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BH109

Ten guiding principles for

high-impact SCM

Stanley E. Fawcett “Competitive dominance will be achieved by the

Donald L. Staheli Professor of Global Supply Chain
Management, Brigham Young University, Provo, Utah
Gregory M. Magnan
Associate Professor of Operations and Supply Chain
Management, Seattle University, Seattle, Washington
entire supply chain, with battles fought supply chain
versus supply chain.” —Roger Blackman
“As the economy changes, as competition becomes
more global, it’s no longer company vs. company but
supply chain vs. supply chain.” — Harold Sirkin

T he quest to meet customer needs in the face of

In the face of fierce global
competition and soaring
customer expectations, many
companies have turned to supply
chain management to leverage the
resources and know-how of suppliers
and customers. To obtain an accurate view
of what this requires, 52 in-depth interviews
were carried out with supply chain leaders to
answer the question, “What are the principles
that drive successful supply chain design and
collaboration?” The findings are summarized as
the ten guiding principles of high-impact SCM.
Mapping these guiding principles to a maturity
framework reveals that there is much work
awaiting managers who embark on the arduous
journey toward supply chain collaboration.
fierce global competition is driving dramatic
changes in the way businesses operate. For more
than a decade, companies have reengineered, reorganized,
and restructured in an effort to boost efficiency and meet
customer expectations. The goal is to develop value-added
processes that deliver innovative, high-quality, low-cost
products on time with shorter development cycles and
greater responsiveness than ever before.
Many managers realize that their companies lack the
wherewithal to do this. They know they need help, so
they are setting out to leverage the resources and know-
how of suppliers and customers. Efforts to align objec-
tives and share resources across companies to deliver
greater value are known as supply chain management
(SCM) initiatives.
In a supply chain world, “teams” of suppliers, finished
goods producers, service providers, and retailers are
formed to create and deliver the best products and serv-
ices possible. Collaboration enables a company to do
exceptionally well a few things for which it has unique
advantages. Other activities are shifted to channel mem-
bers that possess superior capabilities. Charles Fine
(1998), author of Clockspeed, calls this supply-chain-
design process “the ultimate core capability.”
Managers may quote the supply chain mantra of manag-
ing value creation from “suppliers’ supplier to customers’
customer,” say Fawcett and Magnan (2001), but it seems
no one is engaged in this level of integration. Few firms
have mapped their chains so that they know who their
suppliers’ suppliers or customers’ customers really are. If
companies are going to tap SCM to establish a uniquely

