BUSHOR-1400; No.

of Pages 9

Business Horizons (2017) xxx, xxxxxx

Available online at www.sciencedirect.com

ScienceDirect
www.elsevier.com/locate/bushor

An integrated approach to managing extended

supply chain networks
Kenneth Saban, John R. Mawhinney, Matthew J. Drake *

Palumbo-Donahue School of Business, Duquesne University, 600 Forbes Avenue, Pittsburgh, PA 15282, U.S.A.

KEYWORDS Abstract In an effort to improve their competitive position in a rapidly changing

Supply chain marketplace, many companies have replaced their traditional supply chains with
management; extended supply chain networks built on a foundation of supply chain collaboration.
Buyer-seller These extended networks require the use of decision support tools and technologies
relationships; to improve both operating efciencies and customer service, but many companies
Supply chain network; have struggled to realize the expected benets of these tools and the increased
Firm collaboration; collaboration. This article recommends that companies adopt an integrated strategy
Collaborative supply of people, processes, and technology to achieve their competitive supply chain goals.
chain Our recommendation is backed by the results of a survey we conducted of senior-
level practitioners concerning the importance and challenges of supply chain col-
laboration. The article concludes with a set of managerial recommendations to
improve a companys collaborative efforts within its supply chain.
# 2017 Kelley School of Business, Indiana University. Published by Elsevier Inc. All
rights reserved.

1. Introduction networks represent an expanded set of collaborat-

Increased competition and shortened product life
cycles are forcing executives to rethink how their
businesses are going to compete today. In an effort
to provide more value-laden products in shorter
periods of time, executives are replacing their
traditional supply chains with extended supply
chain networks (Accenture, 2005; Cisco Systems
Inc., 2006; Microsoft, 2006). Extended supply chain
* Corresponding author
E-mail addresses: saban@duq.edu (K. Saban),
mawhinney@duq.edu (J.R. Mawhinney),
drake987@duq.edu (M.J. Drake)
ing companies, both upstream and downstream,
that work together to bring value-laden products
to the customer (Davis & Spekman, 2004). While
extended supply chain networks tap into a wide
array of external resources, they also require a high
degree of supply chain collaboration (SCC) between
partners as employees identify and analyze impor-
tant developments in their work environment and
then pass this information on to others to act upon
(Bitran, Gurumurthi, & Sam, 2006; Hoque, 2002).
To achieve SCC, managers are using the latest
decision support systems and technologies (e.g.,
APS, CPFR, SRM) to improve their rms agility,
reduce cycle times, achieve higher efciencies,
and deliver value-laden products to customers in

