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Arcs of supply chain integration

Article  in  International Journal of Production Research · December 2011


DOI: 10.1080/00207543.2010.524259

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Arcs of supply chain integration


a b
P. Childerhouse & D.R. Towill
a
Department of Management Systems, Waikato Management
School, University of Waikato, Hamilton, New Zealand
b
Dynamics Group, Cardiff Business School, Cardiff University,
Cardiff, UK

Available online: 24 May 2011

To cite this article: P. Childerhouse & D.R. Towill (2011): Arcs of supply chain integration,
International Journal of Production Research, 49:24, 7441-7468

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International Journal of Production Research
Vol. 49, No. 24, 15 December 2011, 7441–7468

Arcs of supply chain integration


P. Childerhousea* and D.R. Towillb
a
Department of Management Systems, Waikato Management School, University of Waikato,
Hamilton, New Zealand; bDynamics Group, Cardiff Business School, Cardiff University,
Cardiff, UK
(Received 8 February 2010; final version received 30 August 2010)
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Integration is posited by many authors as a supply chain utopia. Indeed, it is


claimed as being synonymous with supply chain management excellence. The
primary aim of this research is to verify the link between supply chain integration
and competitive performance. Detailed information collected via an 8-year
international field study of 50 products and their associated supply chains
subjected to an extensive statistical analysis provides rigorous insight into supply
chain integration in practice. The breadth of supply chain integration significantly
correlates with increased performance, yet in practice, the majority of supply
chains are not well integrated. However, most supply chains seem to follow a
popular route when seeking to enable seamless operations. This starts with
enhanced internal effectiveness followed by upstream streamlining and then
finally downstream integration. If practitioners are still struggling with supply
chain integration, this research confirms that they are not unique in their
predicament. Indifferent practice is indeed the norm. Fortunately, practitioners
can follow the popular route established herein when seeking to improve
integrative capability.
Keywords: supply chain integration; case investigation; value stream evolution;
performance evaluation

1. Introduction
Integration is posited by many authors as a supply chain utopia. Indeed, it is claimed as
being synonymous with supply chain management excellence (e.g. New 1996, Christopher
2005). Furthermore, in the current climate of global supply chain competition, integration
is regarded as a prerequisite for winning performance (Lee 2000). Given the accepted
importance of supply chain integration, it is a fundamentally pertinent area for current
research. Investigations to date have focused on power position in the supply chain (Cox
2001), purchasing integration (Narasimhan and Das 2001), impact of simplified material
flow (Childerhouse and Towill 2003), barriers to implementation (Pagell 2004), and shared
resources (van Donk and van der Vaart 2005). As far back as Hall et al. (1993) some
reasonable evidence existed showing the financial benefits accruing from breadth of
integration (as measured by the number of processes covered). Since then it has come to be
regarded (sometimes uncritically) as indispensable to success. This is the perception we
shall examine. In other words, what evidence is there which supports the supposed virtue
of the holistic goal?

*Corresponding author. Email: pchilder@waikato.ac.nz

ISSN 0020–7543 print/ISSN 1366–588X online


ß 2011 Taylor & Francis
http://dx.doi.org/10.1080/00207543.2010.524259
http://www.tandfonline.com
7442 P. Childerhouse and D.R. Towill

Upper Lower Lower Upper


quartile quartile quartile quartile

Outward-facing

Customer-facing

Supplier-facing
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Peripheral-facing

Inward

Extensive None Extensive

Suppliers Manufacture Customers

Figure 1. Five alternative arcs of supply chain integration.


Note: Adapted from Frohlich and Westbrook (2001). Reprinted from Journal of Operations
Management, 19, 2, M.T. Frohlich and R. Westbrook, Arcs of integration: an international study of
supply chain strategies, 185–200, ß 2001, with permission from Elsevier.

This article reports on an 8-year field study of supply chain integration. Over 300
person days have been spent on site, collecting real-world case information. This has been
supported by an extensive academe´ infrastructure to perform analysis and modelling as
required (Naim et al. 2002). More specifically, we build on an award winning article by
Frohlich and Westbrook (2001) which greatly advanced the exposure and understanding
of supply chain integration. Their research identified five alternative arcs which may be
summarised as shown in Figure 1. This model provides a rare and valuable way of
classifying supply chain integration. The least integrated is labelled ‘inward-facing,’
proceeding span-wise to the most integrated, ‘outward-facing.’ Although this integration
model is profusely cited in the literature it has not been fully explored, cross-examined or
validated through empirical application. Further, the resultant conclusion that perfor-
mance is stepwise with breadth of integration has only been ascertained for a limited set of
industries via secondary use of survey data. There is thus a clear research gap in fully
exploring this seminal integration model.
All five integration stages posited by Frohlich and Westbrook (2001) will be examined
via statistical significance testing using site-based data output over our 8-year supply chain
study integration. In this study, we are particularly interested in verification of the link
between breadth of integration and performance. We also assess the uptake of supply
chain integration in practice (as distinct from the considerable rhetoric). Are some ‘states’
International Journal of Production Research 7443

more popular than others? If true, this adds support to the idea that organisation proceeds
along a popular route validated by practical experiences.
The primary objective of this research is to exploit the rich field data previously
collected by a systematic supply chain diagnostic approach called the Quick Scan to
further verify the work of Frohlich and Westbrook (2001). Thus, the aim is to test whether
the enhanced performance of supply chains really can be attributed to the five arcs of
integration. Furthermore, by assessing a large sample of value streams through an
industrial site-based lens, we aim to ascertain the overall level of supply chain integration
maturity of real-world supply chains. The final research objective is to hypothesise a
popular route that supply chains progress through when enhancing integration maturity.
Hence, we plan to contribute to knowledge via practical validation of Frohlich and
Westbrook’s (2001) frequently cited model. This will aid further enhanced understanding
of supply chain management practice by the adaptation of this model.
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The following section reviews relevant supply chain integration literature in order to
provide a theoretical basis for the research objectives of this article. We then comment on a
particular feature of our approach termed ‘Triangulation in the Large’. This is followed by
a detailed explanation of the research methodology that has been used. The main body of
this article contains the statistical analysis predominantly associated with testing the
posited relationship between the breadth of the arc of integration and performance. This is
followed by discussions centred on how well supply chains are currently integrated in
practice, the possible identification of a popular route for supply chain evolution, and the
practical implications of the findings. Finally, conclusions from the research are drawn
and further avenues for investigation are discussed.

