Demand Supply Chain

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Demand-supply chainmanagement: industrial survival

recipe for new decadePer Hilletofth

School of Technology and Society, University of Skovde, Skovde, Sweden

Abstract

Purpose The purpose of this paper is to enhance the current understanding and knowledge of thedemand-supply chain management (DSCM) concept by determining its elements, benefits, andrequirements, and by illustrating its occurrence in practice.

Design/methodology/approach This research has utilized a literature and case study researchstrategy. The case study has involved an international manufacturing company from the appliance

industry. Empirical data have been collected mainly from in-depth interviews with key personsrepresenting senior and middle management in the case organization.

Findings This research has established that the main elements of DSCM include market orientation,coordination of the demand and supply processes, viewing the demand and supply processes as beingequally important, as well as value creation, differentiation, innovativeness, responsiveness, and costefficiency in the demand and supply processes. It has also been revealed that the main benefits ofDSCM include enhanced competitiveness, enhanced demand chain performance, and enhanced supplychain performance, while the main requirements of DSCM include organizational competences,company-established principles, demand-supply chain collaboration, and information technology support.

Research limitations/implications This research is explorative in nature, and more empiricaldata, from similar and other research settings, are needed to further validate the findings. Anotherlimitation of the research is that it is limited to one Swedish company; however, the involved casecompany has a large international presence and is among the top three in its industry, which provides

some ground for the generalization. A final limitation of the research is that the involved company onlyrepresents one industry.

Practical implications Thispaperprovides insights useful to researchers and practitioners on howto develop a demand-supply oriented business. It highlights that firms should organize themselvesaround understanding how customer value is created and delivered and how these processes andmanagement directions can be coordinated. The demand and supply processes have to be considered asequallyimportantand thefirm needs to be managed by the demand side and supply side of the company

jointly in a coordinated manner.

Originality/value The need to coordinatethe demand and supply processes has been emphasizedinboth the demand and supply chain literature but still remained relatively unexplored; thus, this papercontributes by investigating this matter further.

Keywords Demand management, Supply chain management, Sweden, Manufacturing industries

Paper type Case study

1. IntroductionThe notion that companies have both a demand and supply chain that requires activemanagement to maximize effectiveness and efficiency is well recognized (Canever et al.,2008; Juttner etal., 2007; Walters, 2008). There is no major difference between the demandand supply chain when it comes to the chain of organizations involved, from customers tosuppliers, but regarding the processes considered (Hilletofth et al., 2009). The demandchain comprises all the demand processes necessary to understand, create, and stimulate

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Received 3 August 2010Revised 15 September 2010Accepted 1 October 2010

Industrial Management & Data

Systems

Vol. 111 No. 2, 2011

pp. 184-211

q Emerald Group Publishing Limited

0263-5577

DOI 10.1108/02635571111115137


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customer demand (Charlebois, 2008; Juttner et al., 2007; Walters and Rainbird, 2004),and is managed within demand chain management (DCM). The supply chain, on the otherhand, comprises all the supply processes necessary to fulfill customer demand(Gibson et al., 2005; Lummus and Vokurka, 1999; Mentzer et al., 2001), and is managed

within supply chain management (SCM). In this sense, the demand and supplychain oftencan be seen as different perspectives on the same chain of organizations (Jacobs, 2006).

Despite the fact that DCM and SCM are of fundamental importance to everyorganization, one of themis usually prioritized in many companies (Hilletofth etal., 2009),and they also tend to be dealt with separately. Thus, a demand- and supply-led businessmodel can be distinguished in most industries ( Juttner etal., 2007). Companies embracingthe demand-led business model (demand chain masters) focus on coordinating andmanaging the demand processes (DCM) to obtain a competitive advantage by providingsuperior customer value while companies embracing the supply led business model(supply chain masters) focus on coordinating and managing the supply processes (SCM)to obtain a competitive advantage by providing comparable customer value at lowercost. Irrespective of business model, the dominating side of the company tends to setthe business agenda (what to sell, where to sell, and how to sell), while the other sidesupports it (Walters, 2008).

The difference between these business models is the choice of emphasis and both ofthem can be appropriate depending on market characteristics (Christopher et al., 2006),as well as on how the company would like to compete (Hilletofth and Hilmola, 2008).However, companies utilizing these restricted business models can experience majordifficulties by focusing too much on either the demand side or supply side of thecompany (Walters, 2006a). A demand chain strength that is not linked to a supply chainstrength may result in a high-cost base, as well as slow and inefficient product delivery;while a supply chain strength that is not linked to a demand chain strength could resultin sub-optimal new product development (NPD), lack of product differentiation, and

ineffective product delivery ( Juttner et al., 2007). Hence, it can be argued that DCM andSCM always should be coordinated (Sheth et al., 2000), even in markets where costefficiency is the basis for competitive advantage. The choice of management orientationdoes not take away the fact that the supply and demand logic must be balanced one wayor another ( Jacobs, 2006), and this has grown to be even more important in todays newmarket environment (Hilletofth et al., 2009).

Some suggestions on how to create this customer-oriented and integrated(or demand-supply oriented) business model have been proposed. In essence, it issuggested that either the responsibilities of DCM or SCM should be extended to facilitatecoordination between the demand and supply processes (Cooper et al., 1997; Lambert andCooper, 2000; Mentzer et al., 2001; Srivastava et al., 1999; Williams et al., 2002). Anothersuggestion is that DCM and SCM instead should focus on their area of expertise and

become coordinated with each other at a overlying or macro-level (Canever et al., 2008;Charlebois, 2008; Hilletofth and Ericsson, 2007; Juttner et al., 2006; Rainbird, 2004;Walters, 2008), and in this research work, this approach is entailed demand-supply chainmanagement (DSCM). The goal of DSCM is to gain a competitive advantage by providingsuperior customer value at lower cost, and this is achieved by organizing the companyaround understanding how customer value is created cost efficiently (managing thedemand chain), how customer value is delivered cost efficiently (managing the supplychain), and how these processes and management directions can be coordinated.

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The underlying principle of DSCM, coordination of the demand and supply processes,is well established (Canever et al., 2008; Charlebois, 2008; Hilletofth and Ericsson, 2007;

Juttner et al., 2007; Walters, 2008). However, it can argued that there is a lack of researchexamining the concept, for example, how the demand and supply processes influence

each other, how they can be coordinated, what benefits that can be obtained bycoordinating them, and what the requirements are to succeed with the coordination(Hilletofth et al., 2009; Juttner et al., 2006; Mentzer et al., 2001). Moreover, there is a lack ofconceptual foundation since most of the research works only are based on best practiceexamples, although notable exception exists (Hilletofth et al., 2009; Juttner et al., 2007;Walters and Rainbird, 2004; Walters, 2008). Another shortage is that most DSCMresearch steam from the supply chain field (Childerhouse et al., 2002; Lee and Whang,2001; Rainbird, 2004; Vollmann et al., 1995), although selected citations from the demandchain field can be traced (Charlebois, 2008; Juttner et al., 2007). This implies that theconcept and application of DSCM is still in its infancy and needs to be researched further.

The purpose of this research is to enhance current understanding and knowledge ofthe DSCM concept by determining its elements, benefits, and requirements, and byillustrating its occurrence in practice. The specific research questions are:

RQ1. What key elements characterize the DSCM concept?

RQ2. What benefits can be gain by adopting DSCM?

RQ3. What are the requirements to succeed with DSCM?

The concept is examined through literature review and a case study including a Swedishmanufacturing company that operates on an international basis in the applianceindustry (to remain anonymity here called Alpha). Empirical data have been collectedfrom several sources during the four-year period of 2006-2009. The remainder of thispaper is structured as follows: to begin with a theoretical framework of DSCM is

presented in Section 2. After that, the research methodology is discussed in more depthin Section 3. Thereafter, the case study findings are presented in Section 4 followed by ananalysis of the research findings in Section 5. Finally, the research findings are discussedand concluded in Section 6.