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 S. Fawcett & G. Magnan / Ten guiding principles for high-impact SCM
competitive business model, they need to understand
more clearly what it is and what it involves.
In practice, definitions of SCM vary greatly not only from
company to company but also from manager to manager
M
in the same company. However, there are several underly-
ing themes. Outstanding supply chain companies stay
customer-centric, focus on process management, invest in
IT as a capability enabler, and are obsessed with perform-
ance measurement. These common characteristics lend
themselves to the following definition:
Supply chain management is the collaborative design and man-
agement of seamless value-added processes to meet the real
needs of the end customer. The development and integration of
people and technological resources as well as the coordinated
management of materials, information, and financial flows are
critical to successful supply chain integration.
SCM’s goal is to establish unique value-added processes
that satisfy customers better and more efficiently than the
competition. Managing outstanding processes across func-
tional and organizational boundaries requires dramatic
and often painful changes in both thinking and behavior.
Thus, SCM initiatives often create a sense of organiza-
tional vulnerability. Inertia created by resistance to change
increases the difficulties. Many emotionally charged ques-
tions arise as a firm embarks on the supply chain journey:
“Can we really trust other supply chain members not to
take advantage of us?” “How are we going to share risks
and rewards among the supply chain members?” “How
do we manage relationships with partners who are also
competitors?” Even when these questions are answered,
the challenge of meshing unique organizational cultures,
incompatible information systems, diverse worker atti-
tudes, and different approaches to performance measure-
ment can seem insurmountable. Managers need a set of
guiding principles to help them design and manage a
world-class supply chain.
To formulate such guidelines and obtain an accurate view
of SCM and its prerequisites, we sought the experience and
insight of industry managers engaged in the trenches of
SCM implementation. Specifically, 52 semi-structured, in-
depth interviews were carried out at leading companies to
answer the question, “What are the principles that drive
successful supply chain design and management?” The
interviews took place along the supply chain as follows: 14
retailers, 13 finished goods assemblers, 12 first-tier suppli-
ers, 3 lower-tier suppliers, and 9 service providers. As a
rule, companies were selected because of their reputations
for leading-edge SCM practices. The case study method
emphasizes in-depth qualitative analysis and is useful for
answering questions about what, why, and how. Thus,
these case studies provided an opportunity to develop a
broad understanding of how managers have tackled and
won the SCM battle.
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Principles to guide supply
chain design
any sports franchises routinely embark on the
quest to win a championship, but only a few
succeed. Success requires more than assembling
a group of outstanding athletes; it depends on finding the
right players, developing the right relationships, and get-
ting everyone to accept the right roles and responsibilities.
The supply chain design challenge is similar to trying to
form a championship team, only more complex. Building
a world-class supply chain team requires a transformation
in cultures and structures. The following five principles
provide the foundation on which to build such a team.
Catch the vision; map it out
Managers find it far easier to talk about SCM than to dedi-
cate the time and resources needed to create a clear picture
of their most important supply chains. Most of those we
interviewed had reasonable visibility one tier up and down
the chain. However, only two of them had mapped their
chains. Knowing how their critical chains work and who
the key participants are, they actively investigate role-shift-
ing opportunities with channel partners and employ sec-
ond-tier purchasing agreements where leverage advantages
exist. Their advanced understanding is beginning to pro-
vide competitive momentum. Moreover, their position in
the chain is more secure as they share vital insight about
the dynamics with other members. Their mapping efforts
help the entire chain understand
● the nature of channel costs and profitability
● critical success factors throughout the chain
● existing and emerging technologies
● important customer linkages
● as-is value-added roles
● should-be value added roles
As companies more actively map processes and relation-
ships, they are positioned to rationalize a chaotic and
complicated environment. Only through mapping can
clear roles and responsibilities be defined for all chain
members. Most managers recognize the need for more
comprehensive supply chain mapping coupled with the
strategic use of the insight gained. Such efforts are needed
for supply chains to compete as cohesive teams rather
than as groups or clusters of companies.
SCM begins with the customer
In a supply chain world, the end customers are the only
ones who really put money into the chain. Lasting success
requires that they become the focal point for the entire
chain. Mapping provides the visibility for every member to
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 S. Fawcett & G. Magnan / Ten guiding principles for high-impact SCM

know who the end customers are and what to do to

satisfy their needs and wants. The burden of provid- Figure 1
ing the best possible customer demand information The competency-customer success factor alignment matrix
typically falls to downstream firms—those closest to

Low
the end customers. Suppliers are expected to pass rel- Efforts to pursue attractive
Effective alignment leads

Customer success factors

evant information upstream. Because this “hand-off activities for which the firm
has no advantage result in
approach” is subject to fumbles, chain leaders vow
diminished focus and
that as their capabilities improve they will aggres- dissipated capabilities.
sively share information and skills further upstream,
making it easier for every member to perform in a Low customer priority and
way that enhances end customer satisfaction. low company competence
means that most firms avoid
Of course, because much of the value customers these activities. Resources
to profitable customer
competitiveness.
Significant effort and
resources dedicated to
non-valued activities
result in low customer