0007-6813/$ see front matter # 2017 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.bushor.2017.05.012
BUSHOR-1400; No. of Pages 9
2 K. Saban et al.
a timely fashion (Gimnez & Loureno, 2008; Rad-
jou, 2003). However, in some cases these tools are
not making the rms more competitive. Forrester
(2005) reported that while 48% of U.S. businesses
implemented advanced supply chain technologies,
only 9% considered future updates, with the remain-
ing businesses not sure how to proceed. Microsoft
(2006) found that a culture of openness contributed
36% to collaboration quality while the use of col-
laborative technology only contributed 16% to col-
laboration quality. Kelton Research found that while
80% of C-level executives believe in enterprise-wide
collaboration, only 30% feel that communication
tools have made it easier to work (Avanade, 2010).
Fawcett, Fawcett, Watson, and Magnan (2012)
argued that the inability of companies to achieve
high levels of SCC is in part due to the lack of
removing behavioral constraints. These constraints
include inter-rm conict, nonaligned goals, and
the non-sharing of sensitive information. These
behavioral restraints also inhibit the use of the
collaborative communication technologies in place
(Setia, Sambamurthy, & Closs, 2008; Wu, Yeniyurt,
Kim, & Cavusgil, 2005).
The same observation was made during the
development of Management Information Systems
(MIS). The Standish Group found that 24% of MIS
projects failed, 44% were challenged, and only 32%
were successful when technology was considered
the sole contributing force. The problem was that
management did not realize that MIS projects hinge
on having two systems in place: (1) a technical
system that is concerned with the processes, tasks,
and technology needed to transform inputs into
outputs; and (2) a social system that represents
the relationships among people, reward systems,
and authority structures (Bostrom & Heinen, 1977).
Technocentric thinking, which is based upon the
belief that SCC can only be achieved by having the
right technology in place, has been reinforced by
the business press, which has promoted information
technology as a silver bullet. In this article, we
argue that an integrated strategyone that links
people, processes, and technologyis a better
strategy to employ when working to achieve SCC.
This position is supported in the literature pre-
sented herein as well as the ndings of a SCC survey
involving senior business practitioners. The article
will conclude with a set of specic recommendations
to facilitate SCC in extended supply chain networks.
2. Literature review
While there is growing interest in the benets of
SCC, management is often unsure of how to achieve
it. One executive was quoted as saying (Cohen &
Roussel, 2005):
If you asked 100 supply chain executives for
a denition, youd likely get 100 different
answers. Certainly most would agree that
collaboration is important, that technology
and relationship building are critical compo-
nents, and that companies with effective
collaboration skills are likely to have a com-
petitive advantage. However, few executives
would be able to offer a clear, unambiguous
denition.
For those rms that forged with various SCC initia-
tives, the Computer Sciences Corporation (2004)
found that only 44% of the rms had staff dedicated
to improving external collaboration and of those
collaboration initiatives, only 35% turned out to be
moderately successful. Given the confusion sur-
rounding SCC, a good place to start is by establishing
an operational denition.
2.1. Supply chain collaboration
Davis and Spekman (2004) dened collaboration as a
state where individual parties work together to
achieve mutually benecial outcomes. Cohen and
Roussel (2005) and Ramanathan and Gunasekaran
(2014) suggested that SCC is the means by which
various partners work together toward mutual ob-
jectives through the sharing of ideas, information,
knowledge, risks, and rewards. Hansen (2009) sub-
mitted that SCC takes place when people from
different units help each other to achieve a common
goal that goes beyond shipping data back and forth
between parties.
Integrating this perspective with a signicant
collection of research,1 we posit that SCC is best
achieved when separate autonomous organizations
successfully integrate their resourcespeople, pro-
cesses, and technologyto achieve a common goal
(see Figure 1). This allows the right people to
connect with the right expertise or information at
the right time to drive the right business decision.
Having identied the three actors in SCC, the next
step is to determine their respective roles across
different buyer-seller relationships.
1
Specically, see Copacino (1997); Fredendall and Hill (2000);
Melville, Kraemer, and Gurbaxani (2004); Poirier, Ferrara,
Hayden, and Neal (2004); Gain (2005); Coyle, Langley, Gibson,
Novak, and Bardi (2008); Fawcett, Magnan, and McCarter (2008);
Soosay, Hyland, and Ferrer (2008); Hansen (2009); Fawcett et al.
(2012); and Chopra and Meindl (2013).
BUSHOR-1400; No. of Pages 9
An integrated approach to managing extended supply chain networks
Figure 1. An integrated approach to supply chain
collaboration
People
Supply Chain
Collaboration
Technology Processes
2.2. Buyer-seller relationships
Many factors are involved in categorizing buyer/
seller relationships, not the least of which is the
time the individuals involved have personally in-
vested to maintain a relationship. However, consid-
ering the strategic value of SCC often leads the
buying organization to assess the risk and value
associated with the goods or services exchanged in
the supply process. One approach involves mapping
