You are on page 1of 7

Integrated Decision Making in Supply Chain Management: A Literature Review J.K.Purohit1, M.L.

Mittal2, Joshi Dushyant3, 1,2 Department of Mechanical Engineering, MNIT Jaipur 2 Department of Mechanical Engineering, MBMEC,JNVU Jodhpur E-mail: jkpurohit17@gmail.com1,mlmittal.mnit@gmail.com2,joshidushyant1520@gmail.com3

Abstract:
Integrated decision making in Supply chain management has increasingly becoming a more popular research area recently. Various papers, with different objectives & environment, have been published since a few years ago. This paper aims to survey integrated decision making in supply chain management literature. Paper published in relevant journals from 2000 to 2012 are analyzed and classified into five categories: conceptual, descriptive, empirical, exploratory, crosssectional, and exploratory longitudinal. We also looked at the papers in terms of the types of integration, the unit of analysis, the industry sectors, and the decision making process or strategies addressed. The literature review will provide the basis for outlining future research opportunities in this field.

Introduction: Supply chain management (SCM) can be defined as the systematic and strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, with the aim of improving the long-term performance of the individual companies and the supply chain as a whole [Mentzer et. Al,2001] A supply chain is composed of trading partners that are interconnected with financial, information and product/service flows. Effective management of these flows requires creating synergistic relationships between the supply and distribution partners with the objective of maximizing customer value and providing a profit for each supply chain member [Fugate,2006]. Todays manufacturers must not only manage their own organisations but also be involved in the management of the network of upstream and downstream firm [Handfield et al.1999]. Competition is no longer among firms, but among supply chains [Christopher et al.2000] The ideal situation is that the entire process across the supply chain is designed, managed and coordinated as a unit[Bagchi et al.2005a]. Few definitions emphasise the importance of the integration of flow of products, services, funds and information across firms for an effective SCM. Romano (2003) describes the concept of integration as a mechanism to support business processes across the supply network to overcome intra- and inter-organisational boundaries. Cagliano et al. (2006) related supply chain integration to coordination mechanisms and in particular implies that business processes should be streamlined and interconnected, both inside and outside company boundaries. Elsewhere, Bagchi et al. (2005a) have defined SCI as comprehensive collaboration between SC network members in strategic, tactical and operational decision-making. Bagchi et al. (2005a) highlights the need for integration at all the levels of planning in order to be effective, the levels may be operational, tactical or strategic. While Sanders et al. (2008), suggested that operational coordination can only lead to operational benefits, strategic coordination provides both operational and strategic benefits. SCI implies collaborative inter- and intra-organisational management on the strategic, tactical and operational levels of activities (and their corresponding materials, funds and information flows) that, starting with raw materials suppliers, add value to the product to satisfy the needs of the final customer at the lowest cost and the greatest speed (Monczka and Morgan 1997, Frohlich and Westbrook 2001, Romano 2003, Chen et al. 2004, Bagchi et al. 2005a, Cagliano et al. 2006, Flynn et al. 2010). Chopra and Meindl (2010) demonstrate that achieving strategic fit between competitive and SC strategies is the key to SCI. Therefore, the researches on SCI should consider not only tactical and operational issues but also strategic aspects of business (Rafaela Alfalla-Luque et al.2012).

Integration avenues: it is generally accepted that improvements in supply chain integration increase efficiency more than optimizing individual functional areas (F. Haghighat et al.) Previous research analyse and measure SCI considering three main line of approaches: (1)Participants Integration (2) Procedural Integration (3) Flow Integration

Participants Integration consists of external (with supplier and customer) and internal (within organizational boundaries) integration. All firms within a supply chain must overcome their own functional blocks and adopt a process approach. Procedural Integration include customer relationship management, customer service management, selling chain management demand management, order acceptance/rejection, product flow management, supplier relationship management, product design & development with commercialisation. The complexity of SCM has also forced companies to go for online communication systems.( A. Gunasekaran et al.2004) the Internet increases the richness of communications through greater interactivity between the firm and the customer (Watson et al., 1999). Cagliano et al. (2006) investigate the relationship between the integration of information flows and the integration of physical flows and two manufacturing improvement programmes (lean production and enterprise resource planning systems). Flow integration also includes the application of advanced technologies for better information and physical goods flows between chain participants. Senge (1990) defines two types of complexity, detail and dynamic. Detail complexity exists when there are many variables needing to be managed. Dynamic complexity exists where cause and effect are separated, and difficult to associate, in both time and space. Effective application of information technology to the integration of supply chain activities has the effect of reducing levels of complexity. Chen et al. (2000) have defined that the demand process seen by a given stage of a supply chain becomes more variable as we move up the supply chain (i.e. as one move away from customer demand). In other words, the orders seen by the upstream stages of a supply chain are more variable than the orders seen by the downstream stages. This shortfall leads to malfunctions which induce poor efficiency. The complexity of supply chain management problems forces managers of today to seek for more integrated decision tools. Eliminating barriers between decision levels, and between different stages of the decision making process in business is crucial in order to improve the efficiency of the supply chain.

