Supply Chain Management

THESIS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY

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

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

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.

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.

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 ...... 16

1.5 OUTLINE OF THE THESIS ...... 17

2. FRAME OF REFERENCE ...... 19

2.1 COMPONENTS OF THE FRAMEWORK ...... 19

2.2 COMPETITIVE ADVANTAGE ...... 20

2.2.1 Role of DCM in creating a competitive advantage ...... 20

2.2.2 Role of SCM in creating a competitive advantage ...... 21

2.3 DEMAND CHAIN MANAGEMENT ...... 22

2.3.1 Demand chain design ...... 22

2.3.2 Marketing intelligence ...... 28

2.3.3 New product development ...... 31

2.4 SUPPLY CHAIN MANAGEMENT ...... 37

2.4.1 Supply chain design ...... 37

2.4.2 Logistics outsourcing ...... 46

2.5 DEMAND-SUPPLY CHAIN MANAGEMENT ...... 48

2.5.1 Key issues of demand-supply chain management ...... 48

2.5.2 Models of demand and supply coordination ...... 53

2.5.3 The role of information technology in demand-supply chain management ...... 56

3. METHODOLOGY ...... 61

3.1 RESEARCH PROCESS ...... 61

3.2 RESEARCH DESIGN ...... 63

3.2.1 Research approach ...... 63

3.2.2 Applied research strategies ...... 65

vii

3.2.3 Case study design ...... 67

3.2.4 Survey design ...... 71

3.3 RESEARCH QUALITY ...... 72

3.3.1 Validity of the research ...... 72

3.3.2 Reliability of the research ...... 74

4. SUMMARY OF APPENDED MANUSCRIPTS ...... 75

4.1 RELATIONSHIPS BETWEEN RESEARCH QUESTIONS AND MANUSCRIPTS ...... 75

4.2 PAPER I: HOW TO DEVELOP A DIFFERENTIATED SUPPLY CHAIN STRATEGY ...... 76

4.2.1 Background ...... 76

4.2.2 Purpose ...... 76

4.2.3 Findings ...... 76

4.3 PAPER II: DEMAND CHAIN MANAGEMENT: A SWEDISH INDUSTRIAL CASE STUDY ...... 77

4.3.1 Background ...... 77

4.3.2 Purpose ...... 77

4.3.3 Findings ...... 77

4.4 PAPER III: ROLE OF LOGISTICS OUTSOURCING ON SUPPLY CHAIN STRATEGY AND MANAGEMENT ...... 78

4.4.1 Background ...... 78

4.4.2 Purpose ...... 78

4.4.3 Findings ...... 78

4.5 PAPER IV: COORDINATING NEW PRODUCT DEVELOPMENT AND SUPPLY CHAIN MANAGEMENT ...... 79

4.5.1 Background ...... 79

4.5.2 Purpose ...... 79

4.5.3 Findings ...... 80

4.6 PAPER V: ROLE OF LOGISTICS SERVICE PROVIDERS IN THE IMPLEMENTATION OF A DIFFERENTIATED SUPPLY CHAIN ...... 80

4.6.1 Background ...... 80

4.6.2 Purpose ...... 81

4.6.3 Findings ...... 81

4.7 SUMMARY OF PAPER FINDINGS ...... 81

5. ANALYSIS ...... 83

viii

5.1 OVERVIEW ...... 83

5.2 DEMAND-SUPPLY CHAIN MANAGEMENT ...... 84

5.2.1 Elements of demand-supply chain management ...... 84

5.2.2 Benefits of demand-supply chain management ...... 86

5.2.3 Requirements of demand-supply chain management ...... 88

5.3 DIFFERENTIATION FOCUSED SUPPLY CHAIN DESIGN ...... 89

5.3.1 Organization of differentiation focused supply chain design ...... 89

5.3.2 The role of logistics service providers in supply chain differentiation ...... 93

5.3.3 Benefits of supply chain differentiation ...... 93

5.3.4 Requirements of supply chain differentiation ...... 94

5.4 COORDINATION BETWEEN NPD AND SCM ...... 94

5.4.1 Linkages between NPD and SCM ...... 94

5.4.2 Coordination between NPD and SCM ...... 97

5.5 THE EFFECT OF OUTSOURCING ON DEMAND-SUPPLY CHAIN MANAGEMENT ...... 97

5.5.1 The effect of outsourcing on supply chain management ...... 97

5.5.2 The effect of outsourcing on demand-supply chain management ...... 98

5.6 SUMMARY OF RESEARCH FINDINGS ...... 99

6. DISCUSSION ...... 101

6.1 RESULTS AND CONTRIBUTION ...... 101

6.2 LIMITATIONS OF THE RESEARCH ...... 107

6.3 IMPLICATIONS OF THE RESEARCH ...... 108

7. CONCLUSIONS AND FURTHER RESEARCH ...... 109

7.1 CONCLUSIONS ...... 109

7.2 FURTHER RESEARCH ...... 110

REFERENCES ...... 113 APPENDIX I – RESPONSIBILITES IN THE APPENDED PAPERS ...... 135 APPENDIX II – LIST OF PUBLICATIONS ...... 137 APPENDIX III – EMPIRICAL DESCRIPTION OF DSCM ...... 141

LIST OF FIGURES

FIGURE 1.1 THE DEMAND-SUPPLY CHAIN ...... 3

FIGURE 1.2 DEMAND-SUPPLY CHAIN MANAGEMENT ...... 4

FIGURE 1.3 LEVELS OF DEMAND AND SUPPLY CHAIN COORDINATION ...... 8

FIGURE 1.4 WORLD TRADE AND GDP DEVELOPMENT FROM 1970 TO 2014 ...... 10

FIGURE 1.5 THE SCOPE OF THE THESIS ...... 17

FIGURE 1.6 THE OUTLINE OF THE THESIS ...... 18

FIGURE 2.1 THE THEORETICAL FRAMEWORK ...... 19

FIGURE 2.2 THE ROLE OF DEMAND CHAIN MANAGEMENT IN CREATING COMPETITIVE ADVANTAGE...... 20

FIGURE 2.3 THE ROLE OF SUPPLY CHAIN MANAGEMENT IN CREATING COMPETITIVE ADVANTAGE...... 21

FIGURE 2.4 THE ROLE OF DEMAND CHAIN STRATEGY IN DEMAND CHAIN MANAGEMENT ...... 22

FIGURE 2.5 DEMAND CHAIN STRATEGY DEVELOPMENT ...... 24

FIGURE 2.6 EXAMPLE OF A NEEDS-BASED SEGMENTATION MODEL ...... 24

FIGURE 2.7 TARGET MARKET SELECTION ...... 27

FIGURE 2.8 THE MARKET INTELLIGENCE PROCESS ...... 31

FIGURE 2.9 THE NEW PRODUCT DEVELOPMENT PROCESS ...... 33

FIGURE 2.10 THE ROLE OF SUPPLY CHAIN STRATEGY IN SUPPLY CHAIN MANAGEMENT ...... 37

FIGURE 2.11 DIFFERENT LEAGILE SUPPLY CHAIN APPROACHES BASED ON POSTPONEMENT OF THE CUSTOMER ORDER POINT (COP) UPSTREAM THE SUPPLY CHAIN ...... 41

FIGURE 2.12 HOW THE TYPE OF PRODUCT INFLUENCES SUPPLY CHAIN STRATEGY ...... 43

FIGURE 2.13 MARKET WINNERS AND MARKET QUALIFIERS FOR AGILE VERSUS LEAN SUPPLY CHAINS ...... 43

FIGURE 2.14 LEAN OR AGILE SUPPLY CHAIN STRATEGY ...... 44

FIGURE 2.15 HOW DEMAND/SUPPLY CHARACTERISTICS DETERMINE SUPPLY CHAIN STRATEGY ...... 45

FIGURE 2.16 LOGISTICS SERVICE PROVIDERS CLASSIFIED BY GENERAL PROBLEM-SOLVING ABILITY AND CUSTOMER ADAPTATION ...... 48

FIGURE 2.17 PROCESS FUSION AND VALUE CATALYST ...... 53

FIGURE 2.18 DEMAND AND SUPPLY PROCESS INTEGRATION ...... 54

FIGURE 2.19 APPLICATION AND SYSTEM INTEGRATION IN THE DEMAND-SUPPLY CHAIN ...... 56

FIGURE 3.1 THE RESEARCH PROCESS ...... 61

FIGURE 3.2 LINKS BETWEEN THE APPENDED MANUSCRIPTS AND THEIR CONTRIBUTION TO THE OVERALL RESEARCH QUESTIONS ...... 62

FIGURE 3.3 THE PRINCIPLE OF INDUCTIVE AND DEDUCTIVE RESEARCH ...... 64

FIGURE 3.4 GENERAL RESEARCH APPROACHES CLASSIFIED BY THE METHODOLOGICAL AND SCIENTIFIC DIRECTIONS OF THE RESEARCH ...... 65

FIGURE 3.5 CASE STUDY DESIGNS ...... 68

FIGURE 4.1 RESEARCH QUESTIONS IN RELATION TO THE APPENDED PAPERS ...... 75

FIGURE 5.1 STRUCTURE OF ANALYSIS CHAPTER WITH REGARD TO THE RESEARCH QUESTIONS ...... 83

FIGURE 5.2 DIFFERENTIATION FOCUSED SUPPLY CHAIN DESIGN ...... 91

FIGURE 5.3 DIFFERENT SUPPLY CHAIN SOLUTIONS BASED ON THE SELECTION OF APPROPRIATE MANUFACTURING STRATEGY ...... 92

FIGURE 6.1 FRAMEWORK OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 101

FIGURE 6.2 THE HEART OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 104

FIGURE 8.1 THE CASE COMPANY’S DSCM APPROACH ...... 141

FIGURE 8.2 THE CASE COMPANY’S PRODUCT MANAGEMENT FLOW ...... 142

FIGURE 8.3 THE CASE COMPANY’S SPARK PROCESS ...... 144

FIGURE 8.4 THE CASE COMPANY’S SUPPLY CHAIN AND STRATEGIES ...... 146

FIGURE 8.5 THE CASE COMPANY’S SUPPLY CHAIN SOLUTIONS ...... 147

xii

LIST OF TABLES

TABLE 1.1 THE RESEARCH QUESTIONS ...... 12

TABLE 1.2 CONTRIBUTION OF THE APPENDED PAPERS TO THE RESEARCH QUESTIONS ...... 15

TABLE 2.1 MAJOR SEGMENTATION VARIABLES FOR CONSUMER MARKETS ...... 25

TABLE 2.2 MAJOR SEGMENTATION VARIABLES FOR INDUSTRIAL MARKETS ...... 26

TABLE 2.3 SEVEN CHARACTERISTICS OF GOOD MARKET RESEARCH ...... 29

TABLE 2.4 WHAT CUSTOMER RELATIONSHIP MANAGEMENT COMPRISES ...... 30

TABLE 2.5 NEW PRODUCT DEVELOPMENT SUCCESS FACTORS ...... 35

TABLE 2.6 NEW PRODUCT DEVELOPMENT FAILURE FACTORS ...... 36

TABLE 2.7 COMPARISON OF LEAN, AGILE AND LEAGILE SUPPLY CHAINS ...... 40

TABLE 2.8 RESEARCH STREAMS OF THIRD-PARTY LOGISTICS ...... 47

TABLE 2.9 DEFINITIONS OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 49

TABLE 2.10 MAIN ELEMENTS OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 50

TABLE 2.11 MAIN BENEFITS OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 51

TABLE 2.12 MAIN REQUIREMENTS OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 52

TABLE 2.13 DEMAND CHAIN MANAGEMENT INFORMATION SYSTEMS ...... 57

TABLE 2.14 SUPPLY CHAIN MANAGEMENT INFORMATION SYSTEMS ...... 59

TABLE 2.14 SUPPLY CHAIN MANAGEMENT INFORMATION SYSTEMS (CONTINUED) ...... 60

TABLE 3.1 RELEVANT RESEARCH STRATEGIES FOR DIFFERENT SITUATIONS ...... 66

TABLE 3.2 MATCHING THE RESEARCH PURPOSE WITH THE RESEARCH STRATEGY ...... 67

TABLE 3.3 THE LINKS BETWEEN INVOLVED CASE COMPANIES AND THE APPENDED PAPERS ...... 69

TABLE 3.4 THE DATA COLLECTION METHODS IN THE APPENDED MANUSCRIPTS ...... 70

TABLE 3.5 VALIDITY IN CASE STUDY RESEARCH ...... 73

TABLE 3.6 RELIABILITY IN CASE STUDY RESEARCH ...... 74

TABLE 4.1 MAIN FINDINGS OF THE APPENDED PAPERS WITH REGARD TO THE RESEARCH QUESTIONS ...... 81

TABLE 4.1 MAIN FINDINGS OF THE APPENDED PAPERS WITH REGARD TO THE RESEARCH QUESTIONS (CONTINUED) ... 82

TABLE 5.1 KEY ELEMENTS OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 86

TABLE 5.2 BENEFITS OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 87

xiii

TABLE 5.3 REQUIREMENTS OF DEMAND-SUPPLY CHAIN MANAGEMENT ...... 88

TABLE 5.4 IMPORTANT ISSUES IN NPD AND THEIR INFLUENCE ON SCM ...... 96

TABLE 5.5 MAIN FINDINGS OF THE RESEARCH WITH REGARD TO THE RESEARCH QUESTIONS ...... 99

TABLE 5.5 MAIN FINDINGS OF THE RESEARCH WITH REGARD TO THE RESEARCH QUESTIONS (CONTINUED) ...... 100

TABLE 6.1 EVALUATION OF THE DEMAND-LED, SUPPLY-LED, AND DEMAND-SUPPLY ORIENTED BUSINESS MODELS ... 105

TABLE 6.2 PERFORMANCE EVALUATION OF THE CASE COMPANY BETA ...... 106

TABLE 6.3 PERFORMANCE EVALUATION OF THE CASE COMPANY GAMMA ...... 107

xiv

LIST OF ABBREVIATIONS

APS ADVANCED PLANNING AND SCHEDULING

ATO ASSEMBLY-TO-ORDER

COP CUSTOMER ORDER POINT

CPFR COLLABORATIVE PLANNING, FORECASTING AND REPLENISHMENT

CRM CUSTOMER RELATIONSHIP MANAGEMENT

CRP CAPACITY REQUIREMENTS PLANNING

CSM CUSTOMER SERVICE MANAGEMENT

DCM DEMAND CHAIN MANAGEMENT

DRP DISTRIBUTION REQUIREMENTS PLANNING

DSCM DEMAND-SUPPLY CHAIN MANAGEMENT

DSS DECISION SUPPORT SYSTEM

DTO DELIVER-TO-ORDER

EAI ENTERPRISE APPLICATION INTEGRATION

EBIT EARNINGS BEFORE INTEREST AND TAXES

ETO ENGINEERING-TO-ORDER

ERP ENTERPRISE RESOURCE PLANNING

GDP GROSS DOMESTIC PRODUCT

IMF INTERNATIONAL MONETARY FUND

KPI KEY PERFORMANCE INDICATOR

LSP LOGISTICS SERVICE PROVIDER

MPS MASTER PRODUCTION AND SCHEDULING

MRP MATERIALS REQUIREMENTS PLANNING

MRPII MANUFACTURING RESOURCE PLANNING

MTO MAKE-TO-ORDER

MTS MAKE-TO-STOCK

NPD NEW PRODUCT DEVELOPMENT

ODM ORIGINAL DESIGN MANUFACTURER

OEM ORIGINAL EQUIPMENT MANUFACTURER

OCF OPERATING CASH FLOW

ROA RETURN ON ASSETS

SCD SUPPLY CHAIN DESIGN

SCS SUPPLY CHAIN STRATEGY

SCM SUPPLY CHAIN MANAGEMENT

STO SOURCING-TO-ORDER

TMS TRANSPORT MANAGEMENT SYSTEM

TPL THIRD-PARTY LOGISTICS

TTC TIME-TO-CASH

TTM TIME-TO-MARKET

VCM VALUE CHAIN MANAGEMENT

VMI VENDOR-MANAGED INVENTORY

WMS WAREHOUSE MANAGEMENT SYSTEM

xvi

LIST OF DEFINITIONS

CUSTOMER ORDER POINT The point where the customer orders (demand) penetrates upstream the supply chain, where forecast-driven activities are distinguished from order-driven activities, and/or where the strategic inventory is stored (Olhager et al., 2006).

CUSTOMER VALUE “The difference between the perceived benefits that flow from a purchase or a relationship and the total costs incurred” (Christopher, 2005, p.46).

CUSTOMER RELATIONSHIP MANAGEMENT The identification, creation, retention, and management of customer relationships, in order to capture market intelligence in a cost-efficient manner (Kotler et al., 2009; Stone et al., 2004; Zablah et al., 2004).

DEMAND CHAIN A network of autonomous organizations involved in the demand processes aimed at responding to customer demand through value creation (Canever et al., 2008; Jüttner et al., 2007; Rainbird, 2004; Walters 2008).

DEMAND CHAIN MANAGEMENT The design, coordination, planning, improvement, execution, and monitoring of the demand processes, within a particular company and across the demand chain, in order to understand, create, and stimulate customer demand as cost-efficiently as possible (Jüttner et al., 2007; Rainbird, 2004; Walters, 2008).

DEMAND-SUPPLY CHAIN A network of autonomous organizations involved in the demand processes aimed at responding to customer demand through value creation and/or in the supply processes aimed at fulfilling customer demand through value delivery (Canever et al., 2008; Jüttner et al., 2007; Rainbird, 2004; Walters 2008).

DEMAND-SUPPLY CHAIN MANAGEMENT The strategic coordination of the demand and supply processes within a particular company and across the demand-supply chain, in order to provide superior customer value as cost- efficiently as possible (Hilletofth et al., 2009; Jüttner et al., 2007; Walters and Rainbird, 2004).

DIFFERENTIATED SUPPLY CHAIN A differentiated supply chain, in contrast to a ‘one-size fits all’ supply chain, incorporates several supply chain solutions (mixtures of different sourcing, manufacturing, and distribution options) each one appropriate to a specific product or market condition (Hilletofth, 2008).

EFFECTIVENESS Conducting the right tasks based on market situation and objectives (revenue growth by doing the right things).

EFFICIENCY Conducting tasks with a minimum of resources (cost reduction by doing the things right).

MARKET INTELLIGENCE The collection and investigation of market and customer data relevant to a specific market situation, problem, or opportunity facing the company, in order to capture market knowledge in a cost-efficient manner (Kotler et al., 2009; Stone et al., 2004). xvii

NEW PRODUCT DEVELOPMENT The design, coordination, planning, improvement, and control of the processes involved in bringing a new or modified product to the market, in order to rapidly develop and introduce desirable products in a cost-efficient manner (Kotler et al., 2009; Kärkkäinen et al., 2001; Van Kleef et al., 2005).

SUPPLY CHAIN A network of autonomous organizations involved in the supply processes aimed at fulfilling customer demand through value delivery (Gibson et al., 2005; Lummus and Vokurka, 1999; Mentzer et al., 2001).

SUPPLY CHAIN MANAGEMENT The design, coordination, planning, improvement, execution, and monitoring of the supply processes, within a particular company and across the supply chain, in order to fulfill customer demand as cost-efficiently as possible (Gibson et al., 2005; Lummus and Vokurka, 1999; Mentzer et al., 2001).

THIRD-PARTY LOGISTICS The use of external companies, generally referred to as logistics service providers, to perform logistics functions which have traditionally been carried out within the company (Marasco, 2008).

xviii

1. INTRODUCTION

In this chapter, the background of the research is given followed by a presentation of the purpose and research questions. Thereafter, the scope and limitations of the research are stated and finally the outline of the thesis is presented.

1.1 Background of the research The customer value based theory of a firm has become more prevalent than ever before (Flint, 2004). It puts forward that companies can only outperform competitors if they can establish a competitive advantage that they can sustain (Piercy, 1998). A competitive advantage can be gained by offering customers superior value, either by providing the same benefits as competitors at a lower cost (cost advantage), or by providing benefits that exceed those of competing offerings (value advantage), or both (Porter, 1996). These advantages are also known as positional advantages since they determine the firm’s positioning in the market. The competitive advantage is formulated in the business strategy and should be difficult for competitors to neutralize (sustainable). The source is found firstly in the ability of the firm to differentiate itself from competition with regard to products and supply chain capabilities (or customer service), and secondly by operating at lower cost with less resources and hence at greater profitability (Christopher, 1998). It enables the firm to create superior value for its customers and stakeholders and higher profits for itself (Slater, 1997). Superior performance (or profitability) is therefore a result of creating and delivering superior customer value in a cost-efficient manner (Porter, 1985), which is achieved by organizing the firm around understanding how customer value is created cost-efficiently (managing value creation), how customer value is delivered cost-efficiently (managing value delivery), and how these processes and management efforts can be coordinated. It is well recognized that the scope of the value creation system and the value delivery system goes beyond the individual firm; hence, firms not only need to manage and coordinate these processes within their own organization but also across organizational boundaries (e.g., Christopher, 1998; Esper et al., 2010; Jüttner et al., 2007). In addition, firms not only need to understand what each customer values, but also the drivers behind shifting perceptions of value over time (Flint et al., 1997), since value not only varies between customers, but also within customers over time (Parasuraman, 1997). Customer value can be defined as follows:

“The difference between the perceived benefits that flow from a purchase or a relationship and the total costs incurred” (Christopher, 2005, p.46).

The view that companies have both a value creation system (or demand chain) and a value delivery system (or supply chain) that need to be managed and coordinated, in order to maximize effectiveness and efficiency, is well recognized in the literature (e.g., Esper et al., 2010; Jacobs, 2006, Jüttner et al., 2006; Walters and Rainbird, 2004). A demand chain can be described as a network of autonomous organizations involved in the demand processes aimed at responding to customer demand through value creation (Esper et al., 2010; Jüttner et al., 2007; Rainbird, 2004). Within each organization, the demand chain includes all the demand processes and activities involved in generating customer demand. The processes may differ between various types of organizations, but typically include market intelligence,

new product development (NPD), branding, as well as marketing and sales (Esper et al., 2010; Jüttner et al., 2007; Walters, 2006A). Demand chain management (DCM) aims to manage and coordinate these demand processes, within a particular company and across the demand chain, in order to understand, create, and stimulate customer demand as cost- efficiently as possible (Jüttner et al., 2007; Rainbird, 2004; Walters, 2008). While DCM, to a degree, is cost-focused (efficiency), the emphasis is on increasing revenues (effectiveness) by identifying, designing, marketing, and selling desirable (e.g., innovative, customized, and affordable) products. The ultimate test of DCM excellence is a revenue level that allows the particular company and the demand chain, as a whole, to prosper in the long run (Gummesson, 2007). DCM can be defined as follows:

The design, coordination, planning, improvement, execution, and monitoring of the demand processes, within a particular company and across the demand chain, in order to understand, create, and stimulate customer demand as cost-efficiently as possible (Jüttner et al., 2007; Rainbird, 2004; Walters, 2008).

A supply chain can be described as a network of autonomous organizations involved in the supply processes aimed at fulfilling customer demand through value delivery (Gibson et al., 2005; Lummus and Vokurka, 1999; Mentzer et al., 2001). Within each organization, the supply chain includes all the supply processes and activities involved in fulfilling customer demand. The processes may differ between various types of organizations but typically include sourcing, manufacturing, and distribution (Christopher, 1998; Fisher and Raman, 1996; Houlihan, 1985; Stevens, 1989). Supply chain management (SCM) aims to manage and coordinate these supply processes, within a particular company and across the supply chain, in order to fulfill customer demand as cost-efficiently as possible (Gibson et al., 2005; Lummus and Vokurka, 1999; Mentzer et al., 2001). While SCM, to a degree, is revenue- focused (effectiveness), the emphasis is on lowering costs (efficiency) by reducing the total amount of resources required to provide the necessary level of customer service (Charlebois, 2008; Jones and Riley, 1985; Kemppainen and Vepsalainen, 2007). The ultimate test of SCM excellence is a cost and service level that allows the particular company and the supply chain, as a whole, to prosper in the long run (Mentzer et al., 2001). SCM can be defined as follows:

The design, coordination, planning, improvement, execution, and monitoring of the supply processes, within a particular company and across the supply chain, in order to fulfill customer demand as cost-efficiently as possible (Gibson et al., 2005; Lummus and Vokurka, 1999; Mentzer et al., 2001).

There is no major difference between the demand and supply chain with respect to the network of organizations involved (besides the focal company, these chains may include suppliers, transporters, distributors/retailers, and the customers themselves), but with regard to the processes considered (Jacobs, 2008). In this sense, the demand and supply chain can often be seen as different perspectives of the same network of organizations (Figure 1.1). When the demand and supply processes are considered simultaneously, the term demand-supply chain (or value chain) can be used (e.g., Rainbird, 2004; Walters, 2006B). Regardless of chain view, the scope begins with the source of supply (or point of origin) and ends at the point of consumption (Stevens, 1989). However, this so-called ultimate chain is seldom considered in reality; instead companies normally utilize more narrow views. For example, Mentzer et al. (2001), in addition to this ultimate chain, also

discuss a direct chain including the focal company and first tier of suppliers and customers, as well as an extended chain which, in addition to the direct chain, also includes suppliers of the immediate suppliers and customers of the immediate customers (second tier). Still, from the perspective of an original equipment manufacturer (OEM), the most common scope in practice (Lumsden, 2006), and also the one used in this thesis, is probably from first tier suppliers to front tier customers.

Demand chain view (managing demand processes) - Market intelligence - New product development - Branding - Marketing and sales Back First First Front tier tier tier tier

S C

S S D of Point consumption/usage

S Supplier Source of supply S S S D C F Focal company S S F D D Distributor/retailer S S S D C C Customer

S S D

S C

Upstream Downstream

Supply chain view (managing supply processes) - Sourcing - Manufacturing - Distribution

Figure 1.1 The demand-supply chain

In summary, the customer value based theory suggests that a firm can be divided into a demand-side, which includes all the demand processes aimed at responding to customer demand through value creation (i.e., the demand chain) and a supply-side, which includes all the supply processes aimed at fulfilling customer demand through value delivery (i.e., the supply chain). The management of the demand-side (DCM) is revenue-driven and focuses on effectiveness, while the management of the supply-side (SCM) tends to be cost-oriented and focuses on efficiency. Evidently, these management directions together determine the firm’s profitability and thus they need to be coordinated. This requires a demand-supply oriented business model where the demand and supply processes are coordinated and oriented towards the customers (e.g., Canever et al., 2008; Esper et al., 2010; Flint, 2004; Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Lambert and Cooper, 2000; Mentzer et al., 2001; Walters and Rainbird, 2004). In the literature, essentially two suggestions have been proposed on how to create this demand-supply oriented business model. The first suggestion is that either the responsibilities of DCM or SCM should be extended to facilitate coordination between the demand and supply processes. For instance, Sheth et al. (2000) and Srivastava et al. (1999) argue that DCM needs to be in charge of SCM in order to achieve customer focus as well as demand and supply coordination. Similarly, Mentzer et al. (2001) as well as Lambert and Cooper (2000) include different demand processes in their models of SCM. The second suggestion is that these management directions should focus on their area

of expertise and become coordinated and directed at an overlying (or macro) level (e.g., Esper et al., 2010; Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Walters and Rainbird, 2004). In this thesis, the latter approach is considered and entitled demand-supply chain management (DSCM).

DSCM aims to coordinate the demand and supply processes within a particular company and across the demand-supply chain, in order to provide superior customer value as cost- efficiently as possible (Hilletofth et al., 2009 Jüttner et al., 2007; Walters and Rainbird, 2004). The emphasis is both on increasing revenues (effectiveness) by providing desirable products and tailored supply chain solutions (customer service) and on reducing costs (efficiency) by managing the demand and supply processes in a cost-efficient manner. Differentiated (or tailored) customer service calls for a differentiated supply chain (also referred to as multiple supply chain). A differentiated supply chain, in contrast to a ‘one-size fits all’ supply chain, incorporates several supply chain solutions (mixtures of different sourcing, manufacturing, and distribution options), each one appropriate to a specific product or market condition (Hilletofth, 2008). The overall goal of DSCM is to gain a competitive advantage (increase profitability) by providing superior customer value at a lower cost. This is achieved by organizing the firm around understanding how customer value is created cost-efficiently (managing the demand chain), how customer value is delivered cost-efficiently (managing the supply chain), and how these processes and management directions can be coordinated (Figure 1.2).

Suppliers Focal company Retailers Market (customers) Demand chain management The management of the demand processes, within a particular company and across the demand chain, in order to understand, create, and stimulate customer demand as cost-efficiently as possible. Demand processes Demand creation Market New product Marketing Branding (value creation) intelligence development and sales

Management levels

Design Planning Execution (strategic level) (tactical level) (operational level)

Competitive Coordination advantage (value and cost) Supply chain management

The management of the supply processes, within a particular company and across the supply chain, in order to fulfill customer demand as cost-efficiently as possible.

Supply processes Demand fulfillment Sourcing Manufacturing Distribution (value delivery)

Management levels Design Planning Execution (strategic level) (tactical level) (operational level)

Figure 1.2 Demand-supply chain management

In essence, DSCM concerns the coordination of DCM and SCM across intra-organizational (within a company) and inter-organizational (across the demand-supply chain) boundaries. The underlying principle is that these management directions should be viewed as being equally important and that neither one should rule single-handedly (Jacobs, 2006; Jüttner et al., 2006; Rainbird, 2004). These management directions are of fundamental importance to every organization and can be separated into three management (or planning) levels: design (or strategy), which covers long-term decisions on how to structure the chain; planning, which covers medium-term decisions on how to plan the chain; and execution, which covers short-term decisions on how to operate the chain (Chopra and Meindl, 2010). Thus, the coordination can occur within and between companies at different levels. The ultimate test of DSCM excellence is a profit level that allows the particular company and the demand- supply chain, as a whole, to prosper in the long run (Hilletofth et al., 2009). DSCM can be defined as follows:

The strategic coordination of the demand and supply processes, within a particular company and across the demand-supply chain, in order to provide superior customer value as cost- efficiently as possible (Hilletofth et al., 2009; Jüttner et al., 2007; Walters and Rainbird, 2004)

Even if the principles of DSCM are well established in the literature, the term is not. Instead, authors addressing these principles utilize different terminologies with regard to both the overlying management (DSCM) and the components (DCM and SCM). Some authors refer to DCM as the overlying management and discuss coordination between marketing and SCM (e.g., Canever et al., 2008; Jüttner et al., 2006). The major problem of this approach is that the difference between the demand and supply chain is not evident. Additionally, the term marketing is related to intra-organizational aspects, while the overlying concept (DCM) and SCM incorporates both intra- and inter-organizational aspects. Other authors refer to SCM as the overlying management and discuss coordination between demand management and supply management (e.g., Esper et al., 2010; Lambert and Cooper, 2000; Mentzer et al., 2001). The major problem of this approach is that the significance of the demand-side is not highlighted. In addition, the terms demand management and supply management are intra- organizational in nature, while the overlying concept (SCM) includes both intra- and inter- organizational aspects. A final group of authors refer to value chain management (VCM) as the overlying management and discuss coordination between DCM and SCM (e.g., Walters, 2008; Rainbird, 2004). The major problem of this approach is that it introduces yet another chain term (value chain), which adds to the confusion rather than reduces it. It can be argued that the underlying principle of coordination between the demand processes and the supply processes across intra- and inter-organizational boundaries is the same in all these approaches. The terminology used in this thesis has been chosen, since it is believed to portray the concept in the most appropriate way.

1.2 Motivation of the research The need to coordinate the demand and supply processes has been emphasized in both the demand chain as well as the supply chain literature. From a demand chain perspective, Flint (2004) argues that effective marketing strategy implementation requires SCM, since it includes the distribution part of the strategy. Likewise, Sheth et al. (2000) emphasize, in their customer-centered marketing approach, the need for DCM to be in charge of SCM. They argue that in environments with increasing diversity, in customer needs and requirements,

companies must rapidly adjust their supply to meet demand. Moreover, Kumar et al. (2000) suggest that market-driven companies can gain a more sustainable competitive advantage, by not only providing superior customer value propositions, but also by having a unique business system to support it. By business system, they mean the configuration of activities required to create, produce, and deliver the customer value proposition, which clearly refers to SCM. Furthermore, Srivastava et al. (1999) define SCM, NPD, and customer relationship management (CRM) as the three core business processes which contribute to creating and delivering customer value. They argue that the role of DCM is to connect these processes; however, they also admit that while it will have a leading function in managing customer relationships, its role in SCM is restricted to communication and direction. The authors emphasize that the processes have to be integrated; however, the integration itself is not discussed. Similarly, Payne and Christopher (1994) argue that CRM and SCM processes have to be integrated to provide high levels of product availability and variety in a cost-efficient manner. While the authors provide guidelines for the processes separately, the integration is depicted at a highly abstract level. Interestingly, the stream of research in the demand chain field which recognized the move towards network competition at the beginning of the 1990s redefined and extended the role of marketing, but did not acknowledge the need for a closer integration with SCM (Achrol, 1991, 1997; Achrol and Kotler, 1999).

Within the supply chain literature, many authors who aim to describe SCM refer to the importance of coordinating demand and supply processes by incorporating various demand processes in the SCM definition. For example, Cooper et al. (1997) and Lambert and Cooper (2000) define SCM as the integration and management of key business processes across the supply chain. They outline three demand processes: CRM, customer service management (CSM), and demand management. Mentzer et al. (2001) also build their model of SCM on the inter-functional coordination of processes spanning demand and supply functions. They suggest the investigation of how the demand and supply processes can be effectively coordinated within a company and across the supply chain as an area for future research. Similarly, Bechtel and Jayaram (1997) suggest a research agenda for SCM and emphasize the need for the supply chain to begin with the customer. They propose that a better term would be seamless demand pipeline, where the end user and not the supply function drives the supply chain. Lee (2001) emphasizes the problems of SCM acting separately from DCM. If the demand and supply processes are separated, supply will view demand as exogenous and will fail to recognize that demand is influenced by the company’s customer facing functions. Also, if consistent and timely demand information does not flow, the company will not be able to respond to the differentiated needs of individual customers and market segments. Fisher (1997) links the integration of DCM into SCM to the concept of the market mediation role of the supply chain. Within this role, the supply chain needs to ensure that the variety of products reaching the market matches what customers want to buy. Finally, Min and Mentzer (2000) stress the important role that DCM (e.g., market orientation and relationship marketing) plays in the implementation of SCM.

Evidently, the need to coordinate demand and supply processes has been addressed in both the demand and supply chain literature. Still, it appears that the supply chain community has considered the coordination more frequently than vice versa. Based on a literature review, Jüttner et al. (2007) conclude that the amount of research work addressing the coordination within the supply chain field outnumbers those from the demand chain field (e.g., Christopher and Peck, 2003; Ellinger, 2000; Emerson and Grimm, 1996; Morash et al., 1996;

Murphy and Poist, 1996). The same situation applies in the most obvious interface between marketing channel management and logistics management; Alvarado and Kotzab (2001) conclude that marketing researchers have been slow in rising to the occasion of combining logistics research into their studies of channel systems. It also appears as if the supply chain community has considered the coordination more comprehensively than the other way around. Min and Mentzer (2000) even argue that DCM and SCM are not separate but inextricably intertwined. Other authors state that the SCM concept aims to reintegrate marketing and logistics, which initially were closely linked but drifted apart over time (Svensson, 2002). Moreover, the demand-supply oriented approach has emerged from the supply chain field (Canever et al., 2008; Holmström et al. 2000; Jüttner et al., 2006).

Coordination between the demand and supply processes is vital in all industries, however, the level required to succeed differs to a certain extent. In essence, four business models can be distinguished with regard to the level of demand chain and supply chain coordination (Figure 1.3). While companies in the first category, market losers, have either demand chain or supply chain strengths, companies in the second category, supply chain masters, have strength in managing the supply processes. This enables them to reduce time and costs in sourcing, manufacturing, and distribution as well as improve asset turnover. In companies embracing this supply-led approach, the supply-side tends to set the business strategy while the demand-side supports it, and the goal is to gain a competitive advantage by providing comparable customer value at a lower cost (Jüttner et al., 2007). These supply-led firms usually focus on activities such as strategic sourcing, collaborative planning, forecasting and replenishment (CPFR), as well as inventory reduction. Several studies report major cost savings, which companies have accomplished through their supply chain excellence (e.g., Rainbird, 2004). Nevertheless, a supply chain strength that is not linked to a demand chain strength usually limits the company to competing on price and availability (Piercy, 2002). Consequently, competition through supply chain excellence assumes that price is a major determinant of competitive advantage. A supply chain strength that is not linked to a demand chain strength may also result in suboptimal NPD, lack of product and service differentiation, as well as ineffective product and service delivery (Jüttner et al., 2007).

Companies in the third category, demand chain masters, have strength in managing the demand processes. This enables them to increase revenues by designing, marketing, and selling desirable products. In companies embracing this demand-led approach, the demand- side tends to set the business strategy while the supply-side supports it, and the goal is to gain a competitive advantage by providing superior customer value. These demand-led firms usually focus on activities such as identifying unique customer needs, developing innovative value propositions, managing customer relationships and developing strong brands (Jüttner et al., 2007). They use their extensive customer knowledge to apply marketing instruments in a more effective way. In particular, the recent trend towards CRM has enabled many companies to capture market intelligence, segment the customer base, customize the value propositions, and coordinate the demand chain (e.g., Day and Van den Bulte, 2002; Zablah et al., 2004). However, a demand chain strength that is not linked to supply chain strength usually leads to a high cost base and inefficient delivery (Piercy, 2002). These problems can only be compensated by an incredibly strong brand, since companies that are unable to deliver according to the promises made will eventually lose credibility and customer satisfaction will decrease. A demand chain strength that is not linked to a supply chain strength may also result in under-delivery or over-delivery, as well as a loss in the share of

customer opportunities, if the firm cannot capitalize on the differentiated customer needs (Jüttner et al., 2007).

Demand chain masters Demand-supply chain masters (value leader) (value and cost leader) Strategy: Strategy: - Superior customer value - Superior customer value at a lower cost

High Focus: Focus: - Product differentiation - Product and service differentiation - Premium brands and products - Cost reduction

Potential problems: Benefit: - Excessive supply costs of products - Satisfying different customer needs with - Under-/overdelivery differentiated supply chain capabilities - Lost share of customer opportunities

(value) Market losers Supply chain masters (commodity market) (cost leader) Strategy: - Comparable customer value at a lower cost Demandchain advantage Low Focus: - Cost reduction

Potential problems: - Lack of product and service differentiation - Ineffective product and service delivery - Suboptimal product development

Low High Supply chain advantage (cost) Figure 1.3 Levels of demand and supply chain coordination Source: Adapted from Jüttner et al. (2007)

Companies in the fourth category, demand-supply chain masters, have strength in managing and coordinating the demand and supply processes. This enables them to enhance profitability by developing and selling desirable products and delivering them in tailored (or differentiated) supply chain solutions (i.e., product and service differentiation), while simultaneously managing the demand and supply processes in the most cost-efficient manner (Hilletofth et al., 2009; Jüttner et al., 2007). This is achieved by creating product and service offerings focused on customer needs and the value they can provide, which is all based on a comprehensive understanding of customer needs and the total demand-supply chain costs (Deloitte, 2002). In companies embracing this demand-supply oriented approach, both the demand- and supply-side are involved in setting the business strategy, and the goal is to gain a competitive advantage by providing superior customer value at a lower cost (Jüttner et al., 2007). The link between supply chain and demand chain strengths enables these companies to lower prices on offerings that are of great value to the customer, proactively and innovatively address new and changing customer needs, improve range management, as well as reduce time-to-market (TTM) and time-to-cash (TTC) (Rainbird, 2004; Walters and Rainbird, 2004).

It can be argued that the difference between supply chain masters, demand chain masters, and demand-supply chain masters is the choice of emphasis (Charlebois, 2008; Esper et al.,

2010; Jüttner et al., 2007). Moreover, it can be argued that all of these business models can be appropriate, depending on demand and supply characteristics (Christopher et al., 2006) as well as on how the company would like to compete (Hilletofth and Hilmola, 2008). For example, the demand-led approach can be appropriate for premium brands, while a supply- led approach can be suitable for manufacturers of low-cost products. However, as shown above, companies utilizing these restricted business models can experience major difficulties by focusing too much on either the demand- or supply-side of the company (Walters, 2006B). Consequently, it can be argued that DCM and SCM should always be coordinated, even in markets where cost-efficiency is the basis for competitive advantage (Jüttner et al., 2007). The choice of management orientation does not eliminate the fact that the supply and demand logic must be balanced one way or another (Jacobs, 2006), which has grown to be even more important in today’s new market environment (Hilletofth et al., 2009).

It is well recognized that the market environment has become radically different for many industries in the last few decades (Christopher et al., 2004). One significant market change has been the globalization of markets. This can be described as the transition from an economic system in which national markets are distinct entities, isolated from each other by trade barriers, as well as barriers of distance, time, and culture, toward a system in which national markets are merging into one huge world market (Dreher, 2006). Three factors lie behind this transformation: the reduction of trade barriers that enable the free flow of goods, services, and capital; the development of information technology that enables companies and customers to communicate globally; and the development of transportation technology and infrastructure that enables companies to operate worldwide (Hilletofth et al., 2007). The onward march of globalization can be seen in the growth of world trade (export and import) compared to the growth of world gross domestic product (GDP). Figure 1.4 shows world trade and GDP from 1970 to 2014 as percent change from the previous year. As indicated, the growth of world trade has outperformed the growth of GDP almost every year during this time period, except during the Iran oil crisis, the early 1980s crisis, the IT crisis, and the recent finance crisis. This means that markets have become global in scope, since world GDP should otherwise have outperformed world trade.

Another significant market change has been the maturing of markets. Mature markets have certain characteristics that distinguish them as being significantly different from growth markets. In growth markets, few customers have experience of the product (low market penetration) and, hence, most of the products that are placed on the market at reasonable prices are sold (Hilletofth and Ericsson, 2007). Typically, few suppliers compete in these markets, resulting in high profitability. In addition, they focus on producing as many units as possible as cheaply as possible, as well as on acquiring more capacity. Customers in mature markets, on the contrary, have had and seen it all (high market penetration), they are thus more sophisticated, experienced, and demanding, and less easily persuaded by marketing (Hilletofth and Ericsson, 2007). Hence, not all products that are put on the market at a reasonable price are sold. Many suppliers compete in these markets, resulting in lower profitability, which means they tend to focus on cost-efficiency. One consequence of this market change is that customers perceive little difference between competing offers, leading to the gradual decline in brand loyalty. According to Christopher and Peck (2003), brand loyalty has been replaced by brand preference. This means that a customer may prefer to purchase a particular product from a particular supplier for a variety of reasons (design, function, or convenience). However, the customer willingly accepts a substitute, if

the preferred product is not available or if a competitor provides more reliable and tailored customer service. Therefore, mature markets exhibit similar characteristics to commodity markets, leading to competition based on price. Even products with high rates of innovation are not immune from this tendency towards commoditization (Christopher and Peck, 2003).

World GDP 0 World trade 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012* 2013* 2014*

-5

-10

-15 Figure 1.4 World trade and GDP development from 1970 to 2014. Percent change from previous year, denotation * is forecast Source: Compiled by data from International monetary fund (IMF)

A final significant market change has been the increased competition from both domestic and foreign competitors, in part due to the globalization and maturing of markets. Almost by definition, the effect of increased competition is a downward pressure on price. This has forced companies to advertise more, as well as to improve the design, function, and quality of their products while at the same time reduce the price of the products. Accordingly, there is a temptation to pursue tactical gains in sales volume, through discounting in one form or another, which is compounded by the continuing demands for price reductions by powerful customers (Christopher and Peck, 2003). Ironically, the more companies compete on price, the more they reinforce the customers’ view that they are commodity suppliers. In an effort to escape price competition that tends to result in reduced profit margins, many companies seek to expand the product range and variety, develop and introduce new products faster, and increase the level of customization (or differentiation). This, in turn, has spurred market trends such as reduced product life cycles and increased volatility of demand (Christopher et al., 2004).