the goods or services in relationship to the quadrants
identied in the risk-value matrix (Figure 2).
Mapping against the matrix enables the supply
manager to strategically assess the risk-value rela-
tionship between major categories of purchased
goods and services and subsequently develop the
best allocation strategy of people and technology
Figure 2. Risk-value matrix
Unique
high risk/low value
(custom products)
Risk
Generics
low risk/low value
(office supplies/MRO)
Value or Profit Potential
Source: Monczka, Handeld, Giunipero, and Patterson (2011)
3
resources to complete the acquisition process. This
is a benecial and necessary process given that most
medium to large companies source from many sup-
pliers, making it infeasible to conduct business at
high levels of collaboration with all of them.
A number of general supply market character-
istics align with the quadrants of the risk-value
matrix. One very inuential element from a sourc-
ing strategy perspective is the number of suppliers
in the quadrant and subsequently the level of supply
chain surplus of the goods and services. Figure 3
provides another view of the quadrants comparing
the number of suppliers to the value of the goods or
services. For example, generic items are low value
and low risk with many suppliers; this drives corre-
sponding supply management strategies of minimiz-
ing total delivered cost and reducing transaction
costs through systems such as e-catalogs. At the
same time, critical items with high risk and value
generally have few suppliers and little supply chain
surplus and are best addressed with strong collabo-
rative alliances.
With the clarity of the risk value relationship
aligned with a supply strategy, a more in-depth
SCC strategy can be developed. With the inverse
relationship between risk and the number of sup-
pliers in the market place, a series of market ex-
change relationships can be established. Geref,
Humphrey, and Sturgeon (2005) and Ashenbaum,
Maltz, Ellram, and Barratt (2009) argue that supply
chain exchanges can be categorized as market,
Strategic
high risk/high value
(patented products)
Commodities
low risk/high value
basic production items
(logistics services)
BUSHOR-1400; No. of Pages 9
4 K. Saban et al.
Figure 3. Sourcing strategy: Methods
Low
Unique Strategies
Cost analysisreverse
pricing
Standardize
requirements
Number
of
available
suppliers Generic Strategies
Total delivered cost
Automate to reduce
purchasing
involvement
High
Low
Source: Monczka, Handeld, Giunipero, and Patterson (2011)
modular, and relational. Each category requires a
different level of SCC and therefore a different mix
of people, process, and technology.
2.2.1. Market exchanges
Market exchanges are formed to generate an ef-
cient means to facilitate low value transactions
such as purchasing cleaning materials or general
maintenance services. The collaboration require-
ment is low due to the low level of information ow
required to facilitate these types of transactions.
People resources are low as management normally
makes all the go/no-go decisions. Process resources
are moderate as they are used to facilitate data
exchange and task alignment. Technology resources
are high as they are used to manage large ows of
data (explicit) information. It is common practice to
use an arms-length supply chain strategy. This type
of strategy is adversarial in that the supplier nor-
mally has to bear most of the costs while the buyer
realizes most of the benets. Therefore, suppliers
are thought of as being kept at arms length.
2.2.2. Modular exchanges
Modular exchanges are formed to improve the
acquisition of material/services from key suppliers
who make signicant investments to maintain the
business. The collaboration requirements are mod-
erate due to a higher level of information ow and
employee interactions. People resources tend to be
lower as supply management works to create a
de facto position of supplier dominance. Process
Strategic Strategies
Cost analysis
Collaborative cost
reduction efforts
focused on total costs
Commodity Strategies
Leverage preferred
suppliers
Price analysis using
market forces
High
Value
resources are moderate as they are used to
facilitate ow of explicit information. Information
technology resources are high as they are used to
distribute explicit data between partners. An
adversarial collaborative supply chain strategy is
often used in these situations. Given the important
role of these relationships, proprietary systems are
required to transfer high levels of information and
as such demand a long-term commitment from both
the buyer and supplier. This exchange requires more
dependency on the right supply chain processes and
less on direct employee involvement.
2.2.3. Relational exchanges
Relational exchanges are formed to create value
added partnerships through complex intellectual
property or resource exchanges. To be successful,
both parties accept the fact that each will make
dedicated investments in the exchange. Some refer
to this state as the holy grail of supply chain rela-
tionships. The collaboration requirements are high
due to the extreme level of information ow and
employee interactions. Therefore, people resour-
ces are high as employees from all organizations are
involved in complex problem solving and tacit in-
formation exchange. Process resources are equally
high as they are used to facilitate high levels of
tacit/explicit information. A collaborative supply
chain strategy is most often used in these buyer/
seller relationships.
Based on this discussion we can draw several
conclusions. First, all supply chain exchanges are
BUSHOR-1400; No. of Pages 9

