CHAPTER TWO

REVIEW OF LITERATURE

Supply chain management (SCM) is the process of planning, implementing, and

controlling the operations of the supply chain as efficiently as possible. Supply Chain
Management spans all movement and storage of raw materials, work-in-process inventory, and
finished goods from point-of-origin to point-of-consumption.

The definition one American professional association put forward is that Supply Chain
Management encompasses the planning and management of all activities involved in sourcing,
procurement, conversion, and logistics management activities. Importantly, it also includes
coordination and collaboration with channel partners, which can be suppliers, intermediaries,
third-party service providers, and customers. In essence, Supply Chain Management integrates
supply and demand management within and across companies.

Some experts distinguish Supply Chain Management and logistics, while others consider
the terms to be interchangeable. Supply Chain Management is also a category of software
products. Supply chain event management (abbreviated as SCEM) is a consideration of all
possible occurring events and factors that can cause a disruption in a supply chain. With SCEM
possible scenarios can be created and solutions can be planned.

Supply chain management problems

Supply chain management must address the following problems: Distribution Network
Configuration: Number and location of suppliers, production facilities, distribution centers,
warehouses and customers.

Distribution Strategy: Centralized versus decentralized, direct shipment, Cross docking,

pull or push strategies, third party logistics. Information: Integrate systems and processes through
the supply chain to share valuable information, including demand signals, forecasts, inventory
and transportation etc.
 Inventory Management: Quantity and location of inventory including raw materials,
work-in-process and finished goods. Cash-Flow: Arranging the payment terms and the
methodologies for exchanging funds across entities within the supply chain.
Supply chain execution is managing and coordinating the movement of materials, information
and funds across the supply chain. The flow is bi-directional.

Milestone payments

Operational
Daily production and distribution planning, including all nodes in the supply chain.
Production scheduling for each manufacturing facility in the supply chain (minute by minute).
Demand planning and forecasting, coordinating the demand forecast of all customers and sharing
the forecast with all suppliers.

Sourcing planning, including current inventory and forecast demand, in collaboration

with all suppliers. Inbound operations, including transportation from suppliers and receiving
inventory.
Production operations, including the consumption of materials and flow of finished
goods. Outbound operations, including all fulfillment activities and transportation to customers.
Order promising, accounting for all constraints in the supply chain, including all suppliers,
manufacturing facilities, distribution centers, and other customers.

Supply chain management

Organizations increasingly find that they must rely on effective supply chains, or
networks, to successfully compete in the global market and networked economy. In Peter
Drucker's (1998) management's new paradigms, this concept of business relationships extends
beyond traditional enterprise boundaries and seeks to organize entire business processes
throughout a value chain of multiple companies.
 During the past decades, globalization, outsourcing and information technology have
enabled many organizations such as Dell and Hewlett Packard, to successfully operate solid
collaborative supply networks in which each specialized business partner focuses on only a few
key strategic activities (Scott, 1993).

This inter-organizational supply network can be acknowledged as a new form of

organization. However, with the complicated interactions among the players, the network
structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind
of performance impacts different supply network structures could have on firms, and little is
known about the coordination conditions and trade-offs that may exist among the players.

From a system's point of view, a complex network structure can be decomposed into
individual component firms (Zhang and Dilts, 2004). Traditionally, companies in a supply
network concentrate on the inputs and outputs of the processes, with little concern for the
internal management working of other individual players. Therefore, the choice of internal
management control structure is known to impact local firm performance (Mintzberg, 1979).

In the 21st century, there have been a few changes in business environment that have
contributed to the development of supply chain networks. First, as an outcome of globalization
and proliferation of multi-national companies, joint ventures, strategic alliances and business
partnerships were found to be significant success factors, following the earlier "Just-In-Time",
"Lean Management" and "Agile Manufacturing" practices.

Second, technological changes, particularly the dramatic fall in information

communication costs, a paramount component of transaction costs, has led to changes in
coordination among the members of the supply chain network (Coase, 1998).

Many researchers have recognized these kinds of supply network structure as a new
organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation",
Global Production Network", and "Next Generation Manufacturing System". In general, such a
structure can be defined as "a group of semi-independent organizations, each with their
capabilities, which collaborate in ever-changing constellations to serve one or more markets in
order to achieve some business goal specific to that collaboration" (Akkermans, 2001).

