International Journal of Physical Distribution & Logistics Management - Vol. 32 No. 10, 2002 : Qualitative methods and approaches in logistics part 2

International Journal of

ISSN 0960-0035

Physical Distribution & Logistics Management

Volume 32 Number 10 2002

Qualitative methods and approaches in logistics: part 2 Editor Professor James R. Stock Paper format The International Journal of Physical Distribution & Logistics Management includes ten issues in traditional paper format. Please note that two issues of the journal are bound together consecutively within these covers. The contents of this issue are detailed below.

Internet Online Publishing with Archive, Reference Linking, Emerald WIRE, Key Readings, Research Register, Institution-wide Licence, E-mail Alerting Service and Usage Statistics. Access via the Emerald Web site: http://www.emeraldinsight.com/ft See previous issue for full details of subscriber entitlements.

Abstracts and keywords ___________________________ 800 French abstracts___________________________________ 802 Spanish abstracts __________________________________ 804 Japanese abstracts_________________________________ 806 Editorial __________________________________________ 808 The theory of constraints’ thinking process approach to developing strategies in supply chains Shams-ur Rahman ______________________________________________

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Logistics in the ‘‘three-day car’’ age: assessing the responsiveness of vehicle distribution logistics in the UK Matthias Holweg and Joe Miemczyk ________________________________

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The impact of e-commerce on supply chain relationships Susan L. Golicic, Donna F. Davis, Teresa M. McCarthy and John T. Mentzer ________________________________________________

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I don’t know much about art but I know what I like: measuring and managing supply quality in a publishing company Amanda Donaldson-Briggs, John Peters and Richard Whitfield __________

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Index to volume 32, 2002 __________________________ 881

This issue is part of a comprehensive multiple access information service

CONTENTS

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International Journal of Physical Distribution & Logistics Management, Vol. 32 No. 10, 2002, Abstracts and keywords. # MCB UP Limited, 0960-0035

The theory of constraints’ thinking process approach to developing strategies in supply chains Shams-ur Rahman Keywords Logistics, Supply-chain management, Systems, Thinking styles Many attempts have been made to study factors influencing the performance of supply chains. These studies are generally quantitative and involve rigorous statistical analyses. This paper describes an application of a systems approach known as the thinking process of the theory of constraints not only to identify critical success factors in supply chain management, but also to understand causal relationships between these factors. The study was conducted in a group-based model building environment with a group of students who specialised either in logistics management or e-commerce. The results suggest that understanding the dynamic nature of supply chains through cause and effect relationships is critical to the formulation of supply chain growth strategies.

Logistics in the ‘‘three-day car’’ age: assessing the responsiveness of vehicle distribution logistics in the UK Matthias Holweg and Joe Miemczyk Keywords Automotive industry, Logistics, Environment, Supply chain, United Kingdom It is now becoming apparent that the prevalent ‘‘stock-push’’ approach in the automotive industry of building vehicles against a long-term forecast and fulfilling the large majority of orders from existing stock is no longer a viable proposition. Pressure from rising stock levels in the market and the discounts needed to sell these vehicles is forcing the vehicle manufacturers to rethink their sourcing strategy in favour of ‘‘build-to-order’’ systems. More responsive order fulfilment at vehicle manufacturer level however will have wide implications on the component supply and logistics subsystems. Based on findings

of the 3DayCar research programme, this paper aims at assessing whether current logistics systems are capable of supporting such a ‘‘build-to-order’’ approach. Based on empirical evidence of benchmarks covering three million annual vehicle movements in the UK vehicle distribution system, key constraints in current vehicle distribution logistics will be established, and the cost and environmental impact of more responsive logistics will be assessed.

The impact of e-commerce on supply chain relationships Susan L. Golicic, Donna F. Davis, Teresa M. McCarthy and John T. Mentzer Keywords Internet, Supply chain, Relationship marketing, Uncertainty E-commerce is such a new phenomenon that little research has addressed the effects it has on relationships in supply chains. A qualitative study was conducted with eight e-commerce companies in order to construct theoretical relationships with which to develop a grounded theory of the impact of e-commerce on managing supply chain relationships. The e-commerce environment was perceived as highly uncertain, stemming from increased information visibility and dynamic market structures. A stronger emphasis on relationship management as part of business strategy enables managers to manage uncertainty better. Interestingly, increased information does not decrease the perception of uncertainty, but creates more uncertainty. As logistics is the function often involved with both information and relationship management within the supply chain, it may prove to be invaluable in helping firms succeed in this dynamic environment. Our research also found support for the application of transaction cost analysis and the resource dependence theory in explaining interorganizational relationship formation in e-commerce.

I don’t know much about art but I know what I like; measuring and managing supply quality in a publishing company Amanda Donaldson-Briggs, John Peters and Richard Whitfield Keywords Supply chain, Intangibility, Performance measurement, Quality, Performance management This is a case study discussion drawn from scholarly publishers Emerald, formerly MCB University Press. It discusses the unusual

‘‘supply circle’’ phenomenon in scholarly publishing, where authors (suppliers) are often the same people as readers (customers). It addresses this from the standpoint of trying to measure and manage performance in an area where measures are highly subjective – where, like art, performance is typically judged on ‘‘I know what I like’’. The paper suggests areas for further research, and points to some steps taken by the firm to make the intangible more tangible.

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French abstracts Le proce´de´ de conside´ration de la the´orie des contraintes comme me´thode de mise au point des strate´gies dans la chaıˆne d’approvisionnement Shams-ur-Rahman Mots-cle´s Logistique, Gestion de la chaıˆne d’approvisionnement, Syste`mes, Styles de pense´e De nombreuses efforts ont e´te´ de´ploye´s pour e´tudier les facteurs qui influencent la performance des chaıˆnes d’approvisionnement. Il s’agit, en re`gle ge´ne´rale, d’e´tudes quantitatives qui impliquent des analyses statistiques rigoureuses. L’article que voici de´crit une des applications de l’approche syste´matique appele´e ‘‘proce´de´ de conside´ration de la the´orie des contraintes’’, non seulement pour identifier les facteurs de succe`s critiques dans la gestion de la chaıˆne d’approvisionnement, mais aussi pour comprendre les rapports de cause a` effet entre ces facteurs. L’e´tude fut entreprise dans un environnement visant a` e´laborer un mode`le, fonde´ sur des groupes, avec un groupe d’e´tudiants qui se spe´cialisaient soit en gestion logistique, soit en commerce e´lectronique. Les re´sultats sugge`rent qu’il est essentiel de comprendre la nature dynamique des chaıˆnes d’approvisionnement, au moyen des rapports de cause a` effet, pour pouvoir formuler les strate´gies de croissance des chaıˆnes d’approvisionnement. La logistique a` l’e´poque de ‘‘la livraison d’une voiture en trois jours’’ – e´valuer la re´ceptivite´ de la logistique de distribution automobile au Royaume-Uni Matthias Holweg et Joe Miemczyk Mots-cle´s Industrie automobile, Logistique, Environnement, Chaıˆne d’approvisionnement, Royaume-Uni Il devient a` pre´sent de plus en plus e´vident que l’approche pre´dominante visant a` ‘‘pousser le stock’’ dans l’industrie automobile, et consistant a` construire des ve´hicules selon des pre´visions a` long terme et a` satisfaire la majorite´ des commandes a` partir du stock existant, ne repre´sente plus une proposition viable. Les contraintes provenant des niveaux de stock croissants sur le marche´, allie´es aux re´ductions requises pour vendre ces ve´hicules, forcent les fabricants d’automobiles a` reconside´rer leur strate´gie d’approvisionnement en faveur de syste`mes visant a` ‘‘construire sur commande’’. Une satisfaction des commandes plus re´ceptive au niveau du fabricant d’automobiles aura cependant de grosses implications pour le sous-syste`me de fourniture des pie`ces de´tache´es et pour le sous-syste`me logistique. L’article que voici se fonde sur les re´sultats du programme de recherche ‘‘3DayCar’’ pour essayer d’e´valuer si les syste`mes logistiques actuels sont capables de suivre cette me´thode visant a` ‘‘construire sur commande’’. Nous nous fondons sur des preuves empiriques, provenant de repe`res e´tablis sur les mouvements de trois milllions de ve´hicules par an dans le syste`me de distribution automobile, pour e´tablir les contraintes principales qui pe`sent sur la logistique actuelle de distribution des ve´hicules, et pour e´valuer le couˆt et l’impact d’une logistique plus re´ceptive au niveau de l’environnement.

International Journal of Physical Distribution & Logistics Management, Vol. 32 No. 10, 2002, French abstracts. # MCB UP Limited, 0960-0035

L’impact du commerce e´lectronique sur les rapports qui existent dans la chaıˆne d’approvisionnement Susan L. Golicic, Donna F. Davis, Teresa M. McCarthy et John T. Mentzer Mots-cle´s Internet, Chaıˆne d’approvisionnement, Mercatique des rapports, Incertitude Vu que le commerce e´lectronique repre´sente un phe´nome`ne tellement re´cent, peu de recherches ont e´tudie´ les effets qu’il a sur les rapports qui existent dans les chaıˆnes d’approvisionnement. Une e´tude qualitative fut entreprise aupre`s de huit socie´te´s engage´es dans le commerce e´lectronique, afin d’e´laborer des rapports the´oriques qui permettent de mettre au point une the´orie fonde´e qui explique l’impact du commerce e´lectronique sur la gestion des rapports existant dans la chaıˆne d’approvisionnement. L’environnement du commerce e´lectronique fut

perc¸u comme e´tant fortement incertain, provenant de la visibilite´ accrue des informations et des structures du marche´ qui sont de plus en plus dynamiques. L’insistance sur la gestion des rapports dans le cadre de la strate´gie commerciale permet aux directeurs d’entreprises de mieux ge´rer l’incertitude. Ce qui est inte´ressant, c’est que l’accroissement des informations ne diminue pas la perception de l’incertitude, mais qu’il donne lieu a` plus d’incertitude. Comme la logistique repre´sente la fonction qui est souvent implique´e dans la gestion de l’information et des rapports, ainsi que dans la chaıˆne d’approvisionnement, elle peut s’ave´rer pre´cieuse en aidant les firmes a` re´ussir dans cet environnement dynamique. Notre recherche a e´galement de´couvert que les faits ont tendance a` encourager l’application de l’analyse des couˆts de transaction et de la the´orie de de´pendance des ressources pour expliquer la formation des rapports interorganisationnels dans le commerce e´lectronique. Je ne m’y connais pas beaucoup en art mais je sais ce qui me plaıˆt; mesurer et ge´rer la qualite´ des services preste´s dans une maison d’e´dition Amanda Donaldson-Briggs, John Peters et Richard Whitfield Mots-cle´s Chaıˆne d’approvisionnement, Caracte`re intangible, Mesurage de la performance, Qualite´, Gestion de la performance Il s’agit d’une discussion portant sur un cas pratique provenant de la maison d’e´dition e´rudite Emerald, autrefois connue sous le nom de MCB University Press. L’article discute le phe´nome`ne inhabituel que repre´sente ‘‘le cercle d’approvisionnement’’ dans le domaine de l’e´dition e´rudite, ou` les auteurs (fournisseurs) sont souvent les meˆmes personnes que les lecteurs (clients). Il aborde cette question en faisant re´fe´rence aux tentatives visant a` mesurer et a` ge´rer la performance dans un domaine ou` les mesures sont fortement subjectives – la` ou`, tout comme l’art, la performance est, de manie`re typique, juge´e en re´fe´rence a` ‘‘je sais ce qui me plaıˆt’’. L’article sugge`re d’autres domaines de recherche pour l’avenir et indique certaines des mesures prises par la firme pour rendre plus tangible ce qui est intangible.

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Spanish abstracts El enfoque del proceso de pensamiento de la teorı´a de las restricciones para el desarrollo de estrategias en las cadenas de suministro Shams-ur Rahman Palabras clave Logı´stica, Gestio´n de la cadena de suministro, Sistemas, Estilos de pensamiento Se han realizado muchos intentos de estudiar los factores que influyen sobre el rendimiento de las cadenas de suministro. Generalmente, dichos estudios son cuantitativos e involucran rigurosos ana´lisis estadı´sticos. Este trabajo describe una aplicacio´n de un enfoque de sistemas conocido como el proceso de pensamiento de la teorı´a de restricciones, no so´lo para identificar factores crı´ticos del e´xito en la gestio´n de la cadena de suministro, sino tambie´n para comprender las relaciones causales entre dichos factores. El estudio se realizo´ en un entorno de construccio´n de modelos basado en grupo con un grupo de estudiantes que se especializaban, bien en la gestio´n de logı´stica o en el comercio electro´nico. Los resultados sugieren que el entendimiento de la naturaleza dina´mica de las cadenas de suministro a trave´s de las relaciones de causa y efecto es un factor crı´tico para la formulacio´n de estrategias de crecimiento de la cadena de suministro. La logı´stica en la era del ‘‘coche de tres dı´as’’ evaluacio´n de la capacidad de respuesta de la logı´stica de distribucio´n de vehı´culos en el Reino Unido Matthias Holweg y Joe Miemczyk Palabras clave Industria automovilı´stica, Logı´stica, Medio ambiente, Cadena de suministro, Reino Unido Actualmente, esta´ resultando aparente que el planteamiento prevaleciente de ‘‘empuje de stock’’ dentro de la industria automovilı´stica de fabricacio´n de vehı´culos, contra un prono´stico a largo plazo y la satisfaccio´n de la gran mayorı´a de pedidos a partir del stock existente, ya no es una proposicio´n viable. La presio´n aplicada por unos niveles crecientes de stock en el mercado y los descuentos necesarios para vender dichos vehı´culos, esta´ forzando a los fabricantes de vehı´culos a replantearse su estrategia de aprovisionamiento a favor de sistemas de ‘‘fabricacio´n a peticio´n’’. No obstante, una satisfaccio´n de pedidos ma´s reactiva al nivel de los fabricantes de vehı´culos tendra´ implicaciones ma´s amplias en los subsistemas de suministro de componentes y de logı´stica. Este trabajo, basado en descubrimientos del programa de investigacio´n 3DayCar, intenta evaluar si los sistemas actuales de logı´stica son capaces de apoyar este planteamiento de ‘‘fabricacio´n a peticio´n’’. Basa´ndose en evidencia empı´rica de puntos de referencia que cubren tres millones anuales de movimientos de vehı´culos en el sistema de distribucio´n de vehı´culos del Reino Unido, se establecera´n restricciones clave en la logı´stica actual de distribucio´n de vehı´culos, y se evaluara´ el coste y el impacto medioambiental de una logı´stica ma´s reactiva.

International Journal of Physical Distribution & Logistics Management, Vol. 32 No. 10, 2002, Spanish abstracts. # MCB UP Limited, 0960-0035

El impacto del comercio electro´nico en las relaciones de la cadena de suministro Susan L. Golicic, Donna F. Davis, Teresa M. McCarthy y John T. Mentzer Palabras clave Internet, Cadena de suministro, Marketing de relaciones, Incertidumbre Dado que el comercio electro´nico es un feno´meno tan reciente, se ha dedicado poca investigacio´n a los efectos que tiene sobre las relaciones en las cadenas de suministro. Se realizo´ un estudio cualitativo con ocho empresas de comercio electro´nico con el fin de construir relaciones teo´ricas con las que desarrollar una teorı´a so´lida sobre el impacto del comercio electro´nico en la gestio´n de las relaciones de la cadena de suministro. El entorno del comercio electro´nico se percibio´ como altamente incierto proviniendo de una mayor visibilidad de informacio´n y estructuras dina´micas de mercado. Un e´nfasis ma´s marcado en la gestio´n de relaciones como parte de la estrategia comercial permite a los gerentes gestionar mejor la incertidumbre. Resulta interesante

el hecho de que una mayor informacio´n no reduce la percepcio´n de incertidumbre, sino que crea ma´s incertidumbre. Ya que la logı´stica es a menudo la funcio´n involucrada tanto con la informacio´n como con la gestio´n de relaciones dentro de la cadena de suministro, podrı´a resultar incalculablemente valiosa a la hora de ayudar a las empresas a tener e´xito dentro de este entorno dina´mico. Nuestra investigacio´n tambie´n encontro´ apoyo para la aplicacio´n del ana´lisis del coste de transacciones y la teorı´a de dependencia de recursos, con motivo de explicar la formacio´n de relaciones interorganizacionales en el comercio electro´nico. No se´ mucho sobre arte pero se´ lo que me gusta; medicio´n y gestio´n de la calidad de suministro en una empresa editorial Amanda Donaldson-Briggs, John Peters y Richard Whitfield Palabras clave Cadena de suministro, Intangibilidad, Medicio´n de rendimiento, Calidad, Gestio´n del rendimiento E´sta es una discusio´n sobre estudios de casos extraı´dos de la editorial acade´mica Emerald, anteriormente conocida como MCB University Press. Debate el inusual feno´meno del ‘‘cı´rculo de suministro’’ en las publicaciones acade´micas, donde los autores (proveedores) son a menudo las mismas personas que los lectores (clientes). Trata este tema desde la postura de intentar medir y gestionar el rendimiento en un a´rea donde las mediciones son altamente subjetivas donde, como en el arte, el rendimiento es tı´picamente juzgado en base a ‘‘Se´ lo que me gusta’’. El trabajo sugiere a´reas para mayor investigacio´n, y apunta hacia ciertos pasos tomados por la empresa para hacer ma´s tangible lo intangible.

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Editorial Qualitative methods and approaches in logistics: part 2 This issue of IJPDLM represents the second special issue on qualitative methods and approaches in logistics. The first special issue appeared earlier this year as No. 6. Additional papers that did not meet the deadline for these issues will appear in subsequent regular issues. Similar to the first issue on this topic, two of the articles that appear in this issue relate to supply chain management (SCM). The first article by Rahman, ‘‘The theory of constraints’ thinking process approach to developing strategies in supply chains’’, describes an application of a systems approach, the thinking process of the theory of constraints, to understand the important elements of SCM and their interrelationships. Holweg and Miemczyk, in ‘‘Logistics in the ‘three-day car’ age’’, assess the responsiveness of vehicle distribution logistics in the UK. The authors utilize a variety of approaches mixing quantitative with qualitative methods. Based on findings from the 3DayCar research program conducted over a three-year period, the authors examine the ‘‘build-to-order’’ approach employed in the automotive sector. In ‘‘The impact of e-commerce on supply chain relationships’’ by Golicic, Davis, McCarthy and Mentzer, the authors analyze data from eight companies to develop grounded theory of the impact of e-commerce on managing supply chain relationships. Several important e-commerce impacts affecting supply chain members are discussed. The final article in this issue, ‘‘I don’t know much about art but I know what I like; measuring and managing supply quality in a publishing company’’, by Donaldson-Briggs, Peters and Whitfield, presents an interesting view of the publishing industry and the elements associated with measuring and managing highly subjective factors relating to performance. Suggestions are provided by the authors regarding areas of needed research in this area and steps that one publishing company has taken to make the ‘‘intangible’’ more ‘‘tangible’’. IJPDLM believes that you will enjoy the articles in this issue. In combination with the previous special issue on this same topic, readers will be presented with a pot-pourri of qualitative methods and approaches directed towards various logistics topics. The editorial team remains committed to publishing high quality, timely articles on a wide range of logistics-related topics, both in regular and special issues of the journal. When submitting manuscripts, prospective authors should contact the editor or one of the regional editors. Your submissions are both encouraged and welcomed. James R. Stock

The research register for this journal is available at http://www.emeraldinsight.com/researchregisters

The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0960-0035.htm

The theory of constraints’ thinking process approach to developing strategies in supply chains Shams-ur Rahman Institute of Transport Studies, School of Business, The University of Sydney, Sydney, Australia

Constraints’ thinking process approach 809 Received May 2001 Revised May 2002 Accepted October 2002

Keywords Logistics, Supply-chain management, Systems, Thinking styles Abstract Many attempts have been made to study factors influencing the performance of supply chains. These studies are generally quantitative and involve rigorous statistical analyses. This paper describes an application of a systems approach known as the thinking process of the theory of constraints not only to identify critical success factors in supply chain management, but also to understand causal relationships between these factors. The study was conducted in a group-based model building environment with a group of students who specialised either in logistics management or e-commerce. The results suggest that understanding the dynamic nature of supply chains through cause and effect relationships is critical to the formulation of supply chain growth strategies.

Introduction Over the last four decades implementation of operations management principles and strategies, such as materials requirements planning (MRPI and MRPII) (Orlicky, 1975), just-in-time (JIT) (Monden, 1981), total quality management (TQM) (Deming, 1986; Juran, 1992), lean manufacturing (Womack and Jones, 1996), and theory of constraints (TOC) (Goldratt, 1988), have helped companies to reduce manufacturing costs as much as practically possible. As the CEO of Hong Kong-based company Li & Fung highlighted: . . . you can try to squeeze the cost of production down 10 cents or 20 cents per product, but today you have to be a genius to do that because everybody has been working on that for years and there’s not a lot of fat left. It’s better to look at the cost that is spread throughout the distribution channels (Magretta, 1998, p. 108).