An integrated approach to managing extended supply chain networks 5

not created equal when one considers the value and
criticality of the project. As such, each buyer-seller
relationship has to be treated independently.
Second, the level of SCC varies depending on
the complexity of the exchange or project. This
variance requires that a different mix of people,
processes, and technology must be created and
properly applied. Third, as buyer/seller relation-
ships require a high level of SCC, the role of human
collaboration is greatly enhanced due to the ex-
change of tactic and explicit information exchange
between internal and external parties.
It is clear that matching the right supply chain
strategy with the right buyer-seller relationship is a
complex task that in turn places a major burden on
the person responsible for orchestrating the ex-
tended supply chain network. The next section will
discuss a method for matching the right supply chain
strategy with the proper buyer-seller relationship.
2.3. Supply chain strategies
The primary reason for having a supply chain strat-
egy is to establish how a rm is going to work with
supply chain partners, including suppliers, distrib-
utors, customers, and even rm customers custom-
ers (Happek, 2005). Table 1 helps managers match
the right supply chain strategy with the right supply
chain partnership (Cohen & Roussel, 2005; Cox,
Watson, Lonsdale, & Sanderson, 2004; Coyle
et al., 2008; Spekman, Kamauff, & Myhr, 1998;
Whipple & Russell, 2007). It addresses several
fundamental questions:
1. What are the different types of supply chain
exchanges?
2. What are the collaboration requirements for
each buyer-seller relationship?
3. How do the collaboration requirements alter the
mix/weight placed on people, processes, and
technology?
4. What supply chain strategy best ts each buyer-
seller relationship?
Armed with the information presented in Table 1,
supply chain managers cannot only select the prop-
er supply chain strategy (arms-length, adversarial
collaborative, or collaborative), but also adjust
the mix/weight of the three resources (people,
processes, and technology). Both will facilitate
the free ow of explicit and tacit information within
and across their extended supply chain networks
as well as better engage key employees. Our
hope is that this framework will start to peel back
the mystery involving SCC, which in turn will
improve the effectiveness of extended supply chain
networks.

Table 1. Relationship strategy framework

Transactional Cooperative Coordinated Complex collaboration
collaboration collaboration collaboration
Business Generate an efcient Improve the Improve the Create value-added
goal means to facilitate low acquisition of routine acquisition of exchanges through
value transactions materials or services materials/services complex intellectual
from key suppliers property or resource
exchanges
Relationship Adversarial or Non-adversarial Adversarial Non-adversarial or
strategy arms-length strategy arms-length strategy collaborative strategy collaborative strategy
People Employee Employee Employee Employee involvement:
involvement: low involvement: low involvement: high
Management makes Management works to moderate Complex problem-
go/no-go decisions create a de facto Joint decision-making solving requires high
position of supplier on traditional make- level of tacit
dominance source-buy projects information exchange
Process Processes used to Processes used to Processes used to Processes used to
facilitate data facilitate ow of facilitate ow of facilitate high levels of
exchange and task explicit information: explicit information tacit/explicit
alignment: moderate moderate and knowledge: high information: high
Technology Technology used to Technology used to Technology used to Technology used to
manage large ow of distribute explicit data distribute explicit data support employee
data/explicit between operations/ between operations/ decision making:
information: moderate units: high units: high moderate
BUSHOR-1400; No. of Pages 9

