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Supply chain integration and organizational success.

Article Excerpt
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Introduction

Supply chain management is widely accepted today as the concept that links the operating side of a business with its suppliers and customers, ideally in a seamless chain of product and information flows. The integration of companies and processes, within a firm and across firms, is suggested as a better way to achieve supply chain success. The purpose of this paper is to ascertain whether companies perform better on various cost and customer performance measures when they have identified themselves as high performers on supply chain integration compared with their competitors.

The paper begins by reviewing the literature on supply chain integration, its definition, and studies that evaluate a strategy to integrate supply chains. The importance of integration for better supply chain performance will be discussed. Next, we present our study that used a multi-country survey instrument to identify companies describing themselves as successful at supply chain integration. Based on supply chain literature, firms that are members of well-integrated supply chains should have better results in meeting customer demands than their competition.

Literature Review

It is quite common today for descriptions of supply chain management to include the term 'integrated' or 'integration' in discussing how relationships should be built across companies. While there is no precise definition of supply chain integration, both practitioner and academic literature make common use of the term. As defined by Ellram and Cooper (1993), supply chain management is "an integrating philosophy to manage the total flow of a distribution channel from supplier to ultimate customer." Monzcka and Morgan (1997) stated that "integrated supply chain management is about going from the external customer and then managing all the processes that are needed to provide the customer with value in a horizontal way." Lummus and Vokurka (1999) in a summary definition of supply chain management offered that "... supply chain management coordinates and integrates all of these activities into a seamless process." They also discussed the total integration required for managing the supply chain.

Supply chain integration. Several authors within the field of supply chain management have proposed definitions for integration (Kahn and Mentzer, 1998; O'Leary-Kelly and Flores, 2002; Vickery, et al., 2003). In his 2004 study of factors that enable and inhibit integration, Pagell (2004) proposes the following definition: Integration is a process of interaction and collaboration in which manufacturing, purchasing, and logistics work together in a cooperative manner to arrive at mutually acceptable outcomes for their organizations.

Naylor et al., (1999) stated that the goal of an integrated supply chain is to remove all boundaries to ease the flow of material, cash, resources, and information. Van Donk and van der Vaart (2005) suggested that removing barriers (or boundaries) can be achieved by developing integrated activities in a number of areas (scope) and with a certain intensity (level) in each area. They looked at four logistical areas as dimensions of scope including flow of goods, planning and control, organization, and flow of information. The level of integration was measured by the extent of integrative activity developed.

The following sections outline the literature support for the importance of supply integration and the performance measures that might indicate the benefits of integration.

The importance of supply chain integration. Integration appears to be viewed from many perspectives. There is widespread support for the concept of integration backwards from customers to suppliers (Trent and Monczka, 1998; Frohlich and Westbrook, 2001; Ragatz, et al., 2001; Narasimhan and Das, 2001; Morgan and Monczka, 1996). Purchasing serves as an integrating mechanism and plays a key role in aligning supplier performance with the firm's competitive priorities.

Integration has also been viewed from the downstream side of the supply chain (forward integration), including the...

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