It can be concluded that the market environment has become radically different in many industries and is nowadays characterized by high competition, high product variety, high customization, high demand variability, and short product life cycles (Christopher et al., 2004). This is almost as apparent in industrial markets as it is in consumer markets, and it

has increased the diversity of customer needs (Canever et al., 2008; Christopher and Peck, 2003), with regard to both products and customer service. Consequently, markets are becoming more competitive and fragmented, since customers increasingly seek individual solutions to their needs, which means that companies must be innovative, differentiated, and responsive, in order to survive in such business environments. The main issue is to maintain profitability (escape price competition) by creating and delivering desirable products in a cost-efficient manner, which requires coordination between the demand and supply processes (i.e., the demand-supply oriented approach) to be successful. For instance, it is necessary to coordinate these processes to be able to rapidly adjust supply to meet demand (Canever et al., 2008; Sheth et al., 2000). In addition, coordination is necessary because the scope of value creation has to be extended to include SCM, as competitiveness is not solely obtained by desirable products, but also concerns how products are delivered (Hilletofth et al., 2009).

In summary, the arguments for coordinating the demand and supply processes are compelling. However, despite the strong motives for the demand-supply oriented approach, the supply-side still seems to be disconnected from the demand-side in most companies and one of them is usually prioritized. In a study of 249 executives in 28 countries, Deloitte (2002) found that only a minority of all firms (17%) have linked the demand and supply processes. They nevertheless conclude that these integrated companies have outperformed their competitors in a range of performance criteria such as sales growth, market share, customer service, and return on assets (ROA). In another global survey of more than 400 companies, Mentzer (2004) found that DCM, as well as the concept of demand itself, is not well understood by the supply chain community. He concludes that many companies have failed to realize that supply chain coordination is not possible without an adequate understanding of demand. Therefore, it can be concluded that the demand-supply oriented approach is not very common in reality. Instead the demand-led and supply-led approaches are more prevalent in most industries.

The fact that only a minority of companies appear to have effectively coordinated the demand and supply chain processes may be influenced by the complexity of the tasks involved (Jüttner et al., 2007). The influence of demand on supply, and vice versa, has to be understood and coordinated (Lee, 2001). For example, pricing, promotion, and product mix efforts influence delivery times and supply chain costs. Conversely, supply chain costs dramatically impact product profitability, and thus have to be considered in the customer value propositions. Furthermore, an inclusive coordination not only combines the activities within one company, but can also involve coordination across the entire demand-supply chain (Jüttner et al., 2006). Another reason that so few companies have coordinated the demand and supply processes may be the lack of research addressing how it can be achieved and benefits that can be gained. It has been concluded that there is a lack of research examining how the demand and supply processes influence each other and how they can be coordinated, what benefits can be gained by coordinating them, and what requirements are necessary to succeed with the coordination (Canever et al., 2008; Esper et al., 2010; Hilletofth et al., 2009; Jüttner et al., 2007, Mentzer et al., 2001). Thus, the concept and application of DSCM is still in its infancy and needs to be researched further.

1.3 Purpose of the research In the background and motivation sections, it is argued that the demand chain and the supply chain processes need to be coordinated in order to maximize effectiveness and efficiency, and a demand-supply oriented approach entitled DSCM is proposed. In addition, it is revealed that few firms have effectively coordinated the demand and supply processes, despite the strong arguments, and it is argued that this might be influenced by the complexity of the tasks involved as well as the lack of research examining the issue. Finally, it is concluded that the concept and application of DSCM is in its infancy and must be further investigated to become more formalized. Hence, the overall purpose of this thesis is:

To enhance current 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.

The purpose is divided into two parts from which four research questions have been derived. The first part (determining elements, benefits, and requirements of DSCM) is covered in the first research question (RQ), while the second part (analyzing key elements of DSCM) is covered in research questions 2 to 4 (Table 1.1). Since key elements of DSCM are established in RQ1, the remaining research questions further analyze some of the established elements. These elements are supply chain differentiation (RQ2), coordination between NPD and SCM (RQ3), and the importance of viewing the demand and supply processes as being equally important (RQ4). In the remainder of this section, the research questions are motivated on the basis of existing literature (theoretical verification), and the links between the appended papers and the research questions are shown.

Table 1.1 The research questions Research question Description RQ 1 What elements, benefits, and requirements characterize the demand-supply chain management concept? RQ 2 How can a differentiated supply chain be developed, and what are the benefits and requirements? RQ 3 What linkages exist between new product development and supply chain management, and how can these management directions be coordinated? RQ 4 What effect has logistics outsourcing on demand-supply chain management?

The fundamental idea of DSCM, coordinating the demand and supply processes across intra- and inter-organizational boundaries, is well established in the literature (Canever et al., 2008; Charlebois, 2008; Esper et al., 2010; Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Walters, 2008). However, it has been concluded that there is a lack of research examining the concept, for example, what elements characterize the concept, what benefits can be obtained by implementing the concept, and what requirements are necessary to succeed with the implementation (Canever et al., 2008; Esper et al., 2010; Hilletofth et al., 2009; Jüttner et al., 2007). Moreover, there is a lack of research examining how the demand and supply processes influence each other and how they can be coordinated (Mentzer et al., 2001). In addition, there is a lack of conceptual foundation since most of the research works are only based on best practice examples (e.g., Langabeer and Rose, 2002; Lee and Whang, 2001; Deliotte, 2002), although notable exceptions exist (e.g., Jüttner et al., 2007; Walters and Rainbird, 2004; Walters, 2008). Another deficiency is that most DSCM research stems from the supply chain field (e.g., Childerhouse et al., 2002; Lee, 2001; Lee and Whang, 2001;

Rainbird, 2004; Vollmann et al., 1995), although selected citations from the demand chain field can be traced (e.g., Baker, 2003; Charlebois, 2008; Esper et al., 2010; Jüttner et al., 2006). Therefore, research works which improve the understanding and conceptualization of DSCM are needed. Thus, the first research question is posed as follows:

RQ1. What elements, benefits, and requirements characterize the demand-supply chain management concept?

One important element of DSCM, discussed in the literature, is product and service differentiation (e.g., Canever et al., 2008; Esper et al., 2010; Walters, 2008). In order to survive in competitive and fragmented market environments, many companies use innovation as a source of product differentiation and strive to increase the pace with which new and innovative products can be developed and introduced into the market (Carillo and Franza, 2006). One reason for this is that the right products have to be developed and successfully launched in ever shorter time frames as product life cycles decrease, so that competitiveness and market differentiation may be achieved (Zacharia, 2001). Other reasons are that first-to-market products may command higher initial prices as well as gain a dominant market share and customer loyalty, while reduction of the TTM may result in significant cost reductions (Droge et al., 2000). In addition, the importance of products introduced the prior year is increasing, since they constitute a growing share of the total revenues, in many markets 40 percent or more (Handfield and Hichols, 2002). Thus, many companies consider rapid and innovative NPD as a key strategic activity, and the ability to reduce the TTM as a key to long-term success and profitability. However, within the DSCM approach, it is also important that value creation and innovation is not restricted to the demand-side of the company, but also applied to the supply chain. The reason is that competitiveness nowadays is not solely based on desirable products, but also concerns customer service (supply chain capabilities). This is particularly the situation in markets where there is a trend towards commoditization. In these markets, it is important to enhance overall customer value, by providing differentiated customer service through the development of a differentiated supply chain (Jüttner et al., 2007). A considerable body of research in the supply chain field has centered on the issue of identifying the appropriate type of supply chain for different market environments (e.g., Christopher et al., 2006; Hilletofth and Hilmola, 2007; Stratton and Warburton, 2003; Warburton and Stratton, 2002). The debate has centered on the ability of the supply chain to be either “lean” (Womack and Jones, 1996) or “agile” (Goldman et al., 1995). However, the need to differentiate the supply chain by utilizing a set of supply chain solutions concurrently has remained relatively unexplored. It has been concluded that there is a lack of research examining how a differentiated supply chain can be developed, implemented, and managed; what benefits can be obtained by differentiating the supply chain; and what requirements are necessary to succeed (Hilletofth, 2008; Kemppainen and Vepsalaninen, 2007). This means that research works which increase the understanding of supply chain differentiation are needed. Hence, the second research question is posed as follows:

RQ2. How can a differentiated supply chain be developed, and what are the benefits and requirements?

Another important element of DSCM, discussed in the literature, is coordination between NPD and SCM (e.g., Canever et al., 2008; Jüttner et al., 2007; Walters, 2008). A considerable amount of NPD research focuses on issues such as reduction of the TTM and process

improvement issues in isolation (e.g., Cohen et al., 2000; Gerwin and Barrowman, 2002; Morgan et al., 2001). However, research addressing the coordination of NPD and SCM, in order to support the introduction of new products into the market, is relatively rare (Carillo and Franza, 2006; Van Hoek and Chapman, 2007). For instance, Krishnan and Ulrich (2001) comment that the literature addressing NPD and production ramp-up is sparse, although notable exceptions exist (e.g., Terwiesch and Bohn, 2001; Terwiesch and Xu, 2001; Terwiesch et al., 2001). This is remarkable, since the TTM is affected by numerous activities in SCM (Hilletofth et al., 2010A). It can be argued that the NPD process not only enables management to coordinate the flow of new products efficiently, but also to assist in the ramp-up of the supply processes and other related activities (marketing and sales) that support the commercialization of the product (Carillo and Franza, 2006). For this reason, companies need to stop thinking around the edges and begin to coordinate and address these issues in parallel, in order to reduce the TTM and enhance profitability (Van Hoek and Chapman, 2006). SCM should no longer clean up after NPD, but be involved from the beginning with the same authority (Van Hoek and Chapman, 2007). It has been concluded that there is a lack of research examining how the NPD and SCM processes influence each other and how they can be coordinated, what benefits can be gained by coordinating them, and what requirements are necessary to succeed with the coordination (Carillo and Franza, 2006; Van Hoek and Chapman, 2006). This implies that research works which enhance the understanding of NPD and SCM coordination are needed. Hence, the third research question is posed as follows:

RQ3. What linkages exist between new product development and supply chain management, and how can these management directions be coordinated?

A final important element of DSCM, discussed in the literature, is that companies should give similar attention to the demand and supply processes (Jacobs, 2006; Jüttner et al., 2006; Rainbird, 2004). Currently, there is a trend towards specialization in many industries, which means that companies concentrate on those processes and activities they regard as their core business and outsource the rest to specialists (Sahay and Mohan, 2006). Thus, supply- led companies tend to outsource demand processes, whilst demand-led companies tend to outsource supply processes. For instance, many OEM nowadays make use of original design manufacturers (ODM), contract manufacturers, and logistics service providers (LSPs). This implies that one interesting research topic is the effect of outsourcing on DSCM. It can be argued that outsourcing is problematic from a DSCM perspective, since it could indicate that the outsourced demand or supply processes are regarded less important and that it could influence the development of differentiated products and supply chain solutions. Logistics outsourcing certainly has an effect on the development of a differentiated supply chain, since it means that an external partner is responsible for the management of the entire logistics process, a sub-process or selected activities within these processes (Marasco, 2008; Selviaridis and Spring, 2007). Even some of the more basic LSPs offer value-added and customized services in addition to more traditional services. Some actors even take complete control of the customer’s logistics process and develop it further by creating new and customer adapted services (Jäger et al., 2007). Hence, LSPs, in various degrees, may support companies in differentiating the sourcing and distribution parts of the supply chain. While a considerable body of third-party logistics (TPL) research has centered on the type of activities outsourced, the reasons behind these decisions, and the benefits of logistics outsourcing (Power et al., 2007), the issue of how it actually effects DCM and SCM have

remained relatively unexplored (Hilletofth and Hilmola, 2009). It is often stated that logistics outsourcing influences these management directions, for example, utilized supply chain solutions, management orientation, business relationships, performance measurements, and information systems. However, very few research studies have investigated this topic further. This means that research works about the effect of logistics outsourcing on DSCM are needed. Hence, the fourth and final research question is posed as follows:

RQ4. What effect has logistics outsourcing on demand-supply chain management?

The appended papers contribute to different aspects of the research questions, which are meant to capture important aspects of DSCM to fulfill the stated purpose. The contribution of the included papers to the specific research questions are summarized in Table 1.2. The first research question – what elements, benefits, and requirements characterize the demand-supply chain management concept? – is covered in Paper II. The second paper contributes by investigating what key elements, benefits, and requirements characterize the concept as well as by illustrating its occurrence in practice. These issues have been examined through a literature review and a qualitative single case study. The case company (Beta) is a Swedish manufacturer operating on an international basis in the appliance and white goods industry. It is important to note that the other papers address important elements of DSCM and thus indirectly contribute to the first research question.

Table 1.2 Contribution of the appended papers to the research questions Paper RQ1 RQ2 RQ3 RQ4 I Literature review Multiple case study Analysis II Literature review Single case study Analysis III Literature review Survey Analysis IV Literature review Multiple case study Analysis V Literature review Literature review Multiple case study Multiple case study Analysis

The second research question – how can a differentiated supply chain be developed, and what are the benefits and requirements? – is covered in Papers I and V. The first paper contributes by investigating how a differentiated supply chain can be developed and what the benefits and requirements are. The study primarily focuses on the manufacturing part of the supply chain, that is, how different manufacturing strategies, such as make-to-stock (MTS), deliver-to-order (DTO), assembly-to-order (ATO), make-to-order (MTO), sourcing-to- order (STO), and engineering-to-order (ETO), are used in manufacturing supply chains. However, the study also includes elements concerning sourcing and distribution parts. These issues have been examined through a literature review and a qualitative multiple case study including two case companies. The first case company (Alpha) is a Swedish manufacturer operating on a global basis in the enterprise telecommunications industry. The second case

company is a Swedish manufacturer (Beta) operating on an international basis in the appliance and white goods industry. The fifth paper contributes by investigating how LSPs can support the development of a differentiated supply chain. The study primarily focuses on the sourcing and distribution parts of the supply chain. This issue has been examined through a literature review and a qualitative multiple case study including two case companies. The first case company (Delta) is a Swedish LSP that offers services within the distribution and warehousing of furniture. The second case company is a Swedish LSP (Epsilon) that offers customer-oriented services by creating strategic alliances with the customers.

The third research question – what linkages exist between new product development and supply chain management, and how can these management directions be coordinated? – is covered in Paper IV. The fourth paper contributes by investigating how NPD and SCM are connected to one another. The study primarily focuses on NPD success factors, and connections to SCM are derived from these success factors. These issues have been examined through a literature review and a qualitative multiple case study including two case companies. The first case company (Beta) is a Swedish manufacturer operating on an international basis in the appliance and white goods industry. The second case company is a Swedish manufacturer (Gamma) operating on an international basis in the appliance and outdoor power products industry.

The fourth and final research question – what effect has logistics outsourcing on demand- supply chain management? – is covered in Papers III and V. The third paper contributes by investigating the effect of logistics outsourcing on SCM. The study primarily focuses on how logistics outsourcing influences management orientation, utilized supply chain strategies business relationships, performance measurements, and information systems. In addition, the study examines if the outsourcing of different supply chain activities has an effect on the relation between local and overseas market share and source of supply. These issues have been examined through a quantitative survey study. The research targeted the largest companies in Sweden and Finland and data was collected through an online questionnaire. Paper V also contributes to this research question, since it investigates how LSPs can contribute to the development of a differentiated supply chain.

1.4 Scope of the research The scope of this thesis is the concept of DSCM and, as described in the background section, the aim of DSCM is to coordinate the demand and supply processes within a particular company and across the demand-supply chain, in order to provide superior customer value as cost-efficiently as possible. This is achieved by organizing the firm with regard to understanding how customer value is created cost-efficiently (managing the demand chain), how customer value is delivered cost-efficiently (managing the supply chain), and how these processes and management directions can be coordinated. In essence, it concerns the coordination of DCM and SCM, which can occur within a particular company and across the demand-supply chain at different planning levels (strategic, tactical, and operational). The scope, as such, is quite broad and gives the opportunity for research from several perspectives. However, to sharpen the focus, as well as to keep it within the researcher’s domain, some aspects were not included in this research (Figure 1.5). Firstly, the concept is investigated from the standpoint of an OEM, and the chain view employed in this thesis is

from first tier suppliers to front tier customers. In essence, the concept is analyzed from the perspective of a single organization, that is, the coordination of DCM and SCM within a particular company (intra-organizational). However, the aspects considered within these management directions are both intra- and inter-organizational in nature (e.g., supply chain design).

Suppliers Focal company Retailers Market (customers) Demand chain management TheThe management management of of the the demand demand processes,processes withinwithin aa particularparticular companycompany andand acrossacross thethe demanddemand chain,chain inin orderorder to understand, create, and stimulate customer demand as costcost-efficiently-efficient as as possible. possible. Demand processes Demand creation Market New product Marketing Branding (value creation) intelligence development and sales

Management levels

StrategyDesign Planning Execution (strategic level) (tactical level) (operational level)

Competitive Coordination advantage (value and cost) Supply chain management

TheThe managementmanagement ofof thethe supplysupply processes,processes withinwithin aa particularparticular company company and and across across the the supply supply chain chain, in in order order to to fulfillfulfill customercustomer demanddemand as as cost cost--efficientefficiently as as possible. possible.

Supply processes Demand fulfillment Sourcing Manufacturing Distribution (value delivery)

Management levels StrategyDesign Planning Execution (strategic level) (tactical level) (operational level)

Figure 1.5 The scope of the thesis, gray areas are primarily addressed

Secondly, this thesis covers the strategic level of DSCM, while the tactical and operational levels are not considered. Since this research focuses on the strategic level of DSCM, supply chain design (strategic level of SCM), and demand chain design (strategic level of DCM) are addressed in this thesis. Finally, the route of this research has been from SCM towards DSCM; hence, the focus is more on SCM than on DCM. In essence, only those demand processes considered relevant from a supply chain design perspective have been included in this research, namely market intelligence and NPD.

1.5 Outline of the thesis The remainder of this thesis is structured as follows (Figure 1.6): In Chapter 2 (theoretical framework), the different theories relevant to providing a deeper understanding and explanation of the research field and questions are presented. Initially, the framework

formed by the concept of DSCM is given. This is followed by a description, in turn, of the main components of the framework, focusing on those aspects relevant in this research. In Chapter 3 (methodology), the research methodology that holds this thesis together is presented and evaluated. Firstly, the different steps of the research process are described and related to one another. Secondly, the research design is presented with regard to the utilized research approach, the applied research strategies, and the design of the conducted studies. Finally, the research quality is evaluated.

Chapter 1: Introduction - Background of the research - Scope of the research - Motivation of the research - Outline of research - Purpose of the research

Chapter 2: Theoretical framework - Components of the framework - Supply chain management - Competitive advantage - Demand-supply chain management - Demand chain management

Chapter 3: Methodology - Research process Chapter 4: Summary of appended papers - Research design - Background - Research quality - Purpose - Findings

Chapter 6: Discussion Chapter 5: Analysis - Results and contribution - Demand-supply chain management - Limitations of the research - Differentiation focused supply chain design - Implications of the research - NPD and SCM coordination - The effect of logistics outsourcing on DSCM

Chapter 7: Conclusion and further research - Conclusions - Further research

Figure 1.6 The outline of the thesis

In Chapter 4 (summary of appended papers), the interrelationships between the research questions and the appended manuscripts are given. Thereafter, the included manuscripts are summarized with respect to background, purpose, and findings. Finally, the main findings of the appended manuscripts are summarized with regard to the research questions. In Chapter 5 (analysis), the research questions are analyzed in turn based on the findings reported in the appended manuscripts and existing literature. The main findings of the research questions are then summarized. In Chapter 6 (discussion), the overall contribution of the research is discussed followed by a presentation of research limitations. Thereafter, theoretical and practical implications of the research are discussed. In the final Chapter 7 (conclusion and further research), the research is concluded and further study avenues are proposed.

2. FRAME OF REFERENCE

In this chapter, the different theories that are relevant, to provide a deeper understanding and explanation of the research field and questions, are presented. Initially, the framework formed by the concept of DSCM is given. Thereafter, the main elements of the framework are described in turn, focusing on those aspects relevant in this research.

2.1 Components of the framework The concept of DSCM constitutes the theoretical framework of this thesis, and is illustrated in Figure 2.1. DSCM and its components have already been described and defined in the background of the research section (Chapter 1.1), hence, in this chapter, theories within those parts of the framework considered relevant are presented and discussed. The motivation why the chosen parts of the framework are relevant in this research work can be found in the scope of the research section (Chapter 1.3).

Management levels

StrategyDesign Planning Execution (strategic level) (tactical level) (operational level)

Competitive Coordination advantage (value and cost) Supply chain management

Supply processes Demand fulfillment Sourcing Manufacturing Distribution (value delivery)

Management levels StrategyDesign Planning Execution (strategic level) (tactical level) (operational level)

Figure 2.1 The theoretical framework, gray areas are primarily addressed

To begin with, the role of DCM and SCM in the establishment of a competitive advantage is further discussed in Section 2.2. Thereafter, demand chain design (strategic level of DCM) is

discussed in Section 2.3, followed by a presentation of supply chain design (strategic level of SCM) in Section 2.4. Finally, important aspects of DSCM are further discussed in Section 2.5

2.2 Competitive advantage The concept of competitive advantage has already been described in the background of the research section (Chapter 1.1). Since the aim of DSCM is to gain a competitive advantage (value and cost) by coordinating the demand processes (DCM) and the supply processes (SCM), with regard to the competitive situation of the market (Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Walters and Rainbird, 2004), the role of DCM and SCM in establishing a competitive advantage is discussed in this section.

2.2.1 Role of DCM in creating a competitive advantage DCM has the potential to assist the firm in the achievement of both a cost advantage and a value advantage (Figure 2.2). It can support the achievement of a cost advantage by managing the demand processes in a cost-efficient manner and the achievement of a value advantage by developing desirable (e.g., innovative, customized, and affordable) products, strong customer relationships, and premium brands (Christopher, 2005; Jüttner et al., 2007).

Value leaders Value and cost leaders

Strategy: Strategy: - Superior customer value - Superior customer value at a lower cost

High DCM opportunities DCM opportunities - Product differentiation - Product differentiation ● Desirable products - Demand chain responsiveness ● Premium brands - Demand chain innovativeness - Demand chain responsiveness - Demand chain efficiency - Demand chain innovativeness

Market losers Cost leaders (commodity market) Value advantageValue Strategy: - Comparable customer value at a lower cost

Low DCM opportunities - Demand chain efficiency ● Cost reduction

Low High Cost advantage

Figure 2.2 The role of demand chain management in creating competitive advantage, dark gray traditional domain and light gray potential domain. Source: Christopher (2005), Hilletofth et al. (2009), and Jüttner et al. (2007)

Nevertheless, DCM is mostly argued to be related to the achievement of a value advantage (e.g., Christopher, 2005; Kotler et al., 2009; Jüttner et al., 2007). One reason for this may be

that the supply chain processes and activities tend to represent a significant part of the total demand-supply chain costs. Still, the opportunity for DCM to achieve a cost advantage should not be ignored. For instance, the costs of NPD in many firms have increased due to new requirements in the market (e.g., customization, rapidness, and innovativeness). Consequently, cost-efficient NPD has become a key to long-term success and profitability (Karlsson and Åhlström, 1996).

2.2.2 Role of SCM in creating a competitive advantage SCM has the potential to assist the firm in the achievement of both a cost advantage and a value advantage (Figure 2.3). Firstly, it can support the achievement of a cost advantage by managing the supply processes in a cost-efficient manner (e.g., through cost reduction, improved productivity, better capacity utilization, enhanced asset turnover, and supply chain integration). Secondly, it can support the achievement of a value advantage by providing reliable, responsive, differentiated, and innovative supply chain solutions, or, in other words, by providing superior and tailored customer service (Hilletofth and Ericsson, 2007; Jüttner et al., 2007).

Value leaders Value and cost leaders

Strategy: Strategy: - Superior customer value - Superior customer value at a lower cost

High SCM opportunities: SCM opportunities: - Supply chain differentiation - Supply chain differentiation - Supply chain responsiveness - Supply chain responsiveness - Supply chain innovativeness - Supply chain innovativeness - Supply chain reliability - Supply chain reliability - Supply chain efficiency

Market losers Cost leaders (commodity market) Value advantageValue Strategy: - Comparable customer value at a lower cost

Low SCM opportunities: - Supply chain efficiency ● Productivity ● Cost reduction ● Capacity utilization ● Asset turnover ● Integrated supply

Low High Cost advantage

Figure 2.3 The role of supply chain management in creating competitive advantage, dark gray traditional domain and light gray potential domain. Source: Christopher (2005), Hilletofth et al. (2009), and Jüttner et al. (2007)

Nevertheless, SCM is mostly argued to be connected to the achievement of a cost advantage (e.g., Christopher, 2005; Kotler et al., 2009; Jüttner et al., 2007). Two reasons for this may be that the supply chain processes and activities tend to represent a significant part of the total demand-supply chain costs, and since value creation and innovation are often regarded to

belong to the demand-side of the company. However, the opportunity for SCM to achieve a value advantage should not be ignored, which has also been highlighted in the literature (e.g., Christopher, 2005; Hilletofth, 2008). The reason is that competitiveness nowadays is not solely based on desirable products, but also on customer service (Hilletofth, 2009). This is particularly the situation in environments with a trend towards commoditization, and in these markets it is important to enhance overall customer value by providing differentiated customer service (Jüttner et al., 2007).

2.3 Demand chain management The concept of DCM has already been described and defined in the background of the research section (Chapter 1.1). Since this research focuses on the strategic level of DSCM, demand chain design (strategic level of DCM) is discussed in this section. Moreover, the marketing intelligence and NPD processes are further described, since their connections to SCM are of particular interest in this research work.

2.3.1 Demand chain design As described in the background of the research section (Chapter 1.1), DCM can be separated into three management or planning levels: design, planning, and execution (Figure 2.4). The development and implementation of a demand chain design is obviously the first task to be considered within DCM and a critical issue to undertake for every organization.

Demand chain management

Demand chain design Strategic Demand chain Demand chain level strategy design Implemented structure and processes

Demand chain planning Tactical level Implemented Feedback rules and routines

Demand chain execution Operational level

Figure 2.4 The role of demand chain strategy in demand chain management, gray areas addressed in this chapter

In essence, demand chain design can be separated into a demand chain strategy phase focusing on crafting the strategy and into a demand chain design phase focusing on implementing the structure and processes supporting the strategy (implementing the strategy). If the demand chain design is to be effective, the strategy has to be linked

(aligned) with the overall business strategy (Kotler et al., 2009). In this research, the focus is on the demand chain strategy phase (for further details about the design phase, see Kotler et al., 2009).

The demand chain strategy phase involves all the activities required to divide a market into clearly identifiable market segments (segmentation), selecting the most appropriate and attractive market segments (targeting), and developing a unique value proposition and positioning strategy for each of the chosen market segments (positioning). A market segment consists of a group of customers with similar needs and characteristics (Kotler et al., 2009; Stone et al., 2004). The objective of demand chain strategy development is to identify the most attractive target markets and to develop a proposition and positioning strategy, for each target market, that matches the expectations of customers (Stone et al., 2004). The reason is that customer needs and characteristics differ greatly between various customers. Each target market may therefore require individual market positioning and separate management attention to ensure that the appropriate mix of customer benefits is blended into suitable product offerings that meet the customers’ requirements (Kotler et al., 2009). This represents the transition from the mass production and mass marketing era (mass production, distribution, and promotion of one item to all customers) to the new mass customization and micromarketing era (customized sourcing, production, distribution, and promotion of many customer adapted items). Another reason is that few companies are large enough to supply the needs of an entire market (Kotler et al., 2009).

Companies handle demand chain strategy development in various ways (Dillon and Mukherjee, 2006). An example of a demand chain strategy development process, including 7 stages, is shown in Figure 2.5. In the first stage of the demand chain strategy development process (market segmentation), the objective is to group customers into segments based on similar needs and benefits sought by the customer to solve a particular consumption problem (Kotler et al., 2009). Accordingly, a segmentation model has to be developed by identifying a set of appropriate segmentation criteria. Several methods for segmenting consumer markets have been described in the literature, including geographic, demographic, psychographic, and behavioral segmentation (Demby, 1974; Harrison and Van Hoek, 2005; Kotler et al., 2009; Stone et al., 2004). Geographic segmentation means that the market is divided into segments on the basis of different geographical units such as nations, states, regions, countries, and cities. Demographic segmentation implies that the market is divided into segments on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class. Psychographic segmentation means that the market is divided into segments on the basis of psychological/personality traits, lifestyle, or values. Behavioral segmentation implies that the market is divided into segments on the basis of customers’ knowledge of, attitude towards, use of or response to a product.

There is a trend towards combining more segmentation variables in an effort to identify smaller and better-defined target markets (Kotler et al., 2009). This has led to the development of the needs-based segmentation approach (Best, 2005), which suggests that companies should group customers into segments based on similar needs and benefits sought by the customer (Figure 2.6). By understanding what elements are key drivers for customers, specific needs and requirements can be identified. Based on this information, firms can find different segments with similar preferences and needs. These segments are

typically the most actionable forms of segments, since the company knows what drivers and performance the product has in order to satisfy the customers. Moreover, they are normally more stable, since they should directly reflect and predict existing market share.

Determine which demographics, Evaluate the lifestyles and usage Select the most attractiveness of each behaviors that make attractive segments segment’s value each segment distinct as target markets proposition and and identifiable positioning strategy (actionable)

4. Market 2. Market 3. Market 5. Market 6. Market 1. Market segment 7. Demand segment segment segment segment segmentation selection chain strategy identification evaluation positioning testing (targeting)

Determine the overall Create a value Expand the value Group customers into attractiveness of each proposition and proposition and segments based on segment using positioning strategy positioning strategy to similar needs and predetermined for each of the a demand chain benefits sought by attractiveness criteria chosen segments strategy that customer in solving a such as market based on the addresses all particular growth, competitive segment’s unique aspects, including consumption problem intensity and market customer needs and product, price, access characteristics promotion and place

Figure 2.5 Demand chain strategy development Source: Best (2005) and Kotler et al. (2009)

Prestige Convenience (high quality lifestyle) (effortless lifestyle)

Customization Sustainability (differentiated lifestyle) (environmental lifestyle)

Customer categories

Figure 2.6 Example of a needs-based segmentation model

The most appropriate way to develop a segmentation model is most certainly to combine variables from several segmentation methods. The presented segmentation methods should therefore be regarded as different classes of segmentation variables rather than conflicting

2 4

methods. The utilized variables differ somewhat between consumer and industrial markets. However, industrial markets can be segmented with variables used in consumer markets, such as geographic and demographic variables together with some additional ones (Kotler et al., 2009). The major segmentation variables for consumer and industrial markets are summarized in Table 2.1 and Table 2.2 respectively.

Table 2.1 Major segmentation variables for consumer markets Class Variable Explanation Geographic Continent North America, Europe, Asia Country Unites States, England, Germany, France, Sweden Region European Union, New England City New York Demographic City or metro size under 5,000; 5,000-20,000; 20,000-50,000; 50,000-100,000; 100,000-250,000; 250,000-500,000; 500,000-1,000,000;1,000,000- 4,000,000; 4,000,000 or over Density Urban, suburban, rural Climate Northern, southern Demographic age Under 6, 6-11, 12-19,20-34, 35-59, 60-64, 64+ Family size 1-2, 3-4, 5+ Family life cycle Young, single; young, married, no children; young, married youngest child under 6; young, married, youngest child over 6; older, married, with children; older, married, no children under 18; older, single; other Gender Male, female Income Under $10,000; $10,000-$15,000; $15,000-$20,000; $20,000- $30,000; $30,000-$50,000; $50,000-$100,000; $100,000 and over Occupation Professional and technical; managers, officials and proprietors; clerical sales; craftspeople; forepersons, operatives; farmers; retired; students; homemakers; unemployed Education Grade school or less; some high school; high school graduate; some college; college graduate Religion Catholic, Protestant, Jewish, Muslim, Hindu, other Race White, Black, Asian, Hispanic Generation Baby boomers, generation Xers Nationality British, Chinese, French, North American Social class Lower lowers, upper lowers, working class, middle class, upper middles, lower uppers, upper uppers Psychographic Psychographic lifestyle Culture oriented, sports oriented outdoor oriented Personality Compulsive, gregarious, authoritarian, ambitious Behavioral Behavioral occasions Regular occasion, special occasion Benefits Quality, service, economy, speed User status Non-user, ex-user, potential user, first time user, regular user Usage rate Light user, medium user, heavy user Loyalty status None, medium, strong, absolute Readiness stage Unaware, aware, informed, interested, desirous, intending to buy Attitude toward product Enthusiastic, positive, indifferent, negative, hostile Source: Kotler et al. (2009)

In the second stage of the demand chain strategy development process (market segment identification), the objective is to determine which characteristics make the identified market segment distinct and identifiable, for example, demographics, lifestyles, and usage behaviors (Kotler et al., 2009). To be useful, each segment needs to fulfill five key criteria. Firstly, it should be possible to measure the size, purchasing power, and other characteristics

of the segments (measurable). Secondly, the segments have to be large and profitable enough. Each segment should be the largest possible homogeneous group worth pursuing with a tailored marketing effort (substantial). Thirdly, it should be possible to effectively reach and serve the segments (accessible). Fourthly, the segments should be conceptually distinguishable and respond differently to different marketing efforts (differentiable). Finally, it should be possible to formulate effective marketing efforts for attracting and serving the segments (actionable).

Table 2.2 Major segmentation variables for industrial markets Class Variable Explanation Geographic Region What geographical regions should we serve? Location What geographical location should we serve? Demographic Industry Which industries should we serve? Customer size What size customers should we serve? Operating Technology What customer technologies should we focus on? User or non-user Should we serve heavy users, medium users, light users or non-users? status Customer capabilities Should we serve customers needing many or few services? Purchasing Organization Should we serve companies with highly centralized or decentralized purchasing organizations? Power structure Should we serve companies that are engineering dominated, financially dominated, and so on? Nature of existing Should we serve companies with which we have string relationships or relationship simply go after the most desirable companies? General purchasing Should we serve companies that prefer leasing? Service contract? policies Systems purchases? Sealed bidding? Purchasing criteria Should we serve companies that are seeking quality?, service? price? Situational Urgency Should we serve companies that need quick and immediate delivery or service? Specific application Should we focus on a certain application of our product rather than all applications? Size of order Should we focus on large or small orders? Personal Buyer-seller similarity Should we serve companies whose people and values are similar to ours? Attitude towards risk Should we serve risk-taking or risk-avoiding customers? Loyalty Should we serve companies that show much loyalty to their suppliers? Source: Bonoma and Shapiro (1983) and Kotler et al. (2009)

In the third stage of the demand chain strategy development process (market segment evaluation), the objective is to determine the overall attractiveness of each segment using predetermined attractiveness criteria (e.g., market growth, competitive intensity, and market access) and to determine the overall profitability of each segment (Kotler et al., 2009). In evaluating the different segments, the company must look at two factors: the segment’s attractiveness and the companies’ objectives and resources. Some attractive market segments may not be compatible with the company’s long-term objectives, or the company may lack one or more necessary competencies to provide superior customer value in that segment. It is also essential to evaluate the market segments against the five key criteria mentioned in the second stage.

In the fourth stage of the demand chain strategy development process (market segment selection), the objective is to select the most attractive market segments as target markets (Kotler et al., 2009). The company can consider five patterns of target market selection,

shown in Figure 2.7. Single-segment concentration means that the company concentrates on a single market segment. Selective specialization means that the company selects a number of segments, each objectively attractive and appropriate. Product specialization means that the company makes a certain product that it sells to several different segments. Market specialization means that the company concentrates on serving many needs of a particular customer group. Full market coverage means that the company attempts to serve all market segments with all the products they might need. Two other considerations that need to be addressed when selecting the most attractive market segments are expansion and ethical choice of target markets (Kotler et al., 2009).

M1 M2 M3 M1 M2 M3 M1 M2 M3

P1 P1 P1

P2 P2 P2

P3 P3 P3

A) Single-segment concentration B) Selective specialization C) Product specialization

M1 M2 M3 M1 M2 M3

P1 P1

M = Market P2 P2 P = Product

P3 P3

D) Market specialization E) Full market coverage

Figure 2.7 Target market selection Source: Adapted from Abell (1980)

In the fifth stage of the demand chain strategy development process (market segment positioning), the objective is to create a value proposition and positioning strategy for each of the chosen segments based on the segment’s unique customer needs and characteristics (Kotler et al., 2009). Positioning is the act of designing the company’s offering and image to occupy a distinct place in the minds of the customer (Ries and Trout, 2000). Each offering has to be positioned so the target market recognizes the company’s distinctive offering and image. Additionally, the offerings need to be differentiated from competitive offerings, if the firm wants to obtain a competitive advantage. Brand positioning constitutes an essential part of this work and aims to establish the brand in the minds of customers to maximize the potential benefit to the company. This helps to formalize the demand chain strategy by clarifying the brand’s essence, what goals it helps the customer achieve and how it does so in a unique way (Marsden, 2002). Everyone in the organization should understand the customer value that underlies the brand positioning and use it as context for decisions (Jackson, 2007; Knox, 2004).

In the sixth stage of the demand chain strategy development process (market segment testing), the objective is to evaluate the attractiveness of each segment’s value proposition

and positioning strategy (Kotler et al., 2009). One common approach to evaluate the attractiveness is to create a storyboard for each segment’s strategy. In the final stage of the demand chain strategy development process (demand chain strategy), the objective is to expand the value proposition and positioning strategy to a demand chain strategy that addresses all aspects, including product, price, promotion, and place (Kotler et al., 2009).

2.3.2 Marketing intelligence Market intelligence (also known as market research and customer insight) is one of the most critical processes within DCM. It involves all the activities required to collect, analyze, and report data and findings regarding a specific market situation, problem, or opportunity facing the company (Stone et al., 2004). Market intelligence is of fundamental importance to every organization that has to keep up with market changes and trends. The objective is to obtain knowledge or insights about how the market is evolving and how this concerns the company to support decision-making in various regards (e.g., demand chain strategy development, NPD, branding, as well as marketing and sales) in the short and long-term (Kotler et al., 2009). This requires timely, accurate, actionable, and relevant information of the firm’s customers, brands, and competitors. As can be noted in Table 2.3, the market intelligence has to be conducted rigorously with regard to seven critical issues, in order to provide decision-makers with valuable insights. Market intelligence can be defined as follows:

The collection and investigation of market and customer data relevant to a specific market situation, problem, or opportunity facing the company, in order to capture market knowledge in a cost-efficient manner (Kotler et al., 2009; Stone et al., 2004).

Companies tend to handle the organizational aspect of market intelligence in various ways (Grover and Vriens, 2006). Most large companies have market research departments, which often play crucial roles within the organization. These firms also extensively use the services of external market research firms, such as syndicated-service (gather customer and trade information), customer market (carry out specific research projects), and specialty-line market research firms (provide specialized research services). Smaller companies generally do not have a market research department. Instead everyone in the organization, including the customers, carry out market research. These companies may rely on the services of a market research company or conduct research in creative and affordable ways, such as engaging students or professors to design and carry out projects, using the Internet to collect considerable information at very little cost, or checking out competitors by routinely visiting them. Most companies, irrespective of size, use a combination of market research resources to study their industries, competitors, audiences, as well as channel strategies (Kotler et al., 2009).

CRM is an essential part the marketing intelligence system and involves all the activities required to identify, create, manage, and maintain customer relationships in an organized and efficient manner to capture market intelligence (Zablah et al., 2004). The recent trend towards CRM has enabled many companies to capture market intelligence, segment their customer base, customize the value propositions, and coordinate the demand chain (e.g., Day and Van den Bulte, 2002; Zablah et al., 2004). The objectives are to find, attract, and gain new customers, nurture and retain those the company already has, entice former customers back into the fold, as well as reduce the costs of marketing and customer service

(Kotler et al., 2009). CRM involves using information technology to organize, automate, and synchronize business processes, particularly sales-related activities, but also those for marketing, customer service, and technical support (Stone et al., 2004). Table 2.4 highlights five imperatives of CRM and how information technology fits in. CRM can be defined as follows:

The identification, creation, retention, and management of customer relationships, in order to capture market intelligence in a cost-efficient manner (Kotler et al., 2009; Stone et al., 2004; Zablah et al., 2004).

Table 2.3 Seven characteristics of good market research Characteristic Explanation 1. Scientific method Effective market research uses the principles of the scientific method: careful observation, formulation of hypotheses, prediction and testing. 2. Research creativity Effective market research develops innovative ways to solve a problem. 3. Multiple methods Effective market research does not have overreliance on any one method. It also recognizes the value of using two or three methods to increase confidence in the results. 4. Interdependence of models and data Effective market research recognizes that data are interpreted from underlying models which guide the type of information sought. 5. Value and cost of information Effective market research recognizes the importance of estimating the value of information against its cost. Costs are typically easy to determine, but the value of research is harder to quantify. It depends on the reliability and validity of the findings and management's willingness to accept and act on those findings. 6. Healthy skepticism Effective market research recognizes the importance of a healthy skepticism toward glib assumptions made by managers about how a market works. It is alert to the problems caused by myths. 7. Ethical marketing Market research benefits both the sponsoring company and its customers. The misuse of market research can harm or annoy customers, increasing resentment at what customers regard as an invasion of their privacy or a disguised sales pitch. Source: Kotler et al. (2009)

Many researchers have proposed different market intelligence processes (e.g., Grover and Vriens, 2006; Kotler et al., 2009; Stone et al., 2004). Figure 2.8 shows an up-to-date example of a marketing intelligence process including 6 stages. In the first stage of the market intelligence process (problem area), the objective is to carefully define the situation, problem, or opportunity to be studied (Kotler et al., 2009). It is very important that the research area is not defined too broadly or too narrowly. After the research area has been defined, a number of specific research objectives are often derived. All market research projects are, of course, not so specific. Some research projects instead aim to shed light on the real nature of a problem and to suggest possible solutions or new ideas (exploratory). Other forms of market research projects mostly aim to determine the amount of demand for a particular product or service (descriptive), or to test cause and effect relations (causal).

In the second stage of the market intelligence process (research plan), the objective is to determine the most appropriate data collection method by estimating the value of the information that may be retrieved against its costs (Kotler et al., 2009). It is important to

select a method that secures timely, accurate, actionable, and relevant information. Several methods can be used to gather information, such as observation, focus group, survey, experiment, questionnaire, and interview (Stone et al., 2004). After the most appropriate data collection method has been selected, a research plan is developed describing the data collection procedure and the anticipated costs.

Table 2.4 What customer relationship management comprises CRM imperative Achieved when CRM technology Accruing the right • The most valuable customers are • Analyze customer revenue and cost customers identified data to identify current and future high- • Each customer's share of total value customers revenues has been calculated • Target direct marketing efforts better Crafting the right value • The products or services that the • Capture relevant product and service proposition customers need today and tomorrow behavior data have been researched • Create new distribution channels • The products or services that the • Develop new pricing models competitors offer today and tomorrow • Build communities have been investigated • The products or services that should be offered have been recognized Instituting best processes • The best way to deliver the products or • Process transactions faster services to customers has been • Provide better information to the front researched, including the required line alliances, technologies and service • Manage logistics and the supply chain capabilities more efficiently • Catalyze collaborative commerce Motivating employees • The required tools to foster • Align incentives and metrics relationships have been identified • Deploy knowledge management • The required human relationship systems systems to boost employee loyalty have been identified Learning to retain • Customers defect and how to win • Track customer defection and customers them back has been learned retention levels • The competitors’ actions to win the • Track customer service satisfaction companies high value customers have levels been analyzed • The senior management monitors customer defection metrics Source: Rigby et al. (2002)

In the third stage of the market intelligence process (data collection), the objective is to gather the necessary information (Kotler et al., 2009). This stage is generally the most expensive and several major problems can arise. For example, some respondent may not be available and thus has to be contacted again or replaced. Moreover, some respondents may refuse to cooperate or be biased and dishonest. One of the biggest obstacles to collecting information from various sources is the need to achieve consistency.

In the fourth stage of the market intelligence process (data analysis), the objective is to analyze the gathered information to extract findings relevant to the problem area (Kotler et al., 2009). The data can be analyzed in both a quantitative and/or qualitative manner. The former may include computing averages and measures of dispersion for the major variables, as well as the application of some advanced statistical techniques and decision models, testing different hypotheses and theories.

Determine the most Analyze the gathered appropriate data data to extract findings collection method and relevant to the problem develop a research plan area

1. Problem 2. Research 3. Data 4. Data 5. Report area plan collection analysis findings

Report the findings in Define the situation, Gather the necessary the most problem or opportunity information understandable and to be studied compelling way

Figure 2.8 The market intelligence process Source: Adapted from Kotler et al. (2009).

