supply chain management

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“Competitive dominance will be achieved by the entire supply chain, with battles fought supply chain versus supply chain.” —Roger Blackman

“As the economy changes, as competition becomes more global, it’s no longer company vs. company but supply chain vs. supply chain.” — Harold Sirkin

T he quest to meet customer needs in the face offierce global competition is driving dramaticchanges in the way businesses operate. For more than a decade, companies have reengineered, reorganized, and restructured in an effort to boost efficiency and meet customer expectations. The goal is to develop value-added processes that deliver innovative, high-quality, low-cost products on time with shorter development cycles and greater responsiveness than ever before.

Many managers realize that their companies lack the wherewithal to do this. They know they need help, so they are setting out to leverage the resources and know- how of suppliers and customers. Efforts to align objec- tives and share resources across companies to deliver greater value are known as supply chain management (SCM) initiatives.

In a supply chain world, “teams” of suppliers, finished goods producers, service providers, and retailers are formed to create and deliver the best products and serv- ices possible. Collaboration enables a company to do exceptionally well a few things for which it has unique advantages. Other activities are shifted to channel mem- bers that possess superior capabilities. Charles Fine (1998), author of Clockspeed, calls this supply-chain- design process “the ultimate core capability.”

Managers may quote the supply chain mantra of manag- ing value creation from “suppliers’ supplier to customers’ customer,” say Fawcett and Magnan (2001), but it seems no one is engaged in this level of integration. Few firms have mapped their chains so that they know who their suppliers’ suppliers or customers’ customers really are. If companies are going to tap SCM to establish a uniquely

In the face of fierce global competition and soaring customer expectations, many companies have turned to supply chain management to leverage the resources and know-how of suppliers and customers. To obtain an accurate view of what this requires, 52 in-depth interviews were carried out with supply chain leaders to answer the question, “What are the principles that drive successful supply chain design and collaboration?” The findings are summarized as the ten guiding principles of high-impact SCM. Mapping these guiding principles to a maturity framework reveals that there is much work awaiting managers who embark on the arduous journey toward supply chain collaboration.

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Stanley E. Fawcett Donald L. Staheli Professor of Global Supply Chain Management, Brigham Young University, Provo, Utah

Gregory M. Magnan Associate Professor of Operations and Supply Chain Management, Seattle University, Seattle, Washington

Ten guiding principles for high-impact SCM

competitive business model, they need to understand more clearly what it is and what it involves.

In practice, definitions of SCM vary greatly not only from company to company but also from manager to manager in the same company. However, there are several underly- ing themes. Outstanding supply chain companies stay customer-centric, focus on process management, invest in IT as a capability enabler, and are obsessed with perform- ance measurement. These common characteristics lend themselves to the following definition:

Supply chain management is the collaborative design and man- agement of seamless value-added processes to meet the real needs of the end customer. The development and integration of people and technological resources as well as the coordinated management of materials, information, and financial flows are critical to successful supply chain integration.

SCM’s goal is to establish unique value-added processes that satisfy customers better and more efficiently than the competition. Managing outstanding processes across func- tional and organizational boundaries requires dramatic and often painful changes in both thinking and behavior. Thus, SCM initiatives often create a sense of organiza- tional vulnerability. Inertia created by resistance to change increases the difficulties. Many emotionally charged ques- tions arise as a firm embarks on the supply chain journey: “Can we really trust other supply chain members not to take advantage of us?” “How are we going to share risks and rewards among the supply chain members?” “How do we manage relationships with partners who are also competitors?” Even when these questions are answered, the challenge of meshing unique organizational cultures, incompatible information systems, diverse worker atti- tudes, and different approaches to performance measure- ment can seem insurmountable. Managers need a set of guiding principles to help them design and manage a world-class supply chain.

To formulate such guidelines and obtain an accurate view of SCM and its prerequisites, we sought the experience and insight of industry managers engaged in the trenches of SCM implementation. Specifically, 52 semi-structured, in- depth interviews were carried out at leading companies to answer the question, “What are the principles that drive successful supply chain design and management?” The interviews took place along the supply chain as follows: 14 retailers, 13 finished goods assemblers, 12 first-tier suppli- ers, 3 lower-tier suppliers, and 9 service providers. As a rule, companies were selected because of their reputations for leading-edge SCM practices. The case study method emphasizes in-depth qualitative analysis and is useful for answering questions about what, why, and how. Thus, these case studies provided an opportunity to develop a broad understanding of how managers have tackled and won the SCM battle.

