Supply Chain Management - A Critical Analysis

Table of contents

1. Introduction
1.1. Problem
1.2. Goals
1.3. Structure

2. Definitions and distinctions
2.1. Definition and Distinction of the Efficient Consumer Response (ECR) Model
2.1.1. Definition and description of the ECR Model
2.1.2. Basic Strategies of the ECR Model
2.1.3. Factors for a successful implementation of the ECR Model
2.2. Definition and Distinction of a Supply Chain
2.2.1. Definition and description of a Supply Chain
2.2.2. Elements of a Supply Chain
2.2.3. Maxims of behaviour in a Supply Chain
2.2.4. Risks in a Supply Chain
2.3. Definition and Distinction of Supply Chain Management (SCM)
2.3.1. Definition of Supply Chain Management
2.3.2. Supply Chain Management in comparison to Porter’s Value Chain

3. Chosen Aspects of Supply Chain Management
3.1. Theoretical Backgrounds of Supply Chain Management
3.1.1. The Order to Payment S
3.1.2. Reasons for Supply Chain Management
3.1.3. Goals and tasks of Supply Chain Management
3.1.4. Requirements and presumption for efficient Supply Chain Management
3.1.5. Possible pitfalls and obstructions for the implementation of SCM
3.1.6. Potentials of Supply Chain Management
3.1.7. Critical acclaim on Supply Chain Management
3.2. The Supply Chain Operations Reference-Model (SCOR Model) as a Reference Model for Supply Chain Management
3.2.1. General definition of Reference Models
3.2.2. Theoretical backgrounds of the SCOR Model
3.2.3. Definition and description of the SCOR Model
3.2.4. Critical Acclaim on the SCOR Model

4. Basic strategies and techniques of SCM on the supply-side of the ECR Model
4.1. Efficient Replenishment
4.1.1. Vendor Managed Inventory
4.1.2. Co-Managed Inventory
4.1.3. Computer Assisted Ordering
4.2. Efficient Administration
4.2.1. Collaborative Planning, Forecasting, and Replenishment (CPFR)
4.2.2. Direct Store Delivery
4.2.3. Cross Docking
4.3. Efficient Operating Standards
4.3.1. Efficient Unit Loads
4.3.2. Roll Cage Sequencing
4.3.3. Logistic Pooling
4.4. Critical acclaim on the SCM basic strategies and techniques

5. Conclusion and Outlook

Literature

List of tables:

Table 1: Definitions of ECR

Table 2: Basic Strategies of Supply Chain Management

Table 3: Potential risks in a Supply Chain

Table 4: Definitions of Supply Chain Management

Table 5: Goals of Supply Chain Management

Table 6: Potentials of Supply Chain Management

Table 7: Benefits of Vendor Managed Inventory

Table 8: Requirements of the packaging concerning different target groups

List of pictures:

Picture 1: The ECR Model

Picture 2: Maxims of Behaviour in a Supply Chain

Picture 3: Porter's Value Chain

Picture 4: The Order-to-Payment-S

Picture 5: The Bullwhip Effect in Supply Chains

Picture 6: Bundles of activities in the SCOR Model

Picture 7: The CPFR Process

Picture 8: CPFR in practice

Picture 9: Direct Store Delivery

Picture 10: Milk Runs

Picture 11: The Cross Docking Process

Picture 12: Modularity of Unit Loads using the example of an Euro-Pallet

List of figures:

Figure 1: Consumer reactions on OOS situations

List of abbreviations

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1. Introduction

1.1. Problem

Financial crisis. Recession. These two topics characterize the latter half of the year 2008. For the first time since 2003 the German economy is in the phase of a recession, which means that the economic performance decreased for two successive quarters.^[1] But recently the recession appears faster than usually. No sector and no region in Germany have been spared. The crisis is everywhere: at sea, on the land and in the air. It hurts producers of yoghurt as well as world market leaders of printing machines, the chemistry industry or small furniture shops.^[2] Popular German companies have to adjust their capacities downwards. Daimler announces short-time work, Opel is on the verge of ruin, and BASF has to temporarily close down several plants and machines.^[3]

One main reason for the recession is the financial crisis in the banking sector of the USA. On the 15th October 2008 the American investment bank Lehman Brothers became insolvent. This led to two different effects. Firstly companies and private persons started to save money, delayed orders or even began to cancel them. Secondly the financial economy started to reorganize itself. The result was that the American economy began to shrink as money was withdrawn from circulation. Due to global Supply Chains this effect was also spread to the German economy.^[4]

During this time the retail trade sector and the private consumers seem to be the only ray of hope. Many consumers got their Christmas money with their November salaries and some branches got a wage increase so that consumers recently have more money to spend.^[5] Moreover the prices for grain and many other agricultural raw materials decreased.^[6] As a consequence discounters were able to reduce prices for groceries.^[7]

So initially it seems that the retail trade sector is not hurt by the recession and the financial crisis. But nevertheless cost pressure in the retail trade sector is increasing. Additionally there is a general consumer caution not only since the financial crisis. Due to stagnating real earnings and absorption of purchasing power because of taxes and social contributions the price of a product is one of the main determinants of the consumer’s purchasing decision.^[8] Thus producers and retailers must reduce costs to keep prices low.^[9]

