntegration %xtending #ntegration to &upply 'hain (rading $artners 1 2 ) $art *+!oo"ing to the ,uture A !oo" at (rends and Developments in #ntegration and $rocess -anagement PROCESS MANAGEMENT IN ACTIONAn Interview with Zack Noshirwani, Vice President of Integrated Supply Chain for Raytheon (he .aytheon 'ompany is a ma/or defense contractor0 its ma/or customer is the .&. Department of Defense. -r. 1ac" 2oshirwani, vice president of integrated supply chain, /oined .aytheon in 2331, and prior to his current post served as vice president for operations for both the Air4-issile Defense &ystems and for #ntegrated Defense &ystems. $reviously, he wor"ed in operations and supply chain capacities with 5oneywell %ngines and &ystems, Allied &ystems, and !oc"heed -artin Defense &ystems. Q: 5ow is operating a supply chain different when the Department of Defense is your ma/or customer6 Noshirwani: 7e need to adapt to the changing customer first. (he focus within D8D has shifted from products to capabilities. And, second, they have raised the awareness of mission assurance within the defense business generally and the missile defense business, in particular. 7ithin .aytheon, 9ill &wanson, our '%8, has said we are going to ta"e mission assurance to the next level across all our businesses. $utting that together, the challenge we have is: 5ow do you ma"e our supply base aware of our new expectations0 and, what do mission assurance and our new business strategy mean to us6 (hat change forces us to loo" at the historical supply chain in a different set of paradigms. Q: 7hat was the shift of ob/ectives6 Noshirwani: 7e went from operating traditional purchasing and supply chain organi:ations to what we today call an integrated supply chain. 7ith that, we intend to lin" our engineering groups and our performance excellence groups with our supplier base as early as we can in the process when building relationships with our suppliers. 7e 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) < need our suppliers to be an extension of ourselves. (he old routine, when dealing with our suppliers was focused on costs, quality, and schedule. !ac" of performance in these categories generally provided a stressful exchange. (hat has changed. 2ow, it=s going to be more collaborative. 7e=ll be wor"ing together so that we=re building the right stuff on time, correct the first time. (here can=t be three iterations before we get it out the door. Q: 5ow do you do that6 7hat is the tas"6 Noshirwani: 8ne "ey thing: 7e used to be a very tactically oriented organi:ation0 we=re now shifting to become more strategic. ,or example, we are organi:ing more supplier conferences at which we can establish expectations with our supply base. (his past >une, we had ;? of our "ey suppliers participating in a supplier forum. (he theme of the event, @$erformance -atters,A focused on how mission assurance is a "ey element. 7e are communicating what mission assurance means to us and to our supplier base, to ma"e sure that their behaviors, our behaviors, and our relationships all improve over time. Q: #deally, what would you li"e to get from your suppliers6 Noshirwani: 7hen # loo" at my integrated supply chain of the future, #=m going to use a phrase: a netted integrated supply chain. 7hat does that mean6 As .aytheon #D& wor"s to become a >oint 9attlespace #ntegrator, we will have expertise over multiple domains. (he challenge for our supply chain organi:ation, then, is to ta"e the suppliers who are expert in certain domains and "nit them together to allow us to create solutions to satisfy our customers= needs and support our business vision. Q: Does this mean that suppliers will be wor"ing with other suppliers6 Noshirwani: #n some cases, absolutely. (hen the question is: 5ow do we bro"er them to partner with each other to bring us the best result6 B ) $art *+!oo"ing to the ,uture Q: 7ith this new business focus, what sort of measures do you use to determine your success6 Noshirwani: $reviously, the ma/ority of our metrics were internally focused on the supply chain. 7hile we still have some metrics that are internally focused, we now have an organi:ational perspective that measures the value we provide to the business. (hese metrics are in the area of effectiveness, efficiency, capability, and capacity. 7e=ve also now established metrics that are lin"ed directly to our business performance and to our customer=s expectations. (he "ey focus is: 5ow do we create value for our customers and our business6 Q: 2ow, what are those new metrics6 Noshirwani: 8ne of them is cashCtoCcash cycle+how quic"ly do we collect cash from our customers6 Another one is onCtime performance to contract. Do we deliver our hardware the way we said we would, when we said we would, with mission assurance and quality levels that satisfy our customers6 And third+we have a strategy within .aytheon #D& that is lin"ed around as"ing: 5ow do we improve our overall cycle time within our business6 Q: 7hy is that one crucial6 Noshirwani: #f our customer is "ing, and if we need to /ump through hoops to come up with a satisfactory solution for that customer, then we need to be very agile, very flexible. 7e will need to ta"e on challenges we=ve have never ta"en on before. (o ma"e that possible, flexibility within the supply chain becomes very "ey. Q: 5ow would you characteri:e your supply chain effort6 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) * Noshirwani: As # said, we=ve /ust reorgani:ed our entire supply chain around the .aytheon #D& vision and our customer=s expectations. (hat supply chain has five ma/or capabilities in it. 8ne is what we call collaborative solutions. (hat is a group of very talented, topCnotch supply chain experts who are engaged with our business development people early in the process. 7e have supply chain professionals who are engaged in that process, to help with the partnering suppliers, the supply selection process+who do we want to partner with to win this proposal6 &o that=s one capability. Q: Dou mentioned subcontracting. #s there a piece for that6 Noshirwani: Des, that=s the next capability. 7ith our business shifting from a productC focused to capabilitiesCfocused solutions, &ubcontract -anagement is a "ey part of our supply chain activity. 8ur strategy here has been to add new s"ills, tools, and techniques to manage ma/or subcontracts. (oday, we have close to E2 billion in subcontracts that we are managing. Q: And finally6 Noshirwani: ,inally, our #ntegrated &upply 'hain organi:ation continues to support the products foundation for our business. -aterial Acquisition, $lanning F $roduct -anagement, and #ntegrated !ogistics are all "ey elements in supporting our manufacturing operations with the right material at the right place at the right time and cost. (he focus in these areas is transformational change to increase the effectiveness and efficiency of operations. %xamples include all elements of eCprocurement, reduction in transactions, lean supply initiatives, and innovative materials handling and flow techniques. ; ) $art *+!oo"ing to the ,uture Q: (hat=s organi:ational. 7hat about people6 5ow do the people you=re loo"ing for today differ from five or ten years ago6 Noshirwani: (raditional supply chain professionals are still very critical to the success of our organi:ation. 9ut, if # had a wish list and all my wishes came true tomorrow, then # would want to hire professionals from this day forward who have multiCdisciplined experiences and expertise in program management, pro/ect management, engineering, operations, and supply chain. #ntegrating these "ey capabilities is critical to the success of our integrated supply chain. Q: 5ow hard is it to find such people6 Noshirwani: #t=s very hard to find such people. # might want to hire the next five program managers that come my way, but a lot of other places also want to hire them. (he Defense Department is trying to hire those same s"ills. 8f course, if we see people with the s"ills we want available on the street, we scrounge them up. Q: #f the people you want are at a premium, how do you meet your need6 Noshirwani: 7ithin our new supply chain, we have created and communicated a career path for the future program managers of our business through the supply chain organi:ation. 7e have set up rotational assignments that move people from engineering to business development to performance excellence+all through the supply chain organi:ation so we create multiCdimensional people. 7e are sowing some of the seeds for tomorrow. At the same time, we are ta"ing some of the veterans of these functional areas and convincing them to ta"e a career path into integrated supply chain. Q: Does this change much affect your #( requirements6 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ? Noshirwani: (he "ey #( tas" is connectivity. (he most important question in my mind is how do # connect my programs, engineering, performance excellence, supply chain, and operations professionals to the best of my ability6 5ow do # share information across the board as fast as # can6 (hen, how do # drive that connectivity into my supply base6 (hat=s one thing that=s required if we are to engage suppliers early in the process. Q: #s it fair to say that the new standards you have from D8D will ripple bac" through your organi:ation6 Noshirwani: #n my mind it has to+the D8D is our customer. 7e have strong relationships with our D8D customers, built on our performance and superior solutions we provide. 2ew standards are another aspect of the dynamics of this business. 7e "now we need to listen and be responsive to our customer needs, and provide solutions at ramp speed. Q: A final question: 5ow important to supply chain reengineering is support from top management6 Noshirwani: -y boss, #D& president Dan &mith, will say at every meeting: #f we can=t get our suppliers in line, and if we can=t change how we do business internally, then we=re not going to get to where we need to be to. (ime is of the essence. #t=s an absolute must happen. &ource: 9ernstein, -., @.aytheon Goes ,rom (raditional $urchasing to an #ntegrated &upply 'hain,A World Trade, H. 1I, 2o. 11, 233*, pp. <;J<I. sed with permission. INTRODUCTION nfortunately, in too many /ournal and maga:ine articles, boo"s, and television programs these days, supply chain process integration is dealt with solely in terms of I ) $art *+!oo"ing to the ,uture information system applications+in other words, simply connecting buyers and a suppliers via the latest software application results in successful supply chain process integration. 5opefully, readers of this text have begun to reali:e that the latest enterprise software applications increase access to information and can certainly add value to internal and external process integration, but they do not allow companies to replace or leapfrog the necessary peopleCoriented elements involved in supply chain management or process integration in general. &o, while 'hapter K of the text, which dealt with information flows, and several other chapters of the text have discussed or mentioned the use of information systems when managing processes, this chapter see"s to guide the reader towards a deeper understanding of successful supply chain process integration, and the necessary steps and tools to get there. 'hapter 1 described the general idea behind business process integration, namely the sharing of ideas and information, coordination of process activities, and collaboration on process design and implementation between supply chain members, such that products and services are provided at the desired levels of quality, speed, and cost along the supply chain+from raw material suppliers to endCproduct consumers. 9usiness research over the past 13 or 1* years has, for the most part, found a positive relationship between process integration and firm performance. < #n general terms, successfully integrating "ey business processes among supply chain trading partners is the essence of supply chain management, and remains one of the biggest hurdles for all companies implementing supply chain management practices. 5owever, as described in the two statements on the opening page of this chapter, there is much to be gained through process integration. 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) K (his text has been divided along the lines of the eight "ey processes involved in supply chain management+customer relationship management, customer service management, demand management, order fulfillment, manufacturing flow management, supplier relationship management, product development and commerciali:ation, and returns management. &uccessfully managing supply chains requires the firm to first become internally integrated in the relevant "ey business process areas, and then loo" to integrate these processes with important trading partners. (his requires brea"ing down barriers to integration inside the firm, followed by establishing a high level of trust and wor"ing experience with the firm=s trading partners, and involves the use of appropriate technologies and performance measures to improve internal and external integration capabilities. $rocess integration is thus something that evolves over time within a firm=s wor"force and its supply chains. &uccessful process integration is also something that can be difficult for firms to benchmar"0 rather, each firm must develop its own unique set of integration capabilities. Different firms have different employees, cultures, processes, products, suppliers, customers, and technical capabilities0 therefore their means to successful integration and supply chain management may vary from their competitors, or other firms li"e (exasC based computer manufacturer Dell and megaCretailer 7alC-art who have created reputations for possessing superior supply chain management capabilities. #n short, there is no @silver bulletA set of detailed practices that will guarantee process integration or supply chain management success. -anagers must define and uncover the appropriate supply chain strategies for their firms, align their own business strategies to those of their supply chains, and then design operations practices that support the strategies. #n a multiC 13 ) $art *+!oo"ing to the ,uture year study first launched in 233* by -#(=s 'enter for (ransportation and !ogistics, a number of successful companies are being studied with the intention of identifying general attributes critical to successful supply chain management. &o far, they have found that companies need to adopt a @competitively principledA strategic supply chain management framewor", or in other words, develop a set of tailored practices for their company that lead to success, based on their unique resources and the required supply chain strategies. B 9ecause successful internal and external process integration also requires the passage of time, most firms and their supply chain trading partners are still heavily involved in their process integration efforts. (his is exacerbated by the seemingly continuous entry of new competitors, new suppliers, new customers and customer requirements, and new information and communication technologies to the mar"etplace. 'onsequently, there are many new trends in process management and process integration impacting supply chain management. &ome of these trends and developments will also be discussed in the final section of this chapter. ACHIEVING INTERNAL PROCESS INTEGRATION As a reminder, the term process integration means coordinating and sharing information and resources to /ointly manage a process. #ntegration can occur both internally or externally with respect to the firm, and reflects how harmoniously employees or businesses wor" together to accomplish tas"s. Developing communication, information sharing, and collaboration capabilities among employees in different units within an organi:ation can be quite difficult, particularly when departments are busy protecting turf and fighting for their share of tight budgets and other firm resources. 