Arlbjorn and de Haas Framework 2009

Working paper (2009/2) Arlbjrn, J.S. and de Haas, H.
(2009), A Framework for Supply Chain Innovation, Department of Entrepreneurship and Relationship Management, University of Southern Denmark.
A FRAMEWORK FOR SUPPLY CHAIN INNOVATION
Professor, Ph.D. Jan Stentoft Arlbjrn* University of Southern Denmark Department of Entrepreneurship and Relationship Management Engstien 1 DK-6000 Kolding DENMARK Phone: + 45 65 50 13 70 Fax: +45 65 50 13 57 E-mail: jar@sam.sdu.dk
and
Post.doc., Ph.D. Henning de Haas University of Southern Denmark Department of Entrepreneurship and Relationship Management Engstien 1 DK-6000 Kolding DENMARK Phone: + 45 65 50 13 74 Fax: +45 65 50 13 57 E-mail: hdh@sam.sdu.dk
* Corresponding author
Working paper (2009/2) Arlbjrn, J.S. and de Haas, H. (2009), A Framework for Supply Chain Innovation, Department of Entrepreneurship and Relationship Management, University of Southern Denmark.
A FRAMEWORK FOR SUPPLY CHAIN INNOVATION ABSTRACT
Supply Chain Management is an area that levers competitive advantages for industrial enterprises. When companies have to make innovations with new products and enter new markets in order to stay in business, they also need to make innovations within selected supply chain areas. But literature explicitly dealing with supply chain innovation is limited, and there seems to be a lack of a common vocabulary. This paper introduces a framework for supply chain innovation focusing on business processes, network structure and technology.
A FRAMEWORK FOR SUPPLY CHAIN INNOVATION
INTRODUCTION Supply Chain Management (SCM) is a concept invented back in 1982 (Oliver and Webber 1982) focusing on: (1) perceiving the whole supply chain as a single entity; (2) strategic decision making; (3) inventories as balancing mechanisms; and (4) increasing emphasis on integration. Since its introduction, there have been completed comprehensive research on different integration stages (Stevens 1989), metaphors of SCM as chains and networks (Harland 1996; Hkansson and Persson 2004), discussions on the scope of SCM (New 1997), operationalized SCM frameworks (Closs and Mollenkopf 2004; Cooper, Lambert and Pagh 1997; Mentzer et al. 2001), definitions of SCM (Gibson, Mentzer and Cook 2005; Larson, Poist and Halldrsson 2007 and Mentzer et al. 2001) and how SCM is related to other disciplines (Frankel et al. 2008 and Mentzer, Stank and Esper 2008). The concept of SCM has, since its introduction, developed from primarily an internal company perspective to also focusing on external relationships in chains and networks. However, the core focus is still related to how competitive advantages can be achieved by simultaneously working with activities and processes that improve services and reduce costs. According to the Council of Supply Chain Management Professionals (CSCMP 2008): "Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies." The domain of SCM constitutes a potential area for creating competitive advantages through innovations. To win the competitive landscape defined by creating one consumer experience at a
time, decision makers must develop a whole new mindset for understanding their global supply, logistics, and communication network (Prahalad and Krishnan, 2008, p. 14). The innovation concept has mainly been applied to product and process innovations. Within these two areas, comprehensive research in innovation has been provided. This is not the case with what is termed Supply Chain Innovation (SCI). In the 20th century, several innovations have been developed, such as Industrial Dynamics (Forrester 1958), Materials Requirements Planning (Orlicky 1975), the pull production systems at the Toyota Production System (Ohno 1988) and new forms of relationships and partnerships (see e.g. Lambert, Emmelhainz and Gardner 1996), but these innovations do not appear under the term SCI, perhaps due to the later invention of the term supply chain. Furthermore, several other innovations have been developed as the logistics and SCM discipline has matured, albeit a perhaps lesser radical magnitude. There has also been an increased awareness on how innovations in other company areas affect or even require innovations in the supply chain functions, such as the three dimensional concurrent engineering model (3-DCE) by Fine (1998, p. 133) that stresses the importance to foster concurrent engineering in terms of product, process and supply chain design. Again, such innovations do not appear as SCI. In practice, several developments point to the need for SCIs, such as the present global financial crisis, the challenges with global warming, and globalization of trade with outsourcing and offshoring manufacturing (e.g. lead-times, transportation, corporate social responsibility). Since 2005, CSCMP has assigned an award to the company with the years best SCI. However, in literature a limited number of contributions is identified that explicitly addresses what comprises a SCI. CSCMP does not provide an explicit definition of what constitutes a SCI, but states instead that an innovation is:
New processes, new technology, or new applications of old processes and technology that create quantifiable and sustainable results in terms of cost savings, revenue, customer satisfaction, etc. (CSCMP 2008) This definition does not include innovation in network structures of a supply chain in terms of, for example, a reduced supplier base. Other examples of changed supply chain networks structures is the direct distribution model by Dell Computer (Magretta 1998) and a responsive supply chain design by Zara (Ferdows, Lewis and Machuca 2004). The purpose of this paper is twofold. First, the paper has set out to clarify how the extant literature explicitly deals with the concept of SCI. Second, it aims to develop a framework for SCI. The remainder of the paper is structured as follows. In the next section, we describe the research method applied in the paper. We then provide a literature review of SCI. In the following section, we propose a SCI framework. Then follows a section analyzing thirty SCI cases against the proposed framework. The final section concludes on the purposes of the paper and considers managerial and theoretical implications of the findings.
RESEARCH METHOD A literature review of fifty academic peer-reviewed journals has been performed, in which a specific search in EBSCO Host Research Database (academic search premier) for papers containing the words supply chain innovation in the field all text (TX) was carried out. Due to discussions whether there is a difference between logistics and SCM (see e.g. Larson, Poist and Halldrsson 2007), we have also made the similar search for logistics innovation. The list of journals reviewed is based on the list provided by Charvet, Cooper and Gardner (2008). Reviews of thirty applications for the CSCMPs SCI award (from 2005 to 2008), selected to be presented at the annual CSCMP conference, constitute the second data input to this paper. The
following criteria for cases being judged and nominated for the SCI award are found at the CSCMPs homepage: educational intent of case study, not promotion towards a product, service, or organization level of significance with regards to the specific supply chain challenge and solutions impact on the organizations overall supply chain quantifiable and sustainable results in: cost savings, revenue generation, and customer satisfaction practical information which would be helpful and relevant to todays supply chain practitioner structure and content: organization/clarity, quality/usefulness of visuals, author knowledge of subject matter innovativeness of solution