Furthermore it has to be pointed out that the path of economies captures the retail trade sector with a time lag. As a consequence of that the recession will hit this sector later^[10] so that in 2009 the retail trade sector will face problems. Although there may be an upswing in 2010 many retail traders will have to struggle for their existence in 2009.^[11] In times of increasing complexity due to greater product variety, shorter product life cycles, technological progress, sharpened global growth, and sophisticated customers the retail trade sector and the other participants in the market can hardly handle this challenges by themselves.^[12] As a consequence retail traders, producers, and all other actors in the Supply Chain are forced to concentrate on their core competences and to increase their external Supply Chain activities.^[13] The need for cross-company cooperation increases and strategic success factors like quality, costs, delivery times and flexibility have to be identified.^[14]

One possibility to implement cross-company cooperation is the use of the Efficient Consumer Response (ECR) Model. It is a holistic and consumer orientated approach of the whole Supply Chain from the raw material supplier to the ultimate consumer. The most important aim of the ECR Model is defined by ECR Europe^[15] as the following: “Working together to fulfil consumer wishes better, faster and at less cost.”^[16]

The ECR Model consists of two parts. One part is the supply side, which deals with the topic Supply Chain Management. The basic strategies of Supply Chain Management are Efficient Replenishment, Efficient Administration and Efficient Operating Standards. The other part is the demand side, which deals with the topic Category Management. The basic strategies of Category Management are Efficient Product Introduction, Efficient Store Assortment and Efficient Promotion. Both parts of the ECR Model are supported by the Enabling Technologies which are basis technologies that support the communication between the involved partners and thus improve the internal and external processes.^[17]

This bachelor thesis concentrates on the supply-side of the ECR Model which deals with the topic of Supply Chain Management because most of the ECR projects start in practice with an implementation of Supply Chain Management. The reason for this is that the use of the Supply Chain Management basic strategies should quickly help to eliminate inefficiencies and to exhaust potential for rationalisation along the Supply Chain. The Supply Chain Management basic strategies should assist to avoid Out-of-stock situations, to realize a reduction of lead-times and to decrease inventories in the Supply Chain. Furthermore Supply Chain Management should be put in the focus of attention because production and supply generate 27 % of the whole costs.^[18] Low profit margins on turnover in the retail trade sector, which are minor than 0.7 % also stress the exigency to verify if there is optimization potential on the supply-side of the ECR model.^[19] A closer look should be set on the interference supplier – retail trader by taking the current economic situation into consideration.

1.2. Goals

The intention of this paper is to establish understanding about Supply Chain Management in general and the basic strategies of Supply Chain Management in special. It shall be determined if Supply Chain Management is only a vogue term or if it can be seen as a practical approach how to decrease costs and to eliminate efficiencies along the Supply Chain with the main focus set on the consumer. Moreover the consciousness for the behaviour in a Supply Chain and the need for cross-company cooperation shall be stressed and the awareness for one of the main success factors for an efficient implementation of the basic strategies of Supply Chain Management should be imparted: the willingness for cooperation.^[20] In addition to that a broad overview of the prior ECR Model shall be given and the close link between Supply Chain Management and Category Management shall be emphasized.

1.3. Structure

In the beginning of the paper the definition and distinction of the ECR Model is pointed out to transfer a broad overview about this prior Model. Afterwards Supply Chains and Supply Chain Management are defined. Furthermore maxims of behaviour in a Supply Chain as well as risks in a Supply Chain are mentioned and Supply Chain Management is compared with the value chain. Thus the relevant theoretical background information shall be given.

In chapter three chosen aspects of Supply Chain Management are discussed. Firstly the order to payment S is described so that the relevant material-, information- and cash-flows in a Supply Chain can be understood. Secondly the reasons for Supply Chain Management are stated. Thus the necessity for Supply Chain Management is pointed out. Afterwards goals and tasks of Supply Chain Management are explained in a detailed manner. In addition to that, presumptions for efficient Supply Chain Management and possible pitfalls for Supply Chain Management are emphasized. Moreover the potentials of Supply Chain Management are determined and a critical acclaim on Supply Chin Management is given. In the end of chapter three the SCOR Model is described to show how a Supply Chain Reference Model can be used to create transparency along a Supply Chain. In summary chapter 3 shall transfer a detailed knowledge about Supply Chain Management in general.

Chapter four characterizes the basic strategies of the supply-side of the ECR-Model and thus of Supply Chain Management. At first, Efficient Replenishment and its techniques Vendor Managed Inventory, Co-Managed Inventory, and Computer Assisted Ordering are introduced. Secondly Efficient Administration is determined. In this context the relevant techniques Collaborative Planning and Forecasting, Direct Store Delivery, and Cross Docking are discussed. Thirdly the last basic strategy Efficient Operating Standards with its techniques Efficient Unit Loads, Roll Cage Sequencing, and Logistic Pooling is presented so that a detailed understanding about the operational techniques shall be created. Chapter four closes with a critical acclaim on the Supply Chain Management basic strategies and its relevant techniques.

