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Charting Supply Chain Management Integration and Initiatives: A Framework to Guide Implementation

W. Rocky Newman, Miami University Mark D. Hanna, Georgia Southern University Thomas Gattiker, Boise State University Xiaowen Huang, Miami University

Abstract
This paper proposes a framework that describes the boundary spanning supply chain management (SCM) initiatives taken by leading companies. Supported by existing literature and interviews with managers from large companies reecting a cross section of businesses, the framework suggests four motivating domains or factors that could support SCM initiatives. They are supply chain understanding, design, improvement, and coordination. Based on the sand cone model, the framework also suggests four levels of SCM integration over which these motivating factors are relevant to the rm and/or supply chain. They range from no integration outside the functional silos of a single rm to a fully integrated multi-tier supply chain. Unlike existing frameworks that are based upon the ow of material and information through the supply chain, our framework is derived by combining the concept of integration with the motivating domains that characterize SCM initiatives. It captures the combined and overlapping impact of supply chain initiatives from a more strategic perspective and is a useful additional resource for practitioners who seek to chart potential improvements to their supply chain from a competitive standpoint.
Keywords: supply chain management, strategic framework, sand cone model, management integration

Introduction
Supply Chain Management (SCM) eorts can be described as cross-functional activities with roots in a wide variety of disciplines. Logistics, purchasing, management information systems (MIS), operations management (OM), engineering, accounting, and marketing all have relevance to the decision making processes of SCM. In one way or another, expertise from each of these functions is indispensable to the supply chain practitioner. Todays supply chain managers are often trained in, or come with signicant experience specic to, one of the aforementioned functions. Unfortunately, without formal train-

ing in SCM, most are likely to view the eld through lenses formed in their training and work background. This can result in quite disparate perspectives. Vendor sales and marketing representatives may see SCM as the strong-arm purchasing tactics used by super retailers like Wal-Mart, Target, and Lowes to force costs of mandated systems back to suppliers and demand price reductions at the same time. Purchasing and procurement analysts of progressive manufacturers may see SCM as an opportunity to improve quality and delivery of key components. Financial experts and venture capitalists may see SCM as new wave service companies like Amazon.com leveraging their e-commerce opera-

tions by providing service to other more traditional enterprises such as Barnes & Noble or ToysRUs. From inside an old school manufacturing rm, SCM may be viewed as simply an extension of traditional logistical activity with little impact outside that functional area, or perhaps as an information technology issue related to nding an Enterprise Resources Planning (ERP) system that provides all the needed solutions. In fact, it is hard to think of a major trend or class of business initiatives buzzed about over the last several years that cannot in some way be linked to a process that supports contemporary SCM. While many SCM initiatives are promoted from a functional point of view
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(i.e., as marketing programs or purchasing initiatives), one common trait is that the processes they aect cross multiple functional and organizational boundaries. In other words, they would be better understood from a cross-functional business process perspective rather than a functional orientation. Many budgets, reporting lines, performance measures, reward structures, and cultures still exist within organizations functionally aligned components. Quite often they fail to span the boundaries that make up a supply chain. Given the possibility of such silos existing within organizations involved with supply chain initiatives, traditional approaches for planning and evaluating SCM initiatives may fail to measure their full value and potential. As previous research (discussed below) has suggested, issues of integration between functions and rms, as well as a full understanding of the motivating factors behind supply chain initiatives, need to be considered before their true impact can be identied. This lack of a comprehensive process- oriented view of SCM initiatives has limited our understanding of their competitive characteristics and value, and thereby potentially retarded their strategic application. This research presents a SCM framework that is useful in helping managers classify the competitive objectives of their SCM initiatives within a single model. It provides managers and their rms with the language to assess the extent of their development among a number of important areas of improvement (or domains) that span functional and/or organizational boundaries. By mapping these initiatives in an integrated framework, comprehensive and summative strengths, weaknesses, opportunities, and threats can be identied and evaluated. This, in turn, may be used to provide strategic direction for supply chain improvement eorts consistent with their objectives -- allowing rms to set priorities for the development of competitive capabilities specic to their business and supply chain context. The framework we propose is supported by existing literature and interviews with managers from four Fortune 500 companies that represent diverse none of these models explicitly considers the role of integration, both internal integration across functions and external integration between rms, as a pre-

...traditional approaches for planning and evaluating SCM initiatives may fail to measure their full value and potential.
businesses. The framework suggests that most supply chain management initiatives can be positioned in a conceptual space made of four motivating factors (or domains) and by four levels of supply chain integration. From a practical point of view, the framework helps rms to identify the value of SCM initiatives, and the impact they have on the rms strengths and weaknesses, in process terms rather than in functional terms. Several SCM frameworks have been introduced in recent years. These include The Supply Chain Management Institutes framework originally developed by the Global Supply Chain Forum (Lambert, Cooper, and Pagh 1998) and the APQCs Process Classication Framework (2008). Each of these considers SCM from a process perspective and helps illustrate the need to view SCM from a boundary spanning perspective that links functional and/or organizational entities. Similarly, The Supply Chain Council (2008) has developed the Supply Chain Operational Reference (SCOR) Model for the purpose of proactively modeling and assessing the relationships between the sequential stages of a supply chain. The Supply Chain Consortiums Supply Chain Best Practices Framework (2008) provides a resource similar to the SCOR model. Both of these models provide a supply chain mapping ability that allows managers to understand the various ows (product service ow, market accommodation ow, information ow, and nancial or cash ow) that are critical to SCM (Stank et al. 2001). However,