2. Demand-supply chain managementThe need to coordinate the demand and supply processeshas been emphasized in both thedemand chain as well as the supply chain literature. From a demand chain perspective,Flint (2004) argues that effective marketing strategy implementation requires SCM, sinceit includes the distribution part of the strategy. Likewise, Sheth et al. (2000) emphasize,in their customer-centered marketing approach, the need for DCM to be in charge of SCM.They argue that in environments with increasing diversity, in customer needs and

requirements, companies must rapidly adjust their supply to meet demand. Moreover,Kumar et al. (2000) suggest that market-driven companies can gain a more sustainablecompetitive advantage by not only providing superior customer value propositions, butalso by having a unique business system to support it. By business system, they meanthe configuration of activities required to create, produce, and deliver the customer valueproposition, which clearly refers to SCM. Furthermore, Srivastava et al. (1999) defineSCM, NPD, and customer relationship management (CRM) as the three core businessprocesses which contribute to creating and delivering customer value. They argue that

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the role of DCM is to connect these processes; however, they also admit that while it willhave a leading function in managing customer relationships, its role in SCM is restrictedto communication and direction. The authors emphasize that the processes have to beintegrated; however, the integration itself is not discussed. Similarly, Payne and

Christopher (1994) argue that CRM and SCM processes have to be integrated to providehigh levels of product availability and variety in a cost-efficient manner. While theauthors provide guidelines for the processes separately, the integration is depicted at ahighly abstract level. Interestingly, the stream of research in the demand chain fieldwhich recognized the move towards network competition at the beginning of the 1990sredefined and extended the role of marketing, but did not acknowledge the need for acloser integration with SCM (Achrol and Kotler, 1999).

Within the supply chain literature, many authors who aim to describe SCM refer to theimportance of coordinating demand and supply processes by incorporating variousdemand processes in the SCM definition. For example, Cooper et al. (1997) and Lambertand Cooper (2000) define SCM as the integration and management of key businessprocesses across the supply chain. They outline three demand processes: CRM, customerservice management, and demand management. Mentzer et al. (2001) also build theirmodel of SCM on the inter-functional coordination of processes spanning demand andsupply functions. They suggest the investigation of how the demand and supplyprocesses can be effectively coordinated within a company and across the supply chain asan area for future research. Similarly, Bechtel and Jayaram (1997) suggest a researchagenda for SCM and emphasize the need for the supply chain to begin with the customer.They propose that a better term would be seamless demand pipeline, where the end-userand not the supply function drive the supply chain. Lee (2001) emphasizes the problems ofSCM acting separately from DCM. If the demand and supply processes are separated,supply will view demand as exogenous and will fail to recognize that demand is influencedby the companys customer facing functions. Also, if consistent and timely demand

information does not flow, the company will not be able to respond to the differentiatedneeds of individual customers and market segments. Fisher (1997) links the integration ofDCM into SCM to the concept of the market mediation role of the supply chain. Within thisrole, the supply chain needs to ensure that the variety of products reaching the marketmatches what customers want to buy. Finally, Min and Mentzer (2000) stress theimportant role that DCM (e.g. market orientation and relationship marketing) plays in theimplementation of SCM.

Although DSCM is a relatively new concept, it has already been defined in severalways in the literature (Table I). At first, it was introduced as a replacement of SCM andit highlighted issues such as market orientation, flexibility, and responsiveness(Heikkila, 2002; De Treville et al., 2004; Vollmann and Cordon, 1998). However, thesetypes of issues were also addressed within SCM and thus there were no major differences

between them, and DSCM never gained approval in the academic community. Morerecently, it has been introduced as an approach to gain a superior competitive advantageby coordinating the demand and supply processes across intra- and inter-organizationalboundaries (Hilletofth and Ericsson, 2007; Juttner et al., 2007; Walters and Rainbird,2004). At the present time, it can be defined as the strategic coordination of the demandand supply processes within a particular company and across the demand-supply chainin order to provide superior customer value as cost efficiently as possible (Hilletofth etal.,2009; Juttner et al., 2007; Walters, 2008).

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The goal of DSCM is to gain a competitive advantage by providing superior customervalue at a lower cost. The emphasis is both on increasing revenues (effectiveness) byproviding desirable products and tailored supply chain solutions and on reducing costs(efficiency) by managing the demand and supply processes in a cost-efficient manner. Inessence, it concerns coordination of DCM and SCM across intra- and inter-organizational

boundaries (Figure 1). The underlying principle is that these management directionsshould be viewed as equally important and that neither one should rule single handedly(Jacobs, 2006; Juttner et al., 2006; Rainbird, 2004). The ultimate test of DSCM excellence isa profit level that allows the particular company and the demand-supply chain as awhole to prosper in the long run (Hilletofth et al., 2009).

The main elements of DSCM discussed in the literature are market orientation,coordination of the demand and supply processes, viewing the demand and supplyprocesses as equally important, value creation in the demand and supply processes,differentiation in the demand and supply processes, innovativeness in the demand andsupply processes, responsiveness in the demand and supply processes, and costefficiency in the demand and supply processes (Table II). Market orientation means thatthe organization and the entire demand-supply chain should be customer oriented and

focus on creating and delivering superior customer value as cost efficient as possible(De Treville et al., 2004; Heikkila, 2002; Hilletofth et al., 2009). To achieve this, thecompany must be organized around understanding how customer value is created anddelivered, and how these demand and supply processes can be coordinated (Esper et al.,2010; Juttner et al., 2007; Walters and Rainbird, 2004). A prerequisite is that the companyviews the demand and supply processes as equally important and manages theprocesses in a coordinated manner (Hilletofth et al., 2009; Langabeer and Rose, 2002;Rainbird, 2004; Walters, 2008). It is also important that value creation is considered

References Definition

Hilletofth et al. (2009) The alignment of demand creation and demand fulfillment processes acrossfunctional, organizational, and inter-organizational boundaries (p. 1181)

Juttner et al. (2007) The concept that aims to integrate demand and supply oriented processes.Demand processes are all processes at the customer or market interfaceaimed at responding to customer demand through value creation [ . . .] Supplyprocesses comprise the tasks necessary for fulfilling demand (p. 381)

Hilletofth and Ericsson(2007)

The task of identifying the value packages for major customers and groupthose with similar requirements into specific market segments, for which asuitable supply chain is developed (p. 7)

Rainbird (2004) An understanding of current and future customer expectations, marketcharacteristics, and of the available response alternatives to meet thesethrough deployment of operational processes (p. 242)

Selen and Soliman(2002)

A set of practices aimed at managing and coordinating the whole demandchain, starting from the end customer and working backward to raw materialsupplier (p. 667)

Williams et al. (2002) The management of supply production systems designed to promote highercustomer satisfaction levels through electronic commerce) that facilitatesphysical flow and information transfer, both forwards and backwardsbetween suppliers, manufacturers, and customers (p. 692)

Vollmann et al. (2000) A practice that manages and coordinates the supply chain from endcustomers backwards to suppliers (p. 82)

Table I.Definitionsof demand-supplychain management

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in both the demand and supply processes since competitiveness not solely is gained by

desirable products, but also concern how products are delivered (Hilletofth and Ericsson,2007; Vollmann and Cordon, 1998; Walters, 2008). The route towards superior customervalue lies in the ability of the firm to differentiate itself from competition with regard toproduct and supply chain solutions (Esper et al., 2010; Hilletofth and Ericsson, 2007;

Juttner et al., 2007). Two of the most important opportunities for product and supplychain differentiation are innovativeness and responsiveness (Canever et al., 2008;De Treville et al., 2004; Selen and Soliman, 2002).

