Journal of Operations Management 30 (2012) 269281

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Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

Customer-facing supply chain practicesThe impact of demand and distribution

management on supply chain success
Daniel Rexhausen a, , Richard Pibernik b,c , Gernot Kaiser d
a
EBS Business School, Department of Supply Chain Management & Information Systems, Konrad-Adenauer-Ring 15, 65187 Wiesbaden, Germany
b
Julius-Maximilians University Wrzburg, Chair of Logistics and Quantitative Methods, Sanderring 2, 97070 Wrzburg, Germany
c
Zaragoza Logistics Center, C/ Bari 55, Edicio Nyade 5, 50197 Zaragoza, Spain
d
Technical University Darmstadt, Department of Law & Economics, Hochschulstrae 1, 64289 Darmstadt, Germany

a r t i c l e i n f o a b s t r a c t

Article history: Traditionally, distribution has been viewed as the key (physical) link between a companys internal supply
Received 13 December 2009 chain activities and its customers. More recently, demand management has emerged as a new dimension
Received in revised form 23 January 2012 at the customer interface. Although it has become increasing popular in industry, it has not yet been ana-
Accepted 1 February 2012
lyzed in depth with respect to its impact on supply chain performance. Both distribution management
Available online 10 February 2012
and demand management entail customer-facing processes and practices and that are interrelated and
(may) jointly determine supply chain performance. In this paper we seek to extend the stream of research
Keywords:
in supply chain management by systematically investigating the impact of customer-facing supply chain
Supply chain performance
Supply chain management practices practices on supply chain performance. Specically, the paper examines the relative impact of relevant
Demand management practices associated with demand and distribution management. To this end, we collected data from 116
Distribution management multi-national companies based in Europe and analyzed it using structural equation modeling techniques.
Survey research Our results suggest that (i) high demand management performance has a substantial positive impact on
the overall supply chain performance, (ii) this effect is stronger than that of distribution management
performance, and (iii) there is no evidence that demand management might be an enabler for effective
distribution management. Among the individual practices that constitute demand and distribution man-
agement, adherence to the demand and distribution management processes and demand segmentation
emerged as the strongest performance levers. Based upon additional in-depth interviews conducted with
selected companies from our sample, we shed light on some of the most important ndings that emerged
from our survey analysis.
2012 Elsevier B.V. All rights reserved.

1. Introduction
The past two decades have witnessed a fast-growing interest of
practitioners and researchers alike in supply chain managements
contribution to corporate success. Today, there is a substan-
tial amount of empirical evidence on the relative importance of
traditional SCM practices and dimensions such as purchasing, man-
ufacturing, and distribution management (Narasimhan and Das,
2001; Mentzer et al., 2008). One comparably new SCM dimension
that has become increasingly popular in industry, but has not yet
been extensively analyzed in academic literature with respect to
its impact on supply chain performance, is demand management
(DeM). In its broadest sense, DeM can be interpreted as the ability of
a company to understand customer demand and requirements and
balance them against the capabilities of the supply chain (Lambert
Corresponding author. Tel.: +49 611 7102 2100.
E-mail address: daniel.rexhausen@ebs.edu (D. Rexhausen).
and Cooper, 2000; Croxton et al., 2002). While traditionally, DeM
has been understood as demand forecasting, a number of new
practices have been identied that constitute the DeM dimension.
Examples of such practices include customer and product segmen-
tation as well as integrated sales and operations planning (S&OP)
(Grimson and Pyke, 2007; Lapide, 2008).
Anecdotal evidence from industry demonstrates the tremen-
dous impact that good DeM or a lack of it may have on company
performance. Probably the most prominent case is network titan
Cisco Systems, who in 2001s economic downturn failed to antici-
pate the decline in demand due to a lack of demand and inventory
visibility. As a consequence, Cisco had to write off USD 2.2 billion
inventory and cut staff by 18% (Byrne and Elgin, 2002). An exam-
ple demonstrating the positive business impact of DeM is the ash
memory producer SanDisk. By implementing a company-wide DeM
process, SanDisk within just one year was able to increase revenues
by almost 50% with at the same time 30% more on-time deliver-
ies and 20% better inventory turns (Paganini and Kenny, 2007).
However, evidence of the relevance and impact of DeM is more of