Principles to guide supply chain design

M any sports franchises routinely embark on the quest to win a championship, but only a few succeed. Success requires more than assembling

a group of outstanding athletes; it depends on finding the right players, developing the right relationships, and get- ting everyone to accept the right roles and responsibilities. The supply chain design challenge is similar to trying to form a championship team, only more complex. Building a world-class supply chain team requires a transformation in cultures and structures. The following five principles provide the foundation on which to build such a team.

Catch the vision; map it out

Managers find it far easier to talk about SCM than to dedi- cate the time and resources needed to create a clear picture of their most important supply chains. Most of those we interviewed had reasonable visibility one tier up and down the chain. However, only two of them had mapped their chains. Knowing how their critical chains work and who the key participants are, they actively investigate role-shift- ing opportunities with channel partners and employ sec- ond-tier purchasing agreements where leverage advantages exist. Their advanced understanding is beginning to pro- vide competitive momentum. Moreover, their position in the chain is more secure as they share vital insight about the dynamics with other members. Their mapping efforts help the entire chain understand

� the nature of channel costs and profitability

� critical success factors throughout the chain

� existing and emerging technologies

� important customer linkages

� as-is value-added roles

� should-be value added roles

As companies more actively map processes and relation- ships, they are positioned to rationalize a chaotic and complicated environment. Only through mapping can clear roles and responsibilities be defined for all chain members. Most managers recognize the need for more comprehensive supply chain mapping coupled with the strategic use of the insight gained. Such efforts are needed for supply chains to compete as cohesive teams rather than as groups or clusters of companies.

SCM begins with the customer

In a supply chain world, the end customers are the only ones who really put money into the chain. Lasting success requires that they become the focal point for the entire chain. Mapping provides the visibility for every member to

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know who the end customers are and what to do to satisfy their needs and wants. The burden of provid- ing the best possible customer demand information typically falls to downstream firms—those closest to the end customers. Suppliers are expected to pass rel- evant information upstream. Because this “hand-off approach” is subject to fumbles, chain leaders vow that as their capabilities improve they will aggres- sively share information and skills further upstream, making it easier for every member to perform in a way that enhances end customer satisfaction.

Of course, because much of the value customers seek is built in upstream (sourced components rep- resent 50–80 percent of the typical finished goods provider’s cost of goods sold), a series of B2B rela- tionships must be actively managed. A breakdown anywhere in the chain drives up costs and dimin- ishes the entire chain’s ability to create customer value. Leading downstream companies employ scorecards, benchmarking diagnostics, and quarterly business reviews to communicate expectations, evaluate performance, and drive constant improvement upward.

Similarly, upstream leaders are looking forward to gain an understanding of what their customers’ customers really want. By understanding downstream market imperatives, they can identify and influence the critical factors that determine whether or not their customers succeed. How- ever, helping customers succeed is a resource-intensive strategy. Chain leaders therefore identify “customers of choice” and build the infrastructure needed to help them improve their own competitiveness. Policies and systems are then put into place to deliver fair and efficient service to remaining customers. Keeping the following questions in mind can help maintain a customer focus throughout the supply chain:

� What are the real needs of our immediate customers?

� What are the real needs of our customers’ customers?

� What are the real needs of our chain’s end customers?

� What information must be shared up and down the chain to meet these customer needs?

� What capabilities must be developed up and down the chain to meet these needs?

� How can we appropriately help other chain members so that the overall supply chain more efficiently and effectively meets these needs?

Know thyself; outsource the rest

Every participant in a winning supply chain must bring a distinctive value-added ability to the team. Great compa- nies possess one or more such capabilities that deliver customer value. Many have cultivated a strength that meets the three-fold test of a core competency: (1) pro-

viding access to a wide variety of markets; (2) making a verifiable contribution to the perceived customer benefits of the end product; and (3) being difficult for competitors to imitate. More important, supply chain leaders meticu- lously align their competencies with the needs of key cus- tomers as well as those of the entire chain (see Figure 1). Interestingly, these managers know that the term “core competency” is highly overused in today’s business world. Knowing where they fit in the supply chain, they invest in capabilities that are truly valued by other members, even if they do not meet the threshold of a true core competency.