2. Integrating the supply chain


Supply chain integration originates from a systems perspective (Parnaby 1979, Christopher
2005) where optimisation of the whole achieves better performance than a string of
optimised sub-systems. The argument is that via integration, trade-offs and wider ranging
decisions can be made based on shared information and co-ordination. Lee (2000) suggests
three particularly powerful dimensions to supply chain integration:
. organisational relationship linkages;
. information integration; and
. co-ordination and resource sharing.
Van Donk and van der Vaart (2005) propose four similar dimensions by subdividing
co-ordination and resource sharing into the two categories of flow of goods, plus planning
and control. Handfield and Nicols (2002) emphasise the same integrative practices and in
addition highlight the need for relationship management. This should result in the more
effective use of the combined resource base, together with better integrated information
and material flows. Figure 2 provides a visual representation of an integrated supply chain.
It emphasises the need for internal integration of key functional areas such as product
development, sourcing, logistics and operations. Downstream integration with customers
and consumers is highlighted together with upstream integration with 1st tier suppliers
and, in turn, the broader supply network.
The scope of supply chain integration studied to date varies considerably according to
the author and the context. For example, Towill (1997) advocates a seamless supply chain,
7444 P. Childerhouse and D.R. Towill
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Figure 2. Integrated supply chain.

with integration from source to sink where all actors think and act as one. This leads to
altruistic behaviour amongst the ‘players’ (Hosada and Disney 2006). Conversely, many
authors focus on the internal integration of functional areas such as marketing and
production (e.g. Ellinger et al. 2000, Narasimhan and Das 2001, Verma et al. 2001, Pagell
2004). Rummler and Brache (1995) support the philosophy of functional integration. They
stress the importance of ‘managing the white spaces on the organisational chart’ as a key
to effective performance. There is thus a strong incentive to ‘put one’s own house in order’
before strengthening relationships upstream and downstream in the supply chain.
Empirical evidence supports this viewpoint as an axiom in furthering supply chain inte-
gration (Childerhouse 2002). Figure 2 illustrates the most common supply chain approach,
being that of a focal organisation and its integration into the wider supply chain. This will
also be the perspective used for the remainder of this article and is in line with many other
authors (e.g. Stevens 1989, Bowersox et al. 2002, Fawcett and Magnan 2002, Christopher
2005).
Although the topic is clearly very popular, the goal of total supply chain integration is
not universally accepted as an ideal state. For example, Swink et al. (2007) show how four
different forms of strategic integration have both benefits and disbenefits. Specifically, Van
Donk and van der Vaart (2005) argue that integrative practices should have greater
exploitation in the volatile circumstance of high demand uncertainty. The practices can
then be limited to physical flow and stock management when customer demand is known
to be relatively certain. They further comment that integrative practices are hardly
possible, or feasible, in circumstances of shared resources and limited capacity. Arguing
along the same lines, de Treville et al. (2004) conclude from their research that the
considerable resources required for demand integration are only warranted when there is
sufficient demand variability. In addition, one of Lee’s (2000) previously stated three
dimensions of supply chain integration, organisational relationship linkages, has been
International Journal of Production Research 7445

particularly scrutinised in the literature. For example, Cox (2001) argues that not all
relationships should be fully integrated, and hence lead to effective partnerships.
Indeed, the relationship type adopted should be specifically matched to supplier and
customer dependency. In a similar vein, van Donk and van der Vaart (2006) introduce
focus into the domain of supply chain integration and show that close co-operation needs
to be judiciously considered and depends on business characteristics.
Nevertheless, supporters of supply chain integration greatly outnumber its opponents.
In fact, many authors strongly assert that integration is an essential attribute of modern
supply chain management (e.g. Narasimhan and Kim 2001, Christopher 2005). Indeed,
some authors even go as far as using the two terms almost interchangeably. Bowersox
et al. (2002) provide a very insightful explanation positing how integration increases
competitiveness via the creation of three types of value. First, integration creates value
via expanding the scope of economies of scale to a wider setting, hence reducing waste and
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lowering costs. Second, integration increases market value by providing the customer with
convenient product assortment. Third, integration increases relevancy value by offering
customised products that are tailored to customers’ specific needs.
Table 1 provides a comprehensive summary of the foregoing integration debate. The
depth of integration has been subdivided into the strategic, tactical and operational levels
to clearly highlight the perspectives of the major proponents and opponents. Integration of
daily operational processes increases productivity and reduces waste via the removal of
interface boundaries. There are no significant opponents to this course of action. At a
more tactical level, the integration practices focus around collaborative planning, problem
solving and continuous improvement from a position of open information exchange.
Proponents argue that these practices result in broader trade-offs, increased economies of
scale and enhanced flexibility. However, a smaller number of proponents raise the
potentially negative impact of the increased risks of sharing commercially sensitive
information and the increased costs of co-ordination.
The major negative effects of integration are seen to be at the strategic level where the
possible reduction of technology flexibility and the necessity of shared high levels of
dependency are required to justify long-term partnerships. But, this is contradicted by
many authors when they argue that fully integrated organisations can altruistically think
and act as one, (Hosada and Disney 2006) thereby leveraging their separate core
competences and achieving system-wide synergy. The conclusion to be reached is that this
is an operations management scenario where ‘theory’ outstrips (useful) practice.
Re-examining the conclusions of Frohlich and Westbrook (2001) in the light of newly
available evidence may therefore be particularly helpful in unravelling any new
management theory.
It is important to emphasise that the debate in the literature is not about the extreme
positions of ‘full integration’ versus ‘no integration.’ Rather, it is about ‘How much
integration is justified, and under what circumstances?’ Initially, we may say that the
answer to this question depends very much on the nature and purpose of the individual
value stream. For example, it is difficult to envisage any circumstance where internal
integration (i.e. step one) will not prove essential to enabling continuing competitiveness.
For companies responding to electronic auctions, as described by Busalacchi (1999), this
may be the single most important action they can take. As de Treville et al. (2004)
argue, in such a business this may well be a good investment for scarce management
resources.
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Table 1. Supply chain integration: practices, proponents and opponents.


7446

Depth of integration Typical integration practices Proponents Opponents

Strategic: Long-term partner-  Joint investment  Increased market value (Bowersox et al.  Not feasible when resources are shared
ship based on shared risks and  Joint research and development 2002) (van Donk and Van der Vaart 2005)
rewards  Mission alignment  Supply chains compete not individual  Only appropriate with shared high
 Co-location companies (Christopher 1998) dependency (Cox 2001)
 Single point of supply chain  Synergy of a combined resource base  Relationship handling costs (Gadde
co-ordination (Handfield and Nicols 2002) and Snehota 2000)
 Open book costing  Increased relevancy value (Bowersox  Reduced technological flexibility
 Knowledge sharing et al. 2002) (Gadde and Hakansson 2001)
 Technology transfer (Burt et al. 2003)
 Leverage of core competence (Quinn
2000)
Tactical: Medium-term  Supplier development  Increased scope of economies of scale  Opportunistic use of commercially
alignment of information  Collaborative planning and forecasting (Bowersox et al. 2002) sensitive information (Burt et al. 2003)
and material flows  Employee exchange  Information integration (Lee 2000)  Missed opportunity from a superior
 Vendor management inventory  Broader more holistic trade-offs power position (Bensaou 1999)
 Shared problem solving (Christopher 1998)  Increased switching costs (Burt et al.
 Integrated information systems  A focus on continuous improvement 2003)
 Performance evaluation and continuous (Burt et al. 2003)  The costs of co-ordination, compromise
improvement  Relational ties enhance flexibility and and inflexibility (Horwitch and Thietart
capability (Das et al. 2006) 1987)
Operational: Integration of  Process alignment  Simplified material flow (Childerhouse
P. Childerhouse and D.R. Towill

daily operations across the  Information enrichment and Towill 2003)


interfaces enabling seamless  Removal of duplicate interface  Increased operational efficiency (Lee
flows inventory 2000)
 Regular cross-interface meetings  Inventory reduction (Stevens 1989)
 EDI and/or B2B e-commerce  Continuity of supply (Burt et al. 2003)
 Time compression  Reduced transactional costs (Das et al.
 Synchronised material flow 2006)
 Increased productivity (Fawcett and
Magnan 2002)
 Breadth of integration enhances per-
formance (Frohlich and Westbrook
2001)
International Journal of Production Research 7447

