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Exploring supply chain innovation

Exploring supply chain innovation Logist. Res. (2011) 3:3–18 DOI 10.1007/s12159-010-0044-3 OR IGINAL PAPER • • Jan Stentoft Arlbjørn Henning de Haas Kristin Balslev Munksgaard Received: 14 June 2010 / Accepted: 17 December 2010 / Published online: 4 January 2011 Springer-Verlag 2010 Abstract Supply chain management promises competi- Keywords Supply chain management  Supply chain tive advantages for industrial organizations. The introduc- innovation  Business processes  Network structure tion of new products and services, or entry into new Technology markets, is likely to be more successful if accompanied by innovative supply chain designs, innovative supply chain management practices, and enabling technology. This is a 1 From pragmatic applications to systematic widely accepted premise in business practice today. investigations into supply chain innovation However, systematic research and knowledge about supply chain innovation (SCI) is little developed. There is a lack The domain of supply chain management (SCM) offers of common terminology, of agreement about the concep- new opportunities for creating competitive advantages. But tual understanding, and of related empirical work. This to leverage these opportunities and to win the competitive paper presents an exploratory study that aims to provide a landscape, a new mindset is required for understanding the better understanding of SCI, mirroring leading edge prac- global supply, logistics, and communication network of a tice, and providing a sound terminological and conceptual business [74, p. 14]. This may be why every year the basis for advanced academic work in the field. The American Council of Supply Chain Management Profes- research is based on an in-depth literature review and the sionals recognizes outstanding practice of innovative analysis of a set of secondary data sources: 36 SCI cases, organizations through their ‘‘Supply Chain Innovation drawn from applications for the Council of Supply Chain Award’’. Among the nominees have been prestigious Management Professionals’ (CSCMP) Supply Chain organizations such as the U.S. Air Force, Motorola, Innovation Award. As results of the research, a new SCI Kellogg’s, and Blockbuster Inc. The list of award winners definition, the construction of a descriptive model of its key includes companies like Intel, Cisco Systems Inc., and elements, and discussion of implications are presented. Hewlett-Packard. The winner is selected out of 45–50 submissions each year, based upon criteria related to the degree of innovativeness, impact on overall supply chain, and sustainability in results (revenue, cost savings, etc.). While this illustrates the practical relevance and a pragmatic approach of bringing together a supply chain J. S. Arlbjørn (&)  H. de Haas  K. B. Munksgaard perspective with an innovation focus, relatively little aca- Department of Entrepreneurship and Relationship Management, demic attention has been paid to specific issues of supply University of Southern Denmark, Engstien 1, chain innovation (SCI). Few contributions can be identified 6000 Kolding, Denmark e-mail: jar@sam.sdu.dk that explicitly deal with SCI. Those that do usually just refer to the term, but lack thorough consideration of its H. de Haas content and conceptual foundations. This seems to be the e-mail: hdh@sam.sdu.dk case despite the fact that the general concept of innovation K. B. Munksgaard in an economic context has been the subject of much e-mail: kbm@sam.sdu.dk 123 4 Logist. Res. (2011) 3:3–18 literature since Schumpeter’s times [4]. Significant factual apply the concept against a set of real-world cases. As a innovations have been developed with relevance to logis- research approach, this is consistent with the method of tics and process management during the second half of the abduction that is considered especially appropriate for twentieth century, such as industrial dynamics [40], mate- creating new insights [58]. The main purpose of the rials requirements planning [73], the pull production sys- abductive method is to develop new theory or refine tems within the Toyota production system [72], new forms existing theory by uncovering new variables and relation- of relationships and partnerships [62], and various incre- ships [26]. In this research, the development of a model of mental improvements to business processes [39, 95]. But SCI and identification of its conceptual elements is derived these have not been systematically and specifically related from an interplay between the literature reviewed and a to the issues of SCM, as it is being understood today: only sample of SCI award application cases, i.e., through a some consideration has been given to innovations in other systematic dialogue between a theoretical construct and functional areas of the company, which then may neces- empirical observations [30]. Consistent with the abductive sitate changes in supply chain activities [36, p. 133]. Only approach, reiterated analysis and interpretation has devel- limited empirical testing of those—and other kinds of oped an analytical understanding of SCI. logistics innovation—has been reported in the literature The literature review was carried out in four steps. As a [45], despite an apparent need to respond to pressures and first step, 50 SCM-related journals as identified by Charvet, events such as the current global financial crisis, leading Cooper, and Gardner [16, see Table 1 in their paper], as to an increased focus on cash flow through changes in potentially dealing with SCI, were chosen. The second step payment terms and lead time reductions [33, 71]; the was a search for papers published in those journals where challenges of global warming leading to new rules and the word ‘innovation’ came up in conjunction with certain regulations for CO emissions, putting pressure on means logistics and SCM-related terms. The journals were scan- of transportation and the layout of the supply chain ned with a specific search term in the EBSCO Host [13, 29], and the globalization of trade with resultant out- Research Database (business search premier). Searches sourcing and off-shoring manufacturing (e.g., lead times, took place in the field ‘‘all text (TX)’’, and there was no transportation, corporate social responsibility [70, 71]). date limit for these searches. In light of discussions as to There is an obvious gap between the pragmatically rec- whether there is a difference between logistics and SCM ognized importance of innovation in the context of SCM [63], searches for both ‘‘supply chain innovation’’ and and the state of systematic academic research on the con- ‘‘logistics innovation’’ were performed. The searches also cept. The purpose of this paper, therefore, is to bridge this included the term ‘‘supply chain development,’’ since gap. It aims to provide a better understanding of SCI, development initiatives may relate to innovations. Fur- which correctly mirrors leading edge practice and provides thermore, logistics/SCM activities [44] were searched for, a sound terminological and conceptual basis for advanced as they appeared to be combined with innovation. All in all, academic work in the field. the search processes identified 140 germane papers. As a third step, these 140 papers were screened in some more detail. Papers that obviously did not deal with innovation 2 Organization of the paper and research method were eliminated, even though the search terms came up in some sentence or in the list of references. The screening The paper is organized in four main sections: the following reduced the total number to 29 papers, which appeared to part of this section outlines the research method applied. be truly relevant (see Table 2). The papers were divided The third section provides a review of the general literature into seven thematic areas based on a collaborative grouping on SCM and innovation, as it relates to SCI. On the basis of process among the authors of the paper. The fourth and this review, in section four, a model is proposed that sug- final step of the review then encompassed a detailed con- gests that the essence of SCI may be captured through the tent review of the remaining 29 papers. description of three conceptual elements and their interac- The methodological approach outlined and utilized to tions. A set of five illustrative case studies is then presented the literature review has two shortcomings with respect to in section five to exemplify the function of the SCI model. the aim of the research: one limitation is that potentially The paper concludes with a discussion of the managerial relevant literature that did not meet the search criteria are and theoretical implications of the analysis and its findings. not covered in the review, even though there may be more Studying a very new phenomenon such as supply chain additional work about SCI, which does not use the speci- innovation calls for an exploratory research design, since fied terms. Secondly, publications in any other sources than this is ‘‘most appropriate in the early stages of research on a those referred to above, like conference proceedings, topic’’ [31, p. 548]. The ambition of this paper is to outline textbooks, and trade journals that may contain relevant a systematic understanding of the SCI concept and then to contributions, were also not considered in the review. 123 Logist. Res. (2011) 3:3–18 5 Table 1 SCM frameworks and models Author(s) Major SCM framework/model elements Cooper et al. [19] and Business processes, management components, and supply chain structure Lambert et al. [61] Bowersox et al. [11] Flows: product service value flow, market accommodation flow, information flow, and cash flow. Six integrative competencies: customer integration, internal integration, material and service supplier integration, technology and planning integration, measurement integration, relationship integration Mentzer et al. [67] Customer satisfaction, supply chain flows, inter-corporate coordination, inter-functional coordination, the global environment Chen and Paulraj [17] Environmental uncertainty, customer focus, top management support, supply strategy, information technology, supply network structure, managing buyer–supplier relationships, logistics integration, and supply chain performance measurement Bowersox et al. [10] Consumers, relationship management, flows, constraints, supply network, integrated enterprise (logistics, procurement, customer accommodation, and manufacturing), and market distribution network Skjøtt-Larsen et al. [85] Three perspectives on SCM: as an internal supply chain, part of a corporate company environment, part of an external environment. The supply chain system consist of: activities, processes and operations, and organizations Supply Chain Council [90] SCOR is based on five distinct management processes: plan, source, make, deliver, and return Mentzer et al. [66] An external view: the domain of SCM includes applying analytical tools and frameworks to improve business processes that cross organizational boundaries. An internal view: operations management includes applying analytical tools and frameworks to improve business processes that cross internal functional boundaries: time (logistics), marketing (planning), and physical transformation (production) Table 2 Literature review on supply chain innovation Focus Relevant aspects highlighted Representative authors Defining and measuring supply Innovation is anything new to the beholder [39, 45, 59] chain innovation Supply chain innovation areas Implementing new supply chain technology [4, 52, 59, 81, 83, 89, 91] Supply chain networks [2, 88] Optimizing supply chain business processes [4, 8, 21, 38, 39, 48, 49, 51, 57, 75, 80, 81, 87] Introducing new products or services [21, 34, 39, 80, 84, 94] (product development processes) Modeling and scenario building for optimization [4, 14, 59] The innovation process [34, 35, 38, 39, 46, 84, 95] The overall number of papers listed is higher than 29, because some papers relate to more than one focus and relevant aspect The second type of data input to our research come from wide availability and low data collection costs [12]. Limi- reviews of 36 applications for the CSCMP SCI Award (from tations include the fact that the researcher is dependent upon 2005 to 2009), which were selected by the jury to be pre- another party in data collection, lack of measures to tap the sented at the Annual CSCMP Conference. These data can be exact extent of the research, and the fact that data may be characterized as archival case studies based on secondary biased. However, the assumption is that the innovations data sources [32, 96]. In general, case studies have been selected this way meet criteria of obvious relevance, as argued to be relevant when investigating a contemporary defined by CSCMP [25], and they were chosen out of a much phenomenon within its real-life context, especially when the larger sample of application by an expert to be presented at boundaries between phenomenon and context are not clearly the annual conferences: evident [5, 32, 96]. Applying secondary data sources has – Educational intent of case study, not promotion toward advantages for the purpose of this study, but also disad- vantage of potential biases. Research on operations man- a product, service, or organization. – Level of significance with regard to the specific supply agement based on secondary data sources is rising [79] and has been suggested to be used more in operations and SCM chain challenge and the solution’s impact on the research [12, 37]. Benefits of secondary data sources include organization’s overall supply chain. 