It is only recently that management of business enterprises have realised that effective supply chain management is the competitive strategy that now has the most potential to reduce costs further (Dyer, 1994, 1996; Lee et al., 1993). Although the interest in supply chain management, both in industry and in academia, has grown rapidly over the past few years, the concept can be traced as far back as Forrester (1958, 1961). Using industrial dynamics techniques, Forrester tracked the effects of delays (material flow lead time and information flow lead time) and decision policies within a simple but representative supply chain consisting of a manufacturing plant and its warehouse, distributors, and retailers. In this seminal work, Forrester (1961) demonstrated the importance of

International Journal of Physical Distribution & Logistics Management, Vol. 32 No. 10, 2002, pp. 809-828. # MCB UP Limited, 0960-0035 DOI 10.1108/09600030210455429

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sharing information with partner organizations in the supply chain, strategic alliances and supply base management, vendor-managed inventory, and the impacts of delays across the supply chain at a time when these vocabularies were not part of the business literature. To date many attempts have been made to identify critical success factors in supply chain management (Holmes, 1995; Power et al., 2001), investigate the relationship between logistics strategy and business processes (Brewer and Hensher, 2001), identify drivers behind successful strategic supplier alliances (Monczka et al., 1998), assess the impact of TQM practices on logistics and supply chain performance (Anderson et al., 1998; Tan et al., 1999), measure the effect of supply management orientation on supplier performance (Shin et al., 2000), examine the role of communication in supply chain management (Ellinger et al., 1999), and investigate the impact of information technology on logistics capability (Cross et al., 1997). These are quantitative studies that have applied rigorous statistical analysis including factor analysis (Power et al., 2001; Tan et al., 1999; Anderson et al., 1998), structural equation modelling (Shin et al., 2000; Anderson et al., 1998) and canonical correlation analysis (Brewer and Hensher, 2001). In this study, a system approach known as thinking process (TP) was applied to identify critical factors of effective supply chain management, determine the causal relationships between these factors and investigate their interrelationship with supply chain performance. These relationships would help managers to analyse and develop growth strategies in supply chains. Theory of constraints and its TP This section provides an overview of the TOC and its TP. For a complete description, readers can refer to Goldratt (1990) and Cox and Spenser (1998). Rahman (1998) provides a detailed description of the TOC methodology including its concepts, principles, tools and performance measures and presents a comprehensive review of the TOC literature. Developed by Goldratt (1988) in the mid-1980s, TOC evolved from the Optimized Production Timetables (OPT) system (Goldratt, 1980) and was later known under the commercial name of Optimized Production Technology (OPT1). As part of a marketing tool for the OPT system, Goldratt illustrated the concepts of OPT in the form of a novel, The Goal (Goldratt and Cox, 1984), in which the theory is gradually unravelled through the context of an everyday production situation. A second book, titled The Race (Goldratt and Fox, 1986), was written to overcome difficulties encountered in the implementations and, gradually, the focus of the concept has moved from the production floor to encompass all aspects of business. By 1987, the overall concept became known as TOC, which Goldratt (1988, p. 453) viewed as ‘‘an overall theory for running an organisation’’. The TOC has two major components. First, a philosophy which underpins the working principles of TOC. This is often referred to as TOC’s ‘‘logistics paradigm’’ and consists of five steps for on-going improvement, the

drum-buffer-rope (DBR) scheduling methodology, and the buffer management Constraints’ information system. This philosophy suggests that the main constraint in most thinking process organizations may not be physical, but in fact managerial-policy related. To approach address the policy constraints and effectively implement the process of ongoing improvement, Goldratt (1990, 1994) developed a generic approach called the TP. This is the second component of TOC. Experts believe that it is the TP 811 which will ultimately have the most lasting impact on business. The working principles of TOC and the application procedure of the TP are discussed in the following two subsections. Philosophy of TOC The working principle of TOC provides a focus for a continuous improvement process. The principle consists of five focusing steps (Goldratt, 1990, p. 5) which are summarised in Figure 1. The steps are: (1) Identify the system’s constraint(s). These may be physical (e.g. materials, machines, people, demand level) or managerial. It is important to identify these constraints and also necessary to prioritise them according to their impact on the goal(s) of the organization. (2) Decide how to exploit the system’s constraint(s). If the constraint is physical, then the objective should be to make the constraint as effective as possible. A managerial constraint should not be exploited but should be eliminated and replaced with a policy which will support increased throughput. (3) Subordinate everything else to the above decision. This means that every other component of the system (non-constraints) must be adjusted to support the maximum effectiveness of the constraint. Because constraints dictate a firm’s throughput, resource synchronisation with the constraint will lead to more effective resource utilisation.

Figure 1. Process of on-going improvement

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(4) Elevate the system’s constraint(s). If existing constraints are still the most critical in the system, rigorous improvement efforts on these constraints will improve their performance. As the performance of the constraints improves, the potential of nonconstraint resources can be better realised, leading to improvements in overall system performance. Eventually the system will encounter a new constraint. (5) If in any of the previous steps a constraint is broken, go back to step 1. Do not let inertia become the next constraint. TOC is a continuous process and no policy (or solution) will be appropriate (or correct) for all time or in every situation. It is critical for the organization to recognise that as the business environment changes, business policy has to be refined to take account of those changes. The implementation of the five focusing steps to a typical production environment can yield rapid and substantial improvements in operations as well as profits (Noreen et al., 1995). However, this process of continuous improvement will eventually shift constraints from factory floor to the market. Insufficient demand is a managerial or policy constraint rather than a physical constraint. Policy constraints are generally difficult to identify and evaluate, and frequently require involvement and cooperation across functional areas. Goldratt (1994) developed the TP methodology to address policy constraints and create breakthrough solutions using common sense, intuitive knowledge and logic. The thinking process According to Goldratt (1990), managers are required to make three generic decisions while dealing with constraints. These are: (1) decide what to change; (2) decide what to change to; (3) decide how to cause the change. To address these questions, the TP prescribes a set of five tools in the form of cause-and-effect diagrams. The questions, associated tools and their purposes are summarised in Table I. The TP process starts with the first decision question, ‘‘What to change?’’, i.e to identify core problems. Current reality tree (CRT) is used for this purpose. Dettmer (1997) defined a CRT as a logical

Table I. Thinking process tools and their roles

Generic questions

Purpose

TP tools

What to change? What to change to? How to cause the change?

Identify core problems Develop simple, practical solutions Implement solutions

Current reality tree Evaporative cloud Future reality tree Prerequisite tree Transition tree

structure that depicts the state of reality as it currently exists in a given system. Constraints’ Once a core problem has been identified, the next question becomes ‘‘What to thinking process change to’’. The second step in the process is therefore to search for a plausible approach solution to the core problem. This requires other tools such as evaporating cloud (EC) and future reality tree (FRT). According to Dettmer (1997) FRT is a strategic tool used to plan major changes. The implementation of these changes 813 is likely to improve a system. Once the ‘‘what to change to’’ question is decided, the organization is left with the question ‘‘How to do it’’ or ‘‘how to change’’. The prerequisite tree (PRT) and transition tree (TT) diagrams are used to identify obstacles to implementation and devise detailed plans for overcoming these obstacles. It is not the purpose of this paper to discuss these tools in great detail. For a detailed discussion readers are referred to Goldratt (1994), Noreen et al. (1995) and Kendall (1998). The purpose of this study is to address the first question: what to change, i.e to identify core problems which reduce the effectiveness and efficiency of supply chains. The CRT tool was used for this purpose. Guidelines for constructing CRT The CRT identifies cause-and-effect relationships in a system. It is constructed from the top-down by identifying undesirable effects (UDEs), and depicting probable causes for those effects (effect-cause). It is, however, read from bottom-up (cause-effect), when the construction is complete. The following steps should be taken to develop a CRT (Noreen et al., 1995, p. 156): (1) Identify a list of UDEs that describe the area being analysed. It is recommended to begin with a list of five to ten UDEs. (2) Connect one or more UDEs to other UDEs if they are causally related. Depict cause-and-effect relationships with an arrow as shown in the categories of legitimate reservations (CLR) (see Appendix, Figure A1). (3) Connect all other UDEs to the result of step 2. Scrutinise each entry and arrow along the way via the CLR. Stop when all the UDEs have been connected. (4) Read the tree from bottom up, scrutinising again each arrow and entry along the way via the CLR. Make any necessary corrections. (5) Ask yourself if the tree as a whole reflects your intuition about the area being analysed. If not, check for each arrow for additional cause reservations (point 6 in the Appendix, Figure A1). (6) Do not hesitate to expand the tree to connect other UDEs that exist but were not included in the original UDE list. (7) Present the tree to someone or a group who will help you surface and challenge the assumptions captured within. (8) Decide that the CRT is complete. Identify the core problem or problems.

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A simple example. A simple storage problem is chosen to illustrate how a CRT is constructed. The UDEs of the problem (adapted from Noreen et al. (1995) are presented below: (1) Note enough space in the store. (2) Too much make-to-stock inventory. (3) Items piled up waiting to be stored. (4) Cycle times are longer than necessary. The corresponding CRT is presented in Figure 2. Suppose the management of a company is concerned with problems in a warehouse and have identified four UDEs. These UDEs can be used to construct a CRT in order to deduce possible causes. The management believes that the lack of space in the warehouse (UDE1) is due to excess inventories that resulted from making parts to stock (UDE2) and items being stockpiled prior to storage (UDE3). So, UDE2 and UDE3 were connected to UDE1. The reason for UDE3 happening is suggested to be due to parts being delivered to the warehouse in large quantities as well as a result of delivery schedules not matching the rate of usage. (This has been identified in Figure 2 as R1, which is simply a reference number and has no significance). R1 is, therefore, connected to UDE3 and is read ‘‘if R1 then UDE3’’. Management suggested that the main reason why parts were delivered in too large quantities (R1) was that work orders were larger than division’s needs (R2). It was also suggested that cycle

Figure 2. A current reality tree

times were longer than necessary (UDE4) and that UDE2 was related to the size Constraints’ of the work order (R2). Therefore, R2 was connected to R1, UDE2 and UDE4. thinking process Note that of all the UDEs and Rs only UDE1 is linked to two UDEs (UDE2 and approach UDE3). This must be read with a ‘‘logical AND’’. Thus, the relationship between UDE1, UDE2, and UDE3 should be read as follows: if there are excess inventories that result from making parts to stock (UDE2) and items that are 815 piled up waiting to be stored (UDE3), then there is not enough space in the warehouse (UDE1). The tree was constructed starting with the UDEs and working down (Figure 2). However, the tree should be read ‘‘bottom-up’’. The management confirmed that the tree (Figure 2) represented the issue at hand and identified R2 (work orders are often larger than division’s needs) as the core problem. In this example the process of building the CRT was illustrated using a simple problem. It has to be remembered that TP should be applied only in a complex problem situation where a solution is not intuitive and the relationships between effects and causes are not clear. Developing strategies in supply chains using TP Group model building process Today’s global business environment is characterised by expanding foreign markets, comprehensive information networks, improved transportation, higher customer expectations, and high wage-rates. Effective and efficient supply chain management offers a means of gaining competitive advantage in an environment increasingly characterised by fierce competition and uncertainty. Shimchi-Levi et al. (2000, p. 1) defined supply chain management as: . . . a set of approaches utilised to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimise system-wide costs while satisfying service level requirements.

Thus the objective of supply chain management is to increase efficiency and minimise costs across the entire supply chain. Identification and application of appropriate supply chain performance metrics are critical to the success of supply chains. Students undertaking a course in international logistics management at the Institute of Transport Studies (ITS), University of Sydney, were invited to participate in a group-based model building exercise in supply chains. The purpose of this exercise was to: . identify the consequences (effects) of failing to organise and run efficient supply chains; . determine possible causes of these consequences; and . develop causal relationships between causes and effects. The course was offered in February 2001 and was taught by the author of this paper in an intensive mode. A total of 44 students who enrolled in this course

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were pursuing masters degrees in either logistics management or e-commerce at the University of Sydney. About 35 percent were international students and the rest were local students. Some 15 percent of the students had very little or no experience, 40 percent had two to five years experience and about 45 percent had more than five years of experience. Two students had more than 20 years of experience. About 35 percent of the students had experience with logistics companies. About 30 percent of the students took a logistics management course prior to taking the international logistics management course. Six groups were formed. Although it was difficult, a conscious attempt was made to ensure that groups were composed of both local and international students, with moderate and extensive experience as well experience with logistics organizations. The group-based model building exercise was run in two sessions. In the first session, students used nominal group technique (NGT) to brainstorm the problem and identify five to ten UDEs of failing to organise and run an efficient supply chain. Groups then identified factors most likely to cause such effects and developed cause-effect relationships in the form of a casual diagram. The actual models were developed in the second session. The TP was applied to develop the casual relationship between causes and effects. Since the students had no prior knowledge of TP and its analytical tools such as the CRT, the author of this paper developed the causal trees on white board with feedbacks and suggestions agreed by the groups. Results of the brainstorming sessions The number of UDEs identified by these groups in the first session of the exercise ranged between four and eight. The first task in the second session was to decide which UDEs were to be considered for the model building process. The groups agreed on the following UDEs: . long cycle time; . high cost of managing inventory; . low customer service; . high distribution cost; . high cost of supply chain. It is interesting to notice that the list of identified UDEs can be considered as the main performance metrics of supply chains and include both cost and non-cost measures. Many authors have suggested these items as measures of performance in supply chain models (Lee and Billington, 1992; Christopher, 1998; Mason-Jones and Towill, 1999). The branches of the CRT were developed choosing one UDE at a time at random and following the guidelines mentioned earlier. When all the UDEs were considered and branches were constructed, these branches were put together and developed into a CRT for the entire supply chain system. The following paragraphs discuss the construction of each of the branches.

High inventory management cost Constraints’ The groups identified high inventory management costs as one of the major thinking process consequences of failing to organise and execute an efficient supply chain. approach Overstock and understock of inventory were considered to be the root causes of this problem. Inventory management costs generally account for a significant percentage of total business costs. For a typical retail company, inventory can 817 account for 10 to 20 percent of product cost. Given these high costs, production technologies and strategies developed over the last four decades, such as MRP, JIT and TOC, have been heavily focused on managing inventory. The major causes for high inventory cost were identified in the second session to be lack of communication, long cycle times and low usage of information technologies (IT). The CRT is shown in Figure 3. Long cycle time The criticality of cycle time or delay in a supply chain (including both product flow time and information flow time) was highlighted by Forrester (1958) some 40 years ago. Recently, Stalk and Hout (1990) and Mason-Jones and Towill (1999) have emphasised the importance of reduction of total cycle time. In order to avoid what is now called ‘‘bullwhip effect’’ (Lee et al., 1997) or ‘‘Forrester effect’’ (Hines et al., 2000), total cycle time must be reduced by improved

Figure 3. Causal relationships based on inventory management cost

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coordination and communication among supply chain partners and by aligning product-process design with appropriate supply chain structure (see Figure 4). Low customer satisfaction Although cost is the performance measure of choice for many supply chains, one must realise that cost alone might not be adequate to describe system performance. During the second session, the group identified low level of customer satisfaction, a non-cost type of supply chain performance measure, as one of the UDEs. There are several ways to measure customer satisfaction in supply chains, such as responsiveness (Lee and Billington, 1993) and flexibility (Voudouris, 1996). Long cycle times adversely affect responsiveness and flexibility in a supply chain and this ultimately affects customer satisfaction (see Figure 5). Management may define customer service as inadequate due to a lack of appreciation of the performance of the supply chain as a whole, which in turn may affect customer satisfaction (Lee and Billington, 1992). Lack of environmental appreciation on the part of the companies can also lead to customer dissatisfaction (see Figure 6). High distribution cost Lack of coordination contributes to low levels of integration across supply chains, which in turn affects distribution costs (see Figure 7).

Figure 4. Causal relationships based on cycle time

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Figure 5. Causal relationships based on customer satisfaction

Figure 6. Causal relationships based on customer satisfaction

High cost of supply chain The cost of supply chains is an aggregation of inventory management cost, distribution cost, and costs resulting from lack of environmental policies (see Figure 8). Inventory costs can be reduced by compressing lead times, appropriately adopting IT, and improving communication with the partners of the supply chain. A synchronised supply chain based on common goals among partner organizations ensures lower distribution cost, whereas lack of product

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Figure 7. Causal relationships based on distribution cost

Figure 8. Causal relationships based on cost of supply chain

retake policy contributes to expenses through increasing resource costs and losses in market share (Vandermerwe and Oliff, 1990). Discussion This research not only identified elements of successful SCM but also developed the causal relationships between these elements. Understanding the dynamic nature of the supply chain through cause and effect relationships is critical to the formulation of supply chain growth strategies. For instance, consider the case of ‘‘long cycle times’’ shown in Figure 4. The cause and effect diagram in Figure 4 identified cycle time as an element of successful SCM and the following two factors or ‘‘paths’’ show the main causes of this problem: . Path I. No appreciation for SC-wide performance ! product-process design without SC consideration ! product unavailability ! long cycle time. . Path II. Lack of trust ! no common goals ! lack of coordination ! low synchronised supply chain ! long cycle time.

Problems like long cycle times are influenced by complex inter-relationships Constraints’ between many factors. With a better understanding of these relationships, thinking process managers would be able to devise strategies for further improvement and approach growth in supply chains. During the second session of the group-based model building exercise, two important aspects of SCM emerged which were not identified during the 821 nominal group discussions. These are supply base management and environmental policy. The following subsections will describe the impact of these two aspects of SCM and develop branches for the CRT. Supply base management Low supply base management is the result of lack of common goals among the partner organizations in supply chains. Mistrust is likely to be a result of not sharing information as well as unwillingness to share risks and rewards (see Figure 9). The importance of supply base management on supply chain performance has been reported for many companies. Recently, Shin et al. (2000) suggested that better supply base orientation improves both the suppliers’ and buyers’ performance. The critical elements that improve the supply base management among organizations are long-term partnerships with channel participants (Choi and Hartley, 1996; De Toni and Nassimbeni, 1999), reducing the number of suppliers (Dyer, 1996; Hahn et al., 1983; Kekre et al., 1995), sharing risks and rewards (Handfield and Nicholas, 1999), involving suppliers in product development (Dyer, 1994), developing trust among channel partners (Newman, 1988).

Figure 9. Causal relationships based on supply base management

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Environmental policy Inadequate environmental policy can result in a number of adverse effects. These can include direct effects on costs of running businesses through low usage of recycled resources and indirect effects of degrading the local and global environment on customer satisfaction and market share (see Figure 10). Today, many researchers are in agreement that the environment makes good business sense and is an opportunity rather than a threat (Porter and Van der Linde, 1995; Shivastava, 1995; Hutchinson, 1996). A number of case studies have demonstrated that that there is compatibility between environmental and business goals (see Eden, 1994). By considering the environment in the design stage of its products, Xerox improved its ability to recover and reuse parts for future equipment. Implementing an end-of-life equipment take-back policy, Xerox’s European operations saved over $80 million in 1997 (Maslennikova and Foley, 2000). Recently, several European countries have enforced environmental legislation, making producers responsible to take back products at the end of their life cycles (Cairncross, 1992). Pressure to consider environmental aspects from legislation is not the only concern for companies. A ‘‘green’’ image has become an important marketing opportunity. Thus, it is imperative for companies to revisit their supply chain performance metrics in response to growing external institutional pressure and customers’ environmental requirements. The big picture The conceptual CRT map developed during the group model building exercise is shown in Figure 11. In addition to the five UDEs identified by the groups,

Figure 10. Causality due to lack of product retake policy

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Figure 11. A CRT for a supply chain system

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four other UDEs were identified during the model building exercise. These are responsiveness, flexibility in the supply chain, incomplete orders, and percentage of products recovered, recycled and reused. All four measures are non-cost measures of supply chain performance and are related to customer satisfaction. Responsiveness and incomplete orders have frequently been suggested in the literature as measures for supply chain performance (Altiok and Ranjan, 1995; Cook and Rogowski, 1996). Responsiveness can be considered as response time and on-time delivery, whereas incomplete orders can be considered as fill rate (Beamon, 1999). Measures such as flexibility, and recovery and reuse rates are seldom used in supply chain analysis. Flexibility can measure a supply chain’s ability to accommodate variety, volume and schedule fluctuations from the chain participants such as suppliers, producers, and customers. Since the supply chain exists in an uncertain environment, Beamon (1999, p. 284) emphasised that ‘‘flexibility is vital to the success of the supply chain’’. The use of recovery and reuse rate as a measure of supply chain performance is a recent phenomenon (Maslennikova and Foley, 2000). The EU Producers Responsibility Obligations (packaging waste) Regulation, 1996, is required to ensure that companies recover 60 percent of packaging waste by 2001 (McIntyre et al., 1998). Researchers identified two types of motivation for companies to engage in product take-back process: (1) economical; and (2) environmental (Fleischmann et al., 1997). These issues are intertwined, as ‘‘increasing disposal costs make waste reduction more economical, and environmentally conscious customers represent new market opportunities’’ (Fleischmann et al., 1997, p. 3). The core problem appears to be with management (Figure 11). Owing to their limited vision, the management of many organizations fails to see and appreciate the importance of system-wide performance measures. Several other factors (causes) which may affect the performance of supply chains are: . communication; . trust among channel participants; . investment and usage of IT; . common goals; . coordination; . product-process design without supply chain consideration; . lack of appreciation for supply chain wide performance measures; . sharing risks and rewards; . supply base orientation, inadequate definition of customer service.