6 K. Saban et al.

In order to validate the fact that relational ex- Table 2. Demographic breakdown of eld study
changeswhich are more prevalent with extended participants
supply chain networksrequire more human col- Industry Segment Percentage of
laboration than market and modular exchanges, we Respondents
conducted a eld test among key supply chain Automotive 24%
decision markers. The next section discusses the Construction 18%
results of this study. Heavy Manufacturing 18%
Aviation 17%
3. Collaboration eld study Mass Merchandising 16%
Computers/High-Tech 4%
To investigate the perceived importance of human Military/Defense 3%
collaboration efforts in meeting an organizations Respondent Title Percentage of
strategic supply chain goals and to assess current Respondents
company performance with respect to human Purchasing Manager 48%
collaboration, we conducted a eld study of key Logistics Manager 15%
decision makers. The focus group for this study was Supply Chain Manager 11%
a cross-section of supply chain professionals in a
President 6%
wide variety of industries. The results of this study
strongly suggest that human collaboration is indeed General Manager 5%
a critical factor in achieving an organizations Other 15%
supply chain goals, and most of the respondents Company Size (# of Employees) Percentage of
felt that their companies currently fall short of Respondents
attaining full collaboration with their supply chain Large (More than 1,000) 17%
partners. Medium (2501,000) 32%
This eld study was organized around in-depth Small (Fewer than 250) 51%
telephone interviews with the potential subjects Operating Revenue Percentage of
using a questionnaire based on our previous Respondents
research in benchmarking human collaboration
Greater than $1 Billion 34%
efforts. The Allegheny Marketing Group conducted
$100 Million to $1 Billion 29%
the interviews and attempted to contact 2,195
potential respondents obtained from their own in- $10 Million to $99 Million 28%
ternal databases and some external sources for $1 Million to $9 Million 9%
each target segment. Eligible participants had Less than $1 Million 0%
to have at least 2 years of experience working in
supply chain management and they had to work for
a company employing at least 50 workers. Out of
these 2,195 potential subjects, 101 completed the appear to be signicantly biased toward one indus-
interview, with most of the companies contacts try, one supply chain management function, or one
failing to participate because the appropriate rm size.
respondent was not available to take the call. The eld study was able to capture participation
The 101 respondents in the study comprise a true from signicant decision makers in the supply man-
cross-section of industries and supply chain func- agement area. Approximately half of the respond-
tions as shown in Table 2. Almost half of the re- ents had 20 or more years of experience in the
spondents were purchasing managers, while the supply chain management eld. Their current com-
others ran the gamut from physical distribution panies stretched from the original equipment man-
responsibilities to company presidents. The most ufacturer level to raw material and service
common industry was the automotive industry, but suppliers, giving the study the perspective of many
the study included representatives from construc- echelons in the supply chain. Almost all of the
tion, heavy manufacturing, aviation, and consumer respondents claimed that their regular responsibil-
goods, among other industries. Half of the compa- ities include supplier selection, supplier develop-
nies had between 50 and 250 employees, but there ment, and collaboration with suppliers. This
was signicant representation from larger compa- ensured that the respondents are well versed in
nies as well. The annual revenue for the respond- supply chain collaborative practices and made them
ents companies ranged from $1 million to over credible authorities on the effect of collaboration
$1 billion. Consequently, the survey data does not with suppliers in their businesses.
BUSHOR-1400; No. of Pages 9
An integrated approach to managing extended supply chain networks
The rst part of the interview focused on estab-
lishing the supply chain goals of the respondents
organizations. The two highest-rated supply chain
goals were lowering operating costs and improving
customer service, which are consistent with the
existing body of research and pedagogy on the
supply chain management eld. The ratings re-
ceived by these two goals were signicantly differ-
ent from the next-highest rated goal of increasing
revenue, suggesting that these companies are still
primarily focused on reducing costs instead of en-
hancing the organizations revenue. Contemporary
supply chain research has shown that innovative
supply chain practices can simultaneously accom-
plish both tasks, especially considering the way that
improved customer service can lead to increased
revenue (Presutti & Mawhinney, 2013). One inter-
esting facet of the data showed that raw material
suppliers, in contrast to companies at the other
echelons of the supply chain, particularly wanted
to increase revenue. Approximately 75% or more of
the respondents said that their organizations were
successful in achieving these three goals in the
current year.
After discussion of the supply chain goals, the
questionnaire focused on the role of human collab-