0272-6963/$ see front matter 2012 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2012.02.001
270 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281
anecdotal character and originates largely from the practitioners
domain. Lapide (2007c), for example, states that excellence in DeM
is a major competitive advantage at the customer interface and
represents the next phase in the evolution of SCM. Some academics
(e.g., Croxton et al., 2002) also argue that DeM is an important driver
of supply chain performance. So far, however, there is no conclu-
sive empirical evidence to support this claim (see Section 2.1 for
a review of the relevant literature). Thus, the rst objective of our
research is to provide empirical evidence of whether or not DeM
does indeed have such a substantial positive impact on supply chain
performance.
Traditionally, establishing a link between a companys inter-
nal (physical) operations and its customers was considered to
be the major objective and integral task of distribution man-
agement (DiM) (Williamson et al., 1990). Thus, past research
on customer-facing processes predominantly targeted DiM;
numerous contributions provide evidence of the importance of
this dimension for supply chain performance (Stewart, 1995;
Gunasekaran et al., 2001). However, the impact of DeM and DiM and
their individual practices should not be studied in isolation since
they both entail practices and customer-facing processes that are
interrelated and may jointly determine supply chain performance.
Such a joint investigation is also highly relevant from a practical
point of view: of the top 10 supply chain disasters that are col-
lected and published by the online platform Supply Chain Digest,
as much as 7 may be attributed to failures either in DeM or in DiM
(Gilmore, 2009). Therefore, the second objective of our research is
the simultaneous evaluation of the impact of customer-facing SCM
practices related to both DeM and DiM.
Considering the typical sequence of and relationships between
different planning tasks in supply chain management, we can
expect a positive relationship between the performance of DeM and
DiM. It is reasonable to assume that companies with more effective
DeM practices should also exhibit better performance with respect
to DiM. An interaction effect between the two may also be conceiv-
able: high performance in DeM and DiM may jointly lead to superior
supply chain performance. As we will detail in Section 2, previous
research has not provided clear evidence of whether or not such
relationships exist. Therefore, the third objective of our research is
the analysis of a potentially existing relationship between DeM and
DiM.
To meet our three research objectives we conducted an empir-
ical analysis. Drawing from an extensive literature review and
expert interviews, we rst identify relevant practices related to
DeM and DiM. We then develop a conceptual model and corre-
sponding hypotheses aligned with the three research objectives
outlined above. We utilize partial least squares (PLS) to test our
hypotheses on the basis of survey data that was collected from sup-
ply chain professionals of 116 multi-national companies based in
Europe.
2. Theoretical foundation and model development
2.1. Literature review and motivation
The relationship between various SCM practices and supply
chain performance is an extremely popular research eld, which a
substantial body of scholarly work has contributed to (Gunasekaran
and Kobu, 2007; van der Vaart and van Donk, 2008). In the following
we review the work that has addressed the impact of customer fac-
ing processes and practices on supply chain or rm performance.
Lockamy III and McCormack (2004) investigate the link between
SCM practices and supply chain performance based on the supply
chain operations reference (SCOR) model (Supply Chain Council,
2008). They nd that those practices with the highest impact
include demand planning, supplier transactional collaboration,
make planning processes, and delivery process measurement. In
their study, demand planning is interpreted as demand forecast-
ing, whereas other demand planning dimensions such as dening
customer and product priorities were combined with more general
items such as supply chain performance measurement into a factor
named supply chain collaborative planning. Research examining
the interface between a companys internal supply chain activi-
ties and its customers has predominantly focused on distribution.
Stewart (1995), for instance, identies distribution performance as
the key element of SCM excellence that drives customer satisfac-
tion. Later, Gunasekaran et al. (2001) proposed four links for an
integrated supply chain and classied distribution as the link deal-
ing with customers. In addition, multiple authors have studied in
detail different distribution practices such as transportation/carrier
management and warehouse/inventory management and have
argued their positive performance impacts (e.g., Williamson et al.,
1990; Baker, 2008). More recently, the understanding of customer-
related SCM processes and practices has been complemented by
overarching planning practices labeled as DeM. However, compa-
rably little work has been conducted in this eld; contributions
generally focus only on isolated aspects of DeM, such as forecast-
ing or S&OP, and originate largely from practitioners (e.g., Lapide,
2006; Mentzer, 2006). Moreover, empirical evidence of any posi-
tive impact DeM as such might have on supply chain performance
is generally scarce and has foremost anecdotal character (e.g.,
Bower, 2006; Milliken, 2008). Among the few academic works deal-
ing with DeM more comprehensively are Croxton et al. (2002),
who, as previously mentioned, provide a conceptual framework
for DeM, which they use to examine a companys DeM process
and its successful implementation with a focus on forecasting and
synchronizing demand and supply. Croxton et al. argue that good
DeM has a positive inuence on distribution performance as well
as overall supply chain performance; they do not, however, pro-
vide any empirical evidence for this claim. In another work, Zhou
and Benton Jr. (2007) examine the relationship between supply
chain planning practices, including aspects of DeM such as fore-
casting, supply/demand balancing, and distribution performance.
In contrast to the conjectures made by Croxton et al. (2002), they
do not nd empirical evidence supporting a positive relationship
between DeM activities and distribution performance. However,
their conceptualization does not consider all previously identi-
ed DeM dimensions (e.g., segmentation, S&OP) and they only
test the link between DeM and one particular dimension of sup-
ply chain performance (delivery performance); their analysis does
not address the relationship between DeM and overall supply
chain performance. In the study of Lockamy III and McCormack
(2004), DeM and DiM are identied among the most important
SCM planning categories; their study provides evidence for posi-
tive performance effects of demand- and distribution-related SCM
practices. Lockamy III and McCormack (2004), however, primar-
ily examine the forecasting element of DeM. Furthermore, they
