European Journal of Purchasing & Supply Management 7 (2001) 39}48

A framework of supply chain management literature

Keah Choon Tan*
University of Nevada Las Vegas, College of Business, Department of Management, 4505 Maryland Parkway, Box 456009, Las Vegas, NV 89154-6009, USA
Received 2 February 1999; received in revised form 6 April 2000; accepted 7 April 2000
Abstract
Over the past decade, the traditional purchasing and logistics functions have evolved into a broader strategic approach to materials
and distribution management known as supply chain management. This research reviews the literature base and development of
supply chain management from two separate paths that eventually merged into the modern era of a holistic and strategic approach to
operations, materials and logistics management. In addition, this article attempts to clearly describe supply chain management since
the literature is replete with buzzwords that address elements or stages of this new management philosophy. This article also discusses
various supply chain management strategies and the conditions conducive to supply chain management. 2000 Elsevier Science
Ltd. All rights reserved.
Keywords: Logistics; Physical distribution; Purchasing; Supply chain management
1. Introduction
During the 1990s, many manufacturers and service
providers sought to collaborate with their suppliers and
upgrade their purchasing and supply management func-
tions from a clerical role to an integral part of a new
phenomenon known as supply chain management. Since
this aspect of supply chain management primarily fo-
cuses on the purchasing and supply management func-
tions of industrial buyers, we have classi"ed it elsewhere
as the purchasing and supply perspective of supply chain
management (Tan et al., 1999, 1998b). Correspondingly,
many wholesalers and retailers have also integrated their
physical distribution and logistics functions into the
transportation and logistics perspective of supply chain
management to enhance competitive advantage. Over
the last 10 years, these two traditional supporting func-
tions of corporate strategy evolved along separate paths
and eventually merged into a holistic and strategic ap-
proach to operations, materials and logistics manage-
ment, commonly referred to as supply chain management
(SCM).
This article reviews the literature base and deve-
lopment of supply chain management along these two
* Tel.: #1-702-895-3873; fax: #1-702-895-4370.
E-mail address: kctan@nevada.edu (K.C. Tan).
separate paths and integrates the two bodies of literature
in the uni"cation of supply chain management into
a commonly accepted terminology that includes all the
value creating activities along the value chain. In addi-
tion, this article attempts to describe supply chain man-
agement clearly, since the term has been used very
liberally in the literature. This article also discusses vari-
ous supply chain strategies and the conditions conducive
to supply chain management.
2. Supply chain management de5ned
The literature is replete with buzzwords such as: integ-
rated purchasing strategy, integrated logistics, supplier
integration, buyer}supplier partnerships, supply base
management, strategic supplier alliances, supply chain
synchronization and supply chain management, to
address elements or stages of this new management
philosophy (Tan et al., 1998a; New, 1997; La Londe
and Masters, 1994). While each terminology addresses
elements of the phenomenon, typically focusing on im-
mediate suppliers of an organization, supply chain man-
agement is the most widely used (but abused) term to
describe this philosophy. Unfortunately, there is no ex-
plicit description of supply chain management or its
activities in the literature (New, 1997). For example,
Harland (1996) describes supply chain management as
0969-7012/00/$- see front matter 2000 Elsevier Science Ltd. All rights reserved.
PII: S 0 9 6 9 - 7 0 1 2 ( 0 0 ) 0 0 0 2 0 - 4
Fig. 1. Activities and "rms in a supply chain. Source: New and Payne (1995).
managing business activities and relationships (1) inter-
nally within an organization, (2) with immediate sup-
pliers, (3) with "rst and second-tier suppliers and
customers along the supply chain, and (4) with the entire
supply chain.
Scott and Westbrook (1991) and New and Payne
(1995) describe supply chain management as the chain
linking each element of the manufacturing and supply
process from raw materials through to the end user,
encompassing several organizational boundaries. Ac-
cording to this broad de"nition, supply chain manage-
ment encompasses the entire value chain and addresses
materials and supply management from the extraction of
raw materials to its end of useful life. Baatz (1995) further
expands supply chain management to include recycling
or re-use. Supply chain management focuses on how
"rms utilize their suppliers' processes, technology, and
capability to enhance competitive advantage (Farley,
1997), and the coordination of the manufacturing, logis-
tics, and materials management functions within an or-
ganization (Lee and Billington, 1992). When all strategic
organizations in the value chain &integrate' and act as
a single uni"ed entity, performance is enhanced through-
out the system of suppliers.