3. Research objectives
Although most academics promote supply chain integration as a desirable goal, many
practitioners query the real advantages of close collaboration and the development of
external linkages (Fawcett and Magnan 2002). Many procurement managers typically still
focus on the short-term gains of price negotiations and arm’s length relationships. They
either do not appreciate or do not accept the longer term advantages of partnerships with
key suppliers (Fawcett and Magnan 2002). Hence, the key theory-testing research objective
of this article is to:
. Verify the link between breadth of supply chain integration and supply chain
performance.
Frohlich and Westbrook’s (2001) survey of fabricated metal products, machinery and
equipment manufacturers demonstrates a positive result to this relationship. Their output
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requires further triangulation from other industrial sectors and, more impor-
tantly, from more in-depth case observations before acceptance as an operational
paradigm.
The advantages of integration have been investigated via a number of surveys that have
endeavoured to evaluate its impact on performance. Gimenez and Ventura (2003) show a
positive correlation between external integration and performance in a survey of large
Spanish grocery manufacturers. The same correlation was also reached by Frohlich and
Westbrook’s (2001) international survey. Although these survey results provide compelling
reading, there is still significant scope for further validation of the relationship between
integration and performance (van der Vaart and van Donk 2008). This should, ideally, be
via triangulation of alternative data sources and research methodologies. This article
specifically seeks to fill this gap in the literature through the analysis of multiple case
studies from a range of industrial sectors.
If due cognisance is taken of the extent of previous research, which clearly
demonstrates the competitive advantages of integration, then good practice should
already be widespread. However, practical supply chain integration is not a simple task.
In fact it is quite the opposite, as there are many barriers to overcome (Spear and Bowen
1999, Bowersox et al. 2002). Hence, it would be valuable to establish the current
integration status of supply chains in practice to see how many have overcome these
barriers. This constitutes our second research objective, to:
. Assess the uptake of supply chain integration in practice.
In order for an organisation to improve its level of integration effectively, clear
guidance via simple models is required. These need to highlight the desirable route for
change. At a strategic level, there could be a common set of steps that organisations pass
through to improve their integration maturity. For example, Stevens (1989) develops a
four stage integration model where a focal organisation matures from baseline to external
integration. In a similar style, Poirier and Quinn (2003) propose five levels of evolution
from enterprise integration to full network connectivity. The final research objective of this
article is thus theory building and is to:
. Investigate whether some integration states are more common than others.
This insight will provide initial guidance on the more popular routes adopted to enable
supply chain integration.
7448 P. Childerhouse and D.R. Towill

4. Triangulation in the large


The importance of triangulation of evidence is well established in operations management
and logistics research, as showing that similar conclusions are obtained pursuing different
areas of investigation can considerably reduce the effects of researcher bias. Triangulation
also substantially eliminates wrong conclusions being arrived at due to the
effect of pure chance. Five such proven routes for establishing causal relationships
(Towill 2006) are:
. Case Studies (Vertical Evidence).
. Surveys (Horizontal Evidence).
. Mathematical Models (Theoretical Evidence).
. Rules-of-Thumb (Generalised Results). and
. Audits (Site-Based Sampling).
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Previously, wherever possible the triangulation has been performed by the same
research team on the same sample. In this article, we attempt something very ambitious
and different, which we term ‘Triangulation in the Large’. This is to distinguish it from the
foregoing well established procedure which can be called ‘Triangulation in the Small.’ It is
our contention that both approaches can strongly contribute towards the discovery and
confirmation of ‘new management theory’. The intention of the latter is to highlight
generic practices transferable not only between companies but also between market sectors
(Micklethwait and Wooldridge 1996). ‘Triangulation in the Large’ relates to seeking out
highly focussed new evidence via channels not previously exploited and also involving
site-based evidence. In contrast, ‘Triangulation in the Small’ does not explore any
additional channels, i.e. the modus operandi is unchanged. The latter might, for example,
direct existing questionnaires at new targets.
In this article, the initial benchmark selected is the ‘arcs of integration’ concept
proposed by Frohlich and Westbrook (2001). This proposition was tested by those authors
via application to a large-scale survey, i.e. horizontal evidence. Such research typically
involves contacting (via letter, telephone and/or email) several hundred companies. The
questionnaires answered by correspondents are designed to elicit information which can be
codified and shaped for further analysis. Checks-and-balances are built into the scheme,
which is usually tested during a pilot run. Hypotheses concerning operational behaviour
can thus be proposed and tested for statistical significance on the dataset. In theory, this
approach is free of observer bias. However, this is counterbalanced by doubts on the
veracity of correspondents’ answers which might have been resolved by on-site
investigations. The Matson and Matson (2007) study is an example where such local
face-to-face resolution of apparently conflicting evidence may well have been hugely
beneficial. ‘Walking the process’ (Naim et al. 2002) is a valuable way of resolving such
problems in the search for truth.
The Frohlich and Westbrook (2001) paper is considered herein to be potentially of
major impact on both research and management practice. What we propose is to further
investigate their important conclusions but to base our contribution on our audit
methodology, i.e. field-based sampling. The argument is that by utilising ‘Triangulation in
the Large’ we can consolidate in part, extrapolate where found valid, question where
doubts have since arisen, and add additional conclusions where justified by this new
evidence. The difficulties in what we are seeking to achieve thereby should not be
under-estimated. All field-based research is extremely resource-intensive. It is also
International Journal of Production Research 7449

intolerant of missed opportunities. Hence the proposal by Ottosson and Borg (2004) to
undertake ‘Insider Action Research’ in order to minimise such risk.

5. Research methodology
The research objectives were investigated via comparative analysis of 50 real-world value
streams. The latter term ‘value stream’ has been popularised by Womack and Jones (1996),
and is defined as ‘the special activities required to design, order and provide a specific
product, from concept to launch, from order to delivery and from raw materials into the
hands of the customer’. In many respects, ‘supply chain’ and ‘value stream’ are
synonymous. A practical interpretation is that a supply chain consists of a bundle of
one, or more often multiple, value streams.
Thirty-three of the current sample of 50 value streams considered herein were analysed
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via a site-based Quick Scan audit methodology. These cover a wide and varied spectrum of
value streams including several European automotive system suppliers, two New Zealand
dairy processors, and six family-owned Thai value streams (Banomyong et al. 2005).
Appendix 1 provides a more detailed list of all the value streams analysed. During the
Quick Scan audit, material and information flows are process mapped; key managers are
interviewed; company archival information is evaluated; and attitudinal, together with
quantitative, questionnaires (Appendix 2) are completed for the interfaces of each value
stream. As a result, an in-depth understanding of the value stream is obtained and then
comprehensively documented. The Quick Scan process is explained in considerable detail
in Naim et al. (2002) and need not be repeated here. Its origins lie in the long established
industrial systems concept (Parnaby 1979). Suffice to say that given resources and
adequate shop floor and managerial access, it has proven to be a rich and time-effective
method of investigation.
The remaining 17 value streams that were not formally audited by the Quick Scan have
been assessed via multiple interviews and review of archival material provided by the case
organisations. Further, empirical information was also made full use of, much of which is
available in the open literature (Lewis 1998, Waddington 2001, Childerhouse 2002) and
based on well-documented large-scale business improvement programmes. Additionally,
quantitative questionnaires were distributed (Appendix 2) and structured interviews were
then conducted on-site with well-qualified champions to obtain an even deeper
understanding of the product delivery and information flow processes. The product
champions were selected for their overview and knowledge of the specific value stream
under scrutiny. Examples of those executives interviewed include European Logistics
Manager, Global Purchasing Manager, Production Manager and Managing Director. The
non-Quick Scanned value streams included ventilation, health care, steel processing,
lighting supplies and electronic products located within the UK, plus three Antipodean
dairy product value streams. Careful and comprehensive statistical analysis has previously
validated, and hence, justified the alignment of the Quick Scan and structured interview
data collection methods (Childerhouse et al. 2004).
In previous research, the Quick Scanned value streams have facilitated an assessment
of supply chain integration maturity (Towill et al. 2000). In order to perform this
particular analysis, the integration level of the supply and customer interfaces was
quantified based upon the extent of the observed presence of uncertainty. For example,
poor or minimal external integration can be considered to produce high levels of
7450 P. Childerhouse and D.R. Towill