measure supply chain performance only as a separate self-assessed
rating of each supply chain management area (plan, source, make,
deliver) and not, as widely accepted, in terms of cost, service and
exibility (e.g., Beamon, 1999; Gunasekaran et al., 2004). In addi-
tion, they do not investigate any interrelationships between DeM
and DiM.
A number of contributions have been made with respect to indi-
vidual practices that can be subsumed under the term DeM. Among
the different works concerned with individual DeM practices,
one stream dealing with the impact of forecasting on opera-
tional performance has emerged. Primarily based on modeling and
simulation methods, several authors report positive relationships
between accurate forecasts and specic performance dimensions,
such as inventory levels, replenishment costs and service levels
 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281
(e.g., Gardner, 1990; Chen et al., 2000). One recent contribution has
been made by Smith and Mentzer (2010), who provide empirical
evidence of a direct relationship between the utilization of forecasts
for logistics decisions and logistics performance. In contrast to fore-
casting, demand segmentation (constituting a specic practice in
DeM) has received comparably little attention in the operations and
supply chain management literature. While practitioners empha-
size the importance of customer and product segmentation for
improving DeM and supply chain performance (e.g., Lapide, 2008;
Mercier et al., 2010), this linkage has not yet been addressed in the
academic literature. A substantial body of scholarly work on seg-
mentation has emerged in the marketing domain (e.g., Hofstede
et al., 1999; Foedermayr and Diamantopoulos, 2008). However, as
Foedermayr and Diamantopoulos (2008) acknowledge in their lit-
erature review on segmentation, most contributions are conceptual
or normative, dealing with how segmentation should be done or
arguing how it adds to achieving competitive advantage, rather
than providing empirical insights. Moreover, of the few empirical
studies they list, none analyzes segmentation practices in con-
junction with other DeM practices, nor are they linked to a rms
(operational or supply chain) performance.
Another particular stream of literature that is worth mention-
ing in a DeM context is dedicated to S&OP, a formalized approach to
internal integration with the primary objective to effectively bal-
ance supply and demand by aligning the different internal functions
involved (Tohamy, 2008; Atkinson, 2009). Anecdotal evidence doc-
umenting the positive performance impact of S&OP is manifold and
lists, for example, reduced procurement, inventory and logistics
costs, better customer service and ultimately increased corporate
performance among the value opportunities of S&OP (e.g., Bower,
2006; Muzumdar and Fontanella, 2006). However, research on
S&OP is again rather limited and foremost conceptual. One study
worth mentioning is that of Grimson and Pyke (2007), who, based
on a literature review and some company interviews, develop a
conceptual framework for S&OP, which is split into the ve dimen-
sions: meetings and collaboration, organization, measurements,
information technology, and plan integration. A number of research
contributions have popularized the term demand chain manage-
ment (DCM) (e.g., Frohlich and Westbrook, 2002; Heikkil, 2002).
DCM can be considered as a set of practices for managing and
coordinating the supply chain from end-customers backwards to
suppliers (Frohlich and Westbrook, 2002). DCM requires exten-
sive up- and downstream integration between all business partners
and a key concept in DCM is the so-called demand integration;
demand integration typically relies on information technologies
(including the Internet) and involves shared data between plan-
ning and control systems (Frohlich and Westbrook, 2002). In their
study, Frohlich and Westbrook provide evidence of the positive
effects of demand and supply integration on (supply chain) perfor-
mance. Their research is closely related to numerous publications
dedicated to supply chain integration. Literature has shown that
external integration, including customer/demand-side integration,
can yield signicant benets, while on the contrary, the picture
is not equally clear for internal integration. As our paper focuses
on customer-facing management practices of one rm and not on
collaboration practices between multiple rms, integration is con-
sidered in the form of internal integration practices, formalized as
integrated S&OP. Although we do not account for the impact of
external integration, we will see later in our analysis, that our con-
ception of DeM with a strong focus on internal practices explains a
substantial part of the DeM performance.
From this summary of previous work, we observe that the
academic SCM literature is lacking a comprehensive empirical
examination of the relevant practices associated with a rms DeM
and its performance impact relative to that of other customer-
related SCM functions such as DiM. Thus, in line with the research
271
objectives outlined in Section 1, we want to (i) study DeM in detail,
covering the most important practices and their impact on per-
formance, (ii) study DiM in detail, again covering most important
practices and their impact on performance in a comprehensive
model of customer-facing SCM practices, and (iii) study whether
there exists a positive relationship between DeM and DiM.
2.2. Model development
To meet our three research objectives, we propose the concep-
tual model presented in Fig. 1.
In order to theoretically develop the relationships in our model,
we build upon the resource-based view (RBV) of the rm. The RBV
analyzes rms based on their resources and argues that if these
resources are valuable, rare, inimitable and non-substitutable, they
constitute the basis for competitive advantage and superior perfor-
mance of a rm (Wernerfelt, 1984; Barney, 1991). Those resources
that can be characterized as (complex) bundles of skills, knowl-
edge and processes enabling rms to advantageously deploy their
assets, are typically classied as capabilities (Day, 1994; Eisenhardt
and Martin, 2000). Along the lines of this reasoning, DeM and DiM
performance in our model are realized higher-order supply chain
capabilities that (may) contribute to enhance a rms supply chain
performance. DeM and DiM practices, such as demand segmenta-
tion and warehouse management, constitute activities that each
entail specic skills, knowledge and processes and jointly create
these higher-order capabilities. Based on this notion we develop
the individual hypotheses constituting or research model.
2.2.1. The impact of demand management
According to the existing literature, DeM can be interpreted as a
rms capability to understand customers demand and require-
ments and balance them against the capabilities of the supply
chain (Lambert and Cooper, 2000; Croxton et al., 2002). Literature
(both academic and from the practitioners domain) discusses dif-
ferent practices that, if effectively implemented, may create this
capability, i.e. determine how well a company is able to balance
customers demand and requirements with the capabilities of the