Andrew Cox, (1999) , Power, value and supply chain management, Explains some of the
thinking that informs both the case study articles that appear in the same issue of Supply Chain
Management: An International Journal and the EPSRC funded research project currently being
undertaken at the Centre for Business Strategy and Procurement. A review is provided of the
dominant ideas that currently inform “supply chain management thinking”. This paradigm is
characterised as operational effectiveness and efficiency. A case is made for understanding
supply chains from a strategic as well as from an operational perspective. Current supply chain
management thinking is criticised for being atheoretical and descriptive, and a case is made for
an analytical approach to supply chain thinking based around the concepts of power and value
appropriation. A more analytically robust way of understanding supply chains is laid out.

Stephen J. New, (1997), The scope of supply chain management research, Advocates an
expanded scope for supply chain management research which accounts for the social function
and the political and economic implications of supply chain developments. Argues that the
research agenda must not be driven by the notion of efficiency alone, but should also be
developed around the concept of the just supply chain. Provides a framework which sets out the
range of issues which may contribute to this approach. Believes that the objectives and
ideological assumptions of research need to be open to challenge and debate.

Kabossa A.B. Msimangira, (2003), Purchasing and supply chain management practices in
Botswana, Discusses supply chain management practices, with emphasis on purchasing, in
Botswana (a developing country). Focuses on problems facing business operations and how to
improve the situation. Presents the views of purchasing personnel from public and private
organizations and of students taking purchasing and supply chain management courses.
Discovers that purchasing has not been recognized as a profession, which has led to lack of
motivation in purchasing sections’ personnel. Further, purchasing policies on external
relationships and image are non-existent in most organizations. Claims that managers need to
change their thinking about the purchasing and supply function – to see it as strategic and not
clerical; and purchasing and supplies personnel require training in supply chain management.

Miguel Martinez Ramos, (2004), Interaction between management accounting and supply chain
management, Despite its importance in other disciplines and its rapid proliferation in
organizational practice, until recently supply chain management (SCM) has had only a relatively
modest impact on management accounting research. This research note focuses on the potential
role that management accounting information can play in SCM. From an alternative point of
view, a reverse impact of the supply chain activities on management accounting (intra- and inter-
firm) practices and uses can be expected. Both perspectives are analysed in this paper.

Andrew Cox, (1999), A research agenda for supply chain and business management thinking,
Summarises the key learning points in supply and value chain mapping. It demonstrates that
there is no best way to manage supply chains. Concludes that the key to success in business is
based on recognising the types of supply chains that exist and aligning strategy and operational
practice with the specific properties of the supply chain that the company is positioned within. It
is argued that some supply chain structures do not lend themselves to effective value
appropriation, so that entrepreneurial rents may not be achievable in all circumstances. It is
argued, in conclusion, that this way of thinking about supply chains and supply innovation –
referred to here as procurement and supply competence – is underdeveloped in business
management thinking.

Chee Yew Wong, Jan Stentoft Arlbjørn, John Johansen, (2005), Supply chain management
practices in toy supply chains, Purpose – Innovative products usually experience highly
unpredictable and variable demand. This is especially valid for the volatile and seasonal toy
industry, which produces high obsolete inventory, lost sales and markdown. In such a volatile
industry, what supply chain management (SCM) practices are applicable and effective? This
study seeks to explore SCM practices, and identify practical and theoretical gaps in toy supply
chains. Design/methodology/approach – This article includes a longitudinal and in-depth case
study during the past year in an international toy manufacturer, which includes qualitative semi-
structured interviews and questionnaire with 11 main European toy retailers.

Remko I. van Hoek, Robina Chatham, Richard Wilding, (2002) Managers in supply chain
management, the critical dimension, Attracting and educating the right supply chain managers
are a critical challenge to the realization of most supply chain objectives irrespective of the state
of the economy (shortage of personnel several months ago or increasing lay-offs currently). This
is because of the richness of capabilities required to do the job well. Much of our teaching in
logistics and supply chain management focuses on the technical aspects of the role. However, the
importance and criticality of the human aspects are becoming increasingly apparent. A new
approach to the people dimension is called for. This paper uncovers a set of emotional
capabilities, which, if combined with the technical capability that is undoubtedly needed as well,
would transform the industry. One emotional capability, the ability to influence, is examined by
way of illustrating what we mean by emotional capability. Suggestions are offered for furthering
managerial capabilities in supply chain management.