oration specically. The interviewers asked the
respondents to rank three factorstechnology,
business practices, and human collaborationwith
respect to their importance in helping the organi-
zation achieve its supply chain goals. The respond-
ents ranked human collaboration as the most
important factor at a statistically signicant differ-
ence compared to business processes and technol-
ogy. Even though they identied it as the most
important factor, 58% of the respondents said that
their companies collaborative efforts could be sig-
nicantly improved.
The questionnaire also asked the respondents to
rank the organizational and personnel factors that
contribute to human collaboration. The group over-
whelmingly identied company leadership as the
most important organizational factor that affects a
rms ability to collaborate, with the companys
planning process and trust level following far
behind. The respondents did not identify a single
most important personnel factor leading to human
collaboration; there was a pretty even split be-
tween a persons communication skills, knowledge
of supply chain and business processes, and motives
to collaborate.
While this and other studies have established
that human collaboration impacts an organizations
ability to achieve its supply chain goals, the degree
to which a rm collaborates can be difcult
to characterize and measure objectively. Of the
7
respondents interviewed, 87% said that it was
important to measure human collaboration efforts
and they identied the ability to work with others
to achieve very high goals as the most important
measurable factor contributing to human collabo-
ration. They acknowledged that an employees
ability to communicate with management and peers
was important as well.
The major result of this eld study was to estab-
lish that human collaboration not only affects but
also is essential to a rms ability to meet its supply
chain goals. It was also striking that while the re-
spondents identied it as the most important factor
compared with business processes and technology,
the majority felt that their own rms had signicant
opportunities to improve their collaborative abili-
ties. We believe that many other organizations cur-
rently experience a similar gap and stand to gain a
competitive advantage in their market if they can
improve their collaboration competencies.
4. Limitations and future research
direction
As is the case with all research studies, our survey
results have several limitations. The survey
response rate could have been higher to enable
us to identify statistically signicant differences
between the responses from different industries
or organizations of different sizes. The survey
respondents were also limited to one specic geo-
graphic area (Western Pennsylvania in the U.S.); as
a result, the conclusions may not be generalized to
include organizations located internationally or in
other parts of the U.S.
In the future, this collaboration eld study could
be extended in a number of ways. The existing
questionnaire could be administered to more com-
panies located in more geographically-diverse areas
to establish more universal insights. It would also be
interesting to use the questionnaire to conduct a
longitudinal study to investigate the evolution of
collaborative activities in supply chains through the
years. Detailed qualitative case studies with spe-
cic companies would help to delve deeper into the
proliferation of particular collaborative activities
and the critical success factors that enable collab-
oration to ourish.
5. Conclusions and implications
It is a well-accepted fact that to succeed in the
21st century, businesses need to construct highly
efcient and effective supply chain networks that
BUSHOR-1400; No. of Pages 9
8 K. Saban et al.
involve a broad array of external partners. Unfor-
tunately, only a small number of companies have
mastered the ability to achieve high-level collabo-
ration among its external partners. This reality has
left many managers perplexed on how to proceed,
especially given the heavy attention given the new
collaboration tools.
To achieve high levels of SCC, management must
rst understand what it is and how it is achieved.
SCC is best achieved when autonomous organiza-
tions successfully integrate their resources (people,
processes, and technology) to achieve a common
goal. This allows the right people to connect with
the right expertise or information at the right time
to drive the right business decision.
Secondly, as all buyer-seller relationships are not
created equal, management also needs to: (1) cat-
egorize the nature of each product/service pur-
chased in relation to risk and value; (2) dene
the importance of the available suppliers in relation
to the products/services provided; (3) match the
right supply chain strategy with the right type of
buyer-seller exchange (market, modular, and rela-
tional); and (4) recognize that each supply chain
strategy requires a particular mix of resources
(people, processes, and technology). The fact that
people can play an equal if not greater role than
technology is signicant given all the attention that
has been directed at todays new collaboration
tools.
Once this process is mastered, management will
be better prepared to achieve a level of SCC that
enables them to bring more value-laden products
and/or services to their ever-demanding customers.
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