Many empirical and case studies have identified these factors. For instance, Constraints’ Power et al. (2001) found that ‘‘more agile’’ supply chains are more customer thinking process focused, have greater involvement with suppliers and better utilise IT approach compared to the ‘‘less agile’’ supply chains. Many have suggested channel-wide management of inventories, coordination, shared visions, reduced supplier base (Cooper and Ellram, 1993; Shin et al., 2000), and fair sharing of risks and 825 rewards (Handfield and Nichols, 1999) as characteristics of integrated supply chain management. Conclusion To date, most of the studies undertaken on supply chain management have focused on a wide range of issues and are generally quantitative in nature. This research applied a qualitative approach not only to identify the critical success factors in a supply chain, but also the causal relationships between these factors. Management can use these relationships to develop growth strategies for their companies. However, these relationships need to be tested by largescale empirical studies. References Altiok, T. and Ranjan, R. (1995), ‘‘Multi-stage, pull-type production/inventory systems’’, IIE Transactions, Vol. 27 No. 2, pp. 190-200. Anderson, R.D., Jerman, R.E. and Crum, M.R. (1998), ‘‘Quality management influences on logistics performance’’, Transportation Research Part E, Vol. 34 No. 2, pp. 137-48. Beamon, B.M. (1999), ‘‘Measuring supply chain performance’’, International Journal of Operations and Production Management, Vol. 19 No. 3, pp. 275-92. Brewer, A. and Hensher, D. (2001), ‘‘Identifying the overarching logistics strategy of business processes: an exploratory analysis’’, International Journal of Logistics: Research and Applications, Vol. 4 No. 1, pp. 1-41. Cairncross, F. (1992), ‘‘How Europe’s companies reposition to recycle’’, Harvard Business Review, March-April, pp. 34-45. Choi, T.Y. and Hartley, J.L. (1996), ‘‘Supplier development: customers as a catalyst of process change’’, Business Horizons, July-August, pp. 37-44. Christopher, M. (1998), Logistics and Supply Chain Management: Strategies for Reducing Cost and Improving Service, 2nd ed., Prentice-Hall, London. Cook, R.L. and Rogowski, R.A. (1996), ‘‘Applying JIT principles to continuous process manufacturing supply chains’’, Production and Inventory Management Journal, First Quarter, pp. 12-17. Cooper, M.C. and Ellram, L.M. (1993), ‘‘Characteristics for supply chain management and the implications for purchasing and logistics strategy’’, Journal of Logistics Management, Vol. 4 No. 2, pp. 13-24. Cox, J.F. and Spenser, M.S. (1998), The Constraints Handbook, St Lucie Press/APICS Series on Constraints Management, Boca Raton, FL. Cross, D.J., Goldsby, T. and Clinton, S.R. (1997), ‘‘Information technology influences on world class logistics capability’’, International Journal of Physical Distribution & Logistics Management, Vol. 27 No. 1, pp. 4-17. Deming, E. (1986), Out of the Crisis, MIT, Cambridge, MA.

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De Toni, A. and Nassimbeni, G. (1999) ‘‘Just-in-time purchasing: an empirical study of operational practices, supplier development and performance’’, Omega, Vol. 28 No. 6, pp. 631-51. Dettmer, H.W. (1997), Goldratt’s Theory of Constraints: A System Approach to Continuous Improvement, ASQC Quality Press, Milwaukee, WI. Dyer, J.H. (1994), ‘‘Dedicated assets: Japan’s manufacturing edge’’, Harvard Business Review, November-December, pp. 174-8. Dyer, J.H. (1996), ‘‘How Chrysler created an American keiretsu’’, Harvard Business Review, JulyAugust, pp. 42-56. Eden, S.E. (1994), ‘‘Using sustainable development – the business case’’, Global Environment Change, Vol. 4 No. 2, pp. 160-7. Ellinger, A.E., Daugherty, P.J. and Plair, Q.J. (1999), ‘‘Customer satisfaction and loyalty in supply chain: the role of communication’’, Transport Research Part E, Vol. 35, pp. 121-34. Fleischmann, M., Bloemhof-Ruwaard, J.M., Dekker, R., Van der Laan, E., Van Nunen, J.A.E.E. and Van Wassenhove, L.N. (1997), ‘‘Quantitative models for reverse logistics: a review’’, European Journal of Operational Research, Vol. 103, pp. 1-17. Forrester, J. (1958), ‘‘Industrial dynamics: a major breakthrough for decision makers’’, Harvard Business Review, July August, pp. 37-66. Forrester, J. (1961), Industrial Dynamics, MIT Press, Cambridge, MA. Goldratt, E.M. (1980), ‘‘Optimized production timetable: beyond MRP: something better is finally here’’, paper presented at APICS 23rd Annual International Conference Proceedings. Goldratt, E.M. (1988), ‘‘Computerized shop floor scheduling’’, International Journal of Production Research, Vol. 26 No. 3, pp. 443-55. Goldratt, E.M. (1990), What Is this Thing Called Theory of Constraints and How Should It Be Implemented?, North River Press, New York, NY. Goldratt, E.M. (1994), It’s Not Luck, Gower, Aldershot. Goldratt, E.M. and Cox, J. (1984), The Goal: An Ongoing Improvement Process, Gower, Aldershot. Goldratt, E.M. and Fox, J. (1986), The Race, North River Press, New York, NY. Hahn, C.K., Pinto, P.A. and Bragg, D.J. (1983), ‘‘‘Just-in-time’ production and purchasing’’, Journal of Purchasing and Materials Management, Vol. 19 No. 3, pp. 2-10. Handfield, R. and Nichols, E. Jr (1999), Introduction to Supply Chain Management, Prentice-Hall, Englewood Cliffs, NJ. Hines, P., Lamming, R., Jones, D., Cousins, P. and Rich, N. (2000), Value Stream Management: Strategy and Excellence in the Supply Chain, Prentice-Hall, London. Holmes, G. (1995), Supply Chain Management: Europe’s New Competitive Battleground, EIU Research Report. Hutchinson, C. (1996), ‘‘Integrating environment policy with business strategy’’, Long Range Planning, Vol. 29 No. 1, pp. 11-26. Juran, J.M. (1992), Juran on Quality by Design, Free Press, New York, NY. Kekre, S., Murthi, B.P.S. and Srinivasan, K. (1995), ‘‘Operating decisions, supplier availability and quality: an empirical study’’, Journal of Operations Management, Vol. 12 No. 3/4, pp. 387-96. Kendall, G.I. (1998), Securing the Future: Strategies for Exponential Growth Using the Theory of Constraints, St Lucie Press/APICS Series on Constraints Management, Boca Raton, FL. Lee, H.L. and Billington, C. (1992), ‘‘Managing supply chain inventory: pitfalls and opportunities’’, Sloan Management Review, Vol. 33, pp. 65-73. Lee, H.L. and Billington, C. (1993), ‘‘Material management in decentralized supply chains’’, Operations Research, Vol. 41 No. 5, pp. 835-47.

Lee, H.L., Billington, C. and Carter, B. (1993), ‘‘Hewlett Packard gains control of inventory and service through design for localisation’’, Interfaces, Vol. 23, July-August, pp. 1-11. Lee, H.L., Padmannabhan, V. and Whang, S. (1997), ‘‘The bullwhip effect in supply chains’’, Sloan Management Review, Vol. 38 No. 3, pp. 93-102. McIntyre, K., Smith, H.A., Henham, A. and Pretlove, J. (1998), ‘‘Logistics performance measurement and greening supply chains: diverging mindsets’’, International Journal of Logistics Management, Vol. 9 No. 1, pp. 57-68. Magretta, J. (1998), ‘‘Fast, global, and entrepreneurial: supply chain management, Hong Kong style: an interview with Victor Fung’’, Harvard Business Review, September-October, pp. 103-14. Maslennikova, I. and Foley, D. (2000), ‘‘Xerox’s approach to sustainability’’, Interfaces, Vol. 30 No. 3, pp. 226-33. Mason-Jones, R. and Towill, D.R. (1999), ‘‘Total cycle time compression and the agile supply chain’’, International Journal of Production Economics, Vol. 62, pp. 61-73. Monczka, R., Peterson, K., Handfield, R. and Ragatz, G. (1998), ‘‘Determinants of successful vs non-successful strategic supplier alliances’’, Decision Sciences, Vol. 29 No. 3, pp. 553-77. Monden, Y. (1981), ‘‘What makes the Toyota production system really tick’’, Journal of Industrial Engineering, January, pp. 36-46. Newman, R.G. (1988), ‘‘The buyer-supplier relationship under just-in-time’’, Production and Inventory Management Journal, Vol. 29 No. 3, pp. 45-50. Noreen, E., Smith, D. and Mackey, J. (1995), The Theory of Constraints and Its Implications for Management Accounting, North River Press, MA. Orlicky, J. (1975), Material Requirement Planning, McGraw-Hill, New York, NY. Porter, M. and Van der Linde, C. (1995), ‘‘Green and competitive: ending the stalemate’’, Harvard Business Review, September, pp. 120-34. Power, D., Sohal, A.S. and Rahman, S. (2001), ‘‘Critical success factors in agile supply chain management: an empirical study’’, International Journal of Physical Distribution & Logistics Management, Vol. 31 No. 4, pp. 247-65. Rahman, S. (1998), ‘‘Theory of constraints – a review of the philosophy and its application’’, International Journal of Operations and Production Management, Vol. 18 No. 4, pp. 336-55. Shin, H., Collier, D.A. and Wilson, D.D. (2000), ‘‘Supply management orientation and supply/ buyer performance’’, Journal of Operations Management, Vol. 18, pp. 317-33. Shrivastava, P. (1995), ‘‘Environmental technologies and competitive advantage’’, Strategic Management Journal, Vol. 16, pp. 183-200. Shimchi-Levi, D., Kaminsky, P. and Shimchi-Levi, E. (2000), Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, McGraw-Hill International Edition, Singapore. Stalk, G. and Hout, T. (1990), Competing against Time, Free Press, London. Tan, K., Kannan, V.R., Handfield, R.B. and Ghosh, S. (1999), ‘‘Supply chain management: an empirical study of its impact on performance’’, International Journal of Operations and Production Management, Vol. 19 No. 10, pp. 1034-52. Vandermerewe, S. and Oliff, M.D. (1990), ‘‘Customer drive corporations green’’, Long Range Planning, Vol. 23 No. 6, pp. 10-16. Voudouris, V.T. (1996), ‘‘Mathematical programming techniques to debotteneck the supply chain of fine chemical industries’’, Computers and Chemical Engineering, Vol. 20, Part B, pp. 1269-74. Womack, J.P. and Jones, D.T. (1996), Lean Thinking, Simon and Schuster, New York, NY.

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Figure A1. Categories for legitimate reservations

Appendix

The research register for this journal is available at http://www.emeraldinsight.com/researchregisters

The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0960-0035.htm

Logistics in the ‘‘three-day car’’ age Assessing the responsiveness of vehicle distribution logistics in the UK Matthias Holweg Lean Enterprise Research Centre, Cardiff Business School, Cardiff University, Cardiff, UK, and

Logistics in the ‘‘three-day car’’ age 829 Received May 2001 Revised February 2002 Accepted June 2002

Joe Miemczyk School of Management, University of Bath, Bath, UK Keywords Automotive industry, Logistics, Environment, Supply chain, United Kingdom Abstract It is now becoming apparent that the prevalent ‘‘stock-push’’ approach in the automotive industry of building vehicles against a long-term forecast and fulfilling the large majority of orders from existing stock is no longer a viable proposition. Pressure from rising stock levels in the market and the discounts needed to sell these vehicles is forcing the vehicle manufacturers to rethink their sourcing strategy in favour of ‘‘build-to-order’’ systems. More responsive order fulfilment at vehicle manufacturer level however will have wide implications on the component supply and logistics subsystems. Based on findings of the 3DayCar research programme, this paper aims at assessing whether current logistics systems are capable of supporting such a ‘‘build-to-order’’ approach. Based on empirical evidence of benchmarks covering three million annual vehicle movements in the UK vehicle distribution system, key constraints in current vehicle distribution logistics will be established, and the cost and environmental impact of more responsive logistics will be assessed.

‘‘Build-to-order’’ – rethinking the automotive supply chain Current vehicle supply systems are predominantly based on ‘‘stock push’’, whereby the majority of vehicles are sourced from existing finished goods inventory in the marketplace. In the UK, for example, only 33 per cent of all new vehicles sold in 1999 were actually built to order (BTO), and the remainder was sold from the average two months stock held at any one time (ICDP, 2000). The idea of building cars to order is not new, though. Over 15 years ago lean production set out with the promise ‘‘to build cars at the rate the customers demand it’’ (Monden, 1983). Monden stressed that the overall objective of the Toyota production system, the ancestor of the lean philosophy (Womack and Jones, 1996) was to build cars to order only and hence avoid the substantive waste or ‘‘muda’’ inherent in overproduction. While lean efforts have fostered undeniable improvements in manufacturing efficiency, from the customers’ perspective they often have failed due to their myopic focus on the factories. Indeed, ten years after the publication of the seminal work The Machine that Changed the World (Womack et al., 1990), few volume vehicle manufacturers are able to build to customer order, and only one builds solely to customer order. In Europe, the

International Journal of Physical Distribution & Logistics Management, Vol. 32 No. 10, 2002, pp. 829-850. # MCB UP Limited, 0960-0035 DOI 10.1108/09600030210455438

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average customer has to wait 48 days for his/her European car to be built and delivered to order. For Japanese models built in Europe, the time reaches 63 days, and for European built specialist vehicles the lead time is 43 days (ICDP, 2000). Despite these long lead times, 3DayCar[1] research in the UK has shown that 61 per cent of customers want their vehicle to be delivered within 14 days or less (Elias, 2000). Even in the USA, where vehicles traditionally are sold from dealer stock, 74 per cent of consumers would rather wait and order the vehicle instead of buying one from the dealer’s lot that is incorrectly equipped, but the majority of North American consumers would wait no more than three weeks to receive their vehicle (Business Wire, 2001). As a result of the vehicle manufacturers’ inability to supply vehicles within the two-week timeframe that most customers find acceptable, very few vehicles in the world are actually built to customer specifications. Large stocks of finished vehicles are held to enable a degree of choice for customers, generally at dealerships, but also at national importers, despatching lots, and the like. This becomes particularly apparent in the USA, where the distribution system is geared at ‘‘instant gratification’’ or ‘‘one-stop shopping’’. Manufacturers hold as many as 100 days of sales in the marketplace, and 60 days is considered to be the optimal level. The USA is also the only country where stock levels are published by the manufacturers themselves (due to a mutual agreement), whereas in Europe stock levels are carefully guarded. However, in the UK 370,000 new vehicles are stored in old airfields and dealer forecourts at any one time, so there is visible proof that overproduction poses serious inventory challenges in Europe as well (see Figure 1). Japanese producers in Japan are most likely to build to order for the domestic market. One reason for this is the high percentage of cars destined for export (in some cases up to 60 per cent of production). These exports are based on sales forecasts and can be used to buffer customer-ordered production for the domestic market. Dealerships are tightly integrated into the planning process and are aided by the stringent Japanese vehicle inspection system, called Shaken, which makes driving vehicles beyond three years of age uneconomical. This results in predictable replacement planning on the part of consumers and their dealers. As a result of holding large volumes of stock, at the highest value (finished goods) and discounting that stock in order to sell, there is a huge cost penalty in current vehicle distribution. It has been estimated that across Europe £6 billion could be saved by eliminating the finished vehicle stocks, and an additional £2.5 billion annual profit potential could be achieved by further operational savings and increased product mix profits due to more profitable options such as alloy wheels, air conditioning or higher specification trim levels (ICDP, 2000). Recent pronouncements have made it clear that there is some recognition of these failures, and many European manufacturers have announced the intention to implement build-to-order strategies to reduce sourcing from stock.

Logistics in the ‘‘three-day car’’ age 831

Figure 1. Sales sourcing and stock levels in main global markets

The best known of these is the Projet Nouvelle Distribution by Renault. The aim here was to produce a BTO vehicle in 14 days from order to delivery by the end of 2001. VW and Ford both have similar 14 or 15-day car programmes, with BMW even attempting a ten-day order-to-delivery (OTD) lead time (Automotive-World, 2001). Volvo was also an early adopter of this model with a plan to reduce OTD times from six weeks to 28 days in 1990, and even down to 14 days in 1995, while having a 100 per cent ‘‘customer-based’’ production (Hertz et al., 2001). It has been recognised that delivery speed for orders built at the factory are too slow. Although this is only partly due to transport, in the USA, Ford with average transport delivery of 15 days (and up to 30 days) aims to reduce this to six days. Ford has enlisted the help of UPS to help co-ordinate this plan and achieve inventory savings and use their tested tracking tools and software (Connelly, 2000). Building vehicles to order as opposed to a forecast has an unmistakable logic, both for the vehicle manufacturers and the customers. Ultimately, three days could be seen as the OTD benchmark, stated as one of the key challenges for Japanese manufacturing in the twenty-first century (Hall, 1993). Such a drastic change in strategy however would have ramifications for all players in the supply chain, for suppliers as well as inbound and outbound logistics operators. Initial research has also been carried out into the inbound logistics operations (Miemczyk and Holweg, 2001) and will extend to component suppliers in due course. The implications for the vehicle manufacturers have been reported previously (Holweg and Jones, 2001; Holweg and Pil, 2001),

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showing that manufacturing could assemble a vehicle in less than one day, yet the order takes over a month from the dealer to the factory. Considering a threeday car scenario with a manufacturing lead time of one day, this would leave one day to receive orders and inform suppliers, and one day to deliver the finished vehicle to the customer. In this paper, we will specifically address the implications for outbound logistics operations, and the role vehicle distribution will have to adopt in support of a build-to-order auto supply chain. Vehicle distribution logistics – a core process in a BTO system Distribution logistics – as a subsystem of the overall new vehicle supply system – is a customer-facing process, and contributes directly to the overall order-to-delivery lead time. BTO will put pressure on suppliers to be flexible, and logistics to reduce lead times. The ability of the vehicle manufacturers and their supply systems have been discussed already (Holweg and Jones, 2001; Holweg and Pil, 2001), yet the question arises – can current distribution logistics cope? Current vehicle delivery lead times from factory to dealer are around four days in the UK (Kiff, 1997; Williams, 1998; ICDP, 2000). Delivery reliability is often seen as more important than lead time though. As research shows, customers prefer reliability of speed and in fact current vehicle supply systems in the UK provide vehicles later than the promised delivery date in 24 per cent of cases (Williams, 1998). Similarly, when Volvo reduced their lead times from 12 days factory release to retail delivery to just four days across Europe, this involved a shift from load consolidation to speed, reliability and frequency of shipment (Hertz et al., 2001). There are around 30 vehicle logistics companies operating in the UK, with five holding the majority of the market share with 55 per cent of the transporters used. There are 46 vehicle holding compounds covering 7,832,837 square metres and the industry employs 11,500 people in the UK. In the year 2000, 8.5 million vehicles were transported by road, two million by ship and just 500,000 by rail (ECG, 2001). Figure 2 shows outbound logistics as an integral part of the new vehicle supply system. This integrative role has been discussed extensively as shown in Figure 3 (Christopher, 1992; Bowersox and Closs, 1996). The logistics

Figure 2. New vehicle supply system

Logistics in the ‘‘three-day car’’ age 833 Figure 3. Outbound logistics as an integral part of the new vehicle supply system

management process is clearly an all-encompassing activity covering the material flows of a whole enterprise or value stream. The initial concept of time as a competitive advantage was suggested by Stalk and Hout (1990). Since then, the responsiveness discussion has focused on the total supply chain (Hunter, 1990; Lowson and King, 1999; Kurt Salmon Associates, 1993) and manufacturing (Suri, 1999), but logistics has not been widely discussed in these terms so far. While the supporting role of logistics has been acknowledged, there is no explicit body of knowledge on logistics responsiveness. The proposition of quick response logistics by Christopher (1992) and time-based distribution by Abrahamsson (1999) have added to knowledge generally. Responsiveness in logistics is commonly seen in conjunction with better information for planning, shorter lead times and hence with higher frequencies of delivery and the potentially negative cost perspective of this type of performance (Germain, 1989; Fawcett and Vellenga, 1992; Lowson and King, 1999). While there is an ongoing discussion of the classic trade-off between transport costs and inventory carrying costs, there is little doubt that build-toorder attempts to resolve this by being responsive to customer needs without relying on extensive stocks to meet those needs. The cost of finished inventory is variable across manufacturers, yet most estimates are in the region of 10-12 per cent of recommended retail price or about £1,000 to £1,200 per car (Lapidus, 2000; Holweg et al., 2001). The following study is an assessment of the implications of responsive vehicle logistics, and the objective is not to provide a detailed cost-benefit analysis. This is beyond the remits of this study, yet should be considered for further detailed research on a case-by-case basis. In addition to the financial cost, the environment is continuing to be a significant issue for manufacturers, with new legislation and agreements affecting global warming emissions from cars, the recycling of end of life vehicles, further limits on paintshop emissions and higher expectations for corporate environmental management. Although traditionally companies in the UK have not tended to address the environmental impacts of their

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transportation activities (Daskin, 1987), new UK government guidelines from the Department of the Environment, Transport and Regions (DETR) such as those on Green Transport Plans, projections of freight transport growth and increases in fuel costs have begun to force this issue onto the corporate agenda (DETR, 1999). As the growth in the impacts due to traffic congestion and urban pollution from road vehicles becomes more significant, the delivery of vehicles using heavy goods vehicles (HGVs) in urban areas makes a greater contribution to the environmental footprint of all the companies involved. Also, legislation aimed at limiting these effects may inhibit efficient operation of the logistics function through higher fuel prices, fees to use certain routes and limitations to access in certain urban centres for only environmentally benign vehicles (Wu and Dunn, 1995). In the specific area of automotive vehicle logistics, little work has been carried out assessing the environmental impacts of this aspect of the vehicle life-cycle outside of the vehicle manufacturers. The general motivation behind using more environmentally benign methods of transport is financial optimisation of the logistics operation. For example, specialised ships are used to transport vehicles from one continent to another and rail is often used across continents to deal with long distance transport needs. In some cases, such as in Germany, barges are used on rivers to deliver vehicles to port distribution points. It must be emphasised that although environmentally less damaging, the main motivation for using these other modes of transport is cost, not pollution. However, with these forms of transport there is always a time penalty. In summary, the logistics literature points to some key concepts which enable responsiveness. These include accurate and precise planning information, lead times, flexibility and cost. Any study of logistics responsiveness, therefore, must include these aspects. In addition, the trade-off between delivery speed, cost and environmental impact has hardly been discussed in the auto sector. In particular, the research questions have been defined as: RQ1. Is the current performance of vehicle distribution logistics systems in the UK capable of supporting a rapid build-to-order framework, and if not, what are the key inhibitors? RQ2. What are the potential cost and environmental impacts of more responsive logistics related to rapid build-to-order? The paper is divided into four sections. The next section discusses the methods used to examine vehicle logistics responsiveness and impacts. The results are then presented addressing the current process, lead times and efficiencies. The environmental and cost impacts of one-day delivery are discussed followed by a summary of the key inhibitors of more responsive and rapid delivery. The paper concludes with areas for further research.

