SUPPLY CHAIN MANAGEMENT

Better Supply Chains

With Baldrige
by Robert J. Vokurka and Rhonda R. Lummus

S
tarting in the 1980s, firms found themselves lower costs. In fact, the Academic Alliance Forum sug-
facing increased global competition and gests traditional company vs. company competition is
greater demand for customized products changing to a business model in which supply chains
with shorter life cycles. Companies were required to compete against supply chains.1
develop competitive advantages in areas such as de- There can be significant inefficiency across supply
livery, flexibility and innovation and found supply chains, from planning the development of a new prod-
chain management concepts could help them suc- uct to stocking the product on the store shelf. A major
cessfully accomplish these competitive objectives.
The competitive model is no longer what it was
for most of the 20th century when it favored mass
production, with organizations focused on reducing
the cost of production through mass markets and
standard designs to allow economies of scale and

In 50 Words
Or Less

• Supply chains, like individual companies,

can benefit from the Malcolm Baldrige
National Quality Award criteria.

• The seven criteria for organizational

performance excellence can be applied
to supply chains.

• The key difference is that the criteria must

be applied by all partners in the chain.

QUALITY PROGRESS I APRIL 2003 I 51

SUPPLY CHAIN MANAGEMENT
research project to measure total cost of supply
chain inefficiency for the soft goods industry identi-
fied $25 billion worth of waste. Improvement initia-
tives eliminated almost $10 billion of that waste.2
Up to 2001, Harley-Davidson had reported 15
straight quarters of record earnings increases.
Harley attributes much of that recent success to effi-
ciently managing its supply chain.3 During those 15
quarters, it cut its supplier base by 80%, cut $40 mil-
lion out of material costs, reduced product develop-
ment time by 30% and reduced part defects from
75% of its suppliers from an average of 10,000 to 48
The entire supply chain must
be sensitive to changing
and emerging customer and
market requirements and the
factors that drive customer
satisfaction and retention.
parts per million. These supply chain improve-
ments reduced waste and assembly line slowdowns
at its manufacturing plants and contributed to over-
all company success.
Previous studies have shown total quality man-
agement (TQM) principles can be applied to supply
chain management. When properly implemented,
TQM can improve supplier quality and delivery,
eliminate waste in the supply chain and ultimately
increase revenues.4
Other studies provide evidence of the need to
implement quality principles across the supply
chain. A study of Whirlpool and its suppliers and
subsuppliers found the different entities in the chain
attempted to impose quality requirements on the
other supply chain partners. Quality communication
was found to be mostly unidirectional across the
chain, and lower levels of the chain were not likely to
understand the need for quality requirements.5
Supply chains, like individual companies, can
52 I APRIL 2003 I www.asq.org
benefit from an effective framework for perfor-
mance improvement such as the Malcolm Baldrige
National Quality Award 2002 Criteria for
Performance Excellence.6
What Is Supply Chain Management?
Many definitions of supply chain management
have been offered. One summary definition sug-
gests the supply chain includes everything from raw
materials and parts to manufacturing and assembly;
warehousing and inventory tracking; order entry
and management; distribution across all channels;
delivery to the customer; and the information sys-
tems necessary to monitor all these activities.7
Supply chain management coordinates and inte-
grates all these activities into a seamless process.
Managers in organizations across the supply chain
work together to make the entire chain more compet-
itive. The chain is viewed as one process, and the goal
is to eliminate any inefficiencies or redundancies.
Waste is eliminated, and the entire chain becomes
more flexible and responsive to customer needs.
Another view of the supply chain is that it is a
model emphasizing material and information flow
between manufacturers and their trading partners.
As described by Donald Davis,8 the changes in how
manufacturers are doing business include:
• Greater sharing of information between ven-
dors and customers.
• Horizontal business processes replacing verti-
cal departmental functions.
• A shift from mass production to customized
products.
• Increased reliance on purchased materials
and outside processing, with a simultaneous
reduction in the number of suppliers.
• Greater emphasis on organizational and
process flexibility.
• The necessity of coordinating processes
across many sites.
• Employee empowerment and the need for
rules based, real-time decision support systems.
• Competitive pressure to introduce new prod-
ucts more quickly.
Supply chain management rests on channel inte-
gration or having all the entities of the chain work-
ing as one coordinated network and on the concept
that system competition occurs among complete
channel units. In essence, organizations compete ➤
TABLE 1 Criteria for Organizational and Supply Chain Performance
Criteria for organizational performance excellence
1. Leadership
• How senior leaders guide the organization and review organizational
performance.
• How the organization addresses its responsibilities to the public and
practices good citizenship.
2. Strategic planning
• How the organization’s strategy development process strengthens
organizational performance and competitive position.
• How the strategy development process leads to action plans and
related performance measures and projects key measures into
the future.
3. Customer and market focus