Fig. 1 shows the activities and "rms involve in such
a value chain as portrayed by New and Payne (1995). It
begins with the extraction of raw materials or minerals
from the earth, through the manufacturers, wholesalers,
retailers, and the "nal users. Where appropriate, supply
chain management also encompasses recycling or re-use
of the products or materials. Supply chain management
appears to treat all organizations within the value chain
as a uni"ed &virtual business' entity. It includes activities
such as planning, product design and development,
sourcing, manufacturing, fabrication, assembly, trans-
portation, warehousing, distribution, and post delivery
customer support. In a truly &integrated' supply chain, the
"nal consumers pull the inventory through the value
chain instead of the manufacturer pushing the items to
the end users.
While in principle this de"nition of supply chain man-
agement addresses the supply process throughout the
value chain, a practical approach to supply chain man-
agement is to consider only strategically important sup-
pliers in the value chain (Tan et al., 1998a, b). Technically,
the value chain is too complex to achieve a full integra-
tion of all business entities within it in order to reap the
bene"ts o!ered by supply chain management. This leads
to a second narrower de"nition of supply chain manage-
ment: the integration of the various functional areas
within an organization to enhance the #ow of goods from
immediate strategic suppliers through manufacturing
and distribution chain to the end user (Houlihan, 1987,
1988). Research in this area generally focuses on improv-
ing the e$ciency and competitive advantage of manufac-
turers by taking advantage of the immediate supplier's
capability and technology, particularly during the prod-
uct design stage through early supplier involvement.
A third de"nition of supply chain management
emerges from the transportation and logistics literature
of the wholesaling and retailing industry, emphasizing
the importance of physical distribution and integrated
logistics. There is no doubt that logistics is an important
function of business and is evolving into strategic supply
chain management (New and Payne, 1995). Physical
transformation of the products is not a critical compon-
ent of this de"nition of supply chain management. This is
probably where the term supply chain management was
originally used (Lamming, 1996). Its primary focus is the
e$cient physical distribution of "nal products from the
manufacturers to the end users in an attempt to replace
inventories with information. This is also consistent with
those marketing related literature in supply chain man-
agement (Christopher et al., 1998; Christopher, 1996).
3. Evolution of supply chain management
In the 1950s and 1960s, most manufacturers empha-
sized mass production to minimize unit production cost
as the primary operations strategy, with little product
or process #exibility. New product development was
slow and relied exclusively on in-house technology and
capacity. &Bottleneck' operations were cushioned with
40 K.C. Tan / European Journal of Purchasing & Supply Management 7 (2001) 39}48
Fig. 2. Strategic vision of supply chain management.
inventory to maintain a balanced line #ow, resulting in
huge investment in work in process (WIP) inventory.
Sharing technology and expertise with customers or sup-
pliers was considered too risky and unacceptable and
little emphasis appears to have been placed on
cooperative and strategic buyer}supplier partnership.
The purchasing function was generally regarded as being
a service to production, and managers paid limited atten-
tion to issues concerned with purchasing (Farmer, 1997).
In the 1970s, Manufacturing Resource Planning was
introduced and managers realized the impact of huge
WIP on manufacturing cost, quality, new product devel-
opment and delivery lead-time. Manufacturers resorted
to new materials management concepts to improve per-
formance within the &four walls' of the company.
The intense global competition in the 1980s forced
world-class organizations to o!er low cost, high quality
and reliable products with greater design #exibility.
Manufacturers utilized just-in-time (JIT) and other man-
agement initiatives to improve manufacturing e$ciency
and cycle time. In the fast-paced JIT manufacturing envi-
ronment with little inventory to cushion production or
scheduling problems, manufacturers began to realize the
potential bene"t and importance of strategic and
cooperative buyer-supplier relationship. The concept
of supply chain management emerged as manufacturers
experimented with strategic partnerships with their
immediate suppliers. In addition to the procurement
professionals, experts in transportation and logistics car-
ried the concept of materials management a step further
to incorporate the physical distribution and transporta-
tion functions, resulting in the integrated logistics con-
cept, also known as supply chain management.