Methods for assessing logistics responsiveness and impacts – a framework Owing to the innovative nature of the research question, no existing research framework was found suitable, and a new methodology framework was developed in order to assess the responsiveness and impacts in the UK vehicle distribution systems. The research was argued from a systems point of view (Bertanlanffy, 1973; Kramer and De Smit, 1977), defining vehicle distribution as a subsystem of new vehicle supply systems. By definition, organisational systems are open systems (Ackoff, 1971), comprising of technical and socio-technical entities (Kuhn, 1975; Kast and Rosenzweig, 1981). The research approach hence is a multi-method approach (Easterby-Smith et al., 1991), for complex issues in management research, comprising of empirical methods as well as qualitative semi-structured interviews. After initial focus group research with programme sponsors, three research phases were conducted, as shown in Figure 4. The first phase aimed at creating an in-depth understanding of the current distribution process. During this stage the research was primarily qualitative in nature. Additionally, high-level process mapping (Rother and Shook, 1998) to gain a complete understanding of the key processes was carried out at three logistic company sites.

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Figure 4. Research framework

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In the second phase a questionnaire survey was conducted of the major vehicle logistics players in the UK. A sample size of eight service providers was used covering approximately 3.1 million annual vehicle movements and a pool of 1,537 car transporters. The companies involved cover 10 per cent of the total European vehicle transportation volume and a majority of the UK market. As the assessment of impacts is based on a theoretical future situation it was decided by the research focus group to model the main characteristics of the vehicle delivery process on the basis of times, distances, load capacities and utilisation using a sponsor’s proprietary software programme. In the third phase, the data gathered from the process mapping and questionnaire survey was used to model the impacts of more responsive delivery. In particular, the modelling exercise was used to test focus group scenarios for reducing impacts of cost and environment in order to indicate whether these yielded the expected gains. The input data was based on dealership locations in the UK (by post code), factory locations, transport capacities and frequency and timing of supply to these locations. The Appendix provides more detail of the model used. All three research stages were complemented with semi-structured interviews. In total, eight key personnel were interviewed at operations and strategic planning (or business development in some cases) level in order to capture several perspectives across three vehicle logistics organisations. Overall 11 interviews were carried out (with some individuals interviewed more than once). The interviews followed the structure as follows: description of the core business and particular issues of concern, description of the order to delivery process, discussion of the questionnaire (following the questionnaire format including customers, data received (type and quality), efficiencies, leadtimes, capacity and other services) and discussion of potential barriers to one-day delivery. Current vehicle distribution process Car manufacturers outsource the delivery of new vehicles. Typically, thirdparty logistics companies are used here, also known as ‘‘ex-works’’ contracts, i.e. the function has been removed from the traditional operations or ‘‘works’’ of the vehicle manufacturer. These third-party logistics providers also undertake a number of other functions such as pre-delivery inspections (PDI), lateconfiguration of some parts of the vehicle such as decals, rear spoilers, fitting of radios or alarms and other aspects specific to the market. These companies also undertake some re-marketing of vehicles, i.e. taking back fleet vehicles and preparing them for re-sale. Figure 5 shows the major routes served by third-party logistics providers. Direct deliveries to private customers are so far the exception in the UK; the direct deliveries referred to in Figure 5 tend to be deliveries to large fleet operators. Although Internet sales are rising, vehicle manufacturers still view these as trial runs and so direct deliveries from this source are also very low. Even in the USA, only 3-7 per cent of new cars are sold via the Internet. Dealer

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Figure 5. Typical routes in UK outbound logistics

transfers are generally performed by the dealers using one-car transporters, rarely by the vehicle logistics providers. Vehicle logistics companies will own transporter vehicles, lease storage compounds, operate PDI centres (including various vehicle service operations such as body shops and paint facilities). For the purposes of this paper we concentrate on the transportation function of these vehicle logistics companies in the UK, that function involved in the third stage of the order to delivery process, delivery from the factory gate to the final customer. The initial focus group research confirmed that current delivery lead times from a UK production facility to the dealer is around three to four days with another day held at the plant to enable economic loads to be built and then delivered. The new cars are also inspected for damage at a number of points. Most cars are taken to holding compounds before they are delivered which adds further delays to the delivery. Figure 6 shows a generic process map for outbound logistics. Mapping was used as a key tool to understand the main sub-processes in the current system of delivery of new vehicles. The comparison of processes between companies showed that there were few significant differences in the systems operated and common themes throughout. Thus, the generic process is thought to be representative of outbound logistics processes in the UK. The current process relies heavily on manual vehicle scheduling and route planning. A main reason is that there is no formal or centralised process available to arrange backloads – a crucial factor for the profitability of the whole operation. Backloading tends to rely on personal contacts of the vehicle scheduler to his counterparts at competitors sites, but this function is crucial to transport efficiency and, therefore, the economics of delivery. The main constraints to shorter delivery lead times are the lack of forward planning information given by the manufacturer, a point also strongly mentioned in the interviews. The integration of the vehicle logistics providers into the

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Figure 6. Generic process map of the outbound distribution process

manufacturers’ systems is very poor, particularly compared to the modus operandi of advanced inbound logistics operations in the UK auto sector (Miemczyk and Holweg, 2001). The subsequent questionnaire survey identified further enablers and inhibitors in the current delivery systems. Benchmarking lead time and efficiency The transportation requirements information is provided by the vehicle manufacturer in a variety of formats (see Table I). Most customers give monthly forecasts with fewer giving weekly and daily forecasts. Few customers actually give the logistics companies firm schedules in terms of volumes or types of vehicle. The variation in the forecast to the actual volumes and model types is also significant and varies from customer to customer, which makes capacity planning problematic. Capacity swings of –170 per cent to +400 per cent within the particular delivery zones were recorded (in terms of variation of forecast versus actual). In some cases, logistics companies do not receive firm information about which vehicles will be transported until they have been passed to the vehicle manufacturer’s gate release, which effectively only gives them the contracted delivery times within which to plan economic capacity use. Despite the lack of planning information, the load efficiencies are generally high in the outbound stage of the delivery, typically 95 per cent (see Table II). This drops to zero as vehicles are delivered to distribution points and then increases to around 54 per cent on the backhaul stage of the process. Key findings of the interviews demonstrated that vehicle logistics companies rely on an assumed 60 per cent backhaul efficiency in their costings and this is included in the rates charged to vehicle manufacturers. Lead times are typically around two days from the vehicle storage compound, which is well within the contracted lead time (see Table III). Again, the time at the storage compound is mainly used for load consolidation and hence better load efficiency on the dispersion run. Damage levels are generally low at around 1.5 per cent of vehicles (for any type of damage, even superficial problems) and ranges from 0.4 per cent to 2 Type of information Percentage surveyed

Monthly Weekly Daily Monthly Weekly forecast forecast forecast firm firm 72

31

Factory to compound Compound to dealer Backload efficiency (compound to dealer)

19

6

Daily firm

Hourly firm

0

6

3

Average (weighted by volume) (%)

Minimum (%)

Maximum (%)

98.9 94.8 54.0

90 66 1

100 100 80

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Table I. Type of information received by percentage of logistics companies

Table II. Load efficiencies of transporters in three transport stages of distribution

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per cent of vehicles in the survey sample. While this only equates to an average damage cost of approximately £2.60 per vehicle transported, damage is critical for the delivery lead time reliability, as the repair work tends to add several extra days delay to the originally planned lead time. The main cause for damage is the loading and unloading of the cars. Responsiveness and lead times are dependent on the capacity profile of the fleet. The larger the capacities, the longer the load assembly lead time, but the lower the unit cost due to higher economies of scale. As can be seen in Figure 7, current transporter fleets are geared towards high volume steady shipments (i.e. 11 and 12 car capacity transporters). More frequent deliveries to the same locations would reduce the utilisation of these transporters given the same volume requirements at the distribution points. Another key constraint was identified as dealer opening times, which influence the flexibility when the new vehicles can be delivered. This restricted time window puts further stress on the optimisation of vehicle routing. This was a common issue raised at the interviews but also confirmed by the questionnaire responses. From the questionnaires, the perceived inhibitors to more responsive delivery were as follows. The highest ranking constraint was perceived to be the fluctuation in overall volume (including general seasonality). The second highest ranked constraint was the lack of information provided by the vehicle

Lead times Compound to dealer Table III. Lead times for vehicle transport from Average compound to the dealer Range (minimum-maximum)

Figure 7. Capacity profile of transporter fleets of surveyed companies

Actual (days)

Contracted (days)

1.96 1-3.5

2.31 1-5

manufacturers. Difference in size of cars was mentioned as a third major constraint, as it has an impact on load building ability. This has to be seen in conjunction with the information quality provided, as the actual information is often inaccurate. The fourth major constraint mentioned was the fluctuation in regional volumes.

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Cost and environmental impacts of the three-day car The primary reason for significant delays in the delivery process is due to cost. As the logistics companies have little forward information they require time to enable economic loads of new cars to be organised. The focus group research showed that at present the cost equates to around £60 per car delivered for an average car. This is a small proportion of the total delivery charge made to customers which includes stocking, administration, inspection costs (Kiff, 1997). The charge made to the customer is therefore, greater than the £60 transport cost. The cost to the logistics companies in providing this service is broken into fuel costs, labour costs, depreciation cost (of transporter fleets and other capital assets) and management/administration costs. The standard rates paid by the vehicle manufacturing companies are calculated on the basis of average costs to deliver plus some margin for profit, rather small, in fact the bulk of revenue is thought to be from non-transportation activities such as PDI, and vehicle remarketing (Kiff, 1997). As mentioned, the rates also allow for some saving of logistics cost by way of collection of vehicles on the way back from a delivery (a backhaul or backload). The results from the cost and environmental impact model show that if delivery times were reduced from the current three to four days to one day with the same assumptions operating, the cost per vehicle would increase by 33 per cent on average (see Figure 8). While this is very significant in terms of logistics cost, this is an increase of £20 per car and only represents 0.2 per cent of the typical total vehicle price. As Figure 8 shows, significant savings would be made in inventory and distribution centres. The model is based on the

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Figure 8. One-day delivery compared to current four days

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Figure 9. Increase in urban/ inter-urban kilometres driven in five UK regions

following assumptions: movement by 11-car transporters, re-active scheduling of transporters without knowledge of vehicle availability until passed to logistics companies, the same volume fluctuation across time as currently occurs and a reduction in backloading efficiency due to the time pressure of a one-day delivery. Figure 8 shows the increase in direct logistics cost per vehicle in terms of transportation from the factory to the compound or delivery region (‘‘outbound’’), the transportation cost from the compound to the dealers (‘‘dispersion’’) and the cost of empty runs on the return. The fact, however, that the costs for holding stock and running the compound would be obsolete with build to order means the ‘‘true’’ current costs are significantly more at approximately £210 per vehicle. The environmental impacts are based on the greater distances required to be driven by 11-car transporters as a result of the one-day delivery. In this case, depending on the region of the UK, distance can increase by up to 30 per cent. This means that fuel use per car delivered increases and, therefore, emissions affecting air quality. As the increase in distance is between retail outlets or delivery points, then the impact is within or between urban areas which is where the impact will be greatest due to population density (see Figure 9). It is estimated that using Government commissioned figures, for transport external environmental cost (DETR, 2000), this increases the external costs of delivering vehicles in the UK from £5.7 to £7.5 per car delivered (see the Appendix for assumptions). This refers to those costs borne by society (the taxpayer). The aggregate impact for the UK based on two million new cars per year would be an estimated increased environmental cost of £3.6 million. It could be argued that this is covered by fuel and road taxes already existing, but is still significant enough to warrant action to reduce these impacts. However this does not account for the impact of the international leg of imported vehicle journeys affecting non-UK countries.

The model was also used to estimate how a number of measures could reduce the financial and environmental cost of a one-day delivery system. The following initiatives would reduce the financial and environmental costs: in co-operating with vehicle manufacturers and other logistics companies by consolidating at fewer ports of entry, carrying out multi-franchise delivery and optimising backload potential, around £8 per car could be saved. Multifranchise (more than one marque on the carrier) delivery would save on the increased urban (dispersion) distances covered, reducing the environmental costs. This means that overall the urban distances would only increase by 11 per cent on average (compared with 50 per cent for single franchise delivery). Co-operation between more than two vehicle marques could save even more. The model further suggests that giving logistics companies two days notice to plan logistics (i.e. when the car is ordered) would enable in the region of £4 per vehicle to be saved. If a mix of smaller transporters were used (three-car and five-car as well as larger ones) then a further £9 per car could possibly be saved. From an environmental standpoint, smaller capacity transporters use more fuel per car transported. However, if these were used only for the urban/ inter-urban leg of the journey, the lower emissions of these vehicles would reduce the environmental costs to less than the current situation. In addition, if new technology expected to be in place by 2010 is used (DTI, 2000), such as low emission truck technology then there is no increase in impact (actually reducing impacts by 85 per cent) except in the area of traffic congestion. If all these measures were implemented then an overall saving of around £1 per car in operational costs compared with the current situation could be made. There may also be no significant increase in environmental impact (except in the area of congestion). The exact figures will depend on the size of the vehicle and the demand in the market place so this can only be seen as indicative and case-bycase assessment should be made for specific companies. Endemic inhibitors to responsive logistics The underlying study investigated the key inhibitors in current outbound logistics operations to more responsive delivery. In some cases, more flexible delivery times would reduce overall logistics costs, but may not be possible due to dealer operating licences and planning consents especially if dealers are located in urban areas. Secure drop-off points might be useful, particularly for urban areas. In the case of severe restrictions on traffic in residential districts, likely to be seen in the future, an alternative holding/customer collection point ‘‘out-of-town’’ may be appropriate. Table IV summarises the main inhibitors that could be established from the research. Furthermore, the cost implication of shortened transportation lead times was modelled, showing an expected significant increase under current assumptions. Using a set of mitigating measures, however, such as diversified transporter fleets and multi-franchised delivery, the costs and environmental impacts could be reduced to the same or below the current level even with a one-day delivery system. While countermeasures could be proposed to mitigate most of these

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Key inhibitor

Root cause

Possible solutions

Lack of forward planning information

Poor integration into VM systems, unreliable build at assembly plants No formalised or central process available

Online access to vehicle build systems to allow for forward planning Online freight-x-changes, formalised procedures under auspices of VM Diversified transporter capacities

Backloading needed to achieve efficient loading Transporter fleet profile Dealer opening times Performance measures

Table IV. Summary of key inhibitors

Damage

Current fleets are geared at high-efficiency and low unit-cost Inspections by dealer needed due to differentiated legal liabilities Current system optimised for low cost Any damage in transit leads to time delays

Share the risks through insurance pooling Lead time (on time to promise date/time) needs to be key measure Reduce damage and share insurance costs

constraints, the dealer opening times will continue to be a problem, as the transporter driver will have a limited time window within which to deliver all vehicles in any one day. Anecdotal evidence suggests that it is twice as efficient to deliver vehicles at night on a dispersion than it is during daytime. However, there are significant barriers to implementing mitigating measures relating to company cultural shift requirements, financial investment in capital equipment, institutional barriers to collaborative relationships and other arrangements. Conclusions and further research This research based on the UK automotive distribution suggests that responsive delivery is actually more cost efficient than the current system given the implementation of certain mitigating measures. Although physical transportation costs per vehicle would increase, a mix of lower stock management costs and mitigating measures would make this a viable proposition on a system level. This research hence strongly suggests that logistics optimisation needs to be undertaken with an holistic perspective, as the study of the logistics function in isolation is only likely to provide sub-optimal solutions. Without considering the influences on the other subsystems in the new vehicle supply system, the vehicle distribution function cannot be optimised much beyond unit costs, derived from questionable standard accounting procedures. This fact has already been widely criticised (Johnson and Kaplan, 1987), yet needs to be further emphasised here: systemwide optimisation of subsystems needs to be aligned with the accounting and performance measures. In the UK vehicle distribution system underlying this study, no customer-related measures are applied. Performance is measured as compliance with contracted delivery lead times, regardless of whether a

customer is waiting for the vehicle, or not. Gratification for the logistics service is based on standard rates per vehicle and distance – again regardless of the urgency of the transportation and the implications on the overall vehicle supply system in general, and customer service in particular. It might hence be argued that the mitigating measures proposed in this study should be implemented irrespective of a three-day car scenario in order to reduce delivery costs, increase service to the customer and improve environmental performance of the distribution system. Despite a good understanding of the operational cost structure though, future research will be required here to understand the full costs of, and barriers to, implementing these measures. These include investment in information infrastructure, smaller transporters, collaborative arrangements between logistics companies to better share resources, and joint insurance pooling to effectively share damage liability. Also, this research should be extended beyond the UK market, which in geographical terms certainly is not representative of all markets. For example there are only 12 sales outlets per 100,000 people compared with Germany and France which have 33 and 37 respectively (ECG, 2001). The question arises whether in a market with starkly contrasting metropolitan areas and long hauling distance in-between, such as the USA for example, such a responsive logistics system would also prove suitable. On a general note, we would argue that a greater emphasis in applied logistics and operations management research needs to be placed on the interaction between the subsystem under investigation and the wider (environmental) system. As Kuhn (1975) pointed out, the research problem should dictate the system boundaries. Focussing on a subsystem only bears the danger of fostering ‘‘island solutions’’, which overall are sub-optimal. The car industry is a classic example of such ‘‘islands of excellence’’, whereby the prevalent focus on manufacturing efficiency has led to ever more efficient factories producing ever growing vehicle stocks in the marketplace. Such a mistake needs to be avoided in future logistics and manufacturing research. Note 1. The 3DayCar programme is a three-year study of the UK automotive supply chain. The objective is to develop a framework which would allow for vehicles to be built to customer order in minimal lead times. It is a collaborative programme between University of Bath, Cardiff University and the International Car Distribution Programme. The authors wish to acknowledge the Engineering and Physical Sciences Research Council of the UK and the programme sponsors for supporting this work. Further information on the 3DayCar Programme can be found at www.3daycar.com References Abrahamsson, M. (1999), ‘‘Time-based distribution’’, in Hadjiconstantinou, E. (Ed.), Quick Response in the Supply Chain, Springer-Verlag, Heidelberg. Ackoff, R.L. (1971), ‘‘Towards a system of systems concepts’’, Management Science, Vol. 17 No. 11, pp. 661-71.