seek is built in upstream (sourced components rep-
resent 50–80 percent of the typical finished goods
provider’s cost of goods sold), a series of B2B rela-
tionships must be actively managed. A breakdown
anywhere in the chain drives up costs and dimin-
ishes the entire chain’s ability to create customer
value. Leading downstream companies employ scorecards,
benchmarking diagnostics, and quarterly business reviews
to communicate expectations, evaluate performance, and
drive constant improvement upward.
Similarly, upstream leaders are looking forward to gain an
understanding of what their customers’ customers really
want. By understanding downstream market imperatives,
they can identify and influence the critical factors that
determine whether or not their customers succeed. How-
ever, helping customers succeed is a resource-intensive
strategy. Chain leaders therefore identify “customers of
choice” and build the infrastructure needed to help them
improve their own competitiveness. Policies and systems
are then put into place to deliver fair and efficient service
to remaining customers. Keeping the following questions
in mind can help maintain a customer focus throughout
the supply chain:
● What are the real needs of our immediate customers?
High
expended here are wasted. satisfaction.
High Low
Firm’s distinctive capab ilities
viding access to a wide variety of markets; (2) making a
verifiable contribution to the perceived customer benefits
of the end product; and (3) being difficult for competitors
to imitate. More important, supply chain leaders meticu-
lously align their competencies with the needs of key cus-
tomers as well as those of the entire chain (see Figure 1).
Interestingly, these managers know that the term “core
competency” is highly overused in today’s business world.
Knowing where they fit in the supply chain, they invest in
capabilities that are truly valued by other members, even if
they do not meet the threshold of a true core competency.
Because chain leaders “know themselves” and the environ-
ment in which they compete, they realize they lack the
resources to do all things. So they invest in the analytical
skills needed to determine which activities can and should
be outsourced. Outsourcing decisions are strategic, made
only after systematically analyzing competitive and market
imperatives as well as the firm’s own value proposition
and distinctive capabilities (see Figure 2). When customer

● What are the real needs of our customers’ customers?

● What are the real needs of our chain’s end customers? Figure 2
An outsourcing model that leverages
● What information must be shared up and down the supply chain capabilities
chain to meet these customer needs?
● What capabilities must be developed up and down Market analysis
the chain to meet these needs?
● How can we appropriately help other chain members Competitive Value
so that the overall supply chain more efficiently and analysis proposition
effectively meets these needs?
What must be done?
Know thyself; outsource the rest
Assess technology trends
Every participant in a winning supply chain must bring a Assess demand trends
distinctive value-added ability to the team. Great compa- Assess strategic alignment
Who will do it? Assess competency alignment
nies possess one or more such capabilities that deliver
Perform total cost analysis
customer value. Many have cultivated a strength that Consider qualitative issues
meets the three-fold test of a core competency: (1) pro-