Because chain leaders “know themselves” and the environ- ment in which they compete, they realize they lack the resources to do all things. So they invest in the analytical skills needed to determine which activities can and should be outsourced. Outsourcing decisions are strategic, made only after systematically analyzing competitive and market imperatives as well as the firm’s own value proposition and distinctive capabilities (see Figure 2). When customer

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S. Fawcett & G. Magnan / Ten guiding principles for high-impact SCM

Figure 1 The competency-customer success factor alignment matrix

Efforts to pursue attractive activities for which the firm has no advantage result in diminished focus and dissipated capabilities.

Effective alignment leads to profitable customer competitiveness.

Low customer priority and low company competence means that most firms avoid these activities. Resources expended here are wasted.

Significant effort and resources dedicated to non-valued activities result in low customer satisfaction.

High Low Firm’s distinctive capab ilities

C u st

om er

s u cc

es s

fa ct

or s

H ig

h

L ow

Figure 2 An outsourcing model that leverages supply chain capabilities

Assess technology trends Assess demand trends Assess strategic alignment Assess competency alignment Perform total cost analysis Consider qualitative issues

Market analysis

What must be done?

Who will do it?

Competitive analysis

Value proposition

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needs, competitor capabilities, and the firm’s distinctive advantages are understood, two critical questions are eval- uated: “What must be done to create customer value more efficiently than competing supply chains?” and “Who in our chain is best positioned to perform specific value- added activities?” Answering these questions enables one of the most important capabilities of supply chain lead- ers—coordinating the complementary activities of a variety of channel members to deliver unparalleled value to the end customers.

Keep it simple

Managing the complexities of building a competitive team consisting of hundreds, perhaps thousands, of members is one of the greatest challenges in SCM. Effective rationaliza- tion decisions can be made only when supply chain dy- namics, customer requirements, and team member capa- bilities are well understood. Simplification must begin within the firm’s own four walls. For example, today’s manufacturing and distribution networks are inherently complex. Configuring and coordinating operations to leverage global resources and access global markets re- quires that cost and performance trade-offs across the net- work be evaluated carefully. Few companies actively do this. And consider the number of stock-keeping units most companies manage. Product lines tend to expand in re- sponse to market pressures. SKU proliferation creates innu- merable headaches, especially for manufacturing and logis- tics. Supply chain leaders are instituting policies that either shrink the number of SKUs or require that each new prod- uct introduction be accompanied by a product deletion.

Beyond a firm’s boundaries, three sources of complexity must be addressed. First, most companies are optimizing their supply base. Some have reduced their active suppliers by 90 percent or more and employ commodity experts to manage key components. Supply chain leaders are going one step further to consolidate purchases upstream via sec- ond-tier purchasing agreements. Second, many companies are classifying customers on the basis of profitability and designing tailored services for “customers of choice.” Lead- ers recognize that looking at current profitability does not provide a clear picture of future opportunity; even so, better analysis is helping them modify relationships to improve collaboration and profits. Third, the transportation network represents “a pot of gold” for many companies; however, managers note that they are too busy dealing with other complications to rationalize a tangled logistics web. Better logistics software combined with the use of third-party serv- ice providers is helping make that web more manageable.

The fact that multiple relationships often exist among supply chain partners increases the intricacy of the design dilemma. Say that one packaged goods producer uses a key customer’s private trucking fleet to move its product. The question arises: “What do we do when they deliver late?” Such complexity may represent the greatest threat to

the long-term sustainability of SCM. Intimidated by the challenge of “keeping it simple,” many firms are tempted to put off tough decisions like capping the number of SKUs. Others simply do not have the systems to enable them to collect and analyze the mountain of “nitty-gritty” information necessary to rationalize the supply chain.