Literature Review

dictor of successfully managing those same critical ows (Stank et al. 2001; Stank, Keller, and Daugherty 2001. In fact, Li, Rao, Ragu-Nathan, and RaguNathan (2005) suggest that most specic SCM studies still focus on the various functional aspects of SCM initiatives, while a unifying framework of SCM initiatives based on an integrated process view of SCM is still largely missing. We feel our approach, with a focus on specic competitive objectives and levels of integration, will help to meet that need. The literature dening the current state of SCM began with logistics and its inter-organizational processes as a focus of study (Lambert, Robeson and Stock 1978) and has been expanding rapidly since the early 1990s. By the mid-1990s, descriptive case studies had been assimilated, and work outlining the more generalized concepts of SCM was published. For example, Anderson, Britt and Favre (1997) suggest SCM was based upon changes in the way rms saw their relationships with customers and suppliers. These authors conceptualized change in terms of structure, organization, policies, and support systems. Many principles of SCM focus on the activities of the marketing, logistics, and procurement functions as they look forward and backward in the supply chain. While they accurately suggest improvements are possible through initiatives such as market segmentation, customized logistics, and strategic sourcing, they take a functional perspective. In doing so, they may miss global process improvement opportunities. By contrast, a process oriented approach would address a business

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Figure 1 Four Construct Areas for SCM Integration Coordination Responding to or adjusting to meet the operational requirements of one or more other entities in the supply chain

Improvement Enhancing the process or systems used to create value by one or more entities in the supply chain

Understanding Gaining awareness of the requirements, capacities, capabilities, and limitations of the entities in the supply chain

Design Designing of the product/ service bundle of one or more other entities in the supply chain

activity, such as inventory management or new product development, which cuts across functional and/or organizational boundaries. Such an approach is more likely to beget global process improvements and less likely to render multiple, functionally based, sup-optimal outcomes. The facilitating role of information technology (IT) is another functional focus of much SCM research and improvement eort. Several authors focus on the improved ow of information that surrounds materials management and procurement activities, reporting benets of exchanging information with other entities in the supply chain (Zuckerman 1998; Kahl 1999; Fine 2000; Berquist, 2000; Chandra and Kumar 2000; Lee 2000; Barratt and Oliveira 2001). Researchers have suggested that organizational inertia (i.e., we do it that way because we have always done it that way) combined with a lack of strategic planning has slowed the impact that IT initiatives have had on supply chains (Spekman, Kamau and Myhr, 1998; Hammer 1999). The lack of an integrated process perspective and a reliance on silo-based legacy systems can similarly limit the evaluation of IT initiatives and actually may be an underlying cause to the organizational

inertia found by Hanna, Newman, and Sridharan (1993). Such a lack of integration may slow even those initiatives whose impact does exceed organizational hurdle rates. In those cases, nonintegrated functionally based performance measures that fail to assess the full impact and value of implemented initiatives may retard their fully integrated adoption. Further evidence of the functional orientation of supply chain research is found in recent endeavors to classify SCM initiatives (Lejeune and Yakova 2005). Some studies categorize SCM initiatives based on the functional problem addressed, such as total quality management practices, logistics integration, strategic purchasing, etc. (Chen and Paulraj 2004). Fisher (1997) groups SCM initiatives by product or supply chain type. While these eorts advance our knowledge of SCM, existing frameworks typically provide only a partial view of SCM practice due to a functional or industry specic orientation. They generally lack a strategic process orientation and may not be generalizable for practitioner use in planning SCM initiatives. In order to address these issues, we propose a new strategic framework to classify SCM initiatives.

The rst dimension of our framework is made of four SCM capability domains. These domains reect the ways in which supply chain initiatives aect supply chain processes. They explain the strategic motivation of supply chain initiatives. The four domains, summarized in Figure 1 and described below, are coordination, understanding, improvement, and design. We dene coordination as responding to or adjusting operational output of one entity to meet the demand requirements of other entities in the supply chain. An example would be using collaborative planning and forecast replenishment (CPFR) to estimate planned shipments to a customer. Also, Gattiker and Goodhue (2005) discuss how ERP provides standard information that can help a manufacturing plant adjust to the changes in a customer forecast. Numerous articles (Barratt and Oliveira 2001; Boyer, Leong, Ward and Krajewski 1997; Das and Handeld 1997; Dewett and Jones 2001; Frohlich and Westbrook 2001; Frohlich and Westbrook 2002; Hill and Scudder 2002; Lejeune and Yakova 2005; Mentzer, Foggin and Golicic 2000; Shah, Meyer-Goldstein and Ward 2002; Tang and Tang 2002) examine relationships between improved supply chain coordination and competitiveness. We dene understanding as an entitys shared awareness of the requirements, capacities, capabilities, and limitations of other entities in the supply chain. For example, supplier certication programs increase understanding between buyer and seller and help remove uncertainty about a sellers ability to meet the needs of a customer. Likewise, the SCOR model (introduced above) provides a set of commonly understood supply chain building blocks that can be used to document and share the operational and procedural requirements, capabilities, and limitations of various entities in the supply chain. Beamon and
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Four SCM Capability Domains