Table 2. Operationalisation of arc of integration (Frohlich and Westbrook 2001).

Arc of integration Classification criteria

Inward-facing In lower quartile for suppliers, In lower quartile for customers


and
Periphery-facing Above lower quartile for Below upper quartile for
suppliers or customers, but suppliers and customers
Supplier-facing In upper quartile for suppliers, Below upper quartile for
and customers
Customer-facing In upper quartile for Below upper quartile for
customers, and suppliers
Outward-facing In upper quartile for suppliers, In upper quartile for customers
and
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uncertainty on either side of an interface (Davis 1993, Wilding 1998, Sabri and Beamon
2000, Bowersox et al. 2002, Childerhouse 2002, Christopher 2005). Based on the systems
approach of Parnaby (1979) it is then straightforward to extend this around the value
stream.
The original data was not specifically collected to perform this research, however, in
line with Jauch et al.’s (1980) structured content analysis of cases approach we have
re-examined the dataset fully to explore three new research propositions, this secondary
use of research data is not uncommon for supply chain research (see for example, Gold
et al. 2010). Once a Quick Scan audit had been completed, the team collated all the
available data and codified the supply and customer uncertainty levels. A variety of data
sources was used to assess the two interface uncertainties focussing predominantly on the
resultant effects of poor integration of material and information flows. Manifestly,
the precise detail varied from company to company due to a wide range of types of
available data, organisational norms and industry sector practice. Supply and customer
uncertainty levels were codified on a 4-point Likert scale. The resultant data was
standardised with a mean of zero and a standard deviation of one, thus facilitating
assessment of baseline quartiles. These were then used in association with Frohlich and
Westbrook’s (2001) classification scheme as shown in Table 2, thereby aligning the two
alternative assessment methods.

6. Data analysis
In order to examine the comparative performance of each of these arcs, 16 indicators were
selected. Many of these (but clearly not all) were also used by Frohlich and Westbrook
(2001). It has therefore been possible to retain their three major groupings of indicators,
which are marketplace, productivity and non-productivity factors. During each of the
Quick Scans and structured interviews, a quantitative questionnaire (Childerhouse 2002)
was used to evaluate the corresponding status of the value stream being audited. The
selected 16 indicators are provided in Appendix 2 and are a subset of this original
questionnaire. Table 3 lists each of the performance indicators, together with a brief
description and an appropriate unit of analysis. Unfortunately, in some cases due to the
host organisation’s imposition of confidentiality claims plus sometimes the lack of
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Table 3. Average performance of each arc and ANOVA.

Inward- Periphery- Supplier- Customer- Outward- ANOVA


Performance indicators Sample size Description Scalar facing facing facing facing facing significance

Arc of Integration 50 Supplier and customer integration Table 1 6 8 21 6 9


Marketplace
Profitability 41 Profit margin Percentage 3.8A 11.6B 8.6B 10.2B 13.8B 0.782
Schedule instability 47 1 month forecast accuracy Percentage 29.3 41.9 41.4 34.3 30.2 0.915
Distance-to-end 49 Echelons upstream from Single units 2.7C 2.0C 2.6C 1.7D 1.9D 0.131
consumer consumer
Stage of product 43 Infancy ! maturity ! decline 1!2!3 1.7E 1.8E 1.8E 2.0F 2.3F 0.094*
life cycle
Productivity
Manufacturing lead time 49 Manufacturing response time Days 6.1 8.4 10.7 9.4 7.6 0.963
Procurement lead time 48 Supplier response time Days 35.7 37.9 77.5 13.6 23.7 0.779
Delivery lead time 49 Response time to customer order Weeks 3.7G 3.1G 1.6H 3.4G 2.6G 0.383
Customer delivery 34 Number of customer deliveries Single units 149.8 77.0 279.0 321.3 687.4 0.008***
frequency per year
Manufacturing 48 Levels in the bill of material Single units 3.2 4.3 2.3 6.8 4.3 0.000***
complexity
Bought out 33 Number of purchased components Single units 3.0 22.8 8.0 60.3 26.3 0.000***
components
Material flow 50 100 ¼ complex material flow, Percentage 66.6I 63.0I 46.1J 56.1J 40.0J 0.027**
complexity 0 ¼ simplified
Non-productivity
Product variety 49 Number of variants Single units 22.0K 504.0K 783.0K 10.0L 12.0L 0.721
International Journal of Production Research

Shortest possible 50 Likert scale 4 ¼ shortest ! 1 ¼ longest Single units 1.2 1.9 2.6 2.2 3.2 0.009***
planning period
Streamlined 34 Likert scale 4 ¼ streamlined ! Single units 2.0 1.4 2.5 1.3 2.8 0.093*
information flows 1 ¼ cumbersome
Structured approach 50 Likert scale 4 ¼ structured ! Single units 1.3 1.9 2.4 3.0 2.8 0.035**
to change 1 ¼ unstructured
Seamless supply 50 Likert scale 4 ¼ seamless ! Single units 1.2 1.3 2.1 2.0 2.3 0.028**
chain target 1 ¼ baseline

Notes: A–KFootnotes relate to statistically significant t-tests, all are fully explained in the text.
*significant at the 90% level; **significant at the 95% level; ***significant at the 99% level.
7451
7452 P. Childerhouse and D.R. Towill

available data, the 16 indicators could not be collected for all 50 value streams. Any such
data shortfall is highlighted in the second column of Table 3. Now follows a detailed
explanation of the statistical analysis. In particular, we are concerned with how and to
what extent the present in-depth value stream case sample verifies the original Frohlich
and Westbrook (2001) survey.