Alain Halley, Martin Beaulieu, (2009), Mastery of operational competencies in the context of
supply chain management, Purpose – According to the most recent theories, the competitiveness
of organizations is based on the development of competencies. Core competencies result from
greater mastery than competitors of organizational abilities valued by customers. This paper
seeks to investigate how a more thorough integration of the supply chain may be associated with
greater mastery of operational competencies. Design/methodology/approach – The study is
based on a mail survey carried out among Canadian manufacturing companies.

Joseph Sarkis, (2012), A boundaries and flows perspective of green supply chain management,
Purpose – Managing the green (environmentally sustainable) supply chain is an important issue
for industry. This paper aims to provide a framework to understand and appreciate the
relationships of various research streams and topics in this field. Utilizing this framework,
emergent research directions to advance the field are also presented.
Design/methodology/approach – Published research in peer-reviewed journals is evaluated using
a new framework of nine non-exclusive, interrelated boundaries and five flows of resources
related to green supply chains and supply chain management. Findings – The research literature
can be integrated into these comprehensive multidimensional frameworks, which also provide
opportunities as vehicles for future research. Research directions are described utilizing the
framework presented in this paper.

Damien Power, (2005), Supply chain management integration and implementation: a literature
review, Purpose – The purpose of this paper is to review a sample of the literature relating to the
integration and implementation of supply chain management practices from a strategic
viewpoint. Design/methodology/approach – The literature is examined from three perspectives.
First, supply chain integration covers issues relating to integration of core processes across
organizational boundaries through improved communication, partnerships, alliances and
cooperation. Second, strategy and planning examines supply chain management as a strategic
matter for trading partners, along with factors relating to the amount of planning required. Third,
implementation issues concern factors critical for successful implementation, as well as issues
specific to inter and intra-organizational aspects of supply chain initiatives are contained in this
sub-group

Stanley E. Fawcett, Gregory M. Magnan, Matthew W. McCarter, (2008), Benefits, barriers,

and bridges to effective supply chain management, Purpose – The purpose of this article is to
provide academics and practitioners a quantitative and qualitative analysis of the benefits,
barriers, and bridges to successful collaboration in strategic supply chains.
Design/methodology/approach – A triangulation method consisting of a literature review, a
cross-functional mail survey, and 51 in-depth case analyses was implemented. Senior managers
from purchasing, manufacturing, and logistics were targeted in the mail survey. The break down
by channel category interviews is as follows: 14 retailers, 13 finished goods assemblers, 12 first-
tier suppliers, three lower-tier suppliers, and nine service providers.

Uma V. Sridharan, W. Royce Caines, Cheryl C. Patterson, (2005), Implementation of supply

chain management and its impact on the value of firms, Purpose – The purpose of this research
is to examine the effect of supply chain implementation issues on firm value.
Design/methodology/approach – Using case study methodology, this paper outlines the cases of
Hershey and Nike and the impact of supply chain implementation issues on these firms’ value.
Findings – Difficulties in the implementation of supply chain management software designed to
maximize firm value, can result in a disruption of a firm's supply chain, causing losses for the
firm and a decline in firm value; thereby creating much disappointment for the firm's
shareholders. Hence, great care should be taken with the implementation of new SCM solutions.

Susan A. Sherer, (2005), From supply-chain management to value network advocacy:

implications for e-supply chains, Purpose – To introduce a broader concept for supply-chain
management (SCM), the notion of value network advocacy. Design/methodology/approach –
The historical roots and the traditional terms used to describe SCM are explored to show how
their meanings have led to specific types of information systems to support SCM. The limitations
of these systems are demonstrated with case studies. Then the concept of value network
advocacy is introduced to address these limitations, and implications of this term are explored.

Jill E. Hobbs, (1996), A transaction cost approach to supply chain management, Observes that
supply chain management is a rapidly-evolving subject which offers many insights into how
industries are organized and into the efficiency gains which can be made under different
organizational structures, pointing out that it is an interdisciplinary concept, drawing on aspects
of marketing, economics, logistics, organizational behaviour, etc. Presents a framework from the
economics literature which may be useful for those interested in understanding and exploring the
concept of supply chain management. Describes the origins and development of transaction cost
analysis and explains the key concepts of the framework. Discusses the potential effects of
transaction costs on vertical co-ordination within an industry and, hence, on supply chain
management. Finally, suggests methods for empiricizing transaction cost analysis, resulting in
recommendations for closer co-operation between researchers and business managers.