Finally chapter five subsumes the content of this paper in a conclusion and gives an outlook for Supply Chain Management in the future.

2. Definitions and distinctions

2.1. Definition and Distinction of the Efficient Consumer Response (ECR) Model

The ECR Model was developed in the 1980s. This decade was characterized by attributes like crowding out, sophisticated and clarified consumers, information overload, inflation of brands and smart shoppers^[21]. The demand decreased in that time and discounters won more and more market share. As a result the Food Marketing Institute and the consultancy Kurt Salmon Associates designed the ECR Model at the end of the 1980s to improve the cross-company cooperation between producers, whole­sale traders, and retail traders with the intention to draft an integrated configuration of their mutual Supply Chain. So the existing Supply Chains were enhanced in a detailed way by mitigating the traditional interface producer – trader. Thus the ECR Model was initiated in the grocery sector but it was transferred to the consumer goods sector during the passage of time.^[22]

2.1.1. Definition and description of the ECR Model

For a broad classification, a closer look at the term ‘Efficient Consumer Response’ itself gives the first hints what it is about:

- The word ‘Consumer’ indicates the orientation on the needs of the consumer.
- The words ‘Efficient’ and ‘Response’ indicate the process-orientated and

cross-company optimization of the Supply Chain.^[23]

Accordingly the ECR Model can be characterized as the efficient reaction to the needs of the customer. To specify this first impression of the term ECR, different definitions from literature of the ECR Model can be examined. The following table gives an overview of several of these definitions.

illustration not visible in this excerpt

Table 1: Definitions of ECR

The examination of the definitions confirms the impression that was given by the analysis of the term itself. They also have in common that the focus of attention must be put on the consumer and that there is the necessity for cross-company cooperation.

In the further context of this paper, the definition of Seifert (2004) is used as the basis for the ECR Model.

As pointed out before, the ECR Model is a method of cooperation between suppliers and producers as well as between producers and the retail trade sector. The main intention is to increase the productivity of the whole Supply Chain and not only of isolated participants, so that the right product can be offered at the right time, at the right place, for the right price and in the right quality. With this in mind the ECR Model represents the transfer of an isolated optimization of an internal Supply Chain to an optimization of the whole Supply Chain, whose focus always has to be put on the consumer’s needs. By using such a kind of cross-company thinking and acting new turn-over and optimization potentials can be achieved – potentials that can not be achieved by acting alone. All actors in the Supply Chain must recognize that there is a mutual dependency between them. For that, cooperation in the field of logistics (Supply Chain Management) and in the field of marketing (Category Management) has to be put into practice.^[24]

By taking Seifert’s definitions into consideration, the Efficient Consumer Response Model can be portrayed in the shape of a house, which is divided into the supply-side and the demand-side. On the supply-side the basic strategies of Supply Chain Management are stated. On the demand-side the basic strategies of Category Management are shown. The basis of this house is exposed by the Enabling Technologies. These technologies support the data transfer between the participants of the Supply Chain which is needed for efficient Supply Chain and Category Management.^[25]

illustration not visible in this excerpt

Picture 1: The ECR Model

Source: Compare Seifert, D. (2001) Page 40.

After dividing the ECR Model into a supply-side and a demand-side, the main goal, which was to increase the productivity of the whole supply chain, can be discussed in more detail as the supply-side and the demand-side track different goals which lead into two different strategic directions. The supply-side generally concentrates on reducing costs and inefficiencies along the whole supply chain whilst the strategies on the demand-side help to generate higher turn-over and a better relationship with the consumer.^[26] This can be emphasized by the citation stated by Kuglin, F. (1998): ‘The key is to listen to the customer and translate what is heard into successful products and services.”^[27]

The main goals of Supply Chain Management are:

- The elimination of inefficiencies along the Supply Chain and the creation of a constant product flow.
- The creation of flexibility for the application of the needed resources.
- Decrease of logistic costs by achieving low inventories.
- The avoidance of the Bullwhip Effect.
- Synchronization of the demand and the supply to generate shorter lead-times.
- Improvement of the customer satisfaction by providing a differentiated and reliable degree of service including the availability of the demanded products.^[28]

The main goals of Category Management are:

- Elimination of wrong developments concerning promotion, product introduction, and store assortment.
- Providing a complete assortment of products wanted by the customer.
- Harmonization of the promotion activities of the manufacturer and the retail trader.
- Developing and introducing new products the consumer really wants by meeting his ultimate needs.^[29]

Generally speaking, the costs of the Supply Chain should be minimized and the satisfaction of the customer should be maximized. At first glance these two goals seem to be a trade-off. But if the basic strategies of both sides of the ECR Model are obeyed, both goals can be achieved simultaneously.^[30]

2.1.2. Basic Strategies of the ECR Model

As mentioned before, the ECR Model can be characterized in the shape of a house, with a supply-side and a demand-side.