6.1 Analysis of marketplace indicators


Table 3 provides some very interesting insights into the relative performance of the five
different arcs of integration. Starting with the marketplace analysis, the results do not fully
substantiate the original work of Frohlich and Westbrook (2001). Only one of the four
performance indicators, i.e. stage of product life cycle, shows a statistically significant
result, and this is at the lowest acceptable level of 90%. The original survey showed a very
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high relationship between profitability and arc of integration, with outward-facing far
outperforming the other four types. This is not the case for the current value stream
sample. However, performing a simple t-test between inward-facing (A) and the other four
categories (B) results in a t-value of 2.86 which is statistically significant at the 99% level.
Hence, the value stream sample partially verifies the original study, but only in relation to
inward-facing being less profitable with an average profit margin of only 3.8%. This is
significantly lower than the other four arcs.
The second marketplace indicator is schedule instability as studied in depth by Liker
and Wu (2000). Theory suggests that increased integration, especially with the customer
(customer-facing and outward-facing), results in increased demand visibility and a
decrease in average forecast errors. But this proposition is not verified by the value stream
sample. It may well be that the companies presently being considered are further upstream
and find it more difficult to understand the end customer needs (Mason-Jones 1998).
Consequently, the need to integrate the supply chain in order to compete better as a single
entity is not demonstrated by our results. The analyis of variance (ANOVA) for this
particular variable is not statistically significant. Nevertheless, a t-test between the
customer-orientated arcs (D) and the remaining three arcs (C) for the distance-to-end
consumer indicator results in a t-value of 2.06, this is statistically significant at the 95%
level. The mean value for the customer-orientated arcs is lower than the other three arcs,
hence verifying the idea that integration is less commonplace for upstream organisations.
The fourth and final marketplace indicator analysed is the stage of product life cycle.
This performance measure is only marginally statistically significant at the very low 90%
level. However, the mean values can be seen to increase stepwise in Table 3 from the
inward- to the outward-facing arcs. This may be because, as the product matures through
its life cycle, supply chain members gradually increase their levels of integration based on
increased familiarity with one another and with the relevant SKU family. The statistical
result is further verified via analysis of the mean values for the customer-orientated arcs (F)
versus the other three arcs (E). The resultant t-value is 2.59, which is statistically significant
at the 98% level.

6.2 Productivity indicators


Seven performance indicators have been studied with regard to the arcs of integration and
productivity. Generally, it is expected that those which are more integrated are
International Journal of Production Research 7453

more productive. Four of the seven productivity indicators in Table 3 confirm this
assertion. However, the three productivity indicators that do not show statistically
significant ANOVA results all relate to lead time data. This is surprising, given the
virtually universal acceptance of the advantages of time compression when managing
supply chains (Stalk and Hout 1990). But despite this initial counter-intuitive ANOVA
finding, an intriguing result has been identified when the sample is split into the two
groups of supplier-facing (H) and the remaining four arcs (G). The average delivery lead
time for the supplier arc is 1.6 weeks compared to over 3 weeks for the remaining four arcs.
The t-value for delivery lead time is 2.13, which is statistically significant at the 95% level.
The data is, therefore, suggesting that those organisations with shorter customer delivery
lead times have integrated with their suppliers in order to achieve the customer
responsiveness asked of them. This makes good operational sense as it is a logical
relationship. Otherwise, the value stream sample does not verify Frohlich and Westbrook’s
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(2001) original survey results, which identified a clear relationship between the five arcs of
integration and manufacturing, procurement and delivery lead times.
On a more positive note, the remaining four productivity-related indicators support the
proposition that integration increases productivity (or perhaps is driven vice versa).
Customer delivery frequency increases dramatically with the arc of integration, with
outward-facing value streams delivering on average 687 times a year to their customers
compared to just 77 for the periphery-facing arc. The difference is verified by the ANOVA
result in Table 3 which is statistically significant at the 99% level. The reasoning behind
this result could be that a wider systems perspective is being taken, and therefore a larger
part of the whole value stream is being optimised rather than optimisation of sub-systems
such as transport and finished goods inventory. The analysis of manufacturing complexity
also produces a 99% level statistically significant result. Interestingly, the customer-facing
arc has the greatest manufacturing complexity, with on average 6.8 levels in the bill of
materials compared with just 3.2 for the inward-facing value streams. Perhaps this
complexity has driven these organisations to integrate their processes with those of their
customers.
The penultimate productivity indicator, bought out components, at first sight produces
a somewhat confusing result. The ANOVA analysis in Table 3 is statistically significant at
the 99% level, highlighting a clear difference between the average scores for the five arcs of
integration. The inward-facing category has the fewest bought out components. This could
represent a minimal reliance on the wider supply chain, and hence a reluctance to
integrate externally. The variance between the other four arcs is very difficult to explain
and opens up new opportunities for further research. It certainly justifies a more detailed
study.
The final productivity indicator relates to the advantages of simplified material flow
(Childerhouse and Towill 2003). Here ANOVA is statistically significant at the 95% level.
The inward-facing value streams have an average complexity score of 66%, which is
significantly greater than the 40% of the outward-facing arc. This result is further
validated when the arcs are grouped into moderate integration (I) (inward- and periphery-
facing) and external integration (J) (supplier-, customer- and outward-facing). The
t-test result for these two groups is 3.27, which is statistically significant at the 99% level.
Hence, this analysis provides yet further evidence for the proposition that simpli-
fied material flow holds the key to supply chain integration (Childerhouse and
Towill 2003).
7454 P. Childerhouse and D.R. Towill

6.3 Analysis of the non-productivity indicators


Frohlich and Westbrook’s (2001) original study found a positive difference between
product variety and arc of integration. In their study, the outward-facing arc provided
significantly more variants to their customers. The current value stream sample does not
verify this result, since the ANOVA result for this indicator in Table 3 is not statistically
significant. Indeed, on closer inspection, the opposite relationship has been identified,
a t-test score of 1.73 results when customer-orientated arcs (L) are compared with the
remaining three arcs (K). Admittedly, this score is only statistically significant at the 90%
level. But this conclusion opposes the original study, with the customer-orientated arcs
actually providing fewer variants on average.
Although the current sample findings for the three material flow lead times did not
verify Frohlich and Westbrook’s (2001) results, this study does emphasise the need to
compress information lead times. The use of the shortest possible planning period (for
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example, running the ERP software twice daily) directly relates to the five arcs of
integration for which the statistical significance level in this instance is 99%. Hence,
the inward- and periphery-facing arcs, on average, use longer planning periods. The third
non-productivity measure also relates to information flows, but in this instance examines
the relationship between the arc of integration and the level of streamlined information
flow. This ANOVA result is only statistically significant at the 90% level. As expected, the
outward-facing arc has the highest level of streamlined information flow.
The final two non-productivity variables have similar ANOVA results. However, both
are statistically significant at the 95% level and both show almost uniform increases from
inward- to outward-facing. The first of these relates to supply chain change and the use of
structured methodologies such as the Watson’s (1994) understand, document, simplify,
and only then optimise (UDSO) procedure. Alternatively, the Management-by-projects
(Parnaby et al. 2003) methodology provides a suitable framework for change. The analysis
indicates that the wider the supply chain integration, the greater the use of structured
methods for change. The final variable also relates to change, but in this instance the
overarching direction is investigated. This statistical result indicates that the wider
integrated arcs are more likely to be aiming for a seamless supply chain where ‘all players
think and act as one’ (Towill 1997).