9ut 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 11 this type of behavior, along with other internal barriers, must change in organi:ations serious about process integration. #n some industries, process integration is the norm and has become necessary for survival+ta"e the automobile industry, for example. As described in 'hapter 13, >apanese auto manufacturer (oyota had become quite proficient at lean principles by the 1KI3s, in part by creating opportunities for its employees to integrate their efforts when designing and building new automobiles, and when solving manufacturing and quality problems. As a result, (oyota has been able to provide higher quality automobiles with shorter new model cycle times when compared to most of their competitors. 'onsequently, ,ord, G-, Daimler'hrysler, and other auto manufacturers have been forced to follow suit to stay competitive. As of midC233;, (oyota was trailing only G- as the world=s largest automa"er and was easily the world=s biggest in terms of profitability Lapproximately E23 billion per yearM. * #n fact by 2331, most 2orth American automa"ers reported that they were practicing internal integration of "ey processes, and wor"ing hard at forming fullyCintegrated supply chains. ; (o achieve internal process integration, firms must first lay the groundwor" necessary to begin process integration efforts. (his includes brea"ing down internal barriers to collaboration, connecting departmental and unit information systems, and developing performance measures that encourage teamwor" and collaboration. 7hen the firm=s employees are comfortable wor"ing together and sharing ideas and information, then supply chain management efforts and external process integration with trading partners can begin to ta"e place. ,igure 1;.1 depicts this integration model, and a discussion of each of these topics follows. 12 ) $art *+!oo"ing to the ,uture Figure 16.1 The Supply Chain Process Integration Model The Preparation Phase (o adequately prepare the organi:ation for external integration and supply chain management efforts in general, managers must first create an internal environment where teamwor" and information sharing are encouraged and rewarded. (o accomplish this, existing barriers to collaboration must be removed, information systems within the organi:ation must be unified under one central database, and collaboration performance measures must be designed, implemented, and periodically reviewed. 9rea"ing Down #nternal 9arriers to 'ollaboration Internal barriers to collaboration can be classified as technological Linformation system software4hardwareM barriers, structural Lmanagement hierarchy, goals, proceduresM barriers, and cultural Lemployee values, norms, behaviorM barriers. 'hapter K discussed a number of information system problems, including the purchasing of software applications at different times or purchasing bestCofCbreed software solutions from different vendors, both of which require integration middleware to tie the systems 9rea"ing down barriers ,orming intraorgani:ational teams #dentifying supply chain to collaboration business strategies 'onnecting all information 'ommunicating and sharing #dentifying "ey business systems information enterpriseCwide process requirements, integration elements, and Developing collaboration Achieving collaboration ob/ectives partnership opportunities performance measures Developing new collaboration #dentifying supply chain opportunities information system requirements Developing external integration performance measures Preparation Phase Active Internal Integration Active External Integration 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 1< together, or the use of web services and web portals to create information sharing capabilities for the disparate applications. (hese could be considered technological barriers to collaboration. A few years ago 7ashingtonCbased fashion retailer 2ordstrom=s online site, nordstrom.com, found itself unable to accept gift cards purchased by customers at 2ordstrom stores Lit lac"ed a lin"age process to the 2ordstrom ban"=s mainframe required to validate and execute the transactionM. (he company adapted quic"ly by using XML web services to integrate its systems and create a standard data format that all of the company=s systems could understand. ? N-! web services are becoming the basic platform for application integration. Applications are constructed using multiple N-! web services from various sources that wor" together regardless of where they reside or how they were implemented. O 1KK; (ed Goff, http:44www.ted.goff.com 1B ) $art *+!oo"ing to the ,uture Structural barriers to collaboration include the often slow, bureaucratic decisionCma"ing hierarchy in firms0 poorly designed pay systems and incentives0 and ineffective administrative procedures and policies. An incentive pay system that encourages groups of employees to wor" against one another is a structural problem, for example. &teve 9an"er, senior supply chain analyst at the A.' Advisory Group in -assachusetts advises companies to establish compensation methods that reward teamwor". @#f you tell people to wor" as a team, to ma"e it wor", you need metrics that measure supply chain performance. (hen you have to tie punishments and rewards to those metrics.A I &tructural change involves a top-down management approach, because the expertise and resources needed for administrative improvements requires the involvement of middle and upper management. 7hen problems such as a lac" of communication and teamwor" are acting as barriers to internal process integration, structural changes are needed, and this requires upper and middle management to ta"e the initiative to propose and implement structural solutions. &tructural change implementation tactics can include employee education, instituting crossCtraining and process teams, and manager4wor"er negotiations to achieve acceptance of the changes. During the early days of .&. professional baseball, hiring a hearingCimpaired player on one team initially caused a severe communication problem among the team=s players. (he coach=s solution was to implement a structural change+he taught the entire team a version of sign language to improve communication. (his creative solution ultimately led to the widespread use of handCsignaling among baseball team coaches and players. K -ore recently, when the .&. 'ongress mandated the restructuring of the #nternal .evenue &ervice L#.&M, a number of structural changes were implemented to 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 1* improve customer service and protect taxpayer rights. ,or example the #.& !arge and -idC&i:e 9usiness Division was created to administer taxes for businesses with over E13 million in assets. !ately, the #.& has ad/usted managerial span of control to better balance the number of employees reporting to managers, eliminated management redundancy in some field offices, and ad/usted the number of its core industry groups from seven to five. 13 5ospital 'orporation of America L5'AM, a leading healthcare services provider based in (ennessee, designed an organi:ational structure that groups everyone together to improve the organi:ation=s effectiveness. (he equipment people include nurses and lab technicians, and construction people include engineers and construction professionals, for instance. (hus, diverse groups of people at 5'A are wor"ing together towards the same goals. 11 At #owa 5ealth C Des -oines, consisting of three hospitals, a new staff position was introduced called @master of the environment,A where employees are crossCtrained in all of the hospitality services, allowing them to better serve patients and permitting them to float between departments and hospitals where needed. (his has improved patient satisfaction as well as employee satisfaction. 12 (he third set of barriers to internal process collaboration or integration can be much more difficult to overcome, namely the often deeplyCrooted cultural barriers to collaboration within the firm, which can encourage employees to hoard information, hide operating problems, and shy away from wor"ing together as a team to develop optimal solutions for the organi:ation. (his is sometimes also referred to as the silo mentality, where wor"ers act only in their own best interests, and managers act only in their departments= best interests. An overall lac" of trust can permeate this type of 1; ) $art *+!oo"ing to the ,uture organi:ation. 'ultural changes in the organi:ation are required to reduce the silo mentality and improve trust, or how employees thin" about their cowor"ers and the organi:ation. #n these types of cases, the organi:ation as a whole must undergo change. (raining large bloc"s of employees is perhaps the most frequently used tool for changing an organi:ation=s mindset, and the impetus for cultural change must come from top management. 8ther activities used in managing cultural change include frequent communications with all employees0 management behaviors that are consistent with desired values and beliefs0 use of newsletters, intranets, "ios"s, and videos0 resolving cultural differences as quic"ly as possible0 and the development of a cultural integration plan. ,orest product company 7eyerhaeuser, headquartered in 7ashington, uses an arsenal of educational tools to help its employees get comfortable wor"ing together under one company culture. #t uses an interactive game to convey the payoffs of aligning wor" styles, and has also created a DHD entitled @All in 8neA to explain the homebuilding industry and the firm=s collaboration strategies. 1< 7hen mergers occur, cultural clashes can result in many problems for the newly formed company, requiring managers to be proactive in building a new vision and integrating cultures and values. 7hen pharmaceutical companies Astra of &weden and 1eneca of the nited Pingdom merged in 1KKK, a senior executive team approved a range of proposals to support the development of a new culture. A "ey proposal was to create a global crossCfunctional leadership development program, initially for the top 233 people in the company. (his successful program led to a more innovative learning environment and greater levels of trust in different parts of the firm. 7ithin three years, about K33 managers had actually participated in the program. 1B 7hen 'aliforniaCbased switch 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 1? ma"er 'isco formally too" control of optical transport producer 'erent 'orp., also of 'alifornia, in 1KKK, the company mobili:ed a transition team to oversee every detail of 'erent=s assimilation. As soon as 'isco too" over, every new employee had a title, boss, bonus plan, health plan, and a direct lin" to 'isco=s internal website. (eam members distributed basic information about the 'isco organi:ation, its vacation policy, and its benefits to employees. (he aim was to reduce uncertainty so employees could more quic"ly focus on their /obs. 1* (he &ervice $erspective feature describes the integration challenges posed by the merger of .&. retailers Pmart and &ears. SERVICE PERSPECTIVESears Faces Massive Supply Chain Integration Challenge 7ith nearly B3 supply chain systems between them, &ears and Pmart must decide which will best support the combined concern=s <,*33 stores. (he enormous #( integration challenge will be even harder for the newly formed &ears 5olding 'orp. because, industry experts contend, neither firm=s supply chain has been a model of agility. @(his is a huge endeavor they have to go through, and neither one is "nown for excellence in #( or supply chain QmanagementR,A says 2oha (ohamy, principal supply chain analyst with mar"et researcher ,orrester .esearch #nc., in 'ambridge, -assachusetts. (o reali:e the E*33 million in operational efficiencies that &ears 5olding executives promise, analysts believe the retailer needs coherent #( and supply chain operations. (he recent &ears and Pmart marriage, however, creates a protracted supply chain management chore. &treamlining the myriad applications is @a timeCconsuming and 1I ) $art *+!oo"ing to the ,uture arduous processA that will ta"e &ears 5olding @several years,A says Pim $icciola, a retail analyst with -orningstar #nc., an investment research company in 'hicago. Amid headlines about cutting expenditures, brand names, and store locations, &ears 5olding publicly eschews tal" about such issues. &ince shareholders finali:ed Pmart=s ta"eover of &ears on -arch 2*, 233B, corporate officials have added little to their initial broad statements about improved efficiencies and cost savings. @(he organi:ation is still ta"ing shape,A says 'hris 9rathwaite, a &ears 5olding spo"esperson in 5offman %states, #llinois. @# don=t thin" there=s any definitive description of Qsupply chainR strategy at this point.A (hat hardly surprises Dean !ane, chief executive of Haritools #nc., a software vendor in &unnyvale, 'alifornia. @#( is almost always an afterthought Qafter a mergerR,A says !ane, a veteran of several companies= merger and acquisition activities. 7hen they announced the union, corporate officials pledged to generate E233 million in revenues through crossCselling opportunities and by converting several Pmart stores to the &ears name. -aximi:ing purchasing power from suppliers, enhancing supply chain and administrative efficiencies, and divesting real estate assets will help save another E<33 million, the company stated in a press release announcing Pmart=s planned E12.< billion ta"eover of &ears. #t=s unclear what supply chain strategy will help the company attain such lofty goals. @#t=s too early to get into specifics,A says 9rathwaite. &ears 5olding inherits both organi:ations= <? supply chain solutions from a host of vendors, including -anugistics #nc., i2 (echnologies #nc., and -anhattan Associates #nc., says !ee 5olman, product development vice president at #5! 'onsulting Group in ,ran"lin, (ennessee. According to 5olman, Pmart operates three inventory management, 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 1K three merchandise planning, and four logistics management systems. &ears runs two inventory management, three logistics management, and four merchandise planning solutions. Despite some commonality, the companies use the solutions differently. 'ustomers, says 5olman, can find merchandise on &ears= shelves, but @you can=t say that about Pmart.A 8bservers want to "now which existing solutions the new retailer will adopt or /ettison, and if it will invest in new ones. (ohamy believes &ears 5olding halted an evaluation of new applications, such as inCstore replenishment and merchandise optimi:ation pac"ages, while it assesses each company=s operations. 7hile such an underta"ing is necessary, (ohamy worries about the pace of review. @(hey have to clean house, move as fast as possible, and show how they will create additional flexibility and efficiencies in the supply chain,A she says. ,irst, however, &ears 5olding must determine its priorities, such as what and why it is, who its customers are, how often they visit and how much they buy, and what it will sell, says $aula .osenblum, retail research director with Aberdeen Group #nc., a mar"et research concern in 9oston. (hen the company must assess its business processes, including how stores interact with suppliers and distribution centers. @(hey need to figure all that out before investing in an inventoryCmanagement application that costs E1 million that won=t provide any benefit because it has no clean data to wor" from,A says (ohamy. &ears 5olding must also determine how to meld two different businesses, and if or to what degree to consolidate supply chain operations. @# don=t see Pmart and &ears being able to wor" off the same strategy,A says &teve 9an"er, supply chain management 23 ) $art *+!oo"ing to the ,uture service director with A.' Advisory Group #nc., a research concern in Dedham, -assachusetts. @8ne=s a department store and one=s a discount mass merchandiser.A 9an"er recommends integrating resources for the biggest bang. 9oth sell apparel, for example, so &ears 5olding could operate fewer warehouses and a set of common supply chain systems. @(he company could standardi:e on QPmart=sR -anhattan QapplicationR or on &ears= thirdCparty logistics providers,A 9an"er suggests. 