supply chain. These practices include demand forecasting, segmen-
tation, S&OP, and DeM adherence. In order to be able to effectively
balance demand and supply, a company needs to know as accurate
as possible what the future demand of their customers will be. This
is the fundamental task of a rms demand forecasting and requires
a clear-cut and regularly modied methodology that processes all
available historic and current demand information from internal
and external sources (Croxton et al., 2002; Mentzer, 2006). Hav-
ing accurate and reliable forecasts decreases uncertainty and thus
helps rms to optimize their inventory levels and replenishment
policies, and to increase service levels (e.g., Gardner, 1990; Chen
et al., 2000). In this sense, effective forecasting practices constitute
a resource that contributes to a rms DeM performance.
H1. The extent to which effective forecasting practices are imple-
mented is positively related with DeM performance
Demand segmentation bundles practices related to the iden-
tication of key (groups of) customers and product-specic
requirements (Lambert and Cooper, 2000; Childerhouse et al.,
2002). Thus, it plays a critical role in a rms DeM, as each rm has
its individual customer base and product offering. By segmenting
on the one hand their customers into disjoint groups characterized
by different product and service requirements, and on the other
hand their portfolio according to the supply chain characteristics
and requirements of their products (e.g., make-to-stock vs. make-
to-order), rms accumulate unique knowledge and skills to better
understand the current and future demand and the capacities to
satisfy this demand (e.g., Lambert and Cooper, 2000; Lapide, 2008).
272 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281
Forecasting Segmentation
H1
DeM performance
DiM performance
H6
Warehouse
management
Fig. 1. Structural equation model.
In line with this reasoning, we consider demand segmentation a key
resource enabling the enhancement of a rms DeM performance.
H2. The level of demand segmentation is positively related with
DeM performance
To ensure the efciency of ows throughout the entire sup-
ply chain, rms seek to synchronize customer demand with the
supply chains purchasing, production, and distribution as well as
overarching functions such as controlling. This activity is com-
monly referred to as integrated S&OP (Croxton et al., 2002). Through
cross-functional processes, regular information exchange and joint
decision making, S&OP creates alignment between the different
internal functions (Grimson and Pyke, 2007; Milliken, 2008) and
as such unique knowledge and skills to surface and tackle cross-
functional issues with impact on inventory, cost and customer
service (e.g., Bower, 2006; Muzumdar and Fontanella, 2006). As
such, S&OP practices add to a rms capability of effectively bal-
ancing supply and demand (Tohamy, 2008; Atkinson, 2009).
H3. The extent to which integrated S&OP is implemented is pos-
itively related with DeM performance
Having the aforementioned practices in place might just not
be enough for a rm to achieve superior DeM performance. One
may argue, for instance, that a highly complex forecasting algo-
rithm that is neither well understood nor rigorously applied may
be far less effective than a quite simple one that is clear to everyone
in the organization and strictly followed. Therefore, we hypothe-
size that the level of adherence to the DeM processes, i.e., they are
well-dened, implemented, and strictly complied with, plays an
important role for a rm to develop superior DeM capabilities.
H4. The level of adherence to the DeM processes is positively
related with DeM performance
We positioned DeM performance as a realized capability to
understand customers demand and effectively balance it with the
own supply. Knowing what customers exactly want and aligning
supply chain capabilities, may enable rms to plan more accurately
and with less uncertainty, which may result in improved order ful-
llment in terms of quantity, speed and quality, lower inventory
levels and obsolescence and increased exibility. Hence, we argue
that superior DeM performance helps rms to improve their overall
supply chain performance (e.g., Lockamy III and McCormack, 2004;
Lapide, 2006).
H5. DeM performance is positively related with supply chain per-
formance
DeM
S&OP
adherence
H2 H3 H4
H5
H10 SC performance
H9
H7 H8
Transport DiM
management adherence
2.2.2. The impact of distribution management
DiM is commonly interpreted as a rms capability to ensure
reliable and efcient ow and storage of goods in order to meet
customers requirements (Bowersox et al., 2007, p. 22; Frankel
et al., 2008). In this sense, three important practices can be dis-
tinguished that create this capability: warehouse management and
transportation management (Larson et al., 2007), which both focus
on operations related to efcient storage and handling of goods
and materials, and DiM adherence. Warehouse management com-
monly bundles practices related to the efcient storage, handling
and picking of raw materials, work in progress, and nished goods
inventories (Bowersox et al., 2007, p. 22; Frankel et al., 2008).
By optimizing warehouse structures in terms of size, locations,
resources, technology and automation, rms may improve their
distribution capabilities signicantly. A high degree of automa-
tion supported by state-of-the-art information technology may, for
instance, increase internal process efciency and reliability through
less manual labor and errors, ultimately resulting in lower cost and
inventory levels as well as better delivery service and higher ex-
ibility (e.g., Baker, 2008; de Koster and Balk, 2008). In this sense,
effective warehouse management practices constitute a resource
that improves a rms DiM performance.
H6. The extent to which effective warehouse management is
implemented is positively related with DiM performance
To ensure the efcient ow of materials and goods from the sup-
pliers via different internal facilities to the customers, rms seek to
optimize their transportation networks. This activity is commonly
referred to as transportation management. Holistically optimiz-
ing transport routes and schedules and bundling transports to
achieve economies of scales may increase utilization and decrease
transportation cost signicantly without sacricing customer ser-
vice (e.g., Thomas and Grifn, 1996; Gunasekaran et al., 2001). In
this sense, effective transportation management practices add to a
rms capability of ensuring efcient ow of goods.
H7. The extent to which effective transportation management is
implemented is positively related with DiM performance
Again, having certain DiM practices in place might not be suf-
cient. One may argue, for instance, that the latest warehouse
automation technology, if not fully understood or leveraged, may
be far less effective than a more traditional and less automated one
that is clear and consequently applied by everyone. Therefore, we
hypothesize that the level of adherence to the DiM processes, i.e.,
they are well-dened, implemented, and strictly complied with,
plays an important role for a rm to develop superior DiM capabil-
ities.
 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281 273