123 6 Logist. Res. (2011) 3:3–18 – Quantifiable and sustainable results in: cost savings, An initial interpretation of these frameworks and models revenue generation, and customer satisfaction. reveals agreement in several respects: there is consensus – Practical information that would be helpful and rele- that an essential element of SCM is its inter-organizational vant to today’s supply chain practitioner. nature. It is concerned with chains and networks of com- – Structure and content: organization/clarity, quality/ panies that collaborate across several tiers to produce some usefulness of visuals, and author’s knowledge of product or service. In spite of a dissimilar vocabulary, there subject matter. is consensus on SCM’s basic intention—to provide supe- – Innovativeness of solution. rior end-customer value. Another common thread is the focus on processes that cut across traditional internal A weakness of the 36 application documents for the functions (or silos). Common output measures considered CSCMP SCI Award is that they have been compiled by the are improved efficiency, improved services, or reduced candidate companies. Naturally, the applicants describe their costs. Still other common denominators include their focus innovations in the best possible way. On the other hand, for on customer demands, relationship management, integra- the purpose given here, the primary interest is the range of tion, and IT. issues and arguments brought up by the applicants—which may be considered relevant elements of SCI—not so much in 3.2 Dimensions of innovation relevant the actual execution and impact of the innovations. to supply chain management The 36 application and award-winning cases of SCI, which dated from 2005 to 2009, were thoroughly analyzed Research on innovation has a long tradition and can be to strengthen the precision, validity, and stability of the traced back to the early work of Schumpeter [82]. Inno- research findings. As the first step in the analysis, appli- vation, he argued, is the introduction of new products and cation documents were coded using interpretive coding production methods, the opening of new markets, the dis- [68]. Phrases reflecting elements of SCI as found in the covery of new raw materials, and the implementation of literature were marked. This procedure included interpre- new organizations. Some initial correspondence between tations of the degree of novelty of innovations as well as Schumpeter’s classical definition and supply chain research deeper insights into the content of and relations between is given through its focus on production methods, raw the SCI elements. An overview of coding results is pre- materials, and organization. However, the academic field of sented in Appendix. In order to provide a thorough innovation and the understanding of the term ‘‘innovation’’ explanation of how elements of SCI are applied by dif- are too comprehensive and multifarious to cover with a ferent award candidates, brief descriptions of the five general definition or simple perception. Therefore, our winners in the sample were compiled (see Sect. 5)to quest is to cover those innovation dimensions that are highlight variations and similarities across cases. relevant in a SCM perspective in order to provide a more concrete definition of supply chain innovation. Drawing further on Schumpeter’s work, the distinction 3 Literature review between invention and innovation [42, p. 22] is helpful: invention relates to new ideas, novel breakthroughs, and This section, first, offers a brief introduction to the general new discoveries. The key feature of an invention is its concepts of SCM, as found in the extant literature. Then, a newness and the fact that, as such, it is not normally review of the general literature on innovation follows. immediately ready for the market. Accordingly, innova- Finally, those literature contributions that directly relate to tions include not only the invention itself, but also the SCI are reported and categorized. The purpose of the lit- activities and processes designed to commercialize these erature review is to identify essential dimensions and ele- new ideas. In this sense, innovation is the successful ments of SCI that may be used as building blocks for the exploitation of new ideas. Furthermore, innovations may construction of a new definition and a coherent model of become widely used and spread to other fields through the the concept. process of diffusion [65]. Innovation processes not only relate to processes of commercializing new ideas, but 3.1 Supply chain management frameworks and models innovation also refers to the broader capability of an organization to continuously renew itself [6, 92, p. 54]. In the literature, numerous frameworks and models related Companies engaged in innovation have to build a process to SCM have been developed in order to substantiate the that facilitates their pursuit of turning new ideas into concept and relationship between subconcepts and vari- products, services, processes, etc. This is in accordance ables within the SCM domain. In Table 1, a listing of with Baumol’s [3] definition of innovation as: ‘‘The rec- frequently quoted SCM frameworks and models is listed. ognition of opportunities of profitable change and the 123 Logist. Res. (2011) 3:3–18 7 pursuit of those opportunities all the way through to their it was possible to deduce additional aspects related to adoption in practice.’’ This is relevant to SCM as it relates various areas of SCI—e.g., implementing supply chain to the focus of proving commercial significance by creating technology leading to innovation, the introduction of new superior end-customer value. products or processes or models intended to optimize the For some time, the innovation concept has lead to supply chain setup. Our characterization suggests that there further differentiation. There may be varying degrees of are relatively few papers explicitly dealing with the issues novelty—dividing innovations into incremental and radi- of definition and measurement, and that there is a lack of cal changes [41, p. 421] and more subtle distinctions by specificity in the definitions provided. The characterization the degree of innovation [47]. For the present purpose, the of the relevant innovation activities, which are dealt with in use of the distinction between radical and incremental the papers, appears to be a rather disjunctive collection of innovations is sufficient. The degree of newness may be aspects. related to both technological innovations (new products or In summary, the SCI literature review leads to the processes) and non-technological innovations (organiza- following five findings. First, the literature reviewed tional innovation or market innovation) [7, 64, p. 8]. The seems to agree on the importance and potential of SCI in distinction between organizational and market innovations improving the performance in the supply chain [39, 59]. conveys a structural dimension within discussions of Second, there is a lack of a coherent classification scheme newness. In a supply chain context, the distinction for the different types of SCI. Academic research so far between the organizational level and the market level can has not yet provided elaborate definitions of SCI beyond a also be defined as an intra-organizational or inter-orga- basic agreement that SCI is concerned with developments nizational focus for the innovation. An intra-organiza- in technology and processes [4]. Third, the present SCI tional innovation might be the application of new contributions are focusing mostly on technology devel- technologies for planning and forecasting, whereas an opment and application. The existing literature on SCI example of inter-organizational innovation might be the specifically points to information technology (IT) as an application of integrated product development in which important driver for innovation [52]. Such IT technologies suppliers and customers become part of the product are, for example, radio frequency identification technol- development process or the implementation of advanced ogy (RFID), pick-by-voice, and advanced planning sys- planning tools [81]. tems (APS) [81]. They have been suggested to serve as Another categorization relates to the field of applica- enablers of a closer cooperation between vendors and tion or use of the innovation. There are product-, process- customers over the last 10–15 years [81]. Fourth, some and service-innovations. Correspondingly, there are authors describe the measurement of innovation perfor- mance in terms of the performance of the product further distinctions in the field of application and context, within which innovations take place, such as organiza- development process (R&D process) [1, 20]. However, as tional innovation, management innovation, production with the general innovation literature, there seems to be a innovation, and commercial/marketing innovation [93, lack of work related to measuring innovation in the p. 17]. supply chain. Instead, the issue of measuring degrees of Some of the dimensions of innovations that have been innovation has been evaded as being based on ‘‘the eyes identified so far may be determined independently from the of the beholder’’ [39], which mean that the degree of perspective of an observer, such as the intended uses of innovation is not related to a fixed scale, but is a relative innovation. Others, such as rating of an innovation on a concept depending upon the beholder (person, organiza- scale of newness as incremental or radical, are contingent tion, etc.) of that change. To one person, a change could upon the eyes of the beholder [39, 54, 78, p. 11]. be a radical innovation, but to another person the same change could be an incremental innovation. This begs the 3.3 Interpretation of publications specific questions as to how one can compare innovations, as well to supply chain innovation as how one can rate innovations and how to judge what the best innovation is. Finally, current contributions are In our research, 29 papers were identified that are dealing mainly conceptual because empirical studies on the SCI explicitly with some aspect of SCI. A total of 7 relevant practice are under-researched; supply chain literature does aspects of SCI were identified by carefully reading and not seem to focus on innovation [39]. At the same time, categorizing the 29 papers. Two general themes emerged the literature on innovation does not seem to have any dividing the papers into whether they explicitly define and/ focus on SCM. This may be one reason why it is difficult or measure SCI, or deal with certain activities that have to find solid definitions of SCI, classifications of inno- relevance in the SCI process (Table 2). By comparing and vation (i.e., radical or incremental), and drivers for contrasting the content and research of the identified paper, innovation. 123 8 Logist. Res. (2011) 3:3–18 4 A definition of supply chain innovation and a model organizational business processes. Furthermore, imple- of its three interacting content elements menting supply chain technology has an explicit usage in the SCI contributions, while also mentioned in the SCM 4.1 Construction of an SCI definition frameworks. Thus, the three interacting content elements of SCI, to be discussed in more detail later, are the following: Based on the dimensions and content identified in the lit- (1) Supply chain business processes, (2) Supply chain erature review earlier, a definition of supply chain inno- network structure, and (3) Supply chain technology. vation is constructed, which is intended to be more specific Compared with the division of the strategy literature into and comprehensive as the earlier ones referred to in process, content, and context [28, p. 5], the SCI model Table 2: presented in this paper applies a content perspective. The product of an innovation process is referred to as the ‘‘A supply chain innovation is defined as a change innovation content. Formulated as a question, innovation (incremental or radical) within the supply chain net- content can be perceived as being the ‘what’ of innova- work, supply chain technology, or supply chain pro- tion—what is the innovation for the company? In contrast, cesses (or combinations of these) that can take place a process perspective is concerned with ‘how’ innovations in a company function, within a company, in an are carried out. The process and content perspectives industry or in a supply chain in order to enhance new influence each other—for example, the content of an value creation for the stakeholder.’’ innovation may influence the way in which the process will This definition of SCI highlights several characteristics: be organized, and vice versa—whereby if we begin with first, SCI is dynamic in nature because of a change process. the processes, this may also influence the specific content. Second, SCI may range from incremental to radical in terms Although this dual interplay between content and processes of its innovation effect. An incremental SCI is an optimi- exists, this paper is focused solely on the content piece—on zation of current practices within networks, technology, and a search for the contents of supply chain innovation. Thus, processes. A radical SCI must have a ‘‘wauw’’ effect— this paper aims to clarify the way in which the content of something that sets new rules for the game within its SCI can be operationalized. Therefore, the management application area. Third, SCI can take place within different area of SCM and the process element of implementing business functions, such as forecasting, distribution, and innovations are not included. The SCI model proposed in procurement. It can take place at an intra-company level, in this paper consists of three elements as shown in Fig. 1. dyads, chains, and networks of companies, as well as cut Supply chain innovations are not static elements but will across entire industries. Accordingly, these different func- typically be triggered by the companies’ dynamic interac- tions and levels may look differently at the same innovation. tion with their business environments. Figure 1 also rec- Fourth, the definition of SCI is considered more than an ognizes a dynamic process in and around the interplay invention or idea in and of itself, but is perceived as the between the three elements in recognition of a need for actual implementation of that idea in a supply chain. An SCI change in a company’s business model. Typical problems is more than an invention because it also has to prove its triggering SCI may be long lead times, high supply chain commercial value [6]. Fifth, the innovations must encom- pass new value creation—such as new markets, new products, new services, and new network structures. This also implies that the goal of the SCI is to create value for the company or any other stakeholder (partner in the supply chain or end customer). Supply Chain Business Recognize a need for Processes Develop solutions for change in business model new business model (performance gap) 4.2 An SCI model of interacting content elements Based on the literature review and as an implicit critique of the lack of coherence and conceptualization in existing Supply Chain Supply Chain Network Structure Technology studies on SCI, these sections suggest a new SCI model. The interacting content element of the SCI was found by comparing and contrasting frequently used SCM frame- works (listed in Table 1) and the literature review of SCI (see Table 2). First, there is a consensus that SCM is Implementation of new business model concerned with the management of relationships in busi- ness networks and deals with both intra- and inter- Fig. 1 Elements of supply chain innovation 123 Logist. Res. (2011) 3:3–18 9 costs, and low service levels, but they also may be resulting Swedish car manufacturer VOLVO [50]. VOLVO has from efforts to better articulate a company’s value propo- implemented an innovative mobile RFID solution using sition, to identify new market segments, to redefine the cellular networks with data package communication structure of the value chain in order to gain advantage over (GSM/GPRS) together with web technology. The practice rivals [18]. The recognition of a need to change should then reveals that a ‘‘smart goods’’ and mobile RFID solution can lead to a process of analyzing current practices and pro- be easy to use and learn, thus facilitating widespread posing new solutions that will improve the performance. adoption among supply chain actors with a ‘‘get pull’’ New solutions adopted must then be implemented, and effect. Another example is the application of advanced after some time, the need for improvements will arise planning systems in supply chains that enable innovations again. Referring to the definition of supply chain innova- in cross-company collaboration, speed in information flow, tion stated earlier, the work is done in order to enhance new and demand visibility [55]. A third example is the way in value creation for the customer. which the application of e-procurement auctions can improve market structure, market behavior, and market 4.3 Supply chain business processes performance [86]. Thus, in this context, it is not the tech- nology in and of itself that is an innovation, but merely its The first element in the SCI model is supply chain business application in a supply chain context. processes. Business processes are the activities that pro- duce a specific output of value to the customer [19]. 