Beware of role shifting

Supply chain design is dynamic. New technologies and emerging players flush with new ideas make disintermedi- ation a constant threat and reintermediation an ever-pres- ent opportunity. Supply chain champions leverage their understanding by keeping an eye open to opportunities to assume new roles and use new technologies to create more value for the end customer. Kimberly-Clark’s transforma- tion from a company dependent on its paper mills to the world’s leading paper-based consumer-products corpora- tion exemplifies a role-shifting mindset. As a mediocre paper mill operator, reports Collins (2003), Kimberly- Clark was vulnerable to being “role shifted” out of its cus- tomers’ supply chains. By moving its value-added capabili- ties downstream, it leveraged its Kleenex brand name and insinuated itself into the minds and budgets of consumers.

While Kimberly-Clark shifted its product line and infra- structure to enhance its supply chain power, Intel created a customer linkage by identifying a previously unperceived desire for processing speed. Through its “Intel Inside” mar- keting campaign, it captured significant mindshare, thus shifting power away from “box makers” like IBM and HP. Similarly, Michael Dell saw a customer need and created a disintermediated business model that leveraged the Inter- net to deliver low-cost PCs directly to customers. Finally, Wal-Mart has created a physical presence and a low-cost supply chain model that allow it to constantly test new markets in its quest to serve customers. By doing so, it has appropriated much of the market power formerly held by consumer product companies such as Procter & Gamble. The moral of the story, says Fine, is to beware of “Intel Inside” and “Wal-Mart Outside.” For supply chain leaders, business models are never fixed.

Ultimately, leaders know that someone, somewhere, is working to make them obsolete. So they are meticulous scanners, always monitoring market and competitive con- ditions. They institutionalize periodic environment, tech- nology, and industry scans and are fanatic benchmarkers, comparing themselves against leading competitors, best-in- class performers, and the needs of demanding customers. Their insistent learning activities help managers (1) grasp the ramifications of constantly changing consumer and supply environments, (2) recognize channel alternatives, (3) assess wide-ranging trade-offs, and (4) balance short- and long-term company requirements. They position themselves to succeed even as the chain evolves, avoiding the threat of disintermediation while insinuating them- selves into the chain’s critical value-added processes.

Principles that guide supply chain integration

A lthough supply chain design has been identified as the “ultimate core capability,” integration may be the more difficult competency to develop. Design

identifies who should be on the team and defines specific roles; integration fosters the collaboration needed to turn a set of independent firms into a cohesive team. Unfortu- nately, neither companies nor managers are accustomed to working synergistically across organizational boundaries. Just as many athletic teams with seemingly superior talent never become champions, many supply chains never learn to work together. Perhaps the distinguishing characteristic of championship-caliber athletic teams is that they have developed team chemistry. Great supply chains likewise cultivate chemistry—a common vision, an understanding of individual roles, an ability to work together, and a will- ingness to adjust and adapt in order to create superior value. The following five principles are the threads that bind chain members into a cohesive team.

Build bridges, knock down walls

A frequently heard complaint throughout our interviews was that “turf” impedes cross-functional communication and cooperation. Managers lamented that a lack of cooper- ation reduces the effectiveness of both strategic initiatives and day-to-day decision-making. Blaming the lack of col- laboration on the intractable nature of conflicting objec- tives and the presence of counterproductive measures (see Figure 3), they argue that given their organizational cul- tures and structures it is almost impossible to get everyone to “read from the same page” consistently. They also deride the need to tie every initiative directly and immedi- ately to the profit- and-loss statement as a practice that promotes the pur- suit of the local optimum. Frustra- tion is palpable, with managers at several companies pointing out that they have given up trying to knock down the walls that inhibit collabora- tion in their own firms. These man- agers have found it easier to build value-added bridges to other companies and are now focus-

ing their collaborative efforts on building tighter relation- ships with supply chain partners.