H8. The level of adherence to the DiM processes is positively Table 1

Demographics of respondents.
related with DiM performance
Percentage of respondents
We characterized DiM performance as a realized capability to
Position within the rm
ensure a reliable and efcient ow and storage of goods. Through
Director 38.8
optimized transportation and warehousing across the entire logis- Head of department 25.0
tics network, e.g., better utilization and higher automation, this Vice president 15.5
capability should aid rms to lower overall supply chain cost, CxO 4.3
increase speed and exibility and improve customer service in Others 16.4
Annual revenue (2008)
terms of more on time in full deliveries (e.g., Gunasekaran et al.,
EUR 5 billion and above 12.9
2001; Rodrigues et al., 2004). Hence, superior DiM performance EUR 1 billion to less than EUR 5 billion 22.4
should improve a rms overall supply chain performance. EUR 500 million to less than EUR 1 billion 11.2
EUR 250 million to less than EUR 500 million 15.5
H9. DiM performance is positively related with supply chain man- EUR 100 million to less than EUR 250 million 12.1
agement performance Less than EUR 100 million 16.4
N/A 9.5
Industry sector
2.2.3. Interrelationships between demand and distribution Manufacturing 71.6
management Consumer products 19.8
Raw materials and chemical products 16.4
Considering the typical sequence of and relationships among
Machinery 11.2
different planning practices in supply chain management, we can Pharmaceutical and healthcare products 8.6
expect that companies with more effective DeM practices should Hightech 6.0
not only exhibit better DeM performance but also better perfor- Electronic and other/electrical equipment 5.2
mance with respect to their DiM. A systematic DeM approach, for Automotive 3.4
Wholesale and retail trade 19.0
instance, that provides an accurate prediction of which customers
Others 9.4
need to be delivered with which quantities of products within a
certain time, also serves as a basis for more efcient logistics and
distribution (Croxton et al., 2002; Taylor, 2006). Thus, we argue manufacturing of consumer products, raw materials and chemi-
that clear customer segmentation, clear-cut and executed forecast- cal products, machinery, pharmaceutical and healthcare products,
ing processes as well as integrated and aligned S&OP do not only high-tech, electronic and other electrical equipment and automo-
constitute key resources to enhance a rms DeM performance, but tive products as well as retail and wholesale trade. The title of the
should also provide DiM with a robust and reliable information respondents targeted was typically director/head of supply chain
basis for effectively managing its activities. Hence, we formulate management or logistics. In an effort to maximize the response rate,
the last hypothesis of our model: a modied version of Dillmans (1978) total design method was fol-
lowed. All mailings, including a personalized cover letter and the
H10. DeM performance is positively related with DiM perfor-
survey, were sent via rst-class mail. In order to make the submis-
mance
sion as convenient as possible, participants were offered several
options for returning the questionnaire (online, via mail, or via
3. Research design and methodology fax). Three weeks after the initial mailing, personalized reminder
e-mails were sent to all potential participants. Those who did not
3.1. Survey instrument respond within six to eight weeks after the initial mailing, received
a reminder telephone call. Of the 817 surveys mailed, 136 were
In order to design and validate an appropriate survey instru- returned due to address errors, or because the contact person was
ment, we undertook an extensive review of the literature to identify no longer with the rm or in the department. This reduced the sam-
scales used in past research. Newly created scales were based upon ple size to 681, of which 116 responses were received, resulting in a
the literature and Churchills (1979) paradigm of developing effec- response rate of 17.0%, in line with response rates of other surveys
tive measures for theoretical constructs. targeting members of professional organizations (van der Vaart and
Prior to data collection, the initial survey instrument was pre- van Donk, 2008). Respondents were, for the most part, middle and
tested for content validity. A panel of 5 researchers familiar with senior level supply chain executives within their organization. As
the constructs employed and 22 practitioner experts were asked shown in Table 1, the responding rms represented a wide range of
to critique the questionnaire as regards structure, clarity, ambigu- industries. Also, rm revenues were well represented, with about
ity, appropriateness, and completeness. Having reviewed the few one third of all respondents reporting revenues in excess of EUR 1
comments (mainly wording), the survey instrument was modied billion, while approximately another third represented rms with
accordingly. revenues of less than EUR 250 million.
To test for the existence of a potential non-response bias, the
3.2. Data collection responses of early responders were compared to late responders
to detect any statistical differences (Armstrong and Overton, 1977;
A combination of mail and online survey was used for data Lambert and Harrington, 1990). The results did not point towards
collection. The target sample frame consisted of members of a non-response bias in our sample.
the Bundesvereinigung Logistik (BVL)1 drawn from multi-national
rms based in Europe from various economic sectors and covered 3.3. Measures
under the International Standard of Industrial Classication of All
Economic Activities (ISIC) codes between 15 and 52. These include All ten constructs introduced in Section 2 constitute latent vari-
ables requiring indirect measurement (Churchill, 1979; Bagozzi
and Phillips, 1982). As the constructs in our study are management
1
BVL is one of Europes largest professional logistics and supply chain manage- practices and performances, which, from their inherent mean-
ment associations. ing, reect (i.e., cause) their indicators, they were specied
274 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281