In the final stage of the market intelligence process (report findings), the objective is to report the findings in the most understandable and compelling way as possible (Kotler et al., 2009). Researchers are increasingly being asked to play a more proactive and consulting role in translating data and information into insights and recommendations (Fielding, 2006). After the findings have been presented, they are used to support the decision-making of the managers who commissioned the market research.

2.3.3 New product development NPD is one of the most critical processes within DCM and involves all the activities required to bring a new or modified product to the market (Cooper et al., 2004; Rogers et al., 2004). It is of fundamental importance to every organization that has to keep up with market trends and changes. Its objective is to develop products with new or different characteristics that offer new or additional benefits to the customers, as quickly and cost-efficiently as possible (Kotler et al., 2009). This may involve the modification of an existing product (e.g., new feature, function, or package), or the formulation of a completely new product (Kärkkäinen et al., 2001; Perks et al., 2005). NPD can be defined as follows:

The design, coordination, planning, improvement, and control of the processes involved in bringing a new or modified product to the market, in order to rapidly develop and introduce desirable products in a cost-efficient manner (Kotler et al., 2009; Kärkkäinen et al., 2001; Van Kleef et al., 2005).

Companies handle the organizational aspect of NPD in different ways. Many companies assign responsibilities for new product ideas to product managers, high-level management committees, cross-functional teams, or to a NPD department (Sethi et al., 2001). Successful companies, on the other hand, tend to develop a holistic NPD process through the stage- gate system (Cooper, 1990). This implies that they organize the NPD work into a process consisting of several stages, the end of each stage being a gate or checkpoint (Kotler et al., 2009). The process is project-oriented, so that each time it is initiated a new project is

created, and typically the project focuses on a particular target group (market segment). The project leader, working with a cross-functional team, is responsible to reach a set of known objectives at each gate before the project can pass on to the next stage. The cross-functional team, at best, not only includes people from the traditional NPD functions, such as marketing, product development, and research and design (R&D), but also from support functions, such as sourcing, manufacturing, distribution as well as marketing and sales (Sharifi et al., 2006). Senior managers review the projects at each gate to make one of four decisions: go, kill, hold, or recycle. Typically, companies have parallel sets of projects working through the NPD process, each at a different stage. The number of projects tends to be winnowed down from a large number in the early stages to a few in the late stages (Kotler et al., 2009). This stage-gate system approach makes the NPD work visible to all the people involved and clarifies the responsibilities of the project leader, product development team, and the senior managers (Cooper, 1998). In addition, it enables companies to achieve a considerable balance between creativity (innovation) and business management.

It is well recognized that the NPD process not only enables management to coordinate the flow of new products efficiently, but also assists in the ramp-up of sourcing, manufacturing, distribution, and other sales-related activities that support the commercialization of the product (Carillo and Franza, 2006). Therefore, the traditional NPD functions have to be coordinated with the support functions (Van Hoek and Chapman, 2007). Usually, companies employ a rather conventional approach to NPD, by assigning representatives from support functions to review and recommend changes as the project evolves (Kotler et al., 2009). This conventional approach to NPD has been questioned in recent years, since it is a cost and time consuming approach, due to its iterative nature (Sharifi et al., 2006). It is argued that the cost of NPD and the TTM can be reduced considerably, by involving the support functions to a greater extent, as well as earlier in the NPD process (Carillo and Franza, 2006; Van Hoek and Chapman, 2006). In order to address this, new practices in the area of NPD have emerged (Sharifi et al., 2006), one of which is concurrent design (Hsiao, 2002; Portioli- Staudacher et al., 2003). Concurrent design (or engineering) involves a multi-functional development team which is highly structured and infused with greater responsibility and authority (Appelqvist et al., 2004). Concurrent design has mostly focused on internal collaboration. However, in today’s global competition, concurrent design, based on integration and collaboration in the entire demand-supply chain (customers and suppliers) is a vital key to success and profitability. The terms “design for manufacturing” and “design for supply chain” are quite often used to imply that the traditional NPD functions are aligned and coordinated with other main functions in the company and in the extended enterprise (Appelqvist et al., 2004; Ellram et al., 2007; Perks et al., 2005; Sharifi et al., 2008; Sharifi and Pawar, 2002). It can be argued that the issue of multi-functional (or cross-functional) NPD teams (concurrent design) can nowadays be seen as a component of NPD (Kotler et al., 2009).

Many researchers have proposed different NPD processes including 5 to 10 stages (e.g., Barcley, 1992; Cooper and Kleinschmidt, 1986; Kärkkäinen et al., 2001; Kotler et al., 2009; Perks et al., 2005; Rogers et al., 2004). Figure 2.9 shows an up-to-date example of a NPD process including 8 stages. In the first stage of the NPD process (idea generation), the objective is to gather insights into new products or product features (Kotler et al., 2009). In essence, it is a systematic activity of gathering and clarifying customer needs (Kärkkäinen et al., 2001). The careful and systematic assessment of customer needs helps to focus NPD

efforts and to reduce the need for future design changes (Van Kleef et al., 2005). These needs, insights, or product ideas can be obtained from market intelligence, market and customer analysis, the R&D department, competitors, customers, employees, salespeople, corporate spies, trade shows, or ethnographic discovery methods (e.g., Kotler et al., 2009). Many commonly used methods have originated from statistics and market research. Urban and Hauser (1980) describe how different market research methods can be utilized in NPD. In spite of the importance of customer insight in the NPD process, it is often implemented in an unsystematic and unorganized way into companies (Kärkkäinen et al., 2001). This is partly a consequence of the lack of proper tools and information about how to use them. According to Holt et al. (1984), methods for customer insight are poorly developed compared to more technical tools for product design.

Gather Eliminate Develop a Develop a Evaluate the Evaluate if Develop and Plan and insights of unsound product marketing product the product test the actually new product concept strategy plan concept’s concept can product introduce the products or ideas prior to based on the for business be translated offering product on product devoting identified introducing attractiveness into a the market features resources to and the new technically them approved product to and product idea the market commercially feasible product

1. Idea 2. Idea 3. Concept 4. Marketing 5. Business 6. Product 7. Marketing 8. Commer- generation screening developing and strategy analysis development testing cialization testing development G1 G2 G3 G4 G5 G6 G7 G8

Project leader

Cross-functional team

Senior management board

G = Gate

G1 = ‘Is the idea worth considering?’; G2 = ‘Is the product compatible with company objectivities, strategies, and resources?’; G3 = ‘Can we find a good concept consumers say they would try?’; G4 = ‘Can we find a cost-effective and affordable marketing strategy?’; G5 = ‘Will this product meet our profit goals?’; G6 = ‘Have we got a technically and commercially sound product?’; G7 = ‘Have prod uct sales met expectations?’; G8 = ‘Are product sales meeting expectations?’ Figure 2.9 The new product development process Source: Adapted from Kotler et al. (2009)

In the second stage of the NPD process (idea screening), the objective is to eliminate unsound product ideas prior to devoting resources to them (Kotler et al., 2009). Most companies require that ideas are described on a standard form for a review. The standard form describes the product idea, the target market, the competition, and roughly estimates of market size, product price, development time, development costs, manufacturing costs, and rate of return. This standard form is then reviewed by an executive committee. At this stage, it is important to investigate whether the customers in the target market benefit from the product, the size/growth forecasts of the target market, the current or expected competitive pressure for the product idea, the industry sales and market trends the product idea is based on, the feasibility of manufacturing the product, and the product’s profitability.

In the third stage of the NPD process (concept development and testing), the objective is to develop a product concept based on the identified and approved product idea (Kotler et al., 2009). A particular product idea can be turned into several product concepts. The product

concept is also tested against the target group to evaluate whether it is an interesting concept or not. Basically, the marketing and engineering details are specified during this stage. It is important, in this stage, to investigate and identify the target market, what product features must be incorporated, what benefits the product provides, how customers react to the product, how it can be produced cost-efficiently, and what the product will cost.

In the fourth stage of the NPD process (marketing strategy development), the objective is to develop a marketing strategy plan for introducing the new product into the market (Kotler et al., 2009). Firstly, this plan should describe the target market’s size, structure, and behavior; the planned positioning; and the sales, market share and profit goals sought in the first few years. Secondly, it should outline the planned price, supply chain strategy, and marketing budget for the first year. Finally, the plan should describe the long-term sales and profit goals as well as the marketing mix strategy over time.

In the fifth stage of the NPD process (business analysis), the objective is to evaluate the business attractiveness of the product concept (Kotler et al., 2009). Management needs to determine whether the product concept satisfies company objectives based on sales, cost and profit forecasts, or not. If it does, the concept can move to the development stage. As new information comes in, the business analysis has to undergo revision and expansion.

In the sixth stage of the NPD process (product development), the objective is to evaluate whether the product concept can be translated into a technically and commercially feasible product (Kotler et al., 2009). Up to this stage, the product has only existed as a verbal description, a drawing or a prototype, and now the actual product is designed, developed, and tested. Accordingly, this stage represents a leap in investments. If it is not possible to translate the concept into a feasible product, the accumulated project costs will be lost, except any useful information gained during the process.

In the seventh stage of the NPD process (market testing), the objective is to develop and test the value offering (Kotler et al., 2009). This implies that the product is dressed up with a brand name and packaging, and put into a market test. It is important to learn the extent of the market, as well as how customers and retailers react to handling, using, and purchasing the product. The market tests can be conducted in different ways. Some companies use simulated tests during which 30-40 qualified shoppers attend a brief screening of both old and new commercials, one of them promoting the new product. Afterwards, the shoppers are questioned about the commercials. Other firms use controlled tests where a skilled research firm conducts a market test by analyzing a couple of stores that sell the product. The ultimate way is to put the full scale product into a chosen test market.

In the final stage of the NPD process (commercialization), the goal is to plan and actually introduce the product into the market. If the company proceeds with commercialization, it will face its largest costs to date (Chandy et al., 2006). Examples of questions that need to be addressed at this stage are: when should the product be introduced, where should the product be introduced, to whom should the product be introduced, and how should it be introduced?

NPD is not an easy task and new products continue to fail at a disturbing rate. Recent studies put the rate as high as 50 percent, and potentially as high as 95 percent in the Unites States

and 90 percent in Europe (Ogama and Pillar, 2006). In Table 2.5, a summary of NPD success factors, identified in the literature, is presented. As can be noted, NPD success may be the result of many reasons arising from market, product, strategy, and process characteristics. Typically, market characteristics affecting new product success are the competitive response and intensity of the product, the product’s market potential, the length of its life cycle, and the competitors’ hostility (e.g., Cheng and Shiu, 2008; Cooper et al., 2004; Henard and Szymanski, 2001; Kotler et al., 2009).

Table 2.5 New product development success factors Success factors References Market characteristics Cheng and Shiu (2008), Cooper et al. (2004), Henard and - Competitive response intensity Szymanski (2001), Jain (2001), and Kotler et al. (2009). - Market potential - Product life cycle length - Competitors’ aggressiveness Product characteristics Cheng and Shiu (2008), Cooper et al. (2004), Droge et al. - Product advantage (unique/superior product) (2008), Hamm and Symonds (2006), Henard and - Product meets customer needs Szymanski (2001), Jain (2001), Kotler et al. (2009), and - Product price Van Kleef et al. (2005). - Product technological sophistication - Product innovativeness Strategy characteristics Carillo and Franza (2006), Cheng and Shiu (2008), Cooper - Marketing synergy et al. (2004), Cooper and Kleinschmidt (1986), Dowling - Technological synergy and Helm (2006), Gerwin and Barrowman (2002), Hamm - Order of entry (timing) and Symonds (2006), Henard and Szymanski (2001), - Dedicated human resources Karlsson and Åhlström (1996), and Kotler et al. (2009). - Dedicated R&D resources - Fit with the organization's culture - Brand power Process characteristics Barczak et al. (2009), Carillo and Franza (2006), Cheng - Strategic and holistic view and Shiu (2008), Ciappei and Simoni (2005), Cooper - Structured approach (1990), Cooper and Kleinschmidt (1986), Cooper et al. - Market/customer oriented (2004), Droge et al. (2008), Gerwin and Barrowman - Project-oriented (2002), Gupta and Wilemon (1990), Hamm and Symonds - Team-based (instead of group of experts) (2006), Henard and Szymanski (2001), Holger (2002), - Cross-functional (concurrent design) Iansiti (1995), Jain (2001), Karlsson and Åhlström (1996), - Segmentation-based Kotler et al. (2009), Kärkkäinen et al. (2001), Schmidt et - Market intelligence driven al. (2009), Swink et al. (1996), Van Kleef et al. (2005), and - Proficiency of the NPD activities Wheelwright and Clark (1992). - Technological proficiency - Reduced lead-time (responsiveness) - Cooperation with suppliers and customers - Information technology support - Senior management involvement

Common product characteristics influencing new product success are the value advantage of the product, the price of the product, the technological sophistication, as well as the innovativeness of the product (e.g., Cheng and Shiu, 2008; Cooper et al., 2004; Droge et al., 2008; Hamm and Symonds, 2006; Henard and Szymanski, 2001; Kotler et al., 2009; Van Kleef et al., 2005). Ordinary strategy characteristics impinging on new product success are marketing and technological synergy, dedicated human and R&D resources, market timing, fit with organizational culture, and brand power (e.g., Carillo and Franza, 2006, Cheng and Shiu, 2008; Cooper and Kleinschmidt, 1986, Dowling and Helm, 2006, Gerwin and

Barrowman, 2002, Hamm and Symonds, 2006; Henard and Szymanski, 2001). Market synergy means congruency between the existing marketing skills and the marketing skills needed, while technological synergy means congruency between the existing technological skills and the technological skills needed. Common process characteristics affecting new product success are strategic and holistic view, structured approach, market-orientation, cross-functional teams, segmentation-based, market intelligence driven, information technology support, and senior management involvement (e.g., Barczak et al., 2009; Cheng and Shiu, 2008; Droge et al., 2008; Gerwin and Barrowman, 2002; Hamm and Symonds, 2006; Henard and Szymanski, 2001; Schmidt et al., 2009).

Table 2.6 New product development failure factors Failure factors References Market failure Cheng and Shiu (2008), Cooper et al. (2004), Henard and - Low competitive response Szymanski (2001), Jain (2001), and Kotler et al. (2009). - Small size of the potential market - Short product life cycle - Mature and fragmented market - Hostile competitors Product failure Cheng and Shiu (2008), Cooper et al. (2004), Droge et al. (2008), - Technical errors Hamm and Symonds (2006), Henard and Szymanski (2001), Jain - Poor design (2001), Kotler et al. (2009), and Van Kleef et al. (2005). - Misunderstood customer needs - Poor technologies - Low innovativeness Strategy failure Cooper and Kleinschmidt (1986), Carillo and Franza (2006), - No clear product differentiation Cooper et al. (2004), Cheng and Shiu (2008), Dowling and Helm - Poor positioning (2006), Gerwin and Barrowman (2002), Hamm and Symonds - Poor timing (to early or to late) (2006), Henard and Szymanski (2001), Jain (2001), Karlsson and - Poor fit with the organization's culture Åhlström (1996), and Kotler et al. (2009). Process failure Cooper and Kleinschmidt (1986), Barczak et al. (2009), Ciappei and - Ad hoc approach Simoni (2005), Carillo and Franza (2006), Cheng and Shiu (2008), - Lack of market/customer focus Cooper et al. (2004), Droge et al. (2008), Gerwin and Barrowman - Lack of organizational skills (2002), Gupta and Wilemon (1990), Hamm and Symonds (2006), - Long development lead-time Henard and Szymanski (2001), Holger (2002), Iansiti (1995), Jain - Lack of internal/external coordination (2001), Karlsson and Åhlström (1996), Kotler et al. (2009), - Lack of support from senior management Kärkkäinen et al., 2001, Schmidt et al. (2009), Swink et al. (1996), Van Kleef et al. (2005), and Wheelwright and Clark (1992). Financial failure Cooper and Kleinschmidt (1986), Jain (2001), and Kotler et al. - Low return on investment (2009). - High cost of development - Capital shortage Environmental failure Jain (2001) and Kotler et al. (2009). - Government regulations - Consumer safety - Poor reputation - Macroeconomic factors

A summary of NPD failure factors, identified in the literature, is presented in Table 2.6. It is important to note that success and failure factors are often related, but the factors leading to success or failure with regard to NPD may also differ. As can be noted, NPD failure may also be the result of many reasons arising from market, product, strategy, process, financial, and environmental issues. Ordinary causes of product failure are ignored or misinterpreted market research, overestimating market size, high development costs, poor design, incorrect

positioning, ineffective advertising or wrong pricing, insufficient distribution support, and competitors who retaliate fiercely. It can be argued that market orientation and innovation are two of the most important issues, in order to become successful with NPD, which implies that NPD requires a deep understanding of customers and their needs (Droge et al., 2008; Kotler et al., 2009; Van Kleef et al., 2005).

2.4 Supply chain management The concept of SCM has already been described and defined in the background of the research section (Chapter 1.1). Since this research focuses on the strategic level of DSCM, supply chain design (strategic level of SCM) is discussed in this section. Moreover, logistics outsourcing is discussed, since the role of LSPs in the development of a differentiated supply chain is of particular interest in this research work.

2.4.1 Supply chain design As described in the background of the research section, SCM can be separated into three management levels: design, planning, and execution (Figure 2.10). The development and implementation of a supply chain design is obviously the first task within SCM to consider and a critical issue for every organization to undertake.

Supply chain management

Supply chain design Strategic Supply chain Supply chain level strategy design Implemented structure and processes

Supply chain planning Tactical level Implemented Feedback rules and routines

Supply chain execution Operational level

Figure 2.10 The role of supply chain strategy in supply chain management, gray areas addressed in this chapter

In essence, supply chain design can be separated into a supply chain strategy phase, focusing on crafting the strategy, and into a supply chain design phase, focusing on implementing the structure and processes supporting the strategy (implementing the strategy). In order for the supply chain design to be effective, the supply chain strategy needs to be linked with the business strategy (Chopra and Meindl, 2010; Harrison and Van Hoek, 2005). In this research,

the focus is on the supply chain strategy phase (for further details about design phase, see Chopra and Meindl, 2010).

There are three types of supply chain designs: single supply chain design (one-size fits all), dual supply chain design, and multiple supply chain design (differentiated). In a “one-size fits all supply chain” one supply chain solution is used for all customers and products. A supply chain solution consists of a coordinated sourcing, manufacturing and distribution strategy, and is managed according to lean or agile principles, or a combination of these. In a dual supply chain, two supply chain solutions are employed, for example, one for standardized products and one for customized products. In a differentiated supply chain, several supply chain solutions, which are connected to specific market segments, are used (Hilletofth et al., 2008). The reason for developing a differentiated supply chain is that companies nowadays usually offer a wide range of products in many types of non-coherent market environments and there are no supply chain solutions applicable to all types of products and markets (Payne and Peter, 2004). The one-size fits all supply chain is most certainly the most common approach, while differentiated supply chains are rare. The use of dual supply chains is increasing, especially in the fashion industry where a separation between fashion and standard products is common (Hilletofth and Hilmola, 2007).

Supply chain strategies A considerable body of research in the supply chain field has centered on the issue of identifying the appropriate type of supply chain for different market environments (e.g., Bruce et al., 2004; Christopher et al., 2006; Hilletofth and Hilmola, 2007; Stratton and Warburton, 2003; Warburton and Stratton, 2002). The debate has centered on the ability of the supply chain to be either “lean” (Womack and Jones, 1996) or “agile” (Goldman et al., 1995). Lean supply chains focus on doing “more with less” by reducing waste or “muda” across the supply chain through inventory, lead-time, and supplier-base reduction, lean manufacturing, as well as a just-in-time approach (Christopher and Towill, 2001; De Treville et al., 2004; Naylor et al., 1999). The origins of the lean supply chain lie partly in lean manufacturing, with its focus on the efficient use of resources through level scheduling (Ohno, 1988; Womack et al., 1990). Later, lean manufacturing was extended into the wider business context (lean thinking) by Womack and Jones (1996), and the concept of lean as a supply chain paradigm was born. Lean thinking (or leanness), means, from a supply chain perspective, developing an efficient supply chain that reduces all waste, including time, to enable a level schedule (Naylor et al., 1999). It emphasizes the role of the efficient supply of the product to a greater degree than the role of responding rapidly to changes in demand (de Treville et al., 2004). It has been suggested that lean supply chains are applicable in markets where demand is high and relatively stable, hence predictable, and where requirements for product variety are low (Christopher, 2000).

Agile supply chains focus on responding rapidly to changes in demand, both in terms of volume and variety, by increasing the flexibility or agility through lead-time reduction, coordinated planning, improved communication, and increased access to demand information (Christopher and Towill, 2001; De Treville et al., 2004; Mason-Jones and Towill, 1999; Naylor et al., 1999). Gunasekaran (1998) has defined agility as the ability to respond to market changes in a cost-efficient and profitable manner. Christopher (2000) has defined agility as “a business-wide capability that embraces organizational structures, information

systems, logistics processes and in particular, mindsets.” Thus, it could be argued that agility concerns the utilization of market knowledge and a responsive organization to exploit profitable opportunities in a volatile market (Naylor et al., 1999). The origins of the agile supply chain lie partly in flexible manufacturing, with its focus on rapid changeovers to create responsiveness to changes in product mix and volume (Christopher and Towill, 2001). Later, this idea of manufacturing flexibility was extended into the wider business context by Nagel and Dove (1991), and the concept of agility as a supply chain paradigm was born. Agility, from a supply chain perspective, means developing a responsive supply chain that responds quickly to unpredictable demand, in order to minimize lost sales, forced markdowns and obsolete inventory (Agarwal et al., 2007; Van Hoek, 2000). Essentially, it emphasizes market mediation to a greater degree than the role of ensuring the efficient physical supply of the product (de Treville et al., 2004); hence, it is about being demand- driven rather than forecast-driven. It has been suggested that the agile supply chain is applicable in markets where demand is volatile and the customer requirement for variety is high (Christopher, 2000).

There is an essential difference between lean supply chains that focus primarily on efficiency (costs and productivity) and agile supply chains that focus primarily on effectiveness or responsiveness. Supply chains emphasizing efficiency create a risk that production may not meet customer demand, while supply chains emphasizing effectiveness create a risk for low- production efficiency (Fearne and Fowler, 2006). If the supply chain is inefficient, there is an impending risk, that when a customer wants to purchase an innovative product, the inventory is empty, which leads to lost sales and low customer satisfaction. On the other hand, if the supply chain is not responsive to demand changes, there is a huge risk for a large number of unsold goods that must be disposed of at reduced prices, leading to customer stocking at home, and cannibalizing future season sales (e.g., Stratton and Warburton, 2003; Warburton and Stratton, 2002). This implies that the constraints of the market must be known to identify the best starting point for the development of an effective and efficient supply chain. Only when the possibilities of the market are known and understood can an organization attempt to develop supply chains that will meet the requirements of both efficiency and effectiveness (Christopher and Towill, 2001).

Although lean and agile supply chains are often discussed as opposing paradigms, they share a common objective, meeting customer demands at the least total cost (Goldsby et al., 2006). It is in terms of the characteristics of this demand and the basis of meeting customer demand that the two approaches differ (Goldsby and Garcia-Dastugue, 2003). Moreover, many researchers have suggested that the lean and agile paradigms can be integrated in a variety of ways to create so-called “leagile” supply chains (e.g., Childerhouse and Towill, 2000; Christopher and Towill, 2001; Stratton and Warburton, 2003; Mistry, 2005). Thus, it is not really a question of lean or agile, but rather the thoughtful selection and integration of suitable aspects of these paradigms appropriate to the specific supply chain (Christopher et al., 2006). A comparison of attributes among the lean, agile, and leagile supply chains is given in Table 2.7.

Christopher and Towill (2001) have visualized three lean-agile hybrids. The first is founded on the Pareto Rule, recognizing that 80 percent of a company’s revenue is generated from 20 percent of its products. It is suggested that the dominant 20 percent of the product assortment should be managed in a lean manner, given that demand is relatively stable for

these items and efficient replenishment is the appropriate objective, while the remaining 80 percent should be managed in an agile manner (Goldsby et al., 2006).

The second lean-agile hybrid is founded on the principle of base and surplus demand, recognizing that most companies experience a base level of demand over the course of the year. It is suggested that the base demand can be managed in a lean manner, while demand peaks, over the course of peak seasons or heavy promotion periods, can be managed in an agile manner (Goldsby et al., 2006).

The third lean-agile hybrid is founded on the principle of postponement. The concept of postponement was first introduced in 1950 by Alderson (Alderson, 1950), who noted that postponement can change the differentiation of products (form, identity and inventory location) to as late a time as possible, and thus improve the efficiency of a distribution system. These ideas were later expanded by Bucklin (e.g., Bucklin, 1965, 1966). The foundation of postponement is that risk and uncertainty costs are linked to the differentiation of products that occurs during the activities in the supply chain (Bucklin, 1965). Furthermore, these costs can be reduced, or fully eliminated, by postponing certain activities (e.g., logistics and manufacturing activities) in the supply chain until customer orders are received (Pagh and Cooper, 1998).

Table 2.7 Comparison of lean, agile and leagile supply chains Attribute Lean supply chain Agile supply chain Leagile supply chain Focus Cost-efficiency Responsiveness Both Typical products Standard (commodities) Special (fashion) Both (modular) Market demand Predictable Volatile Both Product variety Low High Medium Product life cycle Long Short Medium Customer drivers Cost Lead-time, availability Service level Market winner Cost Availability Cost-efficient availability Market qualifiers Quality, availability Quality, cost, lead-time Quality, lead-time Profit margin Low High Moderate Dominant costs Physical costs Marketability costs Both Stock out penalties Long term contractual Immediate and volatile No place for stock out Purchasing policy Buy goods Assign capacity Vendor-managed Information enrichment Highly desirable Obligatory Essential Forecast mechanism Algorithmic Consultative Both/either Lead time compression Essential Essential Desirable Eliminate muda Essential Desirable Arbitrary Rapid reconfiguration Desirable Essential Essential Robustness Arbitrary Essential Desirable Source: Agarwal et al. (2006), Bruce et al. (2004), Mason-Jones et al. (2000A), Naylor et al. (1999), and Olhager (2003).

Traditionally, firms have conducted their business according to a MTS approach. This implies that they, based on forecast and speculations, perform all supply chain activities, including design, sourcing, manufacturing, assembly, packaging, labeling and distribution, before they have received any customer order (Zinn and Bowersox, 1988), and managed these activities according to lean principles (planned and standardized). The aim of logistics postponement (time and place postponement) is to maintain a full-line of anticipatory inventory at one or a few strategic locations (Bowersox and Closs, 1996), that is, postpone inventory location upstream the supply chain to the latest possible point (Bucklin, 1965). This implies that

companies delay the forward movement (distribution) of products as long as possible in the chain of operations (DTO), and that products are kept in storage at central locations in the distribution chain (Bowersox and Closs, 1996).

Manufacturing postponement (form postponement), on the other hand, aims to retain the product in a neutral and non-committed status as long as possible in the supply chain (Bowersox and Closs, 1996), that is, postpone differentiation of form to the latest possible point (Bucklin, 1965). This means that companies delay assembly (ATO), production (MTO), and sourcing (STO), or even design (ETO) until after customer orders have been received. Thus, postponement is about deciding which activities should be performed after orders are received and managed according to agile principles (responsive, order-driven and customized) and which activities should be performed before orders are received and managed according to lean principles (efficient, planned and standardized). In other words, the customer order point (COP) is moved upstream the supply chain (Figure 2.11). The COP (also known as the decoupling point) is the point at which the customer orders (demand) penetrate upstream the supply chain, where forecast-driven activities are distinguished from order-driven activities, and/or where the strategic inventory is stored (Olhager et al., 2006). Customers Suppliers Manufacturer (focal company)

Design Sourcing Production Assembly Packaging Labeling Distribution

LEAN SUPPLY Activities are performed before orders are received and focus on efficiency COP (planned and standardized) Make To Stock (MTS) COP Deliver To Order (DTO) COP Label To Order (LTO) COP Package To Order (PTO) COP Assemble To Order (ATO) COP Make To Order (MTO) COP Source To Order AGILE SUPPLY (STO) COP Activities are performed after orders are received and focus on responsiveness Engineer To Order (order-driven and customized) (ETO)

Figure 2.11 Different leagile supply chain approaches based on postponement of the customer order point (COP) upstream the supply chain

As can be noted, the application of postponement in manufacturing is a logical extension of implementing logistics postponement, while postponement in sourcing and design is a logical extension of implementing manufacturing postponement (Battezzati and Magnani, 2000). This means that the scope of postponement has expanded from logistics through manufacturing to the entire supply chain (Yang et al., 2004). Postponement can occur along

the entire supply chain, from design to final distribution. It can be applied to a minor or a major share of the activities in the supply chain. Companies should first consider every postponement opportunity along the supply chain and then balance the trade-offs, not from an individualistic perspective but from a supply chain perspective (Yang et al., 2004).

Industry has increased the use of postponement (leagile) principles in recent years. Many European industrial companies are currently implementing leagile supply chain systems (Van Hoek, 2001). These systems have several advantages (Van Hoek, 2000). Firstly, they increase the company’s ability to fine-tune products to specific customer preferences (Van Hoek, 2001; Yang et al., 2004), and at the same time achieve cost-efficiency. Thus, postponement can help companies achieve mass customization (Feitzinger and Lee, 1997; Van Hoek et al., 1998; Van Hoek et al., 1999). Secondly, inventory can be held at a generic level, resulting in fewer stock-keeping variants and thus less inventory in total, as well as lower inventory carrying and obsolescence costs. However, it should be noted that postponement may lead to smaller sized shipments over longer distances (Van Hoek, 2001). Thus, postponement is often more relevant when products are more sensitive to inventory than transportation costs (e.g., higher value added products with large product variety). Moreover, lead-time constraints in the supply chain could limit the possibility of carrying out postponed activities while still assuring delivery according to customer required lead-time (Bucklin, 1965; Van Hoek, 2000, 2001). Thirdly, because the inventory is generic, its flexibility is greater, given that the same components, modules, or platforms can be embodied in a variety of end products. Fourthly, forecasting is easier at the generic level than at the level of the finished item. Finally, the ability to customize products locally means that a higher level of variety may be offered at a lower cost, enabling strategies of “mass-customization” to be pursued.

One requirement to succeed with leagile supply chain systems is a reliable supplier network that can supply parts and services in an effective and efficient manner (Feitzinger and Lee, 1997). Moreover, it is important to consider product families and explore the commonality (or modularity) of products and processes, in order to find generic modules or platforms that can be embodied in a variety of end products (Zinn, 1990). However, it should be noted that too much standardization can reduce product differentiation, leading to a cannibalization effect (Swaminathan, 2001).

Taxonomies for supply chain strategy selection A number of classification models have been proposed in the literature to guide the choice of supply chain strategy (e.g., Fisher, 1997; Christopher, 2000; Christopher et al., 2006; Mason-Jones et al., 2000A). One of the first and probably one of the most cited models of supply chain strategy selection is Fisher’s (1997) model on how type of product influences supply chain design (Figure 2.12). In this model, products are classified as either functional (standard) or innovative (special). Innovative product refers to a product with low volume and erratic demand, a short life cycle, or a high level of customization. In contrast, functional product refers to a product with a more stable demand, longer life cycle, or with no or limited customization. It is suggested that functional products should be supplied with efficient (lean) supply chains while innovative products should be supplied with responsive (agile) supply chains.

Efficient supply chain Match Mismatch (lean)

Responsive supply chain Mismatch Match (agile)

Functional products Innovative products

Figure 2.12 How the type of product influences supply chain strategy Source: Fisher (1997)

Efficient 1. Quality 1. Cost supply chain 2. Lead-time (lean) 3. Service level

Responsive 1. Quality 1. Service level supply chain 2. Cost (agile) 3. Lead-time

Market qualifiers Market winners

Figure 2.13 Market winners and market qualifiers for agile versus lean supply chains Source: Mason-Jones et al. (2000A)

A second model of supply chain strategy selection is the one proposed by Mason-Jones et al. (2000A), shown in Figure 2.13. In this model, primarily based on Hill’s (1993) research on manufacturing strategy, markets are classified according to the required market qualifiers and market winners. It is suggested that understanding what the basis for entering into a competitive area is (market qualifiers) and understanding the specific requirements to win an order (market winners) is important. The definitions of market qualifiers and winners logically define the specification of the appropriate supply chain; hence, the supply chain should be tailored to match the required “market winning criteria” of the market. It is argued that the lean supply chain is most powerful when cost is the market winner, while the agile supply chain is most powerful when service level is the market winner.

A third model of supply chain strategy selection is the one proposed by Christopher (2000), shown in Figure 2.14. In this model, markets (also applicable to products and customers) are classified according to three parameters: volume, variety, and variability. However, since variety and variability tend to be related, the taxonomy is simplified into two dimensions. It is suggested that the lean supply chain is most powerful in markets where demand is relatively stable, and therefore predictable, and variety is low, while the agile supply chain is most powerful in markets where demand is volatile and the customer requirement for variety is high. One limitation of this model is that it does not address all possible groups of the market segmentation.

Agile

Agility is needed in less predictable High environments where demand is volatile and the requirement for variety is high.

Lean Variety & variability Variety

Lean works best in high volume, low Low variety and predictable environments.

Low High Volume

Figure 2.14 Lean or agile supply chain strategy Source: Christopher (2000)

A final model, and the most recent one, is the one proposed by Christopher et al. (2006), shown in Figure 2.15. In this model, markets (also applicable to products and customers) are classified according to three parameters: type of products (standard or special); type of

demand (stable or volatile); and replenishment lead-times (short or long). Special product refers to a product with low volume and erratic demand, a short life cycle, or a high level of customization. In contrast, standard product refers to a product with a more stable demand, longer life cycle, or with no or limited customization. The authors argue that replenishment lead-time has to be included in any useful taxonomy for supply chain strategy selection, due to its critical impact on responsiveness and since globalization tends to extend these lead- times. Moreover, they argue that since predictability and type of product tend to be related, that is, standard products are more predictable, it is possible to simplify the taxonomy into only two dimensions: predictability and replenishment lead-times.

Lean Leagile Long lead-time (plan and execute) (postponement)

Supply characteristics Lean Agile Short lead-time (continues replenishment) (quick response)

Predictable Unpredictable Demand characteristics

Figure 2.15 How demand/supply characteristics determine supply chain strategy Source: Christopher et al. (2006)

As can be noted, the matrix suggests that there are four possible generic supply chain approaches. Firstly, when demand is predictable and replenishment lead-times are short, a lean continuous replenishment approach is appropriate. In contrast, when demand is unpredictable and replenishment lead-times are long, a lean-agile hybrid (leagile) supply chain is appropriate. Moreover, when lead-times are long and demand is predictable, a lean supply chain is appropriate, for example, make and source ahead of demand in the most efficient way. Finally, when demand is unpredictable and lead-times are short, an agile supply chain, based on rapid response, is required. In addition, Christopher et al. (2006) argue that within each cell of the matrix, the tactics adopted can also be influenced by whether the product is “standard” or “special”. For example, in the postponement cell for a special product, we may postpone manufacturing, but for a standard product, it could be better to postpone distribution (Pagh and Cooper, 1998).

2.4.2 Logistics outsourcing Logistics outsourcing, also referred to as TPL, involves the use of external companies, generally referred to as LSPs or TPL providers, to perform logistics functions which have traditionally been carried out within the company (Selviaridis and Spring, 2007). The functions performed by the provider can encompass the entire logistics process, a sub- process (sourcing or distribution), or select activities within that process (Jäger et al., 2009; Lieb et al., 1993). It can involve traditional logistics functions such as in- and outbound transportation, warehousing, as well as other services such as information systems and reverse logistics (Rabinovich et al., 1999; Sink and Langley, 1997). Still, LSPs typically specialize in integrated warehousing and transportation services that can be scaled and customized according to customer’s requirements (Jharkharia and Shankar, 2007). TPL has received considerable attention in the popular business press and academic literature and can be defined as follows:

The use of external companies, generally referred to as logistics service providers, to perform logistics functions which have traditionally been carried out within the company (Marasco, 2008).

In essence, three research streams of TPL can be identified in the literature (Table 2.8). One stream of research has focused on the type of activities outsourced. Many processes have been addressed, in this regard, including order taking, procurement, inventory management, fleet management, warehousing, and distribution (Bask, 2001; Berglund et al., 1999; Chopra and Meindl, 2010; Jäger et al., 2009; Lieb et al., 1993). However, the literature also includes examples where the entire logistics process, or a sub-process, has been outsourced (Jäger et al., 2007).

Another stream of research has focused on the reasons behind logistics outsourcing decisions. Several reasons why companies outsource these kinds of processes and activities have been reported in the literature, such as a lack of the necessary competence and resources within the own company (Ericsson et al., 2004), the reduction of capital employed (Andersson et al., 2003), increased environmental awareness (Skjoett-Larsen, 2002), expansion into unfamiliar markets, and trends towards centralized distribution systems (Razzaque and Sheng, 1998). In addition, the need of competence changes over time and a LSP can provide flexibility via its network.

A final stream of research in the logistics service sector has focused on the benefits of logistics outsourcing. Many benefits of logistics outsourcing have been reported in the literature, such as increased market coverage (Skjoett-Larsen, 2002), improved customer service (Richardson, 1995), and increased flexibility regarding the changing requirements of customers (Chopra and Meindl, 2010). Other benefits include reduction in capital investments (Richardson, 1992; Lacity et al., 1995; Fantasia, 1993), distribution cost savings (Richardson, 1995), and reduction in the complexity of logistics operations (Bradley, 1995).

There has been an increased demand, both in terms of volume and variety, in the logistics service industry, leading to the development of different business models. Hertz and Alfredsson (2003) provide a useful classification model that distinguishes between four types of LSPs (Figure 2.16). Standard providers offer standardized services such as pick and pack, warehousing, and distribution, or even assembly, as argued by Hilmola et al. (2005). These providers usually have many customers who can choose from different standard services or

make uncomplicated combinations of them. This type of actor usually offers no help with problem-solving besides the standard services.

Table 2.8 Research streams of third-party logistics Research streams References Type of activities outsourced Bask (2001), Berglund et al. (1999), Chopra and Meindl - Order entry, processing and fulfillment (2010), Jäger et al. (2007), Jäger et al. (2009), Lieb (1992), Lieb - Procurement et al. (1993), Power et al. (2007), and Razzaque and Sheng - Inventory management (1998). - Fleet management - Warehousing - Transportation - Distribution - Customs clearance and brokerage - Reverse logistics Reasons behind logistics outsourcing Andersson et al. (2003), Ericsson et al. (2004), Jäger et al. - Lack of the needed competence/resources (2009), Power et al. (2007), Razzaque and Sheng (1998), and - Reduction of capital employed Skjoett-Larsen, (2002). - Increased environmental awareness - Expansion into unfamiliar markets - Need of centralized distribution systems - Need of flexibility Benefits of logistics outsourcing Bradley (1995), Chopra and Meindl (2010), Fantasia (1993), - Cost-reduction Jäger et al. (2009), Lacity et al. (1995), Power et al. (2007), - Quality improvement Razzaque and Sheng (1998), Richardson (1992), Richardson - Increased focus on core functions (1995), Skjoett-Larsen (2002). - Increased market coverage - Improved customer service - Increased flexibility and speed - Reduction in capital investments - Reduction of supply chain complexity - Improved management - Access to latest technology/infrastructure - Access to skills and talent

Service developers offer, in addition to standardized services, value-added services, including tracking and tracing, cross-docking, and specific packaging. These actors provide somewhat advanced services involving several sets of more standardized activities. However, the focus is more on creating economies of scale and scope than on satisfying unique customer needs. The services are often turned into standard modules and these can be combined according to specific customer needs. The customer base is often large and the customer relationships are normally undeveloped due to the number of customers. Long-term and more developed relationships can, however, exist with some of the more important customers.

Customer adapters, in addition to the above, take complete control of the customer’s logistics function and processes, at the request of the customer. This implies that they manage, operate, and improve the customer’s logistics processes. These providers usually improve the logistics dramatically, but do not develop the processes further. The customer base is typically quite small, and the providers work closely with their customers.

Customer developers, in addition to complete control of the customer’s logistics function and processes, extend the processes by developing new and customer adapted services. It is the highest level that a LSP can attain and implies more advanced services involving high

integration with the customers. The customer base is often limited and the developers work very intensively with their customers (Jäger et al., 2007).

Service developer Customer developer

An advanced modular Advanced customer solutions for each High system of large variety of services and customer. Enhancing of the a common IT-system used for all knowledge in common. The role more customers. of a consultant.

Standard provider Customer adapter Problemsolving ability Relatively A highly standardized modular system Totally dedicated solutions involving high where customers are offered their own the basic services for each customer. relatively simple combination of The provider is seen as a part of the standardized services customer organization.

Relatively high High Customer adaptation

Figure 2.16 Logistics service providers classified by general problem-solving ability and customer adaptation Source: Hertz and Alfredsson (2003)

It is not always possible to locate a LSP to one of these four categories, since they can sometimes be classified as something in between two or more segments (hybrids). Really large providers may also include several of the categories and use each approach for a particular customer group.

2.5 Demand-supply chain management The concept of DSCM has already been described and defined in the background of the research section (Chapter 1.1). Since this research focuses on important elements, benefits, and requirements of DSCM, these issues are discussed further in this section. Moreover, some models of demand-supply coordination are presented and the role of information technology in DSCM is discussed.

2.5.1 Key issues of demand-supply chain management Although DSCM is a relatively new concept, it has already been defined in several ways in the literature (Table 2.9). It was firstly introduced as a replacement of SCM and highlighted issues such as market orientation, flexibility, responsiveness, and cost-efficiency (e.g., Heikkilä, 2002; Hines et al., 2002; De Treville et al., 2004; Vollmann and Cordon, 1998). However, these types of issues were also addressed in SCM and, consequently, there were

no major differences between SCM and DSCM at the time, and the concept thus never gained approval in the academic community. More recently, it has been introduced as an approach to gain a superior competitive advantage by coordinating the demand and supply processes across intra- and inter-organizational boundaries (Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Rainbird, 2004; Walters, 2006; Walters and Rainbird, 2004). This implies that the elements, benefits, and requirements of the concept have evolved over time. In this section these issues are discussed from the current status of the concept.

Table 2.9 Definitions of demand-supply chain management Reference Definition Hilletofth et al. (2009) “The alignment of demand creation and demand fulfillment processes across functional, organizational, and inter-organizational boundaries” (p. 1181). Jüttner et al. (2007) “The concept that aims to integrate demand and supply oriented processes. Demand processes are all processes at the customer or market interface aimed at responding to customer demand through value creation […] Supply processes comprise the tasks necessary for fulfilling demand” (p. 381). Hilletofth and Ericsson (2007) “The task of identifying the value packages for major customers and group those with similar requirements into specific market segments, for which a suitable supply chain is developed” (p. 7). Rainbird (2004) “An understanding of current and future customer expectations, market characteristics, and of the available response alternatives to meet these through deployment of operational processes” (p. 242). Selen and Soliman (2002) "A set of practices aimed at managing and coordinating the whole demand chain, starting from the end customer and working backward to raw material supplier" (p. 667). Williams et al. (2002) “The management of supply production systems designed to promote higher customer satisfaction levels through electronic commerce that facilitates physical flow and information transfer, both forwards and backwards between suppliers, manufacturers, and customers” (p. 692). Vollmann et al. (2000) "A practice that manages and coordinates the supply chain from end customers backwards to suppliers" (p. 82).

The main elements of DSCM, discussed in the literature, are summarized in Table 2.10. As indicated, 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. Market orientation means that the organization and the entire demand-supply chain should be oriented towards the customers and focus on creating and delivering superior customer value as cost-efficiently as possible (e.g., De Treville et al., 2004; Heikkilä, 2002; Hilletofth et al., 2009). This is achieved by organizing the company around understanding how customer value is created cost- efficiently, how customer value is delivered cost-efficiently, and how these demand and supply processes can be coordinated (e.g., Canever et al., 2008; Esper et al., 2010; Jüttner et al., 2007; Walters and Rainbird, 2004). 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 by the demand- and supply-side of the company jointly, in a coordinated manner (e.g., Hilletofth et al., 2009; Jacobs, 2006; Langabeer and Rose, 2002; Rainbird, 2004; Walters, 2008). It is important to consider value creation in both the demand and supply processes, since competitiveness nowadays is not solely obtained by desirable products, but also concerns how products are delivered (e.g., Al-Mudimigh et al., 2004; Hilletofth and Ericsson, 2007; Vollmann and Cordon, 1998; Walters, 2008). The route towards superior customer

value lies in the ability of the firm to differentiate itself from the competition, with regard to products and supply chain solutions (e.g., Esper et al., 2010; Hilletofth and Ericsson, 2007; Jüttner et al., 2007). Two of the most important opportunities for differentiation, with regard to both products and supply chain solutions, are innovativeness and responsiveness (e.g., Canever et al., 2008; De Treville et al., 2004; Selen and Soliman, 2002).