The most widely encountered approach to building a bor- derless supply chain culture is cross-functional, interorga- nizational teaming. Chain leaders are aggressive team builders, employing teams for a variety of activities, such as new product design, commodity management, supplier development, technology assessment and implementa- tion, problem solving, reengineering, customer relation- ship management, and collaborative improvement pro- grams. Top management must commit to collaboration by investing in the creation of a team-oriented culture. At times, this might require sending a team of development engineers to work on site at a supplier’s facility for several months at a time to redesign specific processes (and teach process improvement skills to supplier personnel). Or it might mean giving suppliers’ engineers access to sensitive information and technology to enhance their participa- tion on new product development teams. One company interviewed uses a guest engineer program, claiming that nine of ten engineers at its corporate product develop- ment center are supplier personnel. Leading companies have taken the team mindset one step further to establish permanent internal steering committees, customer advi- sory boards, and supply management councils.

Finally, to create visibility and momentum for supply chain integration, a few companies are experimenting with more formal commitments to collaborative struc- tures. The two most common endeavors are the formation of a supply chain group or division and the establishment of a senior-level position such as Executive Vice President of SCM. These efforts are helping chain leaders begin to effectively bridge the gaps that persist in modern organi- zational and supply chain structures.

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Figure 3 The challenge of conflicting objectives and counterproductive measures

PURCHASING

Goal • Minimize price

Decisions • Lowest purchase price • Stable requirements • Multiple sourcing • Frequent bidding

Measures • Cost orientation • Yr-to-yr purchase price

PRODUCTION

Goal • Minimize costs

Decisions • Long runs • Stable schedules • Standardized products • SKU minimization

Measures • Cost orientation • Per-unit cost

LOGISTICS

Goal • Minimize costs

Decisions • Quick replenishment • Minimal inventory • Centralized inventory • Long lead times

Measures • Cost orientation • Inventory cost • Transportation cost

MARKETING

Goal • Sales/market share

Decisions • High service levels • High inventory • Dispersed inventory • Short delivery times • Quick response

Measures • Market orientation • Sales/share growth

All relationships are not created equal

The ability to define relationship intensity is a vital mana- gerial skill. Astute supply chain managers realize that not all relationships are created equal—nor should they be. They know that building strong, synergistic relationships is time- and resource-intensive. Supplier development, joint engineering, IT integration, and other collaborative ven- tures are feasible only with the most valued partners. Even so, experienced supply chain managers realize that every relationship should be managed for equity and efficiency; it is next to impossible to predict with certainty where the next technological breakthrough will come from or who will emerge as tomorrow’s market share leader. By estab- lishing policies that promote fairness, managers avoid burning the bridge to future success. The twin realities of resource scarcity and an unpredictable future require that all relationships be evaluated and periodically monitored to define their appropriate nature and intensity.

Chain leaders cultivate the skills and mindset needed to both define relationship intensity and build the needed infrastructure. “ABC” classification is commonly used. “A” relationships become candidates for partner status; how- ever, collaborative alliances are established only with mem- bers that have unique technologies or core competencies that give the entire chain a competitive edge. Extraordinary efforts to create value are supported by frequent communi- cation across multiple levels, inter-firm teams, integrated information systems, aligned performance measures, and collaborative training. Such intense partnerships can be sus- tained only with a small number of companies, typically fewer than 5 percent of the customer or supplier commu- nity. Non-alliance but still important relationships (“B”- level) are formalized through long-term contracts. They get as much personal attention, information sharing, and sys- tem integration as can be cost-justified. Finally, the vast majority of relationships are supported by policies and sys- tems designed to enhance efficiency and promote fairness. Again, today’s “C” players may emerge as indispensable down the road. Companies like Hewlett-Packard, Micro- soft, and Wal-Mart started out as seemingly insignificant “C”-level players operating on “shoestring” budgets.

What gets measured, gets done

Successful supply chain firms like eBay, Modus Media, and Unilever are fanatical about measurement because it either promotes or undermines collaboration—it is seldom neu- tral. Even so, few have harnessed the power of measure- ment, which Thomas Monson, member of the Board of Trustees at BYU, describes as follows: “When performance is measured, performance improves. When performance is measured and reported, the rate of improvement acceler- ates.” Advanced supply chain firms capture this accelerated improvement by designing measurement systems to align efforts up and down the chain. For example, they

1. connect company efforts to what customers really value, helping managers understand how customers evaluate company performance

2. adopt measures that clarify critical value-added processes across functional and company boundaries

3. communicate expectations to suppliers, letting them know where they stand and directing their improve- ment efforts