to be reective (Diamantopoulos and Winklhofer, 2001;
Diamantopoulos et al., 2008). All indicators were selected
based on an extensive literature review as well as evidence from
practitioners. The individual items which were used to measure
the constructs in our research model are described in Appendix A.
In Appendix B, we also list the references that were used for the
development of the measures.
As it is generally very difcult to obtain objective data on a rms
operational and nancial issues (Narasimhan and Das, 2001), exist-
ing SCM survey research primarily relies on subjective measures of
performance (van der Vaart and van Donk, 2008). Following this
approach like many other SCM researchers (e.g., Tan et al., 2002;
Autry et al., 2005), this survey also relied on executives perceptions
of their rms performance in the different dimensions. In line with
past practice, the construct supply chain performance is opera-
tionalized by items indicating a rms competitive position in terms
of supply chain cost, service level and exibility (Beamon, 1999;
Gunasekaran et al., 2004). A 5-point Likert scale ranging between
strongly agree and strongly disagree was used to measure the
items. As it is common practice to assess supply chain performance
by relating it to the performance of major competitors (van der
Vaart and van Donk, 2008), the supply chain performance items
were measured using a 5-point Likert scale ranging between much
better and much worse compared with the (best) competitors.
The questionnaire is included in Appendix A.
As one respondent from each rm provided the data for our
study, concerns of common method variance may be raised. There-
fore, we conducted Harmans single-factor test (Podsakoff and
Organ, 1986), the most widely used method to evaluate the possi-
bility of common method variance (Podsakoff et al., 2003). We did
not nd any general factor that accounted for the majority of the
variance in these variables (10 factors emerged in the exploratory
factor analysis: the variance explained by the rst and second fac-
tors were 12% and 11% respectively; the last factor explained 5% of
the variance). Therefore, we conclude that common method vari-
ance is not a problem in our study (Podsakoff and Organ, 1986).
3.4. Analytical procedure
The partial least squares (PLS) structural equation model-
ing technique was applied to test our research model. PLS is a
components-based approach to structural modeling and has lower
sample size requirements than traditional covariance-based tech-
niques such as LISREL (Chin et al., 2003; Braunscheidel and Suresh,
2009). In particular, PLS avoids the problems inherent in small sam-
ple sizes, does not require normally distributed data and provides
more conservative estimates of the individual path coefcients
compared with covariance-based techniques (Chin, 1998; Henseler
et al., 2009), which constitute the major reasons why PLS is applied
to analyze the data in our sample. Several software packages sup-
port PLS; we used SmartPLS version 2.0 (Ringle et al., 2005).
Indicator reliability was tested using a bootstrapping procedure
with 500 randomized samples taken from the original sample and
of original cardinality (Henseler et al., 2009). As shown in Table 2, all
estimates of the outer loadings exceed the recommended minimum
value of .7 and exhibit sufcient t-values. When testing for indicator
reliability, convergent validity is also assessed, as loadings greater
than .7 imply that the indicators share more variance with their
respective constructs than with the error variances (Chin, 1998).
To assess construct reliability, Cronbachs alpha value () and com-
posite reliability (CR) were determined. As depicted in Table 2, the
for the constructs are all above the suggested cut-off value of .7
(Cronbach, 1951; Litwin, 1995). Similar results were observed for
the CR values, which were all greater than .8 and as such above the
suggested cut-off value of .6 (Bagozzi and Yi, 1988; Henseler et al.,
2009). Convergent validity was assessed using the average variance
extracted (AVE). As depicted in Table 2, the AVE is in all cases above
the recommended value of .5 (Fornell and Larcker, 1981; Henseler
et al., 2009). AVE was also used to evaluate discriminant validity.
Table 3 indicates the correlations between the latent variables and
the square roots of AVE on the diagonal. As the square root of AVE is
in each case greater than the correlation among the latent variable
scores with respect to its corresponding row and column values,
we can conclude that none of the constructs shares more variance
with another construct than with its own indicators, thus exhibit-
ing sufcient levels of discriminant validity (Fornell and Larcker,
1981; Henseler et al., 2009). Content validity does not have a for-
mal statistical test, but is augmented in this study by a thorough
foundation of the model (see Section 2) based on the relevant lit-
erature and the review of the survey instrument by a panel of both
academic and practitioner experts, as pointed out in Section 3.1.
To assess the structural models prediction relevance, we applied
a blindfolding procedure with an omission distance of 5 (Henseler
et al., 2009). All resulting Q2 values are larger than zero, indicating
sufcient predictive power of the structural model (Stone, 1974;
Geisser, 1975).
3.5. Results of analysis
The results from the evaluation of the structural model are
shown in Fig. 2 and reported in Tables 4 and 5. According to Chin
(1998), the R2 values of the endogenous latent variables DeM per-
formance (R2 = .60) and DiM performance (R2 = .59) are substantial,
while the R2 value of supply chain performance (R2 = .20) is weak
to moderate from a statistical point of view. In our specic con-
text, however, an R2 of .20 can be considered quite substantial,
because there are other SCM practices (e.g., purchasing or man-
ufacturing management), which certainly impact the supply chain
performance, but are not included in our model.
The signicance of the relationships among the latent variables
was tested using the associated t-statistics obtained from PLS boot-
strapping. As can be seen from the results reported in Table 4, seven
of the ten hypotheses can be conrmed, of which H2, H4, H5 and
H8 are signicant at the .01 level, H6 and H9 are signicant at the
.05 level and H3 (S&OP) is signicant only at the .10 level.
In Table 5 we report effect sizes f2 and the Q2 values for the
StoneGeisser criterion for the structural models latent variables.
The effect size f2 describes the increase in R2 relative to the pro-
portion of variance of the endogenous construct that remains
unexplained (Cohen, 1988). According to Cohen (1988), for the
endogenous latent variable DeM performance, the f2 of demand
segmentation and DeM adherence signify relatively large effects;
for DiM performance, only the variable DiM adherence exhibits a
large effect. In the case of overall supply chain performance, the
effect sizes of DeM and DiM performance range between small
and medium, with that of DeM performance being almost twice
as large as that of DiM performance. Table 5 also reports the latent
variable scores and respective 95% condence intervals, of which
non-overlapping intervals allow ranking of constructs in terms of
higher maturity/level of implementation. From there, we observe
that the constructs associated with DiM (performance and adher-
ence) exhibit substantially higher latent variable scores than those
associated with DeM (performance, adherence and segmentation).
Overall, the results of our analysis indicate a good model t with
substantial effects and predictive power.
4. Discussion of results
Our model and the corresponding analyses contribute to and
extend a growing research stream documenting the impact of dif-
ferent SCM practices on supply chain performance by (i) providing a
 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281 275

Table 2
Overview of indicators and measures of reliability and validity.

Constructs and indicators Outer loadings 95% Condence interval

Point estimation t-Value Lower bound Upper bound

Demand forecasting ( = .78, AVE = .69, CR = .87)

DeF1 Clear-cut forecasting process .795 10.56 .784 .794
DeF2 Regular measurement and modication .815 14.40 .792 .806
DeF3 Monitoring and acting upon accuracy .880 29.76 .877 .883
Demand segmentation ( = .71,  = .549, AVE = .77, CR = .87)
DeS1 Customer segmentation .863 21.07 .855 .863
DeS2 Product segmentation .896 38.73 .896 .900
Sales & operations planning ( = .74, AVE = .65; CR = .85)
SOP1 Fully integrated S&OP processes .869 31.92 .867 .872
SOP2 Organization follows S&OP processes .840 21.11 .831 .837
SOP3 Decision makers participate in S&OP meetings .705 9.85 .695 .707
Demand management adherence ( = .81, AVE = .72, CR = .89)
DeP1 Monitoring and acting upon demand management KPIs .765 14.76 .757 .766
DeP2 Clear process denition .887 43.31 .885 .889
DeP3 Strict process execution .890 51.45 .889 .892
Demand management performance ( = .78,  = .638, AVE = .82; CR = .90)
PDe1 Achieving desired performance .903 45.31 .900 .904
PDe2 Meeting operational business needs .907 48.49 .905 .909
Warehouse management ( = .77, AVE = .68, CR = .87)
WM1 Achieving desired performance of facilities and processes .797 20.54 .793 .800
WM2 Sufcient warehouse automization .887 30.73 .880 .885
WM3 state-of-the-art WMS .793 18.07 .787 .795
Transportation management ( = .72,  = .568, AVE = .78, CR = .87)
TM1 Optimization of transport modes and routes .836 13.64 .829 .839
TM2 Optimization of scheduling and routing .924 44.77 .923 .927
Distribution management adherence ( = .79, AVE = .70, CR = .88)
DiP1 Monitoring and acting upon distribution management KPIs .698 10.64 .691 .703
DiP2 Clear process denition .921 70.53 .919 .922
DiP3 Strict process execution .882 40.66 .882 .885
Distribution management performance ( = .71,  = .556, AVE = .76, CR = .76)
PDi1 Achieving desired performance .848 17.50 .840 .848
PDi2 Meeting operational business needs .901 47.33 .904 .904
Supply chain performance ( = .73, AVE = .65, CR = .85)
PSC1 Supply chain cost .744 9.92 .732 .745
PSC2 Supply chain service level .878 25.32 .872 .878
PSC3 Supply chain exibility .797 12.89 .784 .795