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 S. Fawcett & G. Magnan / Ten guiding principles for high-impact SCM
needs, competitor capabilities, and the firm’s distinctive
advantages are understood, two critical questions are eval-
uated: “What must be done to create customer value more
efficiently than competing supply chains?” and “Who in
our chain is best positioned to perform specific value-
added activities?” Answering these questions enables one
of the most important capabilities of supply chain lead-
ers—coordinating the complementary activities of a variety
of channel members to deliver unparalleled value to the
end customers.
Keep it simple
Managing the complexities of building a competitive team
consisting of hundreds, perhaps thousands, of members is
one of the greatest challenges in SCM. Effective rationaliza-
tion decisions can be made only when supply chain dy-
namics, customer requirements, and team member capa-
bilities are well understood. Simplification must begin
within the firm’s own four walls. For example, today’s
manufacturing and distribution networks are inherently
complex. Configuring and coordinating operations to
leverage global resources and access global markets re-
quires that cost and performance trade-offs across the net-
work be evaluated carefully. Few companies actively do
this. And consider the number of stock-keeping units most
companies manage. Product lines tend to expand in re-
sponse to market pressures. SKU proliferation creates innu-
merable headaches, especially for manufacturing and logis-
tics. Supply chain leaders are instituting policies that either
shrink the number of SKUs or require that each new prod-
uct introduction be accompanied by a product deletion.
Beyond a firm’s boundaries, three sources of complexity
must be addressed. First, most companies are optimizing
their supply base. Some have reduced their active suppliers
by 90 percent or more and employ commodity experts to
manage key components. Supply chain leaders are going
one step further to consolidate purchases upstream via sec-
ond-tier purchasing agreements. Second, many companies
are classifying customers on the basis of profitability and
designing tailored services for “customers of choice.” Lead-
ers recognize that looking at current profitability does not
provide a clear picture of future opportunity; even so, better
analysis is helping them modify relationships to improve
collaboration and profits. Third, the transportation network
represents “a pot of gold” for many companies; however,
managers note that they are too busy dealing with other
complications to rationalize a tangled logistics web. Better
logistics software combined with the use of third-party serv-
ice providers is helping make that web more manageable.
The fact that multiple relationships often exist among
supply chain partners increases the intricacy of the design
dilemma. Say that one packaged goods producer uses a
key customer’s private trucking fleet to move its product.
The question arises: “What do we do when they deliver
late?” Such complexity may represent the greatest threat to
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the long-term sustainability of SCM. Intimidated by the
challenge of “keeping it simple,” many firms are tempted
to put off tough decisions like capping the number of
SKUs. Others simply do not have the systems to enable
them to collect and analyze the mountain of “nitty-gritty”
information necessary to rationalize the supply chain.
Beware of role shifting
Supply chain design is dynamic. New technologies and
emerging players flush with new ideas make disintermedi-
ation a constant threat and reintermediation an ever-pres-
ent opportunity. Supply chain champions leverage their
understanding by keeping an eye open to opportunities to
assume new roles and use new technologies to create more
value for the end customer. Kimberly-Clark’s transforma-
tion from a company dependent on its paper mills to the
world’s leading paper-based consumer-products corpora-
tion exemplifies a role-shifting mindset. As a mediocre
paper mill operator, reports Collins (2003), Kimberly-
Clark was vulnerable to being “role shifted” out of its cus-
tomers’ supply chains. By moving its value-added capabili-
ties downstream, it leveraged its Kleenex brand name and
insinuated itself into the minds and budgets of consumers.
While Kimberly-Clark shifted its product line and infra-
structure to enhance its supply chain power, Intel created a
customer linkage by identifying a previously unperceived
desire for processing speed. Through its “Intel Inside” mar-
keting campaign, it captured significant mindshare, thus
shifting power away from “box makers” like IBM and HP.
Similarly, Michael Dell saw a customer need and created a
disintermediated business model that leveraged the Inter-
net to deliver low-cost PCs directly to customers. Finally,
Wal-Mart has created a physical presence and a low-cost
supply chain model that allow it to constantly test new
markets in its quest to serve customers. By doing so, it has
appropriated much of the market power formerly held by
consumer product companies such as Procter & Gamble.
The moral of the story, says Fine, is to beware of “Intel
Inside” and “Wal-Mart Outside.” For supply chain leaders,
business models are never fixed.
Ultimately, leaders know that someone, somewhere, is
working to make them obsolete. So they are meticulous
scanners, always monitoring market and competitive con-
ditions. They institutionalize periodic environment, tech-
nology, and industry scans and are fanatic benchmarkers,
comparing themselves against leading competitors, best-in-
class performers, and the needs of demanding customers.
Their insistent learning activities help managers (1) grasp
the ramifications of constantly changing consumer and
supply environments, (2) recognize channel alternatives,
(3) assess wide-ranging trade-offs, and (4) balance short-
and long-term company requirements. They position
themselves to succeed even as the chain evolves, avoiding
the threat of disintermediation while insinuating them-
selves into the chain’s critical value-added processes.
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Principles that guide ing their collaborative efforts on building tighter relation-
ships with supply chain partners.
supply chain integration The most widely encountered approach to building a bor-
derless supply chain culture is cross-functional, interorga-