4.5 Supply chain network structure Business processes can be defined as: ‘‘a structured, mea- sured set of activities designed to produce a specified The third element of the SCI model focuses on the supply output for a particular customer or market’’ [27, p. 5]. The chain network structure—both vertical and horizontal—of motivation for implementing customer-oriented business the company and its supply chain partners where innova- processes within and across members of the supply chain is tions materialize. Thus, this element [61] divides the both to make transactions more efficient and effective and structure of the supply chain into three distinct factors: to structure inter-firm relationships [60]. The Global Sup- (1) Members of the supply chain; (2) Structural dimen- ply Chain Forum has identified eight SCM processes with sions, and (3) Different types of process links. Supply subprocesses that are listed below, including their aca- chains are complex business systems that often consist of demic clarification: many members. Not all suppliers or customers attract the same strategic awareness; therefore, a differentiation must • Customer Relationship Management [24] be made. The membership element draws attention to • Customer Service Management [9] activities related to mapping the supply chain structure and • Demand Management [23] then, based on differentiation models, classifies suppliers • Order Fulfillment [22] and customers into different degrees of importance. The • Manufacturing Flow Management [43] structural element is concerned with the horizontal struc- • Supplier Relationship Management [24] ture (number of tiers across the supply chain), the vertical • Product Development and Commercialization [76] structure (the number of suppliers/customers represented • Return Management [77] within each tier), and the horizontal position of the com- In theory and in practice, there can be other SCM pro- pany (e.g., close to the point of origin of raw material as cesses than those listed here (e.g., sequencing activities as opposed to close to private consumers). Process links are listed in [44, p. 4], into processes. For further examples of concerned with different degrees of resources spent on process models on supply chain efficiency, we refer to the integrating and managing processes within and across SCOR Model by the Supply Chain Council [90, p. 10], the members of the supply chain. Again, differentiation is the process classification framework by APQC [69], and the key word. Some process links need to be managed, while Supply Chain Best Practices Framework by the Supply others do not. The network structure element can also be Chain Consortium [69]. unfolded through virtual networks in which new value creation relies on knowledge assets. Such core compe- 4.4 Supply chain technology tences develop the firm’s ability to nurture long-term relationships with customers and suppliers [56]. Another The second element of the SCI model is supply chain example of this is the way in which intercompany collab- technology. By this element, we mean technologies that oration can stimulate continuous innovations in supply can be applied in isolation or in combination with other chains [15]. A final example of innovations within the technologies or the two other elements in the model to supply chain network structure is the emergent practice of create SCIs. As an example, consider the practice of the inter-outsourcing—with its focus on a round-way process 123 10 Logist. Res. (2011) 3:3–18 in which the vendor is its customer’s customer and the 5 Illustrative cases of supply chain innovation customer is its vendor’s vendor [53]. As a final remark, it should be noted that the degree of SCI novelty (incremental Following the abduction research approach (as outlined in to radical) may be perceived differently by the members of Sect. 2 of the paper), this section contributes to a verification a supply chain. An example of this could be a company that of the appropriateness of the definition and model of SCI is incrementally developing existing processes that facili- using the SCI essential elements identified in Sect. 4.An tate the development of radical processes by other mem- overview of all 36 case applications for the CSCMP SCI bers of the supply chain. In Table 3, examples of content Award, classified against the SCI elements and degree of innovation, is found in Appendix. Out of these, the five cases elements of the three SCI are listed. An important characteristic of the SCI model suggested that actually won a CSCMP SCI Award during the period is its ability to provide both a more holistic and a more 2005–2009 are characterized in Table 4 and discussed later nuanced view of what might be labeled an SCI. Thus, an in some detail. The cases were analyzed against the devel- SCI can be both the implementation of one or more ele- oped SCI elements and the degree of innovation (incre- ments within one of the elements and a composition of mental vs. radical). An overview of all 36 case applications more elements from two or all three elements. Each of the for the CSCMP SCI Award, classified against the SCI ele- three elements can vary in innovation effect along the ments and degree of innovation, can be found in Appendix. axis—from incremental to radical. In order to make this The classification of the case companies should uncover the dimension operational, a suggestion by Davenport [27, kinds of SCI in focus and the degrees of innovation that they p. 11] is followed: (1) Starting point (existing processes vs. have made. Table 4 shows the five winning cases classified clean slate); (2) Frequency of change (one-time/continuous against the elements of SCI. A detailed description and vs. one-at-a-time); (3) Time required (short vs. long); (4) classification of the winning cases are presented in the fol- Participation (bottom-up vs. top-down); and (5) Typical lowing sections highlighting the innovation type of each scope (within functions vs. cross-functional). Incremental supply chain element. Based on Appendix, the findings innovations are, for example, small continuous improve- across all the cases are that the innovation takes place as both ments, master data management, and process optimiza- radical and incremental changes in business processes, and tions. Examples of radical innovations include the most of the cases have made radical innovations in the implementation of direct distribution by using the princi- supply chain technology. However, only a few cases have ples of postponement, reengineering business processes by made changes in their supply chain network structure, which corresponds to the organizational perspective that the using state-of-the-art information technology, and the implementation of cross-functional teams in order to speed changes were found to be inter-organizational for most of the cases, i.e., they focus inside their own organization. up the time-to-market processes. Furthermore, the degree of novelty may vary across functions internally and across As Table 4 shows, there is a significant focus on inno- dyads, chains, and networks. vation in supply chain business processes and supply chain Table 3 Examples of content elements of SCI Supply chain business processes Supply chain technology Supply chain network structure Customer relationship management Global positioning systems (GPS) In- and outsourcing Partnership Customer service management Bar coding Demand management Radio frequency identification (RFID) Collaboration Order fulfillment Pick-by-voice technology Distribution channels Manufacturing flow management Electronic data interchange (EDI) Type of links to supply chain actors Supplier relationship management Advanced planning systems (APS) Third-party logistics providers Product development Warehouse management systems (WMS) Fourth-party logistics providers Return management Enterprise resource planning (ERP) Joint ventures Manufacturing execution system (MES) Complexity in supply Product life cycle management (PLM) Business intelligence Internet E-auctions 123 Logist. Res. (2011) 3:3–18 11 Table 4 Five winning cases classified against the elements of SCI Year Company Title Supply chain Supply chain Supply chain Organizational business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra Inter 2009 Intel Corporation Just say yes: innovating customer 99 9 9 (winner) responsiveness at Intel 2008 Cisco Systems Inc. Unlocking value from product returns 99 9 (winner) 2007 Aidmatrix (winner) ‘‘FreeClinic link—empowering a 99 9 supply chain of giving’’ 2006 Mercy ROI (winner) ROI, resource optimization and 99 9 innovation 2005 Hewlett-Packard Procurement risk management 99 9 (winner) (PRM) at HP company technology, while innovation in the supply chain network reduction in inventory levels was completed, and, finally, a structure was the focus for only one of the winning cases. program was instituted to reduce demand forecast errors. In the following, the five winning case companies will be Characteristics of innovation. The Intel innovation can described with regard to their innovations in supply chain be characterized by: (1) Development and implementation business processes and supply chain technology. Each case of a new mindset and processes, setting new business rules description is structured into four sections: (1) Background and developing efficient IT applications to support collab- and initial problem, (2) Case description, (3) Characteris- oration; (2) The Intel innovation consists of a number of tics of the innovation and (4) Findings. changes, it is not a one-time change but a continuous change process; (3) The innovation process has been ongoing since 5.1 Intel—the SCI Award winner in 2009 2005 and is, therefore, a long-term process; (4) The overall change process was initiated as a top-down approach; Background and initial problem. Due to the growth of the however, in the various change projects, there have been computer industry in the 1990s, the demand for micro- both top-down and bottom-up participation; and (5) The processors increased exponentially and exceeded the practical scope of the Intel innovation is cross-functional. In available supply. In the same period, the design and tech- this case, Intel made changes inter-organizationally; for nological complexity of the products increased and resulted example, the changes involved both suppliers and custom- in manufacturing cycle times of up to 90 days or more. ers in their implementation of VMI supply models and After the ‘‘Internet bubble’’ burst, the demand for micro- sharing forecast information. processors became more in line with the supply. Intel’s Findings. This case shows the radical innovations made product, manufacturing and process complexity, as well as in their supply chain in terms of all the parameters: pro- cycle times, improved significantly. Customers were still cesses, network structure, and technology. In a highly required to place orders in due time; however, the long lead complex business setting, Intel has managed to set new time led to situations where a large portion of the order standards for customer response time and delivery service changed close to shipment dates. In 2004/2005, Intel through the innovation of cross-functional business pro- required seven to 9 days to respond to a customer request cesses for order handling and communication with sup- for supply, and as a result of an IBM Global Services study pliers and customers. Intel has implemented technology to benchmark, Intel was rated ‘‘worst in class.’’ support the management of the new supply chain setup and Case description. In 2005, Intel launched the ‘‘Just Say changed the usual patterns of cooperation by implementing Yes’’ campaign, recognizing that a significant cultural VMI solutions and collaborative solutions with their change, in addition to various tool and process enhance- customers and suppliers. ments, was required to reverse their perception issues. The first initiative was to improve the ability to respond quickly 5.2 Cisco—the SCI Award winner in 2008 and positively in order to change order requests. Second, efforts were initiated to increase the Committed Dock Date Background and initial problem. In the logistics operation (CDD) performance to competitive levels and then a of Cisco, handling product returns had traditionally been 123 12 Logist. Res. (2011) 3:3–18 geared toward efficiency in the handling processes and (N.A.F.C.) developed an Internet-based collaborative net- optimizing the cost of the operation. A shift in management work servicing free clinics. The initial problem was that in 2005 changed the focus to that of seeking new ways to many small service organizations do not have the necessary maximize the value obtained from the returned products. resources to be able to meet the needs of their ever-growing With the new focus on value recovery, the logistics orga- client base; therefore, there was a need for coordination nization handling product returns had to change their way across the parties in the supply chain. of working and of understanding the processes. They then Case description. The web-based tool ‘‘FreeClinic Link’’ started projects to increase recovery rates and define and is a system connecting each member of the free clinic supply implement a profit-based business model to capture the chain of care. The value proposition for each participating highest value for Cisco from the returned products. stakeholder is maximized through full capture of benefits as Case description. Based on the changes in leadership, well as minimization of transaction costs. The FreeClinic the reverse logistics team created a reuse program. The Link allows free clinics across the United States to come objective was to give returned and excess equipment a together ‘virtually.’ The system enables each stakeholder to second—or even a third—life, before responsibly recycling behave in a manner that maximizes value for the other it. Originally, the recycling process was outsourced, but stakeholders, creating a truly collaborative supply chain by Cisco found this setup led to management and compliance leveraging supply chain collaboration solutions based on gaps, increased expenses, and created risk. The solution products and services from leading industry supporters such was to bring these core processes back in-house while as Accenture, i2 Technologies, and Sun Microsystems. outsourcing non-core work. The result was tighter control Characteristics of innovation. The Aidmatrix innovation of operations and increased productivity, which enabled can be characterized by: (1) The development and imple- rapid growth. A key element of these changes was the mentation of new processes; (2) A one-time change, establishment of automated data sharing processes, which however, that created a basis for continuous improvements; reduced losses from stocks and excess and obsolete parts. (3) A relatively long development and implementation However, Cisco found that there was no ‘off-the-shelf’ period; (4) Top-down and bottom-up participation; and (5) SCM product available to support the new operational A cross-functional scope. Degree of inter-organizational model, and they decided to custom-build the IT architec- change: the Aidmatrix solution must be characterized as ture to manage its stock, evolving from exchanging an inter-organizational solution spanning a number of spreadsheets to utilizing a central database to track stocks organizations. and take requests from internal customers. Findings. This case illustrated made radical innovations Characteristics of innovation. The Cisco innovation can in supply chain technology and supply chain processes through the development of a web portal by combining be characterized by: (1) Development and implementation of new processes; (2) A one-time change that created the different state-of-the-art technologies. The basic business basis for continuous improvements; (3) A relatively long processes are standard supply chain processes; however, development and implementation period; (4) Top-down through the IT integration, it is possible to automate the and bottom-up participation; and (5) A cross-functional collaboration between the parties in the supply chain and scope. The degree of inter-organizational change in this thereby gain significant results. case was that Cisco made inter-organizational changes, which involved suppliers in terms of in- and outsourcing of 5.4 ROi Mercy—the SCI award winner in 2006 processes. Findings. In this case, the company made radical inno- Background and initial problem. Health-care supply chains vations in supply chain business processes by establishing a exist to support clinical operations, yet the supply chain whole new business model for handling product returns and can rarely be directly linked to improved clinical perfor- implemented the teams and performance measurement mance. The St. Louis-based Sister of Mercy Health System elements necessary to accomplish this. Looking at supply created a new supply chain division called Resource chain technology, Cisco could not find standard IT solu- Optimization and Innovation (ROi) to establish the supply tions to support their new business model, so they devel- chain as a strategic imperative for the business. oped a new IT architecture to support the special needs of Case description. ROi has simplified the health-care the returns business for keeping track of the products. supply chain of Mercy Health Systems by reducing its dependence upon third-party intermediaries. The result of 5.3 Aidmatrix—the SCI Award winner in 2007 the changes was truly a new way of working that closely linked the makers and users of health care products in a Background and initial problem. The Aidmatrix Founda- way that provides greater value for the essential trading tion and the National Association of Free Clinics parties. The scope of the changes was cross-functional and 123 Logist. Res. (2011) 3:3–18 13 contained process development and technology develop- from the small illustrative sample of five ‘‘winner’’ cases is ment and application. The changes were driven in a new quite similar to the patterns and insight found in the larger team structure with competences from inside the hospital sample: that innovation takes place as both radical and and from outside resources that were hired from the incremental changes in business processes, and that in most logistics and supply chain industry. of the cases, radical innovations were undertaking in the Characteristics of innovation. The ROi Mercy innova- area of supply chain technology. Only a few cases related tion can be characterized by: (1) Development and to changes in the supply chain network structure, sug- implementation of new processes; (2) A one-time change; gesting that more changes were found to be intra-organi- (3) A relatively long development and implementation zational, i.e., they focus on change inside their own time; (4) Top-down and bottom-up participation; and (5) A organization. cross-functional (inter-organizational) scope as the changes involved more organizations. Findings. This company has made radical innovations in 6 Conclusion and implications their supply chain business processes and supply chain technology and has changed the view of the supply chain in The aim of this paper has been to provide a better under- terms of being an important element in optimizing the total standing of SCI, mirroring leading edge practice and pro- business. viding a sound terminological and conceptual basis for advanced academic work in the field. A first effort was the 5.5 Hewlett-Packard (HP)—the SCI Award winner review of the extant literature to identify relevant elements in 2005 and contents of SCI: it identified a limited number of papers that dealt explicitly with SCI; however, this does Background and initial problem. Around the year 2000, not mean that the existing literature is without contribu- electronic component market prices were increasing due to tions dealing with SCI, but merely that the conceptualiza- increased demand. A procurement risk management (PRM) tion and consciousness of SCI is less developed. Numerous project was initiated that led to the implementation of new papers exist on SCM and innovation as separate topics, but tools and processes to handle the risks of increasing prices there are only a few on the combined issue of the inno- and material shortages. vation of a supply chain. The focus of many of those papers Case description. The innovation is the use of tools and specifically about SCI is on the application of new tech- processes from the financial risk management processes on nology in the supply chain. However, in most cases, the Wall Street. HP developed a framework to quantify the technology applied is already known in one industry and is then applied to another industry. Other areas in focus are impact of product demand, component pricing, and avail- ability uncertainty on revenue, costs, and profits. It is a theoretical contributions concerning innovation in various software tool designed to support the risk management processes, integration of suppliers or customers, and faster process and to proactively manage procurement uncer- order handling, etc. [52]. Two topics in particular under the tainties and risks. The PRM business process is cross- SCI umbrella seem to be much less researched: the first functional and links and defines the roles and responsibil- area is the structural part of a supply chain (or the archi- ities of procurement, planning, supply chain operations, tecture of the supply chain) and the supply chain network. finance, and marketing. Another less researched area was found to be the mea- Characteristics of innovation. The HP SCI can be surement of the SCI and the scale or rating of an innovation characterized by: (1) Development and implementation of in terms of being an incremental or radical innovation. No new processes; (2) A one-time change; (3) Relatively long clear definition was found with regard to how one measures development and implementation period; (4) Participation the degree of an innovation. A number of papers [39, 59, was both top-down and bottom-up; and (5) The scope 78, 82] state that innovation should be rated subjectively cross-functional and intra-organizational. through the eyes of the person or organization seeing or Findings. Like the previous award-winning cases, this experiencing said change. However, this challenges any company has made radical innovations in their supply capacity for comparisons of innovations in supply chains. chain business processes and supply chain technology. A more objective scale is needed to be able to point to the ‘‘best in class’’ supply chain solutions. This explorative 5.6 Comparing findings from the winner cases piece of research has resulted in proposing an SCI model to the entire sample of 36 cases that consists of the three elements: supply chain processes, supply chain network, and supply chain technology. The findings across all 36 cases, as summarized in The second exertion of this research was an analysis of Appendix, suggest that the patterns of innovation content 36 SCI applications nominated for the CSCMP SCI Award. 123 14 Logist. Res. (2011) 3:3–18 These cases have illustrated the SCI model as a starting the basis for more quantitative studies of supply chain point for obtaining and establishing a common language innovation, which would give the opportunity to perform a for the contents of an SCI. Findings were that some of the test of the proposed model for supply chain innovation. companies have actually been implementing innovation in Fifth, more research is needed to explore the way in which the supply chain network and achieved radical performance an SCI evolves during the life cycle of a product and the improvements by applying postponement principles to development of a market. Does an SCI have a life cycle? In products and logistics. Changes in the supply chain net- a case where market, demand, and supply characteristics work were identified as an important element in the shift to become more predictable, it would be reasonable to understanding but still applied only to a limited extend. think that radical innovations in supply chains would no Here is an indication for possible future developments of longer be the objective; the focus should be solely on SCI. incremental innovations. Next, as the technologies for Building on the literature review and the cases, at least integration and communication in supply chains become six implications for future research can be deduced. First, more and more developed, an interesting area for further the model for SCI provides the foundation for theory research is how virtual network organizations are going to building within SCI. The next step is to continue to refine lead to innovation opportunities in supply chain manage- the model for SCI by conducting empirical qualitative and ment. Finally, there is a need to investigate SCI across quantitative studies. Second, the SCI model contains the industries. Are radical SCIs in one industry merely incre- three elements of business processes, structure, and tech- mental SCIs in another industry? Future research appears nology. Future research needs to dig a little deeper in order to be necessary to address the relationship between life to investigate the interplay between the elements from a cycles of products and markets across industries and the process perspective (process and structure; structure and types of SCI developed. technology; and process and technology). Third, measuring In conclusion, this paper provides a language for con- the degree of SCI is an area for future research. This paper ceptualizing SCI. It provides the basis for sharpening the has found that changes in technologies, processes, and also view of the meaning of SCI, which is a central element in in supply chain networks are areas for SCI. Such changes the process of theory development and is a prerequisite for can be either incremental or radical. However, this raises later tests. The paper can be used to stimulate discussions the basic question of whether everything has to become an on what to do with and how to do SCI in various compa- innovation. What about general continuous optimization of nies. Finally, it can be used to map and position ongoing procurement lead time, for example? Is this an incremental and/or intended SCI projects in a company. It provides a innovation? Within the current body of knowledge, the basis for an assessment of current activities to carry on, and what to look for when creating new development initiatives answer would be ‘‘yes.’’ This is also closely related to the scale of measurement of SCI. Future research must address within the domain of SCM. In other words, it can create the question of whether there is some work and basic more consciousness about the types of innovations needed improvements to be done before entering a degree of and developed, and how these sustain the creation of innovation scale. Fourth, future research may also address competitive advantages. second-level metrics to evaluate the degree of innovation. These metrics should be more supply chain focused than the generic ones applied in this paper [27, p. 5]. Through Appendix this, we would be able to avoid the risk of being too sub- jective in the evaluation of case material, and also provide See Table 5. Table 5 An overview of applications nominated for the CSCMP supply chain award Case Company Title Supply chain Supply chain Supply chain Organizational Nr. business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra. Inter 1 Intel Corporation Just say yes: innovating customer 99 9 9 (winner) responsiveness at Intel 2 Tellabs Achieving agility and responsiveness99 9 9 with an outsourced supply chain 3 Dresser-Rand, D&B Keeping supplier risk at bay 99 123 Logist. Res. (2011) 3:3–18 15 Table 5 continued Case Company Title Supply chain Supply chain Supply chain Organizational Nr. business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra. Inter 4 Liberty Property Trust The largest LEED gold certified 99 Presents Johnson distribution center in the United Diversey States 5 Kraft Foods Improving transportation management99 9 9 through real-time visibility 6 Cisco Systems Inc. Unlocking value from product returns 99 9 (winner) 7 Dynamic Worldwide Instaknow-ACE synchronized global 99 Logistics Inc. and supply chains Instaknow.com, Inc. 8 Genco and Sky-Trax, Tracking solutions 99 Inc. 9 Lockheed Martin Forecasted raw materials (FoRM)99 Aeronautics Company 10 OceanGuaranteed with Creating the industry’s first day- 99 9 9 APL Logistics, Con- definite, guaranteed ocean LCL Way Freight Inc. service 11 Party Lite Gifts and Optimal packaging 99 Chicago Consulting 12 US Air Force with Booz Transforming the United States air 99 9 Allen Hamilton and force supply chain: expeditionary Morgan Borszs logistics for the twenty-first century Consulting (Elog21) 13 Aidmatrix (winner) ‘‘FreeClinic Link—empowering a 99 9 supply chain of giving’’ 14 Bakers Footwear Group, ‘‘Fashionably late is not fashionable99 9 9 Inc. when dealing with trendy footwear’’ 15 John Deer and SmartOps 99 9 9 16 Kraft Foods and IDEO ‘‘Customer supply chain innovation99 and collaboration model’’ 17 Liquor Control Board of ‘‘New item submission system’’ 99 9 Ontario 18 Motorola Supply chain transformation drives 99 9 high-performance results 19 OceanSchedules.com, Innovation for the ocean-transportation 99 industry 20 CEAG/FRIWO A quantum leap in reducing working99 capital 21 Hewlett-Packard Buy sell process 99 22 IBM The road to an on demand supply chain 99 9 23 Kellogg’s and CSCS A closed-loop returns management 99 system, turning failures into profits 24 Mercy ROI (winner) ROI, resource optimization and 99 9 innovation 25 P&G Forces of business and forces of99 nature—building and agile supply network 123 16 Logist. Res. (2011) 3:3–18 Table 5 continued Case Company Title Supply chain Supply chain Supply chain Organizational Nr. business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra. Inter 26 The Dow Chemical 99 9 9 Company 27 Blockbuster Inc. Rental DVD packaging supply chain 99 9 28 Campbell Sales ‘‘Secondary packaging redesign’’ 99 9 Company and Food Lion 29 Hewlett-Packard Design for supply chain program99 9 30 Hewlett-Packard Procurement risk management (PRM) 99 9 (winner) at HP company 31 Kraft Foods Elevating supplier value: the kraft 99 foods supplier relationship management bridge 32 Lexmark Cash to cash cycle time improvement99 9 33 NOV National oil well Varco 99 9 34 United Technologies Supplier insight for better business 99 performance 35 USTRANSCOM Bridging the gap between strategic and 99 9 theater distribution 36 LCBO CPFR—partnerships and profits 99 9 12. 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Exploring supply chain innovation

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Springer Journals
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Copyright © 2010 by Springer-Verlag
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Engineering; Engineering Economics, Organization, Logistics, Marketing; Logistics; Industrial and Production Engineering; Simulation and Modeling; Operation Research/Decision Theory