The main benefits of DSCM discussed in the literature are enhanced competitiveness,demand chain performance, and supply chain performance (Table III). Competitiveness isenhanced with the ability to provide superior customer value at a lower cost, which may beachieved by simultaneous focus on value creation, differentiation, innovativeness,responsiveness, and cost efficiency in the demand and supply processes in a coordinated

manner (Canever et al., 2008; Charlebois, 2008; Walters and Rainbird, 2004). This, in turn,leads to improved profitability due to increased revenues and reduced costs (Esper et al.,2010; Hilletofth et al., 2009; Juttner et al., 2007). Increased demand chain performance isachieved by increased innovativeness, responsiveness, and cost efficiency in NPD,improved range and life cycle management,higher brand loyalty, more effective marketingefforts, and reduced costs in the demand chain (Rainbird, 2004; Walters, 2008). Supplychain performance is increased through more responsiveness, differentiated, cost-efficientproduct delivery, flexible operating structure, reduced inventories, fewer stock outs,

Figure 1.Demand-supply chain

management

Market

(customers)

Demand

creation

(value creation)

Competitive

advantage

(value and cost)

Market

intelligence

New product

developmentBranding

Marketing

and sales

Demand

fulfillment

(value delivery)

The management of the demand processes, within a

particular company and across the demand chain, in order

to understand, create, and stimulate customer demand as

cost-efficiently as possible

Coordination

Suppliers Focal company Retailers

Demand processes

Design

(strategic level)

Planning

(tactical level)

Execution

(operational level)

Management levels

Demand chain management

ManufacturingSourcing Distribution

The management of the supply processes, within aparticular company and across the supply chain, in order

to fulfill customer demand as cost-efficiently as possible

Supply processes

Design

(strategic level)

Planning

(tactical level)

Execution

(operational level)

Management levels

Supply chain management

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less obsolete products, improved customer service, and reduced costs in the supply chain(Childerhouse et al., 2002; De Treville et al., 2004; Langabeer and Rose, 2002).

The main requirements of DSCM discussed in the literature are organizationalcompetences, company established principles, demand-supply chain collaboration, andinformation technology support (Table IV). The required organizational competencesinclude market orientation, advanced market intelligence and segmentation, and

excellence in and coordination between the demand and supply processes (Hilletofth etal.,2009; Juttner et al., 2007; Walters and Rainbird, 2004). Company established principlesmeans that the demand-supply focused approach needs to be embedded into theorganization, for example, DCM and SCM needs to be coordinated and be given equalattention (Canever et al., 2008; Esper et al., 2010; Jacobs, 2006). It is necessary that thesenior management supports this view, and that the demand and supply chain strategiesconform to the overall business strategy (Esper et al., 2010; Juttner et al., 2007; Langabeerand Rose, 2002). Demand-supply chain collaboration means that the actors across

Benefits References

Enhanced competitivenessValue creation in the demand and supply

processesDifferentiation in the demand and supplyprocessesInnovativeness in the demand and supplyprocessesResponsiveness in the demand and supplyprocessesCost efficiency in the demand and supplyprocesses

Superior customer value at a lower costRevenue growthCost reductionImproved profitability

Al-Mudimigh et al. (2004), Canever et al. (2008),Charlebois (2008), Childerhouse et al. (2002), De Treville

et al. (2004), Esper et al. (2010), Frohlich and Westbrook(2002), Heikkila (2002), Hilletofth and Ericsson (2007),

Jacobs (2006), Juttner et al. (2006, 2007), Korhonen et al.(1998), Langabeer and Rose (2002), Rainbird (2004),Selen and Soliman (2002), Vollmann and Cordon (1998),Walters (2006a, b, 2008) and Walters and Rainbird(2004)

Enhanced performance (demand chain)Responsive product developmentInnovative product developmentCost-efficient product developmentImproved range management (life-cyclemanagement)Reduced demand chain costsImproved brand loyalty (preference)Improved marketing efforts

Al-Mudimigh et al. (2004), Canever et al. (2008),Charlebois (2008), Childerhouse et al. (2002), Esper et al.(2010), Hilletofth and Ericsson (2007), Juttner et al.(2006, 2007), Rainbird (2004), Selen and Soliman (2002),Vollmann and Cordon (1998), Walters (2006a, b, 2008)and Walters and Rainbird (2004)

Enhanced performance (supply chain)Responsive product deliveryDifferentiated product deliveryCost-efficient product deliveryFlexible operating structure

Fewer stock outsReduced inventoriesLess product obsolescenceImproved customer serviceReduced supply chain costs

Al-Mudimigh et al. (2004), Canever et al. (2008),Charlebois (2008), Childerhouse et al. (2002), De Trevilleet al. (2004), Esper et al. (2010), Frohlich and Westbrook(2002), Heikkila (2002), Hilletofth and Ericsson (2007),

Jacobs (2006), Juttner et al. (2006, 2007), Korhonen et al.

(1998), Langabeer and Rose (2002), Rainbird (2004),Selen and Soliman (2002), Vollmann and Cordon (1998),Walters (2006a, b, 2008) and Walters and Rainbird(2004)

Table III.Main benefits

of demand-supplychain management

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the demand-supply chain share information, which calls for trust, loyalty and relationshipmanagement (Charlebois, 2008; Frohlich and Westbrook, 2002; Williams et al., 2002).Information technology is required to manage both the individual demand and supplyprocesses but also to support the coordination between them within and betweenorganizations (Al-Mudimigh et al., 2004; Selen and Soliman, 2002; Walters, 2008).

3. Research methodologyIn this research, the applied research strategy has been a qualitative single case study.This strategy was considered appropriate since the research aimed to analyzecontemporary events, capture a wider and in some extent new problem area, and becausethe researcher had no control over the events (Yin, 2008). Although, the case study

strategy can be used for many purposes, including exploration, theory building, theorytesting, and theory refinement (Voss et al., 2002), it only has been used for exploration andtheory building in this research. The main strength of the case study strategy is that it isnot constrained by rigid limits of questionnaire and models (Voss etal., 2002), and thus canhave a very high impact and lead to creative insight and development of theory. The casecompany (to maintain anonymity here called Alpha) is a Swedish manufacturer operatingon international basis in the appliance industry. This company was chosen based on itsvision to become a truly customer-focused company. Other reasons to why this company

Requirements References

Organizational competencesMarket/customer orientation

Sophisticated market intelligenceAdvanced market segmentationProficiency of the demand and supply processesCoordinated demand and supply processes

Al-Mudimigh et al. (2004), Canever et al. (2008),Charlebois (2008), Childerhouse et al. (2002),

Esper et al. (2010), Hilletofth and Ericsson (2007),Jacobs (2006), Juttner et al. (2006, 2007), Rainbird(2004), Walters (2006a, b, 2008) and Walters andRainbird (2004)

Company-established principlesNeither demand nor supply focusedDemand and supply chain strategy linkedCommitment from senior management

Esper et al. (2010), Hilletofth and Ericsson (2007),Jacobs (2006), Juttner et al. (2006, 2007), Rainbird(2004), Walters (2006a, b, 2008) and Walters andRainbird (2004)

Demand-supply chain collaborationInformation sharingTrust and loyaltyRelationship management

Al-Mudimigh et al. (2004), Canever et al. (2008),Charlebois (2008), Childerhouse et al. (2002), DeTreville et al. (2004), Esper et al. (2010), Frohlichand Westbrook (2002), Heikkila (2002), Hilletofthand Ericsson (2007), Jacobs (2006), Juttner et al.