The reviews of the SCI award applications have been done through the framework introduced in this paper. This piece of research does have some limitations. First, the review of literature has applied the terms supply chain innovation and logistics innovation. Thus, potential literature that does not contain these terms, but basically is about SCI, is not covered in the reviews. Second, we have only reviewed peer-reviewed journals for literature on SCI. Literature in other sources like conference proceedings, text books and trade journals may contain contributions dealing with SCI. Finally, the case descriptions are compiled by the applying companies and are thus secondary information. We cannot guarantee for the validity in these applications. However, the case descriptions reviewed should all meet certain criteria defined by CSCMP. The cases analyzed have passed a review by a CSCMP committee and have been chosen to be presented at the annual conferences.
LITERATURE REVIEW This section contains a literature review on SCI, but first a brief introduction is given to the concept of innovation. This introduction is not meant to outline the innovation research agenda, but merely to sketch out the main and well-recognized dimensions on which innovations are discussed. The research of innovation has a long tradition and can be traced back to some of the prior work by Schumpeter (1934). According to Bessant (2003), innovation represents the core renewal process in any organization. But what constitutes an innovation? In literature, several definitions of innovation are provided. Schumpeter (1934) defines innovation as the introduction of new products and production methods, the opening of new markets, the discovery of new raw materials and the implementation of new organizations. In spite of the age of this definition, it has appeal to the supply chain research area (e.g. with the focus on production methods, raw materials and organization). Baumol (2002) defines innovation as: The recognition of opportunities for profitable change and the pursuit of those opportunities all the way through to their adoption in practice. Innovations do appear in many aspects. According to Johannessen, Olsen and Lumpkin (2001), some disagreement exists between the definition and measurement of innovation. Furthermore, the definitions of innovation span from an invention to the introduction of a new idea. There are also indications that innovation should contain a process. Thus, it is not only the idea, but also the process toward the introduction of the idea. Furthermore, innovation is the successful exploitation of new ideas. The definition leads to that innovation contains a degree of novelty a new idea, a new product, a new process, etc. A framework to understand the innovation space is the 4Ps by Francis and Bessant (2005). This framework moves beyond the classical separation of innovation as product and process innovation to also include innovations in positioning and paradigm. The innovation concept has been used in several other contexts such as organizational innovation, management innovation,
production innovation, commercial/marketing innovation, and service innovation (Trott 2005, p. 17). Finally, a widely applied dimension to classify innovations is in innovation effect that ranges along an axis from incremental to radical innovations (Tidd, Bessant and Pavitt 2005, p. 12). Even though we have definitions of innovation to support us in the classification of degrees of innovation, some authors propose that specific rating of an innovation, e.g. the incremental/radical scale, depends on the eyes of the viewer (Flint et al. 2005; Johannessen, Olsen and Lumpkin 2001; and Rogers 1995, p. 11, 2001). The literature review of contributions within SCI identified a limited number of papers dealing with SCI. A gross list of twenty two papers did contain the term Supply Chain Innovation in some way. After a closer review of the papers, only eleven papers published in nine different journals are in essence dealing with SCI. The papers excluded from the gross list were removed since these only were using SCI as a goal for a change process, and thus did not explain the term of SCI, or only contained the term in a reference. Table 1 provides an overview of the eleven identified papers explicitly dealing with SCI. TABLE 1 LITERATURE REVIEW ON SUPPLY CHAIN INNOVATION
Research area Defining and measuring innovation Supply Chain Innovation focus Relevant aspects Innovation is anything new to the beholder Implementing new supply chain technology Representative authors Krabbe (2007) Flint et al. (2005) Bello et al. (2004) Holmstrm (1998) Krabbe (2007) Santosh and Smith (2008) Sebastiao and Golicic (2008) Bello et al. (2004) Billington et al. (2004) Cox (1999) Flint et al. (2008) Flint et al. (2005) Holmstrm et al. (2000) Russel and Hoag (2004) Santosh and Smith (2008) Cox (1999) Flint et al. (2005) Russel and Hoag (2004)
Optimizing supply chain business processes
Introducing new products (product development)
Modeling and scenario building for optimization Bello et al. (2004) Flint et al. (2005) Krabbe (2007) Flint et al. (2008)
The innovation process
The literature review on SCI leads to the following five findings. First, the literature reviewed seems to agree on the importance and potential of SCI in improving the performance in supply chain (Flint et al. 2005; Krabbe 2007). Second, there is a lack of a common SCI framework, and a classification scheme of different types of SCI is missing. Definitions of SCI have not yet attained much research efforts, even though there seems to be alignment on that SCI consists of developments in technology and processes (Bello 2004). Third, the present SCI contributions are mostly concerned with technology development and application. The extant literature on SCI points to information technology (IT) as an important driver for innovation. Such IT technologies are, for example, Radio Frequency Identification Technology (RFID), Pick-By-Voice and Advanced Planning Systems (APS) (Santosh and Smith 2008). These technologies have been enablers of closer cooperation between vendors and customers through the last ten to fifteen years (Santosh and Smith 2008). Thus, contributions on SCI are mainly focused on applying new technologies to the supply chain, or optimizing the supply chain using new technologies (see e.g. Holmstrm 1998). Fourth, like the general innovation literature, there seem to lack scales for measuring innovation. To overcome this, Flint et al. (2005) define the degree of innovation based on the eyes of the beholder, this means that the degree of innovation is not related to a fixed scale, but is a relative concept depending on the eyes (person, organization, etc.) that see a change. To one person a change could be a radical innovation, and to another person the same change could be an incremental innovation. This raises a discussion of how to compare innovations, how to rate innovations and how to judge what is the best innovation in for example SCM. Finally, current contributions are mainly conceptual. Empirical studies on SCI practice are under-researched. The
supply chain literature seems not to have attention on innovation (Flint et al. 2005). At the same time, the innovation literature does not seem to have any focus on SCM. This might be one reason for why it is difficult to find solid definitions of SCI, classifications of innovations (i.e. radical or incremental), and drivers for innovations. This paper attempts to bridge this gab by proposing a framework for SCI.
DEVELOPMENT OF A SUPPLY CHAIN INNOVATION FRAMEWORK In this section, a framework for SCI is developed. The framework is developed from existing theory in the SCM and innovation literature. First, a literature review was conducted of major SCM frameworks in order to extract their key components. This knowledge is then, together with innovation theoretical elements, used to develop a framework for SCI.
Supply Chain Management Frameworks and Models In literature, several SCM frameworks and models have been developed in order to provide overview of the concept and to display coherence between sub-concepts and variables within the SCM domain. The frameworks and models provide a conceptual foundation for SCM. In Table 2, a brief review of SCM frameworks and models is listed.
TABLE 2 REVIEW OF SUPPLY CHAIN MANAGEMENT FRAMEWORKS AND MODELS

