Research on Supply Chain Management Maturity Based-on MICK-4FI Resource Operation Model
Daozhi ZHAO, Qiang ZHANG, Jianyong SUN
(School of Management, TianjinUniversity, Tianjin 300072)
Abstract: SupplyChain Management Maturity (SCM2) is an important index to measure the performance of supply chain management. In this paper, MICK-4FI Resource Operation Model is introduced into the research on SCM2. MICK-4FI Resource Operation Model has an advantage of combining Resources-based View (RBV) and the practice of enterprise. According to MICK-4FI Resource Operation Model, resources belonging to enterprise can be classified as Material(M), Information(I), Capital(C) and Knowledge(K) that are essential for it to gain core competence. Principle ofleverage is used to prove that high ability of resource operation can help enterprise lever outside resources that are essential. As a result, competitive advantage of enterprise is advanced. Based on MICK-4FI Resource Operation Model, this paper gives a new concept of SCM2from the viewing point of resource operation, furthermore a new supply-chain management maturity model (SCM2M) and its evaluating indexes of each maturity stage are also provided.This new SCM2M makes a path, along which enterprise can advance its ability of resource operation, to gain core competence. This SCM2M makes both academic and practical meaning.
Key words: supply chain management; supply chain management maturity; Resource Operation; MICK-4FI.
D. Zhao and M. Fang(2002) have given a new definition of supply chain: “Supply Chain is a network composed by many organizations, in which every enterprise integrates material, information,capital and knowledge resources in order to achieve its business goal, to obtain the competitive advantage”, and also pointed that: “Supply chain management is a process of designing and maintaining a kind of excellent manufacturing network structure,mechanism andpattern for integrating resources and levering the power from cooperative enterprises, in order to enlarge one’s own core competence and make itself and the entire supply network get competitive advantage[]”. The way to “design and maintain a kind of excellent manufacturing network structure,mechanism andpattern” is related with maturity of supply chain management.
Supply Chain Management Maturity (SCM2) is an important index to measure the ability of supply chain management comprehensively. SCM2 can help enterprise analyze and describe supply chain from different viewing points and differentmanagement levels to give a comprehensive measuring system[]. There is a positivecorrelation between maturity of SCM and ability of resource operation for enterprise[]. SCM2 Model can make a path, along which enterprise can advance its ability of resource operation, to gain core competence.
Based on Resource-based View (RBV), MICK-4FI Resource Operation Model classifies the resources of enterprise as Material (M), Information (I), Capital(C) and Knowledge (K). MICK-4FI Resource Operation Model emphasizes that enterprise, by using advantageous resources of its own, should lever outside resources (including material, information, capital or knowledge) to quickly gain core competence that is difficult to copy by enemy.
In this paper, theory of resource operation is introduced into the research on SCM2. Based on MICK-4FI Resource Operation Model, a new concept of SCM2 is given, furthermore a new SCM2 model and its measuring indexes of each maturity stage are both proposed. This new maturity model makes a path, along which enterprise can advance its ability of resource operation, to gain core competence.
SCM2 has received considerable attention during the recent years.
Stevens(1989) gaveseminal research on SCM2. SCM2 is divided into four stages: Baseline, Functional Integration, Internal Integration and External Integration. A basic research framework of SCM2 is constructed[]. Robert Simons and Antonio D’Avila(1998) made a research on the measuring indexes of SCM2 from the viewing point of Return of Management (ROM)[].Beamon(1999)suggested that the use of resources, the desired output and flexibility was identified as vital components to supply chainsuccess[]. Douglas M. Lambert and Martha C. Cooper(2000) provided a method of measuring SCM2 from three factors including Management Structure, Management Strategy and Management Environment[].PMG(The Performance Measurement Group, LLC)(2001) providedthe Supply-Chain Maturity Model。In this model, SCM2 is divided into four stages: Functional Focus, Internal Integration, External Integration and Cross-Enterprise Collaboration[]. Kevin McCormack and Archie Lockamy III (2004) gave the Supply Chain Management Process Maturity Model (SCMPM)[]. Stanley E. Fawcett and Gregory M. Magnan(2004)provided ten guiding principles of high-impact SCM by carrying out 52 in-depth interviews with supply chain leaders[]. Christine Brim, Senior Associate of Lexington Institute(2005) suggested two kinds of supply chain management maturity models: the first one is linear, pragmatic and tactical; the second one is Supply Chain Management Maturity Model Matrix (SCM2M Matrix)[].IBM Institute for Business Value (The 2005 Value Chain Study) gave a model that divided SCM2 into five stages: Static Supply Chain, Functional Excellence, Horizontal Integration, External Collaboration and On Demand Supply Chain[].
3.SCM2M based on MICK-4FI Resource Operation Model
3.1 MICK-4FI Resource Operation Model
Resource-based View (RBV) focus on the resources of firm and argue that firm could be successful through level their efficiency of resources operation[]. Penrose’s (1959) book, The Theory of the Growth of the Firm, is considered by manyscholars in the strategy field to be the seminal work that provided the intellectual foundationsfor the modernresource-based theory of the firm. RBV analyze firm resource in order to know how to get competitionadvantage (CA)[]. Barney argued thatsustained competitive advantage derives from the resources and capabilities a firm controlsthat are valuable, rare, imperfectly imitable, and not substitutable[]. Rumelt also suggest that some elements of firm are critical to gain CA after researches the relationship of market and Industry effective forces[]. At present, the resource-based view of the firm is perhaps the most influential framework forunderstanding enterprisestrategy.