'onversely, &ears 5olding may need separate strategies to support different priorities. &ears, for example, may require higher service levels to stores, which would require warehouses to fill &ears= orders faster. @(hat ma"es using a common warehouseCmanagement system tougher,A 9an"er says. (ohamy disagrees. @-anaging two supply chains is a bad idea,A she says. @(hey want to exploit economies of scale, especially in purchasing and sourcing.A $rocurement, particularly from overseas suppliers, should be a corporate priority, affirms .osenblum. (he company must use its si:e @to design, develop, and source products,A she says. @2either one was all that great Qat sourcingR, and now they have to become great because all they are Qsince the mergerR is bigger.A 5aving the right product in stoc" at the right place seems @elementary,A .osenblum adds. !ong lead times, everCincreasing customer choices, and competing with operational leaders such as 7alC-art &tores #nc., however, complicate things. #ndeed, &ears 5olding must manage suppliers as 7alC-art does, says >ohn -elaniphy ###, executive vice president with 'hicagoCbased retail consultancy -elaniphy F Associates #nc. &ome suppliers lose money on each item they sell to 7alC-art but rely on the retailing behemoth for volume sales. 8ther suppliers move plants offshore to provide 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 21 merchandise at prices that 7alC-art demands. @&uppliers are beaten up by 7alC-art,A -elaniphy says. @Pmart and &ears have to get as tough with their suppliers to compete.A &ears 5olding=s supply chain venture will ta"e time. %xperts wonder, however, if it can ever compete with 7alC-art and other retailing rivals. @.ealistically, it=s a twoC year processA to integrate existing systems or deploy new ones, says !ane of Haritools. &orting out and implementing supply chain systems is /ust the beginning, other analysts maintain. @(hey have 12 to 1I months to show significant progress,A asserts Alexi &arnevit:, retail research director with 9ostonCbased mar"et researcher A-. .esearch #nc. (hat means @not /ust being competitive Qwith 7alC-art and othersR0 they need to find their own unique positioning.A ,or sure, &ears 5olding=s newly appointed '#8, Paren Austin, has a grueling assignment. At the same time, 5olman notes that the ordeal of merging the two retailers= #( systems presents Austin with a potential advantage as well. @(his is a great opportunity to demonstrate QherR talents,A he says. -ostly, experts agree, it=s an enormously complex consolidation tas". @#t sounds li"e she inherited a mess,A says 9an"er. &ource: Pay, %., @&ears 5olding 'orp. ,aces -assive &upply 'hain #ntegration 'hallenge,A Frontline Solutions, H. ;, 2o. *, 233*, pp. 1BJ1*. sed with permission. #ntegrating #nternal #nformation &ystems (oday, information systems can play a critical role in information use and visibility, and during internal communications occurring between cowor"ers within an organi:ation. %mailing someone in the office down the hall, for instance, has become so commonplace that office hallways have become deserted. #f an organi:ation=s information technologies are largely disconnected, and if data elements are not stored in a 22 ) $art *+!oo"ing to the ,uture common database according to some standard format, then wor"ers and departments will not be able to share information, and internal process integration can be significantly impacted. As discussed in detail in 'hapter K, the most common enabler of information system integration today is the firm=s %.$ system. #n that chapter, the importance and capabilities of %.$ systems were described, along with various software applications or modules that are used today. %.$ systems provide a view of the entire organi:ation, enabling decision ma"ers within each function to have information regarding customer orders, manufacturing plans, wor"CinCprocess and finished goods inventories, outbound goods inCtransit, purchase orders, inbound goods inCtransit, purchased item inventories, and financial and accounting information. %.$ systems thus lin" business processes and facilitate communication and information sharing between the firm=s departments. &ince the "ey business processes overlay each of the functional areas, the firm eventually becomes process oriented rather than functionally oriented, once %.$ systems are deployed. (his visibility of information across the organi:ation allows for much greater ease in internal process integration. 7hen assessing the current integration status of "ey processes, firms should first develop an understanding of their internal supply chain. #nternal supply chains can be complex, particularly if the firm has multiple divisions and organi:ational structures around the globe. -anagers should consider forming crossCfunctional, multiCunit teams for setting process integration ob/ectives and performance measures. (hese crossC functional teams should adequately represent the firm=s internal supply chain. 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 2< 8nce the firm has a good overall understanding of its internal supply chain structure, it can begin to assess the existing level of information access across its internal supply chain. Does the firm have a single, companyCwide %.$ system, lin"ing all functional areas6 Are all of the firm=s legacy systems lin"ed to their %.$ system6 5ow easy is it to extract the information needed to ma"e effective decisions6 Are data warehouses being used to collect data from the various divisions of the firm6 ,irms that are internally integrating "ey business processes successfully are using global %.$ systems and data warehouses to ma"e better, informed decisions. Data warehouses store information collected from %.$ and legacy systems in one location, such that users can extract information from various functional areas as needed, analy:e it, and use it to ma"e decisions. An enterpriseCwide %.$ system allows the firm to use a common database from which to ma"e product, customer, and supplier decisions. #nformation is captured once, reducing data input errors0 information is available in real time, eliminating delays throughout the organi:ation as information is shared0 and finally, information is visible throughout the organi:ation+all transactions ta"ing place can be seen and accessed by everyone on the system. As the firm moves away from unconnected legacy systems and moves toward the fully integrated %.$ system, as organi:ationCwide crossCfunctional teams are created to lin" "ey processes throughout the firm, and as process performance is monitored and improved, the firm will become more focused on managing its "ey supply chain processes in an integrated fashion. #n a recent survey, companies with mature business processes and bestCinCclass information systems were found to have average net profit margins of 1B percent, 2B ) $art *+!oo"ing to the ,uture compared to I percent for other firms. (he &panish clothing company 1ara illustrates how information systems can greatly aid integration and lead to higher profits and a competitive advantage. 1ara owns its entire supply chain, from design, to manufacturing, to distribution, to its retail outlets. #ts retail stores provide direct feedbac" regarding demand for its fashions using its advanced information system infrastructure. (his allows its designers to quic"ly identify trends, leading to more new designs and styles. 1ara is thus able to bring these new designs and styles to mar"et in /ust three to four wee"s. #ts retail competitors often ta"e months to do the same thing, causing them to miss many mar"et opportunities. 1; Developing $erformance -etrics that &upport #nternal #ntegration #n order to assess the level of integration occurring within the organi:ation and encourage continued integration activities, department managers and others should design a family of performance metrics around desired collaboration activities. $erformance in these areas should be regularly monitored and improvement initiatives underta"en when necessary. (he old clichS, @what gets measured gets doneA certainly applies to the design and support of integration activities. (able 1;.1 lists a number of potential internal integration performance measures. Table 16.1 Internal Integration Performance Measures Work Groups 2umber of traditional and virtual wor" groups formed 2umber of crossCfunctional wor"Cgroups formed 2umber of wor"ers participating in one or more wor" groups $ercentage of wor" group ob/ectives met 2umber of pro/ects completed by wor" groups 2umber of /ointly developed products or product improvements 2umber of /ointly developed processes or ontinued 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 2* process improvements Information Systems 2umber of %.$ application implementations and upgrades $ercent of employees using %.$ applications $ercent of departments using %.$ applications Employees/Training 5ours of teamCbased training sessions provided 5ours of crossCtraining sessions provided 5ours of %.$ application training provided 2umber of top management discussions of collaboration in company newsletter %mployee trust and satisfaction survey ratings Reward Systems .eward amounts paid to wor" groups $ercent of wor" groups earning rewards $ercent of reward funds paid out to wor" groups 7hile (able 1;.1 is by no means exhaustive, it should serve as an impetus for the design of specific collaboration performance measures for department and topClevel managers. At a minimum, metrics should encourage the formation of work groups Ldefined here to mean two or more individuals wor"ing together on a common tas" who generally have computers connected to a networ" that allow them to send email to one another, share data files, and schedule meetings 1? M, the integration of information system applications utili:ing a central database, employee training, and reward systems. (o "eep the momentum going, efforts should also be underta"en to monitor the impact of internal integration on the firm=s overall performance. .ecent research in this area has shown that there is a direct and positive relationship between internal integration and firm performance. 1I 7hen #llinoisCbased food manufacturer Tua"er ,oods and 2ew Dor"Cbased food and beverage company $epsi'o merged in 2331, a ma/or hurdle was to create internal collaborations that supported their combined external supply chains. Paren Alber, vice president of integration at Tua"er ,oods, was selected to spearhead the effort. &he did her /ob so well 2; ) $art *+!oo"ing to the ,uture that she was later named one of @(he 2* -ost #nfluential %xecutivesA in the industry. ,or example, Tua"er was able to cut its inventory levels within its 'anadian operations by ;3 percent and paperwor" by ?? percent. 1K se of wor" groups or teams to integrate internal processes and improve firm performance has been described by many as a top priority. $revious studies regarding total quality management, quality circles, agile and lean manufacturing, and >#( have all found team wor" to be one of the common elements among successful companies employing these techniques. 23 ,urther, group performance has been shown to be impacted by the group members= abilities, their wor" environment, and their motivation. -aximi:ing the performance of teams should thus ma"e use of wor"er s"ills, their tools, their shared goals and values, and their level of wor"place comfort. (his supports the use of the other performance measures shown in (able 1;.1. ,inally, organi:ations should periodically assess not only the performances of their integration efforts, but the metrics being used as well. As the firm=s internal and external environment changes, so too its performance measures must change. 2ew employees, managers, and technologies will bring new s"ills to the organi:ation, and new competitors, customers, and suppliers will provide new opportunities and requirements for the firm desiring to remain competitive. (his will create additional opportunities for new internal integration efforts. The Active Internal Integration Phase ,irms that have been proactively involved in creating internal integration opportunities and practices will, at some point, reach a stage of development wherein internal process integration is a normal operating condition. (his describes firms in the 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 2? active internal integration phase, the second phase shown in ,igure 1;.1. #ntegrated information systems will provide information visibility throughout the global organi:ation to users at all functional levels0 wor" groups will be common fixtures in the organi:ation, including personnel from different departments and in geographically dispersed units as needs dictate. (hese groups will become successful at generating and meeting pro/ect ob/ectives, and in identifying new opportunities for collaboration efforts. Automa"er ,ord -otor 'ompany is on the cutting edge when it comes to use of information and communication technologies to connect wor"ers within their many production facilities around the globe. -ost employees are furnished with company laptops, a secure #D, and an #nternet connection that allows virtual teams to communicate. #t also allows access to ,ord email, mainframe systems, and instant messaging worldwide, from the office or from home computers. And for some, it allows phone calls to be made using 'isco=s #nternet softCphones. Additionally, ,ord has constructed its own digital fiber networ", and planned to be able to deliver videoconferences within 2orth America by the end of 233;, allowing it to hold virtual meetings. 21
,irms that are successful at internal integration have found that the "ey to building successful teams is in finding people with the right personal chemistry who can quic"ly develop trusting relationships. @&ome of the worst teams #=ve ever seen have been those where everybody was a potential '%8,A says David 2adler, '%8 of the -ercer Delta global consulting firm, who has wor"ed with top companies and their executives for over <3 years. -utual trust is a fundamental element of a winning team, which explains why so many @dream teamsA in sports and other areas have failed to 2I ) $art *+!oo"ing to the ,uture accomplish much. ,or example, the .&. baseball team assembled to compete in the 7orld 9aseball 'lassic in 233; included such baseball greats as .oger 'lemens, Dere" >eter, Alex .odrigue:, and >ohnny Damon, yet they performed relatively poorly, losing games to -exico, &outh Porea, and 'anada. (he 233B .&. 8lympic bas"etball team consisted entirely of 29A superstars, yet it finished third and lost to !ithuania. #n contrast, the 1KI3 .&. 8lympic hoc"ey team was built explicitly by considering the personal chemistries of only college players Lnot necessarily the best playersM, and yet these amateurs beat the heavily favored &oviet team to win the gold medal. #n still another example, >ac" 7elch, the legendary exC'%8 of the 'onnecticutCbased global conglomerate G%, insisted that members of their 'orporate %xecutive 'ouncil meet away from the corporate offices, have no prepared presentations, and wear informal clothing+ he believed this allowed more realistic conversations to occur, and trust to be formed within the council membership. 22 8rgani:ations proactively involved in internal integration create opportunities for more and better collaborations between staff members. (his may include designing facilities conducive to better collaboration0 allowing staff to crossCtrain one another0 creating opportunities to see other wor"er perspectives, ma"e new acquaintances, and see the big picture0 holding adChoc brainstorming sessions when challenging situations develop to encourage problemCsolving s"ills and teamwor" to develop among personnel0 and recogni:ing and celebrating accomplishments when teams hit a milestone, by writing a story in the company newsletter, hosting a luncheon for the team and other employees, or simply putting up a commemorative plaque. (he Aetna #nformation &ystem facility in 9lue 9ell, $ennsylvania, uses space more efficiently to enhance collaboration. @7hat our 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) 2K clients are as"ing us to do is find a way to ma"e a hallway or lobby or gathering space do more than one thing,A says 'arol .ic"ard, of 7ashington D.'