the danish supply chain panel

SUPPLY CHAIN
INNOVATION IS PERCEIVED
IMPORTANT FOR
COMPETITIVENESS
It is hopefully not a secret that the supply chain management area offers a wide
range of opportunities for companies to maintain or even strengthen their
competitiveness. Therefore it is fatal if innovation in the supply chain is neglected.
Read the article and become aware of the drivers and main barriers for supply
chain innovation.

ILLUSTRATION: SHUTTERSTOCK
BY PROFESSOR JAN STENTOFT, PHD, AND ASSISTANT
PROFESSOR OLE STEGMANN MIKKELSEN, PHD,
DEPARTMENT OF ENTREPRENEURSHIP AND
RELATIONSHIP MANAGEMENT, UNIVERSITY OF
SOUTHERN DENMARK, KOLDING

S
upply chain management offers ap-
  proaches to improve the bottom line
  in terms of cost reductions in vari-
ous areas such as purchasing, inventories,
manufacturing and transportation. Supply
chain management can also contribute to an
improved top line in terms of increased turn
over due to e.g. delivering superior products
and services at the right time and at the right
place. In many companies the supply chain
consumptions are relatively high percent-
ages of the overall cost consumption. It is
not unusual that the cost to drive the supply
chain (i.e. the total cost spend in procure-
ment, the cost to ruin factories and the dis-
tribution cost) can count between 60 to 80
% of the total turnover. Innovation becomes
fatal if neglecting in the supply chain man-
agement area. Therefore, we encourage top
management to consider their supply chains
as innovation objects with the same strategic
emphasis as products and service innova-
tions. Conceptually, we prose that supply
chain innovation can be understood in
terms of business processes, network struc-
tures and technology (figure 1).

