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Introduction

Case study
Harland et al. (1999) indicates that the evolution of
The development of supply chain management theory is driven by rapid
supply chain changes in global business practice. The worldwide
recession of the late 1980s and early 1990s forced
management within the firms to re-examine, at a strategic level, the ways in
which they aimed to add value and reduce costs
aerospace throughout their business. The resulting changes
brought about large-scale programmes of
manufacturing sector rationalisation and organisational down-sizing,
(Kanter, 1994; Porter, 1990; Prahalad and Hamel,
R.R. Bales 1990), cost reduction drives, quality improvement
initiatives and inventory reduction programmes
R.S. Maull and (Slack, 1991; Womack et al., 1990). This paper
Z. Radnor describes the changes that are occurring in the
structure of aerospace material supply chains as a
result of these initiatives. Case study results are
The authors
presented of one organisation that has changed its
R.R. Bales is a Researcher and R.S. Maull is Senior Lecturer in business focus from being a supplier to a single
Management, both at the School of Business and Economics, source material service provider.
University of Exeter, Exeter, UK.
Evidence presented here supports the argument
Z. Radnor is Lecturer in Operations Management at Warwick
Business School, University of Warwick, Coventry, UK.
that there has been a general change in
organisations desire to integrate vertically. The
Keywords current tendency is for firms to cooperate more
closely rather than maintaining a diverse range of
Supply chain management, Aerospace industry, Case studies
internal skills and resources. The literature
demonstrates that since the mid 1980s many
Abstract
industries have developed a more open approach
This paper analyses the development of aerospace material towards cooperation rather than vertical
supply chains. The paper begins with an overview of operations integration (Porter, 1987; Thackray, 1986). The
management literature, which introduces and conceptualises the
trend has been for large, vertically integrated
research area. Supply chain literature is examined, focusing on
supply chain structure and the inter-organisational links between
organisations to gradually reduce the financial risk
supply chain actors. Analysis of case study material is presented associated with operating broad business
to illustrate the scope, complexity and interdependent nature of portfolios. Cooperating firms tend not to have
the aerospace supply chain. Recurring themes from the literature become locked in inappropriate, non-core activities
are compared with the data categories emergent from the and have been able to attain an increased global
empirical case data. The results are discussed in terms of the coverage capability (Miles and Snow, 1987).
changes that are taking place in supply chain structure to The operations management concept of focus
increase the overall effectiveness of the network. The paper (Skinner, 1969) is central in the development of
concludes by identifying the need for, and discussing the nature this strategy. Organisations concentrate on a
of, a specialised organisation focused on managing the complex
limited and closely related task load, which, by the
structure of the supply chain.
nature of its manageability, allows for the
Electronic access development of an increased competency level.
Non-core competencies (Prahalad and Hamel,
The Emerald Research Register for this journal is 1990) are classed as periphery activities, which can
available at
be outsourced to specialist organisations (Snow
www.emeraldinsight.com/researchregister
and Miles, 1992). The focus of this paper is the
The current issue and full text archive of this journal is web of interdependent relationships that results
available at from focussed operations and cooperation, driven
www.emeraldinsight.com/1359-8546.htm by the trend in globalisation.

Supply chain literature


Supply Chain Management: An International Journal
Volume 9 Number 3 2004 pp. 250-255 The term supply chain management was originally
q Emerald Group Publishing Limited ISSN 1359-8546 used in the early 1980s (Oliver and Webber, 1992).
DOI 10.1108/13598540410544944 It referred to the management of materials across
250
The development of supply chain management Supply Chain Management: An International Journal
R.R. Bales, R.S. Maull and Z. Radnor Volume 9 Number 3 2004 250-255

functional boundaries within an organisation, but Development of supply chain management