• How the organization determines short- and longer-term requirements,
expectations and preferences of customers and markets to ensure
the relevance of current products and services and develop new
opportunities.
• How the organization determines the satisfaction of customers and
builds relationships to retain current business and develop new
opportunities.
4. Information and analysis 4. Information and analysis
• How the organization provides effective performance measurement • How the supply chain provides an effective cross-company
systems for understanding, aligning and improving performance at
all levels and in all parts of the organization.
• How the organization analyzes performance data and information • How the supply chain analyzes performance data and information
to assess and understand overall organizational performance.
5. Human resource focus
• How the organization’s work and job design, compensation, career
progression and related work force practices enable employees to
achieve high performance in operations.
• How the organization’s education and training support the
achievement of business objectives; build employee knowledge, skills
and capabilities; and contribute to improved employee performance.
• How the organization maintains a work environment and employee
support climate that contribute to the well-being, satisfaction and
motivation of all employees.
6. Process management
• How the organization manages key product and service design and
delivery processes.
• How an individual designs and manages change in his or her life.
• How an individual’s partnering interactions and processes are
managed.
7. Business results
• Customer focused results, including customer satisfaction and
product and service performance results.
• Key financial and marketplace performance results.
• Human resource results, including employee well-being, satisfaction,
development and work system performance.
• Key supplier and partner results.
• Key operational performance results that contribute to the
achievement of organization effectiveness.
Criteria for supply chain performance excellence
1. Leadership
• How members of the supply chain set direction and regularly review
performance and capabilities.
• How the supply chain addresses public responsibilities and practices
good community citizenship.
2. Strategic planning
• How supply chain partners set strategic direction to improve
performance and define and strengthen their competitive position.
• How the joint supply chain process leads to individual company
action plans and results in measures for performance excellence
projected into the future.
3. Customer and market focus
• How the supply chain determines short- and long-term requirements,
expectations and preferences of customers to ensure the relevance
of current capabilities and services and develop new opportunities.
• How the supply chain determines end-user customer satisfaction and
builds relationships with customers to retain current business and
develop new opportunities.
measurement system for aligning priorities and improving
performance within and across all members of the chain.
to assess and understand overall performance of the chain.
5. Human resource focus
• How supply chain partners recognize and encourage employees to
achieve performance and learning objectives through each company’s
compensation, career planning and related work force practices.
• How supply chain partners provide education and training to support
the achievement of personal objectives and contribute to improved
employee performance at member companies.
• How supply chain partners maintain an environment that supports
the well-being, satisfaction and motivation of all employees at
member companies.
6 Process management
• How the supply chain designs and manages key product and service
delivery processes.
• How individual supply chain partners design and manage change
as required for the success of the entire chain.
• How supply chain companies manage partnering interactions and
processes.
7. Business results
• Supply chain partners are focused on end-user customer results,
including customer satisfaction and product and service performance
results.
• Supply chain partners use similar financial measures and share them
across partners.
• Supply chain members measure human resource results, including
employee satisfaction, development and performance.
• Key results are shared between all supply chain partners.
• Key operational performance results contribute to the achievement
of supply chain effectiveness.
QUALITY PROGRESS I APRIL 2003 I 53
SUPPLY CHAIN MANAGEMENT
as members of a complete system rather than at any
specific channel level.
As relationships between suppliers and buyers
move from traditional adversarial transactions
toward cooperative partnerships, companies begin
to realize the benefits obtained through collabora-
tion. These agreements are often long-term and
require a high level of open communication
between companies.
A supply chain must
pursue profits and strategic
business goals as if it
were a single company.
For individual firms to benefit the broader sup-
ply chain, interacting firms must agree on common
capabilities and mutual objectives. In essence, a
supply chain must pursue profits and strategic
business goals as if it were a single company.9
Managers in organizations across the supply
chain take an interest in the success of the other
firms. They work together to make the whole sup-
ply chain competitive. They have facts about the
market, know a lot about competition and coordi-
nate their activities with those of their trading part-
ners. They use technology to gather information on
market demands and exchange information
between organizations.10
Core Baldrige Values and Concepts
The Baldrige criteria can be used to remove qual-
ity barriers and improve the overall performance of