48 DILForientering FEBRUAR 2017 ÅRGANG 54

Supply chain business processes consist
of structured sets of activities designed to
produce specified outputs within differ-
ent process areas (e.g. order fulfilment, de-
mand management and supplier relation-
ship management). Supply chain network
structure is about the internal as well as
external network links to other functions
and firms. Such links are internal cross
functional links and external links in tiers
downstream to customers and upstream
from suppliers. Other links can be with
competitors and diverse knowledge suppli-
ers such as consultants, public agencies and
universities. The third component in fig-
ure 1 is technology that consists of a high
variety of different technologies that can
come into play in the design and execution
of business processes. Such technologies are
e.g. basic ERP systems, bar code technolo-
gy, RFID and the so-called disruptive tech-
nologies such as 3D printing, 3D scanning,
drones, mobile internet, Internet of Things,
and big data (Stentoft & Mikkelsen 2016;
Stentoft et al. 2016). The overall idea with
figure 1 is to create consciousness about the
need to initiate and complete supply chain
innovation projects and their content ele-
ments both contains and affects processes,
FRAMEWORK FOR UNDERSTANDING SUPPLY CHAIN INNOVATION
Recognize a need for change in
business model (performance gap)
Supply Chain
Technology
Implementation of new
business model
Figure 1. S ource: Arlbjørn et al. 2011
49 DILForientering FEBRUAR 2017 ÅRGANG 54
DANSK RESUMÉ
Det er ingen hemmelighed, at supply chain
management-området giver virksomheder en
masse muligheder for at opretholde og endda
styrke deres konkurrenceevne. Derfor er det
også fatalt, hvis udvikling og innovation af
værdikæden bliver forsømt. Læs artiklen fra
The Danish Supply Chain Panel og bliv klogere
på drivkræfter og barrierer bag supply chain-
innovation.
/Redaktionen
networks and technology. In this article,
we present and discuss the recent mini-sur-
vey from The Danish Supply Chain Pan-
el that focuses on the panel’s practices and
judgement of relevance within the supply
chain innovation umbrella.
Supply chain strategy and supply
chain innovation projects
In order to work strategically with sup-
ply chain innovation, it is important to
have a supply chain strategy. The supply
chain strategy must be linked to the over-
all corporate strategy and aligned with oth-
er functional strategies (see alignment tool
Stentoft & Thoms 2014). Hence, the first
Develop solutions for new
Supply Chain business model
Business
Processes
Supply Chain
Network Structure
PRACTISE OF SUPPLY CHAIN STRATEGY AND SUPPLY CHAIN INNOVATION PROJECTS
How important is it, in your opinion, that your company
have a welldefined supply chain strategy that is linked
to corporate strategy?
To which degree is your top management aware of that your
supply chain is a source for competitiveness?
To which degree do your company have a well-defined
supply chain strategy that is linked to corporate strategy?
To which degree do your company in general execute
development/innovation projects in your supply chain?
1 2
Figure 2. S ource: The Danish Supply Chain Panel
thing we sought to ask was if the compa-
nies in this survey do have a well-defined
supply chain strategy that is linked to cor-
porate strategy, and how important the re-
spondents think this is. The answers, based
on a 5 point Likert scale from very little de-
gree/importance (1) to very high degree/im-
portance (5), appear from figure 2.
Several interesting issues emerge from the
responses in figure 2. First we observe that
the respondents find it rather important
(4.52) that their company have a well-de-
fined corporate linked supply chain strat-
egy, while simultaneously they find that
this is the truth to only some degree (3.65).
In other words, it seems that there is a
gap between importance and implement-
ed reality. Second we observe from figure
2 that there is a gap also between the per-
ceived importance of a well-defined cor-
porate linked supply chain strategy and
the top management awareness of the sup-
ply chain as a source for competitiveness
(3.91). The gap between awareness and im-
portance, could to some extend explain the
gap between importance and implement-
ed reality. If top management is not aware
of or does not focus on the supply chain as
50 DILForientering FEBRUAR 2017 ÅRGANG 54
4,52
3,91
3,65
3,58
3 4 5
a source for competitiveness, it may prove
hard to convince top management to in-
vest and allocate resources into developing
the supply chain. This is mirrored in figure
2 in the fact that innovation projects in the
supply chain are only to some degree exe-
cuted (3.58).
Following the SCI framework in the intro-
duction, we have asked questions to which
degree the company find innovation im-