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Automotive-World (2001), Build-to-Order, Just-auto.com, available at: www.just-auto.com/ features (accessed January 2001). Bertanlanffy, L. (1973), General Systems Theory – Foundations, Development, Applications, Penguin Books, Harmondsworth. Bowersox, D. and Closs, D. (1996), Logistical Management: The Integrated Supply Chain Process, McGraw-Hill, New York, NY. Business Wire (2001), ‘‘Gartner survey shows US consumers prefer concept of build-to-order when buying an automobile’’, Business Wire, 8 February. Christopher, M. (1992), Logistics and Supply Chain Management. Strategies for Reducing Costs and Improving Services, Prentice-Hall, London. Connelly, M. (2000), ‘‘UPS helps Ford speed deliveries’’, Automotive News, Vol. 74 No. 5860, p. 3. Daskin, M.S. (1987), ‘‘Logistics: an overview of the state of the art and perspectives on future research’’, Transportation Research, Vol. 19a No. 5/6, pp. 383-98. DETR (1999), Sustainable Distribution, White Paper, Department of Environment, Transport and the Regions, London. DETR (2000), NERA Report on Lorry, Track and Environmental Costs, Department of the Environment, Transport and the Regions, London, August. DTI (2000), Report of the Alternative Fuel Group of the Cleaner Vehicles Tack Force. An Assessment of the Emissions Performance of Alternative and Conventional Fuels, Department of Trade and Industry Automotive Directorate, London, January. Easterby-Smith, M., Thorpe, R. and Lowe, A. (1991), Management Research – An Introduction, Sage Publications, London. ECG (2001), Survey on Vehicle Logistics, M-42589-2001, European Car-Transportation Group of Interest, Brussels. Elias, S. (2000), ‘‘New vehicle buyer behaviour – quantifying key stages in the consumer buying process’’, paper presented at 3DayCar Annual Year End Conference, Cardiff, December. Fawcett, S.E. and Vellenga, D.B. (1992), ‘‘Transportation characteristics and performance in Maquiladora operations’’, Transportation Journal, Vol. 31 No. 4, pp. 5-16. Germain, R. (1989), ‘‘Output standardisation and logistical strategy, structure and performance’’, International Journal of Physical Distribution and Logistics Management, Vol. 19 No. 1, pp. 21-9. Gregory, J. (1999), ‘‘Vehicle logistics and the three-day car programme’’, paper presented at 2nd 3DayCar Conference, Stratford upon Avon, December. Hall, R. (1993), ‘‘The three-day car challenge’’, Target, Vol. 9 No. 2, pp. 21-30. Hertz, S., Johansson, J.K. and Jager, F. (2001), ‘‘Customer-oriented cost cutting: process management at Volvo’’, Supply Chain Management: An International Journal, Vol. 6 No. 3, pp. 128-41. Holweg, M. and Jones, D.T. (2001), ‘‘The challenge of building cars to order: can current vehicle supply systems cope?’’, in Taylor, D.T. and Brunt, D.C. (Eds), Manufacturing Operations and Supply Chain Management, Thomson International, London. Holweg, M. and Pil, F. (2001), ‘‘Successful build-to-order strategies start with the customer’’, Sloan Management Review, Fall, pp. 74-83. Holweg, M., Judge, B. and Williams, G. (2001), ‘‘The three-day car challenge: cars to customer order’’, Logistics Focus, November, pp. 36-44. Hunter, A. (1990), Quick Response in Apparel Manufacturing, The Textile Institute, Manchester. ICDP (2000), Fulfilling the Promise: Is there a Future for Franchised Car Distribution?, International Car Distribution Programme, Solihull.

Johnson, T. and Kaplan, R.S. (1987), Relevance Lost – The Rise and Fall of Management Accounting, Harvard Business School Press, Boston, MA. Kast, F.E. and Rosenzweig, J.E. (1981), Organization and Management – A Systems and Contingency Approach, McGraw-Hill, London. Kiff, J.S. (1997), ‘‘Supply and stocking systems in the UK car market’’, International Journal of Physical Distribution and Logistics Management, Vol. 27 No. 3/4, pp. 226-43. Kramer, N. and De Smit, J. (1977), Systems Thinking – Concepts and Notions, Nijhoff Social Sciences Division, Leiden. Kuhn, A. (1975), ‘‘Boundaries, kinds of system and kinds of interaction’’, in Melcher, A.J. (Ed.), General Systems and Organization Theory: Methodological Aspects, Kent State University Press. Kurt Salmon Associates (1993), Efficient Consumer Response, The Food Marketing Institute, Washington, DC. Lapidus, G. (2000), E-Automotive: Gentlemen, Start Your Search Engines, Goldman Sachs, New York, NY. Lowson, B. and King, R. (1999), Quick Response: Managing the Supply Chain to Meet Customer Demand, John Wiley & Sons, Chichester. Miemczyk, J. and Holweg, M. (2001), ‘‘Building the ‘three-day car’: implications for inbound logistics operations’’, paper presented at Logistics Research Network Conference, Edinburgh, September. Monden, Y. (1983), Toyota Production System, Industrial Engineering and Management Press, Norcross, GO. Rother, M. and Shook, J. (1998), Learning to See: Value Stream Mapping to Create Value and Eliminate Muda, The Lean Enterprise Institute, MA. Stalk, G. and Hout, T. (1990), Competing Against Time: How Time-based Competition is Reshaping Global Markets, Free Press, New York, NY. Suri, R. (1999), Quick Response Manufacturing, Productivity Press, Portland, OR. Williams, G. (1998), European New Car Supply and Stocking Systems, 1997, International Car Distribution Programme, Solihull. Womack, J. and Jones, D.T. (1996), Lean Thinking: Banish Waste and Create Wealth for Your Corporation, Simon & Schuster, New York, NY. Womack, J., Jones, D.T. and Roos, D. (1990), The Machine that Changed the World, Rawson Associates, New York, NY. Wu, H.W. and Dunn, S.C. (1995), ‘‘Environmentally responsible logistics systems’’, International Journal of Physical Distribution and Logistics Management, Vol. 25 No. 2 pp. 20-38. Appendix. Impact model description Background The impact model was designed and implemented with one of the project’s vehicle logistics company sponsors (see Figure A1 for details of the model). In working together with the logistics company developing the model it was possible to ensure that figures were realistic and that costs would equate as closely as possible to real-world situations (as the fuel costs, labour costs and depreciation costs were actual figures). In addition, data from the questionnaire provided the data for typical transporter capacity and fuel use. Model inputs Data from two vehicle manufacturers on their dealer locations and volumes to each dealer were used to calculate times and distances for delivery in five UK regions and the location of the two VM plants (as shown in Figure A2). Assuming the use of standard 11-car transporters, the

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Figure A1. Details of the impact model

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Figure A2. UK delivery regions and two VM plants number of drop-points per transporter were calculated. A period of four days was used in the current scenario for load planning and actual transportation. A period of one day for delivery was used to assess the impact of a three-day car (order to delivery lead time). To reduce the impact a number of manipulations were used on the input data. These were: .

Multi-franchise delivery (vehicles from both manufacturers on one transporter – but including a diversion dogleg to collect from the second site) to reduce the dispersion effects (i.e. capable of delivering to dealers closer together).

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Smaller transporters were tested so that fewer drops (and less dispersion distance and time) would be required. These included nine-car, five-car and three-car transporters.

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Forward planning information giving two days to plan the loads to help find a backload trip.

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Rationalisation of ports to see the effect of more volume from fewer port distribution points (again enabling backloading).

Model description The model was based on calculation over a number of stages using spreadsheet software and standard off-the-shelf route planning software to retrieve distances from the post codes of the dealer networks modelled. Sponsor figures were used to calculate impacts on logistics costs. The cost calculations were based on standard rates of pay for delivery of medium sized cars and the breakdown was according to mileage costs for capital equipment use (depreciation) and labour costs based on delivery hours. As logistics firms run the compounds these costs were used as the inventory carrying costs, plus typical rates for financing stock (carried between the VM and dealers and not logistics). Owing to sponsor confidentiality these base cost figures cannot be revealed. The environmental calculation was based on distances covered to each region by transporters, including trunking; dispersion and backhaul then normalised to per car figures.

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The fuel use is based on average fleet figures for different transporter types (11-car, nine-car, five-car and three-car carriers) taken from the questionnaire survey. The external environmental costs of transport were based on National Economic Research Associates (NERA) estimations of HGV per kilometre emission costs (From £0.05 to £0.25 per km depending on truck type – based on EuroII or III – and road type based on motorway, inter-urban or urban roads (DETR, 2000). These include health costs, ecological damage, noise impacts and global warming impacts (congestion costs were not included in these external cost estimates). Model outputs The output from the model was based on average figures for the five regions studied. The output gave possible delivery times for a one day lead time (ensuring the vehicle arrives within a typical dealer opening window of 9 a.m. to 5 p.m.) and consequent distance and cost implications. The output provided per car comparisons of the output for the various scenarios tested.

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The impact of e-commerce on supply chain relationships Susan L. Golicic, Donna F. Davis, Teresa M. McCarthy and John T. Mentzer The University of Tennessee, Knoxville, Tennessee, USA Keywords Internet, Supply chain, Relationship marketing, Uncertainty Abstract E-commerce is such a new phenomenon that little research has addressed the effects it has on relationships in supply chains. A qualitative study was conducted with eight e-commerce companies in order to construct theoretical relationships with which to develop a grounded theory of the impact of e-commerce on managing supply chain relationships. The e-commerce environment was perceived as highly uncertain, stemming from increased information visibility and dynamic market structures. A stronger emphasis on relationship management as part of business strategy enables managers to manage uncertainty better. Interestingly, increased information does not decrease the perception of uncertainty, but creates more uncertainty. As logistics is the function often involved with both information and relationship management within the supply chain, it may prove to be invaluable in helping firms succeed in this dynamic environment. Our research also found support for the application of transaction cost analysis and the resource dependence theory in explaining interorganizational relationship formation in e-commerce.

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851 Received May 2001 Revised December 2001 Accepted October 2002

Introduction A supply chain can be defined as three or more organizations directly linked by one or more of the flows of products, services, finances, and information from a source to a customer (Mentzer et al., 2001). Management of the supply chain is essentially management of the relationships and activities among the member organizations. These relationships range from single transactions to complex interdependent relationships. As the business environment becomes more complex, organizations recognize that many benefits can be obtained from closer, long-term relationships (Ganesan, 1994). Day (2000) ventures to say that committed relationships are among the most durable of advantages because of their inherent barriers to competition. The goal of supply chain management is for member organizations to work together in close, long-term relationships to increase the competitive advantage of the supply chain as a whole (Mentzer et al., 2001). The phenomenon referred to as ‘‘the next business revolution’’ – the nexus of computers, networks, people, and business goals for purposes of selling goods, services, and information – is an innovative way to cut costs, grow markets and profitability, and improve shareholder return relative to traditional business methods (Palmisano, 1998). This combination is the business phenomenon The authors wish to thank FedEx, Lucent Technologies and Cenedian for co-sponsoring the research. They also wish to thank the participating companies and the editor and reviewers for their insightful comments.

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referred to as e-commerce: the trade of goods and services that takes place electronically such as over the Internet (Dolber et al., 1998). Projections in the business-to-business (B2B) e-commerce arena are staggering, ranging from $1.3 trillion by 2003 (Dolber et al., 1998) to over $8 trillion by 2005 (Pastore, 2001). The ratio of online business trade to traditional channels is projected to vary greatly by industry, from a high of over 20 percent for computing to just over 1 percent for industrial equipment (Goldman-Sachs & Company, 1999). While the downturn in e-commerce stock valuations in 2000 resulted in the failure of many e-commerce ventures, the growth in B2B e-commerce is still on track. In 2000, the value of worldwide B2B Internet commerce sales transactions surpassed $433 billion, a 189 percent increase over 1999 sales transactions (Pastore, 2001). The emergence of business on the Internet brings a new set of challenges to coordinating supply chain activities. Firms conducting business electronically face several differences in the e-commerce business environment that may have a significant impact on managing relationships in the supply chain. Challenges that are frequently mentioned in both the popular press and academic literature are the speed of business and the level of connectivity among supply chain organizations. These differences can lead to higher levels of uncertainty and changes in the traditional structures of supply chains, which can influence the success of supply chain relationship management. Because this phenomenon is so new, little research has addressed the impact of e-commerce on relationship management. As companies attempt to achieve success in managing relationships within their supply chains, the e-commerce environment presents organizations with new dynamics to manage. We conducted a qualitative research study to determine how e-commerce companies perceive the new environment and to explore how they are managing relationships in their supply chains under these new conditions. The purpose of this paper is to build a grounded theory of the impact of e-commerce on relationship management in the supply chain using the study findings, supported by existing research in e-commerce and relationship management. The following section describes the methodology used for the grounded theory study. We then present findings on the e-commerce environment that emerged from analysis of data collected from informant companies and from existing literature. In the fourth section, we discuss the impact of this environment on relationship management as reported by the companies studied and supported with transaction cost economics and resource dependence theories. We then offer implications of this research for both practitioners and researchers based on the findings. Finally, limitations and opportunities for future research are presented. Research methodology An exploratory research study was conducted to examine the impact of the dimensions of e-commerce on managing relationships in the supply chain.

Because the purpose of this research project was to develop an understanding of this new phenomenon, we adopted a theory-building, qualitative research design. Qualitative methods are ideally suited to research substantive areas about which little is known (Stern, 1980). Strengths of qualitative research include realism, significance, richness, high face validity, and potentially a more precise way to assess causality (Miles, 1979). Such strengths are attributed to the fact that the data come directly from the participants involved in the phenomenon. The findings are, therefore, not anecdotes, but rich verbal descriptions reported in the words of the informants, often incorporating direct quotes. Verbal descriptions offered in the findings are illustrative of repeated patterns along with their contextual variations that emerge from the data. These descriptions are systematically analyzed to develop theoretical relationships among the themes and provide important implications for practice and research. Weaknesses to qualitative research that need to be considered during the research include an overabundance of variables due to the amount of data, and a lack of control (Miles, 1979). Specifically, the qualitative method of grounded theory is helpful in understanding processes people use to cope with, respond to, or alter their environment. ‘‘Social phenomena are complex: Thus, they require complex grounded theory. This means conceptually dense theory that accounts for a great deal of variation in the phenomenon studied’’ (Strauss, 1987). Thus, it is the appropriate methodology for a new and previously unresearched phenomenon such as e-commerce. Grounded theory is the process by which theory is derived from data, systematically gathered and analyzed through the research process (Strauss and Corbin, 1998). It was chosen for this research project because it enables interpretive analyses and facilitates theory construction – the two objectives of this research project. The rest of this section describes the general methodology of grounded theory followed for this project, the sampling procedures and details of the data collection process, the data analysis procedures, and the steps taken to ensure quality of the interpretations. Appendix 1 contains a diagram (Figure A1) summarizing the grounded theory research activities (adapted from Flint, 1997). Grounded theory Grounded theory starts with choosing the phenomenon to study; in this case, the phenomenon is the impact of e-commerce on relationship management in the supply chain. The next step is to choose a setting likely to contain the phenomenon in varying states. The setting for the present research is described in more detail in the sample section. Interviews are the primary data collection method used for grounded theory, along with document examination, review of relevant literature, and informal observations (Strauss and Corbin, 1998). Using multiple data sources allows for triangulation in data analysis, which provides more evidence to support the developing theory. For this study, interviews

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were conducted, company documents were reviewed where they existed, and literature on e-commerce and supply chain management was examined. The design of this research remained flexible throughout the study, as grounded theory intends. As Patton (1990) states, inquiry must adapt to the emergent findings. The researcher must avoid being locked into an inflexible design that eliminates the ability to respond to situations that would lead to new paths of discovery. Grounded theory methodology does not follow a sequential process of conceptualization, data collection, and data analysis. The grounded theory methodology requires analysis of data immediately on collection, and subsequent return to sampling for further data collection based on analytical findings. Data analysis is repeated at each stage of data collection, and the emergent findings are organized into themes, which are then integrated into theory (Swan, 1985). Moving back and forth between data collection and analysis moves the research in the direction that the developing theory leads. Detailed descriptions of the procedures applied to the present research are discussed further in the following sections. Sample The unit of analysis for this study was the firm, and the sample was purposive; targeted companies were chosen based on an attempt to locate the phenomenon of interest. Eight B2B companies conducting business electronically agreed to participate. Two to four employees responsible for activities related to management of the supply chain and its relationships at each company were interviewed for a total of 22 on-site, in-depth interviews. McCracken (1988) states that eight respondents is sufficient for many research questions; therefore, the number of participants for this research were more than enough to tap the domain of the impact of e-commerce on supply chain relationships. The companies represented both brick-and-click (traditional businesses now conducting transactions over the Internet) and pure-play firms (only conducting business via the Internet). They also represented various industries, sizes, and lengths of time in e-commerce. These companies were chosen based on the likelihood that the phenomenon would manifest itself in different ways, i.e. both similar and contrasting cases might be found. This was done to meet the grounded theory requirements of specifically and systematically exploring instances of variation for each variable which allows the constructed theory to incorporate as much of the complexity of reality as possible (Strauss and Corbin, 1998). Data collection In-depth interviews are the primary method used for grounded theory data collection; the interview helps thoroughly exhaust concepts (Strauss and Corbin, 1998). A protocol was developed by the research team to guide the interviews and was reviewed by colleagues familiar with the phenomenon of interest. Initially, interview questions were purposefully broad to keep them

flexible. As the research study progressed, they became more focused, eventually leading to theoretical sampling. During theoretical sampling, interviews are driven by concepts derived from the evolving theory and based on the intention of making comparisons in order to maximize opportunities to discover variations and to densify categories (Strauss and Corbin, 1998). All interviews were conducted by two members of the research team and were audiotaped for subsequent transcription to minimize researcher bias and support data quality and reliability. Each interview began with an introduction and questions to ascertain demographic data. This established a rapport between the interviewers and the participants and helped create an understanding of the purpose of the study (Strauss and Corbin, 1998). All respondents were assured of confidentiality. The general question, ‘‘how does your company operate in e-commerce’’ was asked to begin the qualitative portion of the interview. This was followed by prompts as necessary to tap the domain of supply chain relationship management practices in the e-commerce environment. The prompts included questions such as how information was collected, what it was used for, what factors influenced supply chain relationship management, what processes or systems were used, and how success was defined, as well as others that emerged from the interview content. Researchers recorded field notes and memos to capture thoughts, feelings, observations, or insights following the interviews. Interviews were conducted until theoretical saturation was reached; that is, when the concepts were exhausted, and no new information came from interviews. In addition to interviews and field notes, company documents were reviewed, and literature on supply chain management and the e-commerce environment were examined to triangulate the findings. During data collection, even though the aim is to get close to the situation being explored, the researchers must periodically step back in order to maintain skepticism so as not to introduce bias (Strauss and Corbin, 1998). This is also referred to as ‘‘manufacturing distance’’ from the research (McCracken, 1988). The researchers involved in this study have studied e-commerce, interorganizational relationships, and supply chain management. Bringing knowledge and experience to the study is important in order to provide theoretical sensitivity (Strauss and Corbin, 1998). However, there must be a balance between what has been explored prior to data collection and restraining that knowledge to ensure that the theory comes from and is grounded in the data. Data analysis Grounded theory methodology was chosen due to its appropriateness for the research question (determining ‘‘how’’) and the phase in the scientific process (exploratory research of a new phenomenon). Data analysis began immediately following the first interview and continued throughout the data collection process, allowing the developing theory to direct the research. Specific

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techniques prescribed by grounded theory methodology were used to analyze the data collected (see Strauss and Corbin, 1998). Transcribed interviews, memos, field notes, and company documents were all coded in order to categorize, name, and identify properties and dimensions of the research. The basic process of analysis involved continually questioning the information obtained and making comparisons among coded sets of data. These techniques allowed the theoretical concepts to emerge from the data. Over 700 pages of interview transcripts and company documents were systematically organized and coded independently by two members of the research team, which resulted in 95 categories of meaning. The two researchers then reconciled their codes, and any initial discrepancies were resolved by consensus. A third member of the research team then reviewed the transcripts to verify reliability of the codes. Three members of the research team met on three occasions during the data collection and analysis to discuss emergent themes, their definitions, and relationships. As a result, the categories of meaning were linked into 17 major themes. The fourth member of the research team reviewed the themes and samples of text coded within the themes. Coding was facilitated with the latest QSR qualitative research software, NVivo (QSR International Pty Ltd, 2000), which is specifically designed for performing indexing, searching, and theorizing on qualitative data. All three types of coding – open, axial, and selective – recommended by Strauss and Corbin (1998) for grounded theory were conducted. Memos, field notes, and company documents were used to integrate and refine the theory and enabled a comprehensive understanding of the phenomenon. Quality of results The imperative to illustrate that results obtained from qualitative research methods are of the highest quality parallels the importance of measuring validity and reliability in quantitative research. The grounded theory researcher must have empathetic insight for data collection and analysis and neutrality toward the emergent themes and findings. Complete objectivity is not possible, and complete subjectivity is not credible (Patton, 1990, p. 40). Quality is therefore supported through the rigor of the research process and trustworthiness of the data. Five methods for supporting the rigor of the findings were used for this research. First, to minimize researcher bias and improve the reliability of the subsequent interpretations, two researchers conducted each interview. Each interview was transcribed verbatim from audiotapes by a professional transcriber who was unfamiliar with the research objectives. Second, the researchers who conducted the interviews independently coded and then reconciled the transcribed interviews to demonstrate agreement in the constructs that emerged. A third researcher then reviewed the coding for additional inter-coder reliability (Potter and Levine-Donnerstein, 1999). Third, member checks (having interview participants review the interpretations of

their interviews) were done with each interview participant to ensure the data analysis was both complete and credible (Hirschman, 1986). Fourth, triangulation of data from different sources was used to provide additional evidence to support the theory developed. Finally, colleagues familiar with the constructs reviewed results to ensure they were understandable and confirmable (Hirschman, 1986). Evaluating the quality of grounded theory research involves assessing the trustworthiness of the data, theory, research process, and empirical grounding of the research (Strauss and Corbin, 1998). Miles and Huberman (1994) provide several questions grouped into five standards that can be used to address the quality issue. These standards correspond to the notions of validity and reliability used in quantitative research and are presented in Appendix 2, Table AI, along with specific actions taken in this research to address each standard. The nature of the e-commerce environment The in-depth interviews produced numerous themes surrounding e-commerce and supply chain relationship management. These themes were examined in light of the context in which they were collected in the interviews and were compared to information in the literature to determine relationships among them. Emergent themes specific to the nature of conducting business electronically were speed, connectivity, information visibility, market structure, and uncertainty. Each of these is discussed in detail. Speed When interview respondents spoke of the speed of e-commerce, they focused on two components, the increasing rate of change and the pace of decision-making. In discussing how rapidly business takes place in the e-commerce environment, respondents talked about ‘‘Internet time’’ and that one year in e-commerce is equivalent to four years in the traditional business cycle. Regardless of the industry or type of company, they agreed that electronic business evolves very quickly. One respondent from a brick and click company said, ‘‘this thing is moving at 150 miles an hour. Business models are morphing at incredible speed,’’ while their traditional side is ‘‘moving 20 miles an hour.’’ Another respondent summed up the rate of change in the following quote: You are pulled in all these different directions and have a lot of responsibility put on you where [you] probably would have to go through a good five or ten years in another corporation before you get that type of responsibility. Things transpire here, inside an Internet company, more quickly than they would elsewhere.