4. use measures to support functional excellence while promoting cross-functional collaboration

5. balance financial and cost measures with important, hard-to-quantify strategic measures that support longer-term initiatives

The time-honored saying “If you can’t measure it, you can’t manage it” captures an inescapable supply chain real- ity: Managers cannot effectively control collaborative processes they do not understand. And they cannot fully understand them without careful measurement. Feedback on (1) customer requirements, (2) company and supplier capabilities, and (3) the probable success of collaborative initiatives is vital and reveals the inner workings of the processes that characterize supply chain collaboration. Beyond creating insight, it shapes behavior. And it is often more critical than communication or training when it comes to promoting cooperative behavior.

Several of the managers we interviewed pointed out that because it is folly to hope for “A” if you are measuring “B,” it is critical to adopt measures that truly promote collabora- tion. Tailored supplier scorecards exemplify this by relaying expectations, holding suppliers accountable for perform- ance, and promoting continuous improvement. Chain lead- ers use scorecards to establish performance benchmarks and disseminate best practices throughout the supply base. When managers have accurate, relevant, and timely infor- mation for every value-added process and each valued rela- tionship, and share this information up and down the chain, distinctive collaborative capabilities can be built.

People are the bridge or the barrier

Technology issues may be at the top of a firm’s strategic agendas, but the softer people dilemmas often prove more intractable. Managers who are passionate about SCM sense that developing unique processes, shifting value- added roles, and building strong relationships require manager and worker buy-in and commitment. One execu- tive stressed the importance of people, stating, “People are either the bridge or the barrier to SCM.” His point is sim- ple: Proactive people management may not always lead to outstanding processes, but people are almost always in a position to undercut key supply chain initiatives.

For people to become the bridge to collaboration, they must be hired and trained not simply for the work their

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hands can do but also for their ability to think and learn and make a difference. Managers at leading supply chain companies believe their people possess the experience and insight needed to solve many of the most pressing compet- itive dilemmas. However, they note that getting people to share their best ideas remains a serious challenge, exacer- bated by a lack of trust and loyalty. Cautioning that serious commitment and sustained investment precede the cre- ation of a committed and productive workforce, they point out that empowerment is critical and that lip service with- out substance leads to cynicism. To convince workers they are serious about empowerment, managers conscientiously invest in building a great working environment, with such characteristics as compensation that communicates peo- ple’s true value, a flexible work place, family-friendly poli- cies, and investments in employee competencies.

Chain leaders pay particular attention to building em- ployee competencies. Training takes place everywhere. Senior managers require education on the benefits and potential competitive impact of SCM. Middle managers are targeted for training in system thinking, with the goal of diminishing the reticence (and hostility) often directed toward integrative efforts. The oft-stated objective for entry-level managers is to bring them into a rotation pro- gram designed to help them assimilate the skills and mindset of the cross-experienced manager. All this train- ing helps tear down functional silos to develop a process mindset while maintaining strong functional expertise. Additional training in negotiation, team building, process mapping, and total costing helps managers cope with the demands of a supply chain world. Leading companies also invest in the skills of channel partners, inviting them into the classroom while providing on-site training in quality, lean operations, process improvement, and prod- uct design. They emphasize not just the pursuit of produc- tivity but also a quest to unleash people’s passion. Such a mindset seeks more than mere knowledge; it fosters cre- ativity and is knit into the organizational fabric over time.

Technology as an enabler

Advances in IT, both hardware and software, have enabled companies to change the way they organize and operate. Almost every firm we interviewed is investing heavily in one or more of the following applications: enterprise resource planning, customer relationship management, warehouse management, transportation management, advanced planning and scheduling systems, satellite track- ing, computer-assisted ordering, database management, intranets and extranets, and Web-based catalogues. These applications affect every aspect of the order fulfillment process, enhancing the opportunity for collaboration.

Proper use of technology eliminates uncertainty, reduces inventory, and boosts responsiveness to customer requests. One study participant has created a “web-pull” system, which places the data found in an MRP system on the Web so that suppliers can see real-time inventory levels as well as the timing of expected demand. Another company shares three years of sales history with its suppliers along with an 18-month rolling forecast of demand. Such infor- mation helps suppliers better use their production capaci- ties while increasing service levels to the buyer. This com- pany also provides supplier training modules online.