portant and what their current practices
are. The first set of questions pertains to
eight supply chain management processes
(Lambert & Cooper 2000).
Supply chain management business
processes
The responses to the questions on supply
chain management processes presented in
figure 3, in which we have depicted impor-
tance and current practice of the process-
es respectively, are again based on a Likert
scale from 1 (Very little degree/importance)
to 5 (very high degree/importance).
As it appears from figure 3, all the sup-
ply chain business processes lacks behind
in current practices compared to perceived
SUPPLY CHAIN MANAGEMENT BUSINESS PROCESSES
Customer Relationship Management - importance
Customer Relationship Management - current practice
Customer Service Management - importance
Customer Service Management - current practice
Supplier Relationship Management - importance
Supplier Relationship Management - current practice
Order Fulfilment - importance
Order Fulfilment - current practice
Demand Management - importance
Demand Management - current practice
Product Development and Commercialization - importance
Product Development and Commercialization - current practice
Manufacturing Flow Management - importance
Manufacturing Flow Management - current practice
Returns Management - importance
Returns Management - current practice
1 2
Figure 3. S ource: The Danish Supply Chain Panel
importance. In other words, all the pro-
cesses in the survey entail gaps in terms of
importance versus current practice in sev-
eral areas. First, it is not surprising that cus-
tomer relations management and customer
service management processes are report-
ed as the most important by the respond-
ents. After all, it is the customers that pay
the bills. But it is surprising that customer
relationship management even though it
is the process with one of the highest lev-
el of current practice, it is also the process
with the largest gap between importance
and current practice (4.17-3.42 = 0.75). Also
supplier relationship management is high
on the list in terms of importance (3.96).
With an average of 3.35 on current practice
it creates a gap of 0.61 between importance
and current practice, which is also among
the highest gaps. It is interesting that the
three highest averages on perceived impor-
tance are focussed towards external rela-
tions downstream and upstream. At the
same time, the three supply chain process-
es have some of the biggest gaps suggesting
that much still has to be accomplished in
the three supply chain process areas. Here-
51 DILForientering FEBRUAR 2017 ÅRGANG 54
4,17
3,42
4,02
3,42
3,96
3,35
3,79
3,54
3,75
3,12
3,62
3,19
3,48
3,15
2,72
2,50
3 4 5
after follows more internally focussed sup-
ply chain processes such as order fulfil-
ment, demand management, product de-
velopment and manufacturing flow man-
agement. Even that demand management
is placed in the middle of the importance
field (3.75) it is the supply chain process
with the second highest gap (0.63) toward
current practice, suggesting that respond-
ents still notices much potential in work-
ing with this process. This provide some
evidence for that Sales & Operations Plan-
ning is still a challenge in many companies
though this set of practice has been avail-
able on more than two decades (Stentoft
et al. 2016b). At the very bottom of im-
portance we observe the supply chain pro-
cess returns management (2.72), which also
holds the smallest gap compared to current
practice (0.22). So it is fair to say that cur-
rent practice does overall correspond with
perceived importance. On the other hand it
is interesting that this supply chain process
is rated rather low in importance, as this
process is expected to increase in impor-
tance in the future.
SUPPLY CHAIN NETWORK ACTORS
Internally (e.g. cross-functionally) - importance
Internally (e.g. cross-functionally) - current practice
Suppliers - importance
Suppliers - current practice
Customers - importance
Customers - current practice
Third party providers (.e.g logistics providers) - importance
Third party providers (.e.g logistics providers) - current practice
Universities - importance
Universities - current practice
Consultants - importance
Consultants - current practice
Public agencies - importance
Public agencies - current practice
Competitors - importance
Competitors - current practice
1 2
Figure 4. S ource: The Danish Supply Chain Panel
The second element in the supply chain in-
novation framework is supply chain net-
work structure. Here we have asked the re-
spondents to what degree they have inno-
vated together with various supply chain
network actors. The answers are shown in
figure 4.
As shown in figure 4 the supply chain in-
novations with internal actors are perceived
as most important (4.39). It is also observed