Author Cooper, Lambert and Pagh (1997) and Lambert, Cooper and Pagh (1998) Bowersox, Closs and Stank (1999, p. 24) Major SCM Framework/Model Components Business Processes, Management Components and Supply Chain Structure
Mentzer et al. (2001) Chen and Paulraj (2004)
Flows: Product Service Value Flow, Market Accommodation Flow, Information Flow and Cash Flow. Six integrative competencies: Customer Integration, Internal Integration, Material and Service Supplier Integration, Technology and Planning Integration, Measurement Integration, Relationship Integration Customer Satisfaction, Supply Chain Flows, Inter-Corporate Coordination, InterFunctional Coordination, The Global Environment Environmental Uncertainty, Customer Focus, Top Management Support, Supply
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Working paper (2009/2) Arlbjrn, J.S. and de Haas, H. (2009), A Framework for Supply Chain Innovation, Department of Entrepreneurship and Relationship Management, University of Southern Denmark. Strategy, Information Technology, Supply Network Structure, Managing BuyerSupplier Relationships, Logistics Integration and Supply Chain Performance Measurement Consumers, Relationship Management, Flows, Constraints, Supply Network, Integrated Enterprise (logistics, procurement, customer accommodation, and manufacturing) and Market Distribution Network Three perspectives on SCM: As an internal supply chain, Part of a corporate company environment, Part of an external environment. The supply chain system consist of: Activities, Processes and operations and Organizations SCOR is based on five distinct management processes: Plan, Source, Make, Deliver and Return An external view: The domain of SCM includes applying analytical tools and frameworks to improve business processes that cross organizational boundaries. An internal view: Operations management includes applying analytical tools and frameworks to improve business processes that cross internal functional boundaries: Time (logistics), Marketing (planning) and Physical transformation (production)
Bowersox, Closs and Cooper (2007, p. 6) Skjtt-Larsen et al. (2007, p. 27) Supply-Chain Council (2008) Mentzer, Stank and Esper (2008)
The review of SCM frameworks and models reveals an agreement on the scope of SCM with its inter-organizational nature in chains and networks of companies through different tiers. In spite of a different vocabulary, the basic intention is the same to provide superior end-customer value. Another common threat is a focus on processes that cuts across traditional internal functions (or silos). The frameworks do all operate with output measures, like improved efficiency, improved services or reduced costs, although this is more implicit in some of the frameworks than in others. Other common denominators are their focus on customer demands, relationship management, integration and IT.
A Supply Chain Innovation Framework The brief literature review of supply chain frameworks revealed that there seems to be a consensus on that SCM is about processes both internally and inter-organizationally. Furthermore, there is consensus on the scope of SCM from internal functions to dyads, chains and networks. Referring to the brief discussion on innovation literature in general, streams of innovation literature are concerned with the process of innovation and the management of innovation processes. This is also the case for SCI literature (see e.g. Flint et al. 2005). When comparing to the division of the strategy literature into process, content and context (de Wit and Meyer 2004), this
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framework applies a content perspective. The framework aims to clarify how the content of SCI can be operationalized. Thus, the management part of SCM and the process element of doing innovations are not included in the framework. The SCI framework proposed in this paper consists of three components as shown in Figure 1.
FIGURE 1 A SUPPLY CHAIN INNOVATION FRAMEWORK

