Expressing a firm's supply chain strategy: a framework and a methodRoberto Perez-Franco*, Mahender Singh, Yossi SheffiCenter for Transportation and Logistics, Massachusetts Institute of TechnologyPostal address: 77 Massachusetts Ave, E40-276, Cambridge MA 02139, USAEmails: [email protected], [email protected], [email protected] chain strategy is seldom stated explicitly, making it difficult to discuss a firm‟ssupply chain strategy in a factual and meaningful manner. This paper presents a method tocapture and express a firm‟s supply chain strategy, called the Functional Strategy MappingMethod. Examples from an actual deployment illustrate the steps, and show that the output –called the Functional Strategy Map – effectively communicates the supply chain strategy of afirm and serves as a meaningful starting point for its evaluation. The paper describes the processwe followed to develop the FSM Method. An actionable protocol is provided in the Appendix.Keywords: supply chain strategy; grounded mapping; strategy as practice; functionalstrategies; conceptualization and crystallization1. INTRODUCTIONMany events may motivate a firm to rethink its supply chain strategy. Aitken, et al. (2003),for example, argue that changes to the supply chain strategy are necessary as a product proceedsthrough its life cycle, in order to maintain competitiveness. Other motivators may be changesinside the firm, like the arrival of new a CEO or a revised strategic vision for the company; orchanges in the business environment, such as new regulations, new technologies, newcompetitors, and entry to new markets. Rethinking a supply chain strategy, however, is not atrivial problem and it has no clear answer in the extant supply chain management literature.*Corresponding author. Office phone: 1-617-253-7036. Fax: 1-617-253-4560. Mobile phone: 857-233-6098.1

The nature of the problemPart of the difficulty involved with rethinking a firm's supply chain strategy may stem fromthe „elusiveness‟ of strategy in general (Bakir & Bakir, 2006). It is remarkable that, a quartercentury after strategy was described as one of the two faces of „logistics‟ (the other one beingoperations) (Shapiro and Heskett, 1985), very basic questions such as how to characterize asupply chain strategy remain unanswered (Frohlich and Westbrook, 2001).Compared to the progress in supply chain operations domain during the last decades,progress in supply chain strategy domain has been relatively slow. Even some of the most basicideas in the supply chain strategy realm are still hotly contested. Take, for example, Fisher‟s(1997) widely cited matrix, which prescribes (1) efficient supply chains for functional products,and (2) responsive supply chains for innovative products. These two prescriptions haveconsiderable intuitive appeal. Yet researchers trying to validate them empirically have run intocontradictory findings. While Qi, Boyer and Zhao (2009) found support for both prescriptions,Lo and Power (2010) found support for neither one. While Selldin and Olhanger (2007) foundsupport only for the first prescription and not for the second, Li and O‟Brien (2001) found theexact opposite: support for the second and not for the first. Furthermore, Lo and Power (2010)found empirical evidence that undermines the characterization of products as either innovative orfunctional, and of supply chains as either responsive or efficient, suggesting instead that mostproducts and supply chains could be better characterized as hybrids.In addition to the difficulty of characterizing a supply chain strategy, or possibly as a resultof it, supply chain strategies are often left tacit. An international survey by Harrison and New(2002, p. 264) found that more than half of the supply chain strategies in over 250 firms acrossdiverse sectors “were either non-existent, patchily defined with poor definition, or had only some2

elements defined and lacked detail”. This makes their discussion more difficult and may explainwhy – as Hicks (1999, p. 27) laments – “it is often the case that high-level discussions of supplychain strategy are completely void of facts.”Our own analysis supports the view that supply chain strategy is seldom made explicit. Weanalyzed a pool of 20 publicly available case studies prepared in 2005 for a project on supplychain excellence at MIT's Center for Transportation and Logistics. Surprisingly, out of 20 cases,only 2 made explicit reference to the firm‟s supply chain strategy, despite the fact that the caseswere focused on the supply chain practices of world-class firms. In comparison, 18 of the 20cases explicitly stated the business strategy.Subsequently, during direct interactions and projects with multiple firms, we have verifiedthat this pattern holds: although most of the firms have an explicitly stated business strategy, theyalmost never have an explicit supply chain strategy in place, a fact they often admit openly.Research objectiveOur main research objective is to develop a method to express the supply chain strategy of afirm, in a way that is useful as an actionable starting point for evaluating and reformulating it.Since expressing a supply chain strategy in an actionable manner requires – as we soon found– a working understanding of the nature of supply chain strategy, our research objective wasexpanded to include the development of a working framework to represent supply chain strategy.DefinitionsFor the purpose of this research, a supply chain is defined as a group of entities directlyinvolved in the flows of products, services, finances, and information from a source to acustomer (Mentzer, et al., 2001, p. 3-5). Additionally, for the purpose of this research, supplychain strategy is defined as the patterns of decisions related to supply chain activities, in3

accordance with the overall corporate competitive strategy (Narasimhan, Kim, and Tan, 2008, p.4). Included in these activities are the procurement of raw materials, the sourcing of products,capacity planning, demand management, and communication across the supply chain, as well asthe activities related to the delivery of products and services, such as warehouse and inventorymanagement, transportation and distribution.2 LITERATURE REVIEWA search in the supply chain management literature for methods to express a firm‟s supplychain strategy in an actionable manner yields scant results. We discuss three of the approachesfound in the literature.Arcs of integrationFrohlich and Westbrook (2001) envision supply chain strategies as arcs of integration andpropose that “different supply chain strategies can be empirically classified into at least five validtypes, defined by the direction (towards suppliers and/or customers) and degree of integration”.Thus, for example, the supply chain strategy of a given firm could be characterized as having anarrow arc of integration with customers, and a broad arc of integration with suppliers.A limitation of this approach is its focus on a single feature, namely integration, at theexpense of all the other features of a given supply chain strategy. Additionally, it is not clear howthe characterization as an „arc of integration‟ can be an actionable starting point for evaluatingand reformulating the supply chain strategy, one of the objectives we seek to fulfill.Segmentation treeBrun and Castelli (2008), working on the problem of supply chain strategy in the fashionindustry, propose a “framework model for SC strategy segmentation within a portfolioapproach”. This model, which they call a „segmentation tree,‟ is based upon the assumption that4