Table 2.10 Main elements of demand-supply chain management Elements References Market-orientation Al-Mudimigh et al. (2004), Canever et al. (2008), Charlebois (2008), - Market-driven (customer) Childerhouse et al. (2002), De Treville et al. (2004), Esper et al. (2010), - Market segmentation Frohlich and Westbrook (2002), Heikkilä (2002), Hilletofth and Ericsson - Market intelligence (2007), Jacobs (2006), Jüttner et al. (2007), Jüttner et al. (2006), - Customer value oriented Korhonen et al. (1998), Langabeer and Rose (2002), Rainbird (2004), Selen and Soliman (2002), Vollmann and Cordon (1998), Walters (2006B), Walters (2006A), Walters (2008), Walters and Rainbird (2004), and Williams et al. (2002). Coordination of the demand and supply Al-Mudimigh et al. (2004), Canever et al. (2008), Charlebois (2008), processes Childerhouse et al. (2002), Esper et al. (2010), Frohlich and Westbrook - Internally (intra-organizational) (2002), Hilletofth and Ericsson (2007), Jacobs (2006), Jüttner et al. - Externally (inter-organizational) (2007), Jüttner et al. (2006), Rainbird (2004), Selen and Soliman (2002), - Macro-management Walters (2006A), Walters (2006B), Walters (2008), and Walters and Rainbird (2004). Viewing the demand and supply processes as Al-Mudimigh et al. (2004), Esper et al. (2010), Hilletofth and Ericsson being equally important (2007), Jacobs (2006), Jüttner et al. (2007), Jüttner et al. (2006), - Neither demand nor supply focused Langabeer and Rose (2002), Rainbird (2004), Walters (2006A), Walters - Both involved in setting the business strategy (2006B), Walters (2008), and Walters and Rainbird (2004). - Demand and supply chain strategy linked - Senior management involvement Value creation in the demand and supply Al-Mudimigh et al. (2004), Esper et al. (2010), Heikkilä (2002), Hilletofth processes and Ericsson (2007), Jacobs (2006), Jüttner et al. (2007), Jüttner et al. - Desirable products (e.g., innovative, (2006), Rainbird (2004), Vollmann and Cordon (1998), Walters (2006A), customized, and affordable) Walters (2006B), Walters (2008), and Walters and Rainbird (2004). - Differentiated supply chain solutions (customer service) Differentiation in the demand and supply Canever et al. (2008), Charlebois (2008), Childerhouse et al. (2002), De processes Treville et al. (2004), Esper et al. (2010), Heikkilä (2002), Hilletofth and - Product differentiation Ericsson (2007), Jacobs (2006), Jüttner et al. (2007), Jüttner et al. - Supply chain differentiation (2006), Rainbird (2004), Vollmann and Cordon (1998), Walters (2006A), Walters (2006B), Walters (2008), and Walters and Rainbird (2004). Innovativeness in the demand and supply Al-Mudimigh et al. (2004), Canever et al. (2008), Esper et al. (2010), processes Hilletofth and Ericsson (2007), Jacobs (2006), Jüttner et al. (2007), - Innovative product Jüttner et al. (2006), Walters (2006A), Walters (2008), and Walters and - Innovative supply chain solutions Rainbird (2004). Responsiveness in the demand and supply Al-Mudimigh et al. (2004), Canever et al. (2008), Childerhouse et al. processes (2002), De Treville et al. (2004), Esper et al. (2010), Frohlich and - Reactive/rapid development of products Westbrook (2002), Heikkilä (2002), Hilletofth and Ericsson (2007), - Reactive/rapid replenishment of products Jacobs (2006), Jüttner et al. (2007), Jüttner et al. (2006), Korhonen et al. (1998), Langabeer and Rose (2002), Rainbird (2004), Selen and Soliman (2002), Vollmann and Cordon (1998), Walters (2006A), Walters (2006B), Walters (2008), and Walters and Rainbird (2004). Cost-efficiency in the demand and supply Al-Mudimigh et al. (2004), Canever et al. (2008), Charlebois (2008), processes Childerhouse et al. (2002), De Treville et al. (2004), Esper et al. (2010), - Cost-efficient development of new products Frohlich and Westbrook (2002), Heikkilä (2002), Hilletofth and Ericsson - Cost-efficient replenishment of products (2007), Hines et al. (2002), Jacobs (2006), Jüttner et al. (2007), Jüttner et al. (2006), Korhonen et al. (1998), Langabeer and Rose (2002), Rainbird (2004), Selen and Soliman (2002), Vollmann and Cordon (1998), Walters (2006A), Walters (2006B), Walters (2008), Walters and Rainbird (2004), and Williams et al. (2002).

The main benefits of DSCM, discussed in the academic literature, are summarized in Table 2.11. As indicated, the main benefits of DSCM can be categorized into three groups: enhanced competiveness, enhanced demand chain performance, and enhanced supply chain performance. Enhanced competiveness is realized through the ability to provide superior customer value at a lower cost, which can be achieved by simultaneously focusing on value creation, differentiation, innovativeness, responsiveness, and cost-efficiency in both the demand and supply processes in a coordinated manner (e.g., Canever et al., 2008, Charlebois, 2008; Walters and Rainbird, 2004). This allows firms to both increase revenues and to reduce costs, which leads to improved profitability (e.g., Esper et al., 2010; Hilletofth and Ericsson, 2007; Jüttner et al., 2007). Enhanced demand chain performance is achieved through more innovative, responsive, and cost-efficient NPD, better range and life cycle management, improved brand loyalty, more effective marketing efforts, and reduced demand chain costs (e.g., Al-Mudimigh et al., 2004; Rainbird, 2004; Walters, 2008). Enhanced supply chain performance is achieved through more responsive, differentiated, and cost-efficient product delivery, flexible operating structure, reduced inventories, fewer stock-outs, less product obsolescence, improved customer service, and reduced supply chain costs (e.g., Childerhouse et al., 2002; De Treville et al., 2004; Langabeer and Rose, 2002).

Table 2.11 Main benefits of demand-supply chain management Benefits References Enhanced competiveness Al-Mudimigh et al. (2004), Canever et al. (2008), - Value creation in the demand and supply processes Charlebois (2008), Childerhouse et al. (2002), De - Differentiation in the demand and supply processes Treville et al. (2004), Esper et al. (2010), Frohlich and - Innovativeness in the demand and supply processes Westbrook (2002), Heikkilä (2002), Hilletofth and - Responsiveness in the demand and supply processes Ericsson (2007), Jacobs (2006), Jüttner et al. (2007), - Cost-efficiency in the demand and supply processes Jüttner et al. (2006), Korhonen et al. (1998), →Superior customer value at a lower cost Langabeer and Rose (2002), Rainbird (2004), Selen - Revenue growth and Soliman (2002), Vollmann and Cordon (1998), - Cost reduction Walters (2006A), Walters (2006B), Walters (2008), →Improved profitability and Walters and Rainbird (2004). Enhanced performance (demand chain) Al-Mudimigh et al. (2004), Canever et al. (2008), - Responsive product development Charlebois (2008), Childerhouse et al. (2002), Esper - Innovative product development et al. (2010), Hilletofth and Ericsson (2007), Jüttner - Cost-efficient product development et al. (2007), Jüttner et al. (2006), Rainbird (2004), - Improved range management (life cycle management) Selen and Soliman (2002), Vollmann and Cordon - Reduced demand chain costs (1998), Walters (2006B), Walters (2006A), Walters - Improved brand loyalty (preference) (2008), and Walters and Rainbird (2004). - Improved marketing efforts Enhanced performance (supply chain) Al-Mudimigh et al. (2004), Canever et al. (2008), - Responsive product delivery Charlebois (2008), Childerhouse et al. (2002), De - Differentiated product delivery Treville et al. (2004), Esper et al. (2010), Frohlich and - Cost-efficient product delivery Westbrook (2002), Heikkilä (2002), Hilletofth and - Flexible operating structure Ericsson (2007), Jacobs (2006), Jüttner et al. (2007), - Fewer stock-outs Jüttner et al. (2006), Korhonen et al. (1998), - Reduced inventories Langabeer and Rose (2002), Rainbird (2004), Selen - Less product obsolescence and Soliman (2002), Vollmann and Cordon (1998), - Improved customer service Walters (2006A), Walters (2006B), Walters (2008), - Reduced supply chain costs and Walters and Rainbird (2004).

The main requirements of DSCM, discussed in the literature, are summarized in Table 2.12. As indicated, the main requirements of DSCM include organizational competences, company established principles, demand-supply chain collaboration, and information technology

support. The required organizational competences include market orientation, advanced market intelligence and segmentation, proficiency of the demand and supply processes, and coordinated demand and supply processes (e.g., Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Walters and Rainbird, 2004). The aspect of company established principles means that the demand-supply oriented approach needs to be rooted within the organization. For instance, the demand processes and the supply processes have to be considered as being equally important, and the firm needs to be managed by the demand- and supply-side of the company together, in a coordinated manner (e.g., Canever et al., 2008; Esper et al., 2010; Jacobs, 2006). This view has to be supported by the senior management. Furthermore, the demand and supply chain strategies must be linked to one another as well as to the overall business strategy (e.g., Esper et al., 2010; Jüttner et al., 2007; Langabeer and Rose, 2002). Demand-supply chain collaboration means that the actors across the demand-supply chain have to share information with each other, which calls for trust and loyalty, and relationship management (e.g., Charlebois, 2008; Frohlich and Westbrook, 2002; Williams et al., 2002).

Table 2.12 Main requirements of demand-supply chain management Requirements References Organizational competences Al-Mudimigh et al. (2004), Canever et al. (2008), - Market/customer orientation Charlebois (2008), Childerhouse et al. (2002), Esper et al. - Sophisticated market intelligence (2010), Hilletofth and Ericsson (2007), Jacobs (2006), - Advanced market segmentation Jüttner et al. (2007), Jüttner et al. (2006), Rainbird (2004), - Expertise in the demand and supply processes Walters (2006A), Walters (2006B), Walters (2008), and - Coordinated demand and supply processes Walters and Rainbird (2004). Company established principles Esper et al. (2010), Hilletofth and Ericsson (2007), Jacobs - Neither demand nor supply focused (2006), Jüttner et al. (2007), Jüttner et al. (2006), Rainbird - Demand and supply chain strategy linked (2004), Walters (2006A), Walters (2006B), Walters (2008), - Commitment from senior management and Walters and Rainbird (2004). Demand-supply chain collaboration Al-Mudimigh et al. (2004), Canever et al. (2008), - Information sharing Charlebois (2008), Childerhouse et al. (2002), De Treville - Trust and loyalty et al. (2004), Esper et al. (2010), Frohlich and Westbrook - Relationship management (2002), Heikkilä (2002), Hilletofth and Ericsson (2007), Jacobs (2006), Jüttner et al. (2007), Jüttner et al. (2006), Korhonen et al. (1998), Langabeer and Rose (2002), Rainbird (2004), Selen and Soliman (2002), Vollmann and Cordon (1998), Walters (2006A), Walters (2006B), Walters (2008), Walters and Rainbird (2004) , and Williams et al. (2002). Information technology support Al-Mudimigh et al. (2004), Canever et al. (2008), De - Support for individual supply processes Treville et al. (2004), Frohlich and Westbrook (2002), - Support for individual demand processes Hilletofth and Ericsson (2007), Jacobs (2006), Jüttner et al. - Support for internal/external coordination (2007), Korhonen et al. (1998), Langabeer and Rose (2002), → Integrated information systems Rainbird (2004), Selen and Soliman (2002), Vollmann and Cordon (1998), Walters (2006A), Walters (2006B), Walters (2008), and Walters and Rainbird (2004).

Information technology is required to manage both the individual demand and supply processes, however, it is also required to support the coordination between them, within and between organizations (e.g., Al-Mudimigh et al., 2004; Selen and Soliman, 2002; Walters, 2008). Information technology is often referred to as the key enabler of DSCM (e.g., Korhonen et al., 1998; Langabeer and Rose, 2002; Vollmann and Cordon, 1998), and can thus be seen as one of the most critical requirements. The role of information technology in DSCM is further addressed at the end of this section.

2.5.2 Models of demand and supply coordination One recent study by Rainbird (2004) explicitly suggests a process fusion model for demand and supply process integration. He distinguishes between eight supply processes, ranging from order receipt/entry to delivery options, as well as seven demand processes, for example, macro-market definition and CRM (Figure 2.17). This process fusion model operates at a number of levels. It involves the coordination of supply and demand activities, for example, at its most basic, by simply linking sales forecasts with production planning. At a more fundamental level, the effectiveness and viability of process fusion between supply capabilities and demand requirements drive the firm’s entire demand-supply chain and the viability of its business model.

Supply chain management processes

Order Customer Order Inventory Order Value deliver receipt and Manufacturing Transportation service processing management assembly options entry management

Organizational Information Management capabilities technology Catalyst Catalyst Catalyst

Customer Product and Product and Value Value Micro-market Macro-market relationship category service proposition profiling characteristics definition management management features

Demand chain management processes

Figure 2.17 Process fusion and value catalyst Source: Adapted from Rainbird (2004)

The objective is to foster and develop a business model for the company that optimizes the relationship between supply and demand. Companies need to understand customer demand before they can manage it, create future demand and, of course, meet the level of desired customer satisfaction. Demand defines the supply chain target, while supply-side capabilities support, shape, and sustain demand (Walters, 2002). Rainbird (2004) describes this as a catalytic effect between core demand and supply chain processes. This catalyst has to combine the limitations of a company’s assets and its ability to transform them into products and the demands of the market. It ultimately determines the ability of the company to create and fulfill customer demand, and it may provide new opportunities for creating or adding extra value.

Rainbird (2004) argues that the fusion or coordination between these processes (the catalytic effect) can be achieved through management, organizational capabilities and information technology. First and foremost, management has to motivate this coordination, otherwise the supply and demand processes come into harmony only randomly; hence, active management participation is required. Secondly, this coordination can be achieved through specific organizational capabilities, for example, integrated processes addressing

both demand and supply issues concurrently. Baghai et al. (2000) suggest that organizational capabilities are the skills embedded in a company’s workers, processes and institutional knowledge. They define capabilities as operational skills plus privileged assets, growth- enabling skills and special relationships. A final way to achieve this coordination is through information technology. Information systems have the capability to bring supply chains and customer demand into closer alignment by minimizing constraints of time and location.

Building on this work, Jüttner et al. (2007) suggest a three layered process integration model, comprising the life cycle of customer buying and the demand and supply processes (Figure 2.18). The three layers of the model are used to stress, firstly, the integration of the customer into the value creation process as proposed by Woodruff (1997). Secondly, in line with the conceptualizations of relationship marketing and CRM, the buying cycle acknowledges the dynamics in customer relationships (Zablah et al., 2004). Thirdly, by linking the activities in the demand processes with those in the supply processes, directions for the implementation of the process integration can be derived. The level of abstraction is arbitrary, since the incorporated processes can usually be divided into sub-processes and activities. According to the authors, the activity level in this model has been selected to match the phases in the customer buying cycle and to illustrate those activities whose coordination is fundamental for DSCM.

Evaluation

Awareness CustomerCustomer buying buying cyclecycle Decision

Consume Purchase

- Forecasting - Micro segmentation

- Market/customer analysis - Macro segmentationAwareness DemandDemand processprocess - Value proposition - Target market definition - Serving the value - Transaction - Crosselling delivery services - Upselling

- Design supply responses - Propose service packages

- Monitoring the supply Awareness SupplySupply processprocess Order fulfillment network - Physical distribution services - Physical - Revised service distribution services packages proposition

Figure 2.18 Demand and supply process integration Source: Jüttner et al. (2007)

In the first stage of the customer buying cycle (awareness), the customer has recognized a need which can trigger a value creation and delivery process for the company. At this stage,

activities in the demand and supply processes are geared towards the preparedness and housekeeping within both areas. Demand tasks comprise market analysis, macro market segmentation, as well as the definition of target markets, or, in the case of repeat purchases from existing customers, target market approval actions. On the supply-side, the existing supply chain has to be monitored against the market information provided by the demand process. This will comprise common activities such as supplier evaluation based on the supply requirements derived from the market positioning of the company.

In the second stage of the customer buying cycle (evaluation), the customer considers buying from the company and the accuracy of forecasting and demand planning increases. In addition, to the quantitative forecast in the demand process, customers are micro- segmented based on needs, preferences and likely profitability. The supply processes use the information on customer segment-based delivery needs, in order to plan the specific supply chain responses. This will comprise a range of common supply chain activities, such as master production and scheduling (MPS), materials requirements planning (MRP), and capacity requirement planning (CRP). On the demand-side, value profiles are developed by quantifying, for each segment, the ideal customer value model, including the benefits, costs and value imperative drivers (Rainbird, 2004). On the supply-side, important inputs into the potential customer value models are, for example, pipeline costs or delivery options. Therefore, coordination in the demand process is facilitated, if the supply-side proposes service delivery options as input into the value profiling.

In the third and fourth stages of the customer buying cycle (decision and purchase), the demand and supply coordination is put to the test. All the marketing effort which has been put behind the product or service will fail, if it is not available when the customer requires it. The relevant supply tasks are captured in the service concept of physical distribution, with its three dimensions of availability, timeliness and delivery quality, developed by Mentzer et al. (1989). The authors argue that recognition should be given to the fact that each individual customer’s needs along these three dimensions may vary. Moreover, from a demand-supply chain perspective, the objective is not primarily to make the sale, but rather to maintain a portfolio of profitable customers. Therefore, the goal is neither to generally serve customers better, nor to serve them cheaper, but to sell and deliver on the basis of a thorough understanding of customer needs, profit potential and supply capabilities required. Close integration should ensure that the company’s profitably meets different customer needs with differentiated supply chain capabilities.

In the final stage of the customer buying cycle (consume), the customer consumes or uses the product or service. The demand activities range from support tasks, such as installation, financing, and warranty, to simply providing information, which can be summarized as serving the value (Rainbird, 2004). Since the supply activities have to support customer service, demand and supply tasks overlap. For example, offerings such as product return, exchange or disposal tasks are typically carried out by supply functions. Moreover, and consistent with the CRM philosophy, an important objective of the post-sale phase is to build the relationship through cross- and upselling offerings. Renewed awareness and consideration of the cross- and upselling offerings on behalf of the customer will close the buying cycle. In order to build the customer relationship profitably, feedback on over or under-delivery and information on customer profitability enable supply functions to develop revised service solutions. For instance, customers who contribute less to profitability can be

consigned to more appropriate service solutions, for example, longer lead times or reduced after sales support.

2.5.3 The role of information technology in demand-supply chain management The role of information technology in DSCM is widely acknowledged (e.g., Hilletofth et al., 2009; Jüttner et al., 2007; Koudal and Wellener, 2003; Selen and Soliman, 2002). Information systems are crucial to the design of efficient and effective demand-supply chains. They are required to support the individual demand and supply processes as well as the coordination between them (Figure 2.19). Moreover, they should facilitate intra- and inter-organizational integration across the demand-supply chain by integrating different information systems across the chain and by enabling collaboration between the chain members (Kumar and Diesel, 1996). The purpose of utilizing information systems in demand-supply chains is to support companies in understanding, creating, stimulating, and fulfilling customer demand cost-efficiently. This requires strategic collaboration between the chain participants, to achieve a balance between cost, quality, speed, and flexibility.

Suppliers Focal company Customers

Design and Marketing Planning development and Sales

Procurement Manufacturing Distribution

Input Processing Output Inventory Inventory

Inter-organizational Intra-organizational

Figure 2.19 Application and system integration in the demand-supply chain

The utilization of information technology has numerous advantages. At a strategic level, Alkadi et al. (2003) highlight, that the use of information systems can increase the efficiency of demand-supply chains. Moreover, Williams et al. (1997) underline that the use of information systems can increase the alignment between demand-supply chain strategy and business strategy. In addition, Kotha and Swamidass (2000) as well as Byrd and Davidson (2003) maintain that the exploitation of information systems in demand-supply chains can increase overall growth and profitability. At an operational level, Kincade et al. (2001) have linked the utilization of information systems to an increase in product offerings and customer service levels, while Brandbyberry et al. (1999) have linked the employment of information systems to an increase in the quality and timeliness of demand information.

Information systems should be designed on the basis of requirements in the different demand and supply processes and in the coordination between them. This kind of demand- 56

supply integrated information system is not very common in reality. Instead, information systems are often developed based on discrete needs of separate demand or supply functions. Thus, information technology can sometimes reinforce walls between functions rather than help overcome them (Korhonen et al., 1998). Most of the available information systems support either the demand or supply-side of the company. The information systems supporting the demand-side are called front-office (or DCM) systems, while the information systems supporting the supply-side are called back-office (or SCM) systems. These types of systems are rarely integrated and, hence, there is a need of further improvements of information technology. For example, information systems must be able to support the company’s capability of serving differentiated customer segments by providing the ability to search for and develop alternative supply solutions (Jüttner et al., 2007). The remainder of this section discusses different DCM and SCM information systems in more detail.

Demand chain management information systems There is a wide range of DCM information systems which basically support tasks such as the gathering of market intelligence, development of new products, management of customer relationships, and decision-making. Table 2.13 provides a summary of some of the most common DCM information systems discussed in the literature, including market intelligence, CRM, NPD, and decision support systems (Kotler et al., 2009). As can be noted, all of these systems have special functions and objectives. However, most of them include a data collection, planning, and analysis component that aims to improve the ability to understand, create and/or stimulate customer demand. Almost all DCM information systems are used to support decision-making in some way. Nevertheless, it has become increasingly important to develop and utilize pure decision support systems, in order to make feasible decisions in the context of competitive and fragmented market environments, and ever more complex demand chains. The remainder of this section discusses the CRM system in more depth, since it is one of the most common DCM information systems.

Table 2.13 Demand chain management information systems System Description Objective Market intelligence An information system that helps to gather, Increased understanding of how system analyze, and present relevant information the market environment is evolving from the market environment to capture and how this concerns the market intelligence. company. Customer relationship An information system that helps to create, Increased understanding of management system manage, and maintain customer relationships customers. in an organized and efficient manner to capture market intelligence. New product An information system that helps to manage Increased visibility and control of development system the activities required to bring a new or product development as well as modified product to the market (e.g., design more rapid and cost-efficient and simulation applications). product development. Decision support system An information system that helps to gather, Improved decision-making by analyze, and present relevant information timely, accurate, actionable and from the market environment and the relevant information. demand processes to support decisions.

CRM systems are a fairly new genre of information systems where the concern is to improve the selling and revenue generation processes of companies (Corner and Hinton, 2002). There has been a great deal of recent interest in CRM systems (Robinson, 2000), which certainly

has its origin in the emphasis on a customer-oriented organization (Li et al., 2002). These systems enable companies to collect and store unprecedented amounts of customer data and then feed the knowledge back into customized product offerings, as well as sales and marketing campaigns (Zablah et al., 2004). Although the impact of information technology on CRM has been questioned, there is still no doubt of its enabling role for the demand chain (Bose, 2002). As Robinson (1998) pointed out, CRM is an inclusive concept, referring to the applications that a business can use to manage all aspects of customer encounters. Three types of applications can be distinguished (Li et al., 2002; Robinson, 2000): (1) applications for the gathering of data about customers; (2) applications to understand customers and meet their needs; and (3) applications used by customers, such as self-service web sites where customers can obtain information on, or purchase products. Other self-service applications can allow customers access to companies’ databases, for example, when airline companies allow customers access to current flight information on a web site, or to trace the location of a company’s delivery truck (Li et al., 2002).

Supply chain management information systems There is a wide range of SCM information systems which can basically be classified in three ways (Helo and Szekely 2005). The first approach (organizational) distinguishes between intra- and inter-organizational systems, where the former is used to manage and control activities within a company, and the latter is used to coordinate activities between companies. The second approach (data management) distinguishes between transactional and analytical systems, where the former is used for capturing, processing, and storing raw data and the latter is used for analyzing data to find supply chain improvements. The final approach (process management) distinguishes between planning and executing systems, where the former is used to identify the most appropriate processes for order fulfillment, and the latter is used for implementation and control activities to track the physical status of goods and materials, and related information. Table 2.14 provides a summary of the most common SCM information systems discussed in the literature, including warehouse management systems (WMS), transport management systems (TMS), enterprise resource planning (ERP) systems, advanced planning and scheduling (APS) systems, enterprise application integration (EAI) systems, and decision support systems (DSS). As indicated, all of these systems have special functions and objectives. However, most of them include a data collection, planning and analysis component that aims to improve the ability to fulfill demand cost-efficiently. Almost all SCM information systems are used to support decision- making in some way. However, it has also become increasingly important to develop and utilize pure decision support systems, in order to make feasible decisions in the context of competitive and fragmented market environments, and ever more complex supply chains. The remainder of this section discusses the ERP system in more depth, since it is one of the most common SCM information systems.

ERP systems are enterprise-wide information systems that integrate all necessary business functions and activities, such as demand and sales planning, MPS, distribution requirements planning (DRP), MRP, CRP, transportation planning and scheduling, warehouse management, inventory management, supply allocation, finance, and human resources, into a single system with a shared database (Hilletofth et al., 2010C; Liao et al., 2007; Yang et al., 2007). The key idea of the ERP system is using information technology to achieve the capability to plan and integrate enterprise-wide resources (Kumar et al., 2003). A successfully

implemented ERP system can offer companies several benefits, such as automated business processes, timely access to management information, as well as improving SCM through, for example, the use of e-commerce (Yusuf et al., 2004). The ERP system is important in modern business, because of its ability to integrate the flow of materials, finance, and information to support organizational strategies (Yusuf et al., 2004). The ERP system was developed and derived from the previous MRP-systems and manufacturing resource planning (MRPII) systems (Yang et al., 2007).

Table 2.14 Supply chain management information systems System Description Objective Benefit for decision-maker Warehouse An information system that Advanced visibility of the It is possible to produce higher management manages and controls inventory activities within a valued reports and analyses in an system storage and movement of company. This is achieved integrated manner on process products and goods within through cycle time control parameters related to an inventory. It simplifies the reductions, process warehouses, cost indicators of information control of improvements and keeping inventory, and planning associated transactions, such optimized space and scheduling of operations. As a as shipping, receiving, put calculations. consequence, it is possible to away and picking. target better processes for investment portfolio configuration. Transport An information system that Optimized use of vehicles, It is possible to produce higher management manages and controls loads and drivers, enhanced valued reports and analyses in an system transportation of products selection methods for integrated manner on process and goods. It finds carriers and transport control parameters related to the appropriate transportation mode, improved use of transportation fleet, cost routes and modes under synchronization with indicators of deliveries to and given circumstances, and production and lower from suppliers, distribution produces follow-up data to administrative costs. centers and customers, in line monitor the movements of with constraints and seasonal products and goods with fluctuations. As a consequence, it relevant key performance is possible to target better indicators assigned. processes for investment portfolio configuration. Enterprise Information system that Efficient, standardizes and It is possible to produce higher resource integrates business functions streamlines business valued reports and analyses in an planning such as demand and sales processes. integrated manner on the process planning, distribution performance level of customer planning, production service provision, product planning and scheduling, development and launch, and capacity planning, efficiency of human resources. As transportation planning and a consequence, it is possible to scheduling, warehouse target better processes for management, inventory investment portfolio control, supply allocation, configuration. finance and human resources, into a single system with a shared database. Source: Helo and Szekely (2005)

Table 2.14 Supply chain management information systems (continued) System Description Objective Benefit for decision-maker Advanced An information system that Optimized supply chain It is possible to produce higher planning and helps to find the optimal network, minimized costs valued reports and analyses in an scheduling balance between raw and maximized value for all integrated manner on supply system materials and production the parties involved. This is chain network cycle times, service capacity to meet actual achieved through level indicators part of inter- demand in a long run across simulation, mathematical organizational process inter-organizational and linear programming parameters. As a consequence it is boundaries. models, or heuristics. possible to target better processes for investment portfolio configuration. Enterprise An information system that Advanced integration It is possible to produce higher application helps combine processes, between enterprise valued reports and analyses in an integration systems, standards, and systems in different integrated manner on the quality system hardware to facilitate companies to enhance indicators of relationships integration of enterprise customer and supplier between companies from the applications so these could relationships, shorten time logistics viewpoint and utilization function together as one. to markets for products and state of information technology services, and help increase for supply chain management. As responsiveness of a consequence, it is possible to technology platforms in target better processes for use. investment portfolio configuration. Decision An information system that Improved decision-making. It is possible to make more support helps to gather, analyze and This is achieved by timely, feasible decisions, especially in system present relevant information accurate, actionable and ever more competitive and from the market relevant information. fragmented market environments. environment and the supply chain processes to support decision-making. Source: Helo and Szekely (2005)

The selection of an appropriate ERP system and its implementation are not easy tasks. There are numerous examples in which companies were not successful in obtaining the potential benefits that motivated their investing in an ERP system (e.g., Chen, 2001; Davenport, 1998; Davenport; 2000; Nah et al., 2001). Thus, the question of how to successfully select (e.g., Liao et al., 2007; Wei et al., 2005; Yang et al., 2007; Ziaee et al., 2006) and implement (e.g., Kumar et al., 2002; Kumar et al., 2003; Li et al., 2006; Nah et al., 2001; Sun et al., 2005; Umble et al., 2003) an ERP system remains an essential research topic.

3. METHODOLOGY

In this chapter, the research methodology that holds this thesis together is presented and evaluated. The different steps of the research process are first described and related to one another. Thereafter, the research design is presented with regard to the utilized research approach, the applied research strategies, and the design of the specific studies. Finally, the research quality is evaluated.

3.1 Research process The research relating to the doctoral student period has been carried out over a four year period (Figure 3.1). However, the research reported in this thesis only represents the second part of the research process, since the first part has already been reported in a licentiate thesis (Hilletofth, 2008). The second part is quite separate from the first part and includes different papers. However, the research carried out in the second part was initiated on the basis of the results in the first part. This entails that theoretical and empirical findings from the first part of the research process have also been considered in the second part.

Second part

Literature review

Paper V

Paper LIII Paper IV

Paper LII Paper I Paper III

Licentiate Doctoral Paper LI Paper LIV Paper II thesis thesis

2006 2007 2008 2009 2010

Figure 3.1 The research process

Proceeding from a broad and comprehensive approach on how increased globalization and complexity influence SCM, reported in the first part of the research process, the second part was initially directed towards supply chain differentiation. The second part began with a broad literature review of existing research related to the topic of interest. Essentially, the theoretical framework of the licentiate thesis was reused. However, certain topics in that frame were not employed and new ones were also considered. Thereafter, the first study was conducted (Paper I). The aim of this study was to investigate how a differentiated supply chain can be developed, and the issue was examined through a literature review and a qualitative multiple case study. This research revealed the need to coordinate DCM and SCM when differentiating the supply chain and, consequently, the research was directed towards

DSCM. The literature review was expanded to include DCM aspects and the second study (Paper II) was subsequently conducted. The aim of this study was to investigate the concept of DSCM by determining what key elements characterize the concept and by illustrating its occurrence in practice. The issue was examined through a literature review and a qualitative single case study.

The DSCM research revealed the need to coordinate NPD and SCM, and the importance of giving similar attention to the demand- and supply-side of the company. Accordingly, the literature review was expanded to include these aspects, and the third and fourth studies (Papers III and IV) were subsequently conducted. The purpose of the third study was to investigate how logistics outsourcing influences company strategies and direction in the supply-side of the company (SCM), while the aim of the fourth study was to investigate how NPD and SCM are connected to one another. The issue in the third study was examined through a literature review and a quantitative survey study, while the issue in the fourth study was examined through a literature review and a qualitative multiple case study.

The first and second studies also motivated research on the role of LSPs in the development and implementation of a differentiated supply chain. Therefore, the literature review was expanded to include these aspects, and the fifth and final study (Paper V) was subsequently conducted. The aim of this study was to investigate how LSPs can support the design and differentiation of the supply chain. The issue was examined through a literature review and a qualitative multiple case study.

Study 3 Doctoral (Paper III) thesis

RQ 1

Study 1 Study 2 Study 4 RQ 2 (Paper I) (Paper II) (Paper IV)

RQ 3

Study 5 RQ 4 (Paper V)

Connection between manuscripts Contribution to the research questions

Figure 3.2 Links between the appended manuscripts and their contribution to the overall research questions

It can be concluded that the research has successively evolved with inputs from empirical findings and new theoretical insights gained during the research process. Consequently, the overall aim of this thesis, as well as the addressed research questions, has evolved during the research process. Figure 3.2 gives a summary of the connections between the individual studies and how these contribute to the specific research questions.

3.2 Research design Research design provides the glue that holds the research together. It is used to structure the research, in order to show how all its major parts work together to capture the central research questions and fulfill the stated purpose of the research. The research design can be organized in various ways and can essentially be distinguished as either structured (tight) or unstructured (loose). A structured research design could make a researcher blind to vital features in the case, leading to a misreading of local informants’ perceptions (Mils and Huberman, 1994). Conversely, a loose research design could lead to unsystematic data collection and data overload.

The research design of this thesis might be classified as something in between the tight and loose designs. Firstly, it can be regarded as loose, since no general research design for the entire thesis was developed prior to conducting the individual studies. Instead, each study has been designed separately in a structured way, building on common philosophical assumptions of the studied phenomenon, and research strategies have been considered in terms of their “fit” to this setting and the research problem itself (Arbnor and Bjerke, 2008). Secondly, the studies were not all specified from the beginning, but have evolved during the research process. Accordingly, the theoretical framework has continuously has evolved with inputs from empirical findings and new theoretical insights gained during the process. Nevertheless, it has been structured to the best of knowledge at all times. Finally, the previous research on most of the subjects of interest was scarce and thus the framework had to be rather broad. However, an initial loose research design and a broad theoretical framework, gradually with each new paper becoming more structured and narrowed enabled a very good insight into the problem area.

The remainder of this section discusses the research approach, the applied research strategies, as well as the research design of the individual studies and the entire thesis where applicable.

3.2.1 Research approach All research is conducted on the basis of some underlying principles and ideas (Miles and Buberman, 1994) which represent the research approach. These principles are often inherited from the research discipline and working environment. It can be argued that a research approach includes a scientific direction (inductive and deductive) and a methodical direction (quantitative and qualitative).

Inductive research can be described as the generalization of conclusions derived through observing a specific case in reality (Alvesson and Sköldberg, 2007). Deductive research, on the other hand, can be described as the generalization of conclusions derived through testing a theoretical hypothesis on a specific case in reality (Bryman and Bell, 2007). Accordingly, deduction follows a conscious direction from theory to specific case, while induction moves from a specific case to theory (Figure 3.3).

According to Kovacs and Spens (2005), there is a dominance of deductive research in logistics and therefore there is a need for more inductive research for theory development. The deductive approach is most suitable for testing existing theories not creating new ones,

thus, its dominance in a relatively new field of research, such as logistics, is surprising (Spens and Kovacs, 2005).

In qualitative research the emphasis is on the qualities of entities that are not measured in terms of quantity or amount (Merriam, 1994). Quantitative research, on the contrary, emphasizes the measurement and the analysis of causal relationships between variables (Eriksson and Wiedersheim, 2006). It is important to note that these approaches not only represent different views on data collection, but also regarding interpretation of collected data.

The majority of logistics research is primarily populated with quantitative research (Mentzer and Kahn, 1995). Consequently, it can be argued that there is a need for more qualitative research. Näslund (2002) even argues that it is necessary to combine quantitative and qualitative methodologies to further develop logistics research. The mixture of quantitative and qualitative methods has become more common in logistics research. In his study of Finnish and Swedish doctoral theses, published between 1994 and 2003, Vafidis (2007) concludes that the majority of dissertations use both quantitative and qualitative methods (multiple methods), especially when the thesis is a collection of articles.

Inductive approach Theory Deductive approach (Induction) (Model) (Deduction)

Generalization Hypotheses

Observations Observations

Reality (Measuring and interpretation)

Figure 3.3 The principle of inductive and deductive research

The proposed classification model suggests that there are four generic research approaches (Figure 3.4). However, sometimes it is not possible to clearly separate between inductive and deductive research, and studies may combine both quantitative and qualitative methods. Hence, some research works may overlap several categories in this model. Research that combines both inductive and deductive research is called abductive. In abductive research, the original theoretical framework is successively modified, partly as a result of unanticipated empirical findings, but also as a result of theoretical insights gained during the process (Dubois and Gadde, 2002). It is important to note that many types of abductive research coexist in modern science, as the approach is used differently in various research disciplines.

The overall research carried out in this thesis might be characterized as abductive, since the research has successively evolved with inputs from empirical findings and new theoretical

insights gained during the process. Moreover, both qualitative and quantitative methods have been applied, however, the qualitative approach dominates (Figure 3.4). Qualitative research was applied to achieve a deeper understanding of the studied phenomena through examining qualitative information from only a few chosen elements. Quantitative research, on the other hand, was applied to describe some elements of a studied phenomenon in more detail. Qualitative research was also used in this thesis, because the focus was to investigate relatively new phenomena in quite complex situations. The chosen approach corresponds well with the explorative and descriptive purpose of this research.

Type I Type II

Paper III

Quantitative Literature review Literature direction

Type III Type IV

Paper I Methodological Paper II Qualitative Paper IV

Paper V

Inductive Deductive Scientific direction

Figure 3.4 General research approaches classified by the methodological and scientific directions of the research, gray area represents the approach applied in this thesis

Although the overall research carried out in this thesis can be classified as abductive, the individual papers, when considered separately, are inductive in nature, even if they all started with a literature review. This is because the previous research on the subjects of interest was scarce and, therefore, the theoretical framework was broad and only provided a starting point for the empirical investigations focused on exploration and theory building.

3.2.2 Applied research strategies Research can be conducted in various ways, including carrying out experiments, surveys, case studies, as well as archival and history analyses. These strategies can be conducted in either a quantitative or qualitative manner and for various research objectives (Merriam, 1994; Ellram, 1996; Yin, 2008). Essentially, three conditions determine the most appropriate research strategy (Table 3.1). Firstly, the type of research question posed determines what research strategy to apply. The basic research questions posed can be of the following: who,

what, where, how and why, or derivatives of these questions (Yin, 2008). If the nature of the research is exploratory (find out more about phenomenon of which little is known), what and how questions are appropriate (Marshall and Rossman, 2006). These types of questions are well suited for all of the above mentioned strategies, depending on the domain of questions (Merriam, 1994). Similarly, if the nature of the study is descriptive (describe certain characteristics of phenomenon and explore relationships between variables), what, how, and where questions are suitable (Stake, 2006) and well applicable to case studies, surveys, and archival analysis (Merriam, 1994). Likewise, if the nature of the study is explanatory (identify the factors underlying the characteristics found in the study), how and why questions are appropriate (Yin, 2008) and well suited for case studies, experiments, or history analysis (Ellram 1996). Secondly, the extent of control a researcher has over an actual event determines what research strategy to apply. If the researcher is required to have control over the events, experiment is the only suitable research strategy (Yin, 2008). Finally, the degree of focus on current or historical events determines what research strategy to apply; if the focus is on contemporary events, experiments, surveys, or case studies can be applied (Yin, 2008).

Table 3.1 Relevant research strategies for different situations Strategy Form of research Requires control over Focus on question (aim) behavioral events? contemporary events? Experiment how, why Yes Yes Survey who, what, where, how No Yes Case study how, why No Yes Archival analysis who, what, where, how No Yes/No History how, why No No Source: Yin (2008)

The purpose of this thesis is to enhance current knowledge of the DSCM concept by determining its elements, benefits, and requirements, and by analyzing key elements of the concept. The specific research questions are: ‘what elements, benefits, and requirements characterize the demand-supply chain management concept?’; ‘how can a differentiated supply chain be developed, and what are the benefits and requirements?’; ‘what linkages exist between new product development and supply chain management, and how can these management directions be coordinated?’; and ‘what effect has logistics outsourcing on demand-supply chain management?’.

The nature of the research is both explorative and descriptive, hence, the posted types of questions (how and what) fit the aim of the research. The questions posted are suitable for all of the above mentioned research strategies, including experiment, survey, case study, as well as archival and history analysis. However, since this research aimed to analyze contemporary events, capture wider and, to some extent, new problem areas, and because the researcher had no control over the events, case study and survey were the most appropriate, and consequently applied, research strategies.

The case study strategy dominates this research and has been applied in Papers I, II, IV, and V. Although this strategy can be used for different research objectives, including exploration, as well as theory building, testing, and extensions/refinement (Voss et al., 2002), it has only been used for exploration and theory building in this research. The argument for using the

case study instead of survey strategy was that these particular studies concerned phenomena on which research and theory are immature, and, in such situations, the case study strategy is particularly suitable (Eisenhardt, 1989, Benbasat et al., 1987). In addition, these particular studies aimed to capture wider and, to some extent, new problem areas. The main strength of case research is that it is not constrained by rigid limits of models and questionnaires (Voss et al., 2002). It can thus have an extensive impact and lead to creative insights and theory development. The survey strategy has only been applied in Paper III, and it was used for exploration and theory building. The argument for using the survey strategy instead of case study was that this study concerned a problem on which research and theory are moderately mature. Literature review has been used as a complementary research strategy in all the studies. The overall research purpose and questions of this thesis, with respective to the strategies applied in the appended manuscripts, are summarized in Table 3.2.

Table 3.2 Matching the research purpose with the research strategy Research aim Research question Paper Research strategy What elements, benefits, and Paper II Case study requirements characterize the Literature review demand-supply chain management concept? How can a differentiated supply Paper I Case study chain be developed, and what Literature review are the benefits and Paper V Case study Explorative and requirements? Literature review descriptive (focus on What linkages exist between Paper IV Case study theory development) new product development and Literature review supply chain management, and how can these management directions be coordinated? What effect has logistics Paper III Survey outsourcing on demand-supply Literature review chain management? Paper V Case study Literature review

In the remainder of this section, the research designs of the individual studies are discussed, along with data collection and analysis.

3.2.3 Case study design Case study design concerns two questions: the number of cases (single or multiple) and the unit of analysis (holistic or embedded). There are accordingly four generic case study designs (Figure 3.5). Multiple case studies are regarded as more robust than single case studies, and the results generated from them are often more compelling. The objective of multiple case studies is to build a general explanation that fits each of the individual cases, even though the cases will vary in their details. An advantage of multiple case studies is that they not only establish the specific conditions under which a finding occurred, but also help to create a more general category that explains how those conditions may be related. In addition, it has a greater explanatory power and a greater generalisability (Yin, 2008). The unit of analysis question essentially varies the scope and depth of the case study. Holistic case studies observe one unit of analysis, while embedded case studies examine several.

In this research, three holistic multiple case studies (Papers I, IV, and V) and one embedded single case study (Paper II) have been conducted. There were two cases in all the multiple studies. In addition, SCM represented the unit of analysis in Papers I and V, while NPD represented the unit of analysis in Paper IV. In the embedded single case study, DCM and SCM represented the units of analysis. The small number of cases in the different case studies corresponds well with the explorative and descriptive purpose of this research.

Type I Type II

Paper I

Holistic Paper IV (one)

Paper V

(single holistic) (multiple holistic)

Type III Type IV Unit of Unit analysis Paper II

Embedded (several)

(single embedded) (multiple embedded)

Single Multiple Number of cases

Figure 3.5 Case study designs Source: Yin (2008)

A critical aspect of case study design, irrespective of type, is the selection of proper cases. In this research, five case companies were involved (called Alpha, Beta, Gamma, Delta, and Epsilon, to maintain anonymity), and their connections to the appended manuscripts are shown in Table 3.3. Alpha is a Swedish manufacturer operating on an international basis in the enterprise telecommunications industry. This company was chosen on the basis of the type of industry it operates in (highly competitive and customer-focused), as well as its leading role in that industry (in top three).

Beta is a Swedish manufacturer operating on an international basis in the appliance industry. This company was chosen on the basis of its vision to become a truly customer-focused and demand-driven company. Other reasons why this company was chosen are the type of industry it operates in (fast moving, highly competitive, and customer-focused) and its leading role in that industry (in top three).

Gamma is a Swedish manufacturer operating on an international basis in the appliance and outdoor power products industry. This company was also chosen on the basis of its vision to become a truly customer-oriented and demand-driven company, the type of industry it

operates in (fast moving, highly competitive, and customer-focused) and its leading role in its industry (in top three).