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Ware (1998) introduce a quality model for supply chain management that along with others (Fisher 1997; Krause and Ellram 1997; Lejeune and Yakova 2005; Monczka, Nichols, and Callahan 1992; Spekman et al. 1998) suggests that shared understanding of a customers long term specication requirements or a suppliers capabilities and limitations will enhance the related supply chains eectiveness. We dene improvement as an entity involved in enhancing the processes or value-adding systems of one or more entities in the supply chain. An example would be a customers engineering sta working with multiple vendors to reduce packaging waste through a reengineered logistical process. A second example may come from a customer who no longer needs to inspect incoming material from a supplier that has just gone through a six-sigma program. Research describing collaborative eorts by related supply chain entities to improve existing value-adding processes within their supply chain includes Beamon and Ware 1998; Boyer, Newman and Hanna 2000; Choi 1995; Dixon, Arnold, Heineke, Kim and Mulligan 1994; Lejeune and Yakova 2005; Van Hoek 1998. We dene design of the product-service bundle as an entity jointly involved in the design of the product-service bundle with one or more other entities in the supply chain in the role of either a customer or a supplier. For example, rather than component blueprints, a customer might provide a supplier with performance specications and jointly develop the components design specications. A second example is a supplier assigning an engineer to be housed on-site with a major customer (at the customers request) to help with issues related to design specications of the components that the supplier provides the customer. Research provides evidence that collaborative SCM initiatives can positively impact the design of the product-service bundle (Bonner 2005; Choy, Lee, Lau, So and Victor Lo 2004; Petersen, Handeld and Ragatz 2005; Figure 2 Tracey 2004). Sand Cone Model of Supply Chain Management Levels of Integration Figure 1 positions the domain of understanding supplier capaMulti-Tier Effectiveness bilities opposite that of Supplier/Customer Effectiveness coordination of those capabilities as they are Cross-Functional Effectiveness utilized in the supply Functional Effectiveness chain. Understanding and coordination are similar in that they Adapted from Ferdows and DeMeyer, 1990 both consist largely of information sharBoyer, Newman and Hanna (2000), ing. They dier in that coordination Fine (2000), and Stallkamp (2005) to of resources to meet current demand name just a few. With the increased tends to be short-term and operationstudy of SCM ows, including prodally focused, whereas the disclosure uct service ow, market accommodaof process capabilities and capacity tion ow, information ow, and nanlimitations is longer term. By this cial or cash ow, Stank et al. (2001a) positioning we are not suggesting that distinguish between internal integraunderstanding and coordination are tion across functions within a rm and mutually exclusive categories or fully the external integration between rms independent domains. Indeed, coordiin the supply chain. Stank, Keller, and nation may often require understandDaugherty (2001) further suggest ing. Figure 1 also positions the domain that the presence of internal integraof product-service bundle design oppotion enhances the potential benet of site the improvement of the process by external integration. In a similar vein, which the product-service bundle is the seminal work of Wheelwright and produced. Both domains are oriented Hayes (1985) suggested that eorts to toward enhancing the value of what is integrate manufacturing strategy into delivered to the customer in the supply the rms overall strategic process may chain. The two dier in that design is be observed at levels dierentiated as oriented toward changing the propbeing inwardly vs. outwardly focused erties of the product-service bundle and reactive vs. proactive in nature. We itself, whereas improvement is oriented suggest that the integration of supply toward enhancing the value-adding chain initiatives varies by scope and processes (e.g., physical transformation perspective in a similar fashion and processes) by which product-service suggest four distinct levels of SCM bundles are produced or the logistics integration. In Figure 2 we also rely by which they are delivered to the cuson the sand cone model (Ferdows and tomer. Again, mutual exclusivity of the De Meyer 1990). According to Takala domains is not assumed by the placeet al. (2006, 238) this model provides ment of these items on the model. a pictorial representation of concepts that have multi-focused, multidimenFour Levels of Supply sional or hierarchical aspects. Further, Chain Management they report that a good sand cone is one Integration with a stable base made of large grains Increased integration across funcand a detailed surface of smaller grains. tions within a rm has been suggested The idea is that the bedrock of value as a prescription to success by a varifor customers comes from the internal ety of authors including Ferdows and strengths of an organization and the De Meyer (1990), Boyer, et al.(1997), externally visible, customer oriented,

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Figure 3 Sand Cone Model of Supply Chain Management: Combining Constructs and Levels of Integration Coordination

Multi-Tier Coordination

Supplier-Customer Coordination Multi-Tier Involvement in Process Improvement

Supplier-Customer Involvement in Process Improvement

Cross-Functional Cross-Functional Design Cross-Functional Improvement

Functional Effectiveness

Cross-Functional

Supplier-Customer Understanding

Multi-Tier Understanding

Functional Effectiveness Cross-Functional Effectiveness Supplier-Customer Effectiveness Multi-Tier Effectiveness