Supply Chain Business Processes
Supply Chain Technology
Supply Chain Network Structure
Supply Chain Business Processes The first component in the SCI framework is supply chain business processes. Business processes are the activities that produce a specific output of value to the customer (Cooper, Lambert and Pagh 1997). Business processes can be defined as: a structured, measured set of activities designed to produce a specified output for a particular customer or market (Davenport 1993, p. 5). The motivation for implementing customer-oriented business processes within and across members of the supply chain is both to make transactions more efficient and effective and to structure inter-firm relationships (Lambert, Garca-Dastugue and Croxton 2005). The Global Supply Chain Forum has identified eight SCM processes with sub-processes which are listed below, including their academic clarification: Customer Relationship Management (Croxton et al. 2001)
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Customer Service Management (Bolumole, Knemeyer and Lambert 2003) Demand Management (Croxton et al. 2002) Order Fulfillment (Croxton 2003) Manufacturing Flow Management (Goldsby and Garca-Dastugue 2003) Supplier Relationship Management (Croxton et al. 2001) Product Development and Commercialization (Rogers, Lambert and Knemeyer 2004) Return Management (Rogers et al. 2002)
For further examples of process models on supply chain efficiency, we refer to the SCOR model by Supply-Chain Council (2008, p. 10), the process classification framework by APQC and the Supply Chain Best Practice Framework by the Supply Chain Consortium (see Moberg et al. 2008).
Supply Chain Technology The second component of the SCI framework is supply chain technology. By this component we mean technologies that could be applied in isolation or in combination with other technologies or elements of the framework to create SCIs. Thus, in this context, it is not the technology by itself that is an innovation, but merely its appliance in a supply chain context.
Supply Chain Network Structure This component of the overall SCI framework focuses on supply chain network structure vertical and horizontal - of the company and its supply chain partners where innovations can appear. Thus, this component is similar to the component developed by Lambert, Cooper and Pagh (1998) that separates the structure of the supply chain into three elements: (1) the members of the supply chain; (2) the structural dimensions; and (3) the different types of process links. Supply chains are complex business systems that often consist of many members. Not all suppliers or customers
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should have the same strategic awareness. Therefore a differentiation must take place. The membership element draws attention to activities with mapping the supply chain structure and then, based on e.g. differentiation models, classifies suppliers and customers into different degrees of importance. The structural element is concerned with the horizontal structure (number of tiers across the supply chain), the vertical structure (the number of suppliers/customers represented within each tier) and the horizontal position of the company (e.g. close to the point of origin of raw material vs. close to private consumers). Process links are concerned with different degrees of resources spent on integrating and managing processes within and across members of the supply chain. Again, differentiation is the key word. Some process links need to be managed while others do not. In Table 3, examples of content elements of the three SCI components are listed. TABLE 3 EXAMPLES OF CONTENT ELEMENTS OF THE SUPPLY CHAIN INNOVATION COMPONENTS
Supply Chain Business Processes Customer Relationship Management Customer Service Management Demand Management Order Fulfillment Manufacturing Flow Management Procurement Product Development Supply Chain Technology Global Positioning Systems (GPS) Bar coding Radio Frequency Identification (RFID) Pick by voice technology Electronic Data Interchange (EDI) Advanced Planning Systems (APS) Warehouse Management Systems (WMS) Enterprise Resource Planning (ERP) Manufacturing Execution System (MES) Product Life-cycle Management (PLM) Business Intelligence Internet e-auctions Supply Chain Network Structure In- and outsourcing Partnership Collaboration Distribution channels Type of links to supply chain actors Third party logistics providers Fourth party logistics providers Joint ventures Complexity in supply
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An important characteristic of the SCI framework is its ability to provide both a more holistic but at the same time also a more nuanced view of what might be labeled a SCI. Thus a SCI can be both the implementation of one or more elements within one of the components, or it can be the composition of more elements from two or all three components. Each of the three components can vary in innovation effect along the axis incremental to radical. In order to make this dimension operational, we make use of the work by Davenport (1993, p. 11). The following parameters have been chosen to describe the continuum: (1) starting point (existing processes vs. clean slate); (2) frequency of change (one-time/continuous vs. one-at-time); (3) time required (short vs. long); (4) participation (bottom-up vs. top-down); and (5) typical scope (within functions vs. crossfunctional). Incremental innovations are, for example, small continuous improvements, master data management, and process optimizations. Examples of radical innovations are implementation of direct distribution by using the principles of postponement, reengineering business processes by using state-of-the-art information technology and implementation of cross-functional teams in order to speed up time-to-market processes.
ANALYSIS OF CASES AGAINST THE SCI FRAMEWORK This section provides an analysis of the cases being nominated for the CSCMP SCI award over the period 2005 to 2008. In total, there have been more applications than the thirty applications nominated, but these have been selected by committees to present their practices at the annual conferences and have thus been part of the final races for the annual awards. The cases were analyzed against the developed SCI framework and the degree of innovation (incremental vs. radical) as shown in Table 4. A detailed mapping-analysis of each case can be found in appendix 1.
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TABLE 4 CSCMP NOMINATED SCI AWARD CASES DIVIDED ALONG THE SCI FRAMEWORKa
Supply Chain Business Process Innovation Effect Incremental 14 Supply Chain Innovation Components Supply Chain Technology Supply Chain Network Structure 10 3
11 10 Cisco (winner 2008) Cisco (winner 2008) Radical Aidmatrix (winner 2007) Aidmatrix (winner 2007) 3 ROi Mercy (winner 2006) ROi Mercy (winner 2006) HP Procurement Risk HP Procurement Risk (winner 2005) (winner 2005) a The overall number counts more than thirty cases since each case can be rated in more than one component of the SCI framework.
The analysis of the case companies should uncover what kinds of SCI are in focus and what degree of innovations they have made. Table 4 shows that there is a significant focus on innovation in supply chain business processes and supply chain technology, whereas innovation in the supply chain network structure has only been the focus for a few cases. There seems to be an even split between radical and incremental innovations in the three areas. In the following, the four winning case companies will be analyzed regarding their innovations in supply chain business processes and supply chain technology. In Table 4, the cases are all rated with radical innovation in supply chain business processes and supply chain technology. Other cases from the data material will be included to describe the component of supply chain network structure.
Supply Chain Business Processes and Supply Chain Technology The first component in the SCI innovation framework is supply chain business processes that are defined as the activities that produce a specific output of value to the customer. The second component is supply chain technology by which is meant technologies that could be applied in isolation or in combination with other technologies or elements of the framework to create SCIs.
