Setting the Research Context

The five influential manufacturing reports examined in this chapter have highlighted the difficulties faced by UK manufacturers in remaining competitive. Fundamentally, these reports have emphasised the importance recognising and achieving value beyond the manufacturing firm by reaching out to the manufacturing supply chain. This key finding prompts further investigation into the supply chain literature. In understanding how a manufacturing firm may achieve a competitive advantage, Figure 1.2 highlighted four key areas: demand conditions, factor conditions relating to the resources, related and supporting industries, and strategy, structure and rivalry. To better understand demand, factor and resource conditions the research will examine supply chain management (SCM). In understanding the firm’s strategy, structure and rivalry the research will examine the concepts of strategic orientation, supply chain orientation (SCO) and cross-functional coordination. The key messages portrayed in the studies for SCM, SCO, strategic orientation and cross-functional coordination are introduced prior to a more in-depth examination in Chapter II.

 Supply Chain Management (SCM)

Studies which have examined supply chains and the management of supplies can be traced to the eighteenth century (Leenders and Fearon, 2008). However, SCM as a term didn’t appear in published academic studies until the early 1980s (Oliver and Webber, 1982; Lambert and Cooper, 2000). Thereafter, studies of SCM evolved rapidly during the 1990s with conceptual developments and debates continuing in establishing firm boundaries for SCM. Harland (1996) acknowledged that SCM had been interpreted in many ways. Harland (1996) and Lamming et al. (2000) challenged the linear view of the supply chain concept proposing network theory by explaining that organisations existed as complex network clusters. Choi et al. 2001) further emphasised that difficulty in managing supply chain networks resulted in added complexity for the individual firm. Mentzer et al. (2001, p.18) defined SCM as “the systemic, strategic coordination of the traditional business functions and the tactics across these

business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole”.

Cooper and Ellram (1993) had already emphasised the need for effective communication and coordination between business functions both inside the organisation and extended outside to all organisations within the supply chain. SCM has been referred to by Min and Mentzer (2004) as an extension of functional and process integration.

More recently, authors have been competing for an agreed conceptualisation of SCM in the operations and supply chain literature (Stock and Boyer, 2009). The research discipline has still been regarded by authors as in the infancy of its development (Guinipero et al. 2008; Sweeney, 2011). Despite the proliferating growth in the number of studies addressing SCM6_{, there remains a gap in the literature} firstly, identifying a universally accepted definition and secondly, establishing clear boundaries (Mentzer et al. 2001; Stock and Boyer, 2009; Sweeney, 2011).

Despite these contradicting views on defining and delineating SCM, there exists a concurrent view in the literature that the strength of the buyer/supplier relationships within the supply chain and the management of the supply chain can provide a firm with a source of competitive advantage (Harland, 1996; Lummus and Vorkurka, 1999, Lambert and Cooper, 2000; Christopher, 2005). Furthermore, a competitive advantage becomes even more likely when the firm adopts SCM as an integrated philosophy (Mentzer et al. 2001; Sweeney, 2011), which suggests a behavioural change for all levels of employees within the firm.

Historically, the unit of analysis in supply chain studies has examined the inter-firm relationship involving often multiple organisation’s in complex networks within a supply chain. This research will focus on the importance of understanding the firm’s internal supply chain, argued as a pre-requisite for SCM (Mentzer et al., 2001).

Three separate theories have become well established in SCM research and will be discussed more fully in this study. These include Systems Theory, Resource Dependence Theory (RDT) and Resource-Based View (RBV). The three theories have individually been applied to supply chain research. The literature review in Chapter II will examine how collectively, these theories support the manufacturing supply chain decision and the review will build on previous individual findings for all three theories in the supply chain context.

 Supply Chain Orientation (SCO)

The earliest studies of SCO examined ways of improving customer satisfaction, with authors’ attention shifting from the inter-functional relationships across the external supply chain to the individual organisation as the unit of analysis (Lambert and Cooper, 1998; Cooper et al. 1997). At the turn of the century, SCO was considered as a new revolution in supply management research (Cooper et al. 1997; Maloni and Benton, 2000; Ganeshan et al. 2000). However, author interest in SCO has grown exponentially since 20057_.

Mentzer et al. (2001) were the first authors to distinguish between SCO and SCM, proposing SCO as a vital antecedent for SCM. The relationship between SCM and SCO became clearer when a fuller conceptualisation of SCO was offered by Esper et al. (2010). Their study identified three pillars highlighting the importance of strategic intent, supply chain capabilities and internal structure of the firm. Much of the existing research focusing on SCO has a marketing or logistics emphasis.

Effective management of the organisations’ structure, systems and individual behaviours has been characterised in the literature as a firm’s supply chain orientation (SCO) (Min and Mentzer, 2004; Esper et al. 2010). Whilst SCO has been linked as a business model solution there is little evidence in the literature which examines how and why SCO creates a business model8 _{solution for manufacturing} firms and how it leads to more effective SCM. The firm’s business model encapsulates how managers create, deliver and depict value (Osterwalder and Pigneu, 2010).

Few, if any studies since Esper et al. (2010) have taken a zoom lens approach in examining the underlying basis of these three pillars in the supply chain or understanding the concept of strategic orientation in the supply relationship context. The various ways that SCO has been applied will be examined in Chapter II.