supply chain innovations with internal ac-
tors are also first and foremost carried out
together with internal supply chain actors
(3.71). However, the gap (0.68) also shows
some potential for improvement. Suppli-
ers and customers are reported as second
and third in importance of actors to pur-
sue innovations with 4.14 and 4.08 respec-
tively. However, theese actors are also the
ones with some of the largest gaps when
it comes to current practice (1.04 and 0.9).
Thus, these areas also have potentials for
improvement. Third party providers are
seen as a somewhat important actor with
an average of 3.45. Interesting, universities
are also seen as a somewhat important ac-
52 DILForientering FEBRUAR 2017 ÅRGANG 54
4,39
3,71
4,14
3,10
4,08
3,18
3,45
3,02
2,92
1,98
2,68
2,69
2,35
1,90
2,10
1,45
3 4 5
tor when pursuing supply chain innovation
with an average of 2.92. However, thecur-
rent practice is only indicated as 1.98 leav-
ing the second largest gap of 0.94. This gap
indicate a room for improvement where
universities needs to move out from their
ivory towers and seek practical relevance
with their research and where practition-
erns need to lower their guards and with
an open attitute take new critical refelec-
tions to consideration about their practices
(see e.g. Schacht 2016).
The third supply chain innovation element
is supply chain technologies. In this sec-
tion the respondents should answer ques-
tions about to which degree they work with
various technologies in the supply chain.
The results appear in figure 5.
Figure 5 reveals that planning and execu-
tion systems, such as ERP, APP and MRP,
in average, are seen as the most important
supply chain technologies to be used in
the companies with an average of 4.31, and
is at the same time the technology that is
mostly used in current practice (3.90). This
SUPPLY CHAIN TECHNOLOGIES
Planning and execution systems - importance
Planning and execution systems - current practice
Communication systems - importance
Communication systems - current practice
Analytics technology - importance
Analytics technology - current practice
Identification systems - importance
Identification systems - current practice
Electronic marketplace - importance
Electronic marketplace - current practice
Automation of knowledge work - importance
Automation of knowledge work - current practice
Advanced manufacturing technologies - importance
Advanced manufacturing technologies - current practice
Advanced materials - importance
Advanced materials - current practice
1 2
Figure 5. S ource: The Danish Supply Chain Panel
may not be surprising as these systems are
the backbone of most companies manu-
facturing, planning and control. However,
the current practice is slightly behind per-
ceived importance (0.41). Communication
systems (e.g. electronic data interchange,
web-based communication tools, mobile
communication solutions, the Internet of
Things, cloud technology), analytics tech-
nology (e.g. business intelligence, statis-
tics and analytics software) and identifica-
tion systems (e.g. barcodes, radio frequency
identification) following as highly impor-
tant supply chain technologies with averag-
es closely around 4.0. The level of current
practice for the three supply chain tech-
nologies are at the same time among the
highest in the survey, however still poten-
tials exist. This is especially true for com-
munications systems, which holds the larg-
est gap between importance and current
practice (0.73). Electronic marketplaces (e.g.
e-portals, e-auctions, supplier collaboration
tools) come fifth in terms of importance,
however, with the second largest gap to-
wards current practice (0.69). Not much im-
53 DILForientering FEBRUAR 2017 ÅRGANG 54
4,31
3,90
4,08
3,35
4,06
3,39
3,96
3,33
3,16
2,47
3,02
2,51
2,84
2,22
2,51
2,10
3 4 5
portance is ascribed towards automation of
knowledge work, advanced manufacturing
technologies or advanced materials.
Ambidexterity
After having focussed on the elements of
supply chain innovation we now turn to
the challenges of simultaneously operat-
ing the day to day business and develop-
ing the supply chain for competitive ad-
vantage. This dilemma is called ambidex-
terity – and is concerned with right balance
of resources dedicated to exploitation (daily
operation) and exploration (business devel-
opment), respectively (see e.g. Arlbjørn et
al. 2013). The answers on to what degree
the respondents pursue supply chain oper-
ation or supply chain development activi-
ties are shown in figure 6, with blue bars
indicating operation related themes while
green bars indicates themes related to sup-
ply chain development.
Average scores on operation statements and
development statements are 3.61 and 3.33
respectively. Thus, in terms of the state-
SUPPLY CHAIN OPERATION AND SUPPLY CHAIN DEVELOPMENT