The evolution of supply chain management continued
into the 1990s as organizations further extended best
practice in managing corporate resources to include stra-
tegic suppliers and the logistics function in the value
chain. Supplier e$ciency was broadened to include more
sophisticated reconciliation of cost and quality consider-
ations. Instead of duplicating non-value-adding activ-
ities, such as receiving inspection, manufacturers trusted
suppliers' quality control by purchasing only from
a handful of quali"ed or certi"ed suppliers (Inman and
Hubler, 1992). More recently, many manufacturers and
retailers have embraced the concept of supply chain
management to improve e$ciency across the value chain.
Manufacturers now commonly exploit supplier strengths
and technology in support of new product development
(Ragatz et al., 1997; Morgan and Monczka, 1995), and
retailers seamlessly integrate their physical distribution
function with transportation partners to achieve direct
store delivery or cross docking without the need for
receiving inspection (St. Onge, 1996). A key facilitating
mechanism in the evolution of supply chain manage-
ment is a customer-focus corporate vision, which drives
change throughout a "rm's internal and external linkages
(Fig. 2).
4. Two alternative perspectives on supply
chain management
Fig. 3 presents a summary framework of the evolution
of supply chain management along two separate paths
that eventually merged into a common body of literature.
While it is not an exclusive nor distinctive classi"cation
of literature, Fig. 3 illustrates the evolution of supply
chain management from the purchasing and supply ac-
tivities, as well as the transportation and logistics func-
tions, with a focus on integration, visibility, cycle time
reduction, and streamlined channels (Tan et al., 1998b).
The purchasing and supply perspective literature relates
to the previously disparate functions of purchasing and
supply management functions of the industrial buyers,
whereas the transportation and logistics perspective of
supply chain management literature evolves from the
transportation and physical distribution functions of the
wholesalers and retailers. However, there are other
means of classifying supply chain management literature.
For example, Harland et al. (1999) and Harland (1996)
classify research in this area according to the levels of
integration (i.e., internal chain, dyadic relationship,
K.C. Tan / European Journal of Purchasing & Supply Management 7 (2001) 39}48 41
Fig. 3. A framework of supply chain management literature.
external chain and network of suppliers and customers)
among supply chain members.
4.1. Purchasing and supply perspective of the
industrial buyers
In general, most of the recent literature on supply
chain management addresses the purchasing and supply
perspective (e.g., Farmer, 1997; Morgan and Monczka,
1996; Lamming and Hampson, 1996; Kraljic, 1983). This
perspective of supply chain management is synonymous
with supplier base integration that evolves from the tra-
ditional purchasing and supply management functions. It
emphasizes that purchasing and materials management
represents a basic strategic business process, rather than
a narrow specialized supporting function to overall busi-
ness strategy (Reck et al., 1992). It is a management
philosophy that extends traditional internal activities by
embracing an inter-enterprise scope, bringing trading
partners together with the common goal of optimization
and e$ciency (Harwick, 1997). Supply chain manage-
ment creates a virtual organization composed of several
independent entities with the common goal of e$ciently
and e!ectively managing all its entities and operations,
including the integration of purchasing, demand man-
agement, new product design and development, and
manufacturing planning and control.
This perspective on supply chain management focuses
on the manufacturing industry and has little to do with
the wholesaling or retailing industry. Its short-term ob-
jective is primarily to increase productivity and reduce
inventory and cycle time, while the long-term strategic
goal is to increase customer satisfaction, market share
and pro"ts for all members of the virtual organization.
To realize these objectives, all strategic partners must
recognize that the purchasing function is the crucial link
between the sources of supply and the organization
itself, with support coming from overlapping activities
to enhance manufacturability for both the customer
and supplier. The involvement of purchasing in concur-
rent engineering is essential for selecting components
that assure the requisite quality is designed into the
product and to aid in collapsing design-to-production
cycle time.