was soon extended beyond the boundary of the Harland (1996) describes a four-stage supply
firm to include upstream production chains and chain typology (Figure 1), outlining four main uses
downstream distribution channels (Womack for the term supply chain management:
and Jones, 1996; Womack et al., 1990). (1) The internal supply chain integrates business
Davis (1993) defines supply chains by functions involved in the flow of materials and
describing their structure and scope. In general information from inbound to outbound ends
terms, a supply chain consists of a series of of the business.
organisations and activities that are required to (2) The management of a dyadic or two-party
convert raw materials and deliver them as finished relationships with immediate suppliers.
products to the final user. From a simple analytical (3) The management of a chain of businesses
point of view, a supply chain consists of material including a supplier, a suppliers supplier, a
and information processing units with three basic customer and a customers customer and so on.
characteristics of demand, value-adding (4) The management of a network of inter-
transformation and supply. The two-way exchange connected businesses involved in the ultimate
of demand and supply information between the provision of product and service packages
tiers is identified as the key supply chain control required by end customers.
mechanism facilitating the flow of material
Hewitt (2001) describes a development stage
downstream from the raw material producer to the
beyond integrated business networks as demand
final product. The flows of information and
chain communities. These are characterised as
material form the primary links across the supply
demand driven, agile, multi-enterprise
chain system. The strength of the entire supply
organisations, but it is emphasised that
chain relies on the integrity of these links.
maintaining their structure and communal ethos
Simple illustrations often depict the supply
may challenge existing business principles.
chain as a linear construction. Brown et al. (2000)
In line with Harlands supply chain framework,
believe the chain terminology may have originated
Croom et al. (2000) identified three inter-
from the biological food chain concept. The image
organisational supply chain levels as dyadic, chain
of a causal linear chain of events promoted by
and network, using this classification as a
the chain metaphor, is readily accessible but
conceptual framework to structure a literature
somewhat misleading. Predators within food
review. This classification contrasts the nature of
chains consume more than one food type and
the exchange relationships against the supply chain
organisations within supply chains interact widely
types, suggesting the type of exchange relationship
with one another. If this biological comparison is
is a fundamental building block of supply chain
continued food chains are more accurately
management.
described as food webs. The term supply web does
Harland (1996) links the internal supply chain
suggest a more complex non-linear structure,
definitions to previous materials management
described within Brown et al. (2000) as a mess.
research and the concept of the value chain
This paper aims to explain and describe this
(Porter, 1985), but discounts further intra-
mess within the context of the aerospace supply
organisational discussion to focus on inter-
chain, demonstrating how the structure of the
organisational integration. Croom et al. (2000)
supply chain can be managed to increase its
supports this approach citing Saunders (1995) and
efficiency and effectiveness. Harland (1996)
focussing on inter-organisational supply chain
describes supply chain structure as a dynamic,
material. Cox (1997) refers to the inextricably
inter-connected supply network. In practice,
inter-twined nature of intra- and inter-
supply chains form a complex interdependent
organisational perspectives. The focus of this
network of suppliers, manufacturing facilities and
paper is the evolving structure of the supply chain
stockists linking multiple organisations,
and therefore inter-organisational views, but the
increasingly within a global market. Hewitt (2001)
link to, and importance of, the intra-organisational
supports these views, explaining that various terms
are now being used to describe new forms of inter-
organisational relationships and structures, value Figure 1 Stages in supply chain development
nets; virtual organisations; supply webs;
e-networks and collaborative commerce
networks, which all imply that knowledge of
increasingly complex inter-relationships is
replacing the relatively simple understanding of
linear supply chain structures. The next section
will discuss the development of supply chain
management.
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The development of supply chain management Supply Chain Management: An International Journal
R.R. Bales, R.S. Maull and Z. Radnor Volume 9 Number 3 2004 250-255