(2006, 2007), Korhonen et al. (1998), Langabeerand Rose (2002), Rainbird (2004), Selen andSoliman (2002), Vollmann and Cordon (1998),Walters (2006a, b, 2008), Walters and Rainbird(2004) and Williams et al. (2002)

Information technology supportSupport for individual supply processesSupport for individual demand processesSupport for internal/external coordination

Integrated information systems

Al-Mudimigh et al. (2004), Canever et al. (2008),De Treville et al. (2004), Frohlich and Westbrook(2002), Hilletofth and Ericsson (2007), Jacobs(2006), Juttner et al. (2007), Korhonen et al. (1998),Langabeer and Rose (2002), Rainbird (2004),Selen and Soliman (2002), Vollmann and Cordon(1998), Walters (2006a, b, 2008) and Walters andRainbird (2004)

Table IV.Main requirements ofdemand-supply chainmanagement

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was chosen are the type of industry it is operating in (fast moving, highly competitive,and customer driven) as well as its leading position in that industry (in top three).

A case study does not imply the use of a particular data-collection method, as itrepresents a research strategy with multiple data-collection methods. The possibility to

combine several data-collection methods is one of the major advantages of case studyresearch (Yin, 2008), since it allows the researcher to study the research problem fromseveral perspectives. In this research, empirical data have been collected from multiplesources to enhance understanding by examining the research object from severalperspectives. To be begin with, this study is based on data gained from five in-depthinterviews with persons representing senior management in the case company; vicepresident, logistics manager, customer innovation manager, IT manager, and humanresources manager. The interviews were conducted during the two-year period of2006-2008, and the lengths of interviews were between 90 and 120 minutes. The study isalso based on several meetings and discussions with various persons in the company aswell as on secondary data retrieved from strategic and financial reports produced bythe company.

Several tactics have been used to increase the validity of the case study. First, severaldata sources (interviews and company reports) have been used to answer the samequestions (triangulation). Moreover, the respondents have been asked to review the casestudy report to confirm that they were understood correctly (respondent validation) andcolleagues have been asked to continuously comment on the findings as they haveemerged (peer examination). Assumptions and theoretical orientation have also beenclarified to respondents prior to interviewing them (bias reduction). The reliability of thecase study has also been improved through multiple tactics. The use of triangulation notonly increases the validity of the case study, but also the reliability since several datasources improve the measure and makes it more reliable. Moreover, a semi-structuredinterview framework has been used (case study protocol) and assumptions and

theoretical orientation have been presented to the respondents prior to interviewing tomake sure that appropriate respondents were selected (investigators position). The datacollection has also been documented and sometimes digitally recorded (documentation).

4. Case study findingsCase company Alpha is a Swedish manufacturer that operates on an international basis inthe appliance industry. It sells more than 40 million products to consumers andprofessionals in 150 countries every year (top three in its industry). The largest marketsare in Europe and North America, and its strongest market position is in Europe. The casecompany operates in a competitive industry, characterized by intensive competition,high commoditization, and short product life cycles. In this environment, it is vital tocontinuously develop new products in accordance with customer preferences.

Furthermore, the supply chain needs to be cost efficient and provides a high-qualityoutput. The case company has realized that it needs to focus all its resources on creatingand fulfilling customer demand (develop a demand-supply oriented business), sincemarkets are becoming more competitive and fragmented. It needs to become moreinnovative, differentiated, responsive, and cost efficient, to avoid price competition andmaintain profitability. In addition, it needs to focus on both revenue growth (effectiveness)and cost reduction (efficiency), simultaneously. As a result, the case company has begunto transform itself from a production-focused business to an innovative and

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customer-oriented business. It focuses on providing innovative products and customerservice (supply chain solutions), for which customers are willing to pay a premium. Thecompany has defined product flow and demand flow as two major business processes,which constitute its DSCM approach (Figure 2). The management of these major business

processes is further described as follows.

Product management flowThe case company has developed a process for consumer-focused productdevelopment-entitled product management flow (PMF). The PMF is an internationaland holistic process for managing products, from the cradle to the grave, and it describesallthe areas of creating and selling products. The aim of the process is to develop productsthat are adapted to local needs, together with products that can be sold worldwide on thebasis of common global needs. Employees from several functions are involved, althoughno logisticians are included at this time. The PMF is run by the product line manager withsupport from the consumer innovation program. It was introduced in 2004 and will beimplemented in all product lines over the next couple of years. The PMF includes astructured working method with check and decision points, to ensure that no activities areomitted. It consists of three phases: market intelligence, product creation, and commerciallaunch (Figure 3).

The aim of the market intelligence phase is to ensure clear identification andprioritization of opportunity areas, which are expressed in a strategic market plan. Theplan is built on corporate prerequisites (e.g. product innovation strategy, brand strategy,and design strategy, as well as global needs) along with industry analyses. It alsoincludes tools that together with the analyses allow the product line manager to set

Figure 2.The case companysDSCM approach

Market

(customers)

Demand

creation

(value creation)

Competitive

advantage

(value and cost)

Demand

fulfillment

(value delivery)

Coordination

Suppliers Focal company Retailers

Processes (demand)

Design

(strategic level)

Planning

(tactical level)

Execution

(operational level)

Management levels

Product management flow

ManufacturingSourcing Distribution

Processes (supply)

Design

(strategic level)

Planning

(tactical level)

Execution

(operational level)

Management levels

Demand management flow

Product

creation

Market

intelligence

Commercializ

ation

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priorities and take strategic decisions, which are subsequently translated into a strategic

road map and a corresponding product generation plan. This is intended to provide agood frontloading of the product development as well as ensure clear directions forproduct development and market communication. Examples of interesting questions inthis phase are: on what areas should we focus our innovation work, what changes inconsumer behavior can create business opportunities, where are the growth markets,and what can we do that our competitors have not done?

The objective of the product-creation phase is to define and develop consumer relevantand innovative products addressing well-understood consumer needs. It involves foursteps: consumer opportunities, concept development, primary development, and productdevelopment. During the consumer opportunity step, an understanding of consumerneeds in prioritized areas is developed. Consumer understanding and insight are thefoundation for successful concept and product development, as well as for the commercial

launch. Through the concept development step, a feasible product idea addressing theidentified consumer needs is developed, with distinct positioning, consumer value-basedpricing, and a solid business case. In the product development step, the product idea isspecified, designed, and verified, as cost efficiently as possible, as well as prepared forlaunch on the market. In the primary developmentstep, technical solutions within targetedinnovation themes are developed, producing verified ideas or hardware solutions that canbe applied to relevant concepts in product development.

The consumer opportunity and the concept development steps constitute the sparkprocess (Figure 4). The first activity in the spark-process is to identify consumeropportunities by exploring a chosen target group. The case company has developeda needs-based segmentation model on the finding that all their customers purchaseproducts according to four different underlying demand patterns. Accordingly, products

are now developed to meet needs that have been identified within a specific targetsegment in the segmentation model. When a consumer opportunity is identified, the nextactivity is to gather consumer insight regarding the identified opportunity. The casecompany uses several techniques for this activity, such as observations, surveys, andevaluations. However, observations are preferred, as observed behavior is richer thandescribed behavior. The case company is in touch with tens of thousands of consumersworldwide every year. After some insights have been identified, they are grouped into afew product concepts. Some insights may originate from the same problem, or have

Figure 3.The case companys

product management flow

Phase 1: Market

intelligence

Phase 2: Product creation Phase 3: Commercial launch

Executed on product line level

Consumer innovation program

Product line manager

Strategic

market plan

Consumer

opportunities

Primary

development

Concept

development

Product

development

Commerciallaunchpreparation

Launch

execution

Range

managementPhase-out

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something else in common, and could therefore be satisfied with the same solution. Theidentified product concepts are then analyzed and prioritized, resulting in a winningproduct concept. Different product prototypes are subsequently developed, on the basisof the product concept, and later tested on the target group, leading to a winning productidea. Finally, the case company makes a decision regarding whether the product idea isgood enough to develop further, and whether it should proceed to the primary and/orproduct-development phase. All the activities in the spark process are conducted from amarket strategy perspective, and one important output is a business case describing howto ensure long-term profitability, by answering the following questions: What to sell?,Where to sell?, and How to sell?.