Cronbachs alpha; AVE average variance explained; CR composite reliability.

inter-item correlation for 2-item construct.

comprehensive model of customer-facing SCM practices, integrat-
ing relevant practices associated with both DeM and DiM; and (ii)
by demonstrating that DeM has an even stronger positive impact
on supply chain performance compared with DiM. In particular, our
ndings provide evidence supporting statements by practitioners
as regards the positive impact of DeM on supply chain performance
(e.g., Lapide, 2006, 2007a). Although we expected a direct positive
relationship between DeM and DiM, we did not nd any empirical
evidence supporting the existence of such a relationship. This is in
line with the results of Zhou and Benton Jr. (2007) who also did not
nd empirical support for a direct relationship between DeM and
DiM. To further explore this nding, we provide additional insights
from our survey data as well as from interviews with participants
on why this may be the case and why this might change over time,
as DeM practices mature.
In general, our results provide evidence that DeM and DiM per-
formance strongly impact a supply chains overall performance. We
observe that, in our sample of companies, DeM performance has a
stronger impact on the overall supply chain performance (b = .28) as
compared with the performance of DiM (b = .24; condence inter-
vals not overlapping). This is in line with the latent variable scores
displayed in Table 5. On average, companies perceive their distri-
bution performance to be higher (mean of 3.97) with less variability
(standard deviation of .69) than their DeM performance (mean of
3.27; standard deviation of .91). These results reect the fact that,
while DeM is a comparatively new dimension that has received

Table 3
Correlations between constructs.

Construct DeF DeS SOP DeP PDe DiP WM TM PDi PSC

Demand forecasting (DeF) .83

Demand segmentation (DeS) .36 .88
Sales & operations planning (SOP) .47 .42 .81
Demand management adherence (DeP) .52 .39 .51 .85
Demand management performance (PDe) .50 .58 .52 .68 .91
Distribution management adherence (DiP) .33 .36 .44 .60 .50 .84
Warehouse management (WM) .31 .36 .26 .43 .34 .47 .82
Transportation management (TM) .39 .23 .32 .35 .32 .53 .40 .88
Distribution management performance (PDi) .33 .31 .38 .49 .46 .73 .54 .48 .87
Supply chain performance (PSC) .32 .36 .21 .31 .39 .26 .36 .34 .37 .81

Square root of AVE on diagonal in bold face.

276 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281

DeM
Forecasting Segmentation S&OP
adherence
0.09 0.32*** 0.10* 0.46***

R = 0.60 DeM performance

0.28***

0.09 SC performance R = 0.20

0.24**
R = 0.59 DiM performance

0.23** 0.08 0.53***

Warehouse Transport DiM

management management adherence

*** Significant at 0.01 level, ** Significant at 0.05 level, * Significant at 0.10 level

Fig. 2. Complete model of customer-facing SCM practices and performance.

Table 4
Path coefcients and R2 of structural model.

Constructs and indicators Path coefcients 95% Condence interval Hypotheses

Point estimate t-Value Lower bound Upper bound

PDe (R2 = .599)

DeF .094 1.21 .087 .101 H1 Rejected
DeS .323 4.88 .318 .330 H2 Supported
SOP .103 1.46 .104 .117 H3 Supported
DeP .456 5.40 .444 .458 H4 Supported
PDi (R2 = .589)
WM .233 2.47 .217 .234 H6 Supported
TM .079 1.13 .075 .087 H7 Rejected
DiP .531 6.53 .530 .545 H8 Supported
PDe .087 .98 .084 .100 H10 Rejected
PSC (R2 = .199)
PDe .281 2.65 .271 .290 H5 Supported
PDi .241 2.43 .240 .257 H9 Supported

Table 5
Effect size, prediction relevance and latent variable scores.

Q2 f2 Latent variable scores

PDe PDi PSC Mean STDEV 95% Condence interval

Lower bound Upper bound

DeF .392 .01 3.67 .87 3.51 3.84

DeS .224 .20 3.44 .98 3.25 3.62
SOP .324 .02 3.25 .88 3.09 3.42
DeP .459 .32 3.44 .80 3.29 3.59
PDe .470 .01 .07 3.27 .91 3.10 3.44
DiP .419 .38 3.78 .76 3.63 3.92
WM .316 .10 3.44 .92 3.27 3.62
TM .266 .01 3.36 .89 3.19 3.53
PDi .442 .05 3.97 .69 3.84 4.10

Q2 calculated with omission distance of 5.

