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Supply chain integration configuration

Supply chain integration configuration: Process structure and product newness

By Christos Tsinopoulos, Durham University Business School and Carlos Mena, Eli Broad College of Business, Michigan State University.

The supply chain – the journey of a product from the drawing board to the customer – can be a changing and complicated thing. The established literature shows that supply chains vary considerably according to the degree of integration between the various partners.

The existing literature suggests that, for all this variation, those manufacturers who have a close relationship with their partners respond more quickly to change, adapt better to it and eventually experience improved performance. Much of this research is, however, is based on quantitative rather than qualitative data and as such often overlook the complex nature of the relationships between customers and suppler. In the light of this, academics Christos Tsinopoulos and Carlos Mena set out to look in detail at how supply chains are integrated and configured. Their work appears at the International Journal of Operations and Production Management.

A qualitative approach to supply chain integration

Supply chain integration cannot be measured directly; but, working on the premise that understanding of the multidimensional nature of the processes involved is limited by a quantitative approach, Tsinopoulos and Mena adopted an evaluation method based on measurable data collected as part of the submission process for the UK’s Manufacturing Excellence Awards.
This process involves an extensive and detailed questionnaire in which 21 of the questions asked related to supplier and customer integration. The researchers were able to code and analyse these for a total of 68 companies, over a three year period from 2008-10. The results which they obtained allowed them to define what they describe as two contextual dimensions, within which they placed four different supply chain configurations.

Understanding the supply chain

The results of the qualitative study produced two contexts in which supply chain integration operates: the relationship between processes and customer demand; and the ‘product newness’. Under the first, manufacturing processes respond to customer orders and the changes therein, while the second is associated with the changes and developments in the life cycle of the product itself.

Focusing more closely on the results, they identified four different configurations of the supply chain which related to these two dimensions. Broadly speaking they could be split into low- and high-volume. The low-volume aspects were defined as either customised or recurring, both involving very close collaboration between manufacturer, customer and supplier, although the latter had more emphasis on product planning and less on product development. By contrast, higher-volume chains were either ramped up, where there was a close relationship between all parties in terms of developing the product, or co-ordinated, where the product was established and the emphasis was more on incremental improvements.

These findings are significant because it is generally accepted that greater integration is usually a positive feature in terms of overall performance. A deeper understanding of how these relationships work can lead to, among other things, changes and improvements to procurement and contractual agreements, eventually generating improved business performance.