The demand-side is mainly marketing focussed and deals with the topic Category Management. The aim is to concentrate on the needs of the consumer, whose wishes should be fulfilled in a better and faster way at less cost.^[31] To reach this aim, categories have to be considered as strategic business units. A category itself can be defined as a separate group of products which is distinguished by the consumer to fulfil his needs. For that Category Management focuses on the control of categories which are summed up regarding the consumers’ needs. The core is the mutual optimization of categories by the producer and the retail trader. The strategies used to reach the aims of Category Management have to be derived from the whole business strategy of the partners. The strategy can for example be influenced by the vision of the company, the financial and marketing goals, the marketing strategy, the customer strategy, the logistic strategy and the sourcing strategy. For this to work the partners must know and trust each other.^[32]

In the following the basic strategies of Category Management, which are Efficient Assortment, Efficient Promotions, and Efficient Product Introduction are presented.^[33] The basic strategy Efficient Assortment is the process of the producer and the retail trader to develop the optimal range of products of the retail trader within a category. This range of products should fulfil the consumers’ needs and improve the turn-over of the retail trader and therewith that of the producer as well. The needs of the consumer, the trading strategies, the expectations of the producers and the market situation have to be taken into consideration. One advantage is that both, the retail trader and the producer, can share their experiences regarding categories and consumers. Furthermore Efficient Assortment also takes Space Management into consideration. Space Management means that the products have to be placed effectively so that the shelves and the warehouse can be used in an optimal way.^[34] Summarized Efficient Assortment tries to achieve the following aims:

- The optimal use of shelves and warehouses.
- A rational replenishment process.
- To distinguish against the competitors.
- Fulfil consumers’ needs.
- Increase the benefits of all involved parties.^[35]

It has to be pointed out that the task to find the right assortment is a core competence of the retail trader. Producers and retail traders can only build an assortment within a category together.^[36] If the right assortment and the right categories are established, the second basic strategy can be put into the focus of attention: Efficient Promotions.

Efficient Promotions concentrates on the mutual process of producer and retail trader to put the consumer in the focus of campaign activities. Thus the flow of promoted products should be aligned with the needs of the consumer. As a consequence the consumers’ loyalty ought to be won back or be maintained. The campaigns are supposed to generate a maintaining differentiated image. For that special customer orientated campaigns like Point-of-Sale events should be put into practice. Furthermore it has to be stressed that the campaign should not be centred by price politics. A problem in the field of Efficient Promotions is the fact that producers and retail traders mostly want to use different marketing strategies and want to achieve different goals of communication which can lead to a trade-off.^[37] This can lead to logistical problems and disappointed consumers.^[38] Nevertheless trust and knowledge of each other play an important role in the field of Efficient Promotion.^[39]

The third basic strategy of Category Management is Efficient Product Introduction. This strategy should optimize the process of the development and introduction of new products, which should be a solution for customer needs that are not satisfied. In this context it has to be emphasized that new products are a strategic instrument for producers and retail traders to generate higher turn-over and to acquire new markets. By using Efficient Product Introduction, retailers can differentiate themselves against competitors, create preferences, and reduce the rate of flop-products. Producers can reduce costs for the development of products. The aim of Efficient Product Introduction is to decrease costs for the development and introduction of new products by sharing knowledge about consumers and markets as well as to offer innovative products in a shorter time-cycle.^[40] In this case it has to be pointed out that there are six types of new products: i. Innovation = A real innovation like the Gillette Mach3.
ii. Transfer = A new product in a category, whose brand is known by products in other categories like Mars Ice Cream.
iii. Variant = A new version of a product in a category like fat-reduced liver sausage.
iv. Copy = A product that mainly corresponds to an existing product.
v. Seasonal products = Products that have a defined, short-time life-cycle like Easter articles.
vi. Substitution Product = Products that replace existing products like washing-powder in a 5 kg unit instead of a 4.5 kg unit.^[41]

Sustainable advantages can only be generated by innovations which are only 15 % of the entity of new offered products.^[42] Efficient Product Introduction itself can be implemented on three levels: Efficient product introduction, efficient product development and mutual development of trade marks. Due to the high degree of trust, commitment, knowledge of markets and consumers, and the willingness of data exchange required, Efficient Product Introduction is the strategy that is the least spread one.^[43]

The supply-side of the ECR Model can be summarized as Supply Chain Management.

The relevant basic strategies of Supply Chain Management and its techniques are stated in Table 2^[44]: illustration not visible in this excerpt

Table 2: Basic Strategies of Supply Chain Management

Source: Own preparation Compare Seifert, D. (2001) Page 40, Schmickler, M. (2001), Page 59.

The main aims of Supply Chain Management are to reduce costs for supply and to eliminate inefficiencies along the whole Supply Chain.^[45] The efficient use of Supply Chain Management is a core-element of the ECR Model.^[46] Most of the realizations of ECR start with activities on the supply-side using strategies and techniques of Supply Chain Management. This can be emphasized by the following citation presented by Heydt, A.v.d. (1998):”It seems pretty sensible to me that you need to ensure that your basic product flow mechanisms are working effectively as the first step, otherwise trying to optimize promotions, product introduction and product assortment won’t be very successful if you can’t get them to where you want them, when you want them.”^[47]

The reason for this is that today the main focus is set on Efficient Replenishment and Efficient Administration to generate competitiveness in the national and global context. Furthermore Supply Change Management is said to generate higher cost-reducing potential in a short-term horizon than Category Management. The typical German way is to generate trust-building measures on the supply-side of the ECR Model and then to concentrate on the demand-side.^[48]

Due to these facts, this paper concentrates on the supply-side of the ECR Model. The above mentioned basic strategies and techniques of Supply Chain Management are discussed in chapter 4 in detail.