Understanding

aspects of a rms operations are built in a hierarchical fashion on these internalities. In a sense, the smaller grains at higher levels of the cone gain their structural foundation by tting into the base made of larger grains. In many rms, little has been done to integrate infrastructure beyond the boundaries of traditional functional silos. We label this level of integration (or lack thereof ) as simply functional eectiveness (the bottom level of Figure 2). At this rst level, SCM initiatives may have a focus external to the rm, but the potential for adding value in the supply chain may be limited without the leverage that comes from cross-functional understanding, coordination, design, or improvement capabilities within the rm. For example, a purchasing depart-

ment may focus its eorts on improving the eciency of its supplier qualication processes, or the sales and marketing function may agree to a smaller and more frequent delivery schedule to a customer in exchange for collaborative forecasts. In either case, without crossfunctional integration, the incremental understanding and coordination benets of these initiatives would be limited to the functional areas undertaking the initiative. This would occur at the expense of opportunities and synergies outside that function. For example, had there been cross functional integration, operations might have beneted from the increased demand visibility aorded by either initiative. The second level shown in Figure 2, cross-functional eectiveness implies

expanding the scope of SCM integration beyond the walls of a single function. Improving SCM integration to this level will likely require crossfunctional interaction, cooperation, and collaboration. Cross functional eectiveness occurs when decisions are aimed at improving overall business performance - i.e., when the sharing of information or active cooperation between functions is required to eect progress toward company-wide goals. For example, communication between marketing and operations may jointly support a decision to lower prices and a reduced margin for products where the customer commits to a long-term contract. Similar communication between engineering and purchasing may result in accepting a suppliers oer of a substitute lower grade material when the grade called for in original product specications suddenly becomes more costly to source. The third level shown in Figure 2 implies expanding the scope of SCM integration beyond the walls of a rm. We consider supplier-customer eectiveness to occur when a rm actively involves its immediate customer(s) or immediate supplier(s) in SCM improvement initiatives. This entails going beyond the simple passive placement or acceptance of an order. It would assume the coordinated improvement or reengineering of processes that involve a supplier or customer in a synergistic or win/win fashion. It would not include a supplier or customer simply exerting volume or monopolistic position to pass on costly expectations to suppliers or customers. For example, a manufacturer might seek help from a supplier in designing a new container aimed at streamlining material ow or involving a supplier with product development by asking for bids based upon component performance rather than design specications. Finally, multi-tier eectiveness may occur in a the rms relationships with multiple layers of suppliers (i.e., key suppliers and those suppliers suppliers) and/or customers. For example, a rm
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Multi-Tier Involvement in Design

Supplier-Customer Involvement in Design

Designing

Improving

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might work with a second tier supplier such as a steel company in attempting to negotiate better pricing for a handful of its rst tier suppliers who all buy steel from that same company. standing domain, sharing information and goals between functions would be characteristic of the cross-functional eectiveness tier. A commonly sought cross-functional capability within the design domain is a design for manufacturability program. Within the improvement domain, the use of crossfunctional, problem-solving teams is a prevalent activity at this level of integration. In terms of the coordination domain, decisions concerning the logistical ow of material through the rm that had previously been made from a purely functional perspective result from initiatives based on crossfunctional eectiveness. For example, an ERP system could reect the impact that a marketing promotion decision might have on manufacturing inventory planning and control issues as well as cash ow and nancial reporting concerns from nance. Because many initiatives are IT based, it should also be noted that cross-functionality can be argued as a key mediator to the impact that those initiatives have along all four domains. To the extent that legacy systems are built around a less integrated organization, the IT infrastructure of a rm needs to evolve with the level of cross-functional integration and vice versa. We envision functional excellence, as a precursor to cross-functional eectiveness, as an earlier stage of development. Weaknesses in any given functional area will necessarily constrain any cross-functional initiatives that depend on that function. Thus, a key concept promoted by our framework is the requisite sequencing of SCM improvement initiatives. Diculties encountered in attaining cross-functional eectiveness may not be rooted in the improvement initiative itself, but in the prior preparation of the organization to attain functional excellence. Consistent with this notion, a rm pursuing cross-functional eectiveness is likely to continue eorts to enhance functional eectiveness; thereby strengthening the base upon which the cross-functional level of integration is built.

Supplier-Customer Effectiveness
In this stage of SCM integration, the company develops the competence of integrated decision making with suppliers and/or customers. It may pursue understanding of the supplier processes, capabilities, technologies, and the like through supplier certication programs such as ISO9000, QS9000, ISO14000, and other technical standards. The company, in conjunction with suppliers, may seek the improvement of the suppliers and/or customers value-adding systems, business processes, and product/service designs. EDI, CPFR, and RFID technology and other forms of collaborative decision coordination initiatives would be implemented across company boundaries at this level of integration. Just as functional excellence is a precursor to cross-functional eectiveness, the framework envisions cross-functional eectiveness as a prerequisite to supplier-customer eectiveness. Most supplier-customer interactions are also cross-functional. For example, from a horizontal process-oriented perspective, a suppliers marketing department is likely to interact heavily with a customers procurement or operations functions. Developing the ability to interact eectively with other functional areas within ones own rm, in which the commonality of purpose and shared destiny is naturally greater, provides the insights and vocabulary needed to build similar bridges across company boundaries. Thus, a rm pursuing supplier-customer eectiveness is also likely to continue its eorts to enhance the cross-functional eectiveness and functional excellence upon which the supplier-customer eectiveness is built. At the highest level of SCM integration proposed by our framework, multi-tier eectiveness, many of the cross organizational systems developed during the supplier-customer eectiveness level of integration become standardized and are applied to a wide variety of cross company relationships