perspective is recognised. Cooper et al. (1997) Results


describe the integration of business processes
across the supply chain as a fundamental part of Table I identifies and defines five data categories
modern supply chain management. and a high-level proposition that have emerged
The literature illustrates the evolution from the from the empirical data.
traditional intra-organisational operations
management towards an inter-organisational
approach. The linear dyadic understanding evolves
towards chains of dyadic relationships, decreasingly Data analysis
linear interdependent networks and, ultimately,
demand chain communities. The results from the The three main categories from the empirical data;
case study illustrate this process of change. partnering, information exchange and the evolving
supply chain structure, suggest a gradual move
from an adversarial trading mentality towards the
integrated network structure identified by Harland
Methodology (1996). They also confirm that this supply chain is
focussed on developing inter-organisational links
The research was carried out using a case study between the supply chain actors. Analysis of the
methodology. The case study methodology focuses empirical research data demonstrates how this is
on understanding the dynamics present within a occurring.
single setting (Eisenhardt, 1989), and to Outsourcing periphery activities has altered the
understand them within a particular context (Yin, shape of the supply chain. The overall number of
1994). The researchers position within the supply chain actors has decreased but the sub-
business development team of a supply chain contract base now carries out a greater volume of
company (Apollo) allowed three years access to, manufacturing work and of an increasingly
and detailed visibility of, the supply chain. complex nature. The evidence for this is the
Research data was collected via detailed increasing quantities of material Apollo now
participant observation and interaction at various supply direct to the sub-contractors. The type of
levels within the host organisation. This allowed material supplied also indicates that the level of
the researcher to understand the strategic work being carried out by the sub-contract base
now includes the manufacture of complex sub-
complexity and inter-related nature of the supply
assemblies in addition to low order components.
chain interactions.
For example, the Trim group maintain and
During the data collection phase, detailed case
manufacture nose cone assemblies for Westland.
notes were collected. In line with the action
Supporting these findings is information from the
research process described by Coghlan and
partnering and information exchange categories
Brannick (2001) and Saunders et al. (2003), the
regarding the development of inter-organisational
case notes were used to inform business
relationships with a reduced number of prime sub-
development practices, which were continually
contractors. This creates the level of direct,
tested and re-evaluated within the business setting. focussed information exchange necessary to
Content analysis was used to systematically supply the type and quantities of material required.
analyse the detailed research data using techniques This empirical research illustrates how risk has
developed by Glaser and Strauss (1967), further been passed down the supply chain now that
developed by Strauss and Corbin (1990) and material is no longer free issued by the OEMs to
described by Pandit (1996). the sub-contractors. Sub-contractors must plan,
Open coding was used to break down and label purchase and stock this material, or, as indicated
reoccurring phenomena found within the research by this empirical data outsource these activities, to
data, resulting in the identification of base level a third party. As evidenced by the continual
data concepts. Axial coding techniques were used development of single source agreements with
to reconstruct the data in new ways, making sub-contractors, the financial burden on the sub-
connections between concepts to form five higher- contract base created by the move away from free
level sub-categories. These sub-category data sets issue material alters the shape of the supply chain.
(Table I) are defined using data from the base level The information exchange category describes
concepts. Selective coding was used to integrate how multi-tiered supply chains develop where
discrete data categories resulting in the formation prime sub-contractors themselves outsource
of a proposition. The inferred proposition, periphery-manufacturing work to second and third
identified in Table I, is discussed using themes tier sub-contractors. This disseminates supply and
identified from the literature. For a detailed demand information throughout the supply chain
account of the theory-building process see Strauss and blurs the customer-supplier boundaries. The
and Corbin (1990). complexity of the emerging supply chain structure
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The development of supply chain management Supply Chain Management: An International Journal
R.R. Bales, R.S. Maull and Z. Radnor Volume 9 Number 3 2004 250-255