.Jbased !ittle Diversified, who oversaw the design of Aetna=s offices. @9y increasing the width of a circulation hallway or space poc"et, and placing soft seating and a teaming table there, we=re able to maximi:e the use of that space by creating an informal collaboration hub. 7e call it chair ballet. $eople literally wheel themselves over to the table and are able to meet.A 2< ,orwardCthin"ing leaders in the organi:ation are at the heart of the development of a collaborative culture. (hey understand how to put teams together to ta"e advantage of each member=s particular style and strengths0 they provide for and ensure that team members are sufficiently trained and equipped0 they foster a wor" environment conducive to trust and productivity0 and they provide adequate financial and time support. #n a recent interview, 7illiam Donius, '%8 of $ulas"i 9an" of -issouri, a topCperforming ban" in terms of return on assets, listed three things as most responsible for success at the ban"+the recruitment of the best and brightest people at all levels, the offering of products that meet customer needs, and the creation of an environment where teamwor" and collaboration are valued. 2B (he $rocess -anagement in Action feature provides some interesting descriptions of how some companies are encouraging teamwor" s"ills at meetings in !as Hegas, 2evada. PROCESS MANAGEMENT IN ACTIONTeambuilding the Las Vegas Way %xperienced meeting attendees can become immune to the idea of @teambuilding.A (hey=ve done it already, and it=s a real challenge to get them excited. &o if beach 8lympics, ropes challenge courses, and buildCyourCownCsurvivalCrafts sound li"e <3 ) $art *+!oo"ing to the ,uture a laundry list of your latest teamCbuilding efforts, get ready to create some bu:: in !as Hegas, 2evada. 7ith one loo" at the astounding variety of diversions along the !as Hegas &trip, most meeting participants are instantly chomping at the bit to delve into the excitement. 8ne of the best ways &haron Geraci, president of -eeting F #ncentive -anagement, has found to give them a taste of the diverse menu is the @(est Dour !imitsA teambuilding event. &he presents the group with a collection of daring activities, each with a specific point value attached to it. (he team decides together which elements to tac"le as a personal driver ta"es them around town by limousine. 'hallenges could include anything from going to the top of the %mpire &tate 9uilding at 2ew Dor" 2ew Dor" to boarding Land riding, of courseM one of the heartCpounding thrill rides at the top of the &tratosphere 5otel=s tower. @#t=s a really fun ice brea"er,A explains Geraci. @#t=s all about seeing !as Hegas and building camaraderie.A $erhaps the biggest surprise about spending quality time soaring is what you don=t get: noise. $eace and quiet is a big part of what the &oaring 'enter is all about, but the rare thrill of mastering the desert=s air currents in a tiny, engineless plane is the real draw. @7e can do loops and wingCovers, and if they want to ta"e the controls, we=ll put them in the front of the plane,A says instructor and center owner -i"e 5enderson, who is sure to cater the flight to the individual rider. ,or teambuilding, many groups choose the company=s ride on the popular The !ma"ing #ace reality television show. #t includes a fiveChour soaring4A(H adventure for up to <3, where the participants divide their time 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) <1 riding above and below each other+and for the bravest of the group, there=s a s"ydiving option. @(hey /ust thin" it=s the coolest thing in the world,A says 5enderson. &ome people may have heard of a &egway U , but few have actually ta"en a spin. (hat is precisely the appeal of &egway polo as a teambuilding activity. @2obody else is doing it, and it=s a very fun, interactive event,A says Geoff .hodes, director of creative event services for .it:C'arlton, !a"e !as Hegas, who creates teambuilding programs that his crew stages for groups throughout the !as Hegas area. &egway polo allows participants to play competitive polo without ever having to mount a horse, undergo formal coaching, or train for competition. Geared to all fitness levels Land all si:es between 133 and 2*3 poundsM, the game uses &egway U 5uman (ransporters and soft foam mallets and balls to play the traditional game. .hodes= staff provides teams of B to 12 players with the batteryCpowered &egway 5uman (ransporters, polo equipment, helmets, lessons, and practice chu""ers. (he newest trac" in Hegas opened on April 13, 233;, and is offering thrill rides for visitors at the north end of the &trip. General -otors= @(he DriveA offers two professionallyCdesigned driving courses+including a highCperformance loop and an offC road adventure over a dirt terrain. Groups can chec" out the performance course, a halfC mile paved route with /ogs and turns that highlight both the speed and handling control of pure sports car driving. Hehicles available to unleash on the performance course include the 'orvette, the $ontiac G(8, the B33Chorsepower 'adillac '(&CH, and more. $articipants who choose the offCroad course will be handed the "eys to a 5ummer or their choice of several 'hevy, G-', or 'adillac truc"s and select &Hs. <2 ) $art *+!oo"ing to the ,uture (he food cra:e has run rampant in !as Hegas, and groups have been clamoring to get into the "itchen. %nter 9ellagio .esort and its (uscany Pitchen, designed specifically for culinaryCbased teambuilding events. (he 1,1?3CsquareCfoot venue is the first of its "ind in the city, an intimate environment for 1I people that can be expanded for up to ;3 people by using two dropCdown video screens that "eep the bac" rows close to the action. 9ellagio=s awardCwinning chefs lead the fun during a program that can focus on anything the group wants, from how to prepare a specific style of cuisine, such as >apanese, #talian, or 'hinese to setting up a friendly competition, a la the ,ood 2etwor"=s popular #ron 'hef. &ource: 7est, %., @(a"e 8ne for the (eam,A Successful $eetings, >une 233;, pp. 22J2<. 'opyright O 233; H2 9usiness -edia, #nc. .eprinted with permission. (he third and final phase of the process integration model shown in ,igure 1;.1 is the active external integration phase. (his phase is discussed in detail in the following section. EXTENDING INTEGRATION TO SUPPLY CHAIN TRADING PARTNERS #n the most advanced stage of the integration model, the firm=s abilities to integrate internally have matured, creating successful process collaborations between personnel throughout the firm. As the firm witnesses these successes and reali:es the value inherent in process integration, the desire to collaborate and integrate processes with supply chain trading partners also grows. 5opefully, during this maturation phase, the firm is discovering highCperforming suppliers, and is also becoming a valued supplier to its customers. #t is at this point that the firm is prepared to begin actively managing its supply chain through use of external process integration. .evisiting the ultimate goal of 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) << supply chain management+to provide end users with the products and services they desire, at the right levels of price, quality, and service+it follows that firms actively managing their supply chains must become adept at internal process integration and extend the boundaries of the firm through the integration of "ey processes among supply chain trading partners. 8nce the firm has set in motion the activities to achieve internal process integration, it can then turn its attention towards external process integration. %xternal process integration can be an extremely difficult tas", even more so than internal integration, since it requires, first and foremost, willing and competent trading partners, mutual trust, and potentially a change in one or more organi:ational cultures. 5owever, the benefits of supply chain collaboration and information sharing can be significant: reduced supply chain costs, greater flexibility to respond to mar"et changes, less supply chain safety stoc", higher quality levels, reduced time to mar"et, and better utili:ation of resources. (hrough the practice of collaboration, information sharing, and process integration, supply chain management can become a core competitive strength for the firm and its trading partners in the supply chain. (he Global $erspective feature profiles -etro 'ash F 'arry Hietnam, a good example of a company capitali:ing on its external integration opportunities with only limited use of technology. GLOBAL PERSPECTIVEMetro Cash & Carry Vietnam: Keeping Collaboration Simple &uccessful collaborative relationships can be created using relatively simple but effective practices. And they can be found in some unusual places. 'onsider the case of -etro 'ash F 'arry Hietnam, which has developed longCterm collaborative relationships <B ) $art *+!oo"ing to the ,uture both with its local vegetable suppliers and with a ma/or hotel customer in 5o 'hi -inh 'ity. (hese collaborative relationships involve basic informationCsharing and coordination practices, which have led to more efficient produce distribution and more satisfied supply chain partners. -etro 'ash F 'arry Hietnam is a GermanCowned businessCtoCbusiness grocery wholesaler speciali:ing in services to hotels, restaurants, and catering institutions. (he company=s main strategy is to be cheaper than its competitors in the traditional wholesale mar"ets while also focusing on food safety and customer satisfaction. According to -etro managers, the company=s success is closely lin"ed to its strategy of building longCterm supply relationships, especially with local producers of fresh vegetables. (hese relationships are based on trust. (o gain that trust, potential suppliers, for their part, must show that they can deliver highCquality produce regularly and be responsive to fastCchanging customer demands. -etro loo"s for financially stable suppliers with proven experience in vegetable production and a reputation for produce quality. (rust is built mainly on results. -etro will start sourcing from potential suppliers little by little to chec" the regularity of quality. (his reliability is important. ,resh produce buyers at -etro receive many offers from local suppliers, but a supplier that consistently provides good quality and low price in a stable manner throughout the year is difficult to find. At the same time, -etro also needs to acquire the trust of its suppliers. 8ne way it does this is through establishing secured payment in the supply contract. Although there is a fixed delay in payment, which can go up to <3 days, the company rewards a 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) <* successful supply relationship by lowering the delay after a period of satisfactory deliveries. (hese trustCbased relationships rely on the exchange of transparent mar"et information between suppliers and -etro buyers. -etro=s individual fresh food buyers are responsible for maintaining good interpersonal relationships with all regular suppliers. (his means not only communicating frequently with suppliers by telephone and fax but also physically visiting suppliers several times each month. -etro has even purchased fax machines for those suppliers that did not have one. Although the communications may seem low tech, they have proven to be very effective. According to the sta"eholders themselves, the focus on communications and product quality has had a positive impact on supply chain performance. ,rom the viewpoint of the suppliers, -etro=s focus on higherCquality vegetables brings them greater stability in orders and prices. (hese suppliers also gain greater ris" avoidance through the company=s guarantee of payment. ,inally, because reliable quality produce is still relatively difficult to find in Hietnam, established -etro suppliers that focus on quality have a certain power in negotiations with the wholesaler. (rusting relationships are timeCconsuming to build and regular suppliers are difficult to find in Hietnam. &o once a supply relationship is established, it is important for -etro to "eep it because of the investment made. (herefore, bestCperforming -etro suppliers can be assured of a longCterm commitment by the distributor. 'ollaboration doesn=t end with -etro=s suppliers0 it extends to customers as well. (he company=s relationship with the 2ew 7orld 5otel, a fiveCstar property in 5o 'hi -inh 'ity, offers an excellent example. (he two companies agreed in 2332 to experiment <; ) $art *+!oo"ing to the ,uture with a strategic alliance whereby -etro supplies most of the hotel=s needs. As a result, more than K? percent of the hotel=s purchases come from -etro. (he partnership is based on strong collaboration and information sharing in order planning and replenishment. 9oth companies have assigned a dedicated staff member to manage this strategic alliance: a "eyCaccount manager at -etro and a procurement manager at the hotel. (he hotel purchasing manager can call the -etro "eyCaccount manager at any time during wor"ing hours for an emergency delivery, and -etro will deliver immediately, even during wee"ends. ,urthermore, -etro always sends a member of its sales staff to the 2ew 7orld 5otel to supervise each delivery and assess its quality with the hotel=s staff. (he 2ew 7orld 5otel orders three times a wee" on -onday, 7ednesday, and ,riday for delivery on the following ordering day. (his order cycle enables -etro to ta"e its time in preparing the goods and saves time for the hotel=s procurement staff. (ransportation costs are minimi:ed because it is cheaper to have one big truc" transporting a large order than having several truc"s delivering from different suppliers. -etro also extends credit to its privileged partner as the hotel=s payments are made twice a month by ban" transfer. (he relationship depends on frequent communication between the -etro "eyC account sales manager and the hotel procurement manager. (he hotel procurement manager will call the -etro "eyCaccount manager four times every wee" to assess the quality of each delivery. Additionally, when mar"et conditions lead to shortages, -etro staff provides the hotel=s staff with advanced warning of changing supply factors. (his enables the hotel to implement alternative supply arrangements. As with the supplier 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) <? communication, the interaction between -etro and its customer is personali:ed, simple, and highly effective. 8verall, the personnel interviewed in the vegetable supply chains of -etro 'ash F 'arry Hietnam successfully engage in collaboration, /oint planning, and information sharing to optimi:e their forecasting and product replenishment. -oreover, they are doing so with a disarming degree of simplicity: Daily phone calls between dedicated staff in the partner firms and /oint planning of supply and demand are enough to lead to the satisfactory delivery of such perishable articles as fresh vegetables. &ophisticated technology certainly has a place in the modern supply chain. 