We constantly focus on achieving 4,04

our supply chain related KPIs
We constantly fine-tune operational processes in the 3,67
supply chain to keep our current customers satisfied
We constantly fine-tune operational processes with other 3,63
internal functions to keep our current customers satisfied
We constantly fine-tune operational processes 3,49
with our customers to keep them satisfied
We proactively pursue new supply chain solutions 3,47

The supply chain often looks for creative ways 3,45

to satisfy our customers' needs
We are constantly seeking novel approaches 3,39
to solve supply chain problems
We constantly fine-tune operational processes 3,22
with our suppliers to keep them satisfied
The supply chain organization responds to demands 3,20
that go beyond existing products and services
The supply chain has time allocated for 3,14
developing a competitive supply chain

1 2 3 4 5

Figure 6. S ource: The Danish Supply Chain Panel

ments included in this mini-survey the re-
spondents’ self-perception is that they to a
higher degree are pursuing operations prac-
tices than development practices in their
supply chain. In fact, four out of top five
practices are operations practices. Only the
operations statement on constantly fine-
tuning operational processes with suppli-
ers to keep them satisfied is not in top five.
This result just informs how the respond-
ents perceive their resource consumption.
It does not tell whether this is right or
wrong. Companies do differ along several
parameters – and in some companies their
might not need to be a high focus on de-
velopment (i.e. on low technology intensive
companies) whereas in others there might
be a huge demand for this. Our main rec-
ommendation is that companies need to
create consciousness about their own right
balance of this ambidextrous phenomenon.