7. Findings
7.1 Verification of the link between breadth of supply chain integration and performance
Figure 3 summarises the statistical outputs in graphic form. Only those relationships
significant at either the 99% or 95% level have been included. The ‘arcs of integration’ are
shown ranked according to their mean values from Table 3. Where necessary, arcs are
grouped together if there is a stepwise difference observable in the results, Figure 3 thus
repeats the previous analysis. For example, the first row illustrates that profitability is on
average less (5) for the inward-facing arc in comparison to the other four arcs, but no
statistical difference was noticeable between these four themselves, so they are shown in
the same bubble in Figure 3. Whereas customer delivery frequency is stepwise, all five arcs
have statistically significant performance. In this case, the periphery arc is less than the
inward arc which is less than the supplier arc which is less than the customer arc which in
turn is less than the outward-facing arc.
International Journal of Production Research 7455

Very high statistical significant results (99%)

Profitability Inward < Periphery & supplier & customer & outward

Material flow complexity Supplier & customer & outward < Inward & periphery

Customer delivery frequency Periphery < Inward < Supplier < Customer < Outward

Manufacturing complexity Supplier < Inward < Periphery < Outward < Customer
Shortest planning period Inward < Periphery < Customer < Supplier < Outward

< < Periphery < < Customer


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Bought out components Inward Supplier Outward

Highly statistical significant results (95%)

Product life cycle Inward & periphery & supplier < Customer & outward

Distance to consumer Customer & outward < Inward & periphery & supplier

Delivery lead time Supplier < Inward & periphery & customer & outward

Structured approach to change Inward < Periphery < Supplier < Outward < Customer
Bought out components Inward < Periphery < Customer < Supplier < Outward

Figure 3. Graphical display emphasising the meaning of the statistically significant results output
from the ANOVA and t-tests.

The majority of the indicators analysed showed positive relationships between the arcs
of integration and performance, either at the individual (ANOVA) or grouped (t-test)
level. Hence, the initial findings of the Frohlich and Westbrook’s (2001) survey have been
successfully validated via investigator, methodology and data triangulation. However, our
data is based on in-depth field observations and not the traditional horizontal survey.
Thus, the results of Frohlich and Westbrook (2001) have been confirmed via an entirely
different research methodology (‘Triangulation in the Large’). In our view, this greatly
strengthens the value of their original contribution.

7.2 Supply chain integration maturity assessment


The classification of supply chains into the five arcs enables an evaluation of supply chain
integration maturity. Despite more than 20 years of extensive academic publication, it is
clear that there is still a significant gap between theory and practice. The latter is often
7456 P. Childerhouse and D.R. Towill

Table 4. Comparison of three investigations into the distribution of integration type.

Frohlich and
Westbrook Different views of Fawcett and
(2001) 50 value stream supply chain Magnan (2002)
Arc of integration survey % sample % integration survey %

Inward-facing 15 13 Seamless internal processes 47 (47)


Periphery-facing 47 (62) 15 (28)
Supplier-facing 13 (75) 40 (68) First-tier supplier integration 34 (81)
Customer-facing 14 (89) 13 (81) First-tier customer integration 11 (92)
Outward-facing 10 (99) 19 (100) Up and downstream integration 8 (100)

Note: Key () cumulative percentages across the respective arcs of integration.
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perceived to be better than it actually is due to the natural tendency to widely publicise
what may be a relatively small number of best practice companies. A comprehensive
site-based study by Towill et al. (2000) of the European automotive sector, found that only
10% of supply chains could be regarded as fully integrated. An American survey
conducted by Poirier and Quinn (2003) also found that only 10% of supply chains had
reached external integration. Table 4 highlights the arcs of integration frequency
distribution and cumulative percentages of the Frohlich and Westbrook (2001) survey,
together with the current 50 value stream sample. The table also contains results from a
similar survey and classification scheme undertaken by Fawcett and Magnan (2002). Full
supply chain integration is represented by the final row in Table 4. The results cannot be
considered good on evidence from any of the sources shown, since, on average, some 29%
of value streams are yet to advance beyond supplier-facing.

7.3 Popular supply chain integration states


It is our conclusion that the five arcs of integration concept has proved to be a very useful
tool to analyse supply chains. However, re-examination of Figure 1 shows that it is a
significant step to move forward from inward-facing to periphery-facing operations. To
overcome this, it is suggested that a further integration category would enhance the
classification schema. This is now illustrated in Figure 4. Here the periphery-facing arc has
been sub-divided into two levels. Thus, we posit those that are more customer-orientated
levels being differentiated from those which are more supplier-orientated. Given the low
percentage of well integrated supply chains in practice, there is now manifestly a need for a
route map to support such an evolutionary process.
Two suggested alternative routes to full integration are illustrated in Figure 4A and B.
The numbers shown in brackets in Figure 4 are the sample frequency of occurrence in the
50 value stream sample. Further consideration of these suggests a popular route when
integrating a supply chain. Route ‘B’ contains 24 value streams, whilst (allowing for
overlaps) route ‘A’ is more popular with 41 value streams, hence adequately demonstrating
a popular route to full integration. The implication of this trajectory is now clear. It
manifestly offers guidance on how practice may be influenced by ‘theory,’ based on new
evidence from the field observations.
International Journal of Production Research 7457

Upper quartile
Supplier- Outward-
facing facing
(21) (9)

Supplier integration

A
Periphery-facing
supplier emphasis
(5)
Customer-
facing
Periphery-facing (6)
customer emphasis
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(3)
Lower quartile

Inward-
facing B
(6)

Lower quartile Customer integration Upper quartile

Figure 4. Sample distribution of the six arcs of integration.

Initially, companies must get their own houses in order by moving from the
inward-facing to the periphery-facing arc. Many of the cases examined have achieved this
through good internal control and efficient processes. Examples of relevant practice
include the use of Kanbans, Lean production, frequent sales and operations planning, and
assessment of customer and supplier delivery performance. Having reached this standard,
most companies seem able to integrate upstream with their key suppliers. A reasonable
proportion of the cases investigated have achieved this step and have focussed on
removing waste at the inbound interface. Examples include scheduled regular supplier
meetings to discuss previous performance and ways to continuously improve (Narasimhan
et al. 2006). The sharing of information is critical at this step to reduce inventory and
increase trust, further, several organisations have introduced VMI and consignment
stocking with key suppliers. Finally, integration with customers is tackled to achieve an
outward-facing arc. Very few of the cases have achieved this particular transition. Limited
examples observed include collaborative planning and forecasting, VMI, joint pro-
grammes to enhance customer service, and open book costing.
The common exemplar practices of the three best outward-facing arcs from the sample
are highlighted in Table 5. These focal organisations act as a single point of control for the
supply chain. They co-ordinate and synchronise the flow of material and hence
significantly reduce demand amplification. The outward-facing integration is further
illustrated by the utilisation of direct line feed and consignment stocking with suppliers.
Such co-ordination is achieved by totally integrated information systems for all three
exemplars. The downstream integration is highlighted by the extremely stable demand
schedules with, on average, only 4% variation between 1 month forecasts and actual
deliveries to customers. The final common best practice stated in Table 5 highlights the
7458 P. Childerhouse and D.R. Towill

Table 5. Transferable ‘Best Practices’ shared by the three ‘Exemplar’ outward-facing value streams
(Childerhouse et al. 2004).

Area of good practice Exemplar value stream characteristics

Supply chain relationships  Generic partnerships with key suppliers


 Dominant ‘player’ i.e. ‘product champion’, who manages the
synchronisation and co-ordination of the supply chain
 Single point of control
Inventory policy  Direct line feed and consignment stocking
Information system  Totally integrated information systems
Demand stability  Average schedule variability of the three exemplars is 4% over a
1 month forecast, compared to 37% for the entire value stream
sample
Variant mix  Average number of product variants is significantly lower for the
three exemplars in comparison with the remainder of the sample
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Simplified material flow  Visible continuous improvement towards the seamless supply
chain objective
 Customer-orientated operations
 Single piece material flow in place
 Pull systems based on Kanbans
 Use of the shortest possible planning period
 Active process time compression

emphasis on key elements of simplified material flow. It is concluded that these three
organisations provide valuable insight for supply chain integration.