A
lthough supply chain design has been identified as
the “ultimate core capability,” integration may be nizational teaming. Chain leaders are aggressive team
the more difficult competency to develop. Design builders, employing teams for a variety of activities, such
identifies who should be on the team and defines specific as new product design, commodity management, supplier
roles; integration fosters the collaboration needed to turn a development, technology assessment and implementa-
set of independent firms into a cohesive team. Unfortu- tion, problem solving, reengineering, customer relation-
nately, neither companies nor managers are accustomed to ship management, and collaborative improvement pro-
working synergistically across organizational boundaries. grams. Top management must commit to collaboration
Just as many athletic teams with seemingly superior talent by investing in the creation of a team-oriented culture. At
never become champions, many supply chains never learn times, this might require sending a team of development
to work together. Perhaps the distinguishing characteristic engineers to work on site at a supplier’s facility for several
of championship-caliber athletic teams is that they have months at a time to redesign specific processes (and teach
developed team chemistry. Great supply chains likewise process improvement skills to supplier personnel). Or it
cultivate chemistry—a common vision, an understanding might mean giving suppliers’ engineers access to sensitive
of individual roles, an ability to work together, and a will- information and technology to enhance their participa-
ingness to adjust and adapt in order to create superior tion on new product development teams. One company
value. The following five principles are the threads that interviewed uses a guest engineer program, claiming that
bind chain members into a cohesive team. nine of ten engineers at its corporate product develop-
ment center are supplier personnel. Leading companies
Build bridges, knock down walls have taken the team mindset one step further to establish
A frequently heard complaint throughout our interviews permanent internal steering committees, customer advi-
was that “turf” impedes cross-functional communication sory boards, and supply management councils.
and cooperation. Managers lamented that a lack of cooper- Finally, to create visibility and momentum for supply
ation reduces the effectiveness of both strategic initiatives chain integration, a few companies are experimenting
and day-to-day decision-making. Blaming the lack of col- with more formal commitments to collaborative struc-
laboration on the intractable nature of conflicting objec- tures. The two most common endeavors are the formation
tives and the presence of counterproductive measures (see of a supply chain group or division and the establishment
Figure 3), they argue that given their organizational cul- of a senior-level position such as Executive Vice President
tures and structures it is almost impossible to get everyone of SCM. These efforts are helping chain leaders begin to
to “read from the same page” consistently. They also effectively bridge the gaps that persist in modern organi-
deride the need to tie every initiative directly and immedi- zational and supply chain structures.
ately to the profit-
and-loss statement
as a practice that
promotes the pur- Figure 3
suit of the local The challenge of conflicting objectives and counterproductive measures
optimum. Frustra- PURCHASING PRODUCTION MARKETING
LOGISTICS
tion is palpable,
with managers at
several companies
Goal Goal Goal Goal
pointing out that
• Minimize price • Minimize costs • Minimize costs • Sales/market share
they have given up
trying to knock Decisions Decisions Decisions Decisions
down the walls that • Lowest purchase price • Long runs • Quick replenishment • High service levels
inhibit collabora- • Stable requirements • Stable schedules • Minimal inventory • High inventory
• Multiple sourcing • Standardized products • Centralized inventory • Dispersed inventory
tion in their own • Frequent bidding • SKU minimization • Long lead times • Short delivery times
firms. These man- • Quick response
agers have found it Measures Measures Measures
easier to build • Cost orientation • Cost orientation • Cost orientation Measures
• Yr-to-yr purchase price • Per-unit cost • Inventory cost • Market orientation
value-added bridges • Sales/share growth
• Transportation cost
to other companies
and are now focus-