Paula M.G. van Veen-Dirks, Peter J.A. Verdaasdonk, (2009) "The dynamic relation between
management control and governance structure in a supply chain context", Supply Chain
Management: An International Journal, Vol. 14 Iss: 6, pp.466 – 478, The dynamic relation
between management control and governance structure in a supply chain context, Purpose – The
purpose of this paper is to show that local management control systems within supply chain
organisations and the governance of supply chains are intertwined and that local control systems
and governance structure have an important effect on the functioning of the supply chain.
Design/methodology/approach – The paper reports on a case study of a supply chain and
examines how local management control systems within the participating organisations affect
cooperation between the organisations in the supply chain. In the case study, a supply chain,
including eight food manufacturers, two logistic service providers, and two retailers, is
investigated.

Robert E. Spekman, John W. Kamauff Jr, Niklas Myhr, (1998), An empirical investigation
into supply chain management: a perspective on partnerships, States that we have witnessed,
over the last several years, a profound change in understanding the dynamics of competitive
advantage. Managers now acknowledge that a firm’s success is tied, in part, to the strength of its
weakest supply chain partner. This paper develops the concept of supply chain management and
argues that only through close collaborative linkages through the entire supply chain, can one
fully achieve the benefits of cost reduction and revenue enhancing behaviors. Data are presented
that look at a range of supply chain management practices and processes. By examining
differences in practices and processes between buyers and sellers, along with the supply chain,
attempts to understand better the challenges facing managers who espouse supply chain
management. Also proposes a change in mind set for the traditional procurement manager and
present insights for him/her to adapt to the requirements of the new competition.

Natasha Wilson, (1996), Supply chain management: a case study of a dedicated supply chain for
bananas in the UK grocery market, Looks at the concept of supply chain management, discussing
the theory and its relevance to the distribution and marketing of fresh produce. Vertical co-
ordination has seen an accelerated introduction in the context of UK food retailing and the major
food retailers are increasingly demanding dedicated supply as their influence grows. Looks at
three main players: J Sainsbury, the second largest UK grocery retailer; Mack Multiples, an
operating division of M & W Mack, the UK’s largest privately-owned importer and distributor of
fresh produce; and Noboa, a major family-owned plantation business in Ecuador.

Göran Svensson, Hans Bååth, (2008), Supply chain management ethics: conceptual framework
and illustration, Purpose – The purpose of this paper is to describe a conceptual framework of
Supply Chain Management Ethics (SCM-ethics). Design/methodology/approach – The research
is based upon a qualitative approach using a series of semi-structured interviews. Multiple
perspectives and respondents have been applied in the data collection process. The study is
limited to the Swedish vehicle industry. Findings – The empirical findings indicate that the
corporate focus of SCM-ethics is in part narrow in the Swedish vehicle industry. The partial
focus may endanger the corporate ethical performance in the long run, while the immediate one
may not be affected.

Ceren Atilgan, Peter McCullen, (2011) "Improving supply chain performance through
auditing: a change management perspective", Supply Chain Management: An International
Journal, Vol. 16 Iss: 1, pp.11 – 19, Improving supply chain performance through auditing: a
change management perspective, Quick scan audit methodology (QSAM) has been adapted to
include some change management practices. This paper seeks to relate how the company's
dissemination feedback presentation sessions and implementation team-work added value to the
established QSAM by: offering a new method of demonstrating a “listening ear” to employees,
providing enhanced verification of the QS results, increasing “buy in” and offering the
possibility of a deeper knowledge transfer and increased audit accuracy.

Rao Tummala, Tobias Schoenherr, (2011), Assessing and managing risks using the Supply
Chain Risk Management Process (SCRMP), Purpose – The purpose of this paper is to propose a
comprehensive and coherent approach for managing risks in supply chains.
Design/methodology/approach – Building on Tummala et al.'s Risk Management Process
(RMP), this paper develops a structured and ready-to-use approach for managers to assess and
manage risks in supply chains. Findings – Supply chain risks can be managed more effectively
when applying the Supply Chain Risk Management Process (SCRMP). The structured approach
can be divided into the phases of risk identification, risk measurement and risk assessment; risk
evaluation, and risk mitigation and contingency plans; and risk control and monitoring via data
management systems. Specific techniques for conducting this process are suggested.