8. Discussion
The practical implications of this research are thought to be extremely significant. First,
this study has further validated the advantages of supply chain integration. Second, if
managers are struggling with supply chain integration, they should be supported and
reassured that they are not unique in facing this difficult task. As a senior industrialist has
been quoted in a similar context ‘enabling change is a balls-aching task’ (Oliver and
Delbridge 1999), change projects may be extensive, but perseverance may well pay off.
Furthermore, the indifferent performance of most supply chains is an excellent
opportunity for companies to advance beyond the current norm. Finally, this field
research has identified a popular route when improving supply chain integration and
moving towards proven exemplar best practice. However, this hypothesised popular route
requires significant further research, possibly by studying longitudinal change pro-
grammes, ideally via insider action research as defined by Ottosson and Bjork (2004).
In terms of confirmation of existing knowledge, the present research has confirmed
three previous conclusions: that those companies that are more broadly integrated into
their supply chains are more competitive; that simplified material flow is the key to supply
chain integration; and, that when improving integration maturity companies follow a
popular route, there is a benchmark trajectory to aim at. However, in some instances our
field results challenge current perceived wisdom specifically as customer
International Journal of Production Research 7459

integration reduces the number of variants offered, but does not increase customisation.
Furthermore, absolute lead times are not an effective measure of supply chain integration,
since the key is lead time relative to the competition.
In our view, it is unlikely that the foregoing two contra-indicators arise from
differences in either data acquisition or data interpretation. They could well be the result
of sampling variations regarding industrial sectors, company style, supply chain echelon(s)
and countries of origin. However, the Quick Scan methodology does undoubtedly develop
a deeper understanding of any particular value stream. Thus, the expectation is that a
more consistent view of reality may be visible via this modus operandi. As indicated
previously, the contradictory results published by Matson and Matson (2007) are a case in
point. We believe ‘Triangulation in the Large’ involving specific additional site-based
knowledge acquisition could play a significant part in resolving such apparently conflicting
views and circumstances. For the Matson and Matson (2007) scrappage rate-Quality
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Programmes paradox, our experience suggests that either group-based brainstorming, or


activity sampling, and maybe both sources in tandem, provide useful outputs for this
purpose. Note that one possible explanation is the existence of an improvement lag, but
this is an assertion manifestly requiring field testing.
Our sample of value streams is neither random nor truly representative of all possible
real-world scenarios, hence, the results must be considered in the light of this limitation.
A number of further, possible underlying factors have been statistically tested in Appendix
3 to ensure the relationships identified in the results are predominantly due to the
alternative arcs of integration. Seven of the eight cross-checks prove negative, hence
verifying our results. The only variable with a positive correlation is supplier delivery
distance, with a somewhat unexpected positive relationship between geographical distance
and arc of integration. This should not significantly undermine the validity of the results
and the result actually opens up a new avenue for further research. The variety of
industries studied is a double-edged sword. On the one edge, it greatly expands the original
coverage of Frohlich and Westbrook’s (2001) study, but on the other it complicates the
performance assessment due to the alternative industry norms and competitive pressures.
It has not been possible to exactly replicate the performance measures of the original
Frohlich and Westbrook (2001) study due to the extended period of time required to
conduct all the field research. For both sources, due to the complexity of real-world
practice, it is also questionable if the measures of performance correctly assess supply
chain performance.
As with virtually all social science investigations, there are numerous topics unearthed
for furthering this research, in particular we perceive five possible ways to advance the
topic. First, further studies are always required in yet more industrial sectors to ascertain
the generic nature of our findings. Second, the proposed change in the Frohlich and
Westbrook (2001) model from five to six arcs needs further investigation to test if those
thereby categorised are significantly different, and in what ways. Third, longitudinal
change studies would be ideal to further validate the identified popular route. As van
Donk and van der Vaart (2005) postulate, perhaps full integration is not always ideal,
hence further research could be conducted to examine whether situations occur when the
supplier or customer arcs outperform the outward-facing arc. Of real concern is the low
uptake of supply chain integration observed in practice. Hence, the fifth and final avenue
for further research is the identification of both the barriers to change and best approaches
to overcome these obstacles.
7460 P. Childerhouse and D.R. Towill

9. Conclusion
This research has added to the increasing body of knowledge highlighting the link between
performance and supply chain integration. The field data highlights the interesting fact
that in present day operations the narrowest level of integration, i.e. the inward-facing arc,
is least profitable, that is, when compared to that achieved in other major groupings in the
Frohlich and Westbrook (2001) model. This is very much in accordance with historical
results published by Hall et al. (1993). The in-depth case research has also provided more
evidence of the practical difficulties of enabling integration, with most of the real-world
supply chains assessed as not being well integrated. In order to mitigate these problems, a
popular route has been identified that shows a preferred the way to increase effective
supply chain integration. The outcome is evidence that organisations tend to get their own
houses in order first, via increased internal integration, followed by integration upstream
with key suppliers and then finally integration with their customers. This follows from a
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perceived base of confidence and competence.

Acknowledgements
The authors would like to thank the original Cardiff LSDG team that helped in developing the
Quick Scan audit methodology and the 25 plus multinational researchers who have since
participated in the various Quick Scans over the past 8 years.

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Appendix 1. Value stream sample background descriptions

Date analysed Nationality Industrial sector Major value adding processes

Quick scanned value streams


November 1997 England Automotive Machining and assembly of a diesel
injector unit
November 1997 England Automotive Final assembly of a petrol injector
unit
January 1998 England Automotive Assembly of an advanced automotive
sensor
January 1998 England Automotive Final assembly of a distributor
February 1998 England Automotive Sub-assembly and final assembly of a
distributor
April 1998 England Automotive Final assembly of a three cylinder
engine

(continued )
International Journal of Production Research 7463

Appendix 1. Continued.

Date analysed Nationality Industrial sector Major value adding processes

April 1998 England Automotive Machining of engine leak-off pipes


August 1998 England Automotive Sub-contract heat treatment of a
petrol injector unit
August 1998 England Automotive Sub-contract heat treatment of a
diesel injector unit
August 1998 Scotland Automotive Machining and assembly of a engine
component
August 1998 Scotland Automotive Machining and sub-assembly of a
engine component
September 1998 England Automotive Machining and assembly of a engine
component
September 1998 England Automotive Machining and sub-assembly of a
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engine component
September 1998 Germany Automotive Forging of a diesel injector unit body
September 1998 Germany Automotive Forging of a petrol injector unit body
September 1998 England Automotive Complex assembly of a specialised
injector valve
September 1998 England Automotive Sub-assembly of a specialised injector
valve
January 1999 Germany Automotive Machining of brake shoe component
February 1999 Wales Automotive 3PL warehouse and distribution of
brake shoes
February 1999 Wales Automotive Final assembly of braking shoes
November 1999 Wales Automotive Machining and final assembly of
braking systems
October 2000 Wales Automotive Machining and final assembly of
HiFi systems
September 2003 New Zealand Engineering Component machining sub-assembly
and final assembly of farm holding
tanks
September 2003 New Zealand Engineering Machining and final assembly of
vineyard frost protection units
January 2004 New Zealand Food Pasteurisation, separation, drying,
packaging and distribution of milk
powder
January 2004 New Zealand Food Churning, packaging and distribu-
tion of butter
August 2004 England Food Food processing and packaging of
soft drink
August 2004 Thailand Construction Mixing and setting of pre-cast
concrete
August 2004 Thailand Telecommunication Assembly of medium voltage cable
August 2004 Thailand Telecommunication Assembly of telephone cable
August 2004 Thailand Steel fabrication Rolling milled steel bar production
August 2004 Thailand Furniture manufacture Component and assembly of design
to order furniture
August 2004 Thailand Scanning service Consumer scanning service
Date analysed Nationality Industrial sector Date analysed
Interviewed value streams
November 1998 England Mechanical precision Design and assembly of vacuum
pumps
November 1998 England Mechanical precision Design and assembly of vacuum
pumps

(continued )
7464 P. Childerhouse and D.R. Towill

Appendix 1. Continued.