Nevertheless it has to be pointed out that the ECR Model can only generate sustainable and long-term advantages if the basic strategies of the supply-side and the demand-side are both taken into consideration. Furthermore the Enabling Technologies, as the IT infrastructure, have to be put into practice.^[49]

2.1.3. Factors for a successful implementation of the ECR Model

In practice companies sometimes have difficulties with the implementation of the ECR Model. Some companies can handle these problems and are able to implement the ECR Model whilst other can not handle them. This raises the question of why this could be. For a better understanding the main problems of the retail traders and the producers have to be determined.

The main problems faced by the retail traders are:

- The employees have a lack of knowledge and experience.
- The suppliers have a lack of knowledge and experience.
- A focus on other internal priorities than the ECR Model is set. The main problems faced by the producers are:
- A lack of willingness for information exchange by the retail traders.
- A strong functional orientation of the organization structure.
- A focus on other internal priorities than the ECR Mode is set.^[50]

Due to the outlined problems several factors for a successful implementation of the

ECR Model have to be pointed out which can help to handle them.

At first there is the necessity to characterize the general keys of success. In literature two different kinds of success factors are emphasized. The first kinds of factors are the primary factors. These factors contain the behaviour, the attitude, and the motivation of employees as well as the maintenance of a cooperative and pleasant working atmosphere. They are also called the soft factors.^[51]

One important soft factor is the willingness for change which is often discussed under the issue ‘Change Management’. Change Management includes the task to create a positive consciousness of every employee regarding innovations and changes in the company. Furthermore the employees have to be made aware of the fact that a planned change is important to guarantee the maintenance of the company. Additionally Change Management encloses the development of strengths and the elimination of weaknesses and the need for a clear Corporate Identity. Moreover the Change Management process is not finished after a sudden change, but it is a permanent process of optimization.^[52]

Another important soft factor can be summarized as ‘Commitment and Leadership’. Commitment contains the complete support of the Top Management regarding the implementation of ECR. If there is no Commitment, neither the internal change nor external cooperation can be achieved. But as Commitment can not be forced, there is also the necessity for brilliant leadership qualities to implement it.

The second kinds of factors are the ECR secondary factors. They concentrate on the establishment of structures and processes and are also called the hard factors. The main hard factors are the competence in IT and its infrastructure, good skills and qualifications of the employees in the field of ECR (concerning knowledge about the ECR techniques and basic strategies), and the upholding of the required company specific infrastructure.^[53]

It has to be emphasized that the distribution of the soft and hard factors is based on the so called 80-20-rule. This means that the success of the implementation of ECR depends for 80 % on the soft factors and for 20 % on the hard factors. Moreover it has to be stressed that both factors have to be established by the company. It is not possible to implement either soft or hard factors, but it is necessary to implement soft as well as hard factors.^[54]

After establishing the soft and hard factors in a company, there is the necessity to find the ‘right’ ECR partner(s). The main criteria for the choice of the partner are:

- The partner should have the ability to implement the ECR Model.
- The existence of commitment of the partner’s management.
- A mutual trust between the partners.^[55]

Furthermore some key elements of functioning partnership have to be taken into consideration. These are amongst others the complementarities of the resources as well as the compatibility of the structure of the organization, the strategy, and the culture of the partner.^[56] Another deciding point is that the so called ‘ Critical Mass’ can be achieved. This means that approximately 20-30 % of the whole volume of business has to be handled via the strategies of the ECR Model.^[57]

If the right partner is found, three factors have influence on the formation of a partnership: i. The potential partners must have the required freedom of acting: This factor deals with legal and company-internal restrictions that may stand in the way of cooperation. For that, ECR activities have to be designed in such a way that there is no reproach of e.g. hidden gifts that may influence the regular market competition.^[58]
ii. The potential partners must be able to maintain ECR cooperation: This assumes that the partners have to have the needed core-competencies right from the beginning. If these competencies need not be developed over time, advantages in time and resources can be realized.^[59]
iii. The potential partners must be willing to maintain ECR cooperation^[60]: This means that the chosen partner needs to have the fundamental willingness to implement cooperation. This willingness contains the time horizon, the affected employees, the required capital, and the involved know-how. Furthermore the compatibility and the intensity of the provided interests have to be taken into consideration.^[61]

Additionally it has to be pointed out that the ECR cooperation has to be planned for a long-term use. This is a presumption to generate an amortisation of the investments for IT and the alignment of the relevant processes. Furthermore, both partners have to achieve advantages, because if there is a real or even only realized mismatch between the inputs or the advantages of the partner (e.g. a lack of knowledge of one partner, unbalanced specific investments, and imbalance of power) the partnership cannot be maintained.^[62] The citation provided by Kiliman, J./Schlenk, H. (1998b) summarizes the requirements of a partnership within a ECR cooperation in short: “Alliance success depends on an effective and efficient alignment (in other words, fit) between partners involved.”^[63]