Table 3.3 The links between involved case companies and the appended papers Case company Paper I Paper II Paper III Paper IV Paper V Alpha X Beta X X X Gamma Survey X Delta X Epsilon X

Delta is a Swedish LSP that offers services within distribution and warehousing of furniture, while Epsilon is a Swedish LSP that offers customer-oriented services by creating strategic alliances with the customers. These companies were chosen, in order to target two categories of LSPs that were of special interest in this research, namely, service developer and customer developer.

Data collection The selection of appropriate data collection methods is a critical aspect of case study design. In essence, there are two main groups of data collection methods: primary data collection and secondary data collection (Arbnor and Bjerke, 2008). Primary data collection methods collect new data for a specific purpose, while secondary data collection methods collect data previously collected by other researchers. Examples of primary data sources are eyewitness descriptions and firsthand accounts, while books, scientific reports, and scientific journals are examples of secondary data sources (Bell, 2006; Ejvegård, 2009; Lofland and Lofland, 2004). Primary data can be collected in different ways, including interviews, observations, literature reviews, and questionnaires, while secondary data can only be collected through literature review. The literature review method includes several categories, such as articles, books, reports, audiovisual material, and other documentation (Creswell, 2008).

A case study does not imply the use of a particular data collection method, as it represents a research strategy with multiple data collection methods. The possibility to combine several data collection methods is one of the major advantages of case study research (Yin, 2008), since it allows the researcher to study the research problem from several perspectives. In the conducted studies, both primary and secondary data collection methods were used, although most of the data came from primary sources. Data was collected from several sources using different methods. The use of multiple data sources and methods was found to correspond well with the purpose of this research. It was also considered necessary, because prior investigations concerning some of the problem areas were limited and the phenomena under examination were highly complex. Table 3.4 provides a summary of the data collection methods used in the appended manuscripts. However, only the ones utilizing the case study strategy are discussed in this section.

Interviews were applied as the main data collection method in all the case studies. This is quite common, since interviews are one of the most important sources of data in case study research (Yin, 2008). Interviews can be conducted in several ways, including face-to-face, telephone, and group interviews. Face-to-face interviews were used on most occasions;

however, group interviews were used at one company in Paper I. The main documentation method was note taking (in combination with digital recording, if permitted) and, in agreement with the recommendations of Creswell (2008), the transcribed text was reviewed by the respondents in order to avoid misunderstandings. Literature review was used as a complementary data collection method in the case studies. In essence, internal company reports, Internet based documents, archival records, and other research works have been used to achieve validity in analysis, and to provide further insights. Another complementary data collection method, used in the case studies, is observation. There are two types of observations: direct (the researcher only observes) and participant (the researcher is not only a passive observer). By conducting the interviews at the participating organization, an opportunity for direct observation was created and utilized in all the case studies. In the case studies, the collected data was summarized into a case study report which the respondents were asked to review, but only the section referring to their own organization.

Table 3.4 The data collection methods in the appended manuscripts Method Paper I Paper II Paper III Paper IV Paper V Interview Yes (main) Yes (main) No Yes (main) Yes (main) Literature review Yes Yes No Yes Yes Questionnaire No No Yes No No Direct observation Yes Yes No Yes Yes

Another critical aspect of case study design is data collection preparation. It is necessary to prepare the data collection to find relevant information (Bell, 2006). According to Yin (2008), there are three formal topics in the preparation of a case study: training, pilot case study, and case study protocol. Among other issues, a case study protocol contains questions to be addressed (Stuart et al., 2002). In the case studies, such a protocol was used through the development of a semi-structured interview framework that included overall questions or issues to be addressed. Semi-structured interviews were chosen as the appropriate method with which to explore the issues of interests, since this method allowed the interviewees to introduce new issues and the interviewer to follow up topics more fully. The semi-structured interview method corresponds well with the explorative and descriptive purpose of this study. Pilot case studies were not conducted in either of the case studies. However, training and testing of the interview framework was carried out before the interviews.

Data analysis The selection of data analysis methods is another critical aspect of case study design. Case study analysis is one of the least developed and most difficult aspects of case study research, and there are no fixed formulas to guide the novice. Much depends on the researcher’s own style of rigorous thought (Yin, 2008). According to Lofland and Lofland (2004), there is no “right way” to perform case study analysis. Essentially, a strategy for analyzing the case study must be chosen and, if the strategy is a general one, the analytic difficulties can be reduced. Analytic techniques are the most common, but statistical techniques may also be used (Yin, 2008). Within a general strategy, several analytic techniques are relevant, including pattern-matching, explanation-building or time series analysis. Explanation- building is mainly relevant to explanatory case studies and aims to prove causal connections, which was not the aim in either of the case studies. Pattern-matching is one of the most desirable techniques for case studies and also the one used in this research. It implies that

an empirically-based pattern is compared with a predicted one, or, in other words, previously developed theory is used as a template to compare the empirical results of the case study (Yin, 2008).

3.2.4 Survey design There are two types of survey designs: analytic and statistical. While analytic surveys provide information of a descriptive nature, statistical surveys offer information answering questions such as how many (Flink, 2002). Irrespective of type, the survey strategy implies that a survey framework including the questions to be considered is developed. The major difference between the two approaches is the number of participants and the type of question asked (Czaja and Blair, 2004). Statistical surveys use large samples of a specific population, in which the data is analyzed through the use of statistical methods. In a statistical survey, questionnaires (mail or internet) are used to collect data, while both structured interviews and questionnaires may be used in analytical surveys.

In this research, a statistical survey study (Papers III) was conducted. The survey was at first developed by an international research team at the University of Wollongong in Dubai (Tan, 2008). Thereafter, the same survey, limited to certain sections, was completed in Sweden and Finland to compare results (Hilmola and Tan, 2010). The author of this thesis has only analyzed data from a particular section of the survey conducted in Finland and Sweden. Accordingly, the author has not been involved in the actual design of the survey.

The original survey consisted of four key sections. The first section (A) was on organizational information, the second (B) on firm strategies and direction, the third (C) on information technology to enhance SCM, and the final section (D) was on company achievements through the implementation of information technology in logistics. It was designed using a theoretical framework of supply strategies, information technology, and achievements. The survey conducted in Finland and Sweden included sections A and B and was provided in three languages: English, Finnish, and Swedish.

Data collection A questionnaire was sent to roughly 650 companies; 371 companies were from Finland and 286 from Sweden. In the sample, 546 contacts were able to be reached by the email system, and all of the companies had approximately four weeks in which to respond to the first request. Reminder letters were sent twice after this initial contact. As a result, there was a total of 45 responses from the population of 546 companies, a response rate of 8.2%. Among the 45 responses were 34 valid answers (23 from Finland, and the remaining 11 from Sweden); five answers were submitted with empty forms, three were double responses from companies and another three failed to type the correct identification code in the answer. These reported percentages are rather typical for online surveys conducted by other scholars (e.g., Häkkinen et al. 2004; Lorentz 2008). However, it should be noted that online questionnaires tend to receive lower response rates than ordinary mail questionnaires (e.g., Prajogo 2007; Tian et al. 2008), although generally, the respondent population is larger and, thus, analyzed populations have similar absolute sizes.

Data analysis The collected data was analyzed through the systematic use of statistical methods. Single factor analysis of variance (single factor ANOVA) was used to analyze the effect of logistics outsourcing (warehousing, information technology, and custom brokerage) on company strategies and direction in SCM. A single factor ANOVA test (also known as one-way ANOVA) is used to test for differences among two or more independent groups, in other words, to determine whether two or more samples have the same “mean” or average (Anderson et al., 2007). A Chi-square test was used to analyze the effect of logistics outsourcing on market share (local versus overseas) and source of supply (local versus overseas). A Chi-square test (also known as chi-squared or χ2 test) is used to determine whether there is a significant difference between the expected frequencies and the observed frequencies in one or more categories (Plackett, 1983).

3.3 Research quality The quality of a research work is based on its validity and reliability. Validity means that the chosen methods have measured what they were supposed to measure, which is determined by what has been studied (Kvale and Brinkmann, 2009). Reliability, on the other hand, means that the chosen methods have provided reliable operational measures, which is determined by how the study was conducted (Holme and Solvang, 1997). Validity implies reliability, but reliability does not necessarily imply validity. A reliable measure is measuring something correctly, but not necessarily what it was supposed to be measuring (Silverman, 2006). Although validity and reliability are mainly related to quantitative research, it is still important to consider them in qualitative research (Voss et al., 2002; Yin, 2008). High validity and reliability provide confidence in the collected data, and in the successful application of the result, and are important when developing theories and models. In this research, both qualitative case studies (Papers I, II, IV, and V) and a quantitative survey study (Paper III) were conducted. The validity and reliability of the case studies and of the survey study are discussed separately, since the issue of ensuring validity and reliability differs, to a certain extent, between qualitative and quantitative approaches.

3.3.1 Validity of the research The concept of validity can be divided into construct, internal, and external validity (Yin, 2008). Construct validity is the degree to which correct operational measures of the studied phenomenon have been established (Yin, 2008). External validity is the degree to which the findings can be generalized (Voss et al., 2002). Internal validity is the degree to which causal relationship can be established between the studied conditions (Scholz and Tietje, 2002). Validity is typically considered less important in qualitative research, since there is a certain closeness between the researcher and subject. This also has its disadvantages due to the fact that the researcher and subject may influence each other. It is therefore important to consider this issue throughout the research process, in order to avoid interactions between them (Holme and Solvang, 1997). The theoretical framework has been important in avoiding these interactions as well as for increasing the validity in general.

There are many tactics for increasing the validity of case study research (Table 3.5). In the conducted case studies, several techniques were applied to ensure construct and external validity. Internal validity was not considered, since no case study was explanatory in nature

(Yin, 2008). Construct validity was increased through triangulation, respondent validation, peer examination, and bias reduction. Triangulation was achieved by using several data sources to answer the same questions (e.g., interviews, company reports, Internet-based documents, archival records, articles, reports, and observations). However, it was also achieved because the research was conducted in a research environment where colleagues openly share their views in both informal and formal discussions. Still, it should be noted that triangulation does not show that the researcher is correct, but rather indicates data agreement between different methods and/or researchers (Denscombe, 2009). Respondent validation means that the key informants were asked to review the draft of the case study report to confirm that the participants were understood correctly, while per examination means that colleagues were asked to continuously comment on the findings as they emerged. Bias reduction was achieved by clarifying assumptions and theoretical orientation for the respondents prior to interviewing them. External validity was increased through analytical generalization, which means that previously developed theory is used as a template (e.g., case studies from similar or different types of businesses reported in the literature) to compare the empirical results of the case study (Yin, 2008). Analytical generalization is appropriate for both single and multiple case studies (Yin, 2008), and an alternative to the classic statistical generalization employed in quantitative research.

Table 3.5 Validity in case study research Test Tactic Research phase Construct validity Use multiple sources of evidence and/or involve Data collection several researchers (triangulation) Establish chain of evidence Data collection Have key informants review draft case study report Composition (respondent validation) Have colleagues comment on the findings as they Data collection emerge (peer examination) Clarify assumptions and theoretical orientation for Data collection respondents (bias reduction) Have the studied persons or organizations participate Research design in the research design (participatory research) Do repeated observations over a long period (long- Data collection term observation) Internal validity Do pattern-matching Data analysis Do explanation building Data analysis Do time-series analysis Data analysis External validity Use replication logic in multiple-case studies Research design Source: Merriam (1994) and Yin (2008)

Validity in survey research mainly concerns whether the right questions from the topic have been asked and if the respondents are from the accurate area of responsibility. To ensure validity of the survey study, the questionnaire was developed on the basis of a theoretical framework, to make certain that the right questions from the topic were asked. It was also verified that the questionnaire reached a valid audience; answers came from those firms that were contacted. In addition, language alternatives were provided to increase validity, since the survey was conducted in two countries where some people still only speak their native language (in this case, Swedish and Finnish) and other respondents may only speak English.

3.3.2 Reliability of the research Reliability is the degree to which the study can be replicated with the same results (Bell, 2006). The basis is that the research should provide the same results at different times, if the conditions are identical. A way of minimizing the occurrence of random errors is to increase the number of observations or questions of a certain area (Holme and Solvang, 1997). Reliability is typically considered less important in qualitative research, since the aim is to understand certain factors and courses of events. Another reason is that most case studies are unique and the conditions change over time, the conditions are thus seldom identical. In quantitative research, reliability is more important, since these types of methods, originating from statistics, are more sensitive to random factors (Holme and Solvang, 1997).

There are many tactics for increasing the reliability of case study research (Table 3.6), and several techniques were used in the conducted case studies. The reliability was increased through triangulation, case study protocol, investigator’s position, and documentation. The use of triangulation, described in the previous section, not only increases the validity, but also the reliability of the case studies (Merriam, 1994). Multiple data collection and more sources improve the measure and make it more reliable. Case study protocol means that a semi-structured interview framework, including overall questions or issues to be addressed, was used in the case studies. Investigator’s position means that assumptions and theoretical orientation were presented to the respondents prior to interviewing them, to ensure that appropriate respondents were selected. The data collection was well documented in all the case studies and some interviews were also digitally recorded.

Table 3.6 Reliability in case study research Test Tactic Research phase Reliability Use multiple sources of evidence and/or involve Data collection several researchers (triangulation) Use case study protocol Data collection Develop case study data base or store the collected Data collection data in some other way appropriate (documentation) Clarify assumptions and theoretical orientation for Data collection respondents (investigator's position) Have another researcher replicate the study based on Data collection a thorough description of the research design (audit trail) Source: Merriam (1994) and Yin (2008)

Reliability in survey research mainly concerns whether or not a sufficient number of answers from an appropriate population have been received, and whether or not the respondents understood what they were answering. To ensure reliability of the survey study, simple questions and scales were used, a company database was employed to target a suitable population, and reminder letters were sent twice after the first contact. Altogether, the number of responses was relatively small (among 45 responses, 34 were valid from a population of 546 persons), making the response rate 8.2%. However, treating the Finnish and Swedish companies as one group provided some opportunity for statistical analysis. Still, it is important to note that this level of response rate is somewhat typical for online questionnaires (e.g., Häkkinen et al., 2004; Lorentz, 2008).

4. SUMMARY OF APPENDED MANUSCRIPTS

In this chapter, the interrelationships between the research questions and the included manuscripts are given. Thereafter, the appended manuscripts are summarized with respect to background, purpose, and findings. Finally, the main findings of the appended manuscripts are summarized with regard to the research questions.

4.1 Relationships between research questions and manuscripts The purpose of this research is to enhance current knowledge of the DSCM concept by determining its elements, benefits, and requirements, as well as by analyzing key elements of the concept. This aim is pursued through four specific research questions (Figure 4.1). In essence, important elements, benefits, and requirements of DSCM are established in the first research question, while the remaining three analyze some of the established elements further.

Purpose: To enhance current knowledge of the demand-supply chain management concept by determining its elements, benefits, and requirements, and by analyzing key elements of the concept.

RQ1: What elements, benefits, and requirements characterize Paper II the demand-supply chain management concept?

Paper I RQ2: How can a differentiated supply chain be developed, and what are the benefits and requirements? Paper V

RQ3: What linkages exist between new product development and supply chain management, and how can these Paper IV management directions be coordinated?

Paper III RQ4: What effect has logistics outsourcing on demand-supply chain management? Paper V

Figure 4.1 Research questions in relation to the appended papers

The first research question – what elements, benefits, and requirements characterize the demand-supply chain management concept? – is covered in Paper II. The second research question – how can a differentiated supply chain be developed, and what are the benefits and requirements? – is covered in Papers I and V. The third research question – what linkages exist between new product development and supply chain management, and how can these management directions be coordinated? – is covered in Paper IV. The fourth and final research question – what effect has logistics outsourcing on demand-supply chain management? – is covered in Papers III and V.

4.2 Paper I: How to develop a differentiated supply chain strategy The objective of this paper, with respect to the thesis, is to contribute to the understanding of DSCM by investigating how a differentiated supply chain can be developed, and what the benefits and requirements are.

4.2.1 Background Nowadays, companies typically offer a wide range of products and services in various types of non-coherent business environments. Since there are no supply chain solutions that are applicable to all types of products and markets, it has become increasingly necessary to utilize several supply chain solutions concurrently or, in other words, to differentiate the supply chain (Hilletofth, 2008). A considerable body of research, in the supply chain field, has centered on the issue of identifying the appropriate type of supply chain for different market environments (e.g., Christopher et al., 2006; Hilletofth and Hilmola, 2007; Stratton and Warburton, 2003; Warburton and Stratton, 2002). The debate has focused on the ability of the supply chain to be either “lean” (Womack and Jones, 1996), or “agile” (Goldman et al., 1995). However, the need to differentiate the supply chain by utilizing a set of supply chain solutions concurrently has remained relatively unexplored (Hilletofth, 2008). It has been concluded that there is a lack of research examining how a differentiated supply chain can be developed, implemented, and managed; what benefits can be obtained by differentiating the supply chain; and what the requirements are to succeed (Hilletofth, 2008; Kemppainen and Vepsalaninen, 2007). This implies that research works which increase the understanding of supply chain differentiation are needed.

4.2.2 Purpose The purpose of this paper is to investigate how a differentiated supply chain can be developed, and what the benefits and requirements are. These issues have been examined through a literature review and a qualitative multiple case study including two case companies. The first case company (Alpha) is a Swedish manufacturer operating on an international basis in the enterprise telecommunications industry. The second case company (Beta) is a Swedish manufacturer operating on an international basis in the appliance and white goods industry.

4.2.3 Findings This research shows that one way of developing a differentiated supply chain is combining different sourcing, manufacturing, and distribution strategies into various supply chain solutions. By combining relatively few strategies, it is possible to develop several differentiated supply chain solutions. The development can be organized into a process of four stages. In the first stage (market segmentation), the objective is to develop a segmentation model based on those parameters that effect the selection of the most appropriate supply chain solution. In the second stage (market understanding), the objective is to identify how the different market segments would like to acquire products. In the third stage (specification of supply chain solutions), the objective is to specify all the supply chain solutions that can be provided cost-efficiently. In the final stage (selection of supply chain solutions), the objective is to select the supply chain solutions necessary to satisfy most customers within each market segment. The identified benefits of a differentiated supply

chain include enhanced competiveness, by considering SCM as a value generating function, and increased profitability, by allowing differentiated customer needs to be satisfied in a cost-efficient manner. The requirements, in order to succeed with the development of a differentiated supply chain, include the involvement of logisticians in the NPD process, extended supply chain collaboration, and collaboration with DCM. Achieving differentiated service prices for the supply chain solutions provided, based on their cost-to-serve, is beneficial, but problematic to realize in practice.

4.3 Paper II: Demand chain management: A Swedish industrial case study The objective of this paper, with respect to the thesis, is to contribute to the understanding of DSCM by investigating what key elements, benefits, and requirements characterize the concept and by illustrating its occurrence in practice.

4.3.1 Background A firm can be divided into a demand-side, which includes all the demand processes aimed at responding to customer demand through value creation, and into a supply-side, which includes all the supply processes aimed at fulfilling customer demand through value delivery. The need to coordinate the demand and supply processes has been emphasized in both the demand and supply chain literature, as well as in the emerging DSCM approach. It has been argued that better coordination between them could result in greater competitive advantages (Piercy, 2002). Still, there is a lack of research examining how the demand and supply processes influence each other and how they can be coordinated, what benefits can be obtained by coordinating them, and what requirements are necessary to succeed with the coordination (Jüttner et al., 2007; Mentzer et al., 2001). Accordingly, the concept and application of DSCM is in its infancy and needs to be researched further to become more formalized. This implies that research works which improve the understanding and conceptualization of DSCM are needed.

4.3.2 Purpose The purpose of this paper is to investigate the concept of DSCM by determining its elements, benefits, and requirements and by illustrating its occurrence in practice. These issues have been examined through a literature review and a qualitative single case study. The case company (Beta) is a Swedish manufacturer operating on an international basis in the appliance and white goods industry.

4.3.3 Findings This research has revealed several important elements of DSCM. These include market orientation, coordination of the demand and supply processes, viewing the demand and supply processes as being equally important, and product and supply chain differentiation. Further elements include value creation that is considered in both the demand and supply processes, innovativeness with regard to new products and supply chain solutions, responsiveness with respect to new and existing products, and cost-efficiency in the demand and supply processes. The identified benefits of DSCM include increased competiveness, by

becoming more innovative, differentiated, responsive, and cost-efficient, and enhanced profitability, by focusing on both revenue growth and cost reduction. Other benefits include innovative, responsive, and cost-efficient NPD, flexible operating structure, high brand loyalty, reduced inventories, improved range and life cycle management, improved customer service, as well as responsive, differentiated, and cost-efficient product delivery, and reduced demand-supply chain costs. The requirements necessary to succeed with the implementation include organizational competences (e.g., market orientation, advanced market segmentation and intelligence, as well as expertise in and coordination between the demand and supply processes), commitment from senior management (e.g., appropriate business strategy, cultural change, and alignment of functional strategies), collaboration between the demand and supply functions, and information technology.

4.4 Paper III: Role of logistics outsourcing on supply chain strategy and management The objective of this paper, with respect to the thesis, is to contribute to the understanding of DSCM by investigating the effect of logistics outsourcing on SCM.

4.4.1 Background In many industries, there is a trend towards specialization, which implies that firms, in order to remain competitive, concentrate on those activities they regard as their core business and outsource the rest to specialist (Sahay and Mohan, 2006). The increased outsourcing of non- core activities has created an emerging business opportunity attracting several new actors into the market to fill the demand for new services (Hertz and Alfredsson, 2003), especially in the logistics area. Most of the research in the TPL field has centered on the issues concerning the type of activities outsourced, the reasons for these decisions, and the benefits of logistics outsourcing (Jäger et al., 2009; Power et al., 2007). However, the issue of how logistics outsourcing actually influences SCM has remained relatively unexplored. It is often stated that logistics outsourcing influences, for example, management orientation, business relationships, performance measurements, information systems, and utilized supply chain solutions. Nevertheless, very few research works have investigated this topic further. This implies that research works about the effect of logistics outsourcing on SCM are needed.

4.4.2 Purpose The aim of this paper is to investigate how logistics outsourcing affects company strategies and direction in the supply-side of the company, source of supply, and market share. These issues have been examined through a quantitative survey study. The research targeted the largest companies in Sweden and Finland, and data was collected through an online questionnaire.

4.4.3 Findings This research reveals that the outsourcing of warehousing, information technology, and customs brokerage could have some impact on some strategic and managerial aspects of SCM. Consequently, none of the identified areas of difference was found to be statistically

significant. The outsourcing of warehousing possibly seems to be connected to integrated manufacturing and logistics information systems, while the outsourcing of customs brokerage could be tied to re-engineering activities of supply chain processes and regarding logistics as a core strength. Additionally, reverse logistics arrangements could be connected to outsourcing decisions; the outsourcing of information technology increases the facilitation of reverse logistics procedures, while warehousing outsourcing decreases these procedures. This research also reveals that in-house information technology is connected to more international purchasing, while the outsourcing of warehousing potentially facilitates the same. Interestingly, none of these three outsourcing areas was found to be even near statistical significance on market share (sales).

4.5 Paper IV: Coordinating new product development and supply chain management The objective of this paper, with respect to the thesis, is to contribute to the understanding of DSCM by investigating how NPD and SCM are connected.

4.5.1 Background Many companies consider NPD as a key strategic activity, and the ability to reduce the TTM as a key to long-term success and profitability. Most of the research in this field has focused on issues such as the reduction of the TTM and process improvement issues in isolation (e.g., Cohen et al., 2000; Gerwin and Barrowman, 2002; Morgan et al., 2001). However, research addressing the coordination of NPD and SCM, to support bringing new products into the market, is relatively rare (Carillo and Franza, 2006; Van Hoek and Chapman, 2007). For instance, Krishnan and Ulrich (2001) comment that the literature addressing NPD and production ramp-up is sparse, although notable exceptions exist (e.g., Terwiesch and Bohn, 2001; Terwiesch and Xu, 2001; Terwiesch et al., 2001). This is remarkable since the TTM is affected by numerous activities in SCM. It can be argued that the NPD process not only enables management to coordinate the flow of new products efficiently, but also to assist in the ramp-up of the supply processes and other related activities (marketing and sales) that support the commercialization of the product (Carillo and Franza, 2006). For this reason, companies need to stop thinking around the edges and begin to coordinate and address these issues in parallel, in order to reduce the TTM and enhance profitability (Van Hoek and Chapman, 2006). SCM should no longer clean up after NPD, but be involved from the beginning with the same authority (Van Hoek and Chapman, 2007). It has been concluded that there is a lack of research examining how the different NPD and SCM activities influence each other and how they can be coordinated, what benefits can be obtained by coordinating them, and what requirements are necessary to succeed with the coordination (Carillo and Franza, 2006; Van Hoek and Chapman, 2006; Van Hoek and Chapman, 2007). This implies that research works which increase the understanding of NPD and SCM coordination are needed.

4.5.2 Purpose The purpose of this paper is to investigate what linkages that exist between NPD and SCM and how they can be coordinated. These issues have been examined through a literature review and a qualitative multiple case study including two case companies. The first case

company (Beta) is a Swedish manufacturer operating on an international basis in the appliance and white goods industry. The second case company (Gamma) is a Swedish manufacturer operating on an international basis in the appliance and outdoor power products industry.

4.5.3 Findings This research has revealed several linkages between NPD and SCM. The identified linkages include the need to develop a common segmentation model serving both the demand- and supply-side of the company, the need to consider SCM as a value generating function, and the need to collect information regarding customer service requirements in the market intelligence process. A final important linkage is the need to involve logisticians in the NPD process, in order to successfully introduce products rapidly, ensure that the product assortment is updated according to product life cycles, and ensure that obsolete products are properly phased out. The identified linkages motivate the use of an integrative NPD process in which the product design functions are aligned with other main functions in the company. It is proposed that the NPD process, to a larger extent, needs to incorporate the main supply functions and other sales-related functions supporting the commercialization of the product, as well as take into account the impact on the performance and success of the supply chain when developing new products. The NPD is supposed to be cross-functional, but usually only marketing, product development, and research and design are involved in this process.

4.6 Paper V: Role of logistics service providers in the implementation of a differentiated supply chain The objective of this paper, with respect to the thesis, is to contribute to the understanding of DSCM by investigating how LSPs can support the development of a differentiated supply chain.

4.6.1 Background In many industries, there is a trend towards specialization, which implies that firms, in order to remain competitive, concentrate on those activities they regard as their core business and outsource the rest to specialists (Sahay and Mohan, 2006). It can be argued that logistics outsourcing, with some certainty, affects the development of a differentiated supply chain, since it implies that an external partner is responsible for the management of the entire logistics process, a sub-process, or selected activities within those processes (Selviaridis and Spring, 2007). Even some of the more basic LSPs offer value-added and customized services in addition to more traditional ones. Some actors even take complete control of the customer’s logistics process and develop it further, by creating new and customer adapted services (Jäger et al., 2007). Hence, LSPs to various degrees may support companies in differentiating the sourcing and distribution parts of the supply chain. This is a research area that has remained relatively unexplored. This implies that research works which increase the understanding of the role of LSPs in the development of a differentiated supply chain are needed.

4.6.2 Purpose The purpose of this paper is to investigate how LSPs can support the development of a differentiated supply chain. This issue has been examined through a literature review and a qualitative multiple case study including two case companies. The first case company (Delta) is a Swedish LSP that offers services within the distribution and warehousing of furniture. The second case company (Epsilon) is a Swedish LSP that offers customer-oriented services by creating strategic alliances with the customers.

4.6.3 Findings This research reveals that LSPs to various degrees can support the development of a differentiated supply chain in the sourcing and distribution parts of the supply chain. Traditional LSPs can support the development with regard to the implementation by providing services that the company itself is incapable of supplying, providing certain services more efficiently, or by providing complementary services. This is a benefit of TPL that has not been addressed previously in the literature. More sophisticated LSPs can also support the development with regard to the identification, specification, and selection of supply chain solutions, and is sometimes responsible for these activities. This is the case when the entire logistics process (or a sub-process) has been outsourced and the provider should continuously develop the logistics process and customized services according to the company’s market situation and the employed manufacturing strategies.

4.7 Summary of paper findings The main findings of the appended papers, with regard to the research questions, are summarized in Table 4.1.

Table 4.1 Main findings of the appended papers with regard to the research questions RQ Main findings (from appended papers) • The identified elements include market orientation, coordination of the demand and supply processes, viewing the demand and supply processes as being equally important, product and supply chain differentiation, value creation considered in both the demand and supply processes, innovativeness with regard to new products and provided supply chain solutions, responsiveness with respect to new and existing RQ1: What products, and cost-efficiency in the demand and supply processes. elements, • The identified benefits include enhanced competiveness, by becoming more benefits, and innovative, differentiated, responsive, and cost-efficient, as well as enhanced requirements profitability, by focusing on both revenue growth (effectiveness) and cost reduction characterize the (efficiency). Other benefits include innovative, responsive, and cost-efficient NPD, demand-supply flexible operating structure, high brand loyalty, reduced inventories, improved range chain and life cycle management, improved customer service, responsive, differentiated, management and cost-efficient product delivery, and reduced demand-supply chain costs. concept? • The identified requirements include organizational competences (e.g., market orientation, advanced market segmentation and intelligence, as well as expertise in and coordination between the demand and supply processes), commitment from senior management (e.g., appropriate business strategy, cultural change, and alignment of functional strategies), collaboration between the demand and supply functions, and information technology support.

Table 4.1 Main findings of the appended papers with regard to the research questions (continued) RQ Main findings (from appended papers) • A differentiated supply chain can be developed by combining different sourcing, manufacturing, and distribution strategies into supply chain solutions, and the development can be organized into a process of four stages: market segmentation, market understanding, as well as specification and selection of supply chain RQ2: How can a solutions. differentiated • The identified benefits include enhanced competiveness, by considering SCM as a supply chain be value generating function, and increased profitability, by allowing differentiated developed, and customer needs to be satisfied in a cost-efficient manner. what are the • The identified requirements include the involvement of logisticians in the NPD benefits and process, extended supply chain collaboration, and collaboration with DCM. requirements? • Basic LSPs can support the development with regard to implementation in sourcing and distribution parts, while more advanced LSPs can also support the development with regard to the identification, specification, and selection of supply chain solutions. RQ3: What • The identified linkages include the need to develop a common segmentation linkages exist model, the need to consider SCM as a value generating function, the need to collect between new information regarding customer service needs in the market intelligence process, product and the need to involve logisticians in the NPD process. development and • The identified linkages motivate the use of an integrative NPD process where the supply chain NPD functions are aligned with the main supply functions in the company and other management, and sales-related functions supporting the commercialization. This integrative process how can these should take into account the impact on the performance and success of the supply management chain when developing new products. directions be coordinated? • Logistics outsourcing could have some impact on strategies and direction in SCM. For example, outsourcing of warehousing could be connected to integrated manufacturing and information systems, and reverse logistics procedures; customs RQ4: What effect brokerage outsourcing could be connected to re-engineering and considering has logistics logistics as a core strength; and information technology outsourcing could be outsourcing on connected to reverse logistics procedures. demand-supply • In-house information technology is connected to more international purchasing chain and outsourcing of warehousing could be connected to the same. management? • Logistics outsourcing provides an opportunity to improve supply chain differentiation since LSPs can support the development of a differentiated supply chain.

5. ANALYSIS

In this chapter, the research questions are analyzed in turn, based on the findings reported in the appended manuscripts and existing literature. Furthermore, the main findings of the research questions are summarized.

5.1 Overview The purpose of this research is to enhance current knowledge of the DSCM concept by determining its elements, benefits, and requirements, as well as by analyzing key elements of the concept. This aim is pursued through four specific research questions (Figure 5.1). In essence, important elements, benefits, and requirements of DSCM are established in the first research question, while the remaining three analyze some of the established elements further.

Purpose: To enhance current knowledge of the demand-supply chain management concept by determining its elements, benefits, and requirements, and by analyzing key elements of the concept.

Section 5.2 RQ1: What elements, benefits, and requirements characterize the demand-supply chain management concept? Paper II

Section 5.3 RQ2: How can a differentiated supply chain be developed, Paper I and what are the benefits and requirements? Paper V

RQ3: What linkages exist between new product development Section 5.4 and supply chain management, and how can these management directions be coordinated? Paper IV

Section 5.5 RQ4: What effect has logistics outsourcing on demand-supply Paper III chain management? Paper V

Figure 5.1 Structure of analysis chapter with regard to the research questions

The remainder of this chapter is structured as follows: In Section 5.2, the first research question (what elements, benefits, and requirements characterize the demand-supply chain management concept?) is analyzed, based on the findings reported in Paper II and existing literature. In Section 5.3, the second research question (how can a differentiated supply chain be developed, and what are the benefits and requirements?) is analyzed, based on the findings reported in Papers I and V and existing literature. In Section 5.4, the third research question (what linkages exist between new product development and supply chain management, and how can these management directions be coordinated?) is analyzed, based on the findings reported in Paper IV and existing literature. In Section 5.5, the fourth

and final research question (what effect has logistics outsourcing on demand-supply chain management?) is analyzed, based on the findings reported in Papers III and V and existing literature. In the final Section 5.6, the main findings of the research questions are summarized.

5.2 Demand-supply chain management In this section, the first research question (what elements, benefits, and requirements characterize the demand-supply chain management concept?) is analyzed, based on the findings reported in Paper II and existing literature.

5.2.1 Elements of demand-supply chain management The literature review has revealed eight key element of DSCM, and these elements, to varying degrees, have also been identified in the conducted case study (Table 5.1). The first element of DSCM identified in the literature review (market orientation), means that the firm and the entire demand-supply chain should be oriented towards the customers (market-driven) and focus on creating and delivering superior customer value, or, in other words, focus on creating and fulfilling customer demand, as cost-efficiently as possible (e.g., De Treville et al., 2004; Heikkilä, 2002; Hilletofth and Ericsson, 2007; Jüttner et al., 2007). The involved case company (Beta) has realized that it needs to concentrate all its resources on creating and fulfilling customer demand (developing a demand-supply oriented business), since markets are becoming increasingly competitive and fragmented. It has to become more innovative, differentiated, responsive, and cost-efficient, to avoid price competition and maintain profitability. As a result, the case company has begun to transform itself from a production focused company to an innovative and customer oriented business.

The second element of DSCM identified in the literature review (coordination of the demand and supply processes), means that the firm, in order to achieve market orientation, should be organized around understanding how customer value is created cost-efficiently, how customer value is delivered cost-efficiently, and how these demand and supply processes can be coordinated (e.g., Canever et al., 2008; Esper et al., 2010; Hilletofth et al., 2009; Jüttner et al., 2007; Rainbird, 2004). In essence, this means that the management of the demand-side of the company (DCM) and the management of the supply-side of the company (SCM) are coordinated and given equal attention. Neither DCM nor SCM should rule single- handedly (Jacobs, 2006); instead, these management directions should focus on their area of expertise and become coordinated at an overlying (or macro) level. Initially, the coordination needs to be achieved within the own organization (intra-organizational) and, later, across the entire demand-supply chain (inter-organizational). The involved case company currently manages the demand and supply processes somewhat separately, at a strategic level, but it has made major advances in developing and managing the demand and supply processes, which is also an important topic within DSCM. The coordination between the demand and supply processes is, by nature, intra-organizational, while the coordination between supply processes and demand processes are, by nature, intra- and inter-organizational respectively.

The third element of DSCM identified in the literature review (viewing the demand and supply processes as being equally important), means that the firm should regard these types of processes as being equally important and manage them in a coordinated manner (e.g.,

Hilletofth et al., 2009; Jacobs, 2006; Langabeer and Rose, 2002; Rainbird, 2004; Walters, 2008). The organization should neither be demand nor supply focused, and both the demand-side and the supply-side of the company should be involved in setting the business strategy. The demand and supply chain strategies also need to be linked to one another as well as to the overall business strategy. All this has to be supported by the senior management and be clearly expressed in the business agenda, as well as through proper key performance indicators (KPIs) and incentives (Rainbird, 2004). Otherwise, the traditional view, where firms either focus on the demand-side (demand chain masters) or the supply- side of the company (supply chain masters), will almost certainly rule. In the involved case company, all these issues have not yet been fully considered, since the demand-side is in charge and more or less gives directives to the supply-side. Currently, the case company can be classified as both a demand chain and a supply chain master, but the demand-side is in charge and, thus, the case company has to decide whether it aspires to become a true demand-supply chain master or not. If it does, this requires that the role and authority of SCM is enlarged.

The fourth element of DSCM identified in the literature review (value creation in the demand and supply processes), as well as the fifth element (differentiation in the demand and supply processes), means that it is important that value creation is considered in both the demand and supply processes, since competitiveness nowadays is not solely achieved by desirable products, but also concern how products are delivered (e.g., Al-Mudimigh et al., 2004; Hilletofth and Ericsson, 2007; Vollmann and Cordon, 1998; Walters, 2008). Traditionally, value creation has been strongly connected to DCM, but the scope of value creation has to be extended to also include SCM, in order to remain strong in competitive and fragmented markets. DSCM stresses the interplay between DCM and SCM as an enabler of value creation. The route towards superior customer value lies in the ability of the company to differentiate itself from competition, with regard to both products and supply chain solutions (e.g., Esper et al., 2010; Hilletofth and Ericsson, 2007; Jüttner et al., 2007). The involved case company has realized the importance of broadening the scope of value creation to include SCM and is constantly looking for opportunities for SCM to enhance overall customer value. However, as mentioned above, the business is heavily influenced be the demand-side of the company, thus, it can be argued that these efforts are somewhat limited.

The sixth element of DSCM identified in the literature review (innovativeness in the demand and supply processes), as well as the seventh element (responsiveness in the demand and supply processes), means that innovation and responsiveness are two of the most important opportunities for both product and supply chain differentiation (e.g., Canever et al., 2008; De Treville et al., 2004; Jüttner et al., 2007; Selen and Soliman, 2002). On the demand-side of the company, innovativeness and responsiveness refer to the development of innovative products as well as the rapid and reactive development of new products respectively, while innovativeness and responsiveness, on the supply-side of the company, refer to the development of innovative supply chain solutions as well as reactive and rapid product delivery respectively. The involved case company has worked with product differentiation for a long time, but only recently realized the importance of differentiating the supply chain, to enhance overall customer value. However, since the business is heavily influenced by the demand-side of the company, the supply chain differentiation is somewhat restricted.

Table 5.1 Key elements of demand-supply chain management Elements Literature Case Beta1 Market-orientation - Market-driven (customer) - Market segmentation Yes Yes - Market intelligence - Customer value oriented Coordination of the demand and supply processes - Internally (intra-organizational) Yes Yes - Externally (inter-organizational) (partly) - Macro-management Viewing the demand and supply processes as being equally important - Neither demand nor supply focused Yes - Both involved in setting the business strategy Yes (partly) - Demand and supply chain strategy linked - Senior management involvement Value creation in the demand and supply processes - Desirable products (e.g., innovative, customized, and affordable) Yes Yes - Differentiated supply chain solutions (customer service) Differentiation in the demand and supply processes - Product differentiation Yes Yes - Supply chain differentiation Innovativeness in the demand and supply processes - Innovative product Yes Yes - Innovative supply chain solutions Responsiveness in the demand and supply processes - Reactive/rapid development of products Yes Yes - Reactive/rapid replenishment of products Cost-efficiency in the demand and supply processes - Cost-efficient development of new products Yes Yes - Cost-efficient replenishment of products

The eighth and final element of DSCM identified in the literature review (cost-efficiency in the demand and supply processes), means that all of the above mentioned elements of DSCM need to be carried out in a cost-efficient manner (e.g. Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Walters and Rainbird, 2004). The involved case company has worked considerably to reduce both demand and supply chain costs, but has not yet addressed cost reduction from a holistic and coordinated approach, which is necessary, in order to truly reduce overall demand-supply chain costs and to avoid sub-optimization.

5.2.2 Benefits of demand-supply chain management The literature review has identified three main benefits of DSCM, and these benefits, to varying degrees, have also been identified in the conducted case study (Table 5.2). The first benefit of DSCM identified in the literature review (enhanced competiveness), is realized through the ability to provide superior customer value at a lower cost, which is achieved by simultaneously focusing on value creation, differentiation, innovativeness, responsiveness,

1 This research involves five case companies but only case company Beta has been used to study the complete concept. A comprehensive description of case company Beta is given in Appendix III.

and cost-efficiency in the demand and supply processes, in a coordinated manner (e.g., Canever et al., 2008, Charlebois, 2008; Walters and Rainbird, 2004). This allows firms to both increase revenues (effectiveness) and to reduce costs (efficiency), which leads to improved profitability (e.g., Esper et al., 2010; Hilletofth and Ericsson, 2007; Jüttner et al., 2007). The case study supports these findings by showing that the main benefits of DSCM, in general terms, are enhanced competiveness, by becoming more innovative, differentiated, responsive, and cost-efficient as well as enhanced profitability, by focusing on both revenue growth (effectiveness) and cost reduction (efficiency).

Table 5.2 Benefits of demand-supply chain management Benefits Literature Case Beta Enhanced competiveness - Value creation in the demand and supply processes - Differentiation in the demand and supply processes - Innovativeness in the demand and supply processes - Responsiveness in the demand and supply processes Yes Yes - Cost-efficiency in the demand and supply processes →Superior customer value at a lower cost - Revenue growth - Cost reduction →Improved profitability Enhanced performance (demand chain) - Innovative, responsive, and cost-efficient product development (reduced TTM) Yes - Improved range management (life cycle management) Yes (partly) - Reduced demand chain costs - Improved brand loyalty (preference) - Improved marketing efforts Enhanced performance (supply chain) - Responsive, differentiated and cost-efficient product delivery (reduced TTC) - Flexible operating structure - Fewer stock-outs Yes Yes - Reduced inventories (partly) - Less product obsolescence - Improved customer service - Reduced supply chain costs

The second benefit of DSCM identified in the literature review (enhanced demand chain performance), is achieved through more innovative, responsive, and cost-efficient NPD, improved range and life cycle management, higher brand loyalty, more effective marketing efforts, and reduced demand chain costs (e.g., Al-Mudimigh et al., 2004; Jüttner et al., 2006; Rainbird, 2004; Walters, 2008). The case study supports these findings, by showing that the main benefits of DSCM include improved range and life cycle management, higher brand loyalty, innovative, responsive, and cost-efficient NPD, and reduced demand chain costs.

The third and final benefit of DSCM identified in the literature review (enhanced demand chain performance), is achieved through more responsive, differentiated, and cost-efficient product delivery, flexible operating structure, reduced inventories, fewer stock-outs, less product obsolescence, improved customer service, and reduced supply chain costs (e.g., Childerhouse et al., 2002; De Treville et al., 2004; Hilletofth et al. 2009; Jüttner et al., 2007; Langabeer and Rose, 2002). The case study supports these findings, by showing that the

main benefits of DSCM include flexible operating structure, reduced inventories, improved customer service, responsive, differentiated, and cost-efficient product delivery, as well as reduced supply chain costs.

5.2.3 Requirements of demand-supply chain management The literature review has identified four main requirements of DSCM, and these requirements, to varying degrees, have also been identified in the case study (Table 5.3). The first requirement of DSCM identified in the literature review (organizational competences), means that the firm, in order to succeed with the implementation of DSCM, needs to have some organizational competences, such as high market orientation, advanced market segmentation and intelligence, as well as excellence in and coordination between the demand and supply processes (e.g., Hilletofth and Ericsson, 2007; Jüttner et al., 2007; Walters and Rainbird, 2004). The case study supports these findings, by showing that organizational competences, such as advanced market segmentation and intelligence, high market orientation, expertise in the demand and supply processes, as well as coordinated demand and supply processes are required to succeed.

Table 5.3 Requirements of demand-supply chain management Requirements Literature Case Beta Organizational competences - Market/customer orientation - Sophisticated market intelligence Yes Yes - Advanced market segmentation - Expertise in the demand and supply processes - Coordinated demand and supply processes Company established principles - Neither demand nor supply focused Yes Yes - Demand and supply chain strategy linked (partly) - Commitment from senior management Demand-supply chain collaboration - Information sharing Yes Yes - Trust and loyalty (partly) - Relationship management Information technology support - Support for individual supply processes - Support for individual demand processes Yes Yes - Support for internal/external coordination → Integrated information systems

The second requirement of DSCM identified in the literature review (company established principles), means that the demand-supply oriented approach needs to be rooted within the organization. This means that the organization should neither be demand nor supply focused, and that both the demand-side and the supply-side of the company should be involved in setting the business strategy. In addition, the demand and supply chain strategies need to be linked to one another and to the overall business strategy. All this also needs to be supported by the senior management and be clearly expressed in the business agenda, as well as through proper KPIs and incentives (Rainbird, 2004). The case study supports these findings, by showing that commitment from the senior management is required to succeed,

8 8

for example, they should select an appropriate business strategy, inspire cultural change, and align the functional strategies.