Suppliers participate at the earliest stage of product
design to render cost-e!ective design choices, often lead-
ing to innovation in process and material technology to
compete in the global market (Monczka et al., 1994). By
42 K.C. Tan / European Journal of Purchasing & Supply Management 7 (2001) 39}48
involving suppliers early in the design stage, manufac-
turers may be able to develop alternative conceptual
solutions, select the best components and technologies,
and solicit help in design assessment (Ragatz et al., 1997;
Burt and Soukup, 1985). An emphasis on internal com-
petencies requires greater reliance on external suppliers
to support directly non-core requirements, particularly in
design and engineering support (Prahalad and Hamel,
1990).
Elsewhere (Tan et al., 1998b), we have empirically
examined the impact of the purchasing and supply per-
spective of supply chain management on contemporary
business practices, and concluded that the factors cited
in the literature as being elements of e!ective supply
chain management (for example, customer relations and
purchasing practices) positively a!ect corporate perfor-
mance. In general, supply chain management seeks
improved performance through elimination of waste and
better use of internal and external supplier capabilities
and technology to create a seamlessly coordinated supply
chain. Thus, elevating inter-company competition to in-
ter-supply chain competition (Anderson and Katz, 1998;
Birou et al., 1998; Lummus et al., 1998; Morgan and
Monczka, 1996; Christopher, 1996).
4.2. Transportation and logistics perspective
of the merchants
The transportation and logistics functions of the
wholesaling and retailing industry focus on a di!erent
aspect of supply chain management, that is, one of loca-
tion and logistics issues more often than transformation.
Its origin can be traced to an e!ort for better manage-
ment of the transportation and logistics functions (Chris-
topher et al., 1998; Christopher, 1992, 1996; Fisher, 1997;
Lamb, 1995; Turner, 1993; Bowersox et al., 1992;
MacDonald, 1991). While Lamming (1996) primarily
addresses the purchasing and supply perspective of sup-
ply chain management, he concludes that supply chain
management is a theory grounded in the "eld of logistics.
Interestingly, Eloranta and Hameri (1991) note that re-
search in logistics tend to be separated into inbound and
outbound logistics, with a primary focus on inbound
logistics.
According to this perspective, supply chain manage-
ment incorporates logistics focus into the strategic deci-
sions of the business (Hale, 1999; Houlihan, 1988). The
once narrow focus of logistics becomes a comprehensive
topic that spans the entire value chain from suppliers to
customers (Shapiro et al., 1993; Langley and Holcomb,
1992). It enables channel members to compete as a uni-
"ed logistics entity instead of simply pushing inventory
back along the value chain. In such a setup, La Londe
and Masters (1994) suggest that most of the bene"ts of
forward and backward vertical integration can be ob-
tained by coordinating the logistics operations of inde-
pendent "rms in the value chain. In this respect, supply
chain management is synonymous with integrated logis-
tics systems, and the literature base is extensive (Johnson
et al., 1999; Lambert et al., 1998; Bowersox and Closs,
1996; Coyle et al., 1996).
Broadly de"ned, an integrated logistics system en-
compasses the integration of processes, systems and or-
ganizations that control the movement of goods from the
suppliers to a satis"ed customer without waste (Ellram,
1991). Where logistics once meant saturating warehouses
with inventory, an integrated logistics system includes
inventory management, vendor relationships, transpor-
tation, distribution, warehousing and delivery services.
The role of e!ective physical distribution is a critical
component of the logistics process. Merchandise must be
replenished quickly and arrived where and when it is
needed in smaller lot sizes, especially in a JIT system
(Hand"eld, 1994). The goal is to replace inventory with
perfect information. E!ective coordination of logistics
activities, by means of excellent information technology
processes, is essential to organizational performance
(Lewis and Talalayevsky, 1997). The advancement of
electronic interchange, bar coding and radio frequency
scanning technologies has greatly aided the evolution of
the integrated logistics concept. Evidence of work in this
area includes Whiteoak (1994), who traces the evolution
of the retail grocery distribution practice in the 1970s
into the current supply chain management concept.
The current research extends the supply chain man-
agement concept beyond the con"nes of one company to
include other organizations in the value chain, including
the carrier, which plays a crucial role in an e$cient
supply chain (Carter and Ferrin, 1995). However the
literature suggests that internal organization cultures
prevent a truly integrated logistics concept (Gattorna
et al., 1991) although there is empirical evidence that
transaction-speci"c investment has a strong positive
e!ect on the commitments of such a relationship
(Anderson and Weitz, 1992).