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The first case company is Cisco and is the SCI Award winner in 2008 with radical supply chain business process and supply chain technology solutions. The starting point was a returns business area that was more focused on efficiently processing product returns than on seeking ways to maximize their value. A leadership change meant a fresh look at the inherent value of returned equipment. The reverse logistics team created a reuse program that gives returned and excess equipment a second, and sometimes a third life before responsibly recycling it. Vendor ownership of core processes led to management and compliance gaps, increasing expense and creating risk. Bringing these core processes back in-house while outsourcing non-core work allowed the team to tightly control operations, increasing productivity and enabling rapid growth. Establishing automated data sharing processes reduced losses from under-managed parts inventories and excess and obsolete parts. There was no off-the-shelf SCM product available to support the new operational model, the team custom-built IT architecture to manage its inventory. Growing from a manual process based on exchanging spreadsheets, the group now uses a central database to track inventory and take requests from internal customers. This case has made radical innovations in their supply chain business processes, by establishing a whole new business model for handling product returns and implemented the needed teams and performance measurement elements. Looking at supply chain technology, Cisco could not find standard IT solutions to support their new business model and developed a new IT architecture to support the special needs of the returns business for keeping track of the products. Using the five parameters to describe the innovation, the Cisco innovation can be characterized by: (1) a development and implementation of new processes; (2) a one-time change, however, creating a basis for continuous improvements; (3) a relatively long development and implementation time; (4) a both top-down and bottom-up participation; and (5) a the truly cross-functional scope.
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The second case company is Aidmatrix (SCI Award winner in 2007). The Aidmatrix Foundation and the National Association of Free Clinics (N.A.F.C.) have developed an internetbased collaboration network servicing free clinics. The web-based tool FreeClinic Link is a system connecting each member of the free clinic supply chain of care. The value proposition for each stakeholder participating is maximized through both full capture of benefits and minimization of transaction costs. FreeClinic Link allows Free Clinics across US to come together virtually. The system enables each stakeholder to behave in a manner that maximizes the value for the other stakeholders, creating a truly collaborative supply chain. Leveraging supply chain collaboration solutions based on products and services from leading industry supporters such as Accenture, i2 Technologies and Sun Microsystems. This case has made radical innovations in supply chain technology and supply chain processes by their development of a web-portal by combining different state-of-the-art technologies. The basic business processes are standard supply chain processes, however, through the IT integration it is possible to automate the collaboration between the parties in the supply chain. Using the five parameters to describe the innovation, the Aidmatrix innovation can be characterized by: (1) a development and implementation of new processes; 2) a one-time change, however, creating basis for continuous improvements; (3) a relatively long development and implementation time; (4) top-down and bottom-up participation; and 5) a truly cross-functional scope. The third case company is ROi Mercy and the SCI Award winner in 2006. This company has made radical innovations in their supply chain business processes and supply chain technology. The starting point was a consolidation effort in procurement, and implementation of a common materials management system and a common item file. The changes were driven in a new team structure with competences from inside the hospital and from outside, resources that were hired in from the
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logistics and supply chain industry. The scope of the changes was truly cross-functional, and contained both process development and technology development and application. Using the five parameters to describe the innovation, the ROi Mercy innovation can be characterized by: (1) a development and implementation of new processes; (2) a one-time change; (3) a relatively long development and implementation time; (4) top-down and bottom-up participation; and (5) a truly cross-functional scope. The fourth case company is Hewlett-Packard (HP) with an innovation within procurement risk management (PRM). HP won the SCI award in 2005. As the previous winning cases, this company has made radical innovations in their supply chain business processes and supply chain technology. The PRM project implemented new tools and processes to handle the risks for the electronic components market, where prices around year 2000 were increasing due to increased demand. The innovation is the use of tools and processes from the financial risk management processes at Wall Street. HP has developed a framework to quantify the impact of product demand, component price and availability uncertainty on revenue, costs and profits. It is a software tool to support the risk management process to proactively manage procurement uncertainties and risks. The PRM business process is cross-functional and links and defines the roles and responsibilities of procurement, planning, supply chain operations, finance and marketing. Using the five parameters to describe the innovation, the HP SCI can be characterized by: (1) development and implementation of new processes; (2) it was a one-time change; (3) relatively long development and implementation time; (4) participation was both top-down and bottom-up: and (5) the scope was truly cross-functional.
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Supply Chain Network Structure The third component of the overall SCI framework was not in focus for innovation in the four winning cases, therefore two other cases have been chosen to illustrate the two dimensions of the innovation (radical and incremental). The supply chain network structure focuses on the structure vertical and horizontal of the company and its supply chain partners (Lambert, Cooper and Pagh 1998). From the overall case analysis, three cases is found to have made radical innovations in the supply chain network structure and other three have made incremental innovations. An example of a case with radical innovation is LEXMARK who improved their Cash-toCash Cycle time, by application of postponement principles for late dedication of customer specific products, by using the same engine across more products. Changing labeling and naming of the product to stickers makes it possible to dedicate in the Final Specification Assembly (FSA). Downstream shipping modes and routes were defined to optimize product handling, and implementation of a direct delivery process using Collaborative Planning, Forecasting and Replenishment (CPFR) techniques with retail partners. Focus on total product cost (supply chain cost) and not the piece price of the Bill of Material (BOM). The innovation can be characterized by: (1) new processes; (2) a one-time change; (3) a relatively long development and implementation time; (4) a top-down and bottom-up participation; and (5) a truly cross-functional scope. An example of a case with incremental innovation in supply chain network structure is Bakers Footwear Group. They implemented, as first phase of a change strategy, a direct distribution concept by sourcing products from manufactures and distribute them directly to the retailers. This reduced time to market, reduced stock-outs and lowered total landed costs. Phase 2 was a postponement strategy, by treating the ocean container as a floating warehouse and postpone the allocation decision until the last minute. The innovation can be characterized by: (1) existing