9ut the -etro 'ash F 'arry story proves the enduring effectiveness of simple, straightforward communication. &ource: 'adilhon, >. and A. ,earne, @!essons in 'ollaboration: A 'ase &tudy from Hietnam,A Supply hain $anagement #eview, H. K, 2o. B, 233*, pp. 11J12. .eprinted with permission from Supply hain $anagement #eview, copyright O 233*. .eturning once again to ,igure 1;.1, external integration requires identifying supply chain business strategies, translating these into "ey process requirements and integration activities, developing trading partner relationships, identifying information system requirements, and then designing external integration performance measures for continued improvement purposes. Discussions of these topics follow. Identifying and Aligning Supply Chain Business Strategies -anagement must identify the basic supply chain strategies associated with each of their products or services, and then align internal process strategies to support the supply chain strategies. #f, for example, an end product is competing based on quality, then supply chain members should also be designing strategies consistent with delivering highCquality parts, products, and services to their immediate customers, until eventual <I ) $art *+!oo"ing to the ,uture delivery of the final product to the end customer. (he supply chain strategies should translate into internal functional policies that include the types of parts and services purchased, the suppliers used, the shop layout and manufacturing processes employed, the designs of the products manufactured, the modes of transportation used, the warranty and return services offered, the employee training methods used, the types of information technologies used, and potentially the amount of outsourcing employed. #n each of these areas, policies should be geared towards supporting the aboveCmentioned qualityCoriented strategy of the supply chain. Alternately, if end products are competing primarily based on low cost, then strategies and functional policies for intermediate products within each of the supply chain participants must be consistently aimed at achieving low cost as parts, components, and services are purchased, produced, and moved along the supply chain. (his may ta"e the form of purchasing material in bul" to receive pricing discounts, mass producing products to reduce unit costs, operating in a low labor cost environment, and using the least costly modes of transportation. As competition, technology, and customer requirements change, then management must also ad/ust supply chain and internal strategies to remain competitive. Identifying Key Process Requirements, Integration Activities, and Partnership Opportunities (o align internal strategies and policies with external supply chain strategies, managers need to identify the important processes lin"ing their firm and their supply chain partners and establish process integration ob/ectives to ensure that resources and efforts are effectively deployed within each trading partner, to support the overall endC product strategy. (hese "ey processes, along with the methods used to integrate and 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) <K /ointly manage processes among supply chain partners, will vary based on the internal structure of each firm, the prevailing economic conditions in the mar"etplace, the degree that functional silos exist in any of the trading partners, the information systems employed, and the nature of existing relationships within the supply chain. #n some cases, it may be best to start small and integrate only one or two "ey processes with one trading partner, while with other partners, more processes may be integrated. (able 1;.2 lists the eight "ey supply chain processes, as first mentioned in 'hapter 1, along with some potential integration elements associated with each process. Table 16.2 External Integration Elements for the Eight Key Supply Chain Processes` Key Process External Integration Elements 'ustomer relationship management Determining customer requirements0 gathering feedbac" on new product development0 negotiating product4service agreements0 developing agreements for sharing process improvement costs4benefits. 'ustomer service management $roviding information to customers0 resolving product4delivery problems0 gathering customer service performance feedbac". Demand management &haring pointCofCsale, new mar"et, production, and forecast information. 8rder fulfillment Determining order si:es, distribution plans, and communication networ" requirements. -anufacturing flow management Determining customer requirements changes0 translating customer requirements changes into supplier requirements changes. &upplier relationship management 2egotiating product and service agreements, developing or improving supplier capabilities, and then monitoring supplier performance and improvement. $roduct development and commerciali:ation 'ollaborating on new product development teams0 testing new product prototypes0 assessing the success of each new product. .eturns management Developing environmental compliance, substance disposal, and recycling agreements0 composing adequate operating and repair instructions0 developing material disposition guidelines. V(hese processes are discussed in detail in !ambert, D. -., -. '. 'ooper, and >. D. $agh, @&upply 'hain -anagement: #mplementation #ssues and .esearch 8pportunities,A %nternational &ournal of 'ogistics $anagement, H. K, 2o. 2, 1KKI, pp. 1C1K, and in 'roxton, P. !., &. >. GarciaCDastugue, and D. -. !ambert, @(he &upply 'hain -anagement $rocesses,A %nternational &ournal of 'ogistics $anagement, H. 12, 2o. 2, 2331, pp. 1<J<;. B3 ) $art *+!oo"ing to the ,uture As the textboo" has endeavored to illustrate throughout the textboo", there are eight boundaryCspanning processes that have generally been identified as the "ey supply chain processes. 'oordinating or integrating activities within these processes between trading partners is what ultimately enables the supply chain and its members to successfully compete. Activities and integration elements within each of the "ey business processes must be based on the competitive strategies identified for each product=s supply chain. A brief discussion of the activity requirements and integration elements associated with each of these "ey processes follows. 'ustomer .elationship -anagement $rocess (he customer relationship management process provides the firm with the structure for developing and managing customer relationships. As discussed in 'hapter <, "ey customers are identified, their needs are determined, and then products and services are developed to meet their needs. 8ver time, relationships with these "ey customers are solidified through the sharing of product and service information, supply chain strategies, product development strategies, the formation of crossCcompany teams to design and improve products and services, the development of shared goals, and finally, improved performance and profitability for the trading partners. 'ollaboration elements also include the formation of product and service agreements to meet customer needs, decisions regarding product pac"aging, transportation, and storage, and the development of guidelines for sharing process improvement costs and benefits. 'ustomer &ervice -anagement $rocess (he customer service management process is what provides information to customers while also providing ongoing management of any product and service 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) B1 agreements between the firm and its customers. #nformation can be provided through a number of communication channels, including websites, group interactions, information system lin"ages, and printed media. 8b/ectives and policies are developed to ensure the timely distribution of products and services to customers, to adequately respond to product and delivery failures and complaints, and to utili:e the most effective means of communication to coordinate successful product, service, and information deliveries. (he process also includes methods for monitoring and reporting customer service performance, which allow firms to understand the extent their management efforts are achieving the process ob/ectives. %xternal integration elements include the gathering of customer satisfaction feedbac", the methods used for information dissemination, and the adequate and longCterm solutions to customer problems and complaints. Demand -anagement $rocess (he demand management process is what balances customer demand and the firm=s output capabilities. Demand management activities include forecasting demand, and then utili:ing techniques to vary capacity and demand within the purchasing, production, mar"eting, and distribution functions. Harious forecasts can be used, based on the time frame, the "nowledge of the forecaster, the ability to obtain customers= pointCofC sales information, and the use of forecasting models contained in many %.$ systems. A number of effective techniques exist to smooth demand variabilities and increase or decrease capacity when disparities exist between demand and supply. 'ontingency plans must also be ready for use when demand management techniques fail or when forecasts are inaccurate. #nterCcompany teams can thus decide how best to share new mar"et and future purchase requirements, point of sale information, and planned production B2 ) $art *+!oo"ing to the ,uture quantities. (he creation of formal collaborative planning, forecasting and replenishment L'$,.M agreements as discussed in 'hapter * is one way to share this type of information, and tends to result in lower safety stoc"s throughout the supply chain. #ntegration activities can then also include the use of forecasting techniques, purchasing agreements, and order quantity decisions. 8rder ,ulfillment $rocess (he order fulfillment process is the set of activities that allows the firm to fill customer orders while providing the required levels of customer service at the lowest possible delivered cost. (hus, the order fulfillment process must internally integrate the firm=s mar"eting, production, and distribution plans as well as allow customers to provide input in order to be effective. -ore specifically, the firm=s distribution system must be designed to provide adequate customer service levels, and the production system must be designed to produce at the required output levels, while mar"eting plans and promotions must consider the firm=s output and distribution capabilities. .elated order fulfillment issues are the location of suppliers0 the modes of inbound and outbound transportation used0 the location of production facilities and distribution centers0 and the systems used for entering, processing, communicating, pic"ing, delivering, and documenting customer orders. (he order fulfillment process must integrate closely with customer relationship management, customer service management, supplier relationship management, returns management, and directly with "ey suppliers and customers to ensure that customer requirements are being met, customer service levels are being maintained, suppliers are helping to minimi:e order cycle times, and customers are getting undamaged, highC quality products on time. 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) B< -anufacturing ,low -anagement $rocess (he manufacturing flow management process is the set of activities responsible for ma"ing the actual product, establishing the manufacturing flexibility required to adequately serve the mar"ets, and designing the production system to meet cycle time requirements. (o be effective, manufacturing flow management activities must be interfaced with the demand management and customer relationship management processes, using customer requirements as inputs to the process. As customers and their requirements change, so too must the supply chain and the manufacturing flow processes change, to maintain overall competitiveness. 'lose collaboration between the firm and its customers can quic"ly translate changing customer requirements into new flow management solutions. -anufacturing flow characteristics also impact supplier requirements. ,or instance, as manufacturing batch si:es and lead time requirements are reduced, supplier deliveries must become smaller and more frequent, causing supplier interactions and supplier relationships to potentially change. (he importance of an adequate material planning system connecting customers, the firm, and suppliers should become evident here, as customer requirements must be translated into production capabilities and then supplier requirements. As with other processes, a good set of performance metrics should also be utili:ed to trac" the capability of the manufacturing flow process to satisfy demand. &upplier .elationship -anagement $rocess (he supplier relationship management process defines how the firm manages its relationships with suppliers. As discussed in 'hapter 12, firms in actively managed BB ) $art *+!oo"ing to the ,uture supply chains see" out small numbers of the best performing suppliers and establish ongoing, mutually beneficial, close relationships with these suppliers in order to meet cost, quality, and4or customer service ob/ectives for "ey materials, components, and products. #ntegration activities in this process include screening and selecting suppliers, negotiating product and service agreements, developing or improving supplier capabilities, and then monitoring supplier performance and improvement initiatives. Pey suppliers most li"ely have a crossCfunctional team to manage their progress towards meeting the firm=s current and longCterm requirements and establishing a record of performance improvement over time. &upplier relationship management personnel routinely communicate with production personnel to obtain feedbac" on supplier and purchased item performance, and with mar"eting personnel to obtain customer feedbac". (his information can then be passed along to suppliers during periodic performance review meetings. $roduct Development and 'ommerciali:ation $rocess (he product development and commercialization process is responsible for developing new products to meet changing customer requirements and then getting these products to mar"et quic"ly and efficiently. #n actively managed supply chains, "ey customers and suppliers are involved in the new product development process to ensure that products conform to customers= needs and that purchased items meet manufacturing requirements. %xternal integration activities in the product development and commerciali:ation process include the development of customer feedbac" mechanisms0 the formation of new product development teams that include customer and supplier representatives0 assessing and selecting new product ideas based on supplier capabilities 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) B* and advanced supplier component "nowledge, resource requirements, customer needs, and fit with existing infrastructure0 designing and testing new product prototypes0 determining mar"eting channels and rolling out the products0 and finally, assessing the success of each new product. &uccessful new product development hinges on the involvement of external customers and suppliers, and on the internal integration of manufacturing, mar"eting, purchasing, and finance personnel. .eturns -anagement $rocess (he returns management process, given little importance in some organi:ations, can be extremely beneficial for supply chain management in terms of maintaining acceptable levels of customer service and identifying product improvement opportunities. .eturns management activities include environmental compliance with substance disposal and recycling, composing operating and repair instructions, troubleshooting and warranty repairs, developing disposal guidelines, designing an effective reverse logistics process, and collecting returns data. .eturns management personnel frequently interact with customers and personnel from customer relationship management, product development and commerciali:ation, and supplier relationship management during the returns process. 8ne of the goals of returns management is to reduce returns. (his is accomplished by communicating return and repair information to product development personnel, suppliers, and other potential contributors to any returns problems to guide the improvement of future product designs. (ransportation and distribution services may also be included in the returns feedbac" communication loop. $roduct recalls, typically initiated because of safety or quality problems, involves informing customers and B; ) $art *+!oo"ing to the ,uture determining the most effective return, repair, and4or replacement procedures. 