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1865-035X
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1865-0368
DOI
10.1007/s12159-010-0044-3
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Abstract

Logist. Res. (2011) 3:3–18 DOI 10.1007/s12159-010-0044-3 OR IGINAL PAPER • • Jan Stentoft Arlbjørn Henning de Haas Kristin Balslev Munksgaard Received: 14 June 2010 / Accepted: 17 December 2010 / Published online: 4 January 2011 Springer-Verlag 2010 Abstract Supply chain management promises competi- Keywords Supply chain management  Supply chain tive advantages for industrial organizations. The introduc- innovation  Business processes  Network structure tion of new products and services, or entry into new Technology markets, is likely to be more successful if accompanied by innovative supply chain designs, innovative supply chain management practices, and enabling technology. This is a 1 From pragmatic applications to systematic widely accepted premise in business practice today. investigations into supply chain innovation However, systematic research and knowledge about supply chain innovation (SCI) is little developed. There is a lack The domain of supply chain management (SCM) offers of common terminology, of agreement about the concep- new opportunities for creating competitive advantages. But tual understanding, and of related empirical work. This to leverage these opportunities and to win the competitive paper presents an exploratory study that aims to provide a landscape, a new mindset is required for understanding the better understanding of SCI, mirroring leading edge prac- global supply, logistics, and communication network of a tice, and providing a sound terminological and conceptual business [74, p. 14]. This may be why every year the basis for advanced academic work in the field. The American Council of Supply Chain Management Profes- research is based on an in-depth literature review and the sionals recognizes outstanding practice of innovative analysis of a set of secondary data sources: 36 SCI cases, organizations through their ‘‘Supply Chain Innovation drawn from applications for the Council of Supply Chain Award’’. Among the nominees have been prestigious Management Professionals’ (CSCMP) Supply Chain organizations such as the U.S. Air Force, Motorola, Innovation Award. As results of the research, a new SCI Kellogg’s, and Blockbuster Inc. The list of award winners definition, the construction of a descriptive model of its key includes companies like Intel, Cisco Systems Inc., and elements, and discussion of implications are presented. Hewlett-Packard. The winner is selected out of 45–50 submissions each year, based upon criteria related to the degree of innovativeness, impact on overall supply chain, and sustainability in results (revenue, cost savings, etc.). While this illustrates the practical relevance and a pragmatic approach of bringing together a supply chain J. S. Arlbjørn (&)  H. de Haas  K. B. Munksgaard perspective with an innovation focus, relatively little aca- Department of Entrepreneurship and Relationship Management, demic attention has been paid to specific issues of supply University of Southern Denmark, Engstien 1, chain innovation (SCI). Few contributions can be identified 6000 Kolding, Denmark e-mail: jar@sam.sdu.dk that explicitly deal with SCI. Those that do usually just refer to the term, but lack thorough consideration of its H. de Haas content and conceptual foundations. This seems to be the e-mail: hdh@sam.sdu.dk case despite the fact that the general concept of innovation K. B. Munksgaard in an economic context has been the subject of much e-mail: kbm@sam.sdu.dk 123 4 Logist. Res. (2011) 3:3–18 literature since Schumpeter’s times [4]. Significant factual apply the concept against a set of real-world cases. As a innovations have been developed with relevance to logis- research approach, this is consistent with the method of tics and process management during the second half of the abduction that is considered especially appropriate for twentieth century, such as industrial dynamics [40], mate- creating new insights [58]. The main purpose of the rials requirements planning [73], the pull production sys- abductive method is to develop new theory or refine tems within the Toyota production system [72], new forms existing theory by uncovering new variables and relation- of relationships and partnerships [62], and various incre- ships [26]. In this research, the development of a model of mental improvements to business processes [39, 95]. But SCI and identification of its conceptual elements is derived these have not been systematically and specifically related from an interplay between the literature reviewed and a to the issues of SCM, as it is being understood today: only sample of SCI award application cases, i.e., through a some consideration has been given to innovations in other systematic dialogue between a theoretical construct and functional areas of the company, which then may neces- empirical observations [30]. Consistent with the abductive sitate changes in supply chain activities [36, p. 133]. Only approach, reiterated analysis and interpretation has devel- limited empirical testing of those—and other kinds of oped an analytical understanding of SCI. logistics innovation—has been reported in the literature The literature review was carried out in four steps. As a [45], despite an apparent need to respond to pressures and first step, 50 SCM-related journals as identified by Charvet, events such as the current global financial crisis, leading Cooper, and Gardner [16, see Table 1 in their paper], as to an increased focus on cash flow through changes in potentially dealing with SCI, were chosen. The second step payment terms and lead time reductions [33, 71]; the was a search for papers published in those journals where challenges of global warming leading to new rules and the word ‘innovation’ came up in conjunction with certain regulations for CO emissions, putting pressure on means logistics and SCM-related terms. The journals were scan- of transportation and the layout of the supply chain ned with a specific search term in the EBSCO Host [13, 29], and the globalization of trade with resultant out- Research Database (business search premier). Searches sourcing and off-shoring manufacturing (e.g., lead times, took place in the field ‘‘all text (TX)’’, and there was no transportation, corporate social responsibility [70, 71]). date limit for these searches. In light of discussions as to There is an obvious gap between the pragmatically rec- whether there is a difference between logistics and SCM ognized importance of innovation in the context of SCM [63], searches for both ‘‘supply chain innovation’’ and and the state of systematic academic research on the con- ‘‘logistics innovation’’ were performed. The searches also cept. The purpose of this paper, therefore, is to bridge this included the term ‘‘supply chain development,’’ since gap. It aims to provide a better understanding of SCI, development initiatives may relate to innovations. Fur- which correctly mirrors leading edge practice and provides thermore, logistics/SCM activities [44] were searched for, a sound terminological and conceptual basis for advanced as they appeared to be combined with innovation. All in all, academic work in the field. the search processes identified 140 germane papers. As a third step, these 140 papers were screened in some more detail. Papers that obviously did not deal with innovation 2 Organization of the paper and research method were eliminated, even though the search terms came up in some sentence or in the list of references. The screening The paper is organized in four main sections: the following reduced the total number to 29 papers, which appeared to part of this section outlines the research method applied. be truly relevant (see Table 2). The papers were divided The third section provides a review of the general literature into seven thematic areas based on a collaborative grouping on SCM and innovation, as it relates to SCI. On the basis of process among the authors of the paper. The fourth and this review, in section four, a model is proposed that sug- final step of the review then encompassed a detailed con- gests that the essence of SCI may be captured through the tent review of the remaining 29 papers. description of three conceptual elements and their interac- The methodological approach outlined and utilized to tions. A set of five illustrative case studies is then presented the literature review has two shortcomings with respect to in section five to exemplify the function of the SCI model. the aim of the research: one limitation is that potentially The paper concludes with a discussion of the managerial relevant literature that did not meet the search criteria are and theoretical implications of the analysis and its findings. not covered in the review, even though there may be more Studying a very new phenomenon such as supply chain additional work about SCI, which does not use the speci- innovation calls for an exploratory research design, since fied terms. Secondly, publications in any other sources than this is ‘‘most appropriate in the early stages of research on a those referred to above, like conference proceedings, topic’’ [31, p. 548]. The ambition of this paper is to outline textbooks, and trade journals that may contain relevant a systematic understanding of the SCI concept and then to contributions, were also not considered in the review. 123 Logist. Res. (2011) 3:3–18 5 Table 1 SCM frameworks and models Author(s) Major SCM framework/model elements Cooper et al. [19] and Business processes, management components, and supply chain structure Lambert et al. [61] Bowersox et al. [11] Flows: product service value flow, market accommodation flow, information flow, and cash flow. Six integrative competencies: customer integration, internal integration, material and service supplier integration, technology and planning integration, measurement integration, relationship integration Mentzer et al. [67] Customer satisfaction, supply chain flows, inter-corporate coordination, inter-functional coordination, the global environment Chen and Paulraj [17] Environmental uncertainty, customer focus, top management support, supply strategy, information technology, supply network structure, managing buyer–supplier relationships, logistics integration, and supply chain performance measurement Bowersox et al. [10] Consumers, relationship management, flows, constraints, supply network, integrated enterprise (logistics, procurement, customer accommodation, and manufacturing), and market distribution network Skjøtt-Larsen et al. [85] Three perspectives on SCM: as an internal supply chain, part of a corporate company environment, part of an external environment. The supply chain system consist of: activities, processes and operations, and organizations Supply Chain Council [90] SCOR is based on five distinct management processes: plan, source, make, deliver, and return Mentzer et al. [66] An external view: the domain of SCM includes applying analytical tools and frameworks to improve business processes that cross organizational boundaries. An internal view: operations management includes applying analytical tools and frameworks to improve business processes that cross internal functional boundaries: time (logistics), marketing (planning), and physical transformation (production) Table 2 Literature review on supply chain innovation Focus Relevant aspects highlighted Representative authors Defining and measuring supply Innovation is anything new to the beholder [39, 45, 59] chain innovation Supply chain innovation areas Implementing new supply chain technology [4, 52, 59, 81, 83, 89, 91] Supply chain networks [2, 88] Optimizing supply chain business processes [4, 8, 21, 38, 39, 48, 49, 51, 57, 75, 80, 81, 87] Introducing new products or services [21, 34, 39, 80, 84, 94] (product development processes) Modeling and scenario building for optimization [4, 14, 59] The innovation process [34, 35, 38, 39, 46, 84, 95] The overall number of papers listed is higher than 29, because some papers relate to more than one focus and relevant aspect The second type of data input to our research come from wide availability and low data collection costs [12]. Limi- reviews of 36 applications for the CSCMP SCI Award (from tations include the fact that the researcher is dependent upon 2005 to 2009), which were selected by the jury to be pre- another party in data collection, lack of measures to tap the sented at the Annual CSCMP Conference. These data can be exact extent of the research, and the fact that data may be characterized as archival case studies based on secondary biased. However, the assumption is that the innovations data sources [32, 96]. In general, case studies have been selected this way meet criteria of obvious relevance, as argued to be relevant when investigating a contemporary defined by CSCMP [25], and they were chosen out of a much phenomenon within its real-life context, especially when the larger sample of application by an expert to be presented at boundaries between phenomenon and context are not clearly the annual conferences: evident [5, 32, 96]. Applying secondary data sources has – Educational intent of case study, not promotion toward advantages for the purpose of this study, but also disad- vantage of potential biases. Research on operations man- a product, service, or organization. – Level of significance with regard to the specific supply agement based on secondary data sources is rising [79] and has been suggested to be used more in operations and SCM chain challenge and the solution’s impact on the research [12, 37]. Benefits of secondary data sources include organization’s overall supply chain. 