Unfortunately, such promise has led many firms to look to IT as the answer to their integration dilemmas. They fail to prepare the landscape before installing the new technologies and run into serious difficulties implement- ing them. More than one implementation effort was described as a poorly performing technology system far removed from user requirements. Moreover, time and money budgets were often exceeded by 50 to 100 percent for the more complex ERP and VCRP systems. One man- ager warned that companies must not succumb to the marketing hype—expensive, hard-to-implement IT is not a “silver bullet.” Others criticized system providers for over- promising and underdelivering. Follow-the-leader tech- nology strategies seldom deliver competitive advantage; the business case must be made and clearly communi- cated before implementation begins.

Managers at the best of the best companies stressed that effective information sharing requires more than technol- ogy applications. Regardless of the level of connectivity established, sharing happens only when people are com- fortable with relationships and confident that any shared information will be used appropriately. Emphasis on the human or personal contact aspects of information ex- change helps build trust among decision makers and cre- ate the willingness that precedes this sharing. For supply chain leaders, technology and willingness come together to enable information sharing that bridges the gaps in modern supply chains.

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Proactive people management may not always lead to out- standing processes, but people are almost always in a position to undercut key supply chain initiatives.

T he SCM philosophy of collaborative competitionhas gained many adherents. However, supplychain practice continues to be ad hoc at all but the most dedicated companies. Even among leading firms, supply chain practice is often fragmented. Mapping the ten guiding principles of high-impact SCM (summarized in Table 1) to a maturity framework reveals much work and great opportunity awaiting managers who embark on the arduous journey toward supply chain collaboration.

Given the challenges inherent in SCM, it is imperative that firms carefully analyze their specific competitive positions to verify that the integration journey is worth taking. With- out commitment and an understanding of the associated challenges and requirements, they may be better off focus- ing their efforts and resources elsewhere. They must also seriously consider their potential to learn and change. Rigid, bureaucratic organizations cannot successfully pur- sue the ten guiding principles and are unlikely to achieve the benefits. By contrast, fluid firms that empower the workforce to experiment and learn are well positioned for the journey. They tend to have the staying power needed to implement all ten principles. After all, experience clearly shows that the rhetoric surrounding SCM should be tem- pered by the recognition that benefits do not accrue auto-

matically or immediately. According to Deloitte Touche Tohmatsu (2003), the cohesive supply chain with multiple companies collaborating intensively to address competitive issues is the exception rather than the rule. Ultimately, our ten principles can take much of the guesswork out of SCM, helping managers more systematically and successfully design and manage world-class supply chain networks. ❍

References and selected bibliography Collins, Jim. 2003. The ten greatest CEOs of all time. Fortune (21

July): 54-69. Deloitte Touche Tohmatsu. 2003. The challenge of complexity in

global manufacturing. @ www.deloitte.com/dtt/cda/doc/ content/Challenge%20of%20Complexity%20FINAL.pdf.

Fawcett, Stanley E., and Gregory N. Magnan. 2001. Achieving world-class supply chain alignment: Benefits, barriers, and bridges. Phoenix, AZ: National Association of Purchasing Management.

Fine, Charles H. 1998. Clockspeed. Reading, MA: Perseus Books. Wietfeldt, Peter. 2001. Achieving the next level of world-class sup-

ply chain performance. Presentation, Annual Conference of the Council of Logistics Management, Toronto (September).

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Table 1 Maturity of supply chain practice

Stage 1 Stage 2 Stage 3 Stage 4 Functional focus Internal integration External integration Cross-firm collaboration

Supply chain design

Catch the vision; map it out D L

SCM begins with the customer D L

Know thyself; outsource the rest D L

Keep it simple D L

Be aware of role shifting D L

Supply chain integration

Build bridges, knock down walls D L

All relationships are not created equal D L

What gets measured, gets done D L

People are the bridge or the barrier D L

Technology as an enabler D L

D = Dominant practice L = Leading practice

The authors wish to thank the Center for Advanced Purchasing Studies for funding this research.