Although there is no universal concept how to implement ECR, there are 5 general rules that should be obeyed: i. Willingness for change: The permanent willingness of every involved person to achieve changes is as well needed as endurance and persistence.
ii. Thinking in processes: The ability to recognize, evaluate, and live processes (including cross-company processes) is necessary to implement ECR.
iii. Redesign of processes: Processes that do not generate value have to be eliminated.
iv. Knowledge of technologies: Organizational and technological adjustments are the basis of change. The need for the appropriate use of technology has to be determined.
v. Willingness to learn: The employees can be overtaxed by new tasks. Early encouragement and support of the employees is necessary to develop the required comprehension. The process of change starts in the heads of the employees.^[64]

2.2. Definition and Distinction of a Supply Chain

2.2.1. Definition and description of a Supply Chain

In recent literature there are several kinds of definitions for a Supply Chain. These definitions differ according to the viewpoint of the definer. The definers can be distinguished in two groups. One group sets the focus on processes linked with supply, production, and distribution. The other group sets the focus on the institutional perspective.^[65]

For a broader definition, a Supply Chain can be characterized as a set of three or more entities that are directly involved in the upstream and downstream flows of products, services, finances, and information from a source to a consumer.^[66] In the case of a Supply Chain everything from the point of view of the consumer is upstream, whilst everything from the point of the source is downstream.^[67] The word ‘chain’ itself suggests that the flow of products, services, finances, and information is sequential. Thus the output of the previous level is the input for the next level. But as most elements of a Supply Chain nowadays have varied relationships to previous and following levels, the definition as a chain seems unsuitable. The complexity of the relationship rather leads to the term Supply Network. The majority of authors consider the Supply Chain as a Supply Network where the flows are not only sequential but also parallel.^[68] Moreover it has to be emphasized that a company can be part of different Supply Chains so that it can be a customer in one Supply Chain, a supplier in another Supply Chain, and a competitor in a third Supply Chain in the eyes of another company.^[69]

Additionally it has to be pointed out that due to the change from a sellers’ market to a buyers’ market the orientation of a Supply Chain must be set on the consumer, so that the right goods can be delivered at the right time, at the right place, for the right price, and in the right quality. In other words the Supply Chain has to support the satisfaction of the end-user requirements, so that its’ fundamental mission is matching supply and demand. So the elements in a Supply Chain are not only in touch with suppliers but also with customers. These customers should initiate activities throughout the Supply Chain with their purchases so that the whole Supply Chain is driven by the demand of the consumer according to the pull-principle. Due to the orientation on demand, Supply Chains are also often described as Demand Chains.^[70]

Although ‘Supply Network’ and ‘Demand Chain’ are more precise terms than ‘Supply Chain’, the term Supply Chain is still used in recent literature. Thus in this paper the term Supply Chain shall be used.

According to Lee (2006) top-performing Supply Chains have three different qualities: i. Agility,
ii. Adaptability,
iii. Alignment.

A Supply Chain that is agile has to react to sudden changes, has to have a head start over competitors, has super-efficient distribution centres, has to be capable of coping with emergencies (e.g. natural disasters, terrorism, war, epidemics, computer viruses), and has to draw up contingency plans for times of crisis. To build an agile Supply Chain six rules have to be followed: i. Data on changes in supply and demand have to be provided to the partners in a continuous way, so that a quick response is possible.
ii. Collaborative relationships with suppliers and customers have to be built, so that cooperation in designing can be installed.
iii. Postponement has to be implemented and used.^[71]
iv. Non-bulky and inexpensive components of a product can be kept in stock, because these products are often cause bottlenecks.
v. A dependable logistic system has to be built, so that the company can regroup in response to unexpected needs.
vi. A team that knows how to implement backup-plans has to be built.

Additionally a Supply Chain has to be adaptable. This means that the Supply Chain can be adapted to changing needs. For that two key components are required: Firstly there is the need to be able to spot trends. To this end economic changes have to be tracked and the needs of the ultimate customer have to be deciphered. Secondly there is the need to be capable to change Supply Chains: the option to alter Supply Chains has to be retained. For example new suppliers that are complementary to existing suppliers can be developed. Furthermore the design of products has to be aligned to the requirements of the Supply Chain. This means that products have to follow the three design-for-supply principles: Commonality, Postponement, and Standardisation.

Finally a Supply Chain must also fulfil the requirement of alignment. This means that the interests of the own company have to be aligned with the interests of all other companies in the Supply Chain. The main problem is that every company tries to maximize its own interests. To avoid this the terms of relationship in the Supply Chain have to be defined in a new way: Risks, costs, and rewards have to be shared equally. In a first step the information has to be aligned, so that every element of the Chain has equal access to forecasts, sales data, and plans. After that the identities have to be aligned. For this to occur smoothly, the roles and responsibilities have to be assigned to avoid further conflicts. Finally the incentives have to be aligned, which means that if a company tries to maximize returns this must also maximize the performance of the whole Supply Chain.