8ther collaboration activities for the returns management process include developing policies for disposing of ha:ardous materials and recovering waste pac"aging across the supply chain. ,or each of the eight "ey supply chain processes identified, ob/ectives and policies should be coCdeveloped between supply chain members to achieve the overall supply chain strategies. Additionally, consistent ob/ectives within each functional area of the firm for each process help to integrate the processes internally, as well as focus efforts and firm resources on supporting the supply chain strategy. #nternal process integration, trading partner relationships, and external process integration are thus all interrelated. As internal integration efforts get underway, the need for external integration becomes apparent. (his, over time, creates the need for close wor"ing relationships among supply chain members. ,or instance, if the supply chain strategy is to compete using lowCcost ob/ectives, the customer relationship management process might be to find cheaper delivery alternatives that still meet customer requirements, develop vendorCmanaged inventory capabilities with suppliers, and to automate the customer order process while communicating the new order process to customers. $roduction ob/ectives might be to develop bul" pac"aging solutions consistent with customer order quantities and distribution systems used, to increase mass production capabilities, and to identify the lowest total cost manufacturing sites for specific products. $urchasing ob/ectives might be to identify the least expensive materials and components that also meet specifications, and develop other costCsaving ideas for purchased items with input from suppliers. ,irms 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) B? should similarly progress through each of the "ey processes using teams of employees, customers, and suppliers to develop process ob/ectives and policies. Identifying Supply Chain Information System Requirements and Capabilities As soon as external integration efforts are underway, it will li"ely become apparent that information and communications systems need to change to accommodate the need to share information and discuss problems as they arise, both with internal staff members and external trading partner employees. 7hile the topic of information flow management was addressed in detail in 'hapter K, external integration efforts require trading partners to easily and quic"ly translate information from their own departments= systems to those of their partners. Does the firm have a single, companyCwide %.$ system that can easily be lin"ed to its "ey suppliers= and customers= information systems6 Do any of the trading partners have legacy systems that require middleware to communicate with other firms= enterprise or legacy systems6 5ow can pointCofCsales information be shared6 7hat are the information system requirements along the supply chain, and who will pay for the system upgrades6 (hese are external integration elements that all trading partners will have to consider. ,irms that are successfully integrating "ey business processes externally are using global %.$ systems, data warehouses, #nternet portals and other webCbased applications to ma"e better, informed, collaborative decisions with their supply chain partners. Globally lin"ed, supply chainJaccessible %.$ systems allow trading partners to share information from companyCwide databases to ma"e /oint product, customer, and supplier decisions. #nformation is captured once and made visible to all users, reducing data input errors. #nformation is available in real time, eliminating delays throughout the BI ) $art *+!oo"ing to the ,uture organi:ations as information is shared. As firms move away from legacy systems and toward fully integrated %.$ systems, as crossCfunctional trading partner teams are created to lin" "ey processes to supply chain strategies, and as firms become more adept at internal process integration, firms will also become more focused on achieving supply chain ob/ectives, resulting in benefits for all trading partners. Information visibility, or the way information is communicated and made available to various constituents, plays an extremely important role in external process integration. (oday, connecting buyers and suppliers via virtual lin"ages is the way supply chains are becoming integrated. 2* &upply chain communication technologies provide support for a number of issues, including handling the flows of goods between companies, negotiating and executing contracts, managing supply and demand between partners, ma"ing and executing orders, and handling financial settlements, all with a high level of security. &hirley 'ooper, supply chain procurement director at PCbased 'omputacenter, %urope=s leading provider of #( infrastructure services, believes that future collaboration success lies in implementing new technology. @#f you have /oinedCup LintegratedM #( you can get a steal on the mar"etplace. 7e are loo"ing at how we can get our suppliers in a virtual warehousing space so # don=t have to hold stoc". # can loo" into their systems to say, Wyou=ve got it, and #=ll have it at that price=,A she said. 2; (oday=s webCbased collaborative infrastructures can accommodate an array of communication applications using existing systems and %.$ applications. ,or instance, 'aliforniaCbased provider of web conferencing services 7eb%x 'ommunication=s 7eb8ffice application, -icrosoft=s &harepoint U application, and ,loridaCbased software firm 'itrix &ystems= Go(o-eetingX application are /ust a few of the literally hundreds 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) BK of software applications enabling businesses to communicate and share data both internally and externally. ,or example, 9D(, a German manufacturer of paper handling components, found that its many legacy systems were impeding its ability to collaborate effectively with its customers and suppliers. .FD staff, for instance, needed to be able to collaborate frequently with customers in the design process, and suppliers needed visibility into parts inventories on a realCtime basis to avoid wor" stoppages. 9D( decided to deploy an online collaboration and document management solution from -icrosoft=s &hare$oint, which provided each customer and supplier with secure collaboration and information access with 9D(. (he system ultimately reduced administrative labor and supplier management time by over 2,333 hours per year, enabling system paybac" in less than five months. 2?
'ollaboration software application suppliers are busy lumping together everything from Hoice over #nternet protocol LHo#$M, email, instant messaging, web conferencing, document sharing, and web portals to help customers integrate processes. #nformation systems giant #9-=s collaboration software allows customers to integrate their %.$ data across business processes, combining !otus 2otes U tas"s, scorecards, dashboards, eC forms, document and content management, instant messaging, team rooms, and presence awareness. 2I #n the education arena, Ari:ona &tate niversity hosts a web portal that allows all Ari:ona "indergarten through 12th grade students to interact with the state=s math teachers. (he eC'ommerce $erspective feature profiles this collaborative effort. *3 ) $art *+!oo"ing to the ,uture E-COMMERCE PERSPECTIVEAn IDEAL Education 7hen threeCyearCold %lias 5ino/osa goes to "indergarten in (ucson, Ari:ona, he=ll have more than crayons, paper, and paste at his disposal. 5e=ll also have access to a host of interactive educational tools, than"s to a stateCsponsored web portal built and managed by Ari:ona &tate niversity. ,rom "indergarten through 12th grade, 5ino/osa will head to the #ntegrated Data to %nhance Ari:ona=s !earning L#D%A!M portal for math and reading practice tests, supplemental online courses, interactive learning exercises, and stateCrequired advancedC placement tests. 5e=ll also turn to #D%A! for learning materials, coursewor", and video resources his teachers have placed there to supplement their classroom presentations. ltimately, 5ino/osa and as many as 1 million other students will have access to the #D%A! portal, enabled with the open source u$ortal software. ,or now, <33,333 students are authori:ed to log on to #D%A! to chec" out sample tests0 coursewor" is not yet available but will be soon. #n addition to the students, the state=s ;3,333 PC12 teachers have access to the portal, not only to provide supplemental coursewor" but also for lin"s to student demographics, improvement guidelines, grades, and benchmar"s. (eachers manage coursewor" on #D%A! through &a"ai, an open source course management and collaboration application. (he focus of this innovative educational initiative is to use technology to enable lifelong learning, says &am DiGangi, assistant vice provost for #( at Ari:ona &tate niversity LA&M, in (empe. @#D%A! is not /ust access to a 7eb site, but accounts that 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) *1 will stay with students through their schooling and, conceivably their entire career,A he says. A& is building the #D%A! networ" per a contract with the Ari:ona Department of %ducation, which has invested E* million in the networ". A& contributes technical and staffing resources. (he university is phasing in access on a rolling basis, with all students expected to have authority to use the portal by August 233;. 7ith more than 1 million potential users, #D%A! necessitates a heavyCduty storage infrastructure. @(he biggest challenge is managing the authentication and authori:ation of students and teachers,A says >ac" 5su, director of #& and networ" management at A&. @7e have <*3,333 users authenticated and authori:ed, but have over 1 million overall users to authori:e.A (o authenticate portal visitors, A& uses the open source 'entral Authentication &ervice, developed at Dale niversity. A& "eeps costs in chec" for the #D%A! networ" by using technologies such as i&'&# and open source software. @%verything in this pro/ect is open source, so that in itself is a huge cost savings, not /ust in initial but in ongoing costs,A 5su says, noting that A& has been running !inux for three to four years. @(hen we used i&'&#, which really ma"es our costs go down. All the ,ibre 'hannel expenses add up. 7e=ve saved a few hundred thousand right there.A &o for 5ino/osa, if all goes as planned, a lifelong relationship with #D%A! is in the future Lor at least as long as his parents stay in Ari:onaM. &ource: 'onnor, D., @An #D%A! %ducation,A (etwork World, H. 22, 2o. B;, 233*, pp. *BJ*;. sed with permission from (etwork World, http:44nww.com. *2 ) $art *+!oo"ing to the ,uture As internal integration capabilities and relationships and information sharing competencies with trading partners mature, firms should begin to notice that additional external integration opportunities are occurring. (o maximi:e the value of these integration efforts, firms should consider developing external integration performance measures to trac" performance and guide future improvement efforts. (his topic follows. Developing External Integration Performance Measures As was discussed earlier in the chapter when assessing internal integration performance, the firm should also develop external performance measures to monitor its collaboration activities with trading partners in the eight "ey supply chain process areas. #deally, a team composed of members from the firm and several primary trading partners should be created to design these measures to be consistent with overall supply chain strategies. &ubsequently, these measures can be employed by each of the trading partners to monitor their respective collaboration activities in "ey process areas. sing a lowCcost supply chain strategy example, trading partners would monitor a number of costCoriented performance measures that could be used by individual firms and that also might be averaged across all of the supply chain members for each of the "ey supply chain processes. ,or the customer relationship management process, integration performance measurement examples might include the number of '.- initiatives implemented, the percentage of customers hitting a certain profitability level, the number of customer contacts made, and the percentage of collaborative groups that include "ey customers. &imilar sorts of measures could thus be developed for the other "ey processes. 8bviously, these measures can vary widely by industry, supply chain, company, product type, and strategy employed. At 'aliforniaCbased &olectron 'orp., a provider of 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) *< electronics manufacturing services, involving supply chain trading partners is an important part of measuring and improving performance. @8ur goal is to drive lean through the supply chain processes, on the factory floor and through our supply base. 7e want much more visibility between our factory and our supplier=s factory,A says >ames -ol:on, vice president of customer fulfillment at &olectron. 7ith lean principles in place, a factory has much faster response times, -ol:on observes. @'ustomer feedbac" is an important benchmar"ing tool within the highCtech industry as well,A adds -ol:on. @7e do sub/ective and quantitative customer satisfaction surveys, with more and more emphasis on quantitative assessments.A 2K #mproving %xternal $rocess #ntegration and &upply 'hain $erformance %ventually, as supply chain members become more adept at supply chain process integration, poorCperforming suppliers and highCcost customers are replaced by better ones, and longCterm trusting alliances are established among the firms that remain. 9uilding, maintaining, and strengthening these relationships is accomplished through use of external process integration and continued performance monitoring coupled with problemCsolving efforts. As process integration improves among supply chain partners, so too does overall supply chain performance. &upply chain trading partners must concentrate on collaborating and sharing information such as sales and forecast information, along with information on new products, expansion plans, new processes, and new mar"eting campaigns, in order to maximi:e profits for the entire supply chain membership. ,ocusing on building external process integration lin"ages will enable firms to better share and ta"e advantage of this information. (he teams formed to design and organi:e process integration performance *B ) $art *+!oo"ing to the ,uture measures should be viewed as a "ey resource for the supply chain. (hese teams can determine or consider supply chain process ob/ectives and the corresponding integration activities and wor" groups that must occur to achieve the ob/ectives. #ntegration performance metrics can then be designed for each of the processes, followed by monitoring to identify any lac" of process integration and potential supply chain wea"nesses. (hus, firms should periodically /ointly assess their levels of process performance and integration and collaborate on methods to improve both. #n many industries, supply chain managementJrelated costs can account for about ?3 percent of total firm operating costs and as much as half of a company=s assets. Additionally, improving supply chain efficiency is viewed by many companies as about the only remaining way to significantly reduce costs. Given these statements, it becomes easy to appreciate the important roles played by external process integration along with integration performance assessments. $eter &urtees, %uropean logistics director at PimberlyC'lar", a global consumer goods provider, stated @,or manufacturers, the need for collaboration, even between competitors, has never been greater+as the pressure on the physical costs of distribution is now unsustainable.A <3 (he remainder of the chapter closes out the text by providing a discussion of the latest trends and developments in integration and process management. A LOOK AT TRENDS AND DEVELOPMENTS IN INTEGRATION AND PROCESS MANAGEMENT As the push towards @world classA supply chain management continues, driven by the desire to reduce costs while improving quality and customer service, new trends are emerging in areas such as use of technologies, human resource management, and global 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ** trade. &ome of the more advanced and active practitioners of supply chain management are already ma"ing use of these latest developments, while others are ta"ing a waitCandC see approach. Generally spea"ing, companies providing the best products and services at the most competitive prices while achieving high levels of customer satisfaction will ultimately prove to be the most successful in the mar"etplace. And one of the most effective ways to ensure this is through the practice of supply chain management. 