The executives interviewed also stressed the pace at which they needed to make decisions in order to stay ahead of competition. One respondent said, ‘‘In this business, laggards lose, and they lose because somebody else innovates a solution that captures the customer.’’ Another stated, ‘‘We want to maintain our lead position because our lead is really just about a city block. We’ve got to

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keep up real fast here.’’ Because e-commerce represents an emerging market, companies are fighting for market share, so they are trying to get to market with their offerings faster than companies competing in the traditional business environment. Respondents felt their companies have had ‘‘to grow basically twice as fast to ever make any kind of headway.’’ One quote from a respondent epitomized how e-commerce companies view decision-making in this environment: It’s just very dynamic. You don’t sleep. You make decisions much faster. You may take less data points to make a decision. You take higher risks. From a traditional business side, we’ve been analyzing something five, six times . . . we looked at so many different aspects. I think in the Internet world, you just do it.

The literature echoed these two components of speed. Stalk (1988) posits that a strategic shift toward time-based competitive advantage began in the late 1970s with the flexible manufacturing concept. Faster execution of processes allowed companies to reduce costs, improve quality, and attract the most profitable customers. The speed at which business operates electronically is an attractive aspect of e-commerce. It is business in real time where quick decision-making is key. CEOs of e-commerce companies speak of ‘‘doing a deal a minute’’ and being forced to ‘‘be on your toes every minute, every second’’ (Colvin, 1999). Today, the e-commerce environment has intensified the strategic emphasis on speed, enabling further reduction of product cycle time, increased rate of new product introductions, and increased speed of customer transactions (Greenstein and Feinman, 2000). Connectivity Interaction and market access emerged as the two components of connectivity in the interviews. Nearly all respondents spoke of the network effect – being interconnected to their suppliers and customers via the Internet. Companies have begun to rely on the ‘‘system-to-system connection with strategic suppliers and customers.’’ They view e-commerce as a way to open and remove technology barriers among supply chain members and to bring everyone in the network closer. The Internet allows companies to communicate and share information across the supply chain. One respondent stated, ‘‘Now we have Web-hosted technology which allows me to share information on one common data platform and provide different views or uses for folks up and down the supply chain.’’ This connectivity helps companies manage the shared information – as one respondent said, ‘‘when you have big volume flows of data, it (the Internet) has proven to be more reliable and efficient for that integration – systems-to-systems integration.’’ The second aspect of connectivity – market access – illustrates the ability of companies to access customers they could not reach prior to e-commerce. One respondent said that connectivity allowed them ‘‘to understand what customers need.’’ Another company talked about how the Internet would give them a ‘‘cost-effective way to reach out and touch’’ smaller customers. Some companies

spoke of gaining ‘‘critical mass’’ through connectivity. Critical mass is the threshold of network members (suppliers and customers) needed to make their business model successful. A respondent summarized this idea in the following quote: As the size of the network grows, the benefits grow exponentially. So the answer is we use [our business model] to bring other companies in that grow the network fast, and let us achieve critical mass quickly.

The two components of connectivity – interaction and market access – were supported by the e-commerce literature as well. Hamill (1997) asserts that the key to effective use of the Internet is understanding the concept of connectivity. On the Internet, information flows are multidirectional. Compared to the unidirectional, one-to-many communication of traditional business, communication on the Internet has been described as many-to-many (Hoffman et al., 1995). Connectivity provides for a level of interaction that is not as efficiently achieved in the traditional business environment. In addition to providing the opportunity for firms to strengthen relationships with individual customers, the electronic environment also expands the reach of companies as they seek to develop their customer bases. Firms are no longer restricted to markets by their geographic locations. The fastest growth rates for the electronic environment are outside the USA (Cairncross, 1997). As global access grows, new markets are opening. Thus, the connectivity of e-commerce facilitates the extension of electronic storefronts to any location with online access. Information visibility E-commerce technology provides information visibility throughout the supply chain. Respondents spoke of being more responsive to supply chain members’ needs due to the visibility of real time data via the Internet. One respondent specifically said, ‘‘there’s a tremendous amount of value for somebody who can deploy those solutions effectively, link someone to their trading partners, and allow them total visibility to the supply chain in ways that they haven’t had before.’’ One company talked about their customers being able to access and ‘‘check everything where they want,’’ and that they ‘‘also have visibility to ask what’s the status of a particular move or transaction.’’ Supply chains can achieve a great deal of efficiency due to visibility as stated in the following respondent’s quote: If you can integrate in your system the components on production planning and scheduling and inventory control, and do that through the supply chain, then you can really get into justin-time. The procurement officer and the customer enter their requirements, and that gets messaged directly into our system that’s working on all of our production and inventory scheduling. That goes directly in, and then we can feed that back around to the customer so we complete the loop.

The literature also discusses the value of information visibility in supply chains. Information helps managers plan, execute, and evaluate results with

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greater precision and speed (Rayport and Sviokla, 1995). Technology that permits complete visibility to this information enables businesses to manage their operations more effectively. Visibility of information across the supply chain as opposed to information from one supplier or customer provides for better management of the supply chain as a whole rather than as a set of discrete parts. Companies have transformed this kind of information visibility into competitive advantage (Rayport and Sviokla, 1995), not just for themselves, but also for their supply chains. However, visibility can also lead to information overload as companies have access to more information than they are accustomed to managing, potentially resulting in confusion and additional uncertainty in the connected environment. Market structures The fast pace needed to operate in the e-commerce environment and access to new markets has impacted traditional market structures. Continuously adapting to the rapid rate of change, respondents commented on the difficulty encountered in managing supply chain relationships in dynamic market structures. As companies expand into new markets, they begin to work with traditional competitors and compete with suppliers and customers. One respondent said, ‘‘One of the biggest changes that I’ve seen is when I start to talk about who I compete with versus who I work with.’’ Companies have to learn to manage the conflict that is created when this occurs. New competitors are materializing – from new intermediaries entering the market to existing supply chain members taking advantage of new opportunities to reach customers. One respondent told of having to work harder to stay in contact with customers because they ‘‘risk losing the direct contact with the end customer due to (a new intermediary). And once you get in that position, then we become even more commoditized and we lose all pricing power.’’ Another respondent gave an example of how one of their large customers is now competing directly with them and clouding the traditional distinction among supply chain members: On the one hand they are a huge customer of ours, but they’ve made huge investments into the technology side of the business, into logistics. So now suddenly, we are finding that they are trying to interject themselves in our business relationships between us and some of our very largest customers. So while they’re a huge customer, we’re also wondering just what are they doing. For example they’re taking over (logistics for a) huge customer of ours. More than a hundred million dollars a year we do business for and suddenly, here is somebody that’s trying to get between us and them.

According to the literature, the differences in e-commerce have driven a shift in market structures across industries. The emergence of the electronic marketspace provides the opportunity for manufacturers to market directly to customers, eliminating the need for traditional channel intermediaries. At the same time, new ‘‘cybermediaries’’ are stepping between trading partners. As e-commerce opens new opportunities for channels to consumers, the potential

for channel conflict is magnified (Aldridge et al., 1997). In this new environment, functions and a relative power shift among all members of the value chain – suppliers, manufacturers, retailers, and consumers – blurs the boundaries among players in traditional industry structures (Davis and Meyer, 1998; Glazer, 1991; Weiber and Kollmann, 1998).

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Uncertainty The dynamism of markets and the increased information visibility facilitated by the speed and connectivity of e-commerce present an uncertain environment. One respondent described the environment in the following quote:

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In the Internet space, it changes that we deal with the customers and then deal with the suppliers, and it’s all very new to them and it’s scary, right. No longer can I get up and go to work like I used to get up and go to work. I don’t know what’s coming down the path.

Another respondent compared e-commerce on the Internet to the renaissance, ‘‘Everything’s evolving, changing. You know, really the whole structure of the world in some ways is being, you know, touched and modified, changed, and I think that’s true.’’ Companies are making decisions without complete information, making outcomes more uncertain. However, many respondents view the uncertainty as exhilarating. One respondent stated, ‘‘a lot of it is being able to work in the unknown. But you know, as a business person I think it’s very exciting.’’ The literature discusses the characteristics of uncertainty as dynamism, technological intensity, and change – all of these being characteristics of the e-commerce environment. Achrol and Stern (1988) found support for their hypothesis that dynamic or shifting environments create increased uncertainty for decision makers. In discussing the outcomes of uncertainty, Osborn and Baughn (1990) proposed technological intensity as likely to reflect high uncertainty. In the following quote from his article on network organization, Achrol (1997) describes how advances in technology have led to increased external uncertainty faced by firms: Environments are being disturbed by an increasing pace of technological change, fueled by an explosion in the growth and availability of knowledge. The proliferation of technological and managerial know-how is dismantling economic and political boundaries and slowly but surely moving the world toward a borderless marketplace. The impact of technological change is intensified in global environments that are densely interconnected and interdependent.

E-commerce represents the kind of environment of which Achrol speaks. Summary Based on themes that emerged from our research, the nature of the e-commerce environment can be described as shown in Figure 1. E-commerce has two primary dimensions, that make e-commerce very different from the traditional business environment.

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These are: (1) speed; and (2) connectivity. Most respondents discussed how rapidly business takes place in the ecommerce environment and how e-commerce allows them to be interconnected to all their suppliers and customers. The speed of e-commerce impacts the structure of the market by inducing companies to bypass intermediate steps in the supply chain in order to conduct business faster, thereby creating different market structures. The connectivity of e-commerce also contributes to new market structures through the access it provides to new customers. Information visibility is achieved through connectivity. Respondents said the Internet allows communication and the sharing of information providing visibility across the supply chain. Information visibility and dynamic market structures directly create a perception of uncertainty. As shown in Figure 1, the dimensions of speed and connectivity lead to dynamic market structures and information visibility, which then lead to uncertainty. The impact of e-commerce on relationship management The differences in the e-commerce environment impact supply chain relationship management for those companies that conduct business electronically. Because supply chain management is essentially managing the relationships among the companies in a supply chain, we propose that the impact of e-commerce on supply chain management occurs primarily through the management of relationships. Relationship management was a prominent theme that emerged from the respondent interviews. As companies deal electronically with more suppliers and customers in a variety of supply chain structures, they found managing relationships to be very important. One respondent stated, ‘‘I would say more and more, it’s going to become more of a relationship driven business for us.’’ Even though many of the transactions can be accomplished via the Internet, some companies said they would never move away from providing face-to-face contact with their customers, as one respondent commented: One of our market differentiators is that we use a personal account manager model even for our lowest value customers, meaning you’ll have one person that does business with you. You will have a person with a name and an extension and an email address, and you’ll probably know that person’s schedule and you’ll call them. They will do business with you and ideally create a relationship that is truly a consultative relationship – that in itself presents value.

Figure 1. Impact of e-commerce on relationship management

Whether it is a partnership or strategic alliance, companies operating in the e-commerce environment are stressing relationship management in order to combat uncertainty – by providing stability and obtaining needed resources. One respondent stated his company’s goal ‘‘is to get into the relationships with customers where it’s a collaborative, one to one, really so hard to be replaced. They know you and you know them and there’s a fair amount of trust in there.’’ Another respondent talked about how the Internet helps to build stronger relationships: You’ve got to find ways to involve yourself and get them involved in our meetings so that they understand so that we start earning credibility with them so that you can take them into that collaborative thing. They’re not going to do anything unless they trust you. So the Internet can help us with accurate data. You know, if you have zero defect transactions, you start earning credibility with the customers and you’re really not going to be able to establish that collaborative relationship until you do.

In order to maintain flexibility in this uncertain environment, e-commerce companies support basic operations with a minimal in-house staff and obtain additional resources through relationships with other companies. Many partner with information technology providers to acquire a technology infrastructure, while some partner with consulting firms to provide human resources to achieve scalability for growth. One respondent noted, ‘‘the biggest challenge for us is scalability . . . the group is going to reach capacity very quickly as we get a number of clients, so the critical part of our business was to build and partner with folks.’’ Companies also realize the importance of partners for international business, as one respondent noted, ‘‘entering the South American market, and particularly the Asian market, we’re going to have to have some strong strategic alliances, some strong partners who are doing business in those markets to be successful.’’ Successfully competing in dynamic product markets requires resources, capabilities, and strategies that are different from those likely to lead to competitive success in more stable markets (Sanchez, 1993). Higher uncertainty through dynamic market structures and increased information visibility in the e-commerce environment have caused respondents to place a stronger emphasis on relationship management in order to secure these resources, capabilities, and strategies. A great deal of research exists that supports a positive relationship between dynamic structures and environments and the formation of relationships such as partnerships (Lambe and Spekman, 1997; Mentzer et al., 2000) and alliances (Adler and Scherer, 1999; Cravens et al., 1996; Dahlstrom et al., 1996; Lambe and Spekman, 1997). Achrol (1997) adds that closer relationships between firms offer higher levels of coordination, greater stability, and flexibility. Increased visibility can actually make it more difficult to manage the incredible amounts of information available. Companies therefore emphasize relationship management to overcome the uncertainty from information overload.

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Firms internalize fewer resources and capabilities in highly uncertain environments with changing markets than in stable markets (Osborn and Baughn, 1990). Resource dependence theory views interfirm governance as a response to conditions of uncertainty where governance encompasses the initiation, termination, and ongoing relationship maintenance among supply chain parties (Heide, 1994). Firms therefore purposely structure their exchange relationships to reduce uncertainty. In this respect, transaction cost theory parallels resource dependence theory (Heide, 1994). It is based on the assumption that firms are motivated by uncertainty to craft efficient governance structures (Noordewier et al., 1990). Uncertainty is often a determinant for companies deciding whether to obtain or use assets from other organizations or develop them in-house (Skjoett-Larsen, 1999). Since e-commerce is characterized by high uncertainty due to dynamic market structures and total information visibility, resource dependence theory and transaction cost theory support an emphasis on interorganizational relationship management. Implications for relationship management This research has implications for companies conducting business electronically, as well as for those that are not. For companies engaged in e-commerce, an emphasis needs to be placed on relationship management in order to deal with the uncertainty, dynamic market structures, and total information visibility that the environment brings. Alliances and partnerships with various providers allow companies to obtain needed resources while maintaining flexibility in the sometimes volatile environment. This may be even more important when the economy shifts; the viability of e-commerce businesses was tested in late 2000 and 2001 due to a downward turn in the economy. Not only did this create even higher levels of uncertainty for companies, but it also put pressure on them to justify their business models. Successful relationship management is thought to lead to competitive advantage in the traditional environment. In e-commerce, it aids companies in managing their supply chains, which has proven to be critically important not only for success in e-commerce, but also for survival. These companies, therefore, need to consider how managing interorganizational relationships is incorporated in their business models. The infrastructures that e-commerce companies build around relationships could affect traditional firms. Relationships can create barriers to competition as suppliers and customers rely on those with whom they work on a continual basis. This may make it imperative that traditional businesses better manage their relationships so as not to lose suppliers or customers. Proactive relationship and supply chain management will enable companies to enter e-commerce and potentially gain an advantage much more easily than those that did earlier. It will also make it easier for these companies to cope with

uncertainty, changing markets, and visibility to greater amounts of information when they occur in the traditional environment. Relationship management can enable trading partners to more efficiently deal with increased visibility of information afforded by the e-commerce environment. Information overload often leads to uncertainty as firms struggle with decisions regarding which information is important and how to interpret it. Results of this research underscore the importance of managing relationships to reduce uncertainty by working collaboratively toward a shared understanding of what information is relevant and how the information is most advantageously used. The effective management of information flows among supply chain members is critical to gaining competitive advantage in the e-commerce environment. In the absence of proper management, the flood of information can quickly overwhelm managers operating in this environment. Efforts to collect, organize, and disseminate this information can deplete valuable human and financial resources. Trained in the efficient and effective management of information flows, logisticians may prove to be invaluable in helping firms to adapt to the new information economy. There are also implications for theory from this research. By finding the linkage between the perceptions of uncertainty and the importance of relationship management, this study has supported existing theory from the channels literature. Transaction cost analysis and resource dependence theory have been used to help explain why companies form relationships with other companies in their supply chain when faced with uncertainty. Firms purposely structure interorganizational relationships to help minimize uncertainty by decreasing the cost of transactions and establishing a flexible yet stable source of assets through ongoing relationships. In this respect, e-commerce is a different environmental context where these theories provide support for uncertainty leading to the formation and management of interorganizational relationships. An interesting implication of this research is the finding of the relationship between uncertainty and information visibility in the e-commerce environment. Informants in this study linked increased information visibility to higher levels of uncertainty. In contrast, several studies in other contexts support the role of increased information search as a strategy for reducing uncertainty (Bauer, 1960; Cox, 1967; Moorthy et al., 1997; Urbany et al., 1989). Perhaps the extremely high level of information visibility in the e-commerce environment provides a context for examining the natural boundary of the utility of increased information as a source of uncertainty reduction. Limitations and future research The greatest strength of this study also contributes to its greatest limitation, that is, its inductive/qualitative approach, use of interviews, sampling, and context. This was a qualitative study relying primarily on 22 participant interviews as data. The study has demonstrated how conceptually rich interpretations yielding theoretical relationships can be obtained through such

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methods. In terms of the scientific method, this study was inductive in nature, designed to build theory. Thus, it is limited to theory development. It has not provided validation of the developed theoretical relationships. That must be accomplished through further empirical investigation using research design for theory testing. The use of one-on-one interviewing also creates limitations for this study. There exists the potential for interviewers to affect the nature and quality of participants’ responses. A strength of depth interviews is their reliance on welltrained interviewers as research instruments. As a sophisticated information processor whose abilities in many ways far exceed other instrument capabilities, human interviewers can help guide their interviews toward relevant and meaningful (for the study participants) topics and elaboration. However, there is always the risk that the interviewer may overly influence participants’ stories, thus the need to validate the findings and ensure that results are not due to the method. Sampling procedures also limit this study’s contributions. This study relied on purposive theoretical sampling; therefore, findings cannot be generalized to large populations. All population members within e-commerce, or even within a single company, did not have an equal probability of being selected as study participants. Participants were selected expressly for the purpose of elaborating on the study’s emergent themes. The sample consists of a few carefully chosen business development and operations managers within eight organizations. At the most limited level, this study’s findings can be generalized to the study participants, assuming that the interpretations that span all 22 participants partially describe each individual’s past experiences. Member checks were used to examine this level of generalizability. This study’s findings depict perceptions of the e-commerce environment and its impact on supply chain relationships, which apply to similar kinds of companies within e-commerce. However, this level of generalizability cannot be stated from this study alone due to the sampling method and sample size. The study presented opens the door for future research to expand these findings. As a first step, the dimensions of e-commerce and their impact should be examined in greater depth by extending the sample to a larger number of firms to gain a richer understanding of the phenomenon. For example, does the impact on supply chain management differ based on the length of time in e-commerce? This study examined the phenomenon from the single-firm point of view. It would be interesting to explore the effect of e-commerce on supply chain relationship management from a dyadic perspective or perhaps an extended supply chain. Are other supply chain members’ experiences the same as or different from those evaluated? Do factors such as company size, position in the supply chain, or characteristics of other firms in the supply chains play a role in the impact? These and other potential moderating or mediating factors should be included in the theory.

The current research addresses the interface between the e-commerce environment and relationship management. Future research should examine the effects of the e-commerce dimensions on supply chain management, of which interorganizational relationships are a part. Are there implications for all or only certain supply chain management activities, and why? Are there impacts on supply chain performance? Measuring performance across the supply chain in the traditional business environment can be difficult, and whether the speed or connectivity makes measurement easier or more difficult should be explored. Considering how the economy has changed in e-commerce, follow-up with the participant companies as well as new companies may provide new information. These areas may require longitudinal research. Once the conceptualization is complete, the theory developed by this study should be tested. Measures for the constructs in this context (e-commerce) should be developed and quantitative methods used to test the theoretical relationships. The research currently applies to B2B brick-and-click and pureplay companies in limited industries. A research design that extends the study to a larger sample of firms and/or additional supply chain members engaged in e-commerce, including business-to-consumer firms, would assist in generalizing the findings. The findings could then be more specifically compared to supply chain management in the traditional environment, allowing further refinement of the theory, and offering a deeper understanding of the differences between the traditional and e-commerce environments. Separately, e-commerce and relationship management have received a great deal of attention in current research. With e-commerce comes the perception that the business environment is more dynamic and more uncertain than its traditional counterpart. Past research has shown that companies react to uncertainty by structuring and maintaining relationships with supply chain members. These relationships help reduce the risk in making and implementing business decisions. Supply chain management is essentially the management of relationships among supply chain members. This study found that businesses participating in e-commerce rely heavily on effective relationship management with supply chain members to overcome the uncertainty created by e-commerce. References Achrol, R.S. (1997), ‘‘Changes in the theory of interorganizational relations in marketing: toward a network paradigm’’, Journal of the Academy of Marketing Science, Vol. 25, Winter, pp. 56-71. Achrol, R.S. and Stern, L.W. (1988), ‘‘Environmental determinants of decision-making uncertainty in marketing channels’’, Journal of Marketing Research, Vol. 25, February, pp. 36-50. Adler, T.R. and Scherer, R.F. (1999), ‘‘A multivariate investigation of transaction cost analysis dimensions: do contract types differ?’’, Journal of Applied Business Research, Vol. 15, Summer, pp. 65-79. Aldridge, A., Forcht, K. and Pierson, J. (1997), ‘‘Get linked or get lost: marketing strategy for the Internet’’, Internet Research, Vol. 7 No. 3, pp. 161-9.