Combining Domains and Levels of Integration into a Two Dimensional Model


Previously, we suggested that a strategic framework that encompasses and organizes the myriad of supply chain improvement initiatives or activities in which organizations engage would be useful. In an eort to develop such a framework, we combine Figure 1, which enumerates four supply chain domains, and Figure 2, which portrays the four levels of SCM integration. Figure 3, the result, presents a framework of supply chain management integration and development. Each suggested domain occupies one of the gures four quadrants while each level of SCM integration is captured in a given tier of the gure. Figure 3 can also be conceptualized as a sand cone, viewed from above, with the inner levels of the sand-cone at the center of the framework and additional layers radiating outward. At the core of Figure 3 is functional excellence. Many companies, because of their functional organization and the disciplinary focus of their managers, are naturally able to develop this functional excellence. In addition, the size and longevity of most successful companies suggest a large amount of historical success in their respective industries. For these reasons, we assumed a high level of functional excellence within most successful organizations and focused our framework primarily on the three higher tiers of supply chain integration. The level of cross-functional integration in a rm reects process oriented, rather than functionally aligned, management capabilities. In the under-

Functional Effectiveness Tier

Multi-Tier Effectiveness

Cross-Functional Effectiveness Tier

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not just with rst tier suppliers but multiple tiers along the supply chain. The involvement of more than one tier in the supply chain means that much of the power-based hierarchical relationships between companies may be dissipated and also that supply networks are more realistically viewed as networked joint organizations with a shared destiny or, at minimum, a common goal. In the understanding domain, this means that certication by industry specic standards (e.g. QS9000) or accepted standards for modeling supply chains (e.g., the SCOR model) could replace company based supplier certication programs. Along the design domain, both upstream and downstream issues might more eectively be considered through multi-tiered approaches, such as Design for Environment (DFE), Life-Cycle Analysis, or Economic Value Added (EVA). In the improvement domain, industrial and trade organizations might fund technology improvement councils or hold supplier conferences. Joint enterprises, such as kieretsu or consortia, might collaborate to form an electronic marketplace (e.g., Covisint). Coordination at this level of supply chain integration is leveraged by the eective use of commonly accepted and shared technology platforms (e.g., RFID, XML ) that facilitate the multitier transparency in decision making. As with prior levels of integration, a rms multi-tier eectiveness may have predicates; in particular, it may be built on prior development of supplier-customer eectiveness. Developing the ability to share resources and handle political aspects of decision making across the close two-way relationship of a supplier customer dyad provides communication, problem-solving, and project management skills that are essential in the pursuit of multi-tier eectiveness. Firms pursuing initiatives at this level of development are likely to continue eorts to enhance the functional excellence, cross-functional eectiveness, and supplier-customer eectiveness on which multi-tier eectiveness depends.

Applying the Framework to Four Companies


In the remainder of this paper, we describe SCM initiatives undertaken by four large companies representing a cross section of manufacturing and service rms that are also at varying levels of integration as dened by the framework. Utilizing open-ended interviews, we collected data concerning their recent innovations aimed at improving supply chain management eectiveness. We use their experience to illustrate the practical relevance of our proposed domains and framework. We conducted interviews with mid-level career supply chain managers from Chrysler (automotive), Newell Rubbermaid (consumer plastics), Andrew Jergens-Kao Brands (soaps, lotions, and cosmetics), and Cardinal Health (pharmaceutical supply and distribution). There could have been a functional bias in the group, as most of the managers had procurement and/or operations management backgrounds. The interviews were conducted via telephone and lasted sixty to ninety minutes. The interviews were semistructured events using a standard protocol in which interviewees described their rms initiatives and the motivating factors behind them. The interviews were not taped or transcribed; however, a minimum of two interviewers were present to corroborate the responses and assess the reliability of the response. The interviews shed light on the ability of the framework to classify the content and maturity of a variety of rms SCM initiatives: In general, the framework does a good job of organizing the motivation behind each rms supply chain initiatives. The framework helps describe what these rms are and are notdoing. Two rms have been engaged in SCM over a longer period of time and have moved beyond cross-functional integration; reaching the supplier-customer eectiveness level of integration. One rm appears to be approaching the multi-tier eec-