Bernd Huber, Edward Sweeney, (2007), The need for wider supply chain management
adoption: empirical results from Ireland, Purpose – This paper aims to provide empirical results
which suggest that there is a need for more widespread adoption of supply chain management
among Irish firms. Design/methodology/approach – The Republic of Ireland is a small, open,
trade-dependent economy and is one of the fastest growing economies in the developed world.
However, due to rising costs, there is an increasing trend in Ireland to outsource lower function
manufacturing processes to lower-cost locations but to retain high-skill functions (such as R&D).
This trend, together with other factors such as its peripheral location, suggests that supply chain
management is critical from an Irish perspective. In order to gain unique insights of current
levels of awareness/adoption of SCM and the potential impact SCM could have on
competitiveness, a survey was conducted among 776 Irish firms.

Kevin McCormack, Marcelo Bronzo Ladeira, Marcos Paulo Valadares de Oliveira, (2008),
Supply chain maturity and performance in Brazil, Purpose – The purpose of the paper is to
investigate the relationship between supply chain maturity and performance, with specific
references both to the business process orientation maturity model and to the supply chain
operation reference model. Design/methodology/approach – Quantitative, survey based research
was carried out with 478 Brazilian companies. Statistical analysis combined the use of
descriptive statistics and structural equation modeling. Findings – Empirical results indicate a
strong and positive statistical relationship between supply chain maturity and performance. The
results also suggest that the deliver process maturity has a higher impact on overall performance
than the other supply chain processes.

Vinod Kumar, Kamel A. Fantazy, Uma Kumar, Todd A. Boyle, (2006), Implementation and
management framework for supply chain flexibility, Purpose – The purpose of this research is to
develop a conceptual framework for implementing and managing supply chain flexibility in
supply chain organizations. The framework suggests that supply chain flexibility should be
implemented and managed using a three-stage approach: required flexibility identification,
implementation and shared responsibility, and feedback and control.
Design/methodology/approach – The major components of the proposed framework are based on
a review of research in the manufacturing flexibility literature as well as the limited research in
supply chain flexibility. The strengths and weaknesses of these frameworks, combined with a
published empirical study were analyzed to identify the important issues that must be considered
when implementing and managing supply chain flexibility, and those components that need to be
incorporated into a new integrated framework. Findings – This framework was constructed by
synthesizing the strengths of other conceptual frameworks. As a result, the major components of
the framework are supported by the current research on the implementation and management of
manufacturing flexibility, as well as the current literature on supply chain management.

B.S. Sahay, Vasant Cavale, Ramneesh Mohan, (2003), The “Indian” supply chain architecture,
With close to 22 percent of aggregate industry sales tied up in inventories in the entire supply
chain network, what is it that ails Indian industry? Is it the way Indian supply chains are
configured – their orientation to processes to streamline business activities; their fusion of
information technology to speed up business transactions; their approach to supply chain strategy
to improve bottom line results – that has restricted them from achieving global standards? The
article, based on a recently concluded nationwide study titled “Supply chain management
practices in Indian Industry: 2000”, throws up glaring facts about the current architecture of
supply chains in India. The article concludes that though some Indian organizations are moving
fast towards improving supply chain efficiencies, most of them are still far from realising its
effect on business performance.

Yahia Zare Mehrjerdi, (2009), Excellent supply chain management, Purpose – The purpose of
this paper is to review the fundamental concept of supply chain management (SCM) and
discusses the facts that a road to success in the process of design, development, implementation
and operation of a supply chain (SC) is the identification of superior strategies and clear
objectives. To understand important SC strategies for a complete success, main strategies need to
be identified. The literature of SC is filled with a wide range of strategies applied successfully
across various enterprises that reviewed briefly in this paper. Design/methodology/approach –
The paper provides key strategies of SCM, and discusses the fact that the vision for the excellent
SCM can be built on principles as such as speed, quality, cost, flexibility, quality leadership,
customer focused, collaboration, and integrated information system.