the entire supply chain.
The Baldrige criteria are built on a foundation of
11 interrelated core values and concepts that are the
basis for integrating key business requirements
within a results oriented framework. These core
values and concepts are important for an organiza-
tion, and close examination shows a similar impor-
tance to supply chains.
54 I APRIL 2003 I www.asq.org
1. Visionary leadership. An organization’s
senior leaders need to set directions and create a
customer focus, clear and visible values and high
expectations. The directions, values and expecta-
tions should balance the needs of all stakeholders.
Just as senior leaders must set directions and
expectations for an organization, supply chain
leaders must establish the values, directions and
expectations for all their collective stakeholders.
High performance requires a clear direction and
high expectations. If a supply chain is to operate
with all activities in a seamless process, an overall
customer focus, shared values and expectations
must be in place.
2. Customer driven excellence. Quality and per-
formance are judged by customers. Thus an organi-
zation must take into account all product and
service features and characteristics that contribute
value to customers and lead to customer satisfac-
tion, preference, referral and loyalty.
Customer driven quality is a strategic concept
directed toward customer satisfaction, market share
gain and growth. The entire supply chain must be
sensitive to changing and emerging customer and
market requirements and the factors that drive cus-
tomer satisfaction and retention.
3. Organizational and personal learning.
Achieving the highest levels of performance re-
quires a well-executed approach to organizational
and personal learning. The term “organizational
learning” refers to continuous improvement of exist-
ing approaches and processes and adaptation to
change, leading to new goals and approaches.
Learning needs to be embedded in the way an orga-
nization operates.
Supply chains need to continuously improve and
learn, both incrementally and in breakthroughs. As
organizations and technologies change, supply
chains must maintain their currency in skills and
capabilities as they compete against other supply
chains. The competitive environment for supply
chains, as well as for organizations, requires devel-
oping new employee skills and approaches for
advancement at each of the supply chain member
companies.
4. Valuing employees and partners. An organi-
zation’s success depends increasingly on the know-
ledge, skills, innovative creativity and motivation of
its employees and partners. Valuing employees
means committing to their satisfaction, develop-
ment and well-being.
Organizations need to build internal and external
partnerships to better accomplish overall goals. The
strength of the supply chain lies in its ability to
establish relationships with partners to more effec-
tively meet supply chain end-user customer re-
quirements. Good partners value and encourage
creativity from employees. There is a need for
employee empowerment and rules based, real-time
decision support systems, and these need to extend
across the supply chain.11
5. Agility. Success in globally competitive mar-
kets demands a capacity for rapid change and
flexibility. Businesses face ever shorter cycles for
introductions of new or improved products and
services.
As organizations need faster and more flexible
responses to customers, supply chains also need to
be able to adapt to the changing needs of their end-
user customers.
Flexibility in the supply chain adds the require-
ment of flexibility within and between all partners in
the chain, including departments within an organi-
zation and external partners such as suppliers, carri-
ers, third-party companies and information systems
providers. Supply chain flexibility puts a greater
emphasis on organizational and process flexibility.12
6. Focus on the future. Pursuit of sustainable
growth and market leadership requires a strong
future orientation and a willingness to make long-
term commitments to key stakeholders.
A supply chain’s success is based on long-term
performance rather than short-term activities.
Supply chain companies need to establish long-
term relationships with both suppliers and cus-
tomers. This necessitates developing a longer-term
plan with a clear indication of the vision expected
in the future.
7. Managing for innovation. Organizations must
change to improve their programs, services and
processes to create new value for stakeholders. This
improvement in performance should be driven by
innovation.
Supply chains need to continually improve to
create value for the end customers and all stake-
holders. As they find a trade-off between invento-
ries and information, they must innovate in IT and
other processes.
8. Management by fact. Organizations depend on
measurement and analysis of performance.
Measurements must derive from the organization’s
strategy and provide critical data and information
about key processes, outputs and results.
Supply chains need to share and take action on
data and information, not assumptions and emo-
tions. Performance analysis and problem solving
must be based on reliable and relevant information.
It is no longer appropriate to base decisions and
actions on prior experiences and assumptions.
Decision making must be fact based. Measurements
must be cross company and provide information on
overall supply chain performance.
9. Public responsibility and citizenship. An orga-
nization’s leadership needs to stress its responsibili-
ties to the public and practice good citizenship. This
responsibility refers to basic expectations of the orga-
nization: business ethics and protection of public
health, safety and the environment.
The entire supply chain
must focus on the end-user
customer needs and