If these attributes are fulfilled, and if companies do not only concentrate on efficiency, a top-performing Supply Chain can be achieved. Furthermore responsibility for the whole Supply Chain has to be taken by every element. Additionally every element has to be prepared for changing networks. The realization of these requirements can not be generated by technologies but only by the skills of the involved managers.^[72]

2.2.2. Elements of a Supply Chain

After defining what a Supply Chain is the focus of attention can be set on the elements of a Supply Chain. As mentioned before, a Supply Chain starts at a source and ends at the point of consumption, which mostly is the consumer. A Supply Chain can for example consist of the following elements:

- Service Providers (e.g. warehouse operators, transportation companies, trading companies or customs brokers),
- Raw material and component producers,
- Second- and first-tier suppliers,
- Original Equipment Manufacturers (OEM),
- Distributors,
- Retail traders, and
- Customers or end-users.^[73]

[...]

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^[1]https://www.faz.net/s/Rub050436A85B3A4C64819D7E1B05B60928/Doc—EF621292F668342E09D18B A204384540D—ATpl—Ecommon—Scontent.html.

^[2] Cp. Germis, C./von Petersdorff, W. (2008), Page 35.

^[3] Cp. Siedenbiedel, S./Bernau, P. (2008), Page 33.

^[4] Cp. Germis, C./von Petersdorff, W. (2008), Page 35.

^[5] Cp. Winters, G. (2008a), Page C1.

^[6] Cp. Hieschler, H., interview, 08.11.2008.

^[7] Cp. W. a. (2008), Page A1.

^[8] Cp. Seifert, D. (2004), Page 29 pp.

^[9] Cp. Kümmerlen, R. (2008), Page 5.

^[10] Cp. Hieschler, H., interview, 08.11.2008.

^[11] Cp. Winters, G. (2008b), Page C1.

^[12] Cp. Busch, A./Dangelmaier, W. (2002), Page 3-21.

^[13] Cp. Boutellier, R./Locker, A. (1998), Page 1 pp.

^[14] Cp. Meier, H./Hanenkamp, N. (2002), Page 112 p.

^[15] „ECR Europe is a joint trade and industry body, launched in 1994 to make the grocery sector as a hole more responsive to consumer demand and promote the removal of unnecessary costs from the supply chain.“ Cp. http://www.ecrnet.org.

^[16] Cp. Coopers/Lybrand (1996), Page 4.

^[17] Cp. Seifert, D. (2001) Page 40., http://www.gs1-germany.de/content/standards/ecr- prozesse/supply_chain/enabling_techn/index_ger.html?raw=enabling%20technologies&ZMS_HIGHLIG HT=raw.

^[18] Cp. Holland, H./Hermann, J./Machenheimer, G. (2001), Page 11-17.

^[19] Cp. Seifert, D. (2004), Page 29 pp.

^[20] Cp. Gleißner, H./Femerling, J.C. (2008), Page 159 pp.

^[21] For a smart shopper, the price of a product is the main criteria for his purchase decision. Nevertheless there is simultaneously an increased expectation regarding the product quality and the degree of service. To satisfy the needs of a smart shopper thus the price of a product must be low and the quality must be good. Cp. Seifert, D. (2004); Page 31 pp.

^[22] Cp. Kortus-Schultes, D./Ferfer, U. (2005), Page 15 p., Heydt, A.v.d. (1999), Page 4. pp., Heydt, A.v.d. (1998), Page 47 pp.

^[23] Cp. Seifert, D. (2004), Page 49 p.

^[24] Cp. Gleißner, H./Femerling, J.C. (2008), Page 159 pp., Cp. Seifert, D. (2004), Page 49 p., Rodens-Friedrich, B. (1999), Page 205 pp.

^[25] The Enabling Technologies mainly deal with the topic Electronic Data Interchange (EDI). An important challenge in the field of EDI is to push all countries to implement the same standards (e.g. EANCOM). This helps to simplify the EDI in Supply Chains because new participants can then easily cooperate without the necessity that the Enabling Technologies have to be adjusted. Cp. Seifert, D. (2004), Page 49 p.

^[26] Cp. Kotschi, B. (2003), Page 190 pp.

^[27] Cp. Kuglin, F. (1998), Page 256.

^[28] Cp. Nenninger, M./Hillek, T. (2000), Page 1 pp., Kortus-Schultes, D./Ferfer, U. (2005), Page 21 pp., Göpfert, I. (2002), Page 27 pp., Corsten, D./Pötzl, J. (w. y.), Page 7, Töpfer, A. (1999), Page 362. pp., Seifert, D. (2004), Page 49 p.

^[29] Cp. Töpfer, A. (1999), Page 362. pp., Seifert, D. (2004), Page 49 p., Alvarado, U.Y./Kotzab, H. (2001), Page 183 pp.

^[30] Cp. Seifert, D. (2004), Page 49 p.

^[31] Cp. Mau, M. (2005), Page 87.

^[32] Cp. Corsten, D./Pötzl, J. (w. y.), Page 63.

^[33] Cp. Corsten, D./Pötzl, J. (w. y.) Page 63 pp., Mau, M. (2005) Page 87 pp., Holland, H./Hermann, J./Machenheimer, G. (2001), Page 77 pp., Heydt, A.v.d. (1999), Page 4 pp.