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Bauer, R.A. (1960), ‘‘Consumer behavior as risk taking’’, in Cox, D.F. (Ed.), Risk Taking and Information Handling in Consumer Behavior, Harvard University, Boston, MA. Cairncross, F. (1997), The Death of Distance – How the Communications Revolution Will Change Our Lives, Harvard Business School Press, Cambridge, MA. Colvin, G. (1999), ‘‘How to be a great eCEO’’, Fortune, 24 May, pp. 104-10.

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Cox, D.F. (1967), Risk Taking and Information Handling in Consumer Behavior, Harvard University, Boston, MA. Cravens, D.W., Piercy, N.F. and Shipp, S.H. (1996), ‘‘New organizational forms for competing in highly dynamic environments: the network paradigm’’, British Journal of Management, Vol. 7, pp. 203-18. Dahlstrom, R., McNeilly, K.M. and Speh, T.W. (1996), ‘‘Buyer-seller relationships in the procurement of logistical services’’, Journal of the Academy of Marketing Services, Vol. 24, Spring, pp. 110-24. Davis, S. and Meyer, C. (1998), Blur: The Speed of Change in the Connected Economy, AddisonWesley, Reading, MA. Day, G.S. (2000), ‘‘Managing market relationships’’, Journal of the Academy of Marketing Science, Vol. 28 No. 1, pp. 24-30. Dolber, S., Cheema, S. and Sharrard, J. (1998), ‘‘Resizing on-line business trade’’, The Forrester Report, November, pp. 1-13. Flint, D.J. (1997), ‘‘Change in customers’ desired value: a grounded theory study of its nature and processes based on business customers’ lived experiences in the US automobile industry’’, dissertation, University of Tennessee, Knoxville, TN. Ganesan, S. (1994), ‘‘Determinants of long-term orientation in buyer-seller relationships’’, Journal of Marketing, Vol. 58, April, pp. 1-19. Glazer, R. (1991), ‘‘Marketing in an information-intensive environment: strategic implications of knowledge as an asset’’, Journal of Marketing, Vol. 55, October, pp. 1-19. Goldman-Sachs & Company (1999), B2B: 2B or not 2B?, Confidential Proprietary Report, September. Greenstein, M. and Feinman, T.M. (2000), Electronic Commerce: Security, Risk Management and Control, Irwin McGraw-Hill, Boston, MA. Hamill, J. (1997), ‘‘The Internet and international marketing’’, International Marketing Review, Vol. 14, May, pp. 300-23. Heide, J.B. (1994), ‘‘Interorganizational governance in marketing channels’’, Journal of Marketing, Vol. 58, January, pp. 71-85. Hirschman, E.C. (1986), ‘‘Humanistic inquiry in marketing research: philosophy, method, and criteria’’, Journal of Marketing Research, Vol. 23, August, pp. 237-49. Hoffman, D.L., Novak, T.P. and Chatterjee, P. (1995), ‘‘Commercial scenarios for the Web: opportunities and challenges’’, Journal of Computer-Mediated Communication, Vol. 1, December. Lambe, C.J. and Spekman, R.E. (1997), ‘‘Alliances, external technology acquisition, and discontinuous technological change’’, Journal of Production Innovation Management, Vol. 14, pp. 102-16. McCracken, G. (1988), The Long Interview, Sage Publications, Beverly Hills, CA. Mentzer, J.T., DeWitt, W., Keebler, J.S., Min, S., Nix, N.W., Smith, C.D. and Zacharia, Z.G. (2001), ‘‘What is supply chain management?’’, in Mentzer, J.T. (Ed.), Supply Chain Management, Sage Publications, Thousand Oaks, CA, pp. 5-62.

Mentzer, J.T., Min, S. and Zacharia, Z.G. (2000), ‘‘The nature of interfirm partnering in supply chain management’’, Journal of Retailing, Vol. 76 No. 4, pp. 1-20. Miles, M.B. (1979), ‘‘Qualitative data as an attractive nuisance: the problem of analysis’’, Administrative Science Quarterly, Vol. 24, December, pp. 590-601. Miles, M.B. and Huberman, A.M. (1994) Qualitative Data Analysis: An Expanded Sourcebook, 2nd ed., Sage Publications, Thousand Oaks, CA, pp. 245-87. Moorthy, S., Ratchford, B.T. and Talukdar, D. (1997), ‘‘Consumer information search revisited: theory and empirical analysis’’, Journal of Consumer Research, Vol. 23, March, pp. 263-77. Noordewier, T.G., John, G. and Nevin, J.R. (1990), ‘‘Performance outcomes of purchasing arrangements in industrial buyer-vendor relationships’’, Journal of Marketing, Vol. 54, October, pp. 80-93. Osborn, R.N. and Baughn, C.C. (1990), ‘‘Forms of interorganizational governance for multiple alliances’’, Academy of Management Journal, Vol. 33 No. 3, pp. 503-19. Palmisano, S.J. (1998), ‘‘There’s no business like e-business’’, Directors and Boards, Vol. 22, Spring, pp. 38-40. Pastore, M. (2001), ‘‘Economic downturn slows B2B commerce’’, Cyberatlas.com, 21 March. Patton, M.Q. (1990), Qualitative Evaluation and Research Methods, 2nd ed., Sage Publications, Newbury Park, CA. Potter, W.J. and Levine-Donnerstein, D. (1999), ‘‘Rethinking validity and reliability in content analysis’’, Journal of Applied Communication Research, Vol. 27 No. 3, pp. 258-84. QSR International Pty Ltd (2000), Nvivo Qualitative Data Analysis Program, Version 1.2, Melbourne, Australia. Rayport, J.F. and Sviokla, J.J. (1995), ‘‘Exploiting the virtual value chain’’, Harvard Business Review, November-December, pp. 75-85. Sanchez, R. (1993), ‘‘Strategic flexibility, firm organization, and managerial work in dynamic markets: a strategic-options perspective’’, Advances in Strategic Management, Vol. 9, pp. 251-91. Skjoett-Larsen, T. (1999), ‘‘Third party logistics – from an interorganizational point of view’’, International Journal of Physical Distribution and Logistics Management, Vol. 30 No. 2, pp. 112-27. Stalk, G. (1988), ‘‘Time – the next source of competitive advantage’’, Harvard Business Review, July-August, pp. 41-51. Stern, P.N. (1980), ‘‘Grounded theory methodology: its uses and processes’’, Image, Vol. 12, pp. 20-3. Strauss, A.L. (1987), Qualitative Analysis for Social Scientists, University of Cambridge Press, Cambridge. Strauss, A.L. and Corbin, J. (1998), Basics of Qualitative Research: Grounded Theory Procedures and Techniques, 2nd ed., Sage Publications, Newberry Park, CA. Swan, J.E. (1985), ‘‘Grounded theory: an inductive methodology for theory building research in marketing’’, Proceedings of the AMA Educator’s Conference, Chicago, IL, pp. 348-54. Urbany, J.E., Dickson, P.R. and Wilkie, W.L. (1989), ‘‘Buyer uncertainty and information search’’, Journal of Consumer Research, Vol. 16, September, pp. 208-15. Weiber, R. and Kollmann, T. (1998), ‘‘Competitive advantages in virtual markets – perspectives of ‘information-based marketing’ in cyberspace’’, European Journal of Marketing, Vol. 32, July/August, pp. 603-15.

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Figure A1. Grounded theory research activities

Standard

Questions

Action(s) to address question

Objectivity Are the study’s general methods and procedures described explicitly and in detail? Is there a record of the study’s methods and procedures, detailed enough to be followed as an ‘‘audit trail’’? Has the researcher been explicit and as self-aware as possible about personal assumptions, values and biases? Are study data retained and available for reanalysis by others?

The methodology is described in detail in the methodology section of the article Interview protocols and general memos on the research process exist in the Nvivo file to provide an audit trail Multiple researchers were used at each stage of collection, analysis and interpretation to minimize any bias All data, including backups, are held in a central data location.

Reliability

Are the research questions clear, and are the features of the study congruent with them? Do findings show meaningful parallelism across data sources? Were coding checks made, and did they show adequate agreement? Were data quality checks made? Were any forms of peer or colleague review in place?

Research question was explained to participants and used to create the interview protocol Similar themes emerged across participants, industries, and companies Independent coding was subsequently reconciled by two researchers Member checks were conducted Additional researcher reviewed interpretations

Internal validity

Does the account ‘‘ring true,’’ make sense, seem convincing or plausible? Did triangulation among complementary data sources produce generally converging conclusions? Are the presented data well linked to the categories of prior or emerging theory? Were the conclusions considered to be accurate by original informants?

Researchers and participants reviewed and approved of the interpretations Conclusions from different data sources (interviews, memos, field notes, company documents) converged Data are linked to prior theory (resource dependence, transaction cost) Member checks were conducted with all original informants

External validity

Is the sampling theoretically diverse enough to encourage broader applicability? Does the researcher define the scope and the boundaries of reasonable generalization? Are the findings congruent with, connected to, or confirmatory of prior theory? Does the report suggest settings where the findings could fruitfully be tested further?

Different types of companies, industries, participant positions, time in e-commerce The scope and boundaries of generalization are defined in the conclusions The findings are confirmatory of prior theory (resource and transaction cost) Settings for further testing are suggested in the conclusions

Utilization

Do the findings stimulate ‘‘working hypotheses’’? What is the level of usable knowledge offered? Do the findings have a catalyzing effect leading to specific actions?

Propositions for future testing are proposed Conscious-raising information and implications are offered Implications are offered to prompt specific actions

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Table AI. Summary of evaluation criteria

The research register for this journal is available at http://www.emeraldinsight.com/researchregisters

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The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0960-0035.htm

I don’t know much about art but I know what I like Measuring and managing supply quality in a publishing company Amanda Donaldson-Briggs, John Peters and Richard Whitfield Emerald, Bradford, UK Keywords Supply chain, Intangibility, Performance measurement, Quality, Performance management Abstract This is a case study discussion drawn from scholarly publishers Emerald, formerly MCB University Press. It discusses the unusual ‘‘supply circle’’ phenomenon in scholarly publishing, where authors (suppliers) are often the same people as readers (customers). It addresses this from the standpoint of trying to measure and manage performance in an area where measures are highly subjective – where, like art, performance is typically judged on ‘‘I know what I like’’. The paper suggests areas for further research, and points to some steps taken by the firm to make the intangible more tangible.

International Journal of Physical Distribution & Logistics Management, Vol. 32 No. 10, 2002, pp. 872-880. # MCB UP Limited, 0960-0035 DOI 10.1108/09600030210455456

The purpose of this paper is to share our thoughts and actions to date in measuring and managing performance in the editorial supply function of a management publisher. It will provide a brief overview of the industry as we see it to create a context for the discussion. The paper is written from the standpoint of managing the inbound quality of the product, with specific respect to the content and form of a journal publication. The implications of our deliberations, and those of other publishers of management research, have an important and wide impact. Our industry influences business practice, individual academic careers and institutional research funding, sometimes quite significantly. The activity of creating, publishing and consuming management research is an important task for all scholars in management schools and departments. Furthermore, the outcomes of management research should be felt beneficially by those in management practice. We position ourselves deliberately in the knowledge logistics business, as an organization which collects, adds value to, and disseminates knowledge about business and management. Good business research should, ultimately, increase decision productivity. The field is a difficult one for a number of reasons: . Quality in a published work is a subjective and intangible issue, therefore hard to measure and manage. The old adage of ‘‘I don’t know much about art, but I know what I like’’ often holds true in scholarly research. Like a work of art, a research paper has no universally recognised parameters for excellence which can be conformed to, to create a high quality output. It is not possible to judge a research paper

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on the grounds of conformance to specification, or to set controls in terms of tolerance variables from a norm. But accepting the notion of intangibility and subjectivity in our products, although (arguably) philosophically true, is not managerially useful. We need to move beyond ‘‘I know it when I see it’’ and create criteria to which we can manage. Similarly, we are trying to find a priori measures of quality which we can instigate rather than post hoc measures which tell us after the event whether we achieved it or not. Measures of performance in our industry have changed in nature with the advent of electronic publishing. Until recently, retrospective and quantitative accounting measures such as the financial performance of a journal title (shown in a simple profit and loss account of subscription sales, less cost of sales and production, less attributed overhead cost) held sway. Today we are more concerned with how a journal contributes useful papers into a portfolio, as customers increasingly take a journal as part of an online database. For this reason we have to move to more predictive and qualitative accounting measures which address quality and quantity of supply. The central part of our content acquisition process – the network of academic editors, referees and advisors who create, craft and accept papers for publication – lies outside of the direct control and management of the publisher. They are neither employees nor conventionally contracted freelances. In common with other academic publishers, most of our editors hold down professorial jobs in business schools and edit our journals for career enhancement or personal and professional interest. Our authors write for us not for direct financial recompense – indeed, some publishers have been known to charge an author for the privilege of being published in a journal – but, similarly, for career enhancement and personal/professional interest. Because of this, we work on an unusual exchange proposition of mutual interest and symbiosis – if we deliver interest, intellectual engagement and career enhancement, they deliver their time and intellectual property free or at low cost. This area has been little researched, which means that publishers, their customers and suppliers often are working ‘‘in the dark’’. Academic publishing has for any number of reasons traditionally positioned itself as a rather mysterious industry – described to us by one academic as ‘‘a club that you need to know the rules of to get membership, but no-one tells you the rules until you are a member’’. There are no definitive lists of ‘‘good’’ or ‘‘bad’’ journals; no or few transparent criteria as to what to do as an author to get published; no common concept of what an ‘‘academic’’ or ‘‘practitioner’’ publication is; what an ‘‘international’’ journal is; indeed, what ‘‘good’’ research is.

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Customers (typically business school libraries) are not consumers (typically academic researchers and students). Unusually, suppliers and consumers come from the same community (the business school and, less frequently, business practise), creating a ‘‘supply circle’’ rather than the more conventional supply chain.

We believe this paper, limited though it is in scope, provides a useful addition to the body of applied knowledge in this area as well as prompting issues for further research. It is unashamedly a work in progress. We believe the study is novel in its subject matter, and of value to other organizations and managers in industries where subjective performance criteria hold sway. Scholarly business publishing – a brief overview The business school has grown from a bit-player to dominance in the university scene in the last 40 years. Business is the UK’s predominant course for undergraduate students. About 125,000 MBA students graduated worldwide in 2001 – more than any other Master’s level program. Our company, Emerald, was founded as the business school wave just started to swell, in 1967. We currently publish some 80 journals in business, a further 20 in library and information services, and several more in adjacent fields of materials science and engineering, giving us the largest dedicated business and library management portfolios in the world to our knowledge. In common with other disciplines researched, studied and taught in higher education, management and business relies heavily on the journal as its main means of documenting and sharing created knowledge. Journals generally comprise between five and ten papers of 3,000-5,000 words each in an issue, and four to 12 issues a year, or volume. A scholarly management journal is normally constructed around a discipline, whether broad (Journal of Marketing) or narrow and niched (International Journal of Bank Marketing). Some journals are institution-based (Harvard Business Review) or regionally focussed (Scandinavian Journal of Business) or a combination of region/institution/ discipline (European Journal of Marketing). Typically, a customer will make an annual commitment by subscription to a volume, which will be acquired by a library on behalf of its users. In common with most of our competitors, the majority of our publications serve the same researcher market which writes for them, which gives rise to the unusual phenomenon, referred to earlier, of the supply circle rather than the more traditional supply chain. Thus, for many of our readers (about 75 per cent of our market comes from academia), the output of the consumption of one of our research papers is a reference in support of another research paper which the reader is writing. We are typical in our industry in deriving the vast majority of our revenue from subscription income rather than, say, advertising, which would be one notable distinguishing factor between the worlds of scholarly and commercial magazine publishing. Emerald publications are positioned as unbeholden to advertiser pressures, nor those of any institutional body.

We define a journal article as a paper which has archive value; is worthy of being kept as part of the body of scholarly literature; as opposed to something which has temporary or ephemeral value. Typically, a paper is also (but not always) based on some kind of empirical research, rather than just opinion; does something new or different in some way from other papers in the body of knowledge; and has been through some kind of credible validation or review process by someone external to the author themselves to constitute ‘‘publication’’. E-publishing and how the game changed The capability delivered via the Internet of hosting a collection of journals, or indeed a collection of collections of journals, changed the game in our industry and particularly for our company. Today, Emerald works at the level of managing a journal portfolio collection (as well as individual subject-area journals), collected together into a keyword-accessed database, the eponymous Emerald (originally Electronic Management Research Library Database). Increasingly, users access our publications online by interest area rather than journal by journal, and indeed may derive useful research papers without noticing from which journal (or publisher) a paper derives. This behaviour is particularly marked among research students who are unlikely to have ‘‘favourite’’ journals, but will seek information which best suits their needs. At first glance, e-delivery would seem to improve production economics. But although costs of printing and despatch have reduced, total production costs have increased heavily, with the need to host and service a Web site, and to introduce additional production stages to make material capable of being read and searched on-line. In addition, users are driven to demand functionality found elsewhere in the on-line world in their academic research collections. For example, embedded links to move from one site to another, or between parts of a site, have been translated in our industry into reference linking, where a reference at the end of a paper becomes a live link to the source paper. The real impact of e-publishing has been on the user experience, with the opportunity to search quickly by search term across a range of titles. In terms of managing our business, this has led to the phenomenon of dual branding. We market the database brand (Emerald) to our users, with the promise of breadth and depth of coverage, functionality, ease of use, economy; but the individual journal brands to our suppliers, with the promises of distinctive positioning, rigour, speed and efficacy of review process, dissemination to end users. There is no point in the foreseeable future where we see authors writing for a database without the interceding journal. As such, we seek to manage and measure the performance of both the individual journal brands and how they serve their niched supply markets; the individual journal brand as to how they contribute to the portfolio collection and complement other journals in the portfolio; the umbrella Emerald database brand and how it serves its library and consumer market; and the congruence between these needs.

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Identifying what we can manage Against this background of change in our business and industry, and the intangible nature of quality in our core product, and the heightened focus on added value and justification of our raison d’eˆtre, we are seeking to uncover variables which we believe have a positive influence on quality as perceived by suppliers and consumers, and that we can managerially influence, costeffectively. In summary, a selection of these variables, as derived from our position in our industry as described above, are: . stimulation of published research, which is seen as a key output from business scholars to justify their own and their institutions’ existence; . relative positioning of our publications vis-a`-vis those of others; . relative utility of our journals and portfolio vis-a`-vis that of others, for our customer and supplier communities; . assurance of the selection and improvement process used by journal editors, which is (we believe) seen as a key performance indicator among our supplier and customer community; . leverage of any competitive advantage from the ‘‘supply circle’’ phenomenon; . quantification of intangible issues of ‘‘good’’ and ‘‘quality’’ in paper, journal and portfolio so they can be proactively measured and managed. We will discuss each of these briefly in turn, and present some preliminary conclusions. Stimulation of supply Our industry is supply-driven. Researchers (and to a far lesser extent, business practitioners) are pressured to publish their work to demonstrate a return on investment of research funding and salaries, and to share it with the wider community so a ‘‘body of knowledge’’ can be constructed. But many institutions have a management problem, of schooling novice researchers in presenting research output for publication. We manage stimulation of publishable research by working with university research faculties in presenting information, often to younger researchers and research students, on ‘‘How to write papers for publication’’. Although we present general principles applicable to any scholarly publication, we hypothesise that this service is likely to engender good will towards Emerald and its journals, both among the researchers themselves and their institutions, and therefore increase supply to us. This service is supported by a wide-ranging collection of material on the part of our Web site devoted to author relationships, which collects (and makes freely available) research and conceptual papers on research methodology and publishing, and self-help material on constructing a paper for publication.