tiveness level. The impact of the initiatives undertaken by those two reect the mediating and facilitating impact that cross-functional integration can have on the results of their eorts. In the case of the other two, building an internal foundation for eective SCM is paying o in a more limited way at the moment but has potential for more external impact in the future. Cardinal Health (CH) is a large pharmaceutical distribution company based in Columbus, Ohio. It buys from large pharmaceutical companies and distributes to independent and chain pharmacies, as well as mass merchandisers. While the nature of that business makes SCM issues critical to its success, the inherent many to many complexities of both the inbound sourcing and outbound sales issues (not to mention regulatory agencies) have made progress dicult in this industry with respect to buyer-supplier integration and multi-tier integration. One of the most successful companies in the industry, CH has put signicant time and eort into aligning its own organizational structure (in the form of cross-functional teams) with the various processes that comprise their business. Moving from a functional orientation to a process-based orientation was described as a necessary prerequisite to subsequent initiatives with a more external SCM focus. Our interview with CH lends support to the notion that functional excellence precedes and enhances cross-functional eectiveness. Its cross-functional process work has been primarily on the understanding and coordination domains and includes the establishment of cross-functional teams aligned with specic suppliers. Additionally, CH has worked to directly involve nancial analysts in decisions made by the purchasing department. Figure 4 illustrates the initiatives of CH using the sand cone model. The picture shows that this company has
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added little to their cone. Further cross functional initiatives focused on product design or process improvement may be needed to build a sucient base to expand the cone further. Andrew Jergens (AJ) is a Cincinnati, Ohio-based subsidiary of Kao Brands. It manufactures and distributes a variety of soaps, lotions, and cosmetic products to independent and chain mass merchandisers on a national scale. While outsourcing and contract manufacturing now play a bigger role in its business than in the past, it still purchases raw materials and manufactured products from a wide variety of sources; it also manufactures, packages, and distributes an even wider variety of items. Cross-functional integration has been a major emphasis within AJ for several years. Cross-functional teams within AJ are aligned with business processes and major customers (Target, Wal-Mart, Krogers, etc.). Signicant initiatives involving Data Cataloging, ERP implementation, and Product Life-Cycle Management have helped AJ work through internal cross-functional integration issues. Currently, based upon the cross-functional eectiveness developed through those initiatives, more externally focused eorts such as CPFR are underway. Figure 5 illustrates the initiatives of AJ using the sand cone model. The picture illustrates that supply chain initiatives in the area of coordination and understanding are progressing ahead of those in the areas of process improvement and product design. According to the sand cone model, the lack of an internal strength in these areas may inhibit further development of customer focused supply chain capabilities at AJ. The Rubbermaid (RM) division of Newell Rubbermaid is headquartered in Wooster, Ohio. Outsourcing and contract manufacturing also play a growing role in its business. In addition to a large Figures 4 and 5 number of manuSand Cone Model of Supply Chain Management: Cardinal Health and Andrew Jergens (Kao Brands) factured products that it buys and Figure 4: Cardinal Health distributes, RM purchases a handful Coordination of basic raw materials and manufacCross-Functional tures a wide variety Supplier Aligned Teams of plastic and resin products. While it also sells to a wide Functional array of customers, Effectiveness a large percentage of its business is Imbedded Personnel focused on a hand(finance and purchasing) ful of mass merchandisers (such as Wal-Mart, KMart, Understanding and Target). RM established Figure 5: Andrew Jergens (Kao Brands) cross-functional mirror teams to Coordination reect teams within the organizations of its major cusSupplier-Customer Coordination tomers. The success of this approach Cross-Functional is grounded in a strong cross-functionally integrated Functional organization. RMs Effectiveness eorts now extend to supplier-customer eectiveness Cross-Functional in the form of participation in reverse Supplier-Customer Understanding auctions involving only those suppliers whose relationships qualify. Other Understanding initiatives include Functional Effectiveness participation in supCross-Functional Effectiveness plier portals on the Supplier-Customer Effectiveness Internet, co-location of facilities with the headquarters of major customers, Figure 6 illustrates RMs initiatives vendor-managed inventory relationusing the sand cone model. It appears ships with key customers, and serving that this company has built a cone to as a category leader that moderates the the Supplier-Customer Eectiverelationship between several suppliers ness level with initiatives in all of the and its mutual big impact customer. RM directions of our framework using a has also involved suppliers and customhierarchical approach consistent with ers in the design of new products. the model. This suggests that the
Improving Designing Designing Improving

Andrew Jergens (Kao Brands)

Newell Rubbermaid

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Figures 6 and 7 Sand Cone Model of Supply Chain Management: Rubbermaid and Chrysler Figure 6: Rubbermaid Coordination

company is well positioned to begin pursuing opportunities for multi-tier eectiveness. Chrysler Corporation1 (CC) is a major international automobile manufacturer. Given that it spends almost 80 percent of its revenue on purchased components, SCM has been a major concern for CC and the rest of the automobile industry for some time now. Thomas Stallkamp (2005) began pushing for a broader approach to managing the extended enterprise in the early 1990s as the VP of supply for Chrysler. Later as president of Chrysler, his emphasis was on developing cross-functional integration within CC that could be extended to their supply base. Even the physical structure of the North American headquarters (Chrysler Technical Center in Auburn Hills, Michigan) is intended to facilitate a cross-functional approach to managing business processes. In addition to a strong internal foundation of cross-functional eectiveness, CC has taken steps to develop a customer-supplier relationship in all four domain areas proposed by our framework. Shared scheduling using electronic data interfaces (EDI), vendor managed inventory programs, supplier portals, and reverse auctions are all examples of coordination initiatives. Participation in the QS 9000 certication program, supply chain mapping, and advanced quality planning (AQP) fall within the understanding domain. Supplier black belt programs, supplier kaizen workshops, and the older Supplier Cost Reduction (SCORE) Program have all supported process improvement. Pricing tools such as Linear Performance Pricing (LPP) (Newman and Krehbiel 2006) and other collaborative eorts such as Design for Procurement clearly fall within the design domain. Initiatives to map the extended supply chain, negotiate commodity prices for all parts suppliers as a group, and certify supply chain partner compliance with
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Chrysler