not just the immediate
downstream customer.
Supply chain partners must jointly evaluate
product use and recycling, reverse logistics and
waste management. The integrated supply chain
must be collectively responsible for environmental
impacts.
10. Focus on results and creating value. An orga-
nization’s performance measurements need to focus
on key results. Results should be focused on creating
and balancing value for all stakeholders—customers,
employees, stockholders, suppliers and partners, the
public and the community.
As supply chains compete against supply chains,
the bottom line in today’s competitive world is
QUALITY PROGRESS I APRIL 2003 I 55
SUPPLY CHAIN MANAGEMENT
results. Results cannot be individual company
focused but must focus on overall supply chain per-
formance. The supply chain must provide value to
end-user customers if it is to stay viable in the
future. The results must provide value for all stake-
holders and all others with a vested interest in the
supply chain.
11. Systems perspective. The Baldrige criteria pro-
vide a systems perspective for managing an organi-
zation and achieving performance excellence.
By definition, supply chain management uses a
systems perspective. Processes across the supply
FIGURE 1 Baldrige Criteria Framework:
Systems Perspective
Organizational profile:
environment, responsibilities, challenges
2 5
Strategic Human
planning resource focus
1 7
Leadership
3 6
Customer and Process
market focus management
4 and delivery. And finally, end-user customer satis-
Information and analysis
chain partners must be horizontally organized and
integrated. The partnering companies must act as
one organization and make decisions through com-
bined efforts to achieve overall performance excel-
lence.
Baldrige Criteria and Supply Chains
The core values and concepts that are the basis
for the Baldrige Award are integrated into a frame-
work of seven categories that comprise the Baldrige
criteria. The framework connects and integrates the
categories into a systems perspective as shown in
Figure 1. Summary descriptions of the categories
56 I APRIL 2003 I www.asq.org
are shown in column one of Table 1 (p. 53).
As shown in column two of Table 1, each of the
major categories of the Baldrige criteria is appropri-
ate for supply chains. As many organizations per-
form periodic self-assessments against the Baldrige
criteria, supply chains can also periodically assess
their own processes and performance against these
modified criteria. The self-assessments can form the
basis for revised strategic plans for continuous
improvement.
The key difference between evaluating organiza-
tional and supply chain performance excellence is
that excellence must occur at all supply chain part-
ners. The supply chain can only perform as well as
its weakest link. The entire chain must function as a
single organization.
Supply chain leaders must set direction for the
entire chain, and a strategic plan must exist that
crosses organizational boundaries. The entire supply
chain must focus on the end-user customer needs
and not just the immediate downstream customer.
Supply chain partners should share performance
information and use cross company measures to
align performance with supply chain objectives.
Each company needs to focus employee resources
on supply chain goals and provide the appropriate
Results
education and training as customer requirements
change.
Supply chain partners must jointly manage key
processes, including product and service design
faction should be what drives performance across
the supply chain, with each organization focusing
on performance that improves overall supply chain
effectiveness.
The Baldrige Award criteria are thus a closed
loop framework supply chains can use to improve
their overall performance.
REFERENCES
1. Academic Alliance Forum, “Future Competition:
Supply Chain vs. Supply Chain,” Logistics Management &
Distribution Report, Vol. 38, No. 3, pp. 20-21.
2. Kathryn Cullen, “Capitalizing on the Promise of E-busi-
ness,” Supply Chain Management Review, Vol. 9, No. 1,
pp. 42-49.
3. Missy Sullivan, “High-Octane Hog,” Forbes: Best of the
Web, Sept. 10, 2001, pp. 8-10.
4. Robert J. Trent, “Applying TQM to SCM,” Supply Chain
Management Review, Vol. 5, No. 3, pp. 70-78.
 5. Paul Mangiameli and Christopher J. Roethlein, “An RHONDA R. LUMMUS is an associate professor in the
Examination of Quality Performance at Different Levels in a College of Business at Iowa State University. She earned a
Connected Supply Chain: A Preliminary Case Study,” doctorate in operations management from the University of
Integrated Manufacturing Systems, Vol. 12, No. 2, pp. 126-133.
Iowa.
6. 2002 Criteria for Performance Excellence, National
Institute of Standards and Technology, 2002.
7. Rhonda R. Lummus and Robert J.
Vokurka, “Defining Supply Chain Manage-
ment: A Historical Perspective and Practical
Guidelines,” Industrial Management & Data
Systems, Vol. 99, No. 1, pp. 11-17.
8. Donald Davis, “State of a New Art:
Manufacturers and Trading Partners Learn
as They Go,” Manufacturing Systems,
Vol. 13, No. 8, pp. 2-10.
9. Lou Pelton, David Strutton and James
Lumpkin, Marketing Channels: A Relationship
Management Approach, Richard D. Irwin Inc.,
1997.
10. Rhonda R. Lummus, Robert J. Vokur-
ka and Karen L. Alber, “Strategic Supply
Chain Planning,” Production and Inventory
Management Journal, Vol. 39, No. 3,
pp. 49-58.
11. Davis, “State of a New Art: Manufac-
turers and Trading Partners Learn as They
Go,” see reference 8.
12. Ibid.

ROBERT J. VOKURKA is an associate pro-

fessor in the college of business at Texas
A&M University-Corpus Christi. He
earned a doctorate in operations manage-
ment from Texas A&M University-College
Station. Vokurka is a Senior Member of
ASQ and a certified quality engineer and
manager.

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QUALITY PROGRESS I APRIL 2003 I 57