The objective of the commercial-launch phase is to ensure that developed products areproperly introduced into the market with a consistent and consumer relevant message,

as identified earlier during the concept development, based on true consumer needs orproblems. Another objective of the commercial launch phase is to ensure that the productassortment is updated according to the products life cycles, and that obsolete productsare properly phased out. Both these objectives rely on a consistent follow-up process.

A considerable portion of the investment is devoted to the early phases of the PMF,prior to large investments in production, to ensure that the product is successful.The number of new products created through consumer-focused product developmentis increasing rapidly, leading to a better product offering and, thus, to an increasing

Figure 4.The case companysspark process

Businesscase A(60%) B(30%) C(10%) D(5%)

Consumer opportunities in

target group X

3) Analyse and prioritize product

concept

1) Explore chosen target group to

find consumer opportunities

2) Gather consumer insights

regarding the identified

opportunities and group them into

product concepts

4) Winning product concept

6) Winning product idea

7) Continue to primary and/or

product development or put down?

Description Illustration

5) Develop products based on the

winning product concept, create

prototypes and test on target group

To product development

To primary developmentClose project

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number of more successful launches. During a five-year period, the case company hasincreased the number of successful product introductions from one to five per year, with asimilar number of total introductions. In 2006, products that had been launched during thetwo previous years accounted for more than 40 percent of sales; thus, it is very likely that

the increased investment in product development has generated positive results. Since2002, investments in product development have increased from approximately 1.0 percentof sales to 1.8 percent in 2006. At the same time, the development has become moreresponsive and efficient through global cooperation and the coordination of launchesbetween different product categories. The focus is on developing products in profitablesegments and high-growth areas, simultaneously making launches more accurate.

Demand management flowThe case company considers that the most important factor that is required to supplymaterials and products on demand is keeping the end-user in focus. It is also vital thatthe total supply chain (sourcing, manufacturing, and distribution) is managed in acompetitive way. To a large extent, success depends on whether the casecompany and itssupply chain are as good as, or better than, its competitors. This requires collaboration,first internally, then with the retailers and suppliers. To realize the above, the casecompany has created a demand management flow (DMF), including common goals andprinciples. DMF focuses on meeting consumer needs and requirements while minimizingboth the capital tied up in operations and the costs required to fulfill demand.

The case company aims to combine cost-efficient production in low-cost countrieswith manufacturing as close as possible to major final markets. However, it has recentlyfocused on increasing the number of products produced in low-cost countries. The casecompanys supply chain and strategies are shown in Figure 5. It conducts business withretailers, while retailers conduct business with end-users. In addition, the company doesbusiness with direct suppliers. It has chosen to carry out all manufacturing, assembly,


supply chain andstrategies

Case company Alpha

Manu-

facturingAssemblySourcingDesign Packaging DistributionLabeling

Lean supplyActivities are performed before orders

are received and focus on efficiency

(planned and standardized)

Agile supplyActivities are performed after orders are

received and focus on responsiveness

(order-driven and customized)

Deliver to order (DTO)

Make to order (MTO)

Postpo

nement

(decoupli

ngpoi

nts)

Make to stock (MTS)

COP

COP

COP

Suppliers

Retailer

End-user

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warehousing, and distribution operations in-house, and is currently employing threesupply chain strategies. For standard products with short customer required lead-time,it employs two lean supply chain strategies based on the manufacturing strategiesmake-to-stock (MTS) and deliver-to-order (DTO). This implies that the case company,

based on forecasts and speculations, performs all supply chain operations, includingsourcing, manufacturing, assembly, packaging, labeling, and distribution (not includedin DTO approach), before it has received any customer orders, and focuses on efficiency.However, for customized and more complex products, it employs a leagile supply chainstrategy based on the make-to-order (MTO) manufacturing strategy. This means thatthe design and sourcing processes are decoupled from the production, assembly, anddistribution processes, or, in other words, production, assembly, and distributionactivities are postponed until customer orders are received. Activities performed afterorders are received (downstream the customer order point, COP) are managed accordingto agile principles, while activities performed before orders are received (upstreamthe COP) are managed according to lean principles.

The supply chain design process of the case company consists of three steps. First,the case company identifies how its end-users, via retailers, want to acquire its products(understand the market the company serves). This is achieved through consumer insight,where important information that can affect the companys service to the retailersis collected. Retailers have a number of characteristics that need to be considered beforedeciding how to serve them, such as product range, required lead-time, location, andvolumes. Second, the company must understand its capabilities of serving the market viathe retailers. Thisimplies defining its production system and delivery system capabilities.Understanding the capability of the production system, to produce according to demand,and the capability of the distribution system, to deliver the output, is very important.In addition, recognizing the capability of the suppliers to supply the production system isalso important. Finally, when these steps have been completed, the case company can

design various approaches to serve the end-users via the retailers, commonly referred toas supply chain solutions. There may even be more than one solution for each retailer, forexample, in the case of supplying both its own labeled products and the retailers brandedproducts (also known as OEM products or private labels). A supply chain solution is acombination of a supply method (manufacturing strategy), reflecting the productionsystem capabilities, and a delivery method (delivery strategy), reflecting the deliverysystem capabilities. The case company believes that combining supply and deliverymethods into various supply chain solutions creates freedom of choice, while at the sametime maintaining the efficiency of operations in the production and delivery systems.

Oneapplied supply chain solution combines the supply method MTSwith the deliverymethod called self-collect (Figure 6). This implies that the case company produces inadvance, according to a demand plan and stock keeping, until the retailer collects the

goods from one of the companys regional distribution centers. Self-collection needs to beimplemented carefully to maintain loading efficiency in the distribution centers. Inanother applied supply chain solution, the case company combines the supply methodMTO with the delivery method factory direct. This solution is used when retailers order anumber of weeks in advance, which enables the case company to produce and deliver to aspecified date and time. Orders are normally in the form of full truckloads dispatcheddirectly from the factory to a retailer (deliver method factory direct). The case companyalso combines the supply method DTO with the delivery method home delivery.

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This solution implies that the case company, at the retailers request, bypasses retailersdistribution network and delivers directly to the consumers home. This delivery methodis normally combined with other services, such as installation and the removal of oldproducts. In a final applied supply chain solution, the case company combines the supplymethod vendor-managed-inventory with the distribution method of factory delivery.This implies that the case company is responsible for the inventory of its products withinthe retailers warehouses, that is, responsible for the calculation of delivery dates andquantities. Deliveries are normally in the form of full truckloads dispatched directly fromthe factory to a retailer (delivery method factory direct). It is an advanced supply chainsolution that involves a close partnership and collaboration, including totally sharingdata, and regular communication.

Each supply chain solution has different cost implications for the case company andthe retailer. One solution might be cheaper for the retailer, but more expensive for thecompany, and vice versa. It is very important to appreciate the cost to serve for aparticular retailer, when judging its profitability.