Supply chain integration can be described along two directions: scope of integration and level of integration. Scope of integration concerns the number of supply chain areas in which cooperation is developed. There are four main areas namely flow of goods (e.g. VMI, common containers,etc.), planning and control (e.g: joint forecasting), organization (partnership) and flow of information (EDI, Internet). The level of integration indicates to what extent an integrative activity is developed (D. P. van Donk et al. 2005) Integrated decision making One of the areas that is highly researched and that has guaranteed companies significant cost savings is supply chain network design. Supply chain network design allows supply chain managers to pick optimal number, location, and size of warehouses and/or plants; to determine optimal sourcing strategies, and to determine the best distribution channels, that is, which warehouses should service which customers (Meepetchdee & Shah, 2008).Developing decision tools based on supply chain integration allows to offers a higher level of coordination of the supply chain by merging all parties objectives. First of all, decision makers identify problems through various viewpoints. These reflect the way in which they understand the situation and lead to a first formulation of the problem in the form of questions: Where to install the production facilities? Which resources to use? How much to invest? Etc. Once those questions are known and delimited, a more formal and structural formulation is achieved through mathematical modelling: Lot sizing model, Line formulation, Vehicle routing problem, Facility location, etc. Then, the right methodology is used in order to obtain a good solution: branch-and-bound, Benders decomposition, Ant heuristic, Genetic algorithm, Simulation, etc. Finally, those methodologies need to be implemented in computer programs in order to get answers to the original questions. (G. Strack et al. 2010)

Types of integrated techniques

Three different decision integration approaches can be applied to the decision making process: Global integrated decision approaches Functional integrated decision approaches Technological integrated decision approaches

Global integrated decision approaches, encompasses management decisions at various stages and of various levels. This global approach represents the merging of all parties in the supply chain and is solved globally. For example, production planning and scheduling decisions can be considered simultaneously in a global approach instead of being tackled separately and independently. In a hierarchical setting, planning decisions are considered first and take an aggregate capacity constraint into account. Then scheduling decisions are solved considering the planning decisions as fixed. With global integration, a global model is created where production planning and scheduling costs appear in a unique objective function, production planning and scheduling constraints are modeled together and the capacity constraint which links the two levels (planning and scheduling) is fully detailed. This global approach is then solved using the appropriate methodology. This approach offers a very high level of coordination between decisions. Functional integrated decision approaches, encompasses management decision at functional level between different functional areas of a party in a whole supply chain. Compare to global integration the level of coordination between decisions reduced due to decomposition. Technological integration deals with interoperability. Interoperability is the ability of a system (information technology) to work with another system. For example, the production planning problem can be solved using an optimization tool whereas the scheduling problem is solved by a simulation tool. In that case, the link between those different tools must be made. Another well known example of interoperability is the ERP or SAP systems which are information tool which allow to connect different department (logistic, marketing, etc.) together. All transaction may be made in SAP or any other ERP software but the all management information reports may be created in to MS excel for better understanding.

Impact of integrated decision making in supply chain: It has been proved through research and practice that more integration of supply chain leads to better performance (Stock, Greis, & Kasarda, 2000; Droge, Jayaram, & Vickery, 2004; Gimenez & Ventura, 2003). It has also been argued by Cagliano, Caniato, & Spina (2006) that there is a positive impact of supply chain integration on the business performance.

Integrated decision within and outside organizations directly impacted the sales.because of the integration sales increased because the firm remains in a position to satisfy the needs and wants of customers superiorly and increased customer loyalty boosted sales revenues. As customer satisfaction and loyalty increased, customer recommended the product to other customers and thus sales were increased. As a result, the firm performed well financially because of supply chain integration. Vickery, Jayaram, Droge, & Calantone (2003) explained that supply chain integration enhanced the financial performance of an organization. They further exclaimed that supply chain integration improved the financial ratios such as returns on assets, return on equity and working capital ratio etc. because it directly impacted the sales. The same benefits and impacts of supply chain integration on business performance were explained by Gunasekaran, Patel, & McGaughey (2004), Petersen, Handfield, & Ragatz (2005), Stank, Keller, & Closs (2001) and Simatupang, Wright, & Sridharan (2002). Trkman & Groznik (2006) argued that information technology had made it possible for organizations to integrate their supply chains while it was also an advantage in terms of cost because information technology solutions for any business process were always cost effective. Therefore, supply chain integration decreased the costs. Different benefits of supply chain integration were also presented by several other researchers. Li, Ragu-Nathan, Ragu-Nathan, & Rao (2006) stated that supply chain integration enabled the organization to gain a sustainable competitive advantage in the marketplace and it enhances organizational performance by enabling it to reach its goals and objectives effectively and efficiently. Rosenzweig, Roth, & Jr. (2003) state that supply chain integration enables an organization to satisfy the needs and wants of target customers superiorly relative to competition and thus customer satisfaction/loyalty increases. This provides a sustainable competitive advantage to the organization. The following figure summarizes the benefits associated with supply chain integration:

Integrated decision making Challenges: Different research papers provided empirical proofs that supply chain integration provide effective business practices and efficient operational performance but few of them discussed challenges associated with it. Awad & Nassar (2010b) that prominently addressed those challenges. multinational organizations could gain a sustainable competitive advantage internationally as supply chain integration enabled knowledge sharing and innovation across the organization and it enabled the organization to manage uncertainty expected in different geographical boundaries caused by the diverse international political, economic, social and technological contexts. Awad & Nassar (2010b) explained that neither it is easy to integrate

the supply chain strategies among organizations and nor it is easy to align the supply chain strategy of an organization with its corporate strategy. Awad & Nassar (2010b) further argued that the challenges associated with supply chain integration could be described from three perspectives such as: technical perspective, managerial perspective and relationship perspective. The following figure represents the different kinds of challenges that were presented in the paper.

The different challenges that were associated with the supply chain integration are as follows: Change and Culture Globalization Business process integration Transaction costs Strategy and Planning Customer order management Operations Management Business standards CONCLUSION In this paper, integrated decision making in supply chain management and the challenges associated with it were discussed and analyzed. The paper was divided in four main parts. The first part introduced the paper, defined supply chain management and provided a brief overview of supply chain integration.this part of paper also discussed about concept of integration avenues. The second part discussed the concept of integrated decision making with global,functional and technological integrated decision making approaches. Third section highlighted impact of integrated decision making on supply chain.certain business challenges that were associated with supply chain management and its integration. The third section presented the research methodology as secondary research was selected and different research/papers and journal articles were selected to analyze the claim of the paper. The fourth section presented challenges concerning integrated decision making in supply chain .

[1] Mentzer, J. T., Dewitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D., & Zacharia, Z. G. (2001). Defining supply chain management. Journal of Business Logistics, 22(2), 125. [2] Fugate, B., F. Sahin and J.T. Mentzer, 2006. Supply Chain Management Coordination Mechanisms, J. Business Logistics, 27(2): 129-161. [3]Handfield, R.B. and Nichols, E.L., 1999. Introduction to supply chain management. Upper Saddle River, NJ: Prentice-Hall. [4] Christopher, M., 2000. The agile supply chain. Competing in volatile markets. Industrial Marketing Management, 29 (1), 3744. [5] Bagchi, P.K., et al., 2005a. Supply chain integration: a European survey. The International Journal of Logistic Management, 16 (2), 275294.

Cagliano, R., Caniato, F., and Spina, G., 2006. The linkage between supply chain integration and manufacturing improvement programmes. International Journal of Operations and Production Management, 26 (3), 282299

Walton, S., Gupta, N.D., 1999. Electronic data interchange for process change in an integrated supply chain. International Journal of Operations & Production Management 19 (4), 372388.

F. Haghighat. The Impact of Information Technology on Coordination Mechanisms of Supply Chain. World Applied Sciences Journal 3, Supple 2:74{81, 2008.

Senge, P.M. (1990), The Fifth Discipline: The Art and Practice of the Learning Organization, Century Business, London.

D. P. van Donk and T. van der Vaart. A case of shared resources,uncertainty and supply chain integration in the process industry. International Journal of Production Economics, 96:97{108, 2005. G. Strack, Y.Pochet, "An Integrated Model for Warehouse and Inventory Planning" , European Journal of Operational Research, 204, 2010, p.35-50.

Awad, H. A., & Nassar, M. O. (2010a). Supply Chain Integration: Definition and Challenges. Retrieved September 1, 2011, from International Association of Engineers:

Awad, H. A., & Nassar, M. O. (2010b). A Broader view of the Supply Chain Integration Challenges. International Journal of Innovation, Management and Technology , 1 (1), 51-56.

Droge, C., Jayaram, J., & Vickery, S. (2004). The effect of internal versus external integration practices on timebased performance and overall firm performance. Journal of Operations Management , 22 (6), 557-573.

Petersen, K. J., Handfield, R. B., & Ragatz, G. L. (2005). Supplier integration into new product development: coordinating product, process and supply chain design. Journal of Operations Management , 23 (3), 371-388.

Stank, T., Keller, S., & Closs, D. (2001). Performance benefits of supply chain logistical integration. Transportation Journal , 41 (2), 32-46.

Gunasekaran, A., Patel, C., & McGaughey, R. E. (2004). A framework for supply chain performance measurement. International Journal of Production Economics , 87 (3), 333-347