Supplier-Customer Involvement in Process Improvement (supplier portal)

Supplier-Customer Coordination (category leader, reverse auctions) Cross-Functional Coordination

Supplier-Customer Involvement in Design (co-location, new product development)

Cross-Functional Improvement (mirror teams)

Cross-Functional Design (mirror teams)

Designing

Improving

Functional Effectiveness

Cross-Functional Understanding

Supplier-Customer Understanding (mirror teams)

Understanding Figure 7: Chrysler Coordination

Multi-Tier Coordination (CLOSE) Supplier-Customer Coordination (VMI, reverse auctions) Supplier-Customer Involvement in Design (engineering collaboration, AQP) Cross-Functional Cross-Functional Design (cost modeling, part commonization)

Multi-Tier Involvement in Process Improvement (supply chain mapping)

Supplier-Customer Involvement in Process Improvement (SCORE, supplier portal, supplier Kaizen, supplier blackbelts)

Cross-Functional Improvement

Designing

Improving

Functional Effectiveness

Cross-Functional Supplier-Customer Understanding (supplier/dealer certification)

Multi-Tier Understanding (supply chain mapping)

Functional Effectiveness Cross-Functional Effectiveness Supplier-Customer Effectiveness Multi-Tier Effectiveness

Understanding

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Newman, Hanna, Gattiker and Huang


Table 1 Supply Chain Integration at Four Companies Integration Level Cross-Level Effectiveness Teams aligned with suppliers (category manager, marketing, purchasing) Cardinal Health Financial analysts in purchasing department Jergens Teams aligned with customers (sales, marketing, possible future inclusion of purchasing and operations) Data cataloging CPFR Participate in major customers category leader program Co-location at major customers headquarters Reverse auctions Supplier portal (replenishment oriented) Limited purchasing involvement in NPD WWW supplier portal, EDI, Web messaging (replenishment, advanced quality planning, etc) Engineering collaboration VMI Supplier blackbelts Advanced quality planning Reverse auctions Supplier Cost Reduction (SCOR) Chrysler Lean Operating Supplier Enterprise (CLOSE) Supplier Kaizen workshops Supplier-Customer Effectiveness Multi-Tier Effectiveness

Rubbermaid

Mirror teams aligned with customers (traffic, customer service, forecasting, fashion, sales, marketing)

Chrysler

Part commonization Supplier cost modeling (cost accounting, purchasing, engineering) Global commodity leader

Supply chain mapping Dealer certification programs

prescribed distribution practices from the factory to the showroom have led to attainment of the multi-tier eectiveness level of integration in the understanding, improvement and design domain areas. Figure 7 illustrates the initiatives of CC using the sand cone model. The picture suggests that this company has a very mature set of SCM capabilities. Their initiatives can be found in each quadrant of the model and at all levels, providing support for the hierarchical, multi-focused model presented in Figure 3. In this paper, we have identied four motivating factors or capability domains that we believe capture the

Summary and Conclusions

range of initiatives companies pursue in search of integrated SCM. We have also proposed four levels of integration relevant to each of the domains. Combining the levels of integration with the domains we have proposed a framework that provides a basis for planning, describing, mapping, and comparing SCM initiatives that is both strategic and process oriented. Table 1 summarizes the supply chain integration eorts (described previously) of CH, AJ, RM and CC. We nd all four of the domains: understanding, coordination, design and improvement; to be present in the table. Factors such as industry, positioning within the respective supply chains, corporate history and the like combine to help explain what we

found with respect to each company. For example, CH provides a distribution function to major pharmaceutical retailers. Consistent with the diculties suggested by Stank, et al. (2001a, 2001b) improving internal integration between nance and purchasing has been a recent challenge that CH has pursued in order to better leverage improved coordination eorts of teams aligned with major customers. AJ, having worked for some time to improve internal integration, has had more time to accumulate coordination experience through teams aligned with major customers. As a consumer goods producer that sells directly to many major customers, AJ demonstrates that eorts to improve external integration (supplier customer eectiveness) through ini-