less attention, DiM is relatively more mature and maturity varies
less across companies. Moreover, the results also suggest that a
larger potential for improvement lies in the area of DeM, and that
improvements in this area will have a stronger overall impact on
supply chain performance compared with DiM.
The general managerial implication of this is that supply chain
managers should broaden their view of customer-facing SCM prac-
tices, rather than merely focusing on optimizing the (physical)
distribution of goods. Instead, they should seek to improve their
DeM, which was shown in our study to be less mature and to be a
greater lever for supply chain success.
4.1. DeM practices and performance
Out of the four DeM dimensions included in our model, two
exhibit signicant positive effects and emerge as the strongest
drivers of performance in DeM: DeM adherence (b = .35; f2 = .21)
and demand segmentation (b = .35; f2 = .19). Hence, applying dif-
ferent fulllment policies for different customer segments and
products, and adhering to clearly dened and strictly implemented
DeM processes appear to be the key to successful DeM. This pro-
vides empirical evidence for the often encountered managerial
wisdom that it is important to dene the right supply chain for
 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281
a product (e.g., Fisher, 1997), which requires obtaining an under-
standing of different customer needs and product requirements
(e.g., in terms of responsiveness and service levels), while, at
the same time, dening and implementing fulllment processes
accordingly (e.g., Hall and Johnson, 2009).
Although S&OP is presumed to be very important in linking the
customer facing activities to internal activities such as production
planning and inventory management (e.g., Lapide, 2007b; Milliken,
2008), we only nd a weak effect of S&OP implementation on DeM
performance (b = .10; f2 = .02) which is signicant only on a 10%
level. Based on the results displayed in Table 5, we observe that
the overall implementation of S&OP is, with a mean of 3.25, least
mature compared with other practices. This is further supported
by the fact that only 13% of the surveyed companies reported that
they strongly agree when asked whether they have implemented
fully integrated S&OP processes, while only 7% strongly agree
that they rigorously follow these processes. The consistently low
levels of implementation of S&OP may be one explanation for the
fact that we did not nd strong and signicant evidence for a rela-
tionship between S&OP and DeM performance. In order to further
explore this nding, we conducted personal interviews with the
key informants of two companies from our sample. We ranked the
companies according to their supply chain performance construct
scores and split this ranking into a top half, i.e., those 50% of com-
panies with the highest construct scores, and a bottom half, i.e.,
those with the lowest construct scores. One of the interviewees
was drawn from the top half of participants (company A) and one
drawn from the bottom half (company B). Company A is one of
the leading European consumer goods manufacturers of foods and
personal care products. The interview partner of company A was
Supply Chain Manager and responsible for manufacturing plants
and distribution centers across Europe. Company B is a leading pro-
ducer of pharmaceuticals. The interview partner of company B was
the Head of Global Supply Chain Management. Also, we conducted
a third interview with the Head of the Supply Chain Management
Practice of a large consulting company (consultant) who was part
of the expert panel that reviewed our survey instrument. All three
interview partners were confronted with specic ndings of our
analysis and were asked to comment on these, based on their expe-
rience within their own company (A and B) and across different
companies (consultant). Regarding the (negligible) effect of S&OP
in our sample, the respondent from company A stated that his com-
pany correctly dened and implemented an S&OP process already
some time ago, but until today did not see the full benets real-
ized. He identied the underlying cause in the complex nature
of S&OP: company As S&OP process integrated decision makers
from the different departments and corporate functions involved
in supply chain management. Due to the cross-functional character
of S&OP, conicts of interest between the participants frequently
arose. As most of them were on an equal level in the corporate
hierarchy, there was no natural process owner with clear manage-
rial authority to resolve these conicts. This situation either led to
alliance building and suboptimal decisions in favor of the major-
ity, or it took relatively long to achieve a compromise solution. In
the respondents view, both effects prevented the S&OP process
from unfolding its full benets. The interview partner from com-
pany B shared a similar view with us: formally, company B had
also dened and implemented an S&OP process, but in practice,
due to the high complexity, the process was not properly exe-
cuted. Production planning was, for instance, not (fully) aligned
with the demand forecast, there was no data transparency across
the different units, production maintained a dominant role in the
supply chain, conicts were not escalated to the executive level
and company B nally failed to reap the fruits of effective S&OP.
Further support stems from the interview with the consultant.
His comments on the insignicant effect of S&OP in our model
277
highlighted two particular aspects. First, he conrmed the argu-
ment previously brought forward by companies A and B: the high
level of complexity and cross-functional coordination led to many
companies struggling with their S&OP initiatives and prevented
them from implementing a successful S&OP process. Moreover, the
consultant pointed out that S&OP was a comparably recent inno-
vation and as such one of the most wide-spread buzzwords in
SCM in the sense that many companies purported to have S&OP,
but in fact they did not. Instead in most companies, S&OP in its
true sense was still in its infancy or in other cases even had yet
to nd its way into the supply chain organization. However, he
also stated that it still needed more time and experience with the
process in order to see a broad substantial effect of S&OP mate-
rialize. Altogether, this suggests that a major reason for the low
performance effect of S&OP in our model might be found in the com-
parably complex nature of S&OP. While segmentation, for example,
requires less cross-functional coordination, S&OP calls for coor-
dination of multiple stakeholders and functional divisions with
differing responsibilities and incentives involved in supply chain
management, i.e., sales, marketing, manufacturing, and sourcing
(Milliken, 2008). Also, the presumed performance effect of S&OP
in our model might have been diluted by (i) a potentially existing
misconception about what fully implementing S&OP in practice
really means and (ii) an insufcient number of companies that
already achieved satisfactory maturity levels in their S&OP pro-
cesses to draw conclusions. Hence, our ndings only imply that
S&OP does not (yet) have a direct and substantial impact on DeM
performance and thus should be the subject of further research
especially as higher maturity levels and better integration of S&OP
across different functions are reached. From a managerial stand-
point, this implies that it is important for supply chain managers
to understand the cross-functional nature of S&OP, cope with its
complexity and implement the S&OP process in order to realize its
potential benets. Naturally, we would then expect S&OP to play an
important role in efforts aimed at achieving superior performance.
4.2. DiM practices and performance
Of the three dimensions of DiM included in our model, two
exhibit signicant positive effects on DiM performance: DiM adher-
ence (b = .53) and warehouse management (b = .23). It is interesting
to observe that in this dimension, adherence also