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processes, (2) a continuous change, (3) a relatively long development and implementation time; (4) top-down and bottom-up participation; and (5) a cross-functional scope.
Summary of the CSCMP SCI award cases The analysis of the thirty cases of SCI provides as shown that the developed framework with the three components supply chain business processes, supply chain technology and supply chain network structure has explanatory value for the understanding and discussion of SCI. The framework is providing concepts and guiding in the investigation of and the following development of SCI. Furthermore, based on the studied cases, there seems to be a connection between innovation in supply chain business processes and supply chain technology. Most of the case companies who have innovated in supply chain business processes have also made innovations in supply chain technology to support the new business processes. This was also evident in the four winning cases. Based on the study of case studies, developments of the supply chain network structure seem to be lesser presence. However, the two cases outlined above show that there is significant improvement to be gained in supply chain performance by innovating the supply chain network structure.
CONCLUSION AND IMPLICATIONS The overall purpose of the paper has been to investigate what SCI is by clarifying how the extant literature on SCM and innovation explicitly has been dealing with the concept of SCI, and to develop a framework for SCI. The literature review identified a limited number of papers that explicitly deals with SCI. Numerous papers exist on SCM and innovation as separate topics, but few on the combined issue of the innovation of a supply chain. The focus of many of the papers specifically on SCI, are on the application of new of technology in the supply chain. However, era los found that technologies,
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already known in one industry, are applied in other industries. Other areas in focus in the theoretical contributions are innovation in processes, integration of suppliers or customers, faster order handling, etc. (Holmstrm 1998). Two topic areas under the SCI umbrella seem to be less researched. The first area is the structural part of a supply chain (or the architecture of the supply chain) and the supply chain network which is well described by e.g. Cooper, Lambert and Pagh (1997). Looking at the CSCMP award cases, some of the companies have actually been doing innovation in the supply chain network and achieved radical performance improvements, this could be by applying postponement principles to products and logistics. We believe that the supply chain network is an important element in the understanding and possible development of SCIs. The second less researched area is the measurement of the SCI, the scale or rating of an innovation in terms of being an incremental or radical innovation. We found no clear definitions of how to measure the degree of an innovation. A number of papers, among others Flint et al. (2005), Krabbe (2007), Rogers (1995), Schumpeter (1934), state that an innovation should be rated subjectively from the eyes of the person or organization seeing or experiencing a change. However, this challenges the ability of comparisons of innovations in supply chains. A more objective scale is needed to be able to point at the best in class supply chain solutions. A framework for SCI is developed, consisting of the three components Supply Chain Processes, Supply Chain Network and Supply Chain Technology. The framework has been tested on thirty nominated SCI applications for the CSCMP SCI award. It is found that the framework contains explanative power to clarify what constitutes a SCI.
Implications The findings in this paper have both managerial and research implications. Three managerial implications are found. First, the framework provides a language for conceptualizing SCI. It
22
provides the basis to sharpen the view on what is meant by SCI. Second, the framework can be used to stimulate discussions on what and how to do SCI in companies. Finally, the framework can be used to map and position ongoing and/or intended SCI projects in a company. It provides a basis for an assessment on current activities to carry on, and to what to look for when scoping new development initiatives within the domain of SCM. In other words, it can create more consciousness about what types of innovations are needed and developed, and how these sustain the creation of competitive advantages. The paper does also provide implications for research. First, the framework provides the foundation for theory building within SCI. The next step is to continue to refine the framework for SCI by conducting empirical qualitative and quantitative studies. Second, measuring the degree of SCI is an area for future research. This paper has found that changes in technologies, processes and also in supply chain networks are areas for SCI. Such changes can be either incremental or radical. However, this raises the basic question if everything has to become an innovation? What about general continuous optimization of e.g. procurement lead-time? Is this an incremental innovation? Within the current body of knowledge, the answer would be yes. This is also closely related with the scale of measurement of SCI. Future research must address if there is some work and basic improvements to be done before entering the degree of innovation scale. Third, more research is needed to explore how a SCI evolves during the life cycle of a product and the development of a market. Does a SCI have a life cycle? In a case where market, demand and supply characteristics shift to become more predictable, it would be reasonable to think that radical innovations in supply chains would no longer be the objective, but solely be focused on incremental innovations. Finally, there is a need to investigate SCI across industries. Are radical SCIs in one industry merely incremental SCIs in another industry? Thus future research is suggested to address the relationship between lifecycles of products and markets across industries and the types of SCI developed.
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NOTES Baumol, W. J. (2002) The Free-Market Innovation Machine: Analyzing The Growth Miracle Of Capitalism, Woodstock, Oxon: Princeton University Press. Bello, Daniel C., Ritu Lohtia, and Vinita Sangtani (2004), An Institutional Analysis of Supply Chain Innovations in Global Marketing Channels, Industrial Marketing Management, Vol. 33, No. 1, pp. 57-64. Bessant, John (2003), Challenges in Innovation Management, edited by Larisa V. Shavinia (2003) International Handbook on Innovation, Elsevier science limited, London, pp. 761-773. Billington, Corey, and Gianpaolo Callioni, Barrett Crane, John D. Ruark, Julie Unruh Rapp, Trace White, Sean P. Willems, (2004), Accelerating the Profitability of Hewlett-Peckards Supply Chains Inerfaces, Vol. 34, No. 1, pp 59-72. Bolumule, Yemisi A., Michael Knemeyer, and Douglas M. Lambert (2003), The Customer Service Management Process, The International Journal of Logistics Management, Vol. 14, No. 2, pp. 1531. Bowersox, Donald J., David J. Closs and Theodore P. Stank (1999), 21st Century Logistics: Making Supply Chain Integration a Reality, Oak Brook, Il.: Council of Logistics Management. Bowersox, Donald J., David J. Closs and M. Bixby Cooper (2007), Supply Chain Logistics Management, New York: McGraw-Hill. Charvet, Franois F., Martha C. Cooper and John T. Gardner (2008), The Intellectual Structure of Supply Chain Management: A Bibliometric Approach, Journal of Business Logistics, Vol. 29, No. 1, pp. 47-73. Chen, Injazz J. and Antonym Paulraj (2004), Towards a Theory of Supply Chain Management: The Constructs and Measurements, Journal of Operations Management, Vol. 22, No. 2, pp. 119150. Closs, David J. and Diane A. Mollenkopf (2004), A Global Supply Chain Framework, Industrial marketing Management, Vol. 33, No. 1, pp. 37-44. Cooper, Martha C., Douglas M. Lambert and Janus D. Pagh (1997), Supply Chain Management: More Than a New Name for Logistics, The International Journal of Logistics Management, Vol. 8, No. 1, pp. 1-14. Cox, Andrew (1999), A Research Agenda for Supply Chain and Business Management Thinking, Supply Chain Management: An International Journal, Vol. 4, No. 4, pp. 209-211. Croxton, Keely L. (2003), The Order Fulfillment Process, The International Journal of Logistics Management, Vol. 14, No. 1, pp. 19-33.