Organizations in the retail industry resort to supply
chain management to counter the increasing uncertainty
and complexity of the marketplace and competitive situ-
ation to reduce inventory in the entire value chain
(Houlihan, 1987, 1988). It is a strategic tool and di!ers
from classical transportation and logistics management
in that the value chain is a single uni"ed entity. Jones and
Riley (1987) also echo this single entity concept, where
inventories are used only as a last resort to bu!er uncer-
tainty in business pattern. Davis (1993) and Scott and
Westbrook (1991) suggest that a supply chain can reduce
its overall inventory simply by e$ciently redistributing
stock within the supply chain. In the integrated logistics
concept, short and reliable order cycle and the ability to
"ll entire orders are critical customer service elements
(Ellram et al., 1989). However, it is important to recog-
nize that the geographical spreads of channel members
K.C. Tan / European Journal of Purchasing & Supply Management 7 (2001) 39}48 43
and cost structures determine the structure of logistical
support (Fernie, 1995; Taylor and Probert, 1993).
4.3. The unixed/integrated supply chain
management strategy
When supply chain management was integrated from
the two perspectives into a common body of knowledge
that encompasses all the value-adding activities on the
value chain, researchers realized the importance of incor-
porating supply chain management in overall business
planning process (Harland et al., 1999). However, Carter
and Narasimhan (1994) note that it is not widely prac-
tised. Business process reengineering literature (Burgess,
1998; Fliedner and Vokurka, 1997) supports the notion
of closely integrating the operations across functional
areas between manufacturers, suppliers and customer. In
an empirical survey, Ellram and Pearson (1994) also
discover that despite the increased emphasis of integrat-
ing purchasing into overall corporate strategy, the pri-
mary function of purchasing remained a clerical role of
negotiating price/items. While many strategic models
have been proposed (for example, Reck and Long, 1988)
to link the crucial role of supply chain management in
overall strategic corporate planning, they failed to sug-
gest any action model that is useful to practitioners.
More recently, Frohlich et al. (1997) have utilized rigor-
ous statistical analyses of survey data and suggested that
there are three di!erent types of supply chain strategies,
and the process of ful"lling customer's orders is of para-
mount importance to all three types. The three supply
chain strategies are &innovator', &marketeer' and &care-
taker' strategies. While &innovators' emphasize rapid new
product introduction and design changes, &marketeers'
o!er broad product lines and &caretakers' focus on o!er-
ing the lowest price.
The goal of the integrated supply chain strategy is to
create manufacturing processes and logistics functions
seamlessly across the supply chain as an e!ective
competitive weapon that cannot be easily duplicated by
competitors (Anderson and Katz, 1998; Birou et al., 1998;
Lummus et al., 1998; Lee and Billington, 1995). A well-
integrated supply chain involves coordinating the #ows
of materials and information between suppliers, manu-
facturers and customers (White et al., 1999; Narasimhan
and Carter, 1998; Trent and Monczka, 1998), and imple-
menting product postponement and mass customization
in the supply chain (Lee and Tang, 1998; Pagh and
Cooper, 1998; Van Hoek et al., 1998). Higher level of
integration with suppliers and customers in the supply
chain is expected to result in more e!ective competitive
advantage (Johnson, 1999; Hines et al., 1998; Lummus
et al., 1998; Narasimhan and Jayaram, 1998).
Most recent research that addresses supply chain man-
agement strategy emphasizes the critical role of purchas-
ing in formulating corporate level strategies. For
example, Freeman and Cavinato (1990) propose a four-
stage supply chain management model and describe the
purchasing characteristics necessary in each stage. This
conceptual work is useful in matching purchasing with
the strategic process of the "rm, but it does not provide
a framework for strategically linking purchasing to the
other functional areas. Subsequently, Watts et al. (1992)
develop a conceptual framework for linking purchasing
to corporate competitive strategy and to functional level
strategies. This framework is a crucial step in stimulating
more active purchasing involvement in developing and
implementing corporate competitive strategy that will
improve an organization's performance.