Coordination between PMF and DMFThe case company is aware that the demand and supply processes have to becoordinated in an efficient and effective way, to fully exploit the benefits of DSCM, andthis requires coordination between the PMF and the DMF. For example, it is importantthat demand creation and demand fulfillment are coordinated and regarded as beingequally important, and that value creation is not restricted to products, but also appliesto the supply chain. The case company has started to differentiate the supply chain, in

order to enhance overall customer value. However, the business is currently heavilyinfluenced by the demand side of the company, which more or less gives directives to thesupply side. Accordingly, the supply chain differentiation is somewhat restricted, andthere is a lack of strategic coordination between demand creation (PMF) and demandfulfillment (DMF). For example, market segmentation and intelligence is conductedseparately in the PMF and the DMF. However, it is important to note that the casecompany has advanced considerably in developing the demand and supply processes,which is also a key issue within DSCM.


supply chain solutions

Supply method (decoupling points)

Deliverymethod(physicalflow)

MTS MTO VMI

Factory direct

Bulk

Small drop

X

X

X

XSelf collect

Home delivery

X

X

DTO

X

X

X

X

X

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There are many linkages between the PMF and DMF, since where and how to sellproducts (addressed in PMF) are clearly connected to how products are delivered(addressed in DMF), and these linkages the case company has begun to explore.Nevertheless, today, this kind of overall and strategic analysis is only made by marketers

in the PMF. If supply chain representatives were involved, the case company couldprobably develop better supply chain solutions faster, which would imply shortertime-to-market (TTM). In addition, supply chain capabilities are required, in order tosuccessfully launch new products on the market. The commercial launch process ensuresthat the developed products are properly introduced into themarket, with a consistent andconsumer relevant message. However, if the right products are not delivered in the rightquantities, at the right time and place, this is very unlikely to be successful. Moreover, it isnot only important to carefully specify, design, and verify new products, but it is alsonecessary to consider the supply chain processes, since some of the new products mayrequire new processes. The move from commodities to innovative products requires achange of the supply chain design process and how it is connected to the productdevelopment process.

The case company believes, and has also begun to experience, that the benefits of thedemand-supply-oriented approach are enhanced competitiveness, by becoming moreinnovative, differentiated, responsive, and cost efficient; and enhanced profitability, byfocusing on both revenue growth (effectiveness) and cost reduction (efficiency). In morespecific terms, the main advantages include innovative, responsive, and cost-efficientNPD; flexible operating structure; higher brand loyalty; reduced inventories; improvedrange and life-cycle management; improved customer service, responsive, differentiated,and cost-efficient product delivery; and reduced demand-supply chain costs. The casecompany has recently begun implementing the demand-supply oriented approach and itcan currently be classified as both a demand and supply chain master, but the demandside of the company is in charge. It needs to decide whether it aspires to become a true

demand-supply chain master, in order to fully exploit the benefits of DSCM.For this to happen, the senior management has to initiate a cultural change, alter thebusiness strategy, and align the functional strategies and departments. Still, this can bedifficult, since a potential development of the company, accordingto somerepresentatives,is that it can outsource all the supply processes, if it excels in demand creation. Otherrequirements, in order to succeed with the implementation of the demand-supply-orientedapproach, are according to the case companys organizational competences (e.g. marketorientation, advanced market segmentation, and intelligence, as well as expertise in andcoordination between the demand and supply processes) and information technologysupport.The information technology not only needs to support theindividual demand andsupply processes, but also the coordination between them.

5. AnalysisThe literature review has revealed eight key elements of DSCM, and these elements, tovaryingdegrees,havealsobeenidentifiedinthecasestudy(TableV).ThefirstelementofDSCM identified in the literature review (market orientation), means that the firm and theentire demand-supply chain should be oriented towards the customers (market driven)and focus on creating anddelivering superior customer value, or,in other words, focus oncreating and fulfilling customer demand, as cost efficiently as possible (De Treville et al.,2004; Heikkila, 2002; Hilletofth and Ericsson, 2007; Juttner etal., 2007). The involved case

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company (Alpha) has realized that it needs to concentrate all its resources on creatingand fulfilling customer demand (developing a demand-supply-oriented business), sincemarkets are becoming increasingly competitive and fragmented. It has to become moreinnovative, differentiated, responsive, and cost efficient, to avoid price competition andmaintain profitability. As a result, the case company has begun to transform itself from aproduction-focused company to an innovative and customer-oriented business.

The second element of DSCM identified in the literature review (coordination of thedemand and supply processes), means that the firm, in order to achieve market orientation,should be organized around understanding how customer value is created cost efficiently,how customer value is delivered cost efficiently, and how these demand and supply

processes can be coordinated (Canever et al., 2008; Esper et al., 2010; Hilletofth et al., 2009;Juttner et al., 2007; Rainbird, 2004). In essence, this means that the management of thedemand side (DCM) and the supply side (SCM) of the company are coordinated and givenequal attention. Neither DCM nor SCMshould rule single handedly (Jacobs, 2006); instead,these management directions should focus on their area of expertise and becomecoordinated at an overlying (or macro) level. Initially, the coordination needs to beachieved within the own organization (intra-organizational) and, later, across the entiredemand-supply chain (inter-organizational). The involved case company currently

Elements Literature Case Alpha

Market orientationMarket driven (customer)

Market segmentationMarket intelligenceCustomer value oriented

Yes Yes

Coordination of the demand and supply processesInternally (intra-organizational)Externally (inter-organizational)Macro-management

Yes Yes (partly)

Viewing the demand and supply processes as equally importantNeither demand nor supply focusedBoth involved in setting the business strategyDemand and supply chain strategy linkedSenior management involvement

Yes Yes (partly)

Value creation in the demand and supply processes

Desirable products (e.g. innovative, customized, and affordable)Differentiated supply chain solutions (customer service)

Yes Yes

Differentiation in the demand and supply processesProduct differentiationSupply chain differentiation

Yes Yes

Innovativeness in the demand and supply processesInnovative productInnovative supply chain solutions

Yes Yes

Responsiveness in the demand and supply processesReactive/rapid development of productsReactive/rapid replenishment of products

Yes Yes

Cost efficiency in the demand and supply processesCost-efficient development of new productsCost-efficient replenishment of products

Yes Yes

Table V.Key elements

of demand-supplychain management

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manages thedemand and supply processes somewhat separately, at a strategiclevel, butithas made major advances in developing and managing the demand and supply processes,which is also an important topic within DSCM. The coordination between the demand andsupply processes is, by nature, intra-organizational, while the coordination between

supply and demand processes are, by nature, intra- and inter-organizational, respectively.The third element of DSCM identified in the literature review (viewing the demand

and supply processes as being equally important), means that the firm should regardthese types of processes as being equally important and manage them in a coordinatedmanner (Hilletofth et al., 2009; Jacobs, 2006; Langabeer and Rose, 2002; Rainbird, 2004;Walters, 2008). The organization should neither be demand nor supply focused, and boththe demand side and the supply side of the company should be involved in setting thebusiness strategy. The demand and supply chain strategies also need to be linked to oneanother as well as to the overall business strategy. All this has to be supported bythe senior management and be clearly expressed in the business agenda, as well asthrough proper key performance indicators (KPIs) and incentives (Rainbird, 2004).Otherwise, the traditional view, where firms either focus on the demand side (demandchain masters) or the supply side of the company (supply chain masters), will almostcertainly rule. In the involved case company, all these issues have not yet been fullyconsidered, since the demand side is in charge and more or less gives directives to thesupply side. Currently, the case company can be classified as both a demand chain and asupply chain master, but the demand side is in charge and, thus, the case company hasto decide whether it aspires to become a true demand-supply chain master or not. If itdoes, this requires that the role and authority of SCM is enlarged.