123 6 Logist. Res. (2011) 3:3–18 – Quantifiable and sustainable results in: cost savings, An initial interpretation of these frameworks and models revenue generation, and customer satisfaction. reveals agreement in several respects: there is consensus – Practical information that would be helpful and rele- that an essential element of SCM is its inter-organizational vant to today’s supply chain practitioner. nature. It is concerned with chains and networks of com- – Structure and content: organization/clarity, quality/ panies that collaborate across several tiers to produce some usefulness of visuals, and author’s knowledge of product or service. In spite of a dissimilar vocabulary, there subject matter. is consensus on SCM’s basic intention—to provide supe- – Innovativeness of solution. rior end-customer value. Another common thread is the focus on processes that cut across traditional internal A weakness of the 36 application documents for the functions (or silos). Common output measures considered CSCMP SCI Award is that they have been compiled by the are improved efficiency, improved services, or reduced candidate companies. Naturally, the applicants describe their costs. Still other common denominators include their focus innovations in the best possible way. On the other hand, for on customer demands, relationship management, integra- the purpose given here, the primary interest is the range of tion, and IT. issues and arguments brought up by the applicants—which may be considered relevant elements of SCI—not so much in 3.2 Dimensions of innovation relevant the actual execution and impact of the innovations. to supply chain management The 36 application and award-winning cases of SCI, which dated from 2005 to 2009, were thoroughly analyzed Research on innovation has a long tradition and can be to strengthen the precision, validity, and stability of the traced back to the early work of Schumpeter [82]. Inno- research findings. As the first step in the analysis, appli- vation, he argued, is the introduction of new products and cation documents were coded using interpretive coding production methods, the opening of new markets, the dis- [68]. Phrases reflecting elements of SCI as found in the covery of new raw materials, and the implementation of literature were marked. This procedure included interpre- new organizations. Some initial correspondence between tations of the degree of novelty of innovations as well as Schumpeter’s classical definition and supply chain research deeper insights into the content of and relations between is given through its focus on production methods, raw the SCI elements. An overview of coding results is pre- materials, and organization. However, the academic field of sented in Appendix. In order to provide a thorough innovation and the understanding of the term ‘‘innovation’’ explanation of how elements of SCI are applied by dif- are too comprehensive and multifarious to cover with a ferent award candidates, brief descriptions of the five general definition or simple perception. Therefore, our winners in the sample were compiled (see Sect. 5)to quest is to cover those innovation dimensions that are highlight variations and similarities across cases. relevant in a SCM perspective in order to provide a more concrete definition of supply chain innovation. Drawing further on Schumpeter’s work, the distinction 3 Literature review between invention and innovation [42, p. 22] is helpful: invention relates to new ideas, novel breakthroughs, and This section, first, offers a brief introduction to the general new discoveries. The key feature of an invention is its concepts of SCM, as found in the extant literature. Then, a newness and the fact that, as such, it is not normally review of the general literature on innovation follows. immediately ready for the market. Accordingly, innova- Finally, those literature contributions that directly relate to tions include not only the invention itself, but also the SCI are reported and categorized. The purpose of the lit- activities and processes designed to commercialize these erature review is to identify essential dimensions and ele- new ideas. In this sense, innovation is the successful ments of SCI that may be used as building blocks for the exploitation of new ideas. Furthermore, innovations may construction of a new definition and a coherent model of become widely used and spread to other fields through the the concept. process of diffusion [65]. Innovation processes not only relate to processes of commercializing new ideas, but 3.1 Supply chain management frameworks and models innovation also refers to the broader capability of an organization to continuously renew itself [6, 92, p. 54]. In the literature, numerous frameworks and models related Companies engaged in innovation have to build a process to SCM have been developed in order to substantiate the that facilitates their pursuit of turning new ideas into concept and relationship between subconcepts and vari- products, services, processes, etc. This is in accordance ables within the SCM domain. In Table 1, a listing of with Baumol’s [3] definition of innovation as: ‘‘The rec- frequently quoted SCM frameworks and models is listed. ognition of opportunities of profitable change and the 123 Logist. Res. (2011) 3:3–18 7 pursuit of those opportunities all the way through to their it was possible to deduce additional aspects related to adoption in practice.’’ This is relevant to SCM as it relates various areas of SCI—e.g., implementing supply chain to the focus of proving commercial significance by creating technology leading to innovation, the introduction of new superior end-customer value. products or processes or models intended to optimize the For some time, the innovation concept has lead to supply chain setup. Our characterization suggests that there further differentiation. There may be varying degrees of are relatively few papers explicitly dealing with the issues novelty—dividing innovations into incremental and radi- of definition and measurement, and that there is a lack of cal changes [41, p. 421] and more subtle distinctions by specificity in the definitions provided. The characterization the degree of innovation [47]. For the present purpose, the of the relevant innovation activities, which are dealt with in use of the distinction between radical and incremental the papers, appears to be a rather disjunctive collection of innovations is sufficient. The degree of newness may be aspects. related to both technological innovations (new products or In summary, the SCI literature review leads to the processes) and non-technological innovations (organiza- following five findings. First, the literature reviewed tional innovation or market innovation) [7, 64, p. 8]. The seems to agree on the importance and potential of SCI in distinction between organizational and market innovations improving the performance in the supply chain [39, 59]. conveys a structural dimension within discussions of Second, there is a lack of a coherent classification scheme newness. In a supply chain context, the distinction for the different types of SCI. Academic research so far between the organizational level and the market level can has not yet provided elaborate definitions of SCI beyond a also be defined as an intra-organizational or inter-orga- basic agreement that SCI is concerned with developments nizational focus for the innovation. An intra-organiza- in technology and processes [4]. Third, the present SCI tional innovation might be the application of new contributions are focusing mostly on technology devel- technologies for planning and forecasting, whereas an opment and application. The existing literature on SCI example of inter-organizational innovation might be the specifically points to information technology (IT) as an application of integrated product development in which important driver for innovation [52]. Such IT technologies suppliers and customers become part of the product are, for example, radio frequency identification technol- development process or the implementation of advanced ogy (RFID), pick-by-voice, and advanced planning sys- planning tools [81]. tems (APS) [81]. They have been suggested to serve as Another categorization relates to the field of applica- enablers of a closer cooperation between vendors and tion or use of the innovation. There are product-, process- customers over the last 10–15 years [81]. Fourth, some and service-innovations. Correspondingly, there are authors describe the measurement of innovation perfor- mance in terms of the performance of the product further distinctions in the field of application and context, within which innovations take place, such as organiza- development process (R&D process) [1, 20]. However, as tional innovation, management innovation, production with the general innovation literature, there seems to be a innovation, and commercial/marketing innovation [93, lack of work related to measuring innovation in the p. 17]. supply chain. Instead, the issue of measuring degrees of Some of the dimensions of innovations that have been innovation has been evaded as being based on ‘‘the eyes identified so far may be determined independently from the of the beholder’’ [39], which mean that the degree of perspective of an observer, such as the intended uses of innovation is not related to a fixed scale, but is a relative innovation. Others, such as rating of an innovation on a concept depending upon the beholder (person, organiza- scale of newness as incremental or radical, are contingent tion, etc.) of that change. To one person, a change could upon the eyes of the beholder [39, 54, 78, p. 11]. be a radical innovation, but to another person the same change could be an incremental innovation. This begs the 3.3 Interpretation of publications specific questions as to how one can compare innovations, as well to supply chain innovation as how one can rate innovations and how to judge what the best innovation is. Finally, current contributions are In our research, 29 papers were identified that are dealing mainly conceptual because empirical studies on the SCI explicitly with some aspect of SCI. A total of 7 relevant practice are under-researched; supply chain literature does aspects of SCI were identified by carefully reading and not seem to focus on innovation [39]. At the same time, categorizing the 29 papers. Two general themes emerged the literature on innovation does not seem to have any dividing the papers into whether they explicitly define and/ focus on SCM. This may be one reason why it is difficult or measure SCI, or deal with certain activities that have to find solid definitions of SCI, classifications of inno- relevance in the SCI process (Table 2). By comparing and vation (i.e., radical or incremental), and drivers for contrasting the content and research of the identified paper, innovation. 123 8 Logist. Res. (2011) 3:3–18 4 A definition of supply chain innovation and a model organizational business processes. Furthermore, imple- of its three interacting content elements menting supply chain technology has an explicit usage in the SCI contributions, while also mentioned in the SCM 4.1 Construction of an SCI definition frameworks. Thus, the three interacting content elements of SCI, to be discussed in more detail later, are the following: Based on the dimensions and content identified in the lit- (1) Supply chain business processes, (2) Supply chain erature review earlier, a definition of supply chain inno- network structure, and (3) Supply chain technology. vation is constructed, which is intended to be more specific Compared with the division of the strategy literature into and comprehensive as the earlier ones referred to in process, content, and context [28, p. 5], the SCI model Table 2: presented in this paper applies a content perspective. The product of an innovation process is referred to as the ‘‘A supply chain innovation is defined as a change innovation content. Formulated as a question, innovation (incremental or radical) within the supply chain net- content can be perceived as being the ‘what’ of innova- work, supply chain technology, or supply chain pro- tion—what is the innovation for the company? In contrast, cesses (or combinations of these) that can take place a process perspective is concerned with ‘how’ innovations in a company function, within a company, in an are carried out. The process and content perspectives industry or in a supply chain in order to enhance new influence each other—for example, the content of an value creation for the stakeholder.’’ innovation may influence the way in which the process will This definition of SCI highlights several characteristics: be organized, and vice versa—whereby if we begin with first, SCI is dynamic in nature because of a change process. the processes, this may also influence the specific content. Second, SCI may range from incremental to radical in terms Although this dual interplay between content and processes of its innovation effect. An incremental SCI is an optimi- exists, this paper is focused solely on the content piece—on zation of current practices within networks, technology, and a search for the contents of supply chain innovation. Thus, processes. A radical SCI must have a ‘‘wauw’’ effect— this paper aims to clarify the way in which the content of something that sets new rules for the game within its SCI can be operationalized. Therefore, the management application area. Third, SCI can take place within different area of SCM and the process element of implementing business functions, such as forecasting, distribution, and innovations are not included. The SCI model proposed in procurement. It can take place at an intra-company level, in this paper consists of three elements as shown in Fig. 1. dyads, chains, and networks of companies, as well as cut Supply chain innovations are not static elements but will across entire industries. Accordingly, these different func- typically be triggered by the companies’ dynamic interac- tions and levels may look differently at the same innovation. tion with their business environments. Figure 1 also rec- Fourth, the definition of SCI is considered more than an ognizes a dynamic process in and around the interplay invention or idea in and of itself, but is perceived as the between the three elements in recognition of a need for actual implementation of that idea in a supply chain. An SCI change in a company’s business model. Typical problems is more than an invention because it also has to prove its triggering SCI may be long lead times, high supply chain commercial value [6]. Fifth, the innovations must encom- pass new value creation—such as new markets, new products, new services, and new network structures. This also implies that the goal of the SCI is to create value for the company or any other stakeholder (partner in the supply chain or end customer). Supply Chain Business Recognize a need for Processes Develop solutions for change in business model new business model (performance gap) 4.2 An SCI model of interacting content elements Based on the literature review and as an implicit critique of the lack of coherence and conceptualization in existing Supply Chain Supply Chain Network Structure Technology studies on SCI, these sections suggest a new SCI model. The interacting content element of the SCI was found by comparing and contrasting frequently used SCM frame- works (listed in Table 1) and the literature review of SCI (see Table 2). First, there is a consensus that SCM is Implementation of new business model concerned with the management of relationships in busi- ness networks and deals with both intra- and inter- Fig. 1 Elements of supply chain innovation 123 Logist. Res. (2011) 3:3–18 9 costs, and low service levels, but they also may be resulting Swedish car manufacturer VOLVO [50]. VOLVO has from efforts to better articulate a company’s value propo- implemented an innovative mobile RFID solution using sition, to identify new market segments, to redefine the cellular networks with data package communication structure of the value chain in order to gain advantage over (GSM/GPRS) together with web technology. The practice rivals [18]. The recognition of a need to change should then reveals that a ‘‘smart goods’’ and mobile RFID solution can lead to a process of analyzing current practices and pro- be easy to use and learn, thus facilitating widespread posing new solutions that will improve the performance. adoption among supply chain actors with a ‘‘get pull’’ New solutions adopted must then be implemented, and effect. Another example is the application of advanced after some time, the need for improvements will arise planning systems in supply chains that enable innovations again. Referring to the definition of supply chain innova- in cross-company collaboration, speed in information flow, tion stated earlier, the work is done in order to enhance new and demand visibility [55]. A third example is the way in value creation for the customer. which the application of e-procurement auctions can improve market structure, market behavior, and market 4.3 Supply chain business processes performance [86]. Thus, in this context, it is not the tech- nology in and of itself that is an innovation, but merely its The first element in the SCI model is supply chain business application in a supply chain context. processes. Business processes are the activities that pro- duce a specific output of value to the customer [19]. 