5. Conditions conducive to supply chain management
Supply chain management may allow organizations to
realize the advantages of backward vertical integration
while overcoming its disadvantages. However, certain
conditions must be present for a successful supply chain
management adoption. Farley (1997) concludes that the
single most important prerequisite is a change in the
corporate cultures of all members in the value chain to
make it conducive to supply chain management. A tradi-
tional culture that emphasizes seeking good, short-term,
company-focused performance appears to be in con#ict
with the objectives of supply chain management. Supply
chain management focuses on positioning the virtual
organization in such a way that all contributors in the
value chain bene"t. E!ective supply chain management
rests on the twin pillars of trust and communication
(Grieco, 1989), and procurement and logistics profes-
sionals must be equipped with the necessary expertise in
the critical functions of their own enterprise and fully
understand how it a!ects the entire value chain.
A buyers' market is an ideal situation in which to
develop long-term strategies with key suppliers because
buyers have leverage in negotiating cost, quality, certi-
"cation of processes, acquisition and sharing of new
technology and production competence, especially for
recurrent transactions that require specialized processes
(Ellram, 1994). In response to the intense global competi-
tion, mergers and acquisition that create redundant logis-
tics capability, and new information technology, "rms
may adopt supply chain management to move beyond
mere cost reduction into the domain of real manufactur-
ing e$ciency (La Londe and Masters, 1994; Porter,
1994).
In recent years, the rapid development of client/server
supply chain management software that includes a com-
pletely integrated supply chain management and elec-
tronic commerce component also aids in the evolution of
supply chain management (King, 1996; Semich, 1994).
Sharing information with supply chain partners through
Electronic Data Interchange (EDI) is also a critical
44 K.C. Tan / European Journal of Purchasing & Supply Management 7 (2001) 39}48
component of supply chain management (Ellram et al.,
1989). EDI is not just an electronic ordering system; it
can integrate stocking, logistics, materials acquisition,
shipping and other functions to create a more proactive
and e!ective style of business management and customer
responsiveness (Mische, 1992). The direct transfer of in-
formation between retailers and vendors aids in improv-
ing logistics e$ciency and supporting increased customer
service levels. Besides the ability to increase accuracy and
timeliness of information transferred, EDI may improve
cycle reliability and help to decrease cycle time.
Superior logistics management aids in successful sup-
ply chain management adoption. When coupled with an
information system such as EDI, the transportation sys-
tem becomes the warehouse. Orders can be consolidated
in the computer and carriers can be coordinated for JIT
delivery. Successful application of JIT principles in sup-
ply chain management requires agreements that
strengthen buyer}supplier cooperation so that supply
strategy is directly links to the "rm's overall strategy
(Polako!, 1992; Romero, 1991). As discussed above, JIT
purchasing emphasizes reduction in inventory levels
throughout the value chain (Adair-Heeley, 1988), instead
of simply pushing back inventories on suppliers.
The traditional buyer}supplier relationship that em-
phasizes multiple sourcing, competitive bidding and use
of short-term contracts has been characterized as adver-
sarial (Hahn et al., 1986). It tends to focus on the short-
term view of the purchase price and quality of a product
instead of the long-term capabilities of the suppliers.
However, there is a shift to developing long-termsupplier
capabilities in response to escalating competition, shorter
product life cycles, and rapidly changing customer de-
mands (Watts and Hahn, 1993, Shepherd, 1994). Al-
though much has been written on buyer-supplier
relationships (Heide and John, 1990; Ellram, 1991), there,
is a lack of empirical models for establishing a successful
buyer-supplier partnership.
6. Supplier certi5cation
Another issue that has often been discussed in the
supply chain management literature is supplier certi"ca-
tion, primarily focused on purchased raw materials, com-
ponents and "nal goods, and in a few cases, on service
suppliers (Schneider et al., 1995, Jancsurak, 1992). Oper-
ating a supplier certi"cation programme appears is inevi-
table for a JIT manufacturer that operates with no excess
inventory and needs to deliver to the point of use (Maass,
1988; Burgess, 1987). The ultimate goal of supplier certi"-
cation is quality at the source and to reduce inventory,
non-conformance, communication errors, duplicate test-
ing, receiving inspection, deliver to point of use, cycle
time, and the ability to shift focus from process input to
output. An early work in supplier certi"cation is by
Grieco (1989) who proposes a "ve-phase supplier certi"-
cation process. Eventually, supplier certi"cation extends
to include the logistics function, Gibson et al. (1995)
describe the utilization of supplier certi"cation to certify
carriers and its bene"ts. Inman and Hubler (1992) carry
the concept of supplier certi"cation further by suggesting
that manufacturers should consider certi"cation of sup-
plier's product as well as its processes to avoid the
situation where the supplier's product falls well within
customer speci"cations but fails to perform as required.