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Croxton, Keely L., Douglas M. Lambert, Sebastin J. Garca-Dastugue, and Dale S. Rogers (2002), The Demand Management Process, The International Journal of Logistics Management, Vol. 13, No. 2, pp. 51-66. Croxton, Keely L., Sebastin J. Garca-Dastugue, Douglas M. Lambert, and Dale S. Rogers (2001), The Supply Chain Management Process, The International Journal of Logistics Management, Vol. 12, No. 2, pp. 13-36. CSCMP (2008) cscmp.org/education/awards/09guidelines.asp, January 3, 2008 Davenport, Thomas H. (1993), Process Innovation: Reengineering Work through Information Technology, Boston, MA: Harvard Business School Press. de Wit, Bob and Ron Meyer (2004), Strategy: Process, Content and Context An International perspective, 3th. ed., New York: Thomson Learning. Flint, Daniel J., Evert Larsson, Britta Gammelgaard and John T. Mentzer (2005), Logistics Innovation: A Customer Value-Oriented Social Process, Journal of Business Logistics, Vol. 26, No. 1, pp. 113-147. Flint, Daniel J., Evert Larsson, and Britta Gammelgaard (2008), Exploring processes for Customer Value Insights, Supply Chain Learning and Innovation: An International Study, Journal of Business Logistics, Vol. 29, No. 1. pp. 257-281. Ferdows, Kasra, Michael A. Lewis, and Jose A.D. Machuca (2004), Rapid-Fire Fulfillment, Harvard Business Review, Vol. 82, No. 11, pp. 104-110. Fine, Charles H. (1998), Clockspeed, Reading: Perseus Books. Forrester, Jay W. (1958), Industrial Dynamics: A Major Breakthrough for Decision Makers, Harvard Business Review, Vol. 36, No. 4, pp. 37-66. Francis, Dave and John Bessant (2005), Targeting Innovation and Implications for Capability Development, Technovation, Vol. 25, No. 3, pp. 171-183. Frankel, Robert, Yemishi A. Bolumole, Reham A. Eltantawy, Antony Paulraj, and Gregory T. Gundlach (2008), The Domain and Scope of SCMs Foundational Disciplines Insights and Issues to Advance Research, Journal of Business Logistics, Vol. 29, No. 1, pp. 1-30. Gibson, Brian J., John T. Mentzer, and Robert L. Cook (2005), Supply Chain Management: The Pursuit of a Consensus Definition, Journal of Business Logistics, Vol. 26, No. 2 pp. 17-25. Goldsby, Thomas J. and Sebastin J. Garca-Dastugue (2003), The Manufacturing Flow Management Process, The International Journal of Logistics Management, Vol. 14, No. 2, pp. 3352.
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Harland, Christine M. (1996), Supply Chain Management: Relationships, Chains and Networks, British Academy of Management, Vol. 7, special issue, pp. 63-80. Holmstrm, Jan (1998), Business Process Innovation in the Supply Chain a Case Study of Implementing Vendor Managed Inventory, European Journal of Purchasing & Supply Management, Vol. 4, No. 2-3, pp. 127-131. Holmstrm, Jan, William E. Hoover Jr., Perttu Louhiluoto, and Antti Vasara (2000), The Other End of the Supply Chain, The McKinsey Quarterly, No. 1, pp. 63-71. Hkansson, Hkan and Gran Persson (2004), Supply Chain Management: The Logic of Supply Chains and Networks, The International Journal of Logistics Management, Vol. 15, No. 1, pp. 1126. Johannessen, Jon-Arild, Bjrn Olsen and G.T. Lumpkin (2001), Innovation as Newness: What is New, How New, and New to Whom?, European Journal of Innovation Management, Vol. 4, No.1, pp. 20-31. Kim, Bowon (2000), Coordinating an Innovation in Supply Chain Management, European Journal of Operational Research, Vol. 123, No. 3, pp. 568-584. Krabbe, Michael (2007) Leverage Supply Chain Innovation Industrial Engineer, December, pp 26-30. Lambert, Douglas M., Martha C. Cooper and Janus D. Pagh (1998), Supply Chain Management: Implementation Issues and Research Opportunities, The International Journal of Logistics Management, Vol. 9, No. 2, pp. 1-19. Lambert, Douglas M., Margarat A. Emmelhainz and John T. Gardner (1996), Developing and Implementing Supply Chain Partnerships, The International Journal of Logistics Management, Vol. 7, No. 2, pp. 1-17. Lambert, Douglas M., Sebastin J. Garca-Dastugue, and Keely L. Croxton (2005), An Evaluation of Process-Oriented Supply Chain Management Frameworks, Journal of Business Logistics, Vol. 25, No. 1, pp. 25-51. Larson, Paul D., Richard F. Poist and rni Halldrsson (2007), Perspectives on Logistics vs. SCM: A Survey of SCM Professionals, Journal of Business Logistics, Vol. 28, No. 1, pp. 1-24. Magretta, Joan (1998), The Power of Virtual Integration: An Interview with Dell Computers Michael Dell, Harvard Business Review, Vol. 76, No. 2, pp. 72-84. Mentzer, John T., Theodore P. Stank, and Terry L. Esper (2008), Supply Chain Management and Its Relationship to Logistics, Marketing, Production, and Operations Management, Journal of Business Logistics, Vol. 29, No. 1 pp. 31-46.
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Mentzer, John T., William DeWitt, James S. Keebler, Soonhong Min, Nancy W. Nix, Carlo D. Smith, and Zach G. Zacharia (2001), Defining Supply Chain Management, Journal of Business Logistics, Vol. 22, No. 2, pp. 1-25. Moberg, Christopher R., Kate Vitasek, Theodore L. Stank and Abr Pienaar (2008), Time to Remodel, CSCMPs Supply Chain Quarterly, Vol. 2, No. 3, pp. 36-48. New, Stephen J. (1997), The Scope of Supply Chain Management Research, Supply Chain Management: An International Journal, Vol. 2, No. 1, pp. 15-22. Ohno, Taiichi (1988), Toyota Production System: Beyond Large-Scale Production, New York: Productivity Press. Oliver, R. Keith and Michael D. Webber, "Supply-Chain Management: Logistics Catches Up with Strategy," in: Martin G. Christopher, Logistics: The Strategic Issues, London: Chapman and Hall, 1992, pp. 63-75. Orlickly, Jospeh (1975), Materials Requirements Planning, New York: McGraw-Hill. Prahalad, C.K. and M. S. Krishnan (2008), The New Age of Innovation: Driving Cocreated Value Through Global Networks, New York: McGraw-Hill. Rogers, Dale S., Douglas M. Lambert and A. Michael Knemeyer (2004), The Product Development and Commercialization Process, The International Journal of Logistics Management, Vol. 15, No. 1, pp. 43-56. Rogers, Dale S., Douglas M. Lambert, Keely L. Croxton, and Sebastian J. Garca-Dastugue (2002), The Returns Management Process, The International Journal of Logistics Management, Vol. 13, No. 2, pp. 1-18. Rogers, Everett M. (1995), Diffusion of Innovations, 4th ed., New York: The Free Press. Russell, Dawn M. and Anne M. Hoag (2004), People and Information Technology in the Supply Chain: Social and Organizational Influences on Adoption, International Journal of Physical Distribution & Logistics Management, Vol. 34, No. 2, pp. 102-122. Santos, Dos Brian L. and Lars S. Smith (2008), RFID in the Supply Chain: Panacea or Pandoras Box?, Communications of The ACM, Vol. 51, No.10, pp. 127-131. Schumpeter, J.A. (1934), The Theory of Economic Development, Boston: Harvard University Press. Sebastiao, Helder J. and Susan Golicic (2008), Supply Chain Strategy for Nascent Firms in Emerging Technology Markets, Journal of Business Logistics, Vol. 29, No.1. pp 75-91. Skjtt-Larsen, Tage, Philip B. Schary, Juliana H. Mikkola and Hebert Kotzab (2007), Managing the Global Supply Chain, Copenhagen: Copenhagen Business School Press.
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Stevens, Graham C. (1989), Successful Supply Chain Management, Management Decision, Vol. 28, No. 8, pp. 25-30. Supply-Chain Council (2008), Supply Chain Operations Reference-model. Scor Overview Version 9.0. Tidd, Joe, John Bessant and Keith Pavitt (2005), Managing Innovation: Integrating Technological, Market and Organizational Change, Chichester: John Wiley & Sons Ltd. Trott, Paul (2005), Innovation Management and New Product Development, 3rd edition, London: Pearson Education.
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APPENDIX 1: AN OVERVIEW OF NOMINATED APPLICATIONS TO THE CSCMP SUPPLY CHAIN AWARD