The third requirement of DSCM identified in the literature review (demand-supply chain collaboration), means that the actors across the demand-supply chain must share information, which calls for trust, loyalty and relationship management (e.g., Charlebois, 2008; Frohlich and Westbrook, 2002; Williams et al., 2002). The case study supports these findings, by showing that collaboration between the different demand and supply functions are required to succeed. However, in several regards, the coordination is currently more on an intra-organizational level and needs to be extended in the future, to truly exploit the benefits of DSCM. Still, the coordination between supply processes and demand processes are, by nature, both intra- and inter- organizational respectively.

The fourth and final requirement of DSCM identified in the literature review (information technology support), means that information technology is a prerequisite, in order to manage both the individual demand and supply processes, however, also to support the coordination between them, within and between companies (e.g., Al-Mudimigh et al., 2004; Langabeer and Rose, 2002; Selen and Soliman, 2002; Walters, 2008). Information technology is often referred to as the key enabler of DSCM (e.g., Korhonen et al., 1998; Langabeer and Rose, 2002; Vollmann and Cordon, 1998), and can thus be regarded as one of the most critical requirements. The case study supports these findings, by showing that information technology support is required to succeed with DSCM. There are numerous SCM and DCM information systems, but these are rarely integrated. Therefore, information technology is a major barrier to DSCM and the issue of demand-supply integrated information system needs further investigation.

5.3 Differentiation focused supply chain design In this section, the second research question (how can a differentiated supply chain be developed, and what are the benefits and requirements?) is analyzed, based on the findings reported in Papers I and V and existing literature.

5.3.1 Organization of differentiation focused supply chain design In the literature, several models of supply chain strategy selection have been proposed, to guide the choice of the most appropriate supply chain approach (e.g., Fisher, 1997; Mason- Jones et al., 2000A; Christopher, 2000; Christopher et al., 2007). These models emphasize that one should select the supply chain strategy that best matches the strategy’s supply characteristics (efficiency, responsiveness, and supply lead-time) with the market’s demand characteristics (type of product, volume, variety, variability, and required lead-time). It can be argued that these models are too simplistic, due to three major issues. Firstly, they are too holistic, suggesting that it is only a question of choosing a supply chain strategy (lean, agile, or leagile). However, it is rather a question of choosing the appropriate manufacturing strategy and combining it with a suitable sourcing and distribution strategy. The type of manufacturing strategy chosen then determines whether the different supply chain activities are best managed according to lean or agile principles. Secondly, these models link each supply chain strategy to a specific market context. However, research has shown that certain supply chain strategies could be more suitable in particular environments. Nevertheless,

they are not limited to those environments, since different supply chain strategies can be successfully applied in similar market environments (Hilletofth and Hilmola, 2007). It is rather a question of how the firm would like to conduct its business. Finally, most of the models imply that it is a question of choosing two supply chain solutions for the entire company. These models usually propose a segmentation of markets (also applicable to customers and products) into two segments and suggest a specific supply chain strategy (lean or agile) for each one (e.g., Fisher, 1997; Mason-Jones, 2000A; Christopher, 2000). Nevertheless, one of the most recent models proposed distinguishes between four market segments (Christopher et al., 2006). However, the segmentation in this model is too simplistic as well.

The main issue is that these models regard markets as homogeneous, that is, they assume that all customers would like to purchase each type of product in a similar way (similar demand characteristics). However, research has shown that customers purchase similar products rather differently. For example, some customers prefer to purchase fashionable quality clothing at the lowest possible price, while others prefer to purchase the most recent fashion clothing at affordable prices (Hilletofth and Hilmola, 2007). Both these types of products could be categorized as special, given that their demand characteristics are distinguished by high variety, high volume, and high variability. Accordingly, it can be argued that these segmentation and supply chain strategy selection approaches are inadequate, since markets are becoming more competitive and fragmented. Customers are increasingly seeking individual solutions to their needs, and this concerns both products and supply chain solutions.

One proposed strategy for dealing with the increased demand variability, product variety, and customization (competitive and fragmented markets) is postponement (leagile supply chain strategy). Indeed, postponement of certain supply chain activities until orders are received (e.g., switch from MTS environment to ATO) will enable companies to create a responsive and cost-efficient supply chain. However, one type of postponement strategy is certainly not the best option for all markets, products, or customers. Instead, companies should recognize the need to employ several supply chain solutions concurrently (develop a differentiated supply chain), in order to stay strong in competitive and fragmented markets. This corresponds well with current views in the literature. Still, the subject is not well researched, which is exemplified by the small number of case studies reporting on companies that utilize more than two supply chain solutions (e.g., Christopher et al., 2006).

This research has revealed that differentiation focused supply chain design (SCD) can be organized into a process of five stages: market segmentation, market understanding, as well as specification, selection, and implementation of supply chain solutions (Figure 5.2). In essence, the first four stages of the SCD process, concern strategy formulation (supply chain strategy phase), while the last stage of the process, concerns strategy implementation (supply chain design phase). This process should be initiated when a new product (or product category) is in the process of being developed. It is important that the SCD process is addressed in parallel with the NPD process, and that information is exchanged between these processes, for example, through the involvement of supply chain representatives in the NPD process.

In the first stage of the differentiation focused SCD process (market segmentation), the objective is to develop a segmentation model based on those parameters that affect the selection of the most appropriate supply chain solution. It is important to collaborate with DCM, since the segmentation model should preferably be developed on the basis of market knowledge gained from market intelligence. It can be argued that the SCD process should be directed on the basis of the same segmentation model as the NPD process. This is because these processes should have the same goal, satisfying the customers, as well as a common view of customer needs and requirements, in order to create a customer-oriented business. Consequently, this requires that these processes are directed on the basis of a common segmentation model, preferably a needs-based segmentation model, where customers are grouped into different market segments based on the similar needs and benefits sought by the customers, in order to solve a particular consumption problem (Best, 2005). Still, the overall segmentation model needs to be adapted, with regard to the included information, for each type of process. It is important to note that this stage is not conducted each time the process is initiated; instead, the company should develop a segmentation model and evaluate it continuously. However, the target is always one or more of the specified market segments.

Supply chain design

Phase 1: Strategy Phase 2: Design

Market Market Specification of Selection of Implementation segmentation understanding supply chain supply chain of supply solutions solutions chain solutions

Figure 5.2 Differentiation focused supply chain design

In the second stage of the differentiation focused SCD process (market understanding), the objective is to identify how the different market segments, within the segmentation model, want to acquire a particular product, or, in other words, identify the preferred supply chain solutions. It is important to note that each market segment may prefer a number of supply chain solutions. Sometimes a product is only intended for a particular market segment within the segmentation model, the investigation is then restricted to this segment. It is important to collaborate with DCM, as the required information should preferably be gathered through market intelligence. Collaboration with DCM is also crucial, since it has the knowledge and skills regarding how customer needs are identified and how customer value is created.

In the third stage of the differentiation focused SCD process (specification of supply chain solutions), the objective is to specify all the supply chain solutions that can be provided cost- efficiently, or, in other words, identify the capabilities to serve the market. Firstly, the capabilities of the sourcing, production, and distribution systems (existing and possible through investment) are defined. Then, the possible supply chain solutions are specified. This is a matter of choosing an appropriate manufacturing strategy and combining it with a suitable sourcing and distribution strategy (Figure 5.3). By combining relatively few strategies, it is possible to develop several differentiated supply chain solutions. The type of manufacturing strategy chosen determines whether the different supply chain activities are best managed according to lean or agile principles. Customers Suppliers Manufacturer (focal company)

Design Sourcing Production Assembly Packaging Labeling Distribution

LEAN SUPPLY Activities are performed before orders are received and focus on efficiency COP (planned and standardized) Make To Stock (MTS) COP Manufacturing Sourcing Deliver To Order S1 S2 S3 S4 (DTO) COP MTS X X Label To Order ATO X X (LTO) COP MTO X X Manufacturing Distribution ETO X X Package To Order (PTO) D1 D2 D3 D4 COP MTS X X Assemble To Order (ATO) ATO X X X COP MTO X X X Make To Order ETO X X (MTO) COP Source To Order AGILE SUPPLY (STO) COP Activities are performed after orders are received and focus on responsiveness Engineer To Order (order-driven and customized) (ETO)

Figure 5.3 Different supply chain solutions based on the selection of appropriate manufacturing strategy

In the fourth stage of the differentiation focused SCD process (selection of supply chain solutions), the objective is to select the supply chain solutions necessary to satisfy most customers within each market segment. It could be necessary to utilize several supply chain solutions for each segment, in order to satisfy most of the customers. However, it is important to note that each solution may be used in several segments as well as for other products. The number of utilized supply chain solutions is normally a question of finding a balance between customer satisfaction and cost-efficiency. However, this equation could be made more favorable by using differentiated service prices, based on cost-to-serve, in the supply chain solutions provided. In this case, it is a matter of finding a balance between revenues and costs.

In the final stage of the differentiation focused SCD process (implementation of supply chain solutions), the objective is to implement the selected supply chain solutions. If the company proceeds with implementation, it will face its highest costs to date. Sometimes a new product will only utilize existing supply chain capabilities and solutions, consequently, implementation, in such a case, concerns ramp-up of the supply processes. Other times, new supply chain capabilities and solutions have been selected and thus need to be developed. Accordingly, the scope of this stage can vary greatly.

5.3.2 The role of logistics service providers in supply chain differentiation This research has revealed that companies can make use of various types of LSPs in the differentiation focused SCD process. Traditional providers (e.g., standard providers and service developers) often take care of certain activities in the logistics process and not the entire process (Hertz and Alfredsson, 2003). If such a provider is used, the company is responsible for the whole SCD process, but could be supported by the provider, with respect to implementation in sourcing and distribution parts. For example, the LSP can provide services that the company itself cannot supply, provide certain services more efficiently, or provide complementary services. Nevertheless, the capabilities of LSPs must already be considered in the specification and selection stages of the SCD process. This type of support is beneficial, if the company’s logistics function is well-developed, but providing all the supply chain solutions that the various market segments request is problematic.

More advanced LSPs (e.g., customer adapters and developers) usually handle the entire logistics process or a sub-process (Hertz and Alfredsson, 2003). If such a provider is used, the company is still responsible for the entire SCD process, however, the sourcing and/or distribution parts of the supply chain are managed by the provider. In this case, the provider can also support the development with respect to the identification, specification, and selection of supply chain solutions in sourcing and distribution parts, for which the provider is sometimes responsible. This type of support is beneficial, if the company’s logistics function is under-developed and the customers require a wide variety of customized services. However, it is important that the company is active and integrates the provider in its business, in order to be successful with the design and differentiation of the supply chain.

5.3.3 Benefits of supply chain differentiation A significant advantage of a differentiated supply chain, shown in this research, is improved competitiveness, by also considering SCM as a value generating function. Current theories concerning supply chain strategy selection seem to ignore the prospect of competing through logistics in a more comprehensive way. Following tradition, DCM sets the business strategy and SCM executes it. In other words, SCM builds up appropriate supply chain capabilities and advantages, according to the demand chain strategy. However, as customers want more customized products, they could likewise prefer more customized supply chain solutions, and perhaps be willing to pay more for this.

Additionally, there is a trend towards commoditization in many industries, resulting in customers perceiving little difference between products. This implies that brand loyalty dwindles and competition through customer service becomes a major determinant of success. Such a situation, in turn, implies that companies, to stay competitive, must enhance

customer value. This is achieved by increasing the worth of the product in the eyes of the customer, by adding value to the core product through including customer desired customer service (provide desirable supply chain solutions).

Another advantage of a differentiated supply chain is that it allows companies to reach the goal of meeting highly varying needs of local and differing markets while at the same time achieving cost-efficiency (Hilletofth, 2008). Overcapacity exists on a worldwide scale in most industries and, where supply exceeds demand, there is a downward pressure on price. Thus, it is quite cost-efficient to operate in a differentiated manner.

5.3.4 Requirements of supply chain differentiation Several requirements, with regard to design, planning, and execution, which are necessary in order to achieve a differentiated supply chain, have been identified in this research. Firstly, the requirements of supply chain collaboration are in this case even higher than normal since a differentiated supply chain may involve more supply chain partners. The involved case companies (Alpha and Beta) have stated supply chain collaboration as a major issue when differentiating the supply chain.

Secondly, collaboration with DCM in general and NPD in particular constitute two important requirements, in order to succeed with supply chain differentiation. Collaboration with DCM is important, since it has the knowledge and skills regarding how customer needs are identified and how customer value is created (e.g., market intelligence), while coordination with NPD is essential, since product and supply chain design should preferably be addressed in parallel. Logisticians should be involved in the NPD process, to provide feedback from a logistics point of view during the different product development stages and to be able to address SCD in parallel.

Finally, integrated information systems and advanced decision support tools are needed to efficiently manage differentiated supply chains, as well as to make feasible logistics decisions in the context of multiple supply chain. For example, the involved case companies have stated demand and inventory visibility along the supply chain as significantly important to succeed with a differentiated supply chain. This requires some type of integration between the supply chain members’ information systems.

5.4 Coordination between NPD and SCM In this section, the third research question (what linkages exist between new product development and supply chain management, and how can these management directions be coordinated?) is analyzed, based on the findings reported in Paper IV and existing literature.

5.4.1 Linkages between NPD and SCM Several important factors required to become successful with NPD have been identified in this research and their connections to SCM are summarized in Table 5.4. One success factor of NPD shown in this research, in accordance with the literature (e.g., Barczak et al., 2009; Cheng and Shiu, 2008; Cooper et al., 2004; Droge et al., 2008; Kotler et al., 2009; Kärkkäinen et al., 2001; Schmidt et al., 2009), is that successful NPD requires a holistic view from

strategy to commercialization. This implies that several functions need to be incorporated in the NPD process, for example, marketing and sales, product development, R&D, sourcing, manufacturing, and distribution. In this case, the connection to SCM is that different supply chain competences (sourcing, manufacturing, and distribution) have to be involved in the NPD process, in order to provide feedback from a logistics point of view during the different development stages. Another objective with including supply chain representatives in the NPD process is that it provides an opportunity to address NPD and SCD in parallel.

A further NPD success factor shown in this research, as well as in the literature (e.g., Barczak et al., 2009; Cheng and Shiu, 2008; Cooper et al., 2004; Droge et al., 2008; Hamm and Symonds, 2006; Jain, 2001; Kotler et al., 2009; Van Kleef et al., 2005; Schmidt et al., 2009), is that NPD should be driven by customer needs and requirements identified through market intelligence (market-oriented), rather than by technology improvements alone. This requires a profound knowledge of customers and their requirements. In this case, the connection to SCM is that the supply chain solutions provided also need to be developed on the basis of customer needs and requirements. This implies that companies, when gathering information concerning needs of new products, should also collect information regarding customer service needs, in order to develop the most appropriate supply chain solutions.

One more NPD success factor, identified in this research, is that NPD needs to be directed on the basis of a segmentation model including a set of market segments, since customers’ preferences may differ considerably. This has also been put forward in the literature (e.g., Cooper et al., 2004; Hilletofth et al., 2010A; Kotler et al., 2009) and means that products are developed to meet needs which have been identified within a specific market segment within the segmentation model. In this case, the connection to SCM is that the customers’ requirements may also differ with regard to lead-times and service levels, and preferred supply chain solutions (e.g., procurement and distribution alternatives), implying that several solutions are required, to become successful in the market. Moreover, it can be argued that all operations should be directed on the basis of the same segmentation model, to create a truly customer-oriented organization. Accordingly, the same overall segmentation model should be applied in NPD and SCM, which evidently requires coordination between these management directions.

An additional NPD success factor shown in this research, and found in the literature (e.g., Barczak et al., 2009; Cheng and Shiu, 2008; Droge et al., 2008; Hamm and Symonds, 2006; Jain, 2001; Kotler et al., 2009), is that it is important to continuously develop new (or modify old) products in accordance with customer preferences. It is also vital that the products are innovative and thus attractive to the market. In this case, the connection to SCM is that it is unwise to restrict innovation solely to products and their attributes, since companies nowadays offer more than a product, they offer a value package. Other areas should also be included, such as supply chain solutions. These issues need to be considered in the NPD process through the involvement of supply chain representatives and the establishment of information exchange between the NPD and SCD processes. The objective should be to address these issues in parallel.

Also a success factor of NPD highlighted in this research, as well as in the literature (e.g., Carillo and Franza, 2006; Chen et al., 2005; Hamm and Symonds, 2006; Jain, 2001; Kotler et al., 2009; Van Hoek and Chapman, 2007), is the importance of developing products rapidly

and delivering them to the market efficiently. The shortening of product life cycles and more rapid product obsolescence imply that the right products must be developed and fruitfully launched in ever shorter time frames. In this case, the connection to SCM is that TTM is not solely determined in the NPD process, but also in, for example, the ramp-up of sourcing, manufacturing, and distribution (SCM). This means that supply chain representatives should be involved early in the NPD process to reduce TTM.

Table 5.4 Important issues in NPD and their influence on SCM Requirement Connection to SCM A holistic view from strategy to Different supply chain competences have to be involved in the commercialization. NPD process to provide feedback from a logistics point of view. This also creates an opportunity to address NPD and SCD in parallel and as early as possible. Development of products based on The supply chain solutions provided also need to be developed needs identified through market on the basis of customer demand. This implies that companies, intelligence (customer-oriented). when gathering information concerning the needs of new products, should also collect information regarding service needs, in order to develop the most appropriate supply chain solutions. Development of products based on a Customers’ requirements may also differ with regard to lead- segmentation model times and service levels, as well as preferred supply chain solution, implying that several solutions are required to become successful in the market. All the operations should be directed on the basis of the same overall segmentation model. Development of new and innovative It is unwise to restrict innovation in products, other areas should products in accordance with customer also be included, such as supply chain solutions. These issues preferences. need to be considered in the NPD process, through the involvement of supply chain representatives and by establishing information exchange between NPD and SCM. The objective should be to address these issues in parallel. Developing products rapidly and Time-to-market is not solely determined in the NPD process but moving them quickly and efficiently to also in, e.g., sourcing, manufacturing, and distribution. This the market. implies that supply chain representatives should be involved early in the NPD process to reduce time-to-market. Incorporating all the activities SCM and NPD need to be coordinated, in order to successfully supporting the commercialization introduce products into the market, ensure that the product (integrative NPD approach). assortment is updated according to product life cycles, and ensure that obsolete products are properly phased out.

A final success factor of NPD identified in this research is that NPD not only enables the efficient flow of new products, but also assists the ramp-up of various supply chain activities, such as sourcing, manufacturing, distribution, as well as other related activities supporting the commercialization of the product (marketing and sales). These issues need to be addressed in parallel and this requires an integrative NPD process, which is also put forward in the literature (e.g., Carillo and Franza, 2006; Kotler et al., 2009; Sharifi et al., 2008; Van Hoek and Chapman, 2007). In this case, the connection to SCM is that it needs to be coordinated with NPD, in order to successfully introduce products onto the market, ensure that the product assortment is updated according to product life cycles, and to ensure that obsolete products are properly phased out.

5.4.2 Coordination between NPD and SCM All the identified linkages between NPD and SCM, discussed above, motivate the use of an integrative NPD process where the design functions are aligned with other main functions in the company. In essence, this can be achieved by involving representatives from other main functions, within the company, in the NPD process (Hsiao, 2002; Kottler et al., 2009; Portioli- Staudacher et al., 2003; Sharifi et al, 2006; Van Hoek and Chapman, 2006). These various representatives should be involved as early as possible, in order to provide feedback from their function’s perspective during the different NPD stages.

As highlighted previously, this is not new from a theoretical point of view. It has been addressed in concurrent design before. Proposed terms such as “design for manufacturing” and “design for supply chain” are used quite often to imply that the design function is aligned and integrated with other main functions in the company (Appelqvist et al., 2004; Ellram et al., 2007; Perks et al., 2005; Sharifi et al., 2006; Sharifi and Pawar, 2002). The NPD process is supposed to be cross-functional, however, typically only marketing, product development, and R&D are involved in this process (Kotler et al., 2009).

Consequently, it can be argued that the NPD process, to a larger extent, needs to incorporate the main supply functions and other sales-related functions supporting the commercialization of the product, and to take into account the impact on the performance and success of the supply chain when developing new products. In addition, the NPD process needs to be coordinated with SCM in general and the SCD process in particular, to a larger extent. The mission should be to create a customer-oriented business, by organizing the firm around understanding how customer desired products are developed efficiently (NPD), how products are delivered to customers efficiently (SCM), and how these processes and management directions can be coordinated. It can be concluded that such an approach constitutes an essential part of the DSCM concept.

5.5 The effect of outsourcing on demand-supply chain management In this section, the fourth research question (what effect has logistics outsourcing on demand-supply chain management?) is analyzed, based on the findings reported in Paper III and V and existing literature.

5.5.1 The effect of outsourcing on supply chain management In this research, the effect of logistics outsourcing (warehousing, customs brokerage, and information technology) on strategies and direction in SCM, the geographical coverage of purchases (source of supply), and the geographical coverage of sales (market share) has been investigated. The research has revealed that the outsourcing of warehousing, customs brokerage, and information technology could have some impact on some strategic and managerial aspects of SCM. For example, the outsourcing of warehousing could be connected to integrated manufacturing and information systems and reverse logistics procedures; customs brokerage outsourcing could be connected to re-engineering and considering logistics as a core strength; and information technology outsourcing could be connected to reverse logistics procedures. The outsourcing of information technology seems to increase the facilitation of reverse logistics procedures, while warehousing outsourcing seems to decrease it. It is important to note that none of the identified differences was

found to be statistically significant. Still, these “potential” places of difference are naturally good avenues for further research.

In the literature, it often argued that outsourcing is typically used for geographical coverage purposes (both purchasing and sales) and to gain cost advantages (Li and Barnes, 2008). This research has revealed that in-house information technology is connected to more international purchasing, while the outsourcing of warehousing potentially facilitates the same. Interestingly, none of these three outsourcing alternatives was found to be even near statistical significance on market share.

5.5.2 The effect of outsourcing on demand-supply chain management It can be argued that logistics outsourcing can be challenging from a DSCM perspective, if the result of the outsourcing decision is that the supply processes are considered less important and therefore neglected by the senior management, with negative effects for strategies and direction in SCM. This argumentation seems valid, however, this research provides results that are somewhat contrary. Firstly, this research has revealed that company strategies and direction in SCM are not influenced by logistics outsourcing, to such an extent (motivated by the insignificant results presented in the previous section). However, this issue needs to be further investigated, since several places of possible connections have been identified (e.g., the outsourcing of warehousing could be connected to integrated manufacturing and logistics information systems, while customs brokerage outsourcing could be connected to re-engineering activities of supply chain processes and considering logistics as a core strength).

Secondly, this research has revealed that logistics outsourcing provides an opportunity to improve the design and differentiation of the supply chain, which is an important element of DSCM. For example, basic LSPs can support the development of a differentiated supply chain, with regard to implementation in sourcing and distribution parts, by providing services that the company is incapable of supplying, providing certain services more efficiently, or providing complementary services. In addition, more advanced LSPs can also support the development with regard to the identification, specification, and selection of supply chain solutions.

These results do not imply that the argumentation is incorrect, rather that some clarification is needed. Considering the demand and supply processes as being equally important is not synonymous with the internal control of operations, but concerns whether both DCM and SCM are represented in the senior management with the same authority. This should not be an issue, if a limited number of logistics activities have been outsourced to a provider, since the company, in this case, is still responsible for the supply processes. On the other hand, it could become troublesome, if the entire logistics process (or a sub-process) has been outsourced to a more advanced provider, since it implies that the provider is responsible for certain processes in the supply chain. In this situation, the firm needs to be active in the management of the outsourced processes and also integrate the provider in its business, in order to be successful.

5.6 Summary of research findings The four research questions of interest in this research have been analyzed, in turn above, on the basis of the findings reported in the appended papers and existing literature. The main findings of the research questions are summarized in Table 5.5.

Table 5.5 Main findings of the research with regard to the research questions RQ Main findings • The identified elements 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. •The identified benefits include enhanced competiveness (e.g., more innovative, differentiated, responsive, and cost-efficient), enhanced demand chain RQ1: What performance (e.g., more innovative, responsive, and cost-efficient NPD, improved elements, benefits, range and life cycle management, higher brand loyalty, more effective marketing and requirements efforts, and reduced demand chain costs), and enhanced supply chain performance characterize the (e.g., more responsive, differentiated, and cost-efficient product delivery, flexible demand-supply operating structure, reduced inventories, fewer stock-outs, less product chain management obsolescence, improved customer service, and reduced supply chain costs). concept? • The identified requirements include organizational competences (e.g., market orientation, advanced market segmentation and intelligence, as well as expertise in and coordination between the demand and supply processes), company established principles (e.g., neither demand nor supply focused, demand chain and supply chain strategies linked, and commitment from senior management), demand-supply chain collaboration (e.g., information sharing, trust, loyalty, and relationship management), and information technology support. • A differentiated supply chain can be developed by combining different sourcing, manufacturing, and distribution strategies into supply chain solutions, and the development can be organized into a process of five stages: market segmentation, market understanding, as well as specification, selection, and implementation of RQ2: How can a supply chain solutions. differentiated • The identified benefits include enhanced competiveness, by considering SCM as a supply chain be value generating function, and increased profitability, by allowing differentiated developed, and customer needs to be satisfied in a cost-efficient manner. what are the • The identified requirements include the involvement of logisticians in the NPD benefits and process, extended supply chain collaboration, as well as collaboration with DCM in requirements? general and NPD in particular. • Basic LSPs can support the development with regard to implementation in sourcing and distribution parts, while more advanced LSPs can also support the development with regard to the identification, specification, and selection of supply chain solutions. • The identified linkages include the need to develop a common segmentation RQ3: What linkages model, the need to consider SCM as a value generating function, the need to collect exist between new information regarding customer service needs in the market intelligence process, product the need to coordinate NPD with SCM in general and SCD in particular, and the development and need to involve logisticians in the NPD process. supply chain • The identified linkages motivate the use of an integrative NPD process where the management, and NPD functions are aligned with the main supply functions in the company and other how can these sales-related functions supporting the commercialization, by including management representatives from these functions in the NPD process. This integrative process directions be should take into account the impact on the performance and success of the supply coordinated? chain when developing products.

Table 5.5 Main findings of the research with regard to the research questions (continued) RQ Main findings • Logistics outsourcing could have some impact on strategies and direction in SCM. For example, outsourcing of warehousing could be connected to integrated manufacturing and information systems, and reverse logistics procedures; customs brokerage outsourcing could be connected to re-engineering and considering logistics as a core strength; and information technology outsourcing could be RQ4: What effect connected to reverse logistics procedures. has logistics • In-house information technology is connected to more international purchasing outsourcing on (geographical coverage of purchases) and outsourcing of warehousing could be demand-supply connected to the same. chain • Logistics outsourcing could be problematic from a DSCM perspective, if the effect management? of the outsourcing decision is that the supply processes are considered less important. However, if the outsourced processes are regarded as equally important as in-house processes, the effect of logistics outsourcing on company strategies and direction in SCM could be reduced, and providing an opportunity to improve supply chain differentiation.

100

6. DISCUSSION

In this chapter, the overall contribution of the research is discussed followed by a presentation of research limitations. Finally, the theoretical and practical implications of the research are discussed.

6.1 Results and contribution The point of departure for this research has been that all firms, on the premise of the customer value based theory, can be divided into a demand-side, which includes all the demand processes aimed at responding to customer demand through value creation (i.e., the demand chain) and into a supply-side, which includes all the supply processes aimed at fulfilling customer demand through value delivery (i.e., the supply chain). The management of the demand-side of the company (DCM) is revenue-driven and focuses on effectiveness, while the management of the supply-side of the company (SCM) tends to be cost-oriented and focuses on efficiency. Evidently, these management directions together determine the company’s profitability and hence need to be coordinated, which requires a demand-supply oriented management approach, in this research entitled DSCM (Figure 6.1).

Management levels

Design Planning Execution (strategic level) (tactical level) (operational level)

Competitive Coordination advantage (value and cost) Supply chain management

The management of the supply processes, within a particular company and across the supply chain, in order to fulfill customer demand as cost-efficiently as possible.

Supply processes Demand fulfillment Sourcing Manufacturing Distribution (value delivery)

Management levels Design Planning Execution (strategic level) (tactical level) (operational level)

Figure 6.1 Framework of demand-supply chain management

101

The underlying principle of DSCM is that both DCM and SCM are of fundamental importance to every organization and that they have to be coordinated to maximize effectiveness and efficiency. In addition, it can be regarded as macro-level management aimed at coordinating these management directions across intra- and inter-organizational boundaries. It puts forward that DCM and SCM should be viewed as being equally important and that neither one should rule single-handedly. Instead, these management directions should focus on their area of expertise and become coordinated at an overlying level. The emphasis is both on revenue growth (effectiveness) and cost reduction (efficiency), since the goal is to gain a competitive advantage (profitability) by developing desirable products and delivering them through differentiated (or tailored) supply chain solutions (provide superior customer value), while simultaneously managing the demand and supply processes as cost-efficiently as possible (provide superior customer value at a lower cost).

This research has contributed to the understanding of DSCM in many respects. Firstly, it has been 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. Secondly, it has been revealed that the main benefits of DSCM include enhanced competiveness (e.g., becoming more innovative, differentiated, responsive, and cost-efficient), enhanced demand chain performance (e.g., more innovative, responsive, and cost-efficient NPD, improved range and life cycle management, higher brand loyalty, more effective marketing efforts, and reduced demand chain costs), and enhanced supply chain performance (e.g., more responsive, differentiated, and cost-efficient product delivery, flexible operating structure, reduced inventories, fewer stock-outs, less product obsolescence, improved customer service, and reduced supply chain costs). Finally, it has been shown that the main requirements, in order to succeed with the implementation of DSCM, include organizational competences (e.g., market orientation, advanced market segmentation and intelligence, as well as expertise in and coordination between the demand and supply processes), company established principles (e.g., neither demand nor supply focused, demand chain and supply chain strategies linked, and commitment from senior management), demand-supply chain collaboration (e.g., information sharing, trust, loyalty, and relationship management), and information technology support.

Moreover, the research has contributed to the understanding of DSCM by analyzing some of the established elements further. Firstly, the element of supply chain differentiation has been further investigated. It has been established that these efforts can be organized into a SCD process of five stages. In the first stage (market segmentation), the objective is to develop a segmentation model based on those parameters that affect the selection of the most appropriate supply chain solution. In the second stage (market understanding), the objective is to identify how the different market segments within the segmentation model want to acquire the particular product, or, in other words, identify the wanted supply chain solutions. In the third stage (specification of supply chain solutions), the objective is to specify all the supply chain solutions that can be provided cost-efficiently, or, in other words, identify the capabilities of serving the market. In the fourth stage (selection of supply chain solutions), the objective is to select the supply chain solutions necessary to satisfy most customers within each market segment. In the fifth and final stage (implementation of supply chain solutions), the objective is to implement and prepare the selected supply chain

102

solutions. This SCD process should be initiated when a new product (or product category) is in the process of being developed. Furthermore, it is important that this is addressed in parallel with the NPD process, that information is exchanged between them, and that they are directed on the basis of a common segmentation model.

Secondly, the element of NPD and SCM coordination has been further investigated. It has been established that there are several important linkages between these management directions. The linkages include the need to develop a common segmentation model, the need to consider SCM as a value generating function, the need to collect information regarding customer service needs in the market intelligence process, the need to coordinate NPD with SCM in general and SCD in particular, and the need to involve logisticians in the NPD process. These identified linkages motivate the use of an integrative NPD process in which the NPD functions are aligned with the main supply functions in the company and other sales-related functions supporting the commercialization of the product, by including representatives from these functions in the NPD process. This integrative NPD process should take into account the impact on the performance and success of the supply chain when developing new products. The mission should be to create a customer-oriented business by organizing the firm around understanding how customer desired products are developed cost-efficiently (NPD), how products are delivered to customers cost-efficiently (SCM), and how these processes and management directions can be coordinated. It can be concluded that such an approach constitutes an essential part of the DSCM concept.

Finally, the element of viewing the demand and supply processes as being equally important has been further investigated. It has been established that logistics outsourcing can be risky from a DSCM perspective, if the result of the outsourcing decision is that the supply processes are considered less important and thus neglected by the senior management, with serious and negative effects for strategies and direction in SCM. Nevertheless, this research has revealed that company strategies and direction in SCM are not influenced by logistics outsourcing to such an extent. However, this matter needs to be investigated further, since several places of possible connections have been identified. For example, the outsourcing of warehousing could be connected to integrated manufacturing and information systems and reverse logistics procedures; customs brokerage outsourcing could be connected to re-engineering and considering logistics as a core strength; and information technology outsourcing could be connected to reverse logistics procedures. Consequently, it can be argued that considering the demand processes (DCM) and the supply processes (SCM) as being equally important is not synonymous with the internal control of operations, but concerns whether both DCM and SCM are represented in the senior management with the same authority. 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, if the outsourced processes are regarded as equally important as in-house processes.

This research has demonstrated that the heart of DSCM is advanced market segmentation and intelligence. Meaningful as well as actionable market segmentation and intelligence are required to coordinate and manage the demand and supply processes (Hilletofth and Ericsson, 2007; Jüttner et al., 2007, Langabeer and Rose, 2002). In essence, these processes should have the same goal, satisfying the customers, and have a common view of customer needs and requirements. Thus, it can be argued that the demand and supply processes need

103

to be directed on the basis of a common segmentation model and managed on the basis of market knowledge gathered through market intelligence (Figure 6.2). Based on the fact that the demand-side of the company specializes in these types of tasks (segmentation and intelligence), two approaches are sufficient: either a market intelligence unit that serves both sides of the company or the demand-side supports the supply-side of the company in its market segmentation and intelligence. It can therefore be argued that the market segmentation and intelligence processes should belong to and support both the demand- side (DCM) and supply-side of the company (SCM). Accordingly, market researchers should gather information, with regard to both new product requirements and customer service needs (preferred supply chain solutions).

Market intelligence

Demand Supply characteristics characteristics Customer Customer side

- needs needs side (products) Market (service) - segmentation Supply Demand Market segments Market segments and characteristics and characteristics

Demand chain Supply chain management management Coordination

Figure 6.2 The heart of demand-supply chain management

This research work has shown that there is currently a large gap between the concept and application of DSCM, since companies have only recently begun to implement these principles. An inclusive DSCM approach should incorporate all the demand and supply processes. It is probably unlikely that this level of application can be found in practice today, although some companies have started to develop more basic versions including some of the major processes, of which this research work provides an example. The challenge appears to be to include most of the major processes in both domains, and to achieve a high degree of coordination between them. Previous case studies show companies succeeding with one of these challenges. For instance, several studies address the coordination of NPD (part of DCM) and SCM, by incorporating supply chain co-workers in the NPD process (e.g., Hilletofth et al., 2010). The idea of including supply chain representatives in the NPD process is, however, not new; it has been addressed in concurrent design for some time. The terms “design for manufacturing” and “design for supply chain” are quite often used to imply that the design function is aligned and integrated with other main functions in the company (Appelqvist et al., 2004; Ellram et al., 2007; Perks et al., 2005; Sharifi et al., 2006; Sharifi and Pawar, 2002). Nevertheless, the competences most commonly included in the NPD process are marketing, product development, and R&D (Hilletofth et al., 2010). It can be argued that at the moment DSCM in practice is more about coordinating NPD and SCM.

104

Table 6.1 Evaluation of the demand-led, supply-led, and demand-supply oriented business models Company Sales EBIT- OCF-ratio, Inventory ROA, % growth, % margin, % % turnover Supply chain masters 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 AMD (computer) (7.0) (0.9) 12.3 (33.7) 5.6 (9.2) 8.8 7.9 4.9 (24.4) ABB (automation) (8.9) 19.6 13.0 13.0 19.9 19.5 6.5 6.9 9.2 10.6 Astra Zeneca (pharmaceutical) 3.8 6.9 35.2 28.9 34.4 28.3 19.4 16.8 21.2 18.3 1 Dell (computer) (13.4) (0.1) 4.1 5.2 13.9 8.5 55.2 59.7 6.7 12.3 Ericsson (telecommunications) (1.2) 11.3 2.9 7.8 35.6 16.7 8.2 8.3 2.5 6.5 2 H&M (textile and clothing) 14.1 12.9 18.2 19.4 130.7 125.7 12.7 12.6 41.9 45.6 Lantmännen (food, energy, and agriculture) (18.1) 19.1 0.9 2.6 19.0 1.9 5.5 6.4 (0.2) 2.3 3 Lenovo (computer) 27.7 (8.9) 1.2 (1.3) 12.5 (1.8) 28.6 32.3 2.3 (2.7) Metsäliitto (forest, packaging, and tissue) (24.8) (5.3) (3.4) 0.0 6.3 2.2 6.0 6.2 (5.2) (3.1) Nokia (telecommunications) (19.2) (0.7) 2.9 9.8 15.5 13.9 18.6 18.8 2.6 12.9 SSAB (steel) (45.1) 34.3 (5.3) 17.5 14.1 20.7 2.8 4.0 (3.2) 11.1 Stora Enso (forest, paper, and packaging) (18.9) (6.9) (6.8) (6.6) 20.3 9.3 6.0 6.0 (7.3) (6.5) 3 Toyota (automotive) (7.6) (22.8) (2.6) 0.8 13.2 8.0 12.3 11.7 (1.9) 0.9 Volkswagen (automotive) (7.6) 4.5 1.8 5.6 9.1 2.1 6.6 7.1 0.7 4.2 Average (9.0) 4.5 5.3 4.9 25.0 17.6 14.1 14.6 5.3 6.3 Rank 3 3 3 3 3 3 2 2 3 3 Demand chain masters 4 Apple (home entertainment/electronics) 12.5 35.3 21.0 19.3 39.0 51.8 77.4 76.0 17.1 21.2 1 GAP (textile and clothing) (2.3) (7.8) 12.8 10.7 62.3 44.4 9.5 9.6 23.4 20.9 5 HP (home entertainment) (3.2) 13.5 8.8 8.8 18.0 19.6 16.4 14.9 8.3 10.4 6 Nike (textile and clothing) (0.8) 6.4 13.0 12.8 67.8 38.1 8.6 8.0 18.2 15.2 7 RIM (home entertainment) 35.1 84.1 21.7 24.6 116.7 65.2 22.9 20.5 35.7 41.1 3 Sony (home entertainment) (11.5) (13.3) 0.5 (3.2) 9.5 4.6 8.6 7.7 0.2 (1.4) Sony-Ericsson (mobile communications) (39.6) (12.9) (15.0) (1.0) (7.6) (10.0) 15.3 23.2 (27.0) (1.7) Average (1.4) 15.0 9.0 10.3 43.7 30.5 22.7 22.9 10.8 15.1 Rank 2 1 2 2 1 2 1 1 2 1 Demand-supply chain masters Electrolux (home appliance) 4.1 0.1 3.4 1.1 15.4 8.7 9.6 8.4 4.8 0.9 Husqvarna (outdoor appliance) 5.4 (2.8) 4.6 7.3 25.7 12.3 4.5 4.0 3.4 5.6 Intel (computer) (6.5) (2.0) 16.3 23.8 98.1 100.0 10.5 10.6 11.0 14.5 Kone (automation) 3.1 12.8 12.0 12.1 46.3 26.4 5.7 5.5 21.6 22.5 LG Electronics (home entertainment) 10.4 17.6 5.3 4.4 4.0 16.2 36.6 29.9 12.9 3.2 SCA (forest, packaging, and tissue) 0.4 4.3 7.4 7.7 18.6 10.2 8.7 8.3 4.2 4.1 1 Zara (textile and clothing) 9.7 10.7 15.6 15.9 78.3 58.6 10.8 9.8 21.5 21.3 Average 3.8 5.8 9.2 10.4 40.9 33.2 12.3 10.9 11.3 10.3 Rank 1 2 1 1 2 1 3 3 1 2 1 February-January, 2 December-November, 3 April-March, 4 October-September, 5 November-October, 6 June-May, 7 March-February. Source: Compiled by data from annual and interim reports

It is, at present, not easy to evaluate the demand-supply oriented management approach, since only a few companies have begun to adopt these principles, which are often at the

105

very beginning of implementation. However, an initial evaluation of the demand-supply oriented approach compared to the demand-led approach and the supply-led approach is given in Table 6.1. Another limitation of this evaluation, other than the application level in the demand-supply oriented firms, is the simple criterion of distinguishing between demand- led and demand-supply oriented companies. Firms have been classified as demand-led, if they focus on DCM related issues and have outsourced a large share of the supply processes, which is a feasible yet poor criterion, since the real difference concerns the representation and authority of SCM in the senior management. Consequently, some of the companies in the demand-led category should perhaps more accurately be classified as demand-supply oriented, however, this requires a closer investigation of the companies, in order for the matter to be determined.

As can be noted, the demand-supply oriented and the demand-led firms, in general, outperform the supply-led companies with regard to sales growth, profit margin, cash flow, and profitability. The fairly poor performance, irrespective of category and criteria, during 2009 is due to the financial crisis resulting in recession. It is important to note that some supply-led firms, such as H&M and Astra Zeneca, perform really well. Not surprisingly, the demand-led firms are most successful with regard to inventory turnover (probable due to outsourcing). The demand-supply oriented and the demand-led firms’ performance is reasonably similar, with regard to sales growth, profit margins, cash flow, and return on assets. Interestingly, the demand-supply oriented firms outperform the others, with regard to sales growth in the time of recession. It is possible that the demand-supply oriented business model will become standard in the forthcoming decade.

In this research which has involved five case companies only two can be classified as demand-supply oriented, and both are at the very beginning of adopting these principles (Beta and Gamma). The other cases have been used to study elements of DSCM and cannot be classified as demand-supply oriented at the moment. Performance evaluations of case companies Beta and Gamma are shown in Table 6.2 and Table 6.3 respectively. As indicated, something radical has occurred in case company Beta; 2009 was the strongest of the previous few years, with regard to sales growth, cash flow, and inventory turnover, while profit margin and profitably were second best, all this in a period of recession (financial crisis during 2009). This highlights the opportunities of implementing the demand-supply oriented principles.

Table 6.2 Performance evaluation of the case company Beta Indicator 2009 2008 2007 2006 2005 Sales growth (%) 4.1 0.1 0.9 3.1 (16.5) EBIT-margin (%) 3.4 1.1 4.3 3.9 1.0 OCF-ration (%) 15.4 8.7 10.3 8.6 6.1 Inventory turnover 9.6 8.4 8.6 6.8 5.9 ROA (%) 4.8 0.9 6.1 5.1 0.6 Source: Compiled by data from annual reports

Case company Gamma has worked with these principles for a shorter period of time, thus, no major improvement with regard to this work has been realized to this point. However, something might have happened in this company as well, since they managed to increase sales during the recession period. This case also shows what can happen with SCM focused companies in increasingly competitive and fragmented markets: reduced sales, lower profit

106

margins, and reduced profitability. Case company Beta was facing a similar situation before it changed its business model. This implies that manufacturing companies should recognize that competition through SCM excellence is, in many circumstances, inappropriate and they should instead adopt the principles of DSCM.

Table 6.3 Performance evaluation of the case company Gamma Indicator 2009 2008 2007 2006 2005 Sales growth (%) 5.4 (2.8) 13.2 2.2 - EBIT-margin (%) 4.6 7.3 10.7 10.6 10.1 OCF-ration (%) 25.7 12.3 12.4 14.2 9.7 Inventory turnover 4.5 4.0 5.2 5.1 4.6 ROA (%) 3.4 5.6 12.8 16.2 15.5 Source: Compiled by data from annual reports

Nevertheless, it is important to note that DSCM is not without weaknesses. It is, for example, costly to implement and these costs must be deducted from somewhere else. Case company Beta has launched several supply chain re-construction programs, in order to reduce supply chain costs which can subsequently be reinvested in the demand chain (e.g., customer- oriented NPD, branding, and market intelligence). In addition, the implementation time is very long, since it requires fundamental changes of the business, both physically and mentally. This, in turn, implies that implementing DSCM is fairly risky, since the conditions in today's competitive and fragmented markets could change quickly. Furthermore, it requires financially strong firms which have the necessary resources. In conclusion, it is important to achieve a proper balance between demand creation and fulfilment, as well as between revenue growth and cost-reduction.