The literature base reveals three basic approaches to
certify suppliers. Most US "rms develop their own certi-
"cation systems. A growing number are adopting
standardized systems, primarily based on ISO 9000 or
Baldrige Award criteria in an e!ort to streamline the
certi"cation process. However, a small group of organ-
izations encourage suppliers to pursue self-certi"cation
(Maass et al., 1990). Proprietary systems allow the organ-
ization to customize the certi"cation criteria and process,
but require extensive development time and investment.
Utilizing ISO 9000 removes the redundant elements of
proprietary programs and reduces the need for prelimi-
nary quali"cation and site visits. Unfortunately, it is
costly for suppliers to go through the ISO 9000 process
with no guarantee of continuous product improvement,
only the assurance that a documented quality system
process is in place. As a result, some organizations devel-
op in-house certi"cation programmes that combine cer-
tain ISO 9000 criteria with their own.
A related issue in supply chain management literature
is supplier development, which can be de"ned as any
e!ort of a buying "rm with its supplier to increase the
capabilities of the supplier (Krause and Ellram, 1997). It
involves a long-term cooperative e!ort between a buying
"rm and its suppliers to upgrade the suppliers' technical,
quality, delivery and cost capabilities and to foster on-
going improvements. Hahn et al. (1990) propose a con-
ceptual model to describe the organizational decision
process associated with a supplier development pro-
gramme to serve as a guideline for designing such a pro-
gram that can link purchasing strategy with a "rm's
overall corporate competitive strategy. Subsequently,
Watts and Hahn (1993) have concluded that formal sup-
plier evaluation is crucial to the supplier development
process.
7. Conclusion
The development and evolution of supply chain man-
agement owes much to the purchasing and supply man-
agement, and transportation and logistics literature. As
such, the term &supply chain management' is used in
many ways, but three distinct descriptions dominate
prior literature. Firstly, supply chain management may
be used as a handy synonym to describe the purchasing
K.C. Tan / European Journal of Purchasing & Supply Management 7 (2001) 39}48 45
and supply activities of manufacturers. Secondly, it may
be used to describe the transportation and logistics func-
tions of the merchants and retailers. Finally, it may be
used to describe all the value-adding activities from the
raw materials extractor to the end users, and including
recycling. However, it should be no surprise that the
various descriptions overlap in some cases.
Genuinely integrated supply chain management re-
quires a massive commitment by all members of the value
chain. For example, the buyer may have to overhaul its
purchasing process and integrate a supplier's engineering
teams and product designers directly into its own deci-
sion-making process. Since the cost of changing a partner
can be huge, the purchasing "rm can become a captive of
its suppliers. Poor supplier performance is not the only
risk; the purchaser needs to worry about the possibility of
a supplier passing trade secrets to competitors or with its
new-found abilities, venturing out on its own. Trusting
suppliers may be good business sense, but for many "rms
hostility may still be more pro"table, even in the long
run. There are many other pitfalls of supply chain man-
agement, such as con#icting objectives and mission, inad-
equate de"nition of customer service, and separation of
supply chain design from operational decisions (Lee and
Billington, 1992).
Integrating the purchasing and logistics functions with
other key corporate functions can create a closely linked
set of manufacturing and distribution processes. It allows
organizations to deliver products and services to both
internal and external customers in a more timely and
e!ective manner. To further exploit the competitive
advantage associated with integrated processes, some
leading organizations adopt a strategic approach to
managing the value chain, such as forming strategic al-
liances with suppliers and distributors instead of vertical
integrating; inter-company competition is elevated to
inter-supply chain competition. Although supply chain
management developed along two separate paths, it
has eventually merged into a uni"ed body of literature
with a common goal of waste elimination and increased
e$ciency.
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