2008
Case Nr. 1 2 Company Title Supply Chain Business Process Increm. Radical X Supply Chain Technology Increm. Radical X X Supply Chain Network Structure Increm. Radical
Cisco Systems Inc. (winner) Dynamic Worldwide Logistics Inc. and Instaknow.com, Inc. Genco and Sky-Trax, Inc. Lockheed Martin Aeronautics Company OceanGuaranteed with APL Logistics, Con-Way Freight Inc. Party Lite Gifts and Chicago Consulting US Air Force with Booz Allen Hamilton and Morgan Borszs Consulting
Unlocking Value from Product Returns Instaknow-ACE Syncronized Global Supply Chains Tracking Solutions
X Forecasted Raw Materials (FoRM) Creating the Industrys First Day-Definite, Guaranteed Ocean LCL service Optimal Packaging X Transforming the United States Air Force Supply Chain: Expeditionary Logistics for the 21st Centry (Elog21) X
X X X X
6 7
2007
Case Nr. 8 Company Title Supply Chain Business Process Increm. Radical X Supply Chain Technology Increm. Radical X Supply Chain Network Structure Increm. Radical
Aidmatrix (winner)
Bakers Footwear Group, Inc. John Deer SmartOps and
FreeClinic Link Empowering a Supply Chain of Giving Fashionably Late is Not Fashionable When Dealing with Trendy Footwear
10
11
Kraft Foods and IDEO Liquor Control Board of Ontario Motorola
12 13
14
OceanSchedules.com ,
Customer Supply Chain Innovation and Collaboration Model New Item Submission System Supply Chain Transformation Drives High-Performance Results Innovation for the OceanTransportation Industry
X X
29
APPENDIX 1: AN OVERVIEW OF NOMINATED APPLICATIONS TO THE CSCMP SUPPLY CHAIN AWARD (CONT.)
2006
Case Nr. 15 16 17 18 Company Title Supply Chain Business Process Increm. Radical X X X X X Supply Chain Technology Increm. Radical Supply Chain Network Structure Increm. Radical
CEAG / FRIWO Hewlett-Packard IBM Kelloggs and CSCS
19 20
Mercy ROi (winner) P&G
A Quantum Leap in Reducing Working Capital, Buy Sell Process The Road to an On Demand Supply Chain A Closed-Loop Returns Management System, Turning Failures into Profits ROI, Resource Optimization & Innovation Forces of Business and Forces of Nature Building and Agile Supply Network
X X
21
The Dow Chemical Company,
2005
Case Nr. 22 Company Title Supply Chain Business Process Radical Increm. X Supply Chain Technology Radical Increm. X Supply Chain Network Structure Increm. Radical
Blockbuster Inc.
Rental DVD Packaging Supply Chain Secondary Packaging Redesign Design for Supply Chain Programe Procurement Risk Management (PRM) at HP Company Elevating Supplier Value: The Kraft Foods Supplier Relationship Management Bridge Cash to Cash Cycle Time Improvement National Oilwell Varco
23
24 25
Campell Sales Company and Food Lion Hewlett-Packard Hewlett-Packard (winner) Kraft Foods
X X X
26
27 28
Lexmark NOV
X X X
29
United Technologies:
Supplier Insight for Better Business Performance Bridging the Gap Between Strategic and Theater Distribution
30
USTRANSCOM
30

Arlbjorn and de Haas Framework 2009

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Working paper (2009/2) Arlbjrn, J.S. and de Haas, H.

A FRAMEWORK FOR SUPPLY CHAIN INNOVATION

A FRAMEWORK FOR SUPPLY CHAIN INNOVATION ABSTRACT

A FRAMEWORK FOR SUPPLY CHAIN INNOVATION

Optimizing supply chain business processes

Introducing new products (product development)

The innovation process

TABLE 2 REVIEW OF SUPPLY CHAIN MANAGEMENT FRAMEWORKS AND MODELS

Mentzer et al. (2001) Chen and Paulraj (2004)

FIGURE 1 A SUPPLY CHAIN INNOVATION FRAMEWORK

Supply Chain Technology

Supply Chain Network Structure

APPENDIX 1: AN OVERVIEW OF NOMINATED APPLICATIONS TO THE CSCMP SUPPLY CHAIN AWARD

Bakers Footwear Group, Inc. John Deer SmartOps and

Kraft Foods and IDEO Liquor Control Board of Ontario Motorola

CEAG / FRIWO Hewlett-Packard IBM Kelloggs and CSCS

Mercy ROi (winner) P&G

The Dow Chemical Company,

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