 Cross-functional Coordination

Business functions associated with supporting SCM have been identified in the literature as purchasing, operations, logistics and marketing. These business functions have collectively been referred to as “the buying”, “making”, “moving” and “selling of stuff” (New, 1997 cited in Sweeney, 2011, p. 38). Collaboration and integration across these business functions have been argued as important for achieving both SCM and SCO (Lambert and Cooper, 2000; Sweeney, 2011; Esper et al. 2010). In particular, the relationship between marketing and operations has long been recognised as value-adding

7_{Google Scholar anytime search identifies 667 published papers, with 526 published since 2005. [Search conducted: 09/05/13]A more}

detailed evaluation of these findings can be found in Chapter II. 8_{Author variations on business model solutions are provided in Chapter 2}

in support of effective SCM (Stevens, 1989) and deemed critical for the firm’s success (Piercy, 2010 b).

In contrast to this, Hayes and Wheelwright (1979) highlighted that there is likely to be ongoing tension between marketing and production. Trade-offs between the marketing and production business functions have been examined extensively often linking this area of conflict to the management of supply chains (Crittenden et al. 1993; Crittenden & Crittenden, 1995; Piercy, 2010 b). The marketing and operations business functions continue to be acknowledged as conflicting, often leading to competing strategic orientations within the firm, especially in the manufacturing context (Piercy, 2007). In addition to the marketing and operations [production] relationship, strategic purchasing has been recognised as essential for supporting the supply chain (Day, 1997; Carr and Smeltzer, 1999). The clerical, non-value-adding view of the purchasing function has become outdated (Reck and Long, 1988). As the role of purchasing has become strategically elevated within the firm (Cox and Lamming, 1996), it has often been referred to as a strategic orientation (Rajagopal and Bernard, 1994; Carr and Smeltzer, 1999; Guinipero et al. 2006). However, purchasing orientation continues to be questioned as a single solution to support the firm’s supply chain. (Lawson et al. 2009).

Debates about the importance of purchasing and marketing in the supply chain context continue, yet collaboration and integration of these business functions are argued as being crucial in improving value for the firm and its customers (Lindgreen et al. 2009).

The emphasis in research for improving holistic overall value for the individual firm suggests a “…shift, away from functional orientations towards a more company-wide focus” (Sweeney, 2011, p.39). This finding by Sweeney corresponds with the developments of SCO and prompts the need for a fresh approach in examining the company wide focus in understanding the importance of supply chain flows across strategic business functions. The literature review in Chapter II will present a more in-depth and critical evaluation about the three business functions as strategic orientations: purchasing, marketing and production in support of SCO and SCM.

 Strategic Orientation

The introduction section of this chapter highlighted one of the challenges with examining strategic orientation in the supply chain context; that is the ambiguity which exists in defining strategic orientation. For example, McGee and Spiro (1988, p. 40) defined strategic orientation as “a way of operating within the climate that the philosophy has set”. Understanding this definition requires a clear understanding of the meaning of philosophy9_{. In contrast, El-Ansary (2006, p.280) defined a strategic}

orientation as “...a multi-dimensional variable that reflects the strategic purpose, market, knowledge, structure and functional strengths which influence management orientations”. These differing definitions illustrate why it is difficult to fully understand the role, extent and purpose of strategic orientation for the organisation, especially when it is applied in the supply chain context. For example, the latter definition by El-Ansary (2006) refers to “management orientations” as opposed to strategic orientations. The literature is also inconsistent in describing how the strategic orientation of a firm aligns with its business strategy. This suggests that orientations are not all strategic; hence an area which will be explored in Chapter II.

There is also no consensus in the literature over which key business environment challenges trigger the need for a new strategic orientation: a re-orientation. Johnson et al. (2008.p.57) proposed that “one secret to maintaining a thriving business is recognising when it needs fundamental change”. Even small changes within the business environment have been known to trigger major movements and re- orientations within the firm (Senge, 1991). Examples of well-known companies which have successfully undergone fundamental changes to the strategic orientation include IBM and Apple Inc., which provide two interesting case study examples of re-orientation. These are outlined as follows: IBM – originally benefited from a monopoly position in the hardware market and its published history implied adopting an innovation and quality orientation. However, the information technology (IT) market had developed considerably since the dot com bubble in year 2000. To drive overall performance improvements for business growth, IBM became focused on and supported by a value orientation (VO) and a service orientation (SO) (IBM: our strategy).

Apple Inc. – The published history of this company suggests that the motivation behind Apple’s success lay with embracing diversification. Apple Inc. originally focused on both an innovation orientation (IO) and a design orientation (DO) to establish the brand but a more recent emphasis on market orientation drove Apple in developing new affordable products, successfully capturing the music and mobile applications market (Apple: FAQ).

Implementing the necessary changes required for transforming business models such as these, as demonstrated by IBM and Apple Inc. confirm the findings by Amini and Li (2010, p. 314), that when designing new products the supply chain needs to change: “it is critical that the supply chain adapts to the changing environment in terms of demand, lead time and cost in the intermediate run”.

There is no doubt that fundamental changes have been taking place in the business landscape which has made it fiercely competitive (Elnaugh, 2008). Yet, there does not appear to be an accepted theory for explaining how firms change strategic orientation; this is despite change management being at the forefront of managers’ minds (Amason, 2011).

A preliminary literature review in this chapter has exposed three key areas for closer examination in the literature review in Chapter II:

 Understanding how the firm’s SCO decision supports supply chain related issues facing medium and large sized manufacturers;

 Defining and explaining supply chain orientation (SCO);  Clarifying the role of strategic orientation