Research Agenda: Making Supply Chain Processes Work on Network Level

The focus of logistics research and development has during last ten years shifted clearly from logistics functions towards logistics processes, and from company viewpoint to supply chain and network viewpoint. A wide array of general principles and guidelines have been presented about taking a holistic view to supply chains, integrating supply chain processes and collaborating between supply chain partners. The adoption of these principles has, however, been much slower and more difficult than has been expected. The experience from practice has revealed that there are a lot of focused issues that need to be solved before the supply chain processes can be widely integrated in multi-company networks. In this paper we present results from a study that identified the most important development needs for companies to make logistics processes work on a network level. According to the study, the most important problem from a practitioner point of view is the need to restructure logistics networks as the logistics service content is increased. Second, new approaches for streamlined planning collaboration are needed for making it possible to collaborate efficiently with many different partners. Third, new approaches are required for managing logistics information in company networks. INTRODUCTION In the field of logistics, managing multiple company relationships has been increasingly referred to as supply chain management (SCM) (Lambert et al., 1998). A number of definitions exist for the term SCM; However, collectively can be said that the current view involves managing and coordinating multiple business activities across functions and firms, and viewing the supply chain as a single entity, rather as a set of separate functions. (Mentzer, 2001; Larson and Rogers, 1998). There are many examples of companies that have been able to improve their performance by re-engineering and integrating their internal supply chains better with their customers' business processes. For example, Nokia Networks has implemented a program called "breakthrough inventory rotation days" (BIRD), which aimed at developing the company's supply chain processes together with a large number of its customers. In 1.5 years, by the end of the year 2000, Nokia Networks had achieved about 40% average reduction in inventory levels while also achieving significant increase in sales (Heikkilä, 2002). Corbett, Blackburn and Wassenhove (1999) describe two other successful joint supply chain improvement projects between Pellton International, a large multinational chemical company, and its two key customers, Basco PLC and Perdirelli. The positive results, in particular in large corporations, seem to confirm the usefulness of the recent view of the supply chain management; However, many problems have also been identified. First, successful supply chain cooperation, if it requires a lot of resources, is possible with only a few partners (Lambert et al., 1998; Goffin et al., 1997; Spekman et al., 1998). Second, the emphasis on long term relationships reduces the flexibility and market orientation otherwise inherent in a supply network (Cohen and Agrawal, 1999). Third, the implementation efforts concentrate only on small parts of the supply network, often just on single relationships (Pfohl and Buse, 2000). Fourth, inter-company cooperation is difficult because of unequal distribution of costs and benefits between the supply chain partners (Kärkkäinen et al., 2002a), or perhaps even more importantly, because of the inability of buyers and sellers to share a common voice and view (Spekman et al., 1998). And finally, the simplified view of the supply chain does not correspond well to the reality that the front-line employees encounter (Lambert et al., 1998). In this paper, we present results of a study that focused on the following questions: 1. What are the most important development needs to make the supply chain processes -e.g. forecasting, planning, track and trace, inventory management, and physical distribution -work better on network level? 2. How can these development needs be transformed into a form of a research agenda? The paper is organized as follows. After the first introductory section, we describe the methodology used in the study. In the sections that follow, we present and discuss the research agenda. The paper then closes with a summary of the agenda and conclusions. METHODOLOGY AND PROCESS OF THE STUDY The study started with a literature study, followed by semi-structured interviews with representatives from chosen industry partners and two workshops. The study can be described as an iterative seven-step process, as illustrated in Table 1. The initial definition of the research topics were designed based on the literature study and the results from the previous research projects ECOMLOG and KARKeLO (Auramo et al., 2002) of the logistics research group of Helsinki University of Technology. The ECOMLOG and KARKeLO projects had focused on the role of ICT technology in changing the supply chain environment. The initial topics were refined based on results from more than 70 interviews with managers, covering various supply chain functions, levels and processes, in 12 different companies. The companies were from daily consumer goods, furniture, construction, telecommunications and machinery industries representing different roles in their industry’s supply chains: retailers, manufacturers, suppliers and logistics service providers. In order to promote an open atmosphere and free exchange of ideas, it was ensured that none of the companies were direct competitors. An important factor for selecting the companies was that they were considered at least national forerunners in the area of logistics in network environment. TABLE 1. Research method