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tiatives like collaborative planning and forecast replenishment systems provide superior internal gains when built on a foundation of cross functional eectiveness. Similarly, at AJ, data cataloging and other eorts to improve customer understanding were of greater benet where internal silos had been removed. Through RMs development of teams aligned with major customers, the company can map their initiatives across all four motivating domains through the enhancement of internal integration (cross functional eectiveness). This again provides a foundation for external integration at the supplier customer eectiveness level. Additionally, RMs use of mirror teams helps improve customer understanding. It supports process improvement eorts and coordination eorts by making a supplier portal and reverse auctions more eective. As seasonal and promotional products are often designed specically by RM for large customers (e.g. orange totes at Halloween or a special signature color for a given customer) improved supplier customer eectiveness has streamlined the product design process. CC is in the most fully developed supply chain position of the four companies considered in this paper. Objectives for its recent supply chain initiatives can be mapped to all four domains; functional eectiveness, cross functional eectiveness, and supplier customer eectiveness are all largely in place to support multiple instances of multi-tier eectiveness. Supply chain mapping eorts have multi-tier impacts in the areas of improvement, understanding and coordination. Advanced quality planning and supplier certication have had a similar impact on the designing of new models. Candidly, the anecdotal examples provided by these four companies do not exhaustively illustrate eective SCM or even completely summarize what these rms are doing. Viewed from our lens, they do support our contention that these four domains are among the key competitive objectives that provide bases for development of higher levels of supply chain integration. Also, by sorting the company eorts according to the level of integration attained, we feel that Table 1 visually supports our assertion that supplychain integration follows a pattern of expansion from functional excellence, to cross-functional eectiveness, to maintenance of lower levels of integration even after higher levels have been attained. Thus, the framework is helpful for managers who must budget time, money, and other resources to reect priorities between SCM integration initiatives. Furthermore, if multiple parties in a supply chain were to map their SCM integration eorts,

Our proposed framework... suggests the importance of sequencing the development of supply-chain capabilities and the importance of... [maintaining] lower levels of integration even after higher levels have been attained.
supplier-customer eectiveness, to multi-tier eectiveness. Among the rms we studied, higher levels of integration are found only in the presence of prior and ongoing initiatives at the lower levels. We recognize, however, that this is not proof of the sand cone concept that sequential development is required to sustain higher levels of integration. Much like Maslows hierarchy of human needs, there is a logical appeal to sequential development, but there is probably not proof in the literature to support this as a requirement. Indeed, an unassailable proof of this concept as a requirement would be dicult, perhaps impossible, to build. One example of a company competing sustainably at high levels of external integration, but not the lower levels, would call the requirement into question. However, we believe that such sequential development is reasonable to expect, consistent with the literature, observed in our four examples and likely to be both more sustainable and provide superior performance outcomes. Our proposed framework has signicant practical implications. It provides a tool for characterizing a rms SCM integration eorts indicating what capabilities have, and have not, been developed. It also suggests the importance of sequencing the development of supply-chain capabilities and the importance of not neglecting the each utilizing this same framework, the resulting insights would serve to clarify which company leads (and should lead) the extended enterprise and where the most signicant opportunities for improvement may lie. Our paper introduces a new strategically oriented framework that currently can be used for descriptive purposes. Firms and supply chain partners may use it to discuss questions such as: What are the competitive objectives of our supply-chain improvement eorts and to what extent are they aligned? What degree of SCM integration have we achieved? Are there blind spots, or missed opportunities, in our current trajectory of SCM improvement resulting from overlooked objectives or insucient integration? And, what should be the highest priority in our SCM improvement eorts? Despite the current value of our framework, future research in support of the framework is clearly necessary. For example, case studies that chronicle the use of our framework to guide SCM improvement eorts and describe the outcomes achieved would provide greater insight into the value of the tool. Similarly, given that this paper presents only cross-sectional and anecdotal examples, a longitudinal study of the SCM eorts of multiple rms would provide further insight into the veracity of our framework.
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Specically, research using multiple methods, including longitudinal studies, could be useful in resolving the question of sequential development to a greater extent. Finally, empirical studies such as large scale surveys, will be needed to transform our framework from a practitioner support to a reliable tool for research projects that require measurement, statistical categorization, and assessment of SCM initiatives.
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Notes

1. Interviews were conducted with Chrysler executives prior to their acquisition by Cerberus Capital.

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About the Authors


of Iowa) is a professor of supply chain management at the Richard T. Farmer School of Business, Miami University. He co-authored the book Integrated Operations Management: A Supply Chain Perspective, 2e and his research appears in The International Journal of Production Research, The International Journal of Operations and Production Management, The Journal of Production and Inventory Management, The International Journal of Flexible Manufacturing Systems, and other journals and books.

W. Rocky Newman (PhD University

Xiaowen Huang (PhD University

of Minnesota) is an assistant professor of supply chain and operations management at, Miami University. Her research appears in Journal of Operations Management and Journal of Supply Chain Management. Dr. Huang is also co-author of the first empirical research handbook in the Operations Management field, Handbook of Metrics for Research in Operations Management: Multiitem Measurement Scales and Objective Items.

Mark D. Hanna (PhD Clemson University) is a professor of operations management at Georgia Southern University. He co-authored the book Integrated Operations Management: A Supply Chain Perspective, 2e and his research appears in Journal of Operations Management, Production and Operations Management, The International Journal of Operations and Production Management, The Journal of Production and Inventory Management, and other journals and books

Tom Gattiker (PhD - University of Georgia, CFPIM) is an assistant professor of Supply Chain Management at Boise State University. His research on environmentally sustainable supply chains, and the use of information systems in operations and supply chain management appears in The Journal of Operations Management, The International Journal of Production Research, MIS Quarterly, Information and Management, Production and Inventory Management Journal, Quality Management Journal and other journals and books.

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