Table I Data categories


Category title Observations
Partnering The evolution towards integrated supply chain management sees a move away from adversarial trading towards a
partnering approach. For example, sub-contractors are moving material purchasing and stocking to single source suppliers.
The suppliers encourage this by offering to buy back the manufacturers stock. Where this occurs the material supplier
gains an increased and stable revenue stream. The sub-contractor receives a cash payment for the stock and is able to
focus on manufacturing issues rather than purchasing and stocking functions. The nature and complexity of stock buy
back processes force a high level of cooperation to ensure that material traceability meets tight quality requirements.
Agreements have to be reached concerning stock usage rates, stock levels and quantities of redundant stocks. This level of
communication changes historically adversarial trading contracts towards interdependent cooperative relationships. To do
this, Apollo has established single points of contact and intra-organisational work groups with key customers and
suppliers. This type of change requires high-level, inter-organisational support to drive the development process through its
life-cycle. Without this continued backing, complex supply chain development initiatives are often overlooked. Relationship
management builds trust between supply chain actors, extending the scale and service provision elements of the
relationship. Having managed metallic material delivery direct to BAE SYSTEMS remaining in-house manufacturing sites,
Apollos contract has been extended to include the management and maintenance of machine tools. Three-way
communication between BAE SYSTEMS (the OEM), the sub-contractor and the material provider increases, allowing
continuous improvement programmes and contract enhancements
Information exchange The category includes the systems and issues that facilitate inter-organisational supply chain communication and the flow
of information. The infrastructure within the supply chain must support the necessary exchange of supply, demand and
payment information. The inter-connectivity of the systems and their associated processes affect supply chain visibility.
Using open-book contracts and sharing information via Web-enabled databases increase visibility. Creating a transparent
supply chain system encourages supply chain actors to plan accurately. Apollo uses specialised optimising software to
calculate stock levels to meet individual service level agreements. This information is available to customers and is used as
a decision-making tool. Uncertainty is an intrinsic element of the aerospace supply chain. Elements of variation include
build rate fluctuation, engineering change, product immaturity and issues relating to the accuracy, ownership and format of
information, which can all lead to an unforecast demand or forecast inaccuracy. With an increasingly fragmented
manufacturing base, bill of material (BOM) information is no longer centrally controlled and is disseminated across
a wide range of companies. Apollo, acting as the service provider, has to collect and collate this information. At a
strategic level BAE SYSTEMS, Airbus and Boeing demand innovative supply chain solutions. Matching supply and
demand means developing technological, inter-organisational supply chain solutions that allow the necessary level of
information transfer
Supply chain Manufacturing work is increasingly outsourced to sub-contractors on a strategic basis. Sub-contractors must then purchase
structure and therefore finance their own material requirements. Either they have to create the financial flexibility and competencies
to carry out these tasks in-house, or the structure of the supply chain needs to evolve to support their needs. The growing
realisation throughout the supply chain that there are strategic advantages in using a third party to manage these issues
alters the structure of the supply chain. Apollo offers a range of these specialist supply chain services associated with their
traditional material-stocking role. This leaves the manufacturing base to focus on their core competencies. Initially, Apollo
developed this concept in partnership with BAE SYSTEMS in the form of the Millennium Contract. The range of products
the third-party service provider manages influences the shape of the supply chain. Apollos service provision business has
developed from that of a metal stockist. Continuous monitoring ensures that Apollos business structure and practices
create synergies between the two functions without adversely affecting the supply chain system. Material certification and
full supply chain traceability remain strict order-qualifying criteria
Global supply Global business drivers continually reshape the structure of the industry. The global aerospace market is increasingly
chains influenced by offset and technology transfer issues. China is becoming an important marketplace and a potential source of
low-cost manufacturing. The major OEMs are looking to exploit these opportunities; Boeing, horizontal stabilizer
manufacture to Shanghai Aircraft Manufacturing Factory and Airbus, leading and trailing edge wing manufacture to Xian
and Shenyang. Apollo is developing a market entry strategy to support the flow of information and material to and from the
emerging market. This strategy includes opening a representative office in Beijing and potentially a warehousing facility in
Shanghai. Political decisions and government policy continue to influence international supply chain strategy and
operations
Intra-organisational The focus of this research is intra-organisational links between supply chain actors and the evolving structure of the
issues network. Concepts referring to internal operations have not been excluded from the base data, because they are a part of
the supply chain and have operational consequences on inter-organisational supply chain issues. For example, Apollos
internal warehousing procedures and processes are now a part of the supply chain network and are visible to customers
and suppliers
Proposition An observed change in market structure creates a requirement to manage the complete material supply chain, presenting
the opportunity to develop the role of a supply chain integrator