The fourth element of DSCM identified in the literature review (value creation in thedemand and supply processes), as well as the fifth element (differentiation in the demandand supply processes), means that it is important that value creation is considered inboth the demand and supply processes, since competitiveness nowadays is not solely

achieved by desirable products, but also concern how products are delivered(Al-Mudimigh et al., 2004; Hilletofth and Ericsson, 2007; Vollmann and Cordon, 1998;Walters, 2008). Traditionally, value creation has been strongly connected to DCM, butthe scope of value creation has to be extended to also include SCM, in order to remainstrong in competitive and fragmented markets. DSCM stresses the interplay betweenDCM and SCM as an enabler of value creation. The route towards superior customervalue lies in the ability of the company to differentiate itself from competition, withregard to both products and supply chain solutions (Esper et al., 2010; Hilletofth andEricsson, 2007; Juttner et al., 2007). The involved case company has realized theimportance of broadening the scope of value creation to include SCM and is constantlylooking for opportunities for SCM to enhance overall customer value. However,as mentioned above, the business is heavily influenced be the demand side of the firm,

thus, it can be argued that these efforts are somewhat limited.The sixth element of DSCM identified in the literature review (innovativeness in the

demand and supply processes), as well as the seventh element (responsiveness inthe demand and supply processes), means that innovation and responsiveness are two ofthe most important opportunities for both product and supply chain differentiation(Canever et al., 2008; De Treville et al., 2004; Juttner et al., 2007; Selen and Soliman, 2002).On the demand side of the company, innovativeness and responsiveness refer to thedevelopment of innovative products as well as the rapid and reactive development of

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new products, respectively, while innovativeness and responsiveness, on the supply sideof the company, refer to the development of innovative supply chain solutions as well asreactive and rapid product delivery, respectively. The involved case company hasworked with product differentiation for a long time, but only recently realized the

importance of differentiating the supply chain, to enhance overall customer value.However, since the business is heavily influenced by the demand side of the company,the supply chain differentiation is somewhat restricted.

The eighth and final element of DSCM identified in the literature review(cost efficiencyin the demand and supply processes), means that all of the above-mentioned elements ofDSCM need to be carried out in a cost-efficient manner (Hilletofth and Ericsson, 2007;

Juttner et al., 2007; Walters and Rainbird, 2004). The involved case company has workedconsiderably to reduce both demand and supply chain costs, but has not yet addressedcost reduction from a holistic and coordinated approach, which is necessary, in order totruly reduce overall demand-supply chain costs and to avoid sub-optimization.

The literature review has identified three main benefits of DSCM, and these benefits,to varying degrees, have also been identified in the case study (Table VI). The first

benefit of DSCM identified in the literature review (enhanced competitiveness), isrealized through the ability to provide superior customer value at a lower cost, which isachieved by simultaneously focusing on value creation, differentiation, innovativeness,responsiveness, and cost efficiency in the demand and supply processes, in a coordinatedmanner (Canever et al., 2008; Charlebois, 2008; Walters and Rainbird, 2004). This allows

Benefits Literature Case Alpha

Enhanced competitivenessValue creation in the demand and supply processesDifferentiation in the demand and supply processesInnovativeness in the demand and supply processes

Responsiveness in the demand and supply processesCost efficiency in the demand and supply processes

Superior customer value at a lower costRevenue growthCost reduction

Improved profitability

Yes Yes

Enhanced performance (demand chain)Innovative, responsive, and cost-efficient product development(reduced TTM)Improved range management (life cycle management)Reduced demand chain costsImproved brand loyalty (preference)Improved marketing efforts

Yes Yes (partly)

Enhanced performance (supply chain)Responsive, differentiated and cost-efficient product delivery(reduced TTC)Flexible operating structureFewer stock-outsReduced inventoriesLess product obsolescenceImproved customer serviceReduced supply chain costs

Yes Yes (partly)

Table VI.Benefits of

demand-supply chainmanagement

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firms to both increase revenues (effectiveness) and to reduce costs (efficiency), whichleads to improved profitability (Esper et al., 2010; Hilletofth and Ericsson, 2007;

Juttner et al., 2007). The case study supports these findings by showing that the mainbenefits of DSCM, in general terms, are enhanced competitiveness, by becoming more

innovative, differentiated, responsive, and cost efficient as well as enhanced profitability,by focusing on both revenue growth (effectiveness) and cost reduction (efficiency).

The second benefit of DSCM identified in the literature review (enhanced demandchain performance) is achieved through more innovative, responsive, and cost-efficientNPD; improved range and life-cycle management; higher brand loyalty; more effectivemarketing efforts; and reduced demand chain costs (Al-Mudimigh et al., 2004;

Juttner et al., 2006; Rainbird, 2004; Walters, 2008). The case study supports thesefindings, by showing that the main benefits of DSCM include improved range andlife-cycle management, higher brand loyalty, innovative, responsive, and cost-efficientNPD, and reduced demand chain costs.

The third and final benefit of DSCM identified in the literature review (enhanceddemand chain performance) is achieved through more responsive, differentiated, and

cost-efficient product delivery; flexible operating structure; reduced inventories; fewerstock outs; less product obsolescence; improved customer service; and reduced supplychain costs (Childerhouse et al., 2002; De Treville et al., 2004; Hilletofth et al., 2009;

Juttner et al., 2007; Langabeer and Rose, 2002). The case study supports these findings,by showing that the main benefits of DSCM include flexible operating structure, reducedinventories, improved customer service, responsive, differentiated, and cost-efficientproduct delivery, as well as reduced supply chain costs.

The literature review has identified four main requirements of DSCM, and theserequirements, to varying degrees, have also been identified in the case study (Table VII).The first requirement of DSCM identified in the literature review (organizationalcompetences), means that the firm, in order to succeed with the implementation of DSCM,

Elements Literature Case Alpha

Organizational competencesMarket/customer orientationSophisticated market intelligenceAdvanced market segmentationProficiency of the demand and supply processesCoordinated demand and supply processes

Yes Yes

Company established principlesNeither demand nor supply focusedDemand and supply chain strategy linkedCommitment from senior management

Yes Yes (partly)

Demand-supply chain collaborationInformation sharingTrust and loyaltyRelationship management

Yes Yes (partly)

Information technology supportSupport for individual supply processesSupport for individual demand processesSupport for internal/external coordination! Integrated information systems

Yes YesTable VII.Requirements ofdemand-supply chainmanagement

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needs to have some organizational competences, such as high market orientation,advanced market segmentation and intelligence, as well as excellence in and coordinationbetween the demand and supply processes (Hilletofth and Ericsson, 2007; Juttner et al.,2007; Walters and Rainbird, 2004). The case study supports these findings, by showing

that organizational competences, such as advanced market segmentation andintelligence, high market orientation, expertise in the demand and supply processes, aswell as coordinated demand and supply processes are required to succeed.

The second requirement of DSCM identified in the literature review (companyestablished principles), means that the demand-supply-oriented approach needs to berooted within the organization. This means thatthe organization should neitherbe demandnor supply focused, and that both the demand side and the supply side of the companyshould be involved in setting the business strategy. In addition, the demand and supplychain strategies need to be linked to one another and to the overall business strategy. Allthis also needs to be supported by the senior management and be clearly expressed in thebusiness agenda, as well as through proper KPIs and incentives (Rainbird, 2004). The casestudy supports these findings, by showing that commitment from the senior managementis required to succeed, for example, they should select an appropriate business strategy,inspire cultural change, and align the functional strategies.

The third requirement of DSCM identified in the literature review (demand-supplychain collaboration), means that the actors across the demand-supply chain must shareinformation, which calls for trust, loyalty and relationship management (Charlebois,2008; Frohlich and Westbrook, 2002; Williams et al., 2002). The case study supportsthese findings, by showing that collaboration between the different demand and supplyfunctions are required to succeed. However, in several regards, the coordination iscurrently more on an intra-organizational level and needs to be extended in the future, totruly exploit the benefits of DSCM. Still, the coordination between supply processes anddemand processes are, by nature, both intra- and inter-organizational, respectively.