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 S. Fawcett & G. Magnan / Ten guiding principles for high-impact SCM
All relationships are not created equal
The ability to define relationship intensity is a vital mana-
gerial skill. Astute supply chain managers realize that not
all relationships are created equal—nor should they be.
They know that building strong, synergistic relationships is
time- and resource-intensive. Supplier development, joint
engineering, IT integration, and other collaborative ven-
tures are feasible only with the most valued partners. Even
so, experienced supply chain managers realize that every
relationship should be managed for equity and efficiency;
it is next to impossible to predict with certainty where the
next technological breakthrough will come from or who
will emerge as tomorrow’s market share leader. By estab-
lishing policies that promote fairness, managers avoid
burning the bridge to future success. The twin realities of
resource scarcity and an unpredictable future require that
all relationships be evaluated and periodically monitored
to define their appropriate nature and intensity.
Chain leaders cultivate the skills and mindset needed to
both define relationship intensity and build the needed
infrastructure. “ABC” classification is commonly used. “A”
relationships become candidates for partner status; how-
ever, collaborative alliances are established only with mem-
bers that have unique technologies or core competencies
that give the entire chain a competitive edge. Extraordinary
efforts to create value are supported by frequent communi-
cation across multiple levels, inter-firm teams, integrated
information systems, aligned performance measures, and
collaborative training. Such intense partnerships can be sus-
tained only with a small number of companies, typically
fewer than 5 percent of the customer or supplier commu-
nity. Non-alliance but still important relationships (“B”-
level) are formalized through long-term contracts. They get
as much personal attention, information sharing, and sys-
tem integration as can be cost-justified. Finally, the vast
majority of relationships are supported by policies and sys-
tems designed to enhance efficiency and promote fairness.
Again, today’s “C” players may emerge as indispensable
down the road. Companies like Hewlett-Packard, Micro-
soft, and Wal-Mart started out as seemingly insignificant
“C”-level players operating on “shoestring” budgets.
What gets measured, gets done
Successful supply chain firms like eBay, Modus Media, and
Unilever are fanatical about measurement because it either
promotes or undermines collaboration—it is seldom neu-
tral. Even so, few have harnessed the power of measure-
ment, which Thomas Monson, member of the Board of
Trustees at BYU, describes as follows: “When performance
is measured, performance improves. When performance is
measured and reported, the rate of improvement acceler-
ates.” Advanced supply chain firms capture this accelerated
improvement by designing measurement systems to align
efforts up and down the chain. For example, they
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1. connect company efforts to what customers really
value, helping managers understand how customers
evaluate company performance
2. adopt measures that clarify critical value-added
processes across functional and company boundaries
3. communicate expectations to suppliers, letting them
know where they stand and directing their improve-
ment efforts
4. use measures to support functional excellence while
promoting cross-functional collaboration
5. balance financial and cost measures with important,
hard-to-quantify strategic measures that support
longer-term initiatives
The time-honored saying “If you can’t measure it, you
can’t manage it” captures an inescapable supply chain real-
ity: Managers cannot effectively control collaborative
processes they do not understand. And they cannot fully
understand them without careful measurement. Feedback
on (1) customer requirements, (2) company and supplier
capabilities, and (3) the probable success of collaborative
initiatives is vital and reveals the inner workings of the
processes that characterize supply chain collaboration.
Beyond creating insight, it shapes behavior. And it is often
more critical than communication or training when it
comes to promoting cooperative behavior.
Several of the managers we interviewed pointed out that
because it is folly to hope for “A” if you are measuring “B,”
it is critical to adopt measures that truly promote collabora-
tion. Tailored supplier scorecards exemplify this by relaying
expectations, holding suppliers accountable for perform-
ance, and promoting continuous improvement. Chain lead-
ers use scorecards to establish performance benchmarks
and disseminate best practices throughout the supply base.
When managers have accurate, relevant, and timely infor-
mation for every value-added process and each valued rela-
tionship, and share this information up and down the
chain, distinctive collaborative capabilities can be built.
People are the bridge or the barrier
Technology issues may be at the top of a firm’s strategic
agendas, but the softer people dilemmas often prove more
intractable. Managers who are passionate about SCM
sense that developing unique processes, shifting value-
added roles, and building strong relationships require
manager and worker buy-in and commitment. One execu-
tive stressed the importance of people, stating, “People are
either the bridge or the barrier to SCM.” His point is sim-