4.5 Supply chain network structure Business processes can be defined as: ‘‘a structured, mea- sured set of activities designed to produce a specified The third element of the SCI model focuses on the supply output for a particular customer or market’’ [27, p. 5]. The chain network structure—both vertical and horizontal—of motivation for implementing customer-oriented business the company and its supply chain partners where innova- processes within and across members of the supply chain is tions materialize. Thus, this element [61] divides the both to make transactions more efficient and effective and structure of the supply chain into three distinct factors: to structure inter-firm relationships [60]. The Global Sup- (1) Members of the supply chain; (2) Structural dimen- ply Chain Forum has identified eight SCM processes with sions, and (3) Different types of process links. Supply subprocesses that are listed below, including their aca- chains are complex business systems that often consist of demic clarification: many members. Not all suppliers or customers attract the same strategic awareness; therefore, a differentiation must • Customer Relationship Management [24] be made. The membership element draws attention to • Customer Service Management [9] activities related to mapping the supply chain structure and • Demand Management [23] then, based on differentiation models, classifies suppliers • Order Fulfillment [22] and customers into different degrees of importance. The • Manufacturing Flow Management [43] structural element is concerned with the horizontal struc- • Supplier Relationship Management [24] ture (number of tiers across the supply chain), the vertical • Product Development and Commercialization [76] structure (the number of suppliers/customers represented • Return Management [77] within each tier), and the horizontal position of the com- In theory and in practice, there can be other SCM pro- pany (e.g., close to the point of origin of raw material as cesses than those listed here (e.g., sequencing activities as opposed to close to private consumers). Process links are listed in [44, p. 4], into processes. For further examples of concerned with different degrees of resources spent on process models on supply chain efficiency, we refer to the integrating and managing processes within and across SCOR Model by the Supply Chain Council [90, p. 10], the members of the supply chain. Again, differentiation is the process classification framework by APQC [69], and the key word. Some process links need to be managed, while Supply Chain Best Practices Framework by the Supply others do not. The network structure element can also be Chain Consortium [69]. unfolded through virtual networks in which new value creation relies on knowledge assets. Such core compe- 4.4 Supply chain technology tences develop the firm’s ability to nurture long-term relationships with customers and suppliers [56]. Another The second element of the SCI model is supply chain example of this is the way in which intercompany collab- technology. By this element, we mean technologies that oration can stimulate continuous innovations in supply can be applied in isolation or in combination with other chains [15]. A final example of innovations within the technologies or the two other elements in the model to supply chain network structure is the emergent practice of create SCIs. As an example, consider the practice of the inter-outsourcing—with its focus on a round-way process 123 10 Logist. Res. (2011) 3:3–18 in which the vendor is its customer’s customer and the 5 Illustrative cases of supply chain innovation customer is its vendor’s vendor [53]. As a final remark, it should be noted that the degree of SCI novelty (incremental Following the abduction research approach (as outlined in to radical) may be perceived differently by the members of Sect. 2 of the paper), this section contributes to a verification a supply chain. An example of this could be a company that of the appropriateness of the definition and model of SCI is incrementally developing existing processes that facili- using the SCI essential elements identified in Sect. 4.An tate the development of radical processes by other mem- overview of all 36 case applications for the CSCMP SCI bers of the supply chain. In Table 3, examples of content Award, classified against the SCI elements and degree of innovation, is found in Appendix. Out of these, the five cases elements of the three SCI are listed. An important characteristic of the SCI model suggested that actually won a CSCMP SCI Award during the period is its ability to provide both a more holistic and a more 2005–2009 are characterized in Table 4 and discussed later nuanced view of what might be labeled an SCI. Thus, an in some detail. The cases were analyzed against the devel- SCI can be both the implementation of one or more ele- oped SCI elements and the degree of innovation (incre- ments within one of the elements and a composition of mental vs. radical). An overview of all 36 case applications more elements from two or all three elements. Each of the for the CSCMP SCI Award, classified against the SCI ele- three elements can vary in innovation effect along the ments and degree of innovation, can be found in Appendix. axis—from incremental to radical. In order to make this The classification of the case companies should uncover the dimension operational, a suggestion by Davenport [27, kinds of SCI in focus and the degrees of innovation that they p. 11] is followed: (1) Starting point (existing processes vs. have made. Table 4 shows the five winning cases classified clean slate); (2) Frequency of change (one-time/continuous against the elements of SCI. A detailed description and vs. one-at-a-time); (3) Time required (short vs. long); (4) classification of the winning cases are presented in the fol- Participation (bottom-up vs. top-down); and (5) Typical lowing sections highlighting the innovation type of each scope (within functions vs. cross-functional). Incremental supply chain element. Based on Appendix, the findings innovations are, for example, small continuous improve- across all the cases are that the innovation takes place as both ments, master data management, and process optimiza- radical and incremental changes in business processes, and tions. Examples of radical innovations include the most of the cases have made radical innovations in the implementation of direct distribution by using the princi- supply chain technology. However, only a few cases have ples of postponement, reengineering business processes by made changes in their supply chain network structure, which corresponds to the organizational perspective that the using state-of-the-art information technology, and the implementation of cross-functional teams in order to speed changes were found to be inter-organizational for most of the cases, i.e., they focus inside their own organization. up the time-to-market processes. Furthermore, the degree of novelty may vary across functions internally and across As Table 4 shows, there is a significant focus on inno- dyads, chains, and networks. vation in supply chain business processes and supply chain Table 3 Examples of content elements of SCI Supply chain business processes Supply chain technology Supply chain network structure Customer relationship management Global positioning systems (GPS) In- and outsourcing Partnership Customer service management Bar coding Demand management Radio frequency identification (RFID) Collaboration Order fulfillment Pick-by-voice technology Distribution channels Manufacturing flow management Electronic data interchange (EDI) Type of links to supply chain actors Supplier relationship management Advanced planning systems (APS) Third-party logistics providers Product development Warehouse management systems (WMS) Fourth-party logistics providers Return management Enterprise resource planning (ERP) Joint ventures Manufacturing execution system (MES) Complexity in supply Product life cycle management (PLM) Business intelligence Internet E-auctions 123 Logist. Res. (2011) 3:3–18 11 Table 4 Five winning cases classified against the elements of SCI Year Company Title Supply chain Supply chain Supply chain Organizational business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra Inter 2009 Intel Corporation Just say yes: innovating customer 99 9 9 (winner) responsiveness at Intel 2008 Cisco Systems Inc. Unlocking value from product returns 99 9 (winner) 2007 Aidmatrix (winner) ‘‘FreeClinic link—empowering a 99 9 supply chain of giving’’ 2006 Mercy ROI (winner) ROI, resource optimization and 99 9 innovation 2005 Hewlett-Packard Procurement risk management 99 9 (winner) (PRM) at HP company technology, while innovation in the supply chain network reduction in inventory levels was completed, and, finally, a structure was the focus for only one of the winning cases. program was instituted to reduce demand forecast errors. In the following, the five winning case companies will be Characteristics of innovation. The Intel innovation can described with regard to their innovations in supply chain be characterized by: (1) Development and implementation business processes and supply chain technology. Each case of a new mindset and processes, setting new business rules description is structured into four sections: (1) Background and developing efficient IT applications to support collab- and initial problem, (2) Case description, (3) Characteris- oration; (2) The Intel innovation consists of a number of tics of the innovation and (4) Findings. changes, it is not a one-time change but a continuous change process; (3) The innovation process has been ongoing since 5.1 Intel—the SCI Award winner in 2009 2005 and is, therefore, a long-term process; (4) The overall change process was initiated as a top-down approach; Background and initial problem. Due to the growth of the however, in the various change projects, there have been computer industry in the 1990s, the demand for micro- both top-down and bottom-up participation; and (5) The processors increased exponentially and exceeded the practical scope of the Intel innovation is cross-functional. In available supply. In the same period, the design and tech- this case, Intel made changes inter-organizationally; for nological complexity of the products increased and resulted example, the changes involved both suppliers and custom- in manufacturing cycle times of up to 90 days or more. ers in their implementation of VMI supply models and After the ‘‘Internet bubble’’ burst, the demand for micro- sharing forecast information. processors became more in line with the supply. Intel’s Findings. This case shows the radical innovations made product, manufacturing and process complexity, as well as in their supply chain in terms of all the parameters: pro- cycle times, improved significantly. Customers were still cesses, network structure, and technology. In a highly required to place orders in due time; however, the long lead complex business setting, Intel has managed to set new time led to situations where a large portion of the order standards for customer response time and delivery service changed close to shipment dates. In 2004/2005, Intel through the innovation of cross-functional business pro- required seven to 9 days to respond to a customer request cesses for order handling and communication with sup- for supply, and as a result of an IBM Global Services study pliers and customers. Intel has implemented technology to benchmark, Intel was rated ‘‘worst in class.’’ support the management of the new supply chain setup and Case description. In 2005, Intel launched the ‘‘Just Say changed the usual patterns of cooperation by implementing Yes’’ campaign, recognizing that a significant cultural VMI solutions and collaborative solutions with their change, in addition to various tool and process enhance- customers and suppliers. ments, was required to reverse their perception issues. The first initiative was to improve the ability to respond quickly 5.2 Cisco—the SCI Award winner in 2008 and positively in order to change order requests. Second, efforts were initiated to increase the Committed Dock Date Background and initial problem. In the logistics operation (CDD) performance to competitive levels and then a of Cisco, handling product returns had traditionally been 123 12 Logist. Res. (2011) 3:3–18 geared toward efficiency in the handling processes and (N.A.F.C.) developed an Internet-based collaborative net- optimizing the cost of the operation. A shift in management work servicing free clinics. The initial problem was that in 2005 changed the focus to that of seeking new ways to many small service organizations do not have the necessary maximize the value obtained from the returned products. resources to be able to meet the needs of their ever-growing With the new focus on value recovery, the logistics orga- client base; therefore, there was a need for coordination nization handling product returns had to change their way across the parties in the supply chain. of working and of understanding the processes. They then Case description. The web-based tool ‘‘FreeClinic Link’’ started projects to increase recovery rates and define and is a system connecting each member of the free clinic supply implement a profit-based business model to capture the chain of care. The value proposition for each participating highest value for Cisco from the returned products. stakeholder is maximized through full capture of benefits as Case description. Based on the changes in leadership, well as minimization of transaction costs. The FreeClinic the reverse logistics team created a reuse program. The Link allows free clinics across the United States to come objective was to give returned and excess equipment a together ‘virtually.’ The system enables each stakeholder to second—or even a third—life, before responsibly recycling behave in a manner that maximizes value for the other it. Originally, the recycling process was outsourced, but stakeholders, creating a truly collaborative supply chain by Cisco found this setup led to management and compliance leveraging supply chain collaboration solutions based on gaps, increased expenses, and created risk. The solution products and services from leading industry supporters such was to bring these core processes back in-house while as Accenture, i2 Technologies, and Sun Microsystems. outsourcing non-core work. The result was tighter control Characteristics of innovation. The Aidmatrix innovation of operations and increased productivity, which enabled can be characterized by: (1) The development and imple- rapid growth. A key element of these changes was the mentation of new processes; (2) A one-time change, establishment of automated data sharing processes, which however, that created a basis for continuous improvements; reduced losses from stocks and excess and obsolete parts. (3) A relatively long development and implementation However, Cisco found that there was no ‘off-the-shelf’ period; (4) Top-down and bottom-up participation; and (5) SCM product available to support the new operational A cross-functional scope. Degree of inter-organizational model, and they decided to custom-build the IT architec- change: the Aidmatrix solution must be characterized as ture to manage its stock, evolving from exchanging an inter-organizational solution spanning a number of spreadsheets to utilizing a central database to track stocks organizations. and take requests from internal customers. Findings. This case illustrated made radical innovations Characteristics of innovation. The Cisco innovation can in supply chain technology and supply chain processes through the development of a web portal by combining be characterized by: (1) Development and implementation of new processes; (2) A one-time change that created the different state-of-the-art technologies. The basic business basis for continuous improvements; (3) A relatively long processes are standard supply chain processes; however, development and implementation period; (4) Top-down through the IT integration, it is possible to automate the and bottom-up participation; and (5) A cross-functional collaboration between the parties in the supply chain and scope. The degree of inter-organizational change in this thereby gain significant results. case was that Cisco made inter-organizational changes, which involved suppliers in terms of in- and outsourcing of 5.4 ROi Mercy—the SCI award winner in 2006 processes. Findings. In this case, the company made radical inno- Background and initial problem. Health-care supply chains vations in supply chain business processes by establishing a exist to support clinical operations, yet the supply chain whole new business model for handling product returns and can rarely be directly linked to improved clinical perfor- implemented the teams and performance measurement mance. The St. Louis-based Sister of Mercy Health System elements necessary to accomplish this. Looking at supply created a new supply chain division called Resource chain technology, Cisco could not find standard IT solu- Optimization and Innovation (ROi) to establish the supply tions to support their new business model, so they devel- chain as a strategic imperative for the business. oped a new IT architecture to support the special needs of Case description. ROi has simplified the health-care the returns business for keeping track of the products. supply chain of Mercy Health Systems by reducing its dependence upon third-party intermediaries. The result of 5.3 Aidmatrix—the SCI Award winner in 2007 the changes was truly a new way of working that closely linked the makers and users of health care products in a Background and initial problem. The Aidmatrix Founda- way that provides greater value for the essential trading tion and the National Association of Free Clinics parties. The scope of the changes was cross-functional and 123 Logist. Res. (2011) 3:3–18 13 contained process development and technology develop- from the small illustrative sample of five ‘‘winner’’ cases is ment and application. The changes were driven in a new quite similar to the patterns and insight found in the larger team structure with competences from inside the hospital sample: that innovation takes place as both radical and and from outside resources that were hired from the incremental changes in business processes, and that in most logistics and supply chain industry. of the cases, radical innovations were undertaking in the Characteristics of innovation. The ROi Mercy innova- area of supply chain technology. Only a few cases related tion can be characterized by: (1) Development and to changes in the supply chain network structure, sug- implementation of new processes; (2) A one-time change; gesting that more changes were found to be intra-organi- (3) A relatively long development and implementation zational, i.e., they focus on change inside their own time; (4) Top-down and bottom-up participation; and (5) A organization. cross-functional (inter-organizational) scope as the changes involved more organizations. Findings. This company has made radical innovations in 6 Conclusion and implications their supply chain business processes and supply chain technology and has changed the view of the supply chain in The aim of this paper has been to provide a better under- terms of being an important element in optimizing the total standing of SCI, mirroring leading edge practice and pro- business. viding a sound terminological and conceptual basis for advanced academic work in the field. A first effort was the 5.5 Hewlett-Packard (HP)—the SCI Award winner review of the extant literature to identify relevant elements in 2005 and contents of SCI: it identified a limited number of papers that dealt explicitly with SCI; however, this does Background and initial problem. Around the year 2000, not mean that the existing literature is without contribu- electronic component market prices were increasing due to tions dealing with SCI, but merely that the conceptualiza- increased demand. A procurement risk management (PRM) tion and consciousness of SCI is less developed. Numerous project was initiated that led to the implementation of new papers exist on SCM and innovation as separate topics, but tools and processes to handle the risks of increasing prices there are only a few on the combined issue of the inno- and material shortages. vation of a supply chain. The focus of many of those papers Case description. The innovation is the use of tools and specifically about SCI is on the application of new tech- processes from the financial risk management processes on nology in the supply chain. However, in most cases, the Wall Street. HP developed a framework to quantify the technology applied is already known in one industry and is then applied to another industry. Other areas in focus are impact of product demand, component pricing, and avail- ability uncertainty on revenue, costs, and profits. It is a theoretical contributions concerning innovation in various software tool designed to support the risk management processes, integration of suppliers or customers, and faster process and to proactively manage procurement uncer- order handling, etc. [52]. Two topics in particular under the tainties and risks. The PRM business process is cross- SCI umbrella seem to be much less researched: the first functional and links and defines the roles and responsibil- area is the structural part of a supply chain (or the archi- ities of procurement, planning, supply chain operations, tecture of the supply chain) and the supply chain network. finance, and marketing. Another less researched area was found to be the mea- Characteristics of innovation. The HP SCI can be surement of the SCI and the scale or rating of an innovation characterized by: (1) Development and implementation of in terms of being an incremental or radical innovation. No new processes; (2) A one-time change; (3) Relatively long clear definition was found with regard to how one measures development and implementation period; (4) Participation the degree of an innovation. A number of papers [39, 59, was both top-down and bottom-up; and (5) The scope 78, 82] state that innovation should be rated subjectively cross-functional and intra-organizational. through the eyes of the person or organization seeing or Findings. Like the previous award-winning cases, this experiencing said change. However, this challenges any company has made radical innovations in their supply capacity for comparisons of innovations in supply chains. chain business processes and supply chain technology. A more objective scale is needed to be able to point to the ‘‘best in class’’ supply chain solutions. This explorative 5.6 Comparing findings from the winner cases piece of research has resulted in proposing an SCI model to the entire sample of 36 cases that consists of the three elements: supply chain processes, supply chain network, and supply chain technology. The findings across all 36 cases, as summarized in The second exertion of this research was an analysis of Appendix, suggest that the patterns of innovation content 36 SCI applications nominated for the CSCMP SCI Award. 123 14 Logist. Res. (2011) 3:3–18 These cases have illustrated the SCI model as a starting the basis for more quantitative studies of supply chain point for obtaining and establishing a common language innovation, which would give the opportunity to perform a for the contents of an SCI. Findings were that some of the test of the proposed model for supply chain innovation. companies have actually been implementing innovation in Fifth, more research is needed to explore the way in which the supply chain network and achieved radical performance an SCI evolves during the life cycle of a product and the improvements by applying postponement principles to development of a market. Does an SCI have a life cycle? In products and logistics. Changes in the supply chain net- a case where market, demand, and supply characteristics work were identified as an important element in the shift to become more predictable, it would be reasonable to understanding but still applied only to a limited extend. think that radical innovations in supply chains would no Here is an indication for possible future developments of longer be the objective; the focus should be solely on SCI. incremental innovations. Next, as the technologies for Building on the literature review and the cases, at least integration and communication in supply chains become six implications for future research can be deduced. First, more and more developed, an interesting area for further the model for SCI provides the foundation for theory research is how virtual network organizations are going to building within SCI. The next step is to continue to refine lead to innovation opportunities in supply chain manage- the model for SCI by conducting empirical qualitative and ment. Finally, there is a need to investigate SCI across quantitative studies. Second, the SCI model contains the industries. Are radical SCIs in one industry merely incre- three elements of business processes, structure, and tech- mental SCIs in another industry? Future research appears nology. Future research needs to dig a little deeper in order to be necessary to address the relationship between life to investigate the interplay between the elements from a cycles of products and markets across industries and the process perspective (process and structure; structure and types of SCI developed. technology; and process and technology). Third, measuring In conclusion, this paper provides a language for con- the degree of SCI is an area for future research. This paper ceptualizing SCI. It provides the basis for sharpening the has found that changes in technologies, processes, and also view of the meaning of SCI, which is a central element in in supply chain networks are areas for SCI. Such changes the process of theory development and is a prerequisite for can be either incremental or radical. However, this raises later tests. The paper can be used to stimulate discussions the basic question of whether everything has to become an on what to do with and how to do SCI in various compa- innovation. What about general continuous optimization of nies. Finally, it can be used to map and position ongoing procurement lead time, for example? Is this an incremental and/or intended SCI projects in a company. It provides a innovation? Within the current body of knowledge, the basis for an assessment of current activities to carry on, and what to look for when creating new development initiatives answer would be ‘‘yes.’’ This is also closely related to the scale of measurement of SCI. Future research must address within the domain of SCM. In other words, it can create the question of whether there is some work and basic more consciousness about the types of innovations needed improvements to be done before entering a degree of and developed, and how these sustain the creation of innovation scale. Fourth, future research may also address competitive advantages. second-level metrics to evaluate the degree of innovation. These metrics should be more supply chain focused than the generic ones applied in this paper [27, p. 5]. Through Appendix this, we would be able to avoid the risk of being too sub- jective in the evaluation of case material, and also provide See Table 5. Table 5 An overview of applications nominated for the CSCMP supply chain award Case Company Title Supply chain Supply chain Supply chain Organizational Nr. business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra. Inter 1 Intel Corporation Just say yes: innovating customer 99 9 9 (winner) responsiveness at Intel 2 Tellabs Achieving agility and responsiveness99 9 9 with an outsourced supply chain 3 Dresser-Rand, D&B Keeping supplier risk at bay 99 123 Logist. Res. (2011) 3:3–18 15 Table 5 continued Case Company Title Supply chain Supply chain Supply chain Organizational Nr. business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra. Inter 4 Liberty Property Trust The largest LEED gold certified 99 Presents Johnson distribution center in the United Diversey States 5 Kraft Foods Improving transportation management99 9 9 through real-time visibility 6 Cisco Systems Inc. Unlocking value from product returns 99 9 (winner) 7 Dynamic Worldwide Instaknow-ACE synchronized global 99 Logistics Inc. and supply chains Instaknow.com, Inc. 8 Genco and Sky-Trax, Tracking solutions 99 Inc. 9 Lockheed Martin Forecasted raw materials (FoRM)99 Aeronautics Company 10 OceanGuaranteed with Creating the industry’s first day- 99 9 9 APL Logistics, Con- definite, guaranteed ocean LCL Way Freight Inc. service 11 Party Lite Gifts and Optimal packaging 99 Chicago Consulting 12 US Air Force with Booz Transforming the United States air 99 9 Allen Hamilton and force supply chain: expeditionary Morgan Borszs logistics for the twenty-first century Consulting (Elog21) 13 Aidmatrix (winner) ‘‘FreeClinic Link—empowering a 99 9 supply chain of giving’’ 14 Bakers Footwear Group, ‘‘Fashionably late is not fashionable99 9 9 Inc. when dealing with trendy footwear’’ 15 John Deer and SmartOps 99 9 9 16 Kraft Foods and IDEO ‘‘Customer supply chain innovation99 and collaboration model’’ 17 Liquor Control Board of ‘‘New item submission system’’ 99 9 Ontario 18 Motorola Supply chain transformation drives 99 9 high-performance results 19 OceanSchedules.com, Innovation for the ocean-transportation 99 industry 20 CEAG/FRIWO A quantum leap in reducing working99 capital 21 Hewlett-Packard Buy sell process 99 22 IBM The road to an on demand supply chain 99 9 23 Kellogg’s and CSCS A closed-loop returns management 99 system, turning failures into profits 24 Mercy ROI (winner) ROI, resource optimization and 99 9 innovation 25 P&G Forces of business and forces of99 nature—building and agile supply network 123 16 Logist. Res. (2011) 3:3–18 Table 5 continued Case Company Title Supply chain Supply chain Supply chain Organizational Nr. business process technology network perspective structure Increm. Radical Increm. Radical Increm. Radical Intra. Inter 26 The Dow Chemical 99 9 9 Company 27 Blockbuster Inc. Rental DVD packaging supply chain 99 9 28 Campbell Sales ‘‘Secondary packaging redesign’’ 99 9 Company and Food Lion 29 Hewlett-Packard Design for supply chain program99 9 30 Hewlett-Packard Procurement risk management (PRM) 99 9 (winner) at HP company 31 Kraft Foods Elevating supplier value: the kraft 99 foods supplier relationship management bridge 32 Lexmark Cash to cash cycle time improvement99 9 33 NOV National oil well Varco 99 9 34 United Technologies Supplier insight for better business 99 performance 35 USTRANSCOM Bridging the gap between strategic and 99 9 theater distribution 36 LCBO CPFR—partnerships and profits 99 9 12. 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Journal

Logistics ResearchSpringer Journals

Published: Jan 4, 2011

References