It can be argued that DSCM is a universal solution in every market environment, since DCM and SCM should always be coordinated, even in markets where cost-efficiency is the basis of competitive advantage. However, the traditional business models, focusing on either the demand-side of the company or the supply-side of the company, can still be very successful in some environments. Therefore, DSCM could be viewed as an alternative to the traditional business models and it is particularly beneficial in some business environments, for example, in the emerging “cheap luxury” industry, which has evolved in recent years.

6.2 Limitations of the research The research is mainly explorative in nature, and more empirical data is needed to further validate the findings. Another limitation is that the research is essentially restricted to Swedish companies (although Finnish companies are involved in the survey). Nevertheless, several of the case companies have a considerable international presence and are among the top three in their industries, measured by sales, facts which provide some basis for the generalization. A final limitation of the research is that the companies involved only represent a few industries. However, the type of industry was an important parameter in the selection of which companies to involve.

The use of triangulation has contributed to improving the rigor, depth, and breadth of the results (Denzin and Lincoln, 1994), which can be regarded as comparable to validation (Yin, 2008). It has also enhanced the researcher’s ability to achieve a more comprehensive understanding of the studied phenomena (Jick, 1979; Scandura and Williams, 2000). The

107

overall validity and reliability of the case studies could have been further improved by applying more rigor to statistical analysis, increasing the number of informants, and extending the period of data gathering to encompass multi-points in time, rather than providing a retrospective snapshot.

6.3 Implications of the research This research has proposed, explained, and explored a demand-supply oriented business model (DSCM), with regard to its main elements, benefits, and requirements. In essence, this management approach stresses that the demand processes (DCM) and the supply processes (SCM) have to be coordinated and directed at an overlying level, as well as be considered as being equally important, to gain a major competitive advantage, in increasingly competitive and fragmented markets. Moreover, this research has developed a differentiation focused SCD process, which emphasizes that SCM should be regarded as a value generating function and not only as a cost-oriented function following directives from DCM. The research has also identified and analyzed several critical linkages, primarily between NPD and SCM, but also between these management directions and market segmentation and intelligence.

The main practical implication of this research is that companies should organize themselves around understanding how customer value is created cost-efficiently, how customer value is delivered cost-efficiently, as well as how these processes and management directions can be coordinated. In order for this to occur, the demand processes and the supply processes have to 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 vital that value creation is considered in both the demand processes and the supply processes, since the route towards superior customer value lies in the ability of the firm to differentiate itself from the competition, with regard to both products and supply chain solutions. This means that SCM should receive higher authority and logisticians should be involved in all the demand processes impacting on the performance and success of the supply chain. European manufacturers should recognize that competition through SCM excellence is, in many circumstances, inappropriate and they should instead adopt the principles of DSCM. This generates opportunities to avoid price competition, maintain profit margins and, at the same time, keep production in Europe.

The main theoretical implication of this research is that there is a considerable demand for research studies exploring how the different processes in the demand-side (DCM) and the supply-side of the company (SCM) can be coordinated. This issue must also be explored by marketing and logistics researchers jointly. In essence, this research has developed a DSCM framework and shown several significant linkages between some of the included processes. Nevertheless, these linkages need further investigation and the scope of the research should be extended. The main societal implication of this research is that governments should focus on promoting cross-functional research as well as education programs. This is not something new, cross-functional education and research have been addressed for some time. However, it seems that the silo-mentality is still present today. Accordingly, research funds should be distributed, to a larger extent, to research environments where cross-functional research is conducted.

108

7. CONCLUSIONS AND FURTHER RESEARCH

7.1 Conclusions 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, and value creation, differentiation, innovativeness, responsiveness, and cost-efficiency in the demand and supply processes. Moreover, it has revealed that the main benefits of DSCM include enhanced competiveness (e.g., becoming more innovative, differentiated, responsive, and cost-efficient), enhanced demand chain performance (e.g., more innovative, responsive, and cost-efficient NPD, improved range and life cycle management, higher brand loyalty, more effective marketing efforts, and reduced demand chain costs), and enhanced supply chain performance (e.g., more responsive, differentiated, and cost-efficient product delivery, flexible operating structure, reduced inventories, fewer stock-outs, less product obsolescence, improved customer service, and reduced supply chain costs). Furthermore, this research has established that the main requirements, in order to succeed with the implementation of DSCM, include organizational competences (e.g., market orientation, advanced market segmentation and intelligence, as well as expertise in and coordination between the demand and supply processes), company established principles (e.g., neither demand nor supply focused, demand chain and supply chain strategies linked, and commitment from senior management), demand-supply chain collaboration (e.g., information sharing, trust, loyalty, and relationship management), and information technology support. It has also revealed that there is currently a large gap between the concept and application of DSCM, since only a few companies have quite recently begun to adopt these principles.

A key element of DSCM, further investigated in this research, is differentiation focused SCD. It has been shown that these efforts can be organized into a SCD process of five stages. In the first stage (market segmentation), the goal is to develop a segmentation model based on those parameters that effect the selection of the most appropriate supply chain solution. In the second stage (market understanding), the goal is to identify how the different market segments within the segmentation model want to acquire the particular product (identify the wanted supply chain solutions). In the third stage (specification of supply chain solutions), the goal is to specify all the supply chain solutions that can be provided cost- efficiently (identify the capabilities to serve the market). In the fourth stage (selection of supply chain solutions), the goal is to select the supply chain solutions necessary to satisfy most customers within each market segment. In the fifth and final stage (implementation of supply chain solutions), the goal is to implement and prepare the selected supply chain solutions. This SCD process should be initiated when a new product (or product category) is being developed. It is also important that it is addressed in parallel with the NPD process, that information is exchanged between them, and that they are directed on the basis of the same segmentation model. Moreover, it has been revealed that the main benefits of supply chain differentiation (i.e., a differentiated supply chain) are enhanced competiveness, by also considering SCM as a value generating function, and increased profitability, by allowing differentiated customer needs and requirements to be satisfied in a cost-efficient manner. In addition, it has been shown that the main requirements, to succeed with the development

109

of a differentiated supply chain, include the involvement of logisticians in the NPD process, extended supply chain collaboration, and collaboration with DCM in general and NPD in particular.

Another key element of DSCM, further investigated in this research, is coordination between NPD and SCM. This research has revealed several important linkages between these management directions. They include the need to develop a common segmentation model, the need to consider SCM as a value generating function, the need to collect information regarding customer service needs in the market intelligence process, the need to coordinate NPD with SCM in general and SCD in particular, and the need to involve logisticians in the NPD process. These identified linkages motivate the use of an integrative NPD process in which the NPD functions are aligned with the main supply functions in the company and other sales-related functions supporting the commercialization of the product, by including representatives from these functions in the NPD process. This integrative process should take into account the impact on the performance and success of the supply chain when developing new products. The aim should be to create a customer-oriented business, by organizing the firm around understanding how customer desired products are developed efficiently (NPD), how products are delivered to customers efficiently (SCM), and how these processes and management directions can be coordinated. It can be concluded that such an approach constitutes an essential part of the DSCM concept.

A final key element of DSCM, further investigated in this research, is the importance of viewing the demand processes and the supply processes as being equally important. It can be argued that logistics outsourcing can be challenging from a DSCM perspective, if the result of the outsourcing decision is that the supply processes are considered less important and thus neglected by the senior management, with negative effects for company strategies and direction in SCM. Nevertheless, this research has revealed that strategies and direction in SCM are not influenced by logistics outsourcing to such an extent. However, this issue needs to be further investigated, since several places of possible connections have been identified. For example, the outsourcing of warehousing could be connected to integrated manufacturing and information systems and reverse logistics activities; customs brokerage outsourcing could be connected to re-engineering and considering logistics as a core strength; and information technology outsourcing could be connected to reverse logistics procedures. Thus, it can be argued that considering the demand and supply processes as being equally important is not synonymous with the internal control of operations, but concerns whether both DCM and SCM are represented in the senior management with the same authority. 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, if the firm is still active in the management of the outsourced processes and regards them as equally important as in- house processes.

7.2 Further research This research has proposed, described, and analyzed a demand-supply oriented business model (DSCM), with regard to its main elements, benefits, and requirements. The research has mainly been explorative in nature and, thus, more empirical data, from similar and other research settings, is needed, to further validate the findings. In addition, the research should

110

be expanded to include case companies outside of Sweden, as well as from additional industries. Moreover, the concept needs to be further explored by marketing researchers. It can be argued that it would be beneficial to create joint research efforts between the DCM and the SCM disciplines, in order to further develop the DSCM concept.

An interesting area for further research is to continue examining how the demand processes and the supply processes, included in the DSCM framework, influence each other, and how they can be coordinated, in order to develop models incorporating these issues, which can later be integrated into a larger DSCM model. In particular, there is a need for real-life based industrial case studies addressing how the demand and supply processes can be coordinated across intra- and inter-organizational boundaries. In this research, several linkages between some of the included processes (e.g., market segmentation, market intelligence, NPD, and SCD) have been identified. However, these linkages need to be investigated further, and the scope of the research should be extended to also include the processes and aspects (e.g., other management levels) not considered in this research.

Another interesting area for further research is to continue examining how a differentiated supply chain can be developed, implemented, and managed. A differentiation focused SCD process has been developed in this research. However, this matter needs to be investigated further and the scope of the research should be extended to include implementation and managerial aspects as well. Moreover, the role of LSPs in the development, implementation, and management of a differentiated supply chain must be investigated further.

A final interesting area for further research is to continue examining how outsourcing of logistics influences company strategies and direction in SCM. In this research, several places for possible connections have been identified, and these should be investigated further. For example, the outsourcing of warehousing could be connected to integrated manufacturing and information systems and reverse logistics activities; customs brokerage outsourcing could be connected to re-engineering and considering logistics as a core strength; and information technology outsourcing could be connected to reverse logistics procedures.

This research has also inspired several new research topics. For instance, the research has established that the demand-supply chain view must be clearly expressed in the business strategy and through proper KPIs and incentives. There is a lack of research addressing the role of SCM in senior management, how it can be enhanced to the level of DCM, as well as how to develop appropriate KPIs and incentives in demand-supply oriented organizations, issues which should be investigated further. Moreover, the research has established information technology as a critical requirement of DSCM. It is needed to manage both the individual demand and supply processes, but also to support the coordination between them. There are several DCM and SCM information systems, however, they are rarely integrated, and this issue needs to be investigated further.

111

112

REFERENCES

Abell, D. (1980), Defining the Business: The starting point of strategic planning, Prentice Hall, Upper Saddle River, NJ.

Achrol, R. (1991), “Evolution of the marketing organization: New forms for dynamic environments”, Journal of Marketing, 55(4), 77–93.

Achrol, R. (1997), “Chances in the theory of inter-organizational relations in marketing: Toward a network paradigm”, Journal of the Academy of Marketing Science, 25(1), 56–71.

Achrol, R., and P. Kotler (1999), “Marketing in the network economy”, Journal of Marketing, 63(4), 146–163.

Agarwal, A., R. Shankar, and M. Tiwari (2006), “Modeling the metrics of lean, agile and leagile supply chain: An ANP-based approach”, European Journal of Operational Research, 173(1), 211–225.

Agarwal, A., R. Shankar, and M. Tiwari (2007), “Modeling agility of supply chain”, Industrial Marketing Management, 36(4), 443–457.

Albino, V., N. Carbonara, and I. Giannoccaro (2007), “Supply Chain cooperation in industrial districts: A simulation analysis”, European Journal of Operational Research, 177(1), 261–280.

Alderson, W. (1950), “Marketing efficiency and the principle of postponement”, Cost and Profit Outlook, 3, 15–18.

Alkadi, I., G. Alkadi, and M. Totaro (2003), “Effects of information technology on the business world”, Human Systems Management, 22(3), 99–103.

Al-Mudimigh, A., M. Zairi, and A. Ahmed (2004), Extending the concept of supply chain: The effective management of value chains, International Journal of Production Economics, 87(3), 309–320.

Alvarado, U., and H. Kotzab (2001), “Supply chain management: The integration of logistics in marketing”, Industrial Marketing Management, 30(2), 183– 198.

Alvesson, M., and K. Sköldberg (2007), Tolkning och reflektion: Vetenskapsfilosofi och kvalitativ metod, Studentlitteratur, Lund, Sweden (in Swedish).

Andersson, D., H. Dreyer, A. Halldórsson, M. Jahre, L. Ojala, T. Skjoett-Larsen, and H. Virum (2003), Third party logistics: A Nordic research approach, Kirjapaino Grafia Oy, Turku, Finland.

Andersson, D., D. Sweeney, T-A. Williams, J. Freeeman, and E. Shoesmith (2007), Statistics for business and economics, Cengage Learning, Stamford, CT.

113

Anosike, A., and D. Zhang (2008), “An agent-based approach for integrating manufacturing operations”, International Journal of Production Economics, 121(2), 333–352.

Appelqvist, P., J. Lehtonen, and J. Kokkonen (2004), “Modeling in product and supply chain design: Literature survey and case study”, Journal of Manufacturing Technology Management, 15(7), 675–686.

Arbnor, I., and B. Bjerke (2008), Methodology for creating business knowledge, Sage publications, London, UK.

Baghai, M., S. Coley, and D. White (2000), The alchemy of growth: Kickstarting and sustaining growth in your company, Texere, London, UK.

Baker, S. (2003), New consumer marketing: Managing a living demand system, John Wiley and Sons, London, UK.

Barcley, I. (1992), “The new product process: Improving the process of new product development”, R&D Management, 22(4), 307–317.

Barczak, G., A. Griffin, and K. Kahn (2009), “PERSPECTIVE: Trends and Drivers of Success in NPD Practices: Results of the 2003 PDMA Best Practices Study”, Journal of Product Innovation Management, 26(1), 3–23.

Bask, A. (2001), “Relationships among TPL providers and members of supply chains: A strategic perspective”, Journal of Business and Industrial Marketing, 16(6), 470–486.

Battezzati, L., and R. Magnani (2000), “Supply chains for FMCG and industrial products in Italy: Practices and the advantages of postponement”, International Journal of Physical Distribution and Logistics Management, 30(5), 413-424.

Bechtel, C., and J. Jayaram (1997), “Supply chain management: A strategic perspective”, International Journal of Logistics Management, 8(1), 15–34.

Bell, J. (2006), Introduktion till forskningsmetodik, Studentlitteratur, Lund, Sweden (in Swedish).

Benbasat, I., D. Goldstein, and M. Mead (1987), “The case study research strategy in studies of information systems”, MIS Quarterly, 11(3), 369–386.

Berglund, M., P. Van Laarhoven, G. Sharman, and S. Wandel (1999), “Third-party logistics: Is there a future?”, International Journal of Logistics Management, 10(1), 59–70.

Best, R. (2005), Market-based management, Prentice Hall, Upper Saddle River, NJ.

Bonoma, T., and B. Shapiro (1983), Segmenting the industrial market, Lexington books, Lexington, MA.

Bose, R. (2002), “Customer relationship management: Key components for IT success”, Industrial Management and Data Systems, 102(2), 89– 97.

Bowersox, D., and D. Closs (1996), Logistical management: The integrated supply chain process, McGraw-Hill, New York, NY.

114

Bradley, P. (1995), “Third parties gain slow, cautious buyer support”, Purchasing, 118(5), 51– 52.

Brandbyberry A., A. Rai, and G. White (1999), “Intermediate performance impacts of advanced manufacturing technology systems: An empirical investigation”, Decision Sciences, 30(4), 993–1020.

Brandolese, A., A. Brun, and A. Portioli-Straudacher (2000), “A multi-agent approach for the capacity allocation problem”, International Journal of Production Economics, 66(3), 269–285.

Bruce, M., L. Daly, and N. Towers (2004), “Lean or agile: A solution for supply chain management in the textiles and clothing industry?”, International Journal of Operations and Production Management, 24(2), 151–170.

Bryman, A., and E. Bell (2007), Business research method, Oxford University Press, New York, NY.

Bucklin, L. (1965), “Postponement, speculation and the structure of distribution channels”, Journal of Marketing Research, 2(1), 26–31.

Bucklin, L. (1966), A theory of distribution channel structure, IBER Special Publications, Berkely, CA.

Byrd, T., and N. Davidson (2003), “Examining possible antecedents of it impact on the supply chain and its effect on firm performance”, Information and Management, 41(2), 243– 255.

Canever, M., H. Van Trijp, and G. Beers (2008), “The emergent demand chain management: Key features and illustration from the beef business”, Supply Chain Management: An International Journal, 13(2), 104–115.

Caridi, M., and A. Sianesi (2000), “Multi-agent systems in production planning and control: An application to the scheduling of mixed-model assembly lines”, International Journal of Production Economics, 68(1), 29–42.

Carillo, J., and R. Franza (2006), “Investing in product development and production capabilities: The crucial linkage between time-to-market and ramp-up time”, European Journal of Operational Research, 171(2), 536–556.

Chan, F., and J. Zhang (2002), “A multi-agent-based agile shop floor control system”, International Journal of Advanced Manufacturing Technology, 19(10), 764–774.

Chandy, R., B. Hopstaken, O. Narasimhan, and J. Prabhu (2006), “From invention to innovation: Conversion in product development”, Journal of Marketing Research, 43(3), 494–508.

Charlebois, S. (2008), “The gateway to a Canadian market-driven agricultural Economy: A framework for demand chain management in the food industry”, British Food Journal, 110(9), 882–897.

115

Chen, I. (2001), “Planning for ERP-systems: Analysis and future trend”, Business Process Management Journal, 7(5), 374–386.

Chen, D-N., B. Jeng, W-P. Lee, and C-H. Chuang (2008), “An agent-based model for consumer-to-business electronic commerce”, Expert Systems with Applications, 34(1), 469–481.

Chen, J., R. Reilly, and G. Lynn (2005), “The impacts of speed-to-market on new product development: The moderating effects of uncertainty”, Transactions on Engineering Management, 52(2), 199–212

Cheng, C., and E. Shiu (2008), “Critical success factors of new product development in Taiwan's electronics industry”, Asia Pacific Journal of Marketing and Logistics, 20(2), 174–189.

Childerhouse, P., and D. Towill (2000), “Engineering supply chains to match customer requirements”, Logistics Information Management, 13(6), 337–345.

Childerhouse, P., J. Aitken, and D. Towill (2002), “Analysis and design of focused demand chains”, Journal of Operations Management, 20(6), 675–689.

Chopra, S., and P. Meindl (2010), Supply chain management: Strategy, planning and operations, Pearson, Upper Saddle River, NJ.

Christopher, M. (1998), Logistics and supply chain management: Strategies for reducing costs and improving services, Pitman Publishing, London, UK.

Christopher, M. (2000), “The agile supply chain: competing in volatile markets”, Industrial Marketing Management, 29(1), 37–44.

Christopher, M. (2005), Logistics and supply chain management: Creating value-adding networks, Prentice Hall, London, UK.

Christopher, M., and H. Peck (2003), Marketing logistics, Butterworth and Heinemann, New York, NY.

Christopher, M., and D. Towill (2000), “Supply chain migration from lean and functional to agile and customized”, International Journal of Supply Chain Management, 5(4), 206– 213.

Christopher, M., and D. Towill (2001), “An integrated model for the design of agile supply chains”, International Journal of Physical Distribution and Logistics Management, 31(4), 235–246.

Christopher, M., and D. Towill (2002), “Developing market specific supply chain strategies”, International Journal of Logistics Management, 13(1), 1–14.

Christopher, M., R. Lowson, and H. Peck (2004), “Creating agile supply chains in the fashion industry”, International Journal of Retail and Distribution Management, 32(8), 367– 376.

116

Christopher, M., J. Godsell, and U. Jüttner (2005), “Transforming the supply chain into a demand chain”, Proceedings of the Annual Logistics Research Network Conference, Plymouth, UK.

Christopher, M., H. Peck, and D. Towill (2006), “A taxonomy for selecting global supply chain strategies”, International Journal of Logistics Management, 17(2), 277–287.

Ciappei, C., and C. Simoni (2005), “Drivers of new product success in the Italian sport shoe cluster of Montebelluna”, Journal of Fashion Marketing and Management, 9(1), 20– 42.

Cohen, M., J. Eliashberg, and T. Ho (2000), “An analysis of several new product performance metrics”, Manufacturing and Service Operations Management, 2(4), 337–349.

Cooper, R. (1990), “Stage-gate systems: A new tool for managing new products”, Business Horizons, 33(3), 44–54.

Cooper, R. (1998), Product leadership: Creating and launching superior new products, Perseus Books, New York, NY.

Cooper, R., and E. Kleinschmidt (1986), “An investigation into the new product process: Steps, deficiencies and impact”, Journal of Product Innovation Management, 3(2), 71–85.

Cooper, R., S. Edgett, and E. Kleinschmidt (2004), “Benchmarking best NPD practice”, Research-Technology Management, 47(6), 43–55.

Cooper, M., D. Lambert, and J. Pagh (1997), “Supply chain management: More than a new name for logistics”, International Journal of Logistics Management, 8(1), 1–14.

Corner, I., and M. Hinton (2002), “Customer relationship management systems: Implementation risks and relationship dynamic”, Qualitative Market Research: An International Journal, 5(4), 239–251.

Creswell, J. (2008), Qualitative, quantitative, and mixed methods approaches, Sage publications, London, UK.

Czaja, R., and J. Blair (2004), Designing surveys: A guide to decisions and procedures, Sage publications, Thousand Oaks, CA.

Davenport, T. (1998), “Putting the enterprise into the enterprise system”, Harvard Business Review, 76(4), 121–131.

Davenport, T. (2000), Mission critical: Realizing the promise of enterprise systems, Harvard Business School Press, Boston, MA.

Day, G., and C. Van den Bulte (2002), Superiority in customer relationship management: Consequences for competitive advantage and performance, Working paper, Wharton School of Economics, University of Pennsylvania, Philadelphia, PA.

Deloitte (2002), Consumer business digital loyalty networks: Increasing shareholder value through customer loyalty and network efficiency, Deloitte research center.

117

Demby, E. (1974), Psychographics and from Where it Came, American Marketing Association, Chicago, IL.

Denscombe, M. (2009), Forskningshandboken: För småskaliga forskningsprojekt inom samhällsvetenskapen, Studentlitteratur, Lund, Sweden (in Swedish).

Denzin, N., and Y. Lincoln (2000), Handbook of qualitative research, Sage publications, Thousand Oaks, CA.

De Treville, S., R. Shapiro, and A-P. Hameri (2004), “From supply chain to demand chain: The role of lead-time reduction in improving demand chain performance”, Journal of Operations Management, 21(6), 613–627.

Dillon, W., and S. Mukherjee (2006), “A guide to the design and execution of segmentation studies, In R. Grover and M. Vriens (Eds.), Handbook of marketing research, Sage publications, Thousand Oaks, CA.

Dowling, M., and R. Helm (2006), “Product development success through cooperation: A study of entrepreneurial firms”, Technovation, 26(4), 483–488.

Dreher, A. (2006), “Does globalization affect growth? Evidence from a new Index of globalization”, Applied Economics, 38(10), 1091–1110.

Droge, C., J. Jayaram, and S. Vickery (2000), “The ability to minimize the timing of new product development and introduction: An examination of antecedent factors in the North American automobile supplier industry”, Journal of Product Innovation Management, 17(1), 24–40.

Droge, C., R. Calantone, and N. Haramancioglu (2008), “Characterizing the role of design in new product development: An empirically derived taxonomy”, Journal of Product Innovation Management, 22(2), 111–127.

Dubois, A., and L-E. Gadde (2002), “Systematic combining: An abductive approach”, Journal of Business Research, 55(7), 553–560

Eisenhardt, K. (1989), “Building theories from case study research”, Academy of Management Review, 14(4), 532–550.

Ejvegård, R. (2009), Vetenskaplig metod, Studentlitteratur, Lund, Sweden (in Swedish).

Ellinger, A. (2000), “Improving marketing/logistics cross-functional collaboration in the supply chain”, Industrial Marketing Management, 29(1), 85–96.

Ellram, L. (1996), “The use of case study method in logistics research”, Journal of Business Logistics, 17(2), 93-138.

Ellram, L., W. Tate, and C. Carter (2007), “Product-process-supply chain: An integrative approach to three-dimensional concurrent engineering”, International Journal of Physical Distribution and Logistics Management, 37(4), 305–330.

118

Emerson, C., and C. Grimm (1996), “Logistics and marketing components of customer service: An empirical test of the Mentzer, Gomes and Krapfel model”, International Journal of Physical Distribution and Logistics Management, 26(8), 29–42.

Ericsson, D., A. Mårtensson, and K. Rundqvist (2004), Inköp & Logistik, (1), 50–54 (in Swedish).

Eriksson, L-A., and P. Wiedersheim (2006), Att utreda, forska och rapportera, Liber, Malmö, Sweden (in Swedish).

Esper, T., A. Ellinger, T. Stank, D. Flint, and M. Moon (2010), “Demand and supply integration: A conceptual framework of value creation through knowledge management”, Journal of Academic Marketing Science, 38(5), 5–18.

Faisal, M., D. Banwet, and R. Shankar (2006), “Mapping supply chains on risk and customer sensitivity dimensions”, Industrial Management and Data Systems, 106(6), 878–895.

Fantasia, J. (1993), “Are you a candidate for third party logistics?”, Transportation and Distribution, 34(1),1 –30.

Fearne, A., and N. Fowler (2006), “Efficiency versus effectiveness in construction supply chains: The dangers of ‘lean’ thinking in isolation”, Supply Chain Management: An International Journal, 11(4), 283–287.

Feitzinger, E., and H. Lee (1997), “Mass customization at Hewlett-Packard: The power of postponement”, Harvard Business Review, 75(1), 116–121.

Fielding, M. (2006), “Global insights: Synovate’s Chedore discusses MR trends”, Marketing News, 15(May), 41-41.

Fisher, M. (1997), “What is the right supply chain for your product?”, Harvard Business Review, 75(2), 105–116.

Fisher, M., and A. Raman (1996), “Reducing cost of demand uncertainty through accurate response to early sales”, Operations Research, 44(1), 87–99.

Flink, A. (2002), The survey handbook, Sage publications, Thousand Oaks, CA.

Flint, D. (2004), “Strategic marketing in global supply chains: Four challenges”, Industrial Marketing Management, 33(1), 45–50.

Flint, D., R. Woodruff, and S. Gardial (1997), “Customer value change in industrial marketing relationships”, Industrial Marketing Management, 26(2), 163–175.

Frohlich, M., and R. Westbrook (2002), “Demand chain management in manufacturing and services: Web-based integration, drivers and performance”, Journal of Operations Management, 20(6), 729–745.

Fung, R., and T. Chen (2005), “A multi-agent supply chain planning and coordination architecture”, International Journal of Advanced Manufacturing Technology, 25(7/8), 811–819.

119

Gerber, A., C. Russ, and M. Klusch (2003), “Supply web co-ordination by an agent-based trading network with integrated logistics services”, Electronic Commerce Research and Applications, 2(2), 133–146.

Gerwin, D., and N. Barrowman (2002), “An evaluation of research on integrated product development”, Management Science, 48(7), 938–953.

Gibson, B., J. Mentzer, and R. Cook (2005), “Supply chain management: The pursuit of a consensus definition”, Journal of Business Logistics, 26(2), 17–25.

Gimenez, C., and E. Ventura (2005), “Logistics-production, logistics-marketing and external integration: Their impact on performance”, International Journal of Operations and Production Management, 25(1), 20–38.

Goldman, S., R. Nagel, and K. Preiss (1995), Agile competitors and virtual organizations: Strategies for enriching the customer, Van Nostrand Reinhold, New York, NJ.

Goldsby, T., and S. Garcia-Dastuage (2003), “The manufacturing flow management process”, International Journal of Logistics Management, 14(2), 33–52.

Goldsby, T., S. Griffis, and A. Roath (2006), “Modeling lean, agile, and leagile supply chain strategies”, Journal of Business Logistics, 27(1), 57–80.

Grover, R., and M. Vriens (2006), Handbook of marketing research, Sage publications, Thousand Oaks, CA.

Gummesson, E. (2007), “Exit services marketing: Enter service marketing”, Journal of Consumer Behavior, 6(2), 113–141.

Gunasekaran, A. (1998), “Agile manufacturing: enablers and an implementation framework”, International Journal of Production Research, 36(5), 1223–1247.

Gupta, A., and D. Wilemon (1990), “Accelerating the development of technology-based products”, California Management Review, 32(2), 24–44.

Hamm, S., and W. Symonds (2006), “Mistakes made on the road to innovation”, Business Week IN inside innovation, November, 27–31.

Handfield, R., and E. Hichols (2002), Supply chain redesign: Transforming supply chains into integrated value systems, Prentice Hall, Upper Saddle River, NJ.

Harrison, A., and R. Van Hoek (2005), Logistics management and strategy, Prentice Hall, New York, NY.

Heikkilä, J. (2002), “From supply to demand chain management: Efficiency and customer satisfaction”, Journal of Operations Management, 20(6), 747–767.

Helo, P. (2004), “Managing agility and productivity in the electronics industry”, Industrial Management and Data Systems, 104(7), 567–577.

120

Helo, P., and B. Szekely (2005), “Logistics information systems: An analysis of software solutions for supply chain co-ordination”, Industrial Management and Data Systems, 105(1), 5–18.

Henard, D., and D. Szymanski (2001), “Why some new products are more successful than others”, Journal of Marketing Research, 38(3), 362–375.

Hertz, S., and M. Alfredsson (2003), “Strategic development of third party logistics providers”, Industrial Marketing Management, 32(2), 139–149.

Hill, T. (1993), Manufacturing strategy: Text and cases, Macmillan Press, London, UK.

Hilletofth, P. (2008), Differentiated supply chain strategy: Response to a fragmented and complex market, Licentiate Thesis, Chalmers University of Technology, Gothenburg, Sweden.

Hilletofth, P. (2009), “How to develop a differentiated supply chain strategy”, Industrial Management and Data Systems, 109(1), 16–33.

Hilletofth, P., and D. Ericsson (2007), “Demand chain management: Next generation of logistics management”, Conradi Research Review, 4(2), 1–18.

Hilletofth, P., and O-P. Hilmola (2008), “Supply chain management in fashion and textile industry”, International Journal of Services Sciences, 1(2), 127–147.

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.

Hilletofth, P., H. Lorentz, V-V. Savolainen, O-P. Hilmola, and O. Ivanova (2007), "Using Eurasian landbridge in logistics operations – Building Knowledge through Case Studies", World Review of Intermodal Transportation Research, 1(2), 183–201.

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.

Hilletofth, P., D. Ericsson, and K. Lumsden (2010A), “Coordinating new product development and supply chain management”, International Journal of Value Chain Management, 4(1/2), 170–192.

Hilletofth, P., L. Lättilä, S. Ujvari, and O-P. Hilmola (2010B), “Agent-based decision support for maintenance service sector”, International Journal of Services Sciences, 3(2/3), 194–215.

Hilletofth, P., O-P. Hilmola, and S. Ujvari (2010C), “Teaching ERP in logistics curriculum: A case experience from Sweden”, International Journal of Business Information Systems, 6(3), 295–314.

Hilmola, O-P., and A.W.K Tan (2010), “Logistics outsourcing and supply management in Finland, Sweden and UAE”, International Journal of Procurement Management, 3(1), 32–53

121

Hilmola, O-P., P. Helo, and M. Holweg (2005), On the outsourcing dynamics in the electronics sector: The evolving role of the original design manufacturer, Working Paper Series, No. 4, University of Cambridge.

Hines, P., R. Silvi, and M. Bartolini (2002), “Demand chain management: An integrative approach in automotive retailing”, Journal of Operations Management, 20(6), 707– 728.

Holger, E. (2002), “Success Factors of New Product Development: A Review of the Empirical Literature”, International Journal of Management Reviews, 4(1), 1–40.

Holme, I., and B. Solvang (1997), Forskningsmetodik: Om kvalitativa och kvantitativa metoder, Studentlitteratur, Lund, Sweden (in Swedish).

Holmström, J., E. Hoover, P. Louhiluoto, and A. Vasara (2000), “The other end of the supply chain”, The McKinsey Quarterly, (1), 63−71.

Holt, K., H. Geschka, and G. Peterlongo (1984), Need assessment, A key to user-oriented product innovation, Wiley, New York, NY.

Houlihan, J. (1985), “International supply chain management”, International Journal of Physical Distribution and Materials Management, 15(1), 22–38.

Hsiao, S-W. (2002), “Concurrent design method for developing a new product”, International Journal of Industrial Ergonomics, 29(1), 41–55.

Hu, Y., R. Du, and S. Yang (2003), “Intelligent data acquisition technology based on agents”, International Journal of Advanced Manufacturing Technology, 21(11/12), 866–873.

Häkkinen, L., A. Norrman, O-P. Hilmola, and L. Ojala (2004), “Logistics integration in horizontal mergers and acquisitions”, International Journal of Logistics Management, 15(1), 27–42.

Iansiti, M. (1995), “Science-based product development: An empirical study of the mainframe computer industry”, Product and Operations Management, 4 (4), 335– 339.

Jackson, S. (2007), “Market share is not enough: Why strategic marketing positioning works”, Journal of Business Strategy, 28(1), 18-25.

Jacobs, D. (2006), “The promise of demand chain management in fashion”, Journal of Fashion Marketing and Management, 10(1), 84–96.

Jain, D. (2001), “Managing new product development for strategic competitive advantage”, In D. Lacobucci (Ed.), Kellogg Marketing, Wiley, New York, NY.

Jespersen, B., and T. Skjoett-Larsen (2005), Supply chain management: In theory and practice, Copenhagen Business School Press.

Jharkharia, S., and R. Shankar (2007), “Selection of logistics service provider: An analytic network process (ANP) approach”, Omega the International Journal of Management Science, 35(3), 274–289.

122

Jiao, J., X. You, and A. Kumar (2006), “An agent-based framework for collaborative negotiation in the global manufacturing supply chain network”, Robotics and Computer-Integrated Manufacturing, 22(3), 239–255.

Jick, T. (1979), “Mixing qualitative and quantitative methods: Triangulation in action”, Administrative Science Quarterly, 24(4), 602–611.

Jones, T., and D. Riley (1985), “Using inventory for competitive advantage through supply chain management”, International Journal of Physical Distribution and Materials Management, 15(5), 16–26.

Julka, N., R. Srinivasan, and I. Karimi (2002A), “Agent-based supply chain management: A framework”, Computers and Chemical Engineering, 26(12), 1755–1769.

Julka, N., I. Karimi, and R. Srinivasan (2002B), “Agent-based supply chain management: A refinery application”, Computers and Chemical Engineering, 26(12), 1771–1781.

Jüttner, U., J. Godsell, and M. Christopher (2006), “Demand chain alignment competence: Delivering value through product life cycle management”, Industrial Marketing Management, 35(8), 989–1000.

Jüttner, U., M. Christopher, and S. Baker (2007), “Demand chain management: integrating marketing and supply chain management”, Industrial Marketing Management, 36(3), 377–392.

Jäger, K., P. Hilletofth, and S. Ujvari (2009), "From standard 3PL provider to service developer: A case study from the Swedish furniture industry", World Review of Intermodal Transportation Research, 2(4), 376–390.

Jäger, K., S. Ujvari, and O-P. Hilmola (2007), “Operating as a third party logistics integrator without any distribution operations ownership”, International Journal of Services and Standards, 3(2), 154–168.

Kaihara, T. (2003), “Multi-agent based supply chain modeling with dynamic environment”, International Journal of Production Economics, 85(2), 263–269.

Karlsson, C., and P. Åhlström (1996), “The difficult path to lean product development”, Journal of Product Innovation Management, 13(4), 283–295.

Kemppainen, K., and A. Vepsalainen (2007), “Logistical and technological differentiation as a precondition of supply networking”, International Journal of Logistics Management, 18(1), 81–101.

Kincade, D., D. Vass, and N. Cassill (2001), “Implementation of technology and relationships to supply chain performance: apparel manufacturers’ perspectives”, International Review of Retail, Distribution and Consumer Research, 13(3), 301–327.

Knox, S. (2004), “Positioning and branding your organization”, Journal of Product and Brand Management, 13(2), 1105-1159.

123

Korhonen, P., K. Huttunen, and E. Eloranta (1998), “Demand chain management in a global enterprise information management view”, Production Planning and Control, 9(6), 526–531.

Kotak, D., S. Wu, M. Fleetwood, and H. Tamoto (2003), “Agent-based holonic design and operations environment for distributed manufacturing”, Computers in Industry, 52(2), 95–108.

Kotha, S., and P. Swamidass (2000), “Strategy, advanced manufacturing technology and performance: Empirical evidence from US manufacturing firms”, Journal of Operations Management, 18(3), 257–277.

Kotler, P., K. Keller, M. Brady, M. Goodman, and T. Hansen (2009), Marketing Management, Person Education Limited, Harlow, UK.

Koudal, P., and P. Wellener (2003), “Digital loyalty networks: Continuously connecting automakers with their customers and suppliers”, Strategy and Leadership, 31(6), 4– 11.

Kovacs, G., and K. Spens (2005), “Abductive reasoning in logistics research”, International Journal of Physical Distribution and Logistics Management, 35(2), 132-144.

Krishnan, V., and K. Ulrich (2001), “Product development decisions: A review of the literature”, Management Science, 47(1), 1–21.

Kumar, K., and H. Van Diesel (1996), “Sustainable collaboration: managing conflict and cooperation in inter-organizational systems”, MIS Quarterly, 20(3), 279–300.

Kumar, N., L. Scheer, and P. Kotler (2000), “From market driven to market driving”, European Management Journal, 18(2), 129–142.

Kumar, V., B. Maheshwari, and U. Kumar (2002), “ERP-systems implementation: Best practices in Canadian government organizations”, Government Information Quarterly, 19(2), 147–172.

Kumar, V., B. Maheshwari, and U. Kumar (2003), “An investigation of critical management issues in ERP implementation: Empirical evidence from Canadian organizations”, Technovation, 23(10), 793–807.

Kvale, S., and S. Brinkmann (2009), Den kvalitativa forskningsintervjun, Studentlitteratur, Lund, Sweden (in Swedish)

Kärkkäinen, H., P. Pippo, and M. Tuominen (2001), “Ten tools for customer-driven product development in industrial companies”, International Journal of Production Economics, 69(2), 161–176.

Labarthe, O., B. Espinaasse, A. Ferrarini, and B. Montreuil (2007), “Toward a methodological framework for agent-based modeling and simulation of supply chains in a mass customization context”, Simulation and Modeling Practice and Theory, 15(2), 113– 136.

124

Lacity, M., L. Wilcoks, and D. Feeny (1995), “IT outsourcing: maximize flexibility and control”, Harvard Business Review, 73(3), 84–93.

Lambert, D., and M. Cooper (2000), “Issues in supply chain management”, Industrial Marketing Management, 29(1), 65–83.

Lambert, D., M. Cooper, and J. Pagh (1998), “Supply chain management: Implementation issues and research opportunities”, International Journal of Logistics Management, 9(2), 1–19.

Langabeer, J., and J. Rose (2002), “Is the supply chain still relevant?”, Logistics Manager, 11– 13.

Lee, H. (2001), “Demand-based management”, A white paper for the Stanford Global Supply Chain Management Forum, September, 1140–1170.

Lee, H., and S. Whang (2001), “Demand chain excellence”, Supply Chain Management Review, March/April, 41–46.

Li, X., and I. Barnes (2008), “Proactive supply risk management methods for building a robust supply selection process when sourcing from emerging markets”, Strategic Outsourcing: An International Journal, 1(3), 252–627.

Li, J., Q. Fok, L. Fok, and S. Hartman (2002) “The impact of QL maturity upon the extent and effectiveness of customer relationship management systems”, Supply Chain Management: An international Journal, 7(4), 212–224.

Li, Y., X. Liao, and H. Lei (2006), “A knowledge management system for ERP implementation”, Systems Research and Behavioral Science, 23(2), 157–168.

Liang, W-Y., and C-C. Huang (2006), “Agent-based demand forecast in multi-echelon supply chain”, Decision Support Systems, 42(1), 390–407.

Liao, X., Y. Li, and B. Lu (2007), “A model for selecting an ERP-system based on linguistic information processing”, Information Systems, 32(7), 1005–1017.

Lieb, R. (1992), “The use of third-party logistics services by large American manufacturers”, Journal of Business Logistics, 13(2), 29–42.

Lieb, R., R. Miller, and L. Wassenhove (1993), “Third party logistics services: A comparison of experienced American and European manufacturers”, International Journal of Physical Distribution and Logistics Management, 23(6), 35–44.

Lin, F-R., and Y-Y. Lin (2006), “Integrating multi-agent negotiation to resolve constraint in fulfilling supply chain orders”, Electronic Commerce Research and Applications, 5(4), 313–322.

Lofland, J., and L. Lofland (2004), Analyzing social setting: A guide to qualitative observation and analysis, Cengage Learning, New York, NY.

Lorentz, H. (2008), “Collaboration in Finnish-Russian supply chains: Effects on performance and the role of experience”, Baltic Journal of Management, 3(3), 246–265.

125

Lou, P., Z-D. Zhou, Y-P. Chen, and W. Ai. (2004), “Study on multi-agent-based agile supply chain management”, International Journal of Advanced Manufacturing Technology, 23(3/4), 197–203.

Lummus, R., and R. Vokurka (1999), “Defining supply chain management: A historical perspective and practical guidelines”, Industrial Management and Data Systems, 99(1), 11–17.

Lummus, R., D. Krumwiede, and R. Vokurka (2001), “The relationship of logistics to supply chain management: Developing a common industry definition”, Industrial Management and Data System, 101(8), 426–431.

Lumsden, K. (2006), Logistikens grunder, Studentlitteratur, Lund, Sverige (in Swedish)

Marasco, A. (2008), “Third-party logistics: A literature review”, International Journal of Production Economics, 113(1), 127–147.

Marsden, P. (2002), “Brand positioning: Meme’s the word”, Marketing Intelligence and Planning, 20(5), 307-312.

Marshall, C., and G. Rossman (2006), Designing qualitative research, Sage publications, Thousand Oaks, CA.

Mason-Jones, R., and D. Towill (1999), “Total cycle time compression and the agile supply chain”, International Journal of Production Economics, 64(1/2), 71–73.

Mason-Jones, R., J. Naylor, and D. Towill (2000A), “Engineering the leagile supply chain”, International Journal of Agile Management Systems, 2(1), 54–61.

Mason-Jones, R., J. Naylor, and D. Towill (2000B), “Lean, agile or leagile? Matching supply chain to the marketplace”, International Journal of Production Research, 38(17), 4061–4070.

Meixell, M., and V. Gargeya (2005), “Global supply chain design: A literature review and critique”, Transportation Research Part E, 41(6), 531–550.

Mele, F., G. Guillén, A. Espuna, and L. Puigjaner (2007), “An agent-based approach for supply chain retrofitting under uncertainty”, Computers and Chemical Engineering, 31(5/6), 722–735.

Mentzer, J. (2004), “Understanding demand”, Supply Chain Management Review, May/June, 38–45.

Mentzer, J., and B. Konrad (1991), “An efficiency/effectiveness approach to logistics performance analysis”, Journal of Business Logistics, 12(1), 33–62.

Mentzer, J., and K. Kahn (1995), “A framework of logistics research”, Journal of Business Logistics, 16(1), 231–250.

Mentzer, J., R. Gomes, and E. Krapfel (1989), “Physical demand distribution service: A fundamental marketing concept?”, Journal of the Academy of Marketing Science, 17(1), 53–62.

126

Mentzer, J., W. DeWitt, J. Keebler, S. Min, N. Nix, C. Smith, and Z. Zacharia (2001), “Defining supply chain management”, Journal of Business Logistics, 22(2), 1–25.

Merriam, S. (1994), Fallstudien som forskningsmetodik, Studentlitteratur, Lund, Sweden (in Swedish).

Miles, M., and A. Buberman (1994), Qualitative data analysis: An expanded source book, Sage publications, Thousand Oaks, CA.

Min, S., and J. Mentzer (2000), “The role of marketing in supply chain management”, International Journal of Physical Distribution and Logistics Management, 30(9), 766– 787.

Mistry, J. (2005), “Supply chain management: A case study of an integrated lean and agile model”, Qualitative Research in Accounting and Management, 2(2), 193–215.