ple: Proactive people management may not always lead to
outstanding processes, but people are almost always in a
position to undercut key supply chain initiatives.
For people to become the bridge to collaboration, they
must be hired and trained not simply for the work their
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 S. Fawcett & G. Magnan / Ten guiding principles for high-impact SCM
hands can do but also for their ability to think and learn
and make a difference. Managers at leading supply chain
companies believe their people possess the experience and
insight needed to solve many of the most pressing compet-
itive dilemmas. However, they note that getting people to
share their best ideas remains a serious challenge, exacer-
bated by a lack of trust and loyalty. Cautioning that serious
commitment and sustained investment precede the cre-
ation of a committed and productive workforce, they point
out that empowerment is critical and that lip service with-
out substance leads to cynicism. To convince workers they
are serious about empowerment, managers conscientiously
invest in building a great working environment, with such
characteristics as compensation that communicates peo-
ple’s true value, a flexible work place, family-friendly poli-
cies, and investments in employee competencies.
Proactive people management
may not always lead to out-
standing processes, but people
are almost always in a position
to undercut key supply chain
initiatives.
Chain leaders pay particular attention to building em-
ployee competencies. Training takes place everywhere.
Senior managers require education on the benefits and
potential competitive impact of SCM. Middle managers
are targeted for training in system thinking, with the goal
of diminishing the reticence (and hostility) often directed
toward integrative efforts. The oft-stated objective for
entry-level managers is to bring them into a rotation pro-
gram designed to help them assimilate the skills and
mindset of the cross-experienced manager. All this train-
ing helps tear down functional silos to develop a process
mindset while maintaining strong functional expertise.
Additional training in negotiation, team building, process
mapping, and total costing helps managers cope with the
demands of a supply chain world. Leading companies
also invest in the skills of channel partners, inviting them
into the classroom while providing on-site training in
quality, lean operations, process improvement, and prod-
uct design. They emphasize not just the pursuit of produc-
tivity but also a quest to unleash people’s passion. Such a
mindset seeks more than mere knowledge; it fosters cre-
ativity and is knit into the organizational fabric over time.
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Technology as an enabler
Advances in IT, both hardware and software, have enabled
companies to change the way they organize and operate.
Almost every firm we interviewed is investing heavily in
one or more of the following applications: enterprise
resource planning, customer relationship management,
warehouse management, transportation management,
advanced planning and scheduling systems, satellite track-
ing, computer-assisted ordering, database management,
intranets and extranets, and Web-based catalogues. These
applications affect every aspect of the order fulfillment
process, enhancing the opportunity for collaboration.
Proper use of technology eliminates uncertainty, reduces
inventory, and boosts responsiveness to customer requests.
One study participant has created a “web-pull” system,
which places the data found in an MRP system on the Web
so that suppliers can see real-time inventory levels as well
as the timing of expected demand. Another company
shares three years of sales history with its suppliers along
with an 18-month rolling forecast of demand. Such infor-
mation helps suppliers better use their production capaci-
ties while increasing service levels to the buyer. This com-
pany also provides supplier training modules online.
Unfortunately, such promise has led many firms to look
to IT as the answer to their integration dilemmas. They
fail to prepare the landscape before installing the new
technologies and run into serious difficulties implement-
ing them. More than one implementation effort was
described as a poorly performing technology system far
removed from user requirements. Moreover, time and
money budgets were often exceeded by 50 to 100 percent
for the more complex ERP and VCRP systems. One man-
ager warned that companies must not succumb to the
marketing hype—expensive, hard-to-implement IT is not a
“silver bullet.” Others criticized system providers for over-
promising and underdelivering. Follow-the-leader tech-
nology strategies seldom deliver competitive advantage;
the business case must be made and clearly communi-
cated before implementation begins.
Managers at the best of the best companies stressed that
effective information sharing requires more than technol-
ogy applications. Regardless of the level of connectivity
established, sharing happens only when people are com-
fortable with relationships and confident that any shared
information will be used appropriately. Emphasis on the
human or personal contact aspects of information ex-
change helps build trust among decision makers and cre-
ate the willingness that precedes this sharing. For supply
chain leaders, technology and willingness come together
to enable information sharing that bridges the gaps in
modern supply chains.
732019.