Date analysed Nationality Industrial sector Major value adding processes

June 1998 Wales Ventilation Final assembly of air


conditioning units
June 1998 Wales Ventilation Final assembly of air conditioning
units
March 1999 England Electrical products Final assembly of memory tape
January 2000 England Lighting Sub-assembly and final assembly
of standard lights
January 2000 England Lighting Design, fabrication and assembly
of customised lights
February 2000 England Lighting Sub-assembly and final assembly
of aftermarket lights
February 2000 England Lighting Sub-assembly and final assembly
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of customised lights
August 2001 England Electronic products Final assembly of scanners
August 2001 England Food Food processing and packaging
of ready meals
November 2001 England Safety wrapping Simple cutting and sticking of
protective sleeves
November 2001 England Aerospace Assembly of small aeroplane
components
March 2002 Wales Steel fabrication Rolling mill melting and shaping
of channels and bars
September 2002 New Zealand Dairy Pasteurisation, bottling, distribution
and branding of fresh milk
September 2002 New Zealand Dairy Production, packaging, distribution
and branding of yoghurt
September 2002 New Zealand Dairy Production, packaging, distribution
and branding of long life milk
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Appendix 2. Supply chain integration questionnaire (Adapted from Childerhouse (2002))


Select a single value stream to analysis. The value stream should be a major product family that is reasonably representative of the supply chain
operations. If necessary repeat the questionnaire for other value streams if major differences are present.

Organisation name
Interviewee name
Product name
Brief description of the product and its associated value stream

Major value adding processes (e.g. assembly or machining)


Location of Plant/ organisation

Inbound logistics Definition Response Units


Number of suppliers How many different supp liers do you require for the specified product?

Suppliers delivery lead Please state the average time between when you place a firm order with your
Time suppliers and when they deliver the product (Call-off).
Suppliers delivery State the average delivery distance for the suppliers of the specified product.
distance
Bought out components How many different bought out components are required to produce one product?

Outbound logistics Definition Response Units


Customer Please state the time between when a firm order is placed and when the product is
International Journal of Production Research

delivery lead time delivered. (Call-off)


Customer State the frequency of deliveries to your customers for the specified product.
delivery frequency
Number of customers Please state the number of alternative customer companies.

Customer locations State the number of customer locations the specified product is deliver to.

Customer State the average customer delivery distance.


delivery distance
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7466

Internal logistics Definition Response Units


BOM levels Please state the number of levels in the Bill of Materials for the specified product.

Manufacturing lead time State the average time between when the raw materials are taken out of stock to
when the final product is completed ready for delivery.
Position of the Products are manufactured and distributed to stocking points close to the customer. Make and ship to stock
de-coupling point End products are held in stock at the end of the production then sent to customers on demand. Make to stock
Sub-assemblies held in stock, no FG stock, final assembly triggered by specific customer order. Assemble to order
Only raw materials are kept in stock; each order for a customer is a specific project. Make to order
No stocks are kept at all; purchasing takes place on the basis of the specific customer order. Purchase and make to order

Product characteristics Definition Response Units


Product variety State the number of variants of fi nished goods for the specified product. (i.e. FG live
part numbers)
Product margins What is the product’s profit margin?

Annual volume What was last year’s total sales vo lume? Please also specify the units (e.g. tonnes,
pallets).
Echelons from end Number of organisations carrying out activities on the product before end
consumer consumption, excluding transport.
Length of product life- Please state your best estimate of the product’s total life-cycle length.
cycle
Customer schedule Please give your best estimate of the percentage variation between what was
stability scheduled one month ahead and what was actually required on the day.
P. Childerhouse and D.R. Towill

Stage of product life-cycle Which of the three alternatives best describes the current stage of the product’s life- Infancy Maturity Decline
cycle?

Non-productivity Definition 1=never, 2=sometimes,


3=most of the time or 4=always
Shortest possible planning Do you use the shortest planning period, i.e. the smallest run quantity that can be
period managed efficiently?
Structured approach to Do you utilise structured approaches to change, such as understand, document,
change simplify and only then optimise (UDSO) ?
Streamlined information Do you streamline and make highly visible all information flows throughout the
flows chain?
Seamless supply chain Is the operational target to facilitate a Seamless supply chain i.e. all players to ‘think
target and act as one’?
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Complex material flow Symptoms 1= present, 2= not present or ?= not


looked for or investigated
Dynamic behaviour Systems-induced behaviour observed in demand patterns.
System behaviour often unexpected and counter-intuitive.
Causal relationships often geographically separated.
Excessive demand amplification as orders are passed upstream.
Rogue orders induced by system ‘Players’.
Poor and variable customer service levels.
Physical situation Large and increasing number of products per pound of turnover.
High labour content.
Multiple production and distribution points.
Large pools of inventory throughout the system.
Complicated material flow patterns.
Poor stores control.
Operational characteristics Shop floor decisions based on batch-and-queue.
‘Interference’ between competing value streams.
Causal relationships often well separated in time.
Failure to synchronise all orders and acquisitions.
Failure to compress lead times.
Variable performance in response to similar order patterns.
International Journal of Production Research

Organisational Decision-making by functional groups.


characteristics Excessive quality inspection.
Multiple independent information systems.
Overheads and indirect costs allocated across product groups, and not by activity.
Excessive layers of management between CEO and shop floor.
Bureaucratic and lengthy decision-making process.
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7468 P. Childerhouse and D.R. Towill

Appendix 3. Correlation of the descriptive variables and arcs of integration for the value
stream sample

Correlation
Variable Description Scalar coefficient p-value

Delivery locations Total number of customer Single units 0.026 0.86


delivery locations
Customer base Number of alternative Single units 0.043 0.78
customers
Supplier distance Average supplier delivery Miles 0.298 0.05*
distance
Customer distance Average customer delivery Miles 0.136 0.35
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distance
Supply base Number of alternative Single units 0.096 0.51
suppliers
Duration of PLC Average duration of the pro- Years 0.154 0.34
duct life cycle
Annual volume The total production volume Single units 0.020 0.90
over the past year
De-coupling point Position of the strategic stock- 0 ¼ design to order, 0.156 0.28
ing point that divides order 1 ¼ make to order,
driven and forecast driven 2 ¼ assembly to order,
processes 3 ¼ make to order and
4 ¼ make and ship to
stock

Note: PLC, product life cycle.

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