'entral to the practice of supply chain management is the integration of "ey business processes. (hus, some of the current trends and developments in process management and integration are discussed here. New Uses of Technology &ome of the most exciting and certainly the most rapidly changing developments have to do with the application of technologies to process management and supply chain management. A few of these new uses of technology are reviewed here. Global Data &ynchroni:ation Global data synchronization LGD&M is a term that refers to automated direct product data exchange between supply chain partners. 8rgani:ations li"e the nonCprofit G&1 5ong Pong serve as a registry where global retailers can loo" up a 5ong PongC manufactured product and find the full range of product details, as well as initiate an order. -any other local and regional databases such as G&1 are lin"ed by global exchange services such as -arylandCbased Data $ool -anager. Global electronic product identification standards have now been adopted to allow companies from all over the world to communicate product information and purchase orders in this fashion. At the *; ) $art *+!oo"ing to the ,uture time of this writing, GD& initiatives are also occurring in 'anada, the nited Pingdom, the %uropean nion, the nited &tates, and Australia. 'ompanies connect via GD& to reduce stoc"outs, new product time to mar"et, and logistics costs, while providing faster flow of accurate information, which also improves merchandising and fulfillment decisions. %xternally, fast and accurate information flow improves collaboration with transportation providers, giving them more accurate cargo information. Data synchroni:ation also fosters closer ties between suppliers and buyers. @-ore cooperation on developing /oint trade promotion campaigns will enable both sides to reduce the number of missed opportunities and set more competitive prices,A says &teve Piefer, vice president of industry and product mar"eting at eCcommerce software provider Global %xchange &ervices, headquartered in -aryland. <1 8penC&ource 'ommunities and 'ollaborative %nvironments (han"s to the #nternet and openCsource software, wor"ers in every profession with the use of a computer are busy establishing online open-source communities to share ideas and exchange data and information. 8ne of the world=s largest openCsource communities is &ource,orge.net, with millions of registered users collaborating on hundreds of thousands of pro/ects. (his collaboration model is swiftly being adopted by wor"ers worldwide to generate more innovative solutions to a variety of problems. sers can very quic"ly mobili:e information on any topic, pro/ect, or problem in any field. (echnoCfuturist .ay Pur:weil, developer of many artificial intelligence products and patents, calls this moment in time not /ust a technological revolution, but a @singularityA in the history of human"ind. 7ith open collaboration, wor"ers will be able to add 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) *? significant value to their wor", earning additional compensation above what other nonC collaborators might expect to receive. (he end result will be participatory .FD, benefiting from the unique competencies of ran"CandCfile employees across their own organi:ations, their trading partners= organi:ations, and all other organi:ations where wor"ers are willing to share "nowledge. (he irony is that managers typically would re/ect the notion of employees sharing inChouse experiences and "nowledge with their counterparts in other organi:ations, including competitors+if it weren=t already rapidly spreading throughout the industriali:ed world. -any of these open collaborations, though, have the full support of management. ,or example, -arylandCbased defense contractor !oc"heedC-artin=s contract with the .&. Department of Defense to develop a new generation of stealth aircraft involves I3 suppliers, operating in 1I? locations, who rely on groupware to collaborate with each other and with the ?*Cmember Aeronautics (ech Group, who coordinate the pro/ect with the four .& armed services, the .P. Defense -inistry, and eight other allied military groups. $rimary wor" groups will thus be made up of wor"ers from various disciplines and from multiple employers, bound together by a common pro/ect goal. <2 8pen source communities are a form of collaborative environment L'%M, which simply refers to two or more individuals communicating to accomplish a shared ob/ective. (hese days, '%s are constructed from a range of computer and communication technologies, including instant messaging, email, chat rooms, #nternet telephones, mobile communicators, cybercafSs, and web conferences. (hese forms of geographically dispersed collaborations are occurring in part due to the widespread use of the #nternet, *I ) $art *+!oo"ing to the ,uture reduced travel budgets, threats of terrorism, and health fears such as the &A.& epidemic. nfortunately, in a recent study of business executives, only <I percent reported that their firms had a formal plan for using collaborative technologies. Additionally, even when these technologies are used, executives generally admitted that there was no consideration given as to how this type of communication could improve business processes. << .,#D (ags 7hile radio frequency identification L.,#DM tags have already been put into use over the past few years to trac" products, cases, and pallets as they move along the supply chain, the /ury is still out regarding their ability to replace bar codes on products and pallets. -any, though, swear by their use and insist it is only a matter of time until companies reali:e the full potential of .,#D in the supply chain. &pending on .,#D tags is pro/ected to hit EB.2 billion in 233K, more than double what it was in 233*. Discount retailer 7alC-art is perhaps the biggest supporter of the use of .,#D. #t is beginning to require suppliers to use .,#D tags on many items and pallets of goods shipped to its distribution centers. #ts ultimate goal is to use .,#D across its supply chain to speed inventory to store floors and to eliminate stoc"outs. 9y the end of 233*, 7alC -art store tagCreaders had already read over *I million tags. Global consumer goods manufacturer PimberlyC'lar" 'orp. has also been moving ahead rapidly with its .,#D deployment. (he company currently ships hundreds of items to 7alC-art and (arget in .,#DCtagged cases and pallets, and overseas to retailers -etro Group and (esco. #ts .,#D research lab has become one of the few testing centers in 2orth America accredited by .,#D standards groups for consumer goods and retail. 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) *K 8ne of the current problems associated with .,#D is integrating .,#D data into an %.$ system. Data formatting issues and software incompatibilities ma"e it hard to import data directly. .,#D tag readers can also misread tags, causing data errors. @7e have a hec" of a time with the amount of middleware, trying to get one to tal" with another,A says #& director %d -athews of 7isconsinCbased bicycle and scooter manufacturer $acific 'ycle. (hey must dedicate one person to literally sort through the ?3,333 wee"ly records it receives from *3 .,#DCtagged products it sends to retailers, searching for errors that include duplicate data caused from multiple reads generated when a pallet of tagged bicycles gets stalled near a tag reader at a distribution center. 8ther problems with .,#D include tags that don=t transmit signals at all or signals that are strong enough, the fact that metal reflects signals and water absorbs them, tag readers interfering with one another, tag prices that can range from 13 to <3 cents each, and tags that are too large to fit on some products such as pill bottles. &till, 7alC-art executives and others insist that .,#D problems are being solved and the technology is catching on faster than bar code labels Lit too" ten years before bar codes were universally acceptedM. <B 7ireless Access to %nterprise Applications ,irms desiring wor"ers to remain in contact with company systems while out of the office are deploying Wi-Fi networks to achieve mobile access. ,or example, industrial chemical supplier %astman 'hemical 'ompany uses 7iC,i at its Pingsport, (ennessee facility so warehouse wor"ers can trac" inventory on $DAs while engineers monitor chemical mixtures from their laptops. <* .on Ghani, an executive at &afelite 'orp. of 'olumbus, 8hio, an auto glass company, believes the time is right for wireless ;3 ) $art *+!oo"ing to the ,uture technologies. #t has recently given wireless devices to its field technicians and will have provided 9lac"9erryX devices to most of its field wor"ers by the end of 233;. @#t=s the number one pro/ect on my agenda,A he says. (echnicians at &afelite can remotely cloc" in and out, get wor" orders, and issue status reports in real time. Ghani explains, @(he number one goal Qof wirelessR is to become more efficient and effective in serving our customer.A #n fact, a omputerworld $aga"ine survey of executiveClevel #( professionals identified wireless technology as one of the top pro/ect priorities for 233;, second only to security initiatives. <; Automated 9usiness $rocesses (he use of software to perform a function and replace a manuallyCperformed one, can reduce time, cost, and errors for the organi:ation. #n many cases, offCtheCshelf software can solve a basic problem, but more and more, companies are turning to software designers to design a solution for a unique set of parameters that can meet a specific need. DelawareCbased 'ounterpoint &oftware, #nc. L'&#M develops business management software solutions mostly for the insurance industry. A '&# representative meets with company personnel, interviews them, and evaluates their hardware and software situation. (hey can develop a custom agency management system to meet the needs of each client, consisting of claims trac"ing, reporting, accounting, quoting, and policy issuance modules. <? (here are numerous software products available that help companies build webC based applications. 8ne of the most comprehensive software products, 2N> 13.*, is available from 'aliforniaCbased nify 'orp. 2N> is an enterprise application development suite used for automating business processes, and allows users to build most 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ;1 any transactionCbased business application requiring endCuser interactions. 2N> includes a process designer module, a reporting module, and a webCservices design module. 'orporate %xpress, a ,rench office supply company, wanted to implement webCbased automation for its supply chain management, fulfillment, delivery, and transportation scheduling processes. (he goal was to increase customer satisfaction, order delivery accuracy, and sales force efficiency while reducing call center expenses. #t selected nify to design the applications, using its existing business application development staff. (he initial version of the field sales automation system application was designed in /ust three days. %ach sales representative was able to have @anytime, anywhereA access to customer setup, order management and entry, price loo"up, and sales message retrieval. 7ith the new 2N>Cbased system, 'orporate %xpress eliminated <33 inbound calls per day to its call center and significantly enhanced the call center processes. (he nify web application provides sales representatives with realCtime quotations while onsite with the customer. 9ecause the application is lin"ed to 'orporate %xpress=s %.$ system, price quotes are based on current contracts, calculated and quoted in real time, ma"ing them more accurate. <I
Also referred to as smart BPM systems, or automated decision systems, these automated systems are being deployed frequently for a variety of processes in many industries. (hese are rulesCbased expert systems, often involving statistical analysis of data, and they typically ma"e decisions in real time after weighing all the data and rules for a particular customer or situation. #n ban"ing, realCtime mortgages and lending decisions are commonly made using automated decision systems. 2orth 'arolinaCbased onCline lending service !ending(ree.com uses automated decision ma"ing to decide ;2 ) $art *+!oo"ing to the ,uture which of its participating ban"s are most li"ely to issue a mortgage to a customer, and to offer several mortgage deals within a few minutes to potential customers. <K
Human Resource Management Developments As alluded to earlier in this chapter, firms have to somehow find ways to brea" down barriers to internal integration, and in many cases this involves use of innovative human resource management L5.-M practices. #n fact, research conducted by $rofessors 'asey #chniows"i and Pathryn &haw studied the relationship between innovative 5.- practices and business performance. (hey found that there were @systemsA of innovative practices that were more effective in raising firm performance than the more traditional approaches to 5.-. (he most successful firms were found to incorporate innovation across seven different areas: employee screening, payCforCperformance plans, wor" teams, employment security guarantees, laborJmanagement communications, /ob definitions, and ongoing training in s"ills and problem solving. B3
(he .&. steel industry is a great example of an industry containing both innovative and traditional forms of human resource management. 2orth 'arolina steel manufacturer 2ucor &teel, for instance, has some innovative ideas regarding 5.-. %mployees earn a fairly low base salary, but then can earn large bonuses based on productivity. As a result, 2ucor=s employees straighten <* to B3 tons of steel per hour per employee, compared to 13 tons per hour per employee for the industry. -anagers can also earn big bonuses, based on return on assets and wee"ly crew production. &enior officers earn bonuses based on return on shareholder equity. Additionally, no one has been laid off in over 2I years. %mployees can voice their concerns in crew meetings, department meetings, shop dinners, and surveys. #f they feel they have been treated 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ;< unfairly, there is an appeals process whereby their voices will be heard. B1 #nnovative and wellCdesigned 5.- practices such as the ones outlined here can contribute greatly to the creation of a collaborative and supportive wor" environment. As a result, these collaborative wor" environments will enable the firm to more quic"ly and effectively integrate processes both internally and externally. 'ollaborative 2ew $roduct and $rocess Development 8ne specific innovative form of 5.- is termed collaborative new product and process development L2$$DM. #deally, collaborative 2$$D encourages representatives from all "ey trading partners to act as full partners on designCbuildCsupport teams. (he teams are responsible for developing a total system of design requirements for both the product and its associated processes. $ro/ects involve biCdirectional communications from both team and nonCteam members, all of whom have access to a common design database. 'ollaboration spans all disciplines, functions, divisions, pro/ects, and target mar"ets to gather and use expert "nowledge and ma"e effective business plans. (oday, these collaborative 2$$D teams are using the openCsource communities described earlier to communicate and share information. &everal studies of collaborative 2$$D have found benefits in terms of reduced proposal and development cycle times, reduced new product introduction time, reduced nonCvalueCadded wor", reduced scrap and rewor"s, and increased design reuse. B2 Global Trade Issues #n a 233* interview, -ar" 'olumbo, vice president for strategic mar"eting for global pac"age delivery service ,ed%x, thought the largest impact to supply chain management over the following ten years would be the continued liberali:ation of global ;B ) $art *+!oo"ing to the ,uture trade. ,ewer trade tariffs and regulations will open up free trade to many more countries, creating a larger supply base with more access to raw materials, and new mar"ets. (o remain competitive, even smaller firms are now considering foreign purchases of parts, supplies, and even new products that can be licensed. 'ompanies li"e ,ed%x will be needed to help identify trading partners, transport and store goods, get items through customs, and finally deliver the purchased items. ,ed%x is building its largest ever logistics hub in Guang:hou, 'hina, since this is where most of the new manufacturing facilities are being built. #n a recent study of 'hinese and .&. manufacturing companies, 'hinese plants were found to have embraced process integration to a greater degree than their .&. counterparts. After a closer loo", it was found that most of the 'hinese facilities studied were /oint ventures and foreignCowned facilities. (hese plants were newer and more modern than the traditional 'hinese manufacturers, and their "ey customer was often their parent or partner firm. (here is still a need, though, for outsourcing partners for many 'hinese manufacturers in the areas of pac"aging, customer service, and purchasing. B<