Mohanty, P. (2004), “An agent-oriented approach to resolve the production planning complexities for a modern steel manufacturing system”, International Journal of Advanced Manufacturing Technology, 24(3/4), 199–205.

Morash, E., C. Droge, and S. Vickery (1996), “Boundary spanning interfaces between logistics, production, marketing and new product development”, International Journal of Physical Distribution and Logistics Management, 26(8), 43–62.

Morgan, L., R. Morgan, and W. Moore (2001) “Quality and time-to-market trade-offs when there are multiple product generations”, Manufacturing and Service Operations Management, 3(2), 89–104.

Murphy, P., and R. Poist (1996), “Comparative views of logistics and marketing practitioners regarding inter-functional coordination”, International Journal of Physical Distribution and Logistics Management, 28(8), 15–28.

Nagel, R., and R. Dove (1991), 21st century manufacturing enterprise strategy, Incocca Institute, Leigh University.

Nah, F., J. Lau, and L. Kuang (2001), “Critical factors for successful implementation of enterprise systems”, Business Process Management Journal, 7(3), 285–296.

Naylor, J., M. Naim, and D. Berry (1999), “Leagility: Integrating the lean and agile manufacturing paradigms in the total supply chain”, International Journal of Production Economics, 62(1-2), 107–118.

Näslund, D. (2002), “Logistics needs qualitative research: Especially action research”, International Journal of Physical Distribution and Logistics Management, 32(5), 321– 338.

Ogama, S., and F. Pillar (2006), “Reducing the risk of new product development”, MIT Sloan Management Review, 47(2), 65–71.

Ohno, T. (1988), The Toyota production system: Beyond large scale production, Productivity Press, Portland, OR.

127

Olhager, J. (2003), “Strategic positioning of the order penetration point”, International Journal of Production Economics, 85(3), 319-329.

Olhager, J., E. Selldin, and J. Wikner (2006), “Decoupling the value chain”, International Journal of Value Chain Management, 1(1), 19-32.

Pagh, J., and M. Cooper (1998), “Supply chain postponement and speculation strategies: How to choose the right strategy”, Journal of Business Logistics, 19(2), 13–33.

Parasuraman, A. (1997), “Reflections on gaining competitive advantage through customer value”, Journal of the Academy of Marketing Science, 25(2), 154–161.

Payne, A., and M. Christopher (1994), “Integrating customer relationship management and supply chain management”, In M. Baker (Ed.), The marketing book, Butterworth Heinemann, New York, NY.

Payne, T., and M. Peters (2004), “What is the right supply chain for your products”, International Journal of Logistics Management, 15(2), 77–92.

Perks, H., R. Cooper, and C. Jones (2005), “Characterizing the role of design in new product development: An empirically derived taxonomy”, Journal of Product Innovation Management, 22(2), 111–127.

Piercy, N. (1998), “Marketing implementation: The implications of marketing paradigm weakness for the strategy execution process”, Journal of the Academy of Marketing Science, 26(3), 222–237.

Piercy, N. (2002), Market-led strategic change, Butterworth-Heinemann, Oxford, UK.

Plackett, R. (1983), “Karl Pearson and the Chi-squared test”, International Statistical Review, 51(1), 59–72.

Porter, M. (1985), Competitive advantage: Creating and sustain superior performance, Free Press, New York, NY.

Porter, M. (1996), “What is strategy?”, Harvard Business Review, 74(6), 61–78.

Portioli-Staudacher, A., H. Van Landeghem, M. Mappelli, and C. Redaelli (2003), “Implementation of concurrent engineering: A survey in Italy and Belgium”, Robotics and Computer Integrated Manufacturing, 19(3), 225–238.

Power, D., M. Sharafali, and V. Bhakoo (2007), “Adding value through outsourcing: Contributions of 3PL services to customer performance”, Management Research News, 30(3), 228–235.

Prajogo, D., T. Laosirihongthong, A. Sohal, and S. Boonitt (2007), “Manufacturing strategies and innovation performance in newly industrialized countries”, Industrial Management and Data Systems, 107(1), 52–68.

Rabinovich, E., R. Windle, M. Dresner, and T. Corci (1999), “Outsourcing of integrated logistics functions”, International Journal of Physical Distribution and Logistics Management, 29(6), 353–373.

128

Rainbird, M. (2004), “Demand and supply chains: The value catalyst”, International Journal of Physical Distribution and Logistics Management, 34(3-4), 230–251.

Razzaque, M., and C. Sheng (1998), “Outsourcing of logistics functions: A literature survey”, International Journal of Physical Distribution and Logistics Management, 28(2), 89– 107.

Richardson, H. (1992), “Outsourcing: the power work source”, Transportation and Distribution, July, pp.22–24.

Richardson, H. (1995), “Logistics help for the challenged”, Transportation and Distribution, 36(1), 60–64.

Ries, A., and J. Trout (2000), Positioning: The battle for your mind, McGraw-Hill, New York, NY.

Rigby, D., F. Reichheld, and P. Schefter (2002), “Avoid the four perils of CRM”, Harvard Business Review, 80(2), 101–109.

Robinson, R. (2000), “Customer relationship management”, Computerworld, 34(9), 67–68.

Rogers, D., D. Lambert, and M. Knemeyer (2004), “The product development and commercialization process”, International Journal of Logistics Management, 15(1), 43–56.

Sadeh, N., D. Hildum, D. Kejenstad, and A. Tseng (2001), “MASCOT: An agent-based architecture for dynamic supply chain creation and coordination in the internet economy”, Production Planning and Control, 12(3), 212–223.

Sahay, B., and R. Mohan (2006), “3PL practices: an Indian perspective”, International Journal of Physical Distribution and Logistics Management, 36(9), 666–689.

Santos, E., F. Zhang, and P. Luh (2003), “Intra-organizational logistics management through multi-agent systems”, Electronic Commerce Research, 3(3/4), 337–364.

Scandura, T., and E. Williams (2000), “Research methodology in management: Current practices, trends, and implications for future research”, Academy of Management Journal, 43(6), 1248–1264.

Schmidt, J., K. Sarangee, and M. Montoya (2009), “Exploring New Product Development Project Review Practices”, Journal of Product Innovation Management, 26(5), 520– 535.

Scholz, R., and O. Tietje (2002), Embedded case study methods: integrating quantitative and qualitative knowledge, Sage publications, Thousand Oaks, CA.

Selen, W., and F. Soliman (2002), “Operations in today’s demand chain management framework”, Journal of Operations Management, 20(6), 667–673.

Selviaridis, K., and M. Spring (2007), “Third party logistics: a literature review and research agenda”, International Journal of Logistics Management, 18(1), 125–150.

129

Sethi, R., D. Smith, and C. Park (2001), “Cross-functional product development team, creativity and the innovativeness of new consumer products”, Journal of Marketing Research, 38(1), 73–85.

Sharifi, S., and K. Pawar (2002), “Virtually co-located teams sharing teaming experiences after the event?”, International Journal of Operations and Production Management, 22(6), 656–679.

Sharifi, H., H. Ismail, and I. Reid (2006), “Achieving agility in supply chain through simultaneous ‘design of’ and ‘design for’ the supply chain”, Journal of Manufacturing Technology, 17(8), 1078–1098.

Shen, W., Q. Hao, S. Wang, Y. Li, and H. Ghenniwa (2007), “An agent-based service-oriented integration architecture for collaborative intelligent manufacturing”, Robotics and Computer-Integrated Manufacturing, 23(3), 317–325.

Sheth, J., D. Gardner, and D. Garrett (1988), Marketing theory: Evolution and evaluation, John Wiley and Sons, New York, NY.

Sheth, J., R. Sisodia, and A. Sharan (2000), “The antecedents and consequences of customer- centric marketing”, Journal of the Academy of Marketing Science, 28(1), 55–66.

Silverman, D. (2006), Interpreting qualitative data: Methods for analyzing talk, text and interaction, Sage publications, London, UK.

Sink, H., and C. Langley (1997), “A managerial framework for the acquisition of third-party logistics services”, Journal of Business Logistics, 19(1), 121–136.

Skjoett-Larsen, T. (2002), “Third party logistics: From an inter-organizational point of view”, International Journal of Physical Distribution and Logistics Management, 30(2), 112– 127.

Slater, S. (1997), “Developing a customer value-based theory of the firm”, Journal of the Academy of Marketing Science, 25(2), 162–167.

Smirnov, A., M. Pashkin, N. Chilov, and T. Levashova (2003), “Agent-based support of mass customization for corporate knowledge management”, Engineering Applications of Artificial Intelligence, 16(4), 349–364.

Smirnov, A., M. Pashkin, N. Chilov, and T. Levashova (2004), “Knowledge logistics in information grid environment”, Future Generation Computer Systems, 20(1), 61–79.

Spens, K., and G. Kovacs (2005), “A content analysis of research approaches in logistics research”, International Journal of Physical Distribution and Logistics Management, 36(5), 374–390.

Srivastava, R., T. Shervani, and L. Fahey (1999), “Marketing, business processes, and shareholder value: An organizational embedded view of marketing activities and the discipline of marketing”, Journal of Marketing, 63(4), 168– 179.

Stake, R. (2006), Multiple case study analysis, Guilford press, New York, NY.

130

Stevens, G. (1989), “Integrating the supply chain”, International Journal of Physical Distribution and Logistics Management, 19(8), 3–8.

Stone, M., A. Bond, and Foss, B. (2004), Consumer insight: How to use data and market research to get closer to your customers, Kogan Page, London, UK.

Stratton, R., and R. Warburton (2003), “The strategic integration of agile and lean supply”, International Journal of Production Economics, 85(2), 183–298.

Stuart, I., D. McCutcheon, R. Handfield, R. McLachlin, and D. Samson (2002), “Effective case research in operations management: A process perspective”, Journal of Operations Management, 20(5), 419–433

Sun, A., A. Yazdani, and J. Overend (2005), “Achievement assessment for enterprise resource planning (ERP) system implementations based on critical success factors (CSFS)”, International Journal of Production Economics, 98(2), 189–203.

Svensson, G. (2002), “Supply chain management: The re-integration of marketing issues and logistics theory and practice”, European Business Review, 14(6), 426– 436.

Swaminathan, J. (2001), “Enabling customization using standardized operations”, California Management Review, 43(3), 125–35.

Swink, M., J. Sandvig, and V. Mabert (1996), “Customizing concurrent engineering processes: Five case studies”, Journal of Product Innovation Management, 13 (3), 229–244.

Tan, A. (2008), Survey report on the role of IT to enhance supply chain management in UAE companies, report, University of Wollongong, Dubai, UAE.

Terwiesch, C., and R. Bohn (2001), “Learning and process improvement during production ramp-up”, International Journal of Production Economics, 70(1), 1–19.

Terwiesch, C., and Y. Xu (2001), “The copy-exactly ramp-up strategy: Trading-off learning with process change”, IEEE Transactions on Engineering Management, 51(1), 70–84.

Terwiesch, C., R. Bohn, and K. Chea (2001), “International product transfer and production ramp-up: A case study from the data storage industry”, R&D Management, 31(4), 435–451.

Teruaki, I., S. Mousavi, and J. Abadi (2002), “Agent-based material handling and inventory planning in warehouse”, Journal of Intelligent Manufacturing, 13(3), 201–210.

Tian, Y., F. Lai, and F. Daniel (2008), “An examination of the nature of trust in logistics outsourcing relationship: Empirical evidence from China”, Industrial Management and Data Systems, 108(3), 346–367.

Umble, E., R. Haft, and M. Umble (2003), “Enterprise resource planning: Implementation procedures and critical success factors”, European Journal of Operational Research, 146(2), 241–257.

Urban, G., and J. Hauser (1980), Design and marketing of new products, Prentice-Hall, Hemel Hempstead, UK.

131

Vafidis, D. (2007), Approaches for knowledge and application creation in logistics: An empirical analysis based on Finnish and Swedish doctoral dissertations published between 1994 and 2003, doctoral thesis, Turku School of Economics, Turku, Finland.

Van der Zee, D. (2006), “Modeling decision making and control in manufacturing simulation”, International Journal of Production Economics, 100(1), 155–167.

Van Hoek, R. (2000), “The thesis of leagility revisited”, International Journal of Agile Management Systems, 2(3), 196–221.

Van Hoek, R. (2001), “The rediscovery of postponement: A literature review and directions for research”, Journal of Operations Management, 19(2), 164–184.

Van Hoek, R., and P. Chapman (2006), “From tinkering around the edge to enhancing revenue growth; supply chain-new product development”, Supply Chain Management: An International Journal, 11(5), 385–389.

Van Hoek, R., and P. Chapman (2007), “How to move supply chain beyond cleaning up after new product development”, Supply Chain Management: An International Journal, 12(4), 239–244.

Van Hoek, R., H. Commandeur, and B. Vos (1998), “Reconfiguring logistics systems through postponement strategies”, Journal of Business Logistics, 19(1), 33–54.

Van Hoek, R., E. Peelen, and H. Commandeur (1999), “Achieving mass customization through postponement: A study of international changes”, Journal of Market Focused Management, 3(3/4), 353–368.

Van Kleef, E., H. Trijp, and P. Luning (2005), “Consumer research in the early stages of new product development: A critical review of methods and techniques”, Food Quality and Preference, 16(3), 181–201.

Vollmann, T., and C. Cordon (1998), “Building successful customer-supplier alliances”, Long Range Planning, 31(5), 684–694.

Vollmann, T., C. Cordon, and H. Raabe (1995), “From supply chain management to demand chain management” IMD Perspectives for Managers, November.

Vollmann, T., C. Cordon, and J. Heikkilä (2000), “Teaching supply chain management to business executives”, Production and Operations Management, 9(1), 81–90.

Voss, C., N. Tsikriksis, and M. Frohlich (2002), “Case research in operations management”, International Journal of Operations and Production Management, 22(2), 19–29.

Walters, D. (2002), Strategic operations management: A value chain approach, Palgrave, Basingstoke, UK.

Walters, D. (2006A), “Demand chain effectiveness supply chain efficiencies”, Journal of Enterprise Information Management, 19(3), 246–261.

Walters, D. (2006B), “Effectiveness and efficiency: The role of demand chain management”, International Journal of Logistics Management, 17(1), 75–94.

132

Walters, D. (2008), “Demand chain management + response management = increased customer satisfaction”, International Journal of Physical Distribution and Logistics Management, 38(9), 699–725.

Walters, D., and M. Rainbird (2004), “The demand chain as an integral component of the value chain”, Journal of Consumer Marketing, 21(7), 465–475.

Wang, D., S. Nagalingam, and G. Lin (2007), “Development of an agent-based Virtual CIM architecture for small to medium manufacturers”, Robotics and Computer-Integrated Manufacturing, 23(1), 1–16.

Warburton, R., and R. Stratton (2002), “Questioning the relentless shift to offshore manufacturing”, Supply Chain Management: An International Journal, 7(2), 101–108.

Wei, C-C., C-F. Chien, and M-J. Wang (2005), “An AHP-based approach to ERP system selection”, International Journal of Production Economics, 96(1), 47–62.

Wheelwright, S., and K. Clark (1992), “Creating project plans to focus product development”, Harvard Business Review, 70 (2), 70–82.

Williams, L., A. Nibbs, D. Irby, and T. Finley (1997), “Logistics integration: The impact of information technology, team composition, and corporate competitive positioning”, Journal of Business Logistics, 18(2), 31–41.

Williams, T., R. Maull, and B. Ellis (2002), “Demand chain management theory: constraints and development from global aerospace supply webs”, Journal of Operations Management, 20(6), 691–706.

Win, A. (2008), “The value a 4PL provider can contribute to an organization”, International Journal of Physical Distribution and Logistics Management, 38(9), 674–684

Womack, J., and D. Jones (1996), Lean thinking: Banish waste and create wealth in your corporation, Simon and Schuster, New York, NY.

Womack, J., D. Jones, and D. Roos (1990), The machine that changed the world, Macmillan, New York, NY.

Woodruff, R. (1997), “Customer value: The next source for competitive advantage”, Journal of the Academy of Marketing Science, 25(2), 139–153.

Xue, X., X. Li, Q. Shen, and Y. Wang (2005), “An agent-based framework for supply chain coordination in construction”, Automation in Construction, 14(3), 413-430.

Yang, B., N. Burns, and C. Backhouse (2004), “Postponement: A review and an integrated framework”, International Journal of Operations and Production Management, 24(5), 468–487.

Yang, J-B., C-T. Wu, and C-H. Tsai (2007), “Selection of an ERP system for a construction firm in Taiwan: A case study”, Automation in Construction, 16(6), 787–796.

Yin, R. (2008), Case study research: Design and methods, Sage publications, London, UK.

133

Yu, R., B. Lung, and H. Panetto (2003), “A multi-agents based E-maintenance system with case-based reasoning decision support”, Engineering Applications of Artificial Intelligence, 16(4), 321–333.

Yung, S., C. Yang, A. Lau, and J. Yen (2000), “Applying multi-agent technology to supply chain management”, Journal of Electronic Commerce Research, 1(4), 119–131.

Yusuf, Y., A. Gunasekaran, and M. Abthorpe (2004), “Enterprise information systems project implementation: A case study of ERP in Rolls-Royce”, International Journal of Production Economics, 87(3), 251–266.

Zablah, A., D. Bellenger, and W. Johnston (2004), “An evaluation of divergent perspectives on customer relationship management: Towards a common understanding of an emerging phenomenon”, Industrial Marketing Management, 33(6), 475–489.

Zacharia, Z. (2001), “Research and development in supply chain management”, In J. Mentzer (Ed.), Supply Chain Management, Sage Publication, London, UK.

Ziaee, M., M. Fathian, and S. Sadjadi (2006), “A modular approach to ERP system selection”, Information Management and Computer Security, 14(5), 485–495.

Zinn, W. (1990), “Developing heuristics to estimate the impact of postponement on safety stock”, International Journal of Logistics Management, 1(2), 11–16.

Zinn, W., and D. Bowersox (1988), “Planning physical distribution with principles of postponement”, Journal of Business Logistics, 9(2), 117–136.

134

APPENDIX I – RESPONSIBILITES IN THE APPENDED PAPERS

Paper I: Hilletofth, P. (2009), “How to develop a differentiated supply chain strategy”, Industrial Management and Data Systems, 109(1), 16–33.

Sole author: the design, planning, data collection, analysis, and writing of the paper were accomplished unaided.

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.

Main author: the design, planning, data collection, analysis, and writing of the paper were accomplished with support from co-authors, with regard to interesting topics of discussion.

Main author: the design, planning, analysis, and writing of the paper were accomplished with support from the co-author. The data collection was carried out in our research group.

Main author: the design, planning, data collection, analysis, and writing of the paper were accomplished with support from co-authors, with regard to interesting topics of discussion.

Main author: the design, planning, analysis, and writing of the paper were accomplished with support from the co-author, with regard to data collection.

135

136

APPENDIX II – LIST OF PUBLICATIONS

Articles in journals [total 17] [1] Hilletofth, P., O-P. Hilmola, and F. Claesson, (2011), “In-transit Distribution Strategy: Solution for European Factory Competitiveness?”, Industrial Management and Data Systems (accepted for publication). [2] 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). [3] Hedenstierna, P., P. Hilletofth, and O-P. Hilmola (2010), “Integrative purchasing and inventory control at wood retailer: Case study”, International Journal of Procurement Management (accepted for publication). [4] Claesson, F., and P. Hilletofth (2010), “In-transit distribution as a strategy in a global distribution system”, International Journal of Shipping and Transport Logistics (accepted for publication). [5] Into, C., Zetterberg, S., and Hilletofth, P. (2010), “Transitlager som en strategi i ett globalt distributionssystem”, Bättre Produktivitet, 5, 12-16. [6] Lättilä, L., P. Hilletofth, and B. Lin (2010), “Hybrid simulation models: When, Why, How?”, Expert Systems with Applications, 37(12), 7419–8914. [7] Hilletofth, P., O-P. Hilmola, and S. Ujvari (2010), “Teaching ERP in logistics curriculum: A case experience from Sweden”, International Journal of Business Information Systems, 6(3) 295–314. [8] Hilletofth, P., L. Lättilä, S. Ujvari, and O-P. Hilmola (2010), “Agent-based decision support for maintenance service provider”, International Journal of Services Sciences, 3(2/3), 194–215. [9] 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. [10] 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. [11] Hilletofth, P., T. Aslam, and O-P. Hilmola (2010), “Multi-agent based supply chain management: Case study of requisites”, International Journal of Networking and Virtual Organisations, 7(2/3), 184–206. [12] 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. [13] Jäger, K., P. Hilletofth, and S. Ujvari (2009), “From standard 3PL provider to service developer: A case study from the Swedish furniture industry”, World Review of Intermodal Transportation Research, 2(4), 376–390. [14] Hilletofth, P. (2009), “How to develop a differentiated supply chain strategy”, Industrial Management and Data Systems, 109(1), 16–33. [15] Hilletofth, P., and O-P. Hilmola (2008), “Supply chain management in fashion and textile industry”, International Journal of Services Sciences, 1(2), 127–147.

137

[16] Hilletofth, P., and D. Ericsson (2007), “Demand chain management: Next generation of logistics management”, Conradi Research Review, 4(2), 1–18. [17] Hilletofth, P., H. Lorentz, V-V. Savolainen, O-P. Hilmola, and O. Ivanova (2007), “Using Eurasian land-bridge in logistics operations: Building knowledge through case studies”, World Review of Intermodal Transportation Research, 1(2), 183–201.

Articles in conferences [total 21] [1] Hilletofth, P., and O-P. Hilmola (2010), “Role of Emerging Markets in Demand- Supply Chain Management”, Proceedings of the 15th annual Cambridge International Manufacturing Symposium. [2] Eriksson, D., and P. Hilletofth (2010), “Role of consumer insight in new product development and its impact on supply chain management: A Swedish case study”, Proceedings of the Hamburg International Conference of Logistics. [3] Hilletofth, P., F. Claesson, and O-P. Hilmola (2010), “In-transit distribution strategy: Hope for European factories”, Proceedings of the 2nd Rapid Modeling Conference, pp. 249–262. [4] Jensen, Å., L. Palm, F. Claesson, and P. Hilletofth (2010), “Supply Chain Planning in Automotive Sector: Swedish Case Study”, Proceedings of the Plan Research Conference, pp. 53–72. [5] Hilletofth, P., and D. Ericsson (2010), “Coordinating demand and supply processes: Towards demand-supply chain management”, Proceedings of the 20th International Conference on Flexible Automation and Intelligent Manufacturing, pp. 512-521. [6] Asplund, A., A. Persson, P. Hilletofth (2010), “E-procurement beyond the buyer cost perspective”, Proceedings of the 22nd NOFOMA Conference, pp. 483–498. [7] Into, C., S. Zetterberg, and P. Hilletofth (2009), “Transitlager som en strategi i ett globalt distributionssystem”, Proceedings of the Plan Research Conference, pp. 93- 103. [8] Hilletofth, P., S. Ujvari, and R. Johansson (2009), “Agent-based simulation fusion for improved decision making for service operations”, Proceedings of the 12th International Conference on Information Fusion. [9] Hilletofth, P., D. Ericsson, O-P. Hilmola, and P. Hedenstierna (2009), “New product development in a manufacturing company: A challenge for supply chain management”, Proceedings of the 19th International Conference on Flexible Automation and Intelligent Manufacturing, pp. 1169-1177. [10] Hedenstierna, P., P. Hilletofth, and O-P. Hilmola (2009), “Design of a framework for inventory control: Evaluation of forecasting and inventory control systems”, Proceedings of the 19th International Conference on Flexible Automation and Intelligent Manufacturing, pp. 573-580. [11] Hedenstierna, P., P. Hilletofth, and O-P. Hilmola (2009), “An integrative approach to inventory control”, Proceedings of the 1st Rapid Modeling Conference, pp. 105-118. [12] Hilletofth, P., L. Lättilä, S. Ujvari, and O-P. Hilmola (2009), “Agent-based decision support in maintenance service operations”, Proceedings of the 16th International Annual EurOMA Conference. [13] Hilletofth, P., L. Lättilä, and O-P. Hilmola (2009), “Agent-based decision support in manufacturing supply chain”, Proceedings of the 3rd International KES Symposium on Agents and Multi-agent Systems – Technologies and Applications, pp. 677-686.

138

[14] Van Laere, J., M. Nilsson, S. Ujvari, and P. Hilletofth (2008), “Reflections on fusion systems requirements analysis for maintenance planning”, Proceedings of the 2nd Skövde Workshop on Information Fusion Topics, pp. 5-8. [15] Hilletofth, P., D. Ericsson, O-P. Hilmola, and S. Ujvari (2008), “Differentiated supply chain strategies based on customer insights”, Proceedings of the 18th International Conference on Flexible Automation and Intelligent Manufacturing, Vol. 1, pp. 540- 547. [16] Hilletofth, P., D. Ericsson, O-P. Hilmola, and S. Ujvari (2008), “Integration and formalization of strategic product development and commercialization in a manufacturing company – A challenge for supply chain management”, Proceedings of the 18th International Conference on Flexible Automation and Intelligent Manufacturing, Vol. 1, pp, 532-539. [17] Jäger, K., S. Ujvari, A. Hermansson, and P. Hilletofth (2008), “Logistics actors – Key issues for a service developer”, Proceedings of the 18th International Conference on Flexible Automation and Intelligent Manufacturing, Vol. 2, pp. 1329-1336. [18] Hilletofth, P. (2008), “Differentiated supply chain strategy: Building knowledge through case studies”, Proceedings of the 4th Railway Logistics Seminar: Co- operation among Transportation Modes in Northern Europe, pp. 5-28. [19] Hilletofth, P. (2008), “Enterprise resource planning systems in higher education”, Proceedings of the 4th Railway Logistics Seminar: Co-operation among Transportation Modes in Northern Europe, pp. 167-180. [20] Szekely, B., J. Saranen, O-P. Hilmola, T. Toikka, and P. Hilletofth (2008), “Globalization and international division of work: New ways of co-operation within lean production networks”, Proceedings of the 4th Railway Logistics Seminar: Co- operation among Transportation Modes in Northern Europe, pp. 181-198. [21] Hilletofth, P., S. Ujvari, and O-P. Hilmola (2007), “Information fusion in maintenance planning”, Proceedings of the Swedish Production Symposium.

Chapters in books and research reports [total 5] [1] Hilletofth, P., F. Claesson, and O-P. Hilmola (2010), “In-transit distribution strategy: Hope for European factories”, In G. Reiner (Ed.), Rapid Modeling and Quick Response, pp. 105-118, Springer, London, UK. [2] Hedenstierna, P., P. Hilletofth, and O-P. Hilmola (2009), “An integrative approach to inventory control”, In G. Reiner (Ed.), Rapid Modeling for Increasing Competitiveness, pp. 249–262, Springer, London, UK. [3] Hilletofth, P., L. Lättilä, and O-P. Hilmola (2009), “Agent-based decision support in manufacturing supply chain”, In A. Håkansson et al. (Eds.), Agents and Multi-agent Systems: Technologies and Applications, pp. 677-686, Springer, London, UK. [4] Szekely, B., P. Hilletofth, and A.F. Bakhsheshi (2009), “Role of software applications in logistics decision making: Case of warehouse management systems”, In O-P. Hilmola, and B. Korovyakovsky (Eds.), Networked Logistics and Production at South- East Finland, St Petersburg and Leningrad Oblast, Research Report 211, pp. 111- 144, Lappeenranta University of Technology, Kouvola, Finland. [5] Hilletofth, P., and O-P. Hilmola (2009), “ERP training through traditional and intensive course formats”, In O-P. Hilmola, and B. Korovyakovsky (Eds.), Networked Logistics and Production at South-East Finland, St Petersburg and Leningrad Oblast,

139

Research Report 211, pp. 145-166, Lappeenranta University of Technology, Kouvola, Finland.

Monographs and reports [total 8] [1] Hilletofth, P. (2008), Differentiated supply chain strategy: Response to a fragmented and complex market, licentiate thesis, Chalmers University of Technology, Gothenburg, Sweden. [2] Hilletofth, P., and T. Aslam (2008), Information fusion in agent systems, research report, University of Skövde, Skövde, Sweden. [3] Hilletofth, P. (2007), Demand chain management: A Solution for the fashion business, research report, University of Skövde, Skövde, Sweden. [4] Hilletofth, P. (2006), Multi-agent based supply chain management, research report, University of Skövde, Skövde, Skövde, Sweden. [5] Hilletofth, P. (2006), Risk management in a supply chain context: The concept of supply chain risk management, research report, University of Skövde, Skövde, Sweden. [6] Hilletofth, P. (2006), Demand chain management: Alignment of demand creation and fulfillment processes across functional, organizational and inter-organizational boundaries, research report, University of Skövde, Skövde, Sweden. [7] Hilletofth, P. (2005), Travel management: A concept for the future, master thesis, University of Skövde, Skövde, Sweden. [8] Hilletofth, P. (2004), Logistics concepts in theory: Similarities and differences, research report, University of Skövde, Skövde, Sweden.

140

APPENDIX III – EMPIRICAL DESCRIPTION OF DSCM

This research includes five case companies, however, most of them have only been used to study a certain aspect of DSCM, rather than the entire concept. Nevertheless, as shown in the methodology section, one case company (Beta) has been involved in most of the studies, thus providing an overall description that is given below.

Case company Beta Case company Beta is a Swedish manufacturer that operates on an international basis in the appliance industry. It sells more than 40 million products to consumers and professionals in 150 countries every year (top three in its industry). The largest markets are in Europe and North America, and its strongest market position is in Europe. The case company operates in a competitive industry, characterized by intensive competition, high commoditization, and short product life cycles. In this environment, it is vital to continuously develop new products in accordance with customer preferences. Furthermore, the supply chain needs to be cost- efficient and provide a high quality output. The case company has realized that it needs to focus all its resources on creating and fulfilling customer demand (develop a demand-supply oriented business), since markets are becoming more competitive and fragmented. It needs to become more innovative, differentiated, responsive, and cost-efficient, to avoid price competition and maintain profitability. In addition, it needs to focus on both revenue growth (effectiveness) and cost reduction (efficiency) simultaneously.

Suppliers Focal company Retailers Market (customers) Product management flow

Processes (demand) Demand creation Market Product Commercializ (value creation) intelligence creation ation

Management levels

Design Planning Execution (strategic level) (tactical level) (operational level)

Competitive Coordination advantage (value and cost)

Demand management flow

Processes (supply) Demand fulfillment Sourcing Manufacturing Distribution (value delivery)

Management levels Design Planning Execution (strategic level) (tactical level) (operational level)

Figure 8.1 The case company’s DSCM approach

141

As a result, the case company has begun to transform itself from a production-focused business to an innovative and customer-oriented business. It focuses on providing innovative products and customer service (supply chain solutions), for which customers are willing to pay a premium. The company has defined ‘product flow’ and ‘demand flow’ as two major business processes, which constitute its DSCM approach (Figure 8.1). The management of these major business processes is further described below.

Product management flow The case company has developed a process for consumer-focused product development entitled product management flow (PMF). The PMF is an international and holistic process for managing products, from the cradle to the grave, and it describes all the areas of creating and selling products. The aim of the process is to develop products that are adapted to local needs, together with products that can be sold world-wide on the basis of common global needs. Employees from several functions are involved, although no logisticians are included at this time. The PMF is run by the product line manager with support from the consumer innovation program. It was introduced in 2004 and will be implemented in all product lines over the next couple of years. The PMF includes a structured working method with check and decision points, to ensure that no activities are omitted. It consists of three phases: market intelligence, product creation, and commercial launch (Figure 8.2).

Phase 1: Market Phase 2: Product creation Phase 3: Commercial launch intelligence

Executed on product line level

Primary Product development development Strategic Consumer Launch Range Phase-out market plan opportunities Commercial execution management Concept launch development preparation

Product line manager

Consumer innovation program

Figure 8.2 The case company’s product management flow

The aim of the market intelligence phase is to ensure clear identification and prioritization of opportunity areas, which are expressed in a strategic market plan. The plan is built on corporate prerequisites (e.g., product innovation strategy, brand strategy, and design strategy, as well as global needs) along with industry analyses. It also includes tools that together with the analyses allow the product line manager to set priorities and take strategic decisions, which are subsequently translated into a strategic road map and a corresponding product generation plan. This is intended to provide a good frontloading of the product development as well as ensure clear directions for product development and market communication. Examples of interesting questions in this phase are: on what areas should we focus our innovation work, what changes in consumer behavior can create business

142

opportunities, where are the growth markets, and what can we do that our competitors have not done?

The objective of the product creation phase is to define and develop consumer relevant and innovative products addressing well-understood consumer needs. It involves four steps: consumer opportunities, concept development, primary development, and product development. During the consumer opportunity step, an understanding of consumer needs in prioritized areas is developed. Consumer understanding and insight are the foundation for successful concept and product development, as well as for the commercial launch. Through the concept development step, a feasible product idea addressing the identified consumer needs is developed, with distinct positioning, consumer value based pricing, and a solid business case. In the product development step, the product idea is specified, designed, and verified, as cost-efficiently as possible, as well as prepared for launch on the market. In the primary development step, technical solutions within targeted innovation themes are developed, producing verified ideas or hardware solutions that can be applied to relevant concepts in product development.

The consumer opportunity and the concept development steps constitute the spark process (Figure 8.3). The first activity in the spark-process is to identify consumer opportunities by exploring a chosen target group. The case company has developed a needs-based segmentation model on the finding that all their customers purchase products according to four different underlying demand patterns. Accordingly, products are now developed to meet needs that have been identified within a specific target segment in the segmentation model. When a consumer opportunity is identified, the next activity is to gather consumer insight regarding the identified opportunity. The case company uses several techniques for this activity, such as observations, surveys, and evaluations. However, observations are preferred, as observed behavior is richer than described behavior. The case company is in touch with tens of thousands of consumers world-wide every year. After some insights have been identified, they are grouped into a few product concepts. Some insights may originate from the same problem, or have something else in common, and could therefore be satisfied with the same solution. The identified product concepts are then analyzed and prioritized, resulting in a winning product concept. Different product prototypes are subsequently developed, on the basis of the product concept, and later tested on the target group, leading to a winning product idea. Finally, the case company makes a decision regarding whether the product idea is good enough to develop further, and whether it should proceed to the primary and/or product development phase. All the activities in the spark process are conducted from a market strategy perspective, and one important output is a business case describing how to ensure long-term profitability, by answering the following questions: ‘What to sell?’, ‘Where to sell?’, and ‘How to sell?’.

The objective of the commercial launch phase is to ensure that developed products are properly introduced into the market with a consistent and consumer relevant message, as identified earlier during the concept development, based on true consumer needs or problems. Another objective of the commercial launch phase is to ensure that the product assortment is updated according to the products’ life cycles, and that obsolete products are properly phased out. Both these objectives rely on a consistent follow-up process.

143

Description Illustration

1) Explore chosen target group to Consumer opportunities in find consumer opportunities target group X

2) Gather consumer insights regarding the identified opportunities and group them into product concepts BUSINESS CASE 3) Analyse and prioritize product concept A(60%) B(30%) C(10%) D(5%)

4) Winning product concept

5) Develop products based on the winning product concept, create prototypes and test on target group

6) Winning product idea

7) Continue to primary and/or To primary development Close project product development or put down? To product development

Figure 8.3 The case company’s spark process

A considerable portion of the investment is devoted to the early phases of the PMF, prior to large investments in production, to ensure that the product is successful. The number of new products created through consumer-focused product development is increasing rapidly, leading to a better product offering and, thus, to an increasing number of more successful launches. During a five year period, the case company has increased the number of successful product introductions from one per year to five per year, with a similar number of total introductions. In 2006, products that had been launched during the two previous years accounted for more than 40 percent of sales; thus, it is very likely that the increased investment in product development has generated positive results. Since 2002, investments in product development have increased from approximately 1.0 percent of sales to 1.8 percent in 2006. At the same time, the development has become more responsive and efficient through global cooperation and the coordination of launches between different product categories. The focus is on developing products in profitable segments and high- growth areas, simultaneously making launches more accurate.

Demand management flow The case company considers that the most important factor that is required to supply materials and products on demand is keeping the end-user in focus. It is also vital that the total supply chain (sourcing, manufacturing, and distribution) is managed in a competitive way. To a large extent, success depends on whether the case company and its supply chain are as good as, or better than, its competitors. This requires collaboration, first internally, then with the retailers and suppliers. To realize the above, the case company has created a

144

demand management flow (DMF), including common goals and principles. DMF focuses on meeting consumer needs and requirements while minimizing both the capital tied up in operations and the costs required to fulfill demand, and it has three major aims:

(1) Make sure that the company delivers on time, which is the first priority. However, it is also supposed to reduce ineffective time in the delivery process, thus the aim is to deliver on time in less time.

(2) Contribute significantly towards improving value creation, e.g., it aims to increase sales by making products available on time, and to decrease costs and waste in the supply chain.

(3) Contribute significantly towards improving innovation, which is critical for the success of new products, because without new features the company will fail in the market. However, innovation should not only be restricted to the products, it should also be applied in other areas as well, such as customer service.

The case company aims to combine cost-efficient production in low-cost countries with manufacturing as close as possible to major final markets. However, it has recently focused on increasing the number of products produced in low-cost countries. The case company’s supply chain and strategies are shown in Figure 8.4. It conducts business with retailers, while retailers conduct business with end-users. In addition, the company does business with direct suppliers. It has chosen to carry out all manufacturing, assembly, warehousing, and distribution operations in-house, and is currently employing three supply chain strategies. For standard products with short customer required lead-time, it employs two lean supply chain strategies based on the manufacturing strategies MTS and DTO. This implies that the case company, based on forecasts and speculations, performs all supply chain operations, including sourcing, manufacturing, assembly, packaging, labeling, and distribution (not included in DTO approach), before it has received any customer orders, and focuses on efficiency. However, for customized and more complex products, it employs a leagile supply chain strategy based on the MTO manufacturing strategy. This means that the design and sourcing processes are decoupled from the production, assembly, and distribution processes, or, in other words, production, assembly, and distribution activities are postponed until customer orders are received. Activities performed after orders are received (downstream the COP) are managed according to agile principles, while activities performed before orders are received (upstream the COP) are managed according to lean principles.

The supply chain design process of the case company consists of three steps. Firstly, the case company identifies how its end-users, via retailers, want to acquire its products (understand the market the company serves). This is achieved through consumer insight, where important information that can affect the company’s service to the retailers is collected. Retailers have a number of characteristics that need to be considered before deciding how to serve them, such as product range, required lead-time, location, and volumes. Secondly, the company must understand its capabilities of serving the market via the retailers. This implies defining its production system and delivery system capabilities. Understanding the capability of the production system, to produce according to demand, and the capability of the distribution system, to deliver the output, is very important. In addition, recognizing the capability of the suppliers to supply the production system is also important. Finally, when

145

these steps have been completed, the case company can design various approaches to serve the end-users via the retailers, commonly referred to as supply chain solutions. There may even be more than one solution for each retailer, for example, in the case of supplying both its own labeled products and the retailers’ branded products (also known as OEM products or ‘private labels’). A supply chain solution is a combination of a supply method (manufacturing strategy), reflecting the production system capabilities, and a delivery method (delivery strategy), reflecting the delivery system capabilities. The case company believes that combining supply and delivery methods into various supply chain solutions creates freedom of choice, while at the same time maintaining the efficiency of operations in the production and delivery systems. Suppliers End Case company Beta Retailer - Manu- user Design Sourcing Assembly Packaging Labeling Distribution facturing

LEAN SUPPLY Activities are performed before orders are received and focus on efficiency (planned and standardized) COP Make To Stock (MTS)

COP Deliver To Order (DTO)

COP Make To Order (MTO) AGILE SUPPLY Activities are performed after orders are received and focus on responsiveness (order-driven and customized)

Figure 8.4 The case company’s supply chain and strategies

One applied supply chain solution combines the supply method MTS with the delivery method called self collect (Figure 8.5). This implies that the case company produces in advance, according to a demand plan and stock-keeping, until the retailer collects the goods from one of the company’s regional distribution centers. Self-collection needs to be implemented carefully to maintain loading efficiency in the distribution centers. In another applied supply chain solution, the case company combines the supply method MTO with the delivery method factory direct. This solution is used when retailers order a number of weeks in advance, which enables the case company to produce and deliver to a specified date and time. Orders are normally in the form of full truckloads dispatched directly from the factory to a retailer (deliver method factory direct). The case company also combines the supply method DTO with the delivery method home delivery. This solution implies that the case company, at the retailer’s request, bypasses retailer’s distribution network and delivers directly to the consumer’s home. This delivery method is normally combined with other services, such as installation and the removal of old products. In a final applied supply chain solution, the case company combines the supply method vendor-managed-inventory (VMI) with the distribution method of factory delivery. This implies that the case company is

146

responsible for the inventory of its products within the retailer’s warehouses, that is, responsible for the calculation of delivery dates and quantities. Deliveries are normally in the form of full truckloads dispatched directly from the factory to a retailer (delivery method factory direct). It is an advanced supply chain solution that involves a close partnership and collaboration, including totally sharing data, and regular communication. Delivery Supply Method (decoupling points) Method (physicalMethod MTS DTO MTO VMI Factory direct X X X Bulk X X Small drop X X

flow) Self collect X X X Home delivery X

Figure 8.5 The case company’s supply chain solutions

Each supply chain solution has different cost implications for the case company and the retailer. One solution might be cheaper for the retailer, but more expensive for the company, and vice versa. It is very important to appreciate the cost to serve for a particular retailer, when judging its profitability.

Coordination between PMF and DMF The case company is aware that the demand and supply processes have to be coordinated in an efficient and effective way, to fully exploit the benefits of DSCM, and this requires coordination between the PMF and the DMF. For example, it is important that demand creation and demand fulfillment are coordinated and regarded as being equally important, and that value creation is not restricted to products, but also applies to the supply chain. The case company has started to differentiate the supply chain, in order to enhance overall customer value. However, the business is currently heavily influenced by the demand-side of the company, which more or less gives directives to the supply-side. Accordingly, the supply chain differentiation is somewhat restricted, and there is a lack of strategic coordination between demand creation (PMF) and demand fulfillment (DMF). For example, market segmentation and intelligence is conducted separately in the PMF and the DMF. However, it is important to note that the case company has advanced considerably in developing the demand and supply processes, which is also a key issue within DSCM.

147

There are many linkages between the PMF and DMF, since where and how to sell products (addressed in PMF) are clearly connected to how products are delivered (addressed in DMF), and these linkages the case company has begun to explore. Nevertheless, today, this kind of overall and strategic analysis is only made by marketers in the PMF. If supply chain representatives were involved, the case company could probably develop better supply chain solutions faster, which would imply shorter TTM. In addition, supply chain capabilities are required, in order to successfully launch new products on the market. The commercial launch process ensures that the developed products are properly introduced into the market, with a consistent and consumer relevant message. However, if the right products are not delivered in the right quantities, at the right time and place, this is very unlikely to be successful. Moreover, it is not only important to carefully specify, design, and verify new products, but it is also necessary to consider the supply chain processes, since some of the new products may require new processes. The move from commodities to innovative products requires a change of the supply chain design process and how it is connected to the product development process.

The case company believes, and has also begun to experience, that the benefits of the demand-supply oriented approach are enhanced competiveness, by becoming more innovative, differentiated, responsive, and cost-efficient, and enhanced profitability, by focusing on both revenue growth (effectiveness) and cost reduction (efficiency). In more specific terms, the main advantages include innovative, responsive, and cost-efficient NPD, flexible operating structure, higher brand loyalty, reduced inventories, improved range and life cycle management, improved customer service, responsive, differentiated, and cost- efficient product delivery, and reduced demand-supply chain costs. The case company has recently begun implementing the demand-supply oriented approach and it can currently be classified as both a demand chain master and supply chain master, but the demand-side of the company is in charge. It needs to decide whether it aspires to become a true demand- supply chain master, in order to fully exploit the benefits of DSCM.

For this to happen, the senior management has to initiate a cultural change, alter the business strategy, and align the functional strategies and departments. Still, this can be difficult, since a potential development of the company, according to some representatives, is that it can outsource all the supply processes, if it excels in demand creation. Other requirements, in order to succeed with the implementation of the demand-supply oriented approach, are according to the case company’s organizational competences (e.g., market orientation, advanced market segmentation and intelligence, as well as expertise in and coordination between the demand and supply processes) and information technology support. The information technology not only needs to support the individual demand and supply processes, but also the coordination between them.

148