three dimensions, namely product, brand and retail channel, suffice to get “a complete overviewof the fashion industry”, and suggests that by stating how the segmentation takes place in thesethree dimensions, and in what order, a supply chain strategy in the fashion industry would besufficiently defined. “[I]t can be supposed that the overall supply chain strategy of a companycould be described by a segmentation tree,” Brun and Castelli state (2008, p.172.)However, the „segmentation tree‟ may be – by definition – a limited tool when it comes todescribing the supply chain strategy of a firm. Just as the „arcs of integration‟ focus solely onintegration, at the expense of every other aspect of the supply chain strategy, the „segmentationtree‟ focuses solely on segmentation, and is therefore largely blind to every other aspect of asupply chain strategy. As a framework it may be useful in the fashion industry, yet when itcomes to other industries, or when more is required from a representational devise than just asummary of how segmentation was done, the „segmentation tree‟ may not be enough.Techniques-tools matrixCigolini, Cozzi, and Perona (2004) explicitly state the question of “how can [a supply chainstrategy] be operationally defined and represented?” They develop a partial catalog of techniquesthat operate at the interface between companies, and then identify in the literature the supplychain tools that support the implementation of these techniques. Cigolini, et al. propose creatinga „techniques-tools matrix‟, namely a matrix listing the SC techniques as row headers and the SCtools as column headers. The matrix contains a checkmark in each cell where a tool providessupport to a technique. Cigolini, et al. state that “perhaps the most promising usage of thetechniques-tools matrix is in its inherent ability to synthesize and represent supply chainmanagement techniques.”The „techniques-tools matrix‟ is a significant effort to operationally define and represent a5

supply chain strategy. Nevertheless, it suffers from numerous limitations: (1) the matrix fails tocapture how the supply chain techniques and tools relate to the firm‟s strategic imperatives; (2)by focusing exclusively on the interface between firms, it deliberately ignores the activities thattake place inside the firm; (3) the matrix lacks the intuitive readability that should be expectedfrom a representational device; (4) there is no provision for the tacit nature of supply chainstrategy: it is not clear how the matrix is to be built and how the techniques and tools being usedin the case of a particular firm are to be identified; (5) by relying on a catalog of supply chaintechniques, the applicability of the matrix is restricted to areas currently covered by the catalog;(6) the matrix builder may be tempted to pick items from the catalog based on social desirability(e.g. because they sound good), as opposed to items that are grounded on the activities of thefirm; and (7) even after the matrix has been built, it is not clear how it can be used as anactionable starting point for evaluating and reformulating a supply chain strategy.3. DEVELOPING A FRAMEWORK OF SUPPLY CHAIN STRATEGYOur research started with an effort to develop an early framework of supply chain strategy,what Yin (2003) calls a preliminary "understanding - or theory - of what is being studied."Early inquiry. We conducted a series of five exploratory interviews with supply chainmanagers from several firms and different levels in the hierarchy, from VP to plant manager, toexplore the view they had of supply chain strategy and its role in their firms. These interviewssuggested that the purpose of the supply chain strategy was largely to make the business strategy„happen‟. Later we confirmed this view through interviews with a VP and an EVP of supplychain strategy, from separate firms, who confirmed that, as heads of the supply chain function,they would receive the business strategy from the top, as a given strategic imperative, and werethen asked to formulate and implement the supply chain strategy to support it.6

The strategic imperativeGiven the importance of business strategy as a main driver of the supply chain strategy, weworked to better understand how it is articulated when it is communicated to the supply chainfunction. For this, we resorted to theory generation tools from the grounded-theory tradition(Glaser and Strauss, 1967).Grounded theory. Since our goal was to generate ideas inductively to better understandstrategy articulation, research techniques from the qualitative toolkit were preferred (EasterbySmith, Thorpe, and Lowe, 2002). Qualitative methods help the researcher keep assumptions incheck and open thought process to emergent – and often unsuspected – findings that enrich thetheory-generation effort (Gummesson, 2000; Eriksson and Kovalainen, 2008).Data sources. Our data source for developing the preliminary framework was a pool oftwenty publicly available case studies on supply chain excellence prepared in 2005 for the Centerfor Transportation and Logistics‟ Supply Chain 2020 Project.Analysis. Techniques such as open and categorical coding, typically recommended for theanalysis of qualitative data (Charmaz, 2006), were employed extensively to analyze passages ofthe cases that referred to the strategy of the firms. The purpose of using open coding was to stayclose to the data, while categorical coding was used afterwards to help us identify the deeperconcepts behind the text (Goulding, 2002). Discourse analysis was used to analyze particularpassages of interest, and interpret the meaning behind the strategy discourse (Eriksson andKovalainen, 2008). Other techniques for the analysis of qualitative data were applied as needed.For example, tables that summarize the evidence (Eisenhardt, 1998; Eisenhardt and Graebner,2007) were used to compare and contrast some key features of the cases. Also, conceptual maps(Miles and Huberman, 1984) were used to summarize in a graphical form the framework that7

emerged from the analysis.The qualitative analysis of data from the 20 cases mentioned above suggested that thestrategic imperative given to the supply chain function often includes two distinct elements: a core strategy, the central idea behind the strategy, and a few strategic themes that clarify and expa