#ndia is also having a ma/or impact on global trade, due to the rapid increase of "nowledge wor"ers there and the low wages they are receiving. (hese wor"ers are causing #ndia to become a much larger consumer of goods. BB A number of global organi:ations are opening facilities in #ndia to ma"e use of these highly s"illed wor"ers. ,or instance, at the end of 233*, '%8 9ill Gates of -icrosoft announced that the company would invest over E1.? billion in #ndia over the following four years for its own .FD facilities. B* #t is li"ely that these types of arrangements will also lead to process 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ;* integration opportunities with #ndian service companies. (he many software development engineers in #ndia are also having an impact on service firms located outside #ndia that are doing applications development and systems integration pro/ects. #ndian #( firms such as (ata 'onsultancy &ervices and #nfosys are capturing an everCgrowing segment of this mar"et. As of 233B, B* percent of these types of firms worldwide were in #ndia. %ven small businesses li"e '$A firms in the .&. are now integrating with chartered #ndian accountants who can do the boo""eeping and simple tax preparation chores, leaving the .&. wor"ers more time to do higherCvalue activities li"e tax planning. B; Another reason world trade is li"ely to increase is the overall increase in prices paid for most components and materials. #n a survey of .&. manufacturers, materials costs rose more than ; percent from 233B to 233*, while mar"et forces "ept sales prices level or even lower for the same time period. 'ost reduction and competitive pressures have thus spurred more global outsourcing efforts to produce products more quic"ly and cheaply. #n the pharmaceutical industry, for example, drug companies might ta"e years to develop and test new products, only to find that profit margins are greatly reduced as other competitor products enter the mar"et. B? Environmental Concerns (oday, environmental, health, and safety L%5&M excellence means much more than achieving a @greenA supply chain. %5& professionals are collaborating on crossC functional supply chain management teams to improve customer retention, revenue generation, cost reduction, and asset utili:ation along the supply chain. %5& leaders, historically responsible for regulatory compliance, are now routinely involved in directing supply chain firms= corporate social responsibility programs. %5& has become ;; ) $art *+!oo"ing to the ,uture important in today=s global economy for several reasons+environmental regulations are continuously growing due to the general understanding of why environmental issues matter0 manufacturers are expected to ta"e responsibility for product disposal at the end of a product=s life0 companies routinely outsource chemical management, ha:ardous product handling, and waste disposal0 and the current concerns about energy consumption and greenhouse gas emissions. (hus, %5& personnel are needed when products and processes are designed, when companies develop environmental compliance plans, when reverse logistics strategies are developed, when potential outsourcing partners are identified, and when customers expect environmental performance to be part of a product or service. 'ompanies such as #ntel, ,ed%x, Dow 'hemical, and -otorola commonly integrate %5& managers into crossCfunctional teams that guide supply chain business processes. ,or example, as part of a &ix &igma pro/ect at #llinoisCbased wireless and broadband communications equipment manufacturer -otorola, %5& personnel led an effort to reduce palletCrelated in/uries. (he %5& team discovered that pallets coming from suppliers often didn=t conform to specifications. (he team developed a solution for standardi:ed pac"aging and pallets, which dramatically reduced the number of pallets handled, stored, and disposed0 maximi:ed the pac"aging density to reduce transportation costs0 and reduced in/ury occurrences and costs. #n 233B alone, the plan saved over E* million. BI Outsourcing Business Processes 7ith continued demands for cost reduction and quality and service improvement, firms are also frequently turning to business process outsourcing L9$8M or the 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ;? outsourcing of an entire function or capability, allowing more resources to be placed in core competency areas. 7ithin the human resources management area, for example, the training function is one area being outsourced. #ndustry experts predict that by 231*, half of all company trainers will wor" for outsourced services. Due to costCcutting measures and a reali:ation that training can perhaps be delivered more effectively by external training services, the number of companies outsourcing training is rapidly increasing. @(he number of requests for proposals has tripled in the last 12 months,A said Doug 5arward, '%8 of (he %xceleration Group, a 2orth 'arolina training consulting firm. (raining 9$8 can thus help companies to avoid large training facility capital expenditures, receive highCquality and relatively lowCcost training services, ta"e advantage of global training opportunities, and vary training levels as the si:e of the firm dictates. BK #n general, though, 9$8 needs to be conducted with great care. &ome companies are getting very close to outsourcing their core capabilities in search of cost reductions, and instead are finding that external services can eventually be more expensive, create a loss of focus and integration, and can lose customers for the company. A recent study in Germany, for example, found that the internal costs of providing information technology services were frequently much lower than they were at the outsource companies. !ac" of an internal #( function also led to a lac" of integration between company strategies and #( strategies. ,inally, the use of overseas suppliers can create concerns regarding cultural differences, political stability, and infrastructure capabilities, leading to increased ris" associated with 9$8 providers from developing economies. *3 ;I ) $art *+!oo"ing to the ,uture SUMMARY (here is a growing recognition that supply chain process integration creates significant opportunities for trading partners to achieve high levels of competitiveness and financial returns0 however, this entails sharing information and requires cultural change in many cases. &upply chain partners must first achieve internal process integration, which means brea"ing down integration barriers that include the silo mentality, the firm=s culture, and trust issues. 7hen firms have become proficient at internal process integration, they can turn their attention outward to external process integration, or collaborating with trading partners. (o improve, firms must also develop performance metrics to assess both internal and external integration efforts. -any issues impact process integration, including new uses of technology, global trade, and process outsourcing. KEY TERMS active internal integration phase automated decision systems business process integration collaborative environment collaborative new product and process development cultural barriers to collaboration customer relationship management process customer service management process data warehouses demand management process environmental, health, and safety excellence global data synchroni:ation information visibility internal barriers to collaboration internal process integration internal supply chain "ey business process integration "ey supply chain processes manufacturing flow management process open collaboration 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ;K openCsource communities order fulfillment process process integration product development and commerciali:ation process radio frequency identification returns management process silo mentality smart 9$- systems structural barriers to collaboration supplier relationship management process technological barriers to collaboration topCdown management approach 7iC,i networ"s wor" groups N-! web services DISCUSSION QUESTIONS 1. Define @process integrationA and discuss why it might be difficult to achieve. 2. 5ow does internal process integration differ from external process integration6 <. 7hat activities are necessary for achieving internal process integration6 B. Describe the activities that occur during the internal integration preparation phase. 7hy is this important6 *. 7hat are the three types of internal integration barriers6 Discuss each one. ;. 7hat is the most common strategy used to overcome technological barriers to internal integration6 ?. 7hat are some of the issues to consider as the firm integrates its various information systems6 I. 7hy is it important to develop a set of internal integration performance metrics6 K. 7hy is the use of teams so important in achieving internal integration6 13. At what point is the firm ready to wor" on achieving external process integration6 11. 7hat is the "ey element in building successful teams6 12. 7hat is meant by the term chair ballet, as it was used in the section of the chapter describing Aetna=s offices, and why might this be a good thing to do6 1<. 7hy might achieving external integration be so difficult6 1B. 7hat are the general requirements for achieving external process integration6 1*. 7hy do you thin" it is important to align internal functional strategies with supply chain strategies6 ?3 ) $art *+!oo"ing to the ,uture 1;. Describe some integration activities for each of the eight "ey supply chain processes for: a. an upscale hotel b. a clothing retailer c. an automobile manufacturer 1?. &hirley 'ooper, supply chain procurement director at PCbased 'omputacenter, %urope=s leading provider of #( infrastructure services, believes that future collaboration success lies in implementing new technology. $rovide arguments supporting this statement, and arguments refuting this statement. 1I. 7hy is it important to measure external integration performance6 1K. 7hy does technoCfuturist .ay Pur:weil, developer of many artificial intelligence products and patents, call this moment in time not /ust a technological revolution, but a @singularityA in the history of human"ind6 23. 7hat is an open collaborative environment, and how is it formed6 21. 7hat is .,#D, and what are its advantages4disadvantages6 22. 7hat are smart business process management systems used for6 2<. Describe the relationship between collaborative new product design and development and process integration. 2B. 7hat impact will the liberali:ation of global trade have on supply chain management6 2*. %nvironmental health and safety issues play an important role in supply chain process management. Describe why. 2;. 7hy can the outsourcing of business processes be ris"y from a supply chain management perspective6 INTERNET QUESTIONS 1. .eport on some of the definitions and software applications found when searching on the term integration middleware. 2. !oo" up one of the following products and describe how it wor"s: a. 7eb%x=s 7eb8ffice application b. -icrosoft=s &harepoint application 'hapter 1;+&upply 'hain $rocess #ntegration and a !oo" (owards the ,uture ) ?1 c. 'itrix &ystems= Go(o-eeting application <. Go to http:44sourceforge.net, register as a user, and then go to a discussion group of interest to you and report on your group experiences. INFOTRAC QUESTIONS Access http:44www.infotracCthomsonlearning.com to answer the following questions: 1. 7rite a term paper on the topic of corporate culture and its impact on supply chain management. #nclude discussions of how several firms have developed cultural change programs. 2. 7rite a report on >ac" 7elch and General %lectric, focusing on how the company=s culture was impacted by >ac" 7elch and how that impacted its dealings with its trading partners. <. .eport on some of the latest issues in collaboration software or other new uses of technology for process integration or collaboration. REFERENCES 'roxton, P., &. GarciaCDastugue, and D. !ambert, @(he &upply 'hain -anagement $rocesses,A The %nternational &ournal of 'ogistics $anagement, H. 12, 2o. 2, 2331, pp. 1<J<;. Daft, .., and D. -arcic L1KKIM, )nderstanding $anagement, 5arcourt 9race F 'ompany, 8rlando, ,!. 7isner, >., G. !eong, and P. (an L233*M, @*rinciples of Supply hain $anagement+ ! ,alanced !pproach,A &outhC7estern, -ason, 85. ENDNOTES 1 Tuote from >oe Andras"i, president and '%8, Holuntary #nterC#ndustry 'ommerce &tandards Association, in 9erthiaume, D., @'ollaboration: #s #t ,inally 'atching on in the &upply 'hain6A hain Store !ge, H. I2, 2o. 2, 233;, p. *2. 2 Tuote from 9ob 2oe, '%8, 1&ync, in 9erthiaume, D., @'ollaboration: #s #t ,inally 'atching on in the &upply 'hain6A hain Store !ge, H. I2, 2o. 2, 233;, p. *2. < 9ar"i, 5. and A. $insonneault, @A -odel of 8rgani:ational #ntegration, #mplementation %ffort, and $erformance,A -rgani"ation Science, H. 1;, 2o. 2, 233*, pp. 1;*J1I3. B !apide, !., @-#(=s &'2323 $ro/ect: (he %ssence of %xcellence,A Supply hain $anagement #eview, H. 13, 2o. <, 233;, pp. 1IJ2B. * !ittle, -., @(oyota -oves to 9ecome 2o. 1 'ar -a"er in the 7orld,A .poch Times, April 11, 233;, available at http:44www.theepochtimes.com4news. ; @&hifting the &upply 'hain into 5igh Gear,A !utomotive %ndustries, H. 1I1, 2o. 11, 2331, pp. IJ12. ? -uscarella, G., -. Prishnan, and 5. Ault, @9usiness Advantages ,low with N-!,A -ptimi"e, 2ovember 233<, pp. I;JIK. I 'oo"e, >., @9ringing Down the 9arriers,A 'ogistics $anagement, H. <I, 2o. ?, 1KKK, pp. 13*J13?. K -essmer, -. and !. Pahn, @-anaging 'onflict,A ,usiness redit, H. 13I, 2o. B, 233;, pp. *2J*<. 13 2olan, D., @!-&9 .ealigns Pey -anagement $ersonnel for Greater %fficiency,A The Ta/ !dvisor, H. <?, 2o. B, 233;, pp. 2BBJ2B;. 11 -onroe, !., @Do the .ight (hing,A ,uildings, H. KI, 2o. 11, 233B, pp. <IJB2. 12 'hyna, >., @#ntegrating $atient &ervice,A 0ealthcare ./ecutive, H. 23, 2o. ;, 233*, pp. *3J*1. 1< 5uff, '., @(earing Down 7or"force 7alls,A Workforce $anagement, H. I*, 2o. K, 233;, p. <B. 1B 5yde, A. and >. $aterson, @!eadership Development as a Hehicle for 'hange During -erger,A &ournal of hange $anagement, H. 2, 2o. <, 2332, pp. 2;;J2?1. 1* -iller, .., @5ow 'ulture Affects -ergers and Acquisitions,A %ndustrial $anagement, H. B2, 2o. *, 2333, pp. 22J2;. 1; 5einrich, '. and D. &imchiC!evi, @Do #( #nvestments .eally $ay 8ff6A Supply hain $anagement #eview, H. K, 2o. B, 233*, pp. 22J2I. 1? http:44www.bitpipe.com4tlist47or"groups.html. 1I &anders, 2. and .. $remus, @-odeling the .elationship 9etween ,irm #( 'apability, 'ollaboration, and $erformance,A &ournal of ,usiness 'ogistics, H. 2;, 2o. 1, 233*, pp. 1J2<. 1K 9ernstein, -., @(he 7orld (rade -aga:ine: ,abulous *3 $lus 8ne,A World Trade, H. 1?, 2o. I, 233B, pp. 1BJ22. 23 &ee, for instance, 'ast"a, $., D. 9amber, >. &harp, and $. 9elohoube", @,actors Affecting &uccessful #mplementation of 5igh $erformance (eams,A Team *erformance $anagement, H. ?, 2o. ?4I, 2331, pp. 12<J1<B. 21 !in", A. and $. ,ilias, @(he %xpert 8pinion: An #nterview with Alan 5uberty, 'onsultant to ,ord -otor 'ompany=s Hirtual (eams $ro/ects, 1KIIJ233*,A &ournal of 1lobal %nformation Technology, H. K, 2o. 1, 233;, pp. ;2+;I. 22 'olvin, G., @7hy Dream (eams ,ail,A Fortune, H. 1*<, 2o. 11, 233;, pp. I?JK2. 2< 7ars"i, $., @-eeting in the 5allway,A ,uildings, H. KK, 2o. 12, 233*, pp. ;;J;?. 2B 5ymes, A., @,irstC.ate !eadership Guides A'9 9usiness $artners= &uccess,A ommunity ,anker, H. 12, 2o. 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