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The development of supply chain management Supply Chain Management: An International Journal
R.R. Bales, R.S. Maull and Z. Radnor Volume 9 Number 3 2004 250-255

increases further, where, for example, The global supply chain category describes the
subcontractors hold work packages as a prime geographic scope of the aerospace supply chain,
contractors but also complete work as second or both in terms of offset opportunities and the
third tier suppliers. This means less material and potential to benefit from low-cost manufacturing. It
therefore less supply and demand information is is an important factor in the empirical data, because
transferred directly with the OEMs. The empirical successful supply chain solutions must be adaptable
data has highlighted problems with incomplete to the global market place. The base level concepts
BOMs, resulting in material shortages for projects, that form this category identify and describe the
including the Eurofighter programme. Demand importance of offset agreements in terms of market
and supply information that was held centrally by access and potentially low manufacturing costs in
the OEMs and used to manufacture in-house return for technology transfer and the wider
requirements is now disseminated throughout the economic multiplier effects created by the packages
supply chain. The need to control this information of sub-contract work. Data from this category
is recognised within the partnering and demonstrates the investment Western supply chain
information exchange categories by the companies are making to enter the Chinese market
importance of building relationships with supply to support the OEMs.
chain actors in order to gather decentralised
demand and supply information.
As the level of cooperation between
organisations increases, so does the level of inter- Conclusion
dependency. The empirical data also shows that
the OEMs have outsourced strategic activities such The case material demonstrates the complex nature
as the metal supply chain. The existence and of the aerospace manufacturing industry. The inter-
development of service providers is highlighted as dependent nature of the supply chain results from a
a role that includes traditional purchasing and combination of end-product complexity and the
stocking functions, historically carried out by the increasingly dynamic structure of the modern
OEMs, but also information management services supply chain. Historically OEMs acted as the focal
required to operate the evolving supply chain point of supply chains, carrying out the majority of
structure. Sub-contractors form a relationship transformational manufacturing and assembly
with one organisation and together they manage processes in-house and co-ordinating work placed
supply and demand information to ensure they with third parties. The OEMs also controlled and
receive their required material on schedule at a co-ordinated raw material purchase and stock,
visible and competitive price. These relationships balancing the key supply chain control mechanisms
become reinforcing loops, which act to strengthen of supply and demand to satisfy operational
inter-organisational relationships and dependency. requirements. The development of the global
It becomes easier for supply chain actors to business environment increased economic pressure,
cooperate with the network than it does for them to causing organisations to focus on specific skills and
compete against it. competencies.
Supply chain managers aim to maintain the Within the new emerging supply chain
equilibrium between cooperation and the ever- structure, the pressures which forced the OEMs to
present risk of opportunistic behaviour, while co-ordinate and maintain in-house productivity
managing the flow of inter-dependent demand and have reduced. A greater proportion and variety of
supply information to ensure continuity of supply. work is now carried out by specialist third-party
Creating transparent processes and procedures organisations including the complete metal supply
can increase supply chain visibility. This increases chain. This has altered the supply chain structure
the levels of confidence that the supply chain and decentralised the flow of information. OEMs
actors have in the integrity of their supply chain have transferred risk down the supply chain, but in
system, this is shown within the empirical data by doing so they have lost direct control of the
the development of sole service agreements. information flows at the basic supply and demand
Intra-organisational issues were not the direct level.
focus of this research but they are part of the Although the OEMs remain strategically
supply chain. In addition to the overall increase in powerful, they have lost operational control of
supply chain visibility, the increasingly inter- outsourced work packages, reducing their overall
organisational nature of supply chain management power and therefore influence over the supply
means that internal procedures become externally chain. Cox (1999) believes the way organisations
linked and therefore visible to the supply chain. control power within the supply chain directly
For example, Apollos internal warehousing affects their ability to retain or control
procedures are now directly linked to customer- appropriated value. Evidence from this empirical
supplier systems and form part of the inter- research, combined with the recurring themes in
organisational supply chain network. the literature, indicates the increasing importance
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The development of supply chain management Supply Chain Management: An International Journal
R.R. Bales, R.S. Maull and Z. Radnor Volume 9 Number 3 2004 250-255

of inter-organisational supply chain management. Glaser, B.G. and Strauss, A.L. (1967), The Discovery of Grounded
This balances the needs of individual supply chain Theory, Aldine, Chicago, IL.
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Harland, C.M., Lamming, R.C. and Cousins, P.D. (1999),
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