^[34] Cp. Corsten, D./Pötzl, J. (w. y.)Page 63 pp., Mau, M. (2005), Page 87 pp., ., Holland, H./Hermann, J./Machenheimer, G. (2001), Page 77 pp.

^[35] Cp. Moll, C. (2000), Page 277 pp.

^[36] Cp. Moll, C. (2000), Page 277 pp.

^[37] Retail traders want to achieve store loyalty; producers want to increase the image of their own products. Cp. Holland, H./Hermann, J./Machenheimer, G. (2001), Page 77.

^[38] Cp. Holland, H./Hermann, J./Machenheimer, G. (2001), Page 77 pp., Moll, C. (2000), Page 277 pp.

^[39] Cp. Heydt, A.v.d. (1999), Page 4 pp.

^[40] Cp. Holland, H./Hermann, J./Machenheimer, G. (2001), Page 77 pp, Mau, M. (2005), Page 87 pp, Corsten/Pötzl Page 89 pp.

^[41] Cp. Corsten, D./Pötzl, J. (w. y.) Page 89 pp.

^[42] Cp. Mau, M. (2005), Page 87 pp

^[43] Cp. Holland, H./Hermann, J./Machenheimer, G. (2001), Page 77 pp., Mau, M. (2005), Page 87 pp., Corsten, D./Pötzl, J. (w. y.), Page 89 pp., Heydt, A.v.d. (1999), Page 4 pp.

^[44] For other constructions of the supply-side of the ECR Model see e.g. Corsten, D (2004), Page19, Corsten, D./Pötzl, J. (w. y.) Page 11..

^[45] Cp. Kotschi, B.: (2003), Page 196 pp., Kreipl, C. (2004) Page 15 pp.

^[46] Cp. Hausmann, S. (1999); Page 112 pp.

^[47] Cp. Heydt, A.v.d. (1998), Page 98.

^[48] Cp. Zeiner, R./Ring, T. (1999), Page 23 pp., Hinterhuber, H.H./Friedrich, S.A. (1999), Page 331.

^[49] Cp. Corsten, D./Pötzl, J. (w. y.), Page 60.

^[50] Cp. Spalink, (1999), Page 293 pp.

^[51] Cp. Heydt, A.v.d. (1999), Page 4. pp

^[52] Cp. Heydt, A.v.d. (1999), Page 4. pp, Rodens-Friedrich (1999), Page 205 pp., Kreipl, C. (2004) Page 38-40., Holland, H./Hermann, J./Machenheimer, G. (2001), Page 170.

^[53] Cp. Heydt, A.v.d. (1999), Page 4. pp, Rodens-Friedrich (1999), Page 205 pp.

^[54] Cp. Heydt, A.v.d. (1999), Page 4. pp, Rodens-Friedrich (1999), Page 205 pp., Kreipl, C. (2004), Page 38-40., Holland, H./Hermann, J./Machenheimer, G. (2001), Page 170.

^[55] Cp. Friese, M. (1998), Page 91 pp.

^[56] Cp. Schmickler, M. (2001), Page 293 pp.

^[57] Cp. Mau, M. (2005), Page 62.

^[58] Cp. Vollmöller, T. (2001), Page 15 p.

^[59] Cp. Büschken, J. (1999), Page 778-791.

^[60] Cp. Kreipl, C. (2004), Page 38-40.

^[61] Cp. Linn, N. (1989) Page 37.

^[62] Cp. Lingenfelder, M./Kreipl, C. (2002), Page 873 pp.

^[63] Cp. Douma, M.U./Bilderbeek, J./Idenburg, P.J./Looise, J.K. (2000), Page 581.

^[64] Cp. Kiliman, J./Schlenk, H. (1998b), Page 215 pp.

^[65] Cp. Sucky, E. (2004), Page 5 pp., Ayers, J.B./Odegaard, M.A. (2008), Page 3 pp.

^[66] Cp. Mentzer et.al. (2001), Page 5.

^[67] Cp. Ayers, J.B./Odegaard, M.A. (2008), Page 3 pp.

^[68] Cp. Sucky, E. (2004); Page 5 pp., . Gleißner, H./Femerling, J.C. (2008), Page 23 pp., Busch, A./Danglmaier, W./Pape, U./Rüther, M. (2003), Page 5 pp., Ellram, L.M. (1991), Page 13-22.

^[69] Cp. Mentzer et.al. (2001), Page 5.

^[70] Cp. Gleißner, H./Femerling, J.C. (2008), Page 23 pp., Busch, A./Danglmaier, W. (2002), Page 4 pp., Ayers, J.B./Odegaard, M.A. (2008), Page 7 pp.

^[71] Postponement means that products are designed to share common parts and processes. They should only differ substantially by the end of the production process. An example can be T-Shirts that get their colour at the end of the production process. Cp. Lee, H.L. (2006), Page 87 pp.

^[72] Cp. Lee, H.L. (2006), Page 87 pp.

^[73] Cp. Mentzer et. al. (2001), Page 3, Ayers, J.B./Odegaard, M.A. (2008), Page 3, Nenninger, M./Hillek,