Based on RBV, MICK-4FI Resource Operation Model is given by Dr. Zhao. MICK-4FI is the abbreviation of Material Flow, Information Flow, Capital Flow, and Knowledge Flow. According to MICK-4FI Resource Operation Model, there are many kinds of resources for enterprise to product its productions, but these resources can be divided into four categories: Material (M), Information (I), Capital(C) and Knowledge (K) that are essential for enterprise to gain core competence[]. Within enterprise, the relation among MICK four resources can be described in figure 1.
MICK-4FI Resource Operation Model emphasizes the integration of material flow, information flow, capital flow and knowledge flow. The core idea is that using its own advantages, enterprise should lever outside MICK resource that are essential to gain core competence. It can be seen from figure 2.
Using the principle ofleverage, MICK-4FI Resource Operation Model has explained how to lever outside resources, seen from figure 3. At one end of this lever are own MICK resources, and at the other end are outside MICK resources that can be integrated. The length of lever matching the own resources stands for the ability of resource operation. Extending the length of lever matching the own resource means advancing the ability of resource operation. As a result, enterprise can lever outside resources more easily and more effectively.
Based on MICK-4FI Resource Operation Model, enterprise, if wants to gain competitive advantages, has to advance its ability of resource operation to lever resources from outside supply network. Meanwhile, there is a positivecorrelation between maturity of SCM and ability of resource operation for enterprise, which is to say that higher maturity stage means more advanced ability of resource operation, seen from figure 4. As a conclusion, the new SCM2 model makes a path, along which enterprise can advance its ability of resource operation, to gain core competence.
3.2 SCM2M based on MICK-4FI Resource Operation Model
Based on MICK-4FI Resource Operation Model and the relation between this model and SCM2 mentioned above, this paper, from the viewing point of resource operation, gives a new definition of SCM2. Supply Chain Management Maturity (SCM2) is a standardized system that can measure the ability of resource operation. Firm could grows successfully following by SCM2 ’s instruction.
In this new SCM2M, each maturity stage can be described as below.
Static Supply Chain
Organization structure and management system facing supply chain are not constructed. The relation between enterprise and its suppliers-retailers is scattered and fragile. Credit authority is low. The management put on MICK resources and their fluid belonging to self or outside is very poor. The use and transmission of MICk resources is disturbed, without any integration. Personal behaviors take the place of enterprise behaviors, resulting in grate randomness. The object of enterprise is not structured or ill defined. SCM costs are high.
Basic organization structure and business process are constructed. MICK resources are distributed at department level as a result of functional structure. But the separation among MICK flows gives an obstacle against resourcesharing. Basic business relation between enterprise and its suppliers-retailers is constructed, but competitionis paid much more attention than cooperation. Demand information is transmitted through formal procedure, resulting in slow response. The ability of integrating outside resources does not exist. SCM cost remains high.
Process management is introduced. Matrix-styled organization structure is used broadly. The obstacle against communicating between different departments is broken. Sharing information and collaborating become a routine. MICK resources are distributed at functional or cross-functional level, resulting in good integration of resources. Enterprise is connected with its suppliers-retailers through network technologies. Competitive relation begins to be replaced by cooperative relation. The integration of outside resources can be realized primarily. Customers can be included into supply chain horizontally and quickly. The rate of response is accelerated. The self-adaptive ability and self-learning ability are advanced. SCM costs begin decreasing.
Process management is used broadly. Organization structure is designed based on business process. Compressed structure is introduced instead of functional structure. Knowledge management system is constructed, and the learning ability of enterprise and its partners is greatly advanced. Cooperation is paid much more attention than competition. Utilizing network technologies, enterprise and its partners make a decision about forecast, plans and objects, with effective actualization. As a result, the integration and sharing of MICK resources on network can be realized. The rate of response is dramatically accelerated. SCM costs are dramatically reduced.
On Demand Supply Chain
Information technologies and e-business are used broadly to realize strategic objects of supply chain. Learning system of supply network is constructed based on trust and dependence among participators. The supply chain culture facing final customers is also constructed. MICK resources are shared on network level, with standardized and routine collaboration. Material management, information management, capital management and knowledge management are utilized along supply chain broadly. The integration of four flows is realized on network level. Quick response to changing market gives birth to core competence that is difficult to copy by enemies. SCM costs are lowest.
Based on MICK-4FI Resource Operation Model and the present research on supply chain management maturity (SCM2), this paper provides a new supply chain management maturity model (SCM2M). A new concept of SCM2 is given from the viewing point of resource operation. The descriptions of each maturity stage in this provided model are also given. This new model makes a path, through which enterprise can advance its ability of resource operation to gain core competence. All of these mentioned give a new reference framework to the research on SCM2.
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