Table 1
Maturity of supply chain practice
Stage 1
Functional focus
Supply chain design
Catch the vision; map it out
SCM begins with the customer
Know thyself; outsource the rest
Keep it simple
Be aware of role shifting
Supply chain integration
Build bridges, knock down walls
All relationships are not created equal
What gets measured, gets done
People are the bridge or the barrier
Technology as an enabler
T he SCM philosophy of collaborative competition
has gained many adherents. However, supply
chain practice continues to be ad hoc at all but
the most dedicated companies. Even among leading firms,
supply chain practice is often fragmented. Mapping the
ten guiding principles of high-impact SCM (summarized
in Table 1) to a maturity framework reveals much work
and great opportunity awaiting managers who embark on
the arduous journey toward supply chain collaboration.
Given the challenges inherent in SCM, it is imperative that
firms carefully analyze their specific competitive positions
to verify that the integration journey is worth taking. With-
out commitment and an understanding of the associated
challenges and requirements, they may be better off focus-
ing their efforts and resources elsewhere. They must also
seriously consider their potential to learn and change.
Rigid, bureaucratic organizations cannot successfully pur-
sue the ten guiding principles and are unlikely to achieve
the benefits. By contrast, fluid firms that empower the
workforce to experiment and learn are well positioned for
the journey. They tend to have the staying power needed to
implement all ten principles. After all, experience clearly
shows that the rhetoric surrounding SCM should be tem-
pered by the recognition that benefits do not accrue auto-
74is authorized for use only in Gonzalo Javier Cachay Silva's MBAG CXVII-IV-GGCAS at Pontificia Universidad
This document
S. Fawcett & G. Magnan / Ten guiding principles for high-impact SCM
Stage 2 Stage 3 Stage 4
Internal integration External integration Cross-firm collaboration
D L
D L
D L
D L
D L
D L
D L
D L
D L
D L
D = Dominant practice L = Leading practice
matically or immediately. According to Deloitte Touche
Tohmatsu (2003), the cohesive supply chain with multiple
companies collaborating intensively to address competitive
issues is the exception rather than the rule. Ultimately, our
ten principles can take much of the guesswork out of SCM,
helping managers more systematically and successfully
design and manage world-class supply chain networks. ❍
References and selected bibliography
Collins, Jim. 2003. The ten greatest CEOs of all time. Fortune (21
July): 54-69.
Deloitte Touche Tohmatsu. 2003. The challenge of complexity in
global manufacturing. @ www.deloitte.com/dtt/cda/doc/
content/Challenge%20of%20Complexity%20FINAL.pdf.
Fawcett, Stanley E., and Gregory N. Magnan. 2001. Achieving
world-class supply chain alignment: Benefits, barriers, and bridges.
Phoenix, AZ: National Association of Purchasing Management.
Fine, Charles H. 1998. Clockspeed. Reading, MA: Perseus Books.
Wietfeldt, Peter. 2001. Achieving the next level of world-class sup-
ply chain performance. Presentation, Annual Conference of the
Council of Logistics Management, Toronto (September).
The authors wish to thank the Center for Advanced Purchasing
Studies for funding this research.
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