Integrated Strategy
The integration of business processes in supply chain management from suppliers would add value first to original equipment manufacturers (OEM) and finally to their customers. This integrated strategic process is enhanced through the use of logistics management. According to the Council of Logistics Management, logistics management is defined as the process of planning, implementing, and controlling the efficient, cost-effective, flow and storage of raw materials, in-process inventory, finished goods, and related information flow from point of- origin to point-of-consumption for the purpose of conforming to customer requirements. The scope of the supply chain management expands further upstream to the source of supply and downstream to the point of consumption, involving the integrated strategic process. The need for integration of information systems, planning, and control activities exceeds the level of integration necessary in the management of logistics alone. Although not all efforts toward integration are successful, companies are increasingly using an integrated, strategic approach not only to manage the supply chain, but as a general philosophy in managing the business due to the perceived benefits of improved performance . In fact, one study completed in 1998 supports a positive impact to performance by correlating supplier performance and firm performance . The study summarizes literature available to that point. The study also concludes that a company’s customer relations and purchasing practices—as major components of supply chain management strategy—have a positive impact on the effectiveness of supply chain management as a whole. Furthermore, through empirical analysis, the same study lays a foundation for the premise that additional practices of concurrent engineering, customer focus, strategic alliances, and quality-driven production improve the strategic management of the supply chain management function as a whole.
However, in slight contrast to these findings, companies should be further interested in the firm’s overall performance and their ability to attain competitive advantage, as opposed to merely positively impacting the supply chain management strategic process. Since the concept of supply chain management as a strategic tool for business planning is relatively new, there is less clear data on the effect of “overall” performance of the corporation given a successful supply chain management strategy. A statistical study on the impact of purchasing and supply chain management of activities relating to corporate success was published in 2002 that attempted to answer many of the questions concerning overall firm performance by stratifying companies into three categories using a number of different financial and benchmarking criteria. The results determined that above-average firms showed no increased use of supply chain management processes when compared to average and below-average firms and that below-average firms had higher perceptions of actually practicing this strategic process. The reasons for this are partially explained by realizing that firms with average and below-average performance levels may be facing market pressures and declining profitability and must seek ways to improve performance and lower costs. In other words, above-average performing firms may not seek the advantages of strategically managing the supply chain given the relative success of the corporation despite additional opportunities to increase the firm’s performance. These results heavily support many of the underlying principles developed later in this analysis