The fourth and final requirement of DSCM identified in the literature review(information technology support), means that information technology is a prerequisite, inordertomanageboththeindividualdemandandsupplyprocesses,however,alsotosupportthe coordination between them, within and between companies (Al-Mudimigh et al., 2004;Langabeer and Rose, 2002; Selen and Soliman, 2002; Walters, 2008). Informationtechnologyis oftenreferred to as the key enabler of DSCM (Korhonen etal., 1998; Langabeerand Rose, 2002; Vollmann and Cordon, 1998), and can thus be regarded as one of the mostcritical requirements. The case study supports these findings by showing that informationtechnology support is required to succeed with DSCM. There are numerous SCM and DCMinformation systems, but these are rarely integrated. Therefore,information technology is amajor barrier to DSCM and the issue of demand-supply-integrated information systemneeds further investigation.

6. Concluding discussionIn the literature, it has been concluded that that there is a lack of research examining theDSCM concept, for example, what elements characterize the concept, what benefits can beobtained by implementing the concept, and what requirements are necessary to succeedwith the implementation (Canever et al., 2008; Esper et al., 2010; Hilletofth et al., 2009;

Juttner et al., 2007). This research has contributed to the understanding and knowledge ofDSCM in many respects. First, it has been established that the main elements of DSCM

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include market orientation, coordination of the demand and supply processes, viewing thedemand and supply processes as being equally important, as well as value creation,differentiation, innovativeness, responsiveness, and cost efficiency in the demand andsupply processes. Second, it has been revealed that the main benefits of DSCM include

enhanced competitiveness (e.g. becoming more innovative, differentiated,responsive, andcost efficient), enhanced demand chain performance (e.g. more innovative, responsive,and cost-efficient NPD; improved range and life-cycle management; higher brand loyalty;more effective marketing efforts; and reduced demand chain costs), and enhanced supplychain performance (e.g. more responsive, differentiated, and cost-efficient productdelivery; flexible operating structure; reduced inventories; fewer stock outs; less productobsolescence; improved customer service; and reduced supply chain costs). Finally, it hasbeen shown that the main requirements, in order to succeed with the implementation ofDSCM, include organizational competences (e.g. market orientation, advanced marketsegmentation and intelligence, as well as expertise in and coordination between thedemand and supply processes), company-established principles (e.g. neither demand norsupply focused, demand chain and supply chain strategies linked, and commitment fromsenior management), demand-supply chain collaboration (e.g. information sharing, trust,loyalty, and relationship management), and information technology support.

Nevertheless, it is important to note that DSCM is not without weaknesses. It is, forexample, costly to implement and these costs must be deducted from somewhere else.Case company Alpha has launched several supply chain re-construction programs, inorder to reduce supply chain costs which can subsequently be reinvested in the demandchain (e.g. customer-oriented NPD, branding, and market intelligence). In addition, theimplementation time is very long, since it requires fundamental changes of the business,both physically and mentally. This, in turn, implies that implementing DSCM is fairlyrisky, since the conditions in todays competitive and fragmented markets could changequickly. Furthermore, it requires financially strong firms which have the necessary

resources. In conclusion, it is important to achieve a proper balance between demandcreation and fulfillment, as well as between revenue growth and cost reduction. It can beargued that DSCM is a universal solution in every market environment, since DCM andSCM should always be coordinated, even in markets where cost efficiency is the basis ofcompetitive advantage. However, the traditional business models, focusing on either thedemand side or the supply side of the company, can still be very successful in someenvironments. Therefore, DSCM could be viewed as an alternative to the traditionalbusiness models and it is particularly beneficial in some business environments, forexample, in the emerging cheap luxury industry, which has evolved in recent years.

This research has also shown that the heart of DSCM is advanced marketsegmentation and intelligence. Meaningful as wellas actionable market segmentation andintelligence are required to coordinate and manage the demand and supply processes

(Hilletofth and Ericsson, 2007; Juttner et al., 2007; Langabeer and Rose, 2002). In essence,these processes should have the same goal, satisfying the customers, and have a commonview of customer needs and requirements. Thus, it can be argued that the demand andsupply processes need to be directed on the basis of a common segmentation model andmanaged on the basis of market knowledge gathered through market intelligence(Figure 7).Based on the fact that the demand side of thecompany specializes in these typesof tasks (segmentation and intelligence), two approaches are sufficient: either a marketintelligence unit that serves both sides of the company or the demand-side supports

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the supply side of the company in its market segmentation and intelligence. It cantherefore be argued that the market segmentation and intelligence processes shouldbelong to andsupport both thedemand side (DCM)and supply side (SCM) of the company.Accordingly, market researchers should gather information, with regard to both newproduct requirements and customer service needs (preferred supply chain solutions).

This research has shown that there is currently a large gap between the concept andapplication of DSCM, since firms have only recently begun to implement theseprinciples. An inclusive DSCM approach should incorporate all the demand and supplyprocesses. It is probably unlikely that this level of application can be found in practicetoday, although some companies have started to develop more basic versions including

some of the major processes, of which this research work provides an example. Thechallenge appears to be to include most of the major processes in both domains, and toachieve a high degree of coordination between them. Previous case studies showcompanies succeeding with one of these challenges. For instance, several studiesaddress the coordination of NPD (part of DCM) and SCM, by incorporating supply chaincoworkers in the NPD process (Hilletofth et al., 2010). The idea of including supply chainrepresentatives in the NPD process is, however, not new; it has been addressed inconcurrent design for some time. The terms design for manufacturing and design forsupply chain are quite often used to imply that the design function is aligned andintegrated with other mainfunctions in the company (Appelqvist etal.,2004;Ellram etal.,2007; Perks et al., 2005; Sharifi et al., 2006; Sharifi and Pawar, 2002). Nevertheless, thecompetences most commonly included in the NPD process are marketing, product

development, and R&D (Hilletofth et al., 2010). It can be argued that at the momentDSCM in practice is more about coordinating NPD and SCM.

The main practical implication of this research is that companies should organizethemselves around understanding how customer value is created cost efficiently,how customer value is delivered cost efficiently, as well as how these processes andmanagement directions can be coordinated. In order for this to occur, the demand and thesupply processes have to be considered as being equally important, and the firmneeds tobe managed jointly and in a coordinated manner by the demand side and supply

Figure 7.The heart of

demand-supplychain management

Supplycharacteristics

Market segments

and characteristics

Customer

needs

(service)

Market segments

and characteristics

Customer

needs

(products)

Market

intelligence

Market

segmentation

Demand chain

management

Supply chain

management

Demand

characteristics

Demand-side

Supply-side

Coordination

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side of the company. It is also vital that value creation is considered in both the demandand the supply processes, since the route towards superior customer value lies in theability of the firm to differentiate itself from the competition, with regard to bothproducts and supply chain solutions. This means that SCM should receive higher

authority and logisticians should be involved in all the demand processes impacting onthe performance and success of the supply chain. European manufacturers shouldrecognize that competition through SCM excellence is, in many circumstances,inappropriate and they should instead adopt the principles of DSCM. This generatesopportunities to avoid price competition, maintain profit margins and, at the same time,keep production in Europe. The main theoreticalimplication of this research is that thereis a considerable demand for research studies exploring how the different processes inthe demand side and the supply side of the company can be coordinated. This issue mustalso be explored by marketing and logistics researchers jointly. In essence, this researchhas developed a DSCM framework and shown several significant linkages betweensome of the included processes. Nevertheless, these linkages need further investigationand the scope of the research should be extended.

Interesting aspects for further research is to continue the investigation of how thedemand (DCM) and the supply (SCM) processes included in the DSCM frameworkinfluence each other and how they can be coordinated in order to develop models of this,which later can be integrated into a larger DSCM model. In particular, there exists a needfor real-life-based industrial case studies addressing how the various demand andsupply processes influence each other and how they can be coordinated across intra- andinter-organizational boundaries.

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Sheth, J., Sisodia, R. and Sharan

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