Supply Chain Management
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THESIS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DEMAND-SUPPLY CHAIN MANAGEMENT Per Hilletofth Department of Technology Management and Economics Division of Logistics and Transportation CHALMERS UNIVERSITY OF TECHNOLOGY Göteborg, Sweden 2010 Demand-Supply Chain Management Per Hilletofth © PER HILLETOFTH, 2010 ISBN 978-91-7385-428-3 Doktorsavhandlingar vid Chalmers Tekniska Högskola Ny serie Nr. 3109 ISSN 0346-718X Department of Technology Management and Economics Chalmers University of Technology SE-412-96 Göteborg, Sweden Phone +46 (0) 31 772 10 00 Printed by Chalmers Reproservice Göteborg, Sweden 2010 PREFACE The research for this thesis has been conducted at the Division of Logistics Management, School of Technology and Society, University of Skövde and at the Division of Logistics and Transportation, Department of Management and Economics, Chalmers University of Technology. Although the thesis is the result of my own efforts, it would not have been finished without the support and encouragement of a large number of people. First and foremost, I am deeply indebted to my main supervisor, Prof. Olli-Pekka Hilmola, who has encouraged and supported me throughout the entire process. Without his guidance, support, and enthusiasm, this thesis would simply not have been completed. Our discussions have helped me to develop a deeper insight and a firmer grasp of the research questions, as well as inspired me during the whole process. Secondly, I would like to express my gratitude to my other supervisors, Prof. Kenth Lumsden and Prof. Dag Ericsson. Our discussions have guided, inspired, and supported me to complete this thesis. Thirdly, I would like to express my appreciation to all colleagues for their cooperation, suggestions, and discussions; my warmest thanks for making our research group such a stimulating environment. Moreover, I must take the opportunity to thank all the co-authors of the appended papers: Prof. Martin Christopher, Prof. Olli-Pekka Hilmola, Prof. Kenth Lumsden, Prof. Dag Ericsson, and Mrs. Kerstin Jäger. It has been a pleasure and stimulating to work with you all. Last, but by no means least, is the support I have received from my family. Without your encouragement and understanding I would never have been able to finish this thesis; my warmest thanks for being my never-ending source of inspiration and discussion partners. Lidköping, September 12, 2010 Per Hilletofth i ii ABSTRACT Purpose: This research aims to enhance the current understanding and knowledge of the demand-supply chain management (DSCM) concept by determining its elements, benefits, and requirements, as well as by analyzing key elements of the concept. Methodology: This research has utilized the case study strategy and the survey strategy, however, the case study strategy dominates. The case study research has involved five companies originating from Sweden and the collection of empirical data mainly from in- depth interviews with key persons representing senior and middle management. The survey research targeted the largest firms in Sweden and Finland and empirical data was collected through an online questionnaire. Findings: This research has established that the main elements of DSCM include market orientation, coordination of the demand and supply processes, viewing the demand and supply processes as being equally important, as well as value creation, differentiation, innovativeness, responsiveness, and cost-efficiency in the demand and supply processes. It has also been revealed that the main benefits of DSCM include enhanced competiveness, enhanced demand chain performance, as well as enhanced supply chain performance, while the main requirements of DSCM include organizational competences, company established principles, demand-supply chain collaboration, and information technology support. A key element of DSCM further investigated is differentiation focused supply chain design. It has been shown that these efforts can be organized into a process of five stages. In addition, it is important that this process is addressed in parallel with the new product development (NPD) process, that information is exchanged between them, and that they are directed on the basis of the same segmentation model. Another key element of DSCM further investigated is coordination between NPD and SCM. This research has identified several significant linkages between these management directions, which motivate the use of an integrative NPD process where the NPD functions are aligned with the main supply functions in the company and other sales-related functions supporting the commercialization. A final key element of DSCM further investigated is the significance of regarding the demand processes and the supply processes as being equally important. This research has revealed that logistics outsourcing can be risky, if it results in the supply processes being considered less important. Nevertheless, if senior management regards the outsourced processes as equally important as the in-house processes, the effect of logistics outsourcing on company strategies and direction in SCM could be reduced and logistics outsourcing could instead provide an opportunity to improve the design and differentiation of the supply chain. Research limitations/implications: This research has proposed, described, and further analyzed a demand-supply oriented management approach. Such a management approach stresses that the demand processes and the supply processes have to be coordinated and directed at an overlying level, in order to gain and sustain a competitive advantage in competitive and fragmented markets. This research is mainly explorative in nature, and more empirical data, from similar and other research settings, is needed to further validate the findings. Another limitation of the research is that it is essentially limited to Swedish companies (even if some Finnish companies are involved in the survey), however, many of iii the case companies have a large international presence and are among the top three in their industries, facts which provide some grounds for generalization. Practical implications: This research provides researchers and practitioners with insights into how to develop a demand-supply oriented business. It shows that companies should organize themselves around understanding how customer value is created and delivered, as well as how these processes and management directions can be coordinated. In order for this to occur, the demand and supply processes must be considered as being equally important and the firm needs to be managed jointly and in a coordinated manner by the demand- and supply-side of the company. It is also important that value creation is considered in both the demand and supply processes. Originality/value: Despite strong arguments from both researchers and practitioners for a demand-supply oriented management approach only a minority of companies appear to have effectively coordinated the demand and supply processes. This might be influenced by the lack of research examining how the demand and supply processes can be coordinated, what benefits can be gained by coordinating them, and what requirements are necessary to succeed. This research contributes by investigating these types of aspects further. Keywords: Demand-supply chain management (DSCM), Elements, Benefits, Requirements, Demand chain management (DCM), Supply chain management (SCM), Sweden. iv LIST OF APPENDED PAPERS This thesis is based on the work contained in the following five papers, which are appended in full and referred to in the text by the Roman numerals I, II, III, IV, and V: Paper I: Hilletofth, P. (2009), “How to develop a differentiated supply chain strategy”, Industrial Management and Data Systems, 109(1), 16–33. Paper II: Hilletofth, P., D. Ericsson, and M. Christopher (2009), “Demand chain management: A Swedish industrial case study”, Industrial Management and Data Systems, 109(9), 1179–1196. Paper III: Hilletofth, P., and O-P. Hilmola (2010), “Role of logistics outsourcing on supply chain strategy and management: Survey findings from Northern Europe”, Strategic Outsourcing: An International Journal, 3(1), 46–61. Paper IV: Hilletofth, P., D. Ericsson, and K. Lumsden (2010), “Coordinating new product development and supply chain management”, International Journal of Value Chain Management, 4(1/2), 170–192. Paper V: Hilletofth, P., and K. Jäger (2010), “Role of logistics service providers in the implementation of a differentiated supply chain”, International Journal of Shipping and Transport Logistics (accepted for publication). The author’s role and responsibilities in the appended papers are presented in Appendix I, while additional papers written by the author, outside the scope of this thesis, can be found in Appendix II. v vi TABLE OF CONTENTS 1. INTRODUCTION ..................................................................................................................................... 1 1.1 BACKGROUND OF THE RESEARCH ....................................................................................................................... 1 1.2 MOTIVATION OF THE RESEARCH ........................................................................................................................ 5 1.3 PURPOSE OF THE RESEARCH ........................................................................................................................... 12 1.4 SCOPE OF THE RESEARCH ..............................................................................................................................