To our knowledge, our ‘‘author workshops’’ service to universities, and our online ‘‘how to get published’’ service is unique in the scholarly publishing industry. Anecdotal feedback from our community indicates a high level of popularity for it, and we see it as a competitive advantage. The expectations of our industry are that a paper will be published on its merits as assessed, usually anonymously, by a writer’s peers. You cannot (in theory) buy your way into a credible scholarly publication, just as you cannot (in theory) buy yourself a credible degree. Therefore as a scholarly publisher (as opposed to a magazine publisher) one would not normally commission a paper in return for payment. In this situation, based on meritocratic intellectuality, an attractive journal becomes one which is hard to get into. We theorise that oversupply, to a point, both signifies and creates attractiveness to suppliers. Our overarching strategic thesis is that positioning Emerald and the journals within it as ‘‘world class’’, meaning that our publications will be sought-after as both publication and research vehicles, will lead to higher sales and higher re-buy (renewal) propensity. Attractiveness is in many cases a function of the journal’s history and reputation. Actions that a publisher can manage include circulation of calls for papers for a journal and circulation of publicity material for a journal (which we do to stimulate sales and supply). In addition, we encourage both editors and our editorial staff to go to academic conferences, both as general profiling for a journal and for specific solicitation of interesting papers. Encouraging editor conference presence is achieved by segmenting a part of an editor’s financial compensation towards conference travel. Stimulation of supply – in effect, marketing the organization to its suppliers – is an unusual logistics activity. It means that as well as the skill-set of inventory management and supply-chain cost management comes that of actual market positioning. Relative positioning of our publications Some years ago we conducted a study which examined relative journal positioning and attractiveness. As discussed above, the issue of what makes a ‘‘good’’ journal is debatable. We chose to address it by deriving rating and ranking criteria from the people who knew our journals best – our authors – and asking them about how they choose between the relative merits of journals when considering where they will publish a research paper. Our methodology was derived from the market research technique of conjoint analysis, where potential customers are asked to measure trade-offs by scaling relative importance among the benefit factors of a product or service, and then comparing relative performance with competing suppliers of similar services. We asked our authors to rank in order of importance factors which made a good journal, and compare ‘‘our’’ journal’s performance with another in the field. The factors were derived from interviews and focus group discussion among a smaller group of editors and authors (Day and Peters, 1994). As well as using the findings to help determine perceived strengths and relative market

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position and perceptions, we were able to share these results with editors as a discussion framework – ‘‘this is how your journal ranked against Journal X in the following areas – what do you think that means?’’ and so on. Relative utility of our journals and portfolio There is a story in the publishing industry, possibly apocryphal, that publisher sales representatives used to go into libraries, take their company’s journals off the shelves, crease the spines and fold over some of the pages, then replace the journals. Come the year end, a librarian would look at which journals seemed to have the most wear and tear, and equate that to a journal which was well read. Today as collections are increasingly held and accessed through digital media, very detailed usage data can be uncovered through downloads and ‘‘hits’’ on an on-line page. But collecting data is one issue; transforming it to information for use by customers, editors and authors is another, and one we are still learning. Why, for example, would one of our marketing journals gain more than twice the number of downloads than another, if customers are accessing the articles from these journals directly via keyword search? Why indeed would our longest-established and highest reputation journals correlate to highest usage? In digging behind the data we found more than half of our digital users still searched the portfolio in the same way that they would search a hard copy library, by browsing contents pages. This led us to redesign our Web site to bring contents page lists more to the fore. We are trying to create interest around usage data by rewarding our mostaccessed authors with certificates and publicity on our author Web site, and sharing data with editors as discussion points. In addition, we are benchmarking our ratio of downloads per papers loaded with those of other publishers (and, gratifyingly, scoring well ahead of any other scholarly publisher in the world). We now face the challenge of understanding what our success variables are – relevance of content, ease of use, etc. – and building on them. Assurance of the selection and improvement process used by editors Although it has been challenged, the ‘‘blind’’ peer review system, where a paper is assessed by one or more scholars who do not know the identity of the author, still holds sway. We accept its position as a generally accepted and understood indicator of quality in a publication. We ask our editors to demonstrate a credible and defensible peer review system, which normally equates to two reviewers per paper, ‘‘blind’’ as described above. Managerially we specify an appropriate system by contractual agreement with editors, and support it by providing administrative funding and, on some occasions, administrative help to editors as part of an editorial fee.

Leverage of competitive advantage from the ‘‘supply circle’’ phenomenon In the early 1990s we started to log all our authors onto a database, and to construct a membership ‘‘club’’ out of the list, which we called the Literati Club. Membership of Literati was and is simply achieved by being published in one of our journals. The rationale was that because our authors are the same people or type of people to our consumers, we should try to manage relationships with them in a similar way we manage and maintain our customer database. The Literati Club today circulates around an on-line information collection (www.emeraldinsight.com/literaticlub) and contains around 30,000 registered members, 16,000 of who have ‘‘live’’ e-mail and Web contact with us. Investment in the Literati Club was stepped up in 2001 to follow a ‘‘ladder of loyalty’’ model (Raphel and Raphel, 1995). Our journals and journal editorial staff manage the acquisition of an author (equivalent to the acquisition of a customer). Literati Club manages authors post-publication with the intention of developing them into repeat authors, referring authors who will recommend others to write for us, and advocate for us, who will extol the virtues of the publisher and its publications. The analogy from customer service is a postpurchase initiative which aims to positively influence repeat purchase, referrals to other customers, and advocacy in an organization’s community. We measure performance through ‘‘live’’ membership numbers, Web site traffic, repeat authorship rates, repeats from institutions which we can reasonably correlate to referrals, satisfaction rates, and evidence of advocacy behaviour, such as letters or anecdotal expressions of satisfaction. Quantification of intangible issues of ‘‘good’’ and ‘‘quality’’ We may know what kind of art we like, but the question of how to measure ‘‘good’’ or ‘‘quality’’ in art is a challenge of a different kind. Since there are no absolute parameters for ‘‘good’’, we measure good art by taking proxy measures which we believe represent a wider view of ‘‘good’’ in the art world. Thus good art is art critically recognised as such; is art produced by an artist who has critical acclamation; whose work gets displayed in popular galleries; whose work sells for a high price; whose work wins prizes. In our publishing field we typically take similar proxy measures to make tangible the intangible. Thus, a good journal has good authors writing for it; good authors come from good schools; good schools can be recognised by listings produced by credible judges such as The Economist or Business Week. We can measure the number of authors who appear in our journals from (for example) Business Week Top 100 schools, and we can influence that number by focusing copy stimulation efforts, our own and those of editors, on similar institutions. Also, and importantly, for us a good journal is global, and has a high degree of diversity in that it encourages and publishes papers from young as well as established researchers; from practitioners as well as theorists, and from lesserdeveloped as well as fully-developed regions of the world.

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As such we count and measure all of these (and more) and will be making them transparent around our supply chain/circle. Conclusions Success in our industry means that value-added business research information is being effectively disseminated to other researchers, to business educators and students, and to managers. The more effective our performance in knowledge transfer, the better we all do. The less effective, the less well we all do. However, the issues of performance management have not been wellexplored. Our aim in creating this paper is to share our understanding and our findings, and invite comment and input from all members of our community – research scholars, teachers, students, practitioners and other publishers. We would invite further research, and for the benefit of all participants in the industry, further sharing of practical steps and ideas. Our logistics management challenges in this industry are unusual, and various. Our practical lessons for others in similar industries are to seek where possible to tangibilise the intangible, and to treat suppliers as customers. Industries where products and services are intangible and subjective may be like art, where judgements are based on ‘‘I know what I like’’. But it is important managerially to step beyond this and understand, deeply and properly, what variables influence performance. References Day, A. and Peters, J. (1994), ‘‘Quality indicators in academic publishing’’, Library Review, Vol. 43 No. 7. Raphel, M. and Raphel, N. (1995), Up the Loyalty Ladder: Turning Sometime Customers into Full-time Advocates of Your Business, Raphel Marketing.

Index to International Journal of Physical Distribution & Logistics Management, Volume 32, 2002 Authors ABHARY, K., see HUIN, S.F. ALBERS, S., see DELFMANN, W. AMINOFF, A., see AURAMO, J. ANTU_ N, J.P., see CARRANZA, O. ¨ RN, J.S. and HALLDORSSON, A., Logistics knowledge creation: reflections on content, ARLBJO context and processes, No. 1, pp. 22-40. AURAMO, J., AMINOFF, A. and PUNAKIVI, M., Research agenda for e-business logistics based on professional opinions, No. 7, pp. 513-31. BEULENS, A.J.M., see VAN DER VORST, J.G.A.J. BIENSTOCK, C.C., Understanding buyer information acquisition for the purchase of logistics services, No. 8, pp. 636-48. CARIDI, M. and CIGOLINI, R., Improving materials management effectiveness: a step towards agile enterprise, No. 7, pp. 556-76. ´ N, J.P., Linking logistics to strategy in Argentina, No. 6, CARRANZA, O., MALTZ, A. and ANTU pp. 480-96. CHANDRA, C., see KUMAR, S. CHARMAN, Z., see SANKARAN, J. CHILDERHOUSE, P., see TOWILL, D.R. CIGOLINI, R., see CARIDI, M. COLE, M.H., see MASON, S.J. CUTLER, B.D., see MOBERG, C.R. DAVIS, D.F., see GOLICIC, S.L. DE KOSTER, R.B.M., Distribution structures for food home shopping, No. 5, pp. 362-80. DE KOSTER, R.B.M., see FABER, N. DELFMANN, W., ALBERS, S. and GEHRING, M., The impact of electronic commerce on logistics service providers, No. 3, pp. 203-22. DISNEY, S.M., see TOWILL, D.R. DONALDSON-BRIGGS, A., PETERS, J. and WHITFIELD, R., I don’t know much about art but I know what I like: measuring and managing supply quality in a publishing company, No. 10, pp. 872-80. ENGLISH, J.R., see FITE, J.T. ESPER, T.L., see WILLIAMS, L.R. FABER, N., DE KOSTER, R.B.M. and VAN DE VELDE, S.L., Linking warehouse complexity to warehouse planning and control structure: an exploratory study of the use of warehouse management information systems, No. 5, pp. 381-95. FARRIS, M.T. II and HUTCHISON, P.D., Cash-to-cash: the new supply chain management metric, No. 4, pp. 288-98. FAWCETT, S.E. and MAGNAN, G.M., The rhetoric and reality of supply chain integration, No. 5, pp. 339-61.

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FITE, J.T., TAYLOR, G.D., USHER, J.S., ENGLISH, J.R. and ROBERTS, J.N., Forecasting freight demand using economic indices, No. 4, pp. 299-308. GEHRING, M., see DELFMANN, W. GIBSON, B.J., RUTNER, S.M. and KELLER, S.B., Shipper-carrier partnership issues, rankings and satisfaction, No. 8, pp. 669-81. GOLICIC, S.L., DAVIS, D.F., McCARTHY, T.M. and MENTZER, J.T., The impact of e-commerce on supply chain relationships, No. 10, pp. 851-71. GOLICIC, S.L., see McCARTHY, T.M. GROSS, A., see MOBERG, C.R. ¨ RN, J.S. HALLDORSSON, A., see ARLBJO HOLWEG, M. and MIEMCZYK, J., Logistics in the ‘‘three-day car’’ age: assessing the responsiveness of vehicle distribution logistics in the UK, No. 10, pp. 829-50. HUIN, S.F., LUONG, L.H.S. and ABHARY, K., Internal supply chain planning determinants in small and medium-sized manufacturers, No. 9, pp. 771-82. HUTCHISON, P.D., see FARRIS, M.T. II JIANG, B. and PRATER, E., Distribution and logistics development in China: the revolution has begun, No. 9, pp. 783-98. KELLER, S.B., Internal relationship marketing: a key to enhanced supply chain relationships, No. 8, pp. 649-68. KELLER, S.B., see GIBSON, B.J. KNEMEYER, A.M. and MURPHY, P.R., Logistics internships: employer and student perspectives, No. 2, pp. 135-52. KNEMEYER, A.M., PONZURICK, T.G. and LOGAR, C.M., A qualitative examination of factors affecting reverse logistics systems for end-of-life computers, No. 6, pp. 455-79. KUMAR, S. and CHANDRA, C., Managing multi-item common vendor inventory system with random demands, No. 3, pp. 188-202. LJUNGBERG, A., Process measurement, No. 4, pp. 254-87. LOGAR, C.M., see KNEMEYER, A.M. LUONG, L.H.S., see HUIN, S.F. MAGNAN, G.M., see FAWCETT, S.E. MALTZ. A., see CARRANZA, O. MASON, S.J., COLE, M.H., ULREY, B.T. and YAN, L., Improving electronics manufacturing supply chain agility through outsourcing, No. 7, pp. 610-20. McCARTHY, T.M. and GOLICIC, S.L., Implementing collaborative forecasting to improve supply chain performance, No. 6, pp. 431-54. McCARTHY, T.M., see GOLICIC, S.L. MEHTA, S.G., see SUNDARAM, R.M. MENTZER, J.T., see GOLICIC, S.L. MIEMCZYK, J., see HOLWEG, M. MILLEN, R., see SOHAL, A.S. MOBERG, C.R., CUTLER, B.D., GROSS, A. and SPEH, T.W., Identifying antecedents of information exchange within supply chains, No. 9, pp. 755-70. MOSS, S., see SOHAL, A.S. MUN, D., see SANKARAN, J. MURPHY, P.R., see KNEMEYER, A.M.

¨ SLUND, D., Logistics needs qualitative research – especially action research, No. 5, pp. 321-38. NA OZMENT, J., see WILLIAMS, L.R. PETERS, J., see DONALDSON-BRIGGS, A. PONZURICK, T.G., see KNEMEYER, A.M. POWER, D.J., see SOHAL, A.S. PRATER, E., see JIANG, B. PUNAKIVI, M., see AURAMO, J. RAHMAN, S., The theory of constraints’ thinking process approach to developing strategies in supply chains, No. 10, pp. 809-28. ROBERTS, J.N., see FITE, J.T. ROSS, A., A multi-dimensional empirical exploration of technology investment, coordination and firm performance, No. 7, pp. 591-609. RUTNER, S.M., see GIBSON, B.J. SANKARAN, J., MUN, D. and CHARMAN, Z., Effective logistics outsourcing in New Zealand: an inductive empirical investigation, No. 8, pp. 682-702. SOHAL, A.S., MILLEN, R. and MOSS, S., A comparison of the use of third-party logistics services by Australian firms between 1995 and 1999, No. 1, pp. 59-68. SOHAL, A.S., POWER, D.J. and TERZIOVSKI, M., Integrated supply chain management from the wholesaler’s perspective: two Australian case studies, No. 2, pp. 96-109. SPEH, T.W., see MOBERG, C.R. STOCK, J.R., Marketing myopia revisited: lessons for logistics, No. 1, pp. 12-21. SUNDARAM, R.M. and MEHTA, S.G., A comparative study of three different SCM approaches, No. 7, pp. 532-55. SVENSSON, G., A conceptual framework of vulnerability in firms’ inbound and outbound logistics flows, No. 2, pp. 110-34. SVENSSON, G., A typology of vulnerability scenarios towards suppliers and customers in supply chains based upon perceived time and relationship dependencies, No. 3, pp. 168-87. SVENSSON, G., The theoretical foundation of supply chain management: a functionalist theory of marketing, No. 9, pp. 734-54. TAYLOR, G.D., see FITE, J.T. TERZIOVSKI, M., see SOHAL, A.S. TIBBEN-LEMBKE, R.S., Life after death: reverse logistics and the product life cycle, No. 3, pp. 223-44. TOWILL, D.R., CHILDERHOUSE, P. and DISNEY, S.M., Integrating the automotive supply chain: where are we now?, No. 2, pp. 79-95. ULREY, B.T., see MASON, S.J. URBAN, T.L., The interdependence of inventory management and retail shelf management, No. 1, pp. 41-58. USHER, J.S., see FITE, J.T. VAN DE VELDE, S.L., see FABER, N. VAN DER VORST, J.G.A.J. and BEULENS, A.J.M., Identifying sources of uncertainty to generate supply chain redesign strategies, No. 6, pp. 409-30. WEBER, M.M., Measuring supply chain agility in the virtual organization, No. 7, pp. 577-90. WHITFIELD, R., see DONALDSON-BRIGGS, A.

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WILLIAMS, L.R., ESPER, T.L. and OZMENT, J., The electronic supply chain: its impact on the current and future structure of strategic alliances, partnerships and logistics leadership, No. 8, pp. 703-19. YAN, L., see MASON, S.J. Titles Cash-to-cash: the new supply chain management metric, FARRIS, M.T. II and HUTCHISON, P.D., No. 4, pp. 288-98. (A) comparative study of three different SCM approaches, SUNDARAM, R.M. and MEHTA, S.G., No. 7, pp. 532-55. (A) comparison of the use of third-party logistics services by Australian firms between 1995 and 1999, SOHAL, A.S., MILLEN, R. and MOSS, S., No. 1, pp. 59-68. (A) conceptual framework of vulnerability in firms’ inbound and outbound logistics flows, SVENSSON, G., No. 2, pp. 110-34. Distribution and logistics development in China: the revolution has begun, JIANG, B. and PRATER, E., No. 9, pp. 783-98. Distribution structures for food home shopping, de KOSTER, R.B.M., No. 5, pp. 362-80. Effective logistics outsourcing in New Zealand: an inductive empirical investigation, SANKARAN, J., MUN, D. and CHARMAN, Z., No. 8, pp. 682-702. (The) electronic supply chain: its impact on the current and future structure of strategic alliances, partnerships and logistics leadership, WILLIAMS, L.R., ESPER, T.L. and OZMENT, J., No. 8, pp. 703-19. Forecasting freight demand using economic indices, FITE, J.T., TAYLOR, G.D., USHER, J.S., ENGLISH, J.R. and ROBERTS, J.N., No. 4, pp. 299-308. I don’t know much about art but I know what I like: measuring and managing supply quality in a publishing company, DONALDSON-BRIGGS, A., PETERS, J. and WHITFIELD, R., No. 10, pp. 872-80. Identifying antecedents of information exchange within supply chains, MOBERG, C.R., CUTLER, B.D., GROSS, A. and SPEH, T.W., No. 9, pp. 755-70. Identifying sources of uncertainty to generate supply chain redesign strategies, VAN DER VORST, J.G.A.J. and BEULENS, A.J.M., No. 6, pp. 409-30. (The) impact of e-commerce on supply chain relationships, GOLICIC, S.L., DAVIS, D.F., McCARTHY, T.M. and MENTZER, J.T., No. 10, pp. 851-71. (The) impact of electronic commerce on logistics service providers, DELFMANN, W., ALBERS, S. and GEHRING, M., No. 3, pp. 203-22. Implementing collaborative forecasting to improve supply chain performance, McCARTHY, T.M. and GOLICIC, S.L., No. 6, pp. 431-54. Improving electronics manufacturing supply chain agility through outsourcing, MASON, S.J., COLE, M.H., ULREY, B.T. and YAN, L., No. 7, pp. 610-20. Improving materials management effectiveness: a step towards agile enterprise, CARIDI, M. and CIGOLINI, R., No. 7, pp. 556-76. Integrated supply chain management from the wholesaler’s perspective: two Australian case studies, SOHAL, A.S., POWER, D.J. and TERZIOVSKI, M., No. 2, pp. 96-109. Integrating the automotive supply chain: where are we now?, TOWILL, D.R., CHILDERHOUSE, P. and DISNEY, S.M., No. 2, pp. 79-95. (The) interdependence of inventory management and retail shelf management, URBAN, T.L., No. 1, pp. 41-58.

Internal relationship marketing: a key to enhanced supply chain relationships, KELLER, S.B., No. 8, pp. 649-68. Internal supply chain planning determinants in small and medium-sized manufacturers, HUIN, S.F., LUONG, L.H.S. and ABHARY, K., No. 9, pp. 771-82. Life after death: reverse logistics and the product life cycle, TIBBEN-LEMBKE, R.S., No. 3, pp. 223-44. ´ N, J.P., No. 6, Linking logistics to strategy in Argentina, CARRANZA, O., MALTZ, A. and ANTU pp. 480-96. Linking warehouse complexity to warehouse planning and control structure: an exploratory study of the use of warehouse management information systems, FABER, N., DE KOSTER, R.B.M. and VAN DE VELDE, S.L., No. 5, pp. 381-95. Logistics in the ‘‘three-day car’’ age: assessing the responsiveness of vehicle distribution logistics in the UK, HOLWEG, M. and MIEMCZYK, J., No. 10, pp. 829-50. Logistics internships: employer and student perspectives, KNEMEYER, A.M. and MURPHY, P.R., No. 2, pp. 135-52. ¨ RN, J.S. and Logistics knowledge creation: reflections on content, context and processes, ARLBJO HALLDORSSON, A., No. 1, pp. 22-40. ¨ SLUND, D., No. 5, pp. 321-38. Logistics needs qualitative research – especially action research, NA Managing multi-item common vendor inventory system with random demands, KUMAR, S. and CHANDRA, C., No. 3, pp. 188-202. Marketing myopia revisited: lessons for logistics, STOCK, J.R., No. 1, pp. 12-21. Measuring supply chain agility in the virtual organization, WEBER, M.M., No. 7, pp. 577-90. (A) multi-dimensional empirical exploration of technology investment, coordination and firm performance, ROSS, A., No. 7, pp. 591-609. Process measurement, LJUNGBERG, A., No. 4, pp. 254-87. (A) qualitative examination of factors affecting reverse logistics systems for end-of-life computers, KNEMEYER, A.M., PONZURICK, T.G. and LOGAR, C.M., No. 6, pp. 455-79. Research agenda for e-business logistics based on professional opinions, AURAMO, J., AMINOFF, A. and PUNAKIVI, M., No. 7, pp. 513-31. (The) rhetoric and reality of supply chain integration, FAWCETT, S.E. and MAGNAN, G.M., No. 5, pp. 339-61. Shipper-carrier partnership issues, rankings and satisfaction, GIBSON, B.J., RUTNER, S.M. and KELLER, S.B., No. 8, pp. 669-81. (The) theoretical foundation of supply chain management: a functionalist theory of marketing, SVENSSON, G., No. 9, pp. 734-54. (The) theory of constraints’ thinking process approach to developing strategies in supply chains, RAHMAN, S., No. 10, pp. 809-28. (A) typology of vulnerability scenarios towards suppliers and customers in supply chains based upon perceived time and relationship dependencies, SVENSSON, G., No. 3, pp. 168-87. Understanding buyer information acquisition for the purchase of logistics services, BIENSTOCK, C.C., No. 8, pp. 636-48.

Index

885