OVERALL PROJECT PORTFOLIO AND RESOURCE ALLOCATION TO DEVELOPING THE SUPPLY CHAIN

We find it important to have a dedicated task focusing on

4,12
development activities in the supply chain

We have a dedicated task focusing on development

3,53
activities in our supply chain

We find it imporant to have an overall overview of planned

and ongoing development projects (small to large) 3,94
(portfolio) in the supply chain

We have an overall overview of planned and ongoing

development projects (small to large) (portfolio) in our 3,59
supply chain

1 2 3 4 5

Figure 7. S ource: The Danish Supply Chain Panel

54 DILForientering FEBRUAR 2017 ÅRGANG 54

As it shows in figure 7, companies on av-
erage find it important to a high degree to
have both a dedicated task focussing on
development activities (with an average of
4.12) as well as to have an overall overview
of the development projects (with an aver-
age of 3.94). However, especially the dedi-
cated task of focussing on development ac-
tivities lack behind implementing (3.53),
while it seem that the companies are ap-
proximately on par with importance and
current status on project overview.
Drivers for supply chain innovation
Initiation of supply chain innovation needs
drivers. Therefore it is interesting to uncov-
er how the supply chain panel sees what
triggers their supply chain innovations.
We have asked the respondents to mark
the three main driving forces for develop-
ing their supply chains. The answers to this
question are depicted in figure 8.
Internal demands are in this mini-survey
marked as the most driving force in devel-
oping the supply chain with 84 % of the
respondents followed by external require-
DRIVERS FOR SUPPLY CHAIN INNOVATION (SEVERAL MARKS ALLOWED)
Internal demands to improve performance
External requirements from customers
Demands from top management
Demands from sale/marketing
External requirements/opportunities from suppliers
Respond to competitors practice
Change in legislation
Demands from owners
Other
0%
Figure 8. S ource: The Danish Supply Chain Panel
55 DILForientering FEBRUAR 2017 ÅRGANG 54
ments from customers (67 %). Internal de-
mands have different faces. The results
do not separate whether such an internal
demand is caused by e.g. customer com-
plaints at first hand. An internal demand
can thus be a true internal demand – wish-
es to do it better or it can be a result based
on stimuli from e.g. customers or suppli-
ers. Also 43 % of the respondents view de-
mands from top management as an impor-
tant driver for supply chain innovation. In-
teresting only 18 % has marked respond to
competitors practice as an important driv-
er for supply chain innovation. More plau-
sible possible explanations to this may ex-
ist. On one hand it could be because the
respondents perceive themselves as already
superior to competitors and, hence, does
not need to respond to competitor moves.
Otherwise, the companies do not pay at-
tention to what competitors are doing. This
type of attitude may be a dangerous one
as seen in the case of disruptions of supply
chains. On the other hand it may also be
that companies pay attention to competitor
moves but in a proactive way develop the
supply chain “… to gain competitive advan-
84 %
67 %
43 %
29 %
24 %
18 %
12 %
12 %
6%
10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 %
BARRIERS FOR SUPPLY CHAIN INNOVATION (SEVERAL MARKS ALLOWED)
Lack of time (more focused on operation)
Lack of man power (project participants)
Lack of internal development oriented capabilities
Too much silo mentality in our company
High supply chain complexity
Lack of burning platform / lack of hunt
An unbalanced company in terms of power between sale/
marketing supply chain, product development and finance)
Lack of financial resources
Lack of top management awareness
Lack of supply chain strategy
Other
Lack of supply chain KPIs
0%
Figure 9. S ource: The Danish Supply Chain Panel
tage and be one step ahead of competitors”
as one respondent replied.
Barriers for supply chain innovation
In line with other supply chain panel sur-
veys, we also this time desired to under-
stand what challenges the respondents per-
ceive that holds them from making inno-
vations in their supply chain. The respond-
ents were asked to list the five main chal-
lenges perceived. The answers are illustrat-
ed in figure 9.
By far the most cited barrier for supply
chain innovation, we observe 77 % of the
companies reporting lack of time. In oth-
er words, daily operations win over devel-
opment. We find it interesting to challenge
the perception of lack of time. In most of
the mini-surveys in The Danish Supply
Chain Panel during the last five years we
have seen this factor in the top of main
barriers whatever topic we have investigat-
ed. One view of this phenomenon can be
that it simply has become an accepted wis-
dom to say we lack time. Perhaps we need
56 DILForientering FEBRUAR 2017 ÅRGANG 54
77 %
69 %
58 %
50 %
44 %
38 %
33 %
27 %
27 %
21 %
13 %
10 %
10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 %
to be more productive in all means. Anoth-
er, and more serious view is, that top man-
agement has limited understanding of de-
velopment activities and are too much fo-
cussed on daily performance. Also lack of
human resources to take the task of devel-
oping the supply chain is often an issue
(69 %). To a lesser extent, but highly relat-
ed, the lack of internal development ori-
ented capabilities is likewise often rated as
a top five barrier for supply chain inno-
vation. As is also shown in figure 8 many
companies still truckles with internal si-
los (50 %). Compared to a similar survey
in 2012 (Arlbjørn & Mikkelsen 2012) we
observe that top five have all increased
in terms of how many companies have
marked them as barriers.
Lack of time has gone up 20 % from 64 %
in 2012 to 77 %, while lack of human re-
sources has moved from 62 % to 69 % and
at the same time lack of internal capabili-
ties has jumped from approximately 30
% in 2012 to now 58 %. Quite interest-
ing, and in our opinion alarming, we ob-
serve that silo mentality has gone up from
around 30 % that mentioned in 2012 to
now half of the companies mention this as
a barrier to supply chain innovations. A
complex supply chain has increased from
approximately 30 % to now 44 %. The
numbers indicate that companies are even
more challenged now on time, human re-
sources and internal capabilities than in
2012 and that companies has not been suc-
cessful in breaking down the walls between
the silos – on the contrary. Under “other”
some respondents have written lack of crea-
tivity skills/innovation skills and too many
projects going on at the same time.
Conclusion
This paper has set out to present and dis-
cuss the findings of a mini-survey distrib-
uted to The Danish Supply Chain Pan-
el about their perception of relevance and
current practice of supply chain innova-
tion. The survey indicates several interest-
ing findings. Firstly, the survey reveals a
gap in the respondent’s perceptions of their
own judgment of the supply chain as a
source of competitiveness compared with
their judgement of how their top manage-
ment perceive it. This calls for a need to
teach top management in supply chain
management practice and theory. Main
business processes pursued are external ori-
ented (customer relationship management,
customer service management and supplier
relationship management). Main actors in
supply chain innovation projects are inter-
nal stakeholders and customers and suppli-
ers. Main technologies in supply chain in-
novation are planning and execution sys-
tems, communication systems and analyti-
cal technologies. The respondents scores
on operation practices compared with de-
velopment practices obtain higher average
scores. The two highest scoring drivers for
supply chain innovation are internal mo-
tivation and customer requirements. Top
57 DILForientering FEBRUAR 2017 ÅRGANG 54
three barriers are lack of time (too much
focus on operation), lack of man power and
lack of internal development oriented ca-
pabilities. We hope these results will stim-
ulate discussion on this phenomenon in
your organizations to assess your own prac-
tice and potential of supply chain innova-
tion to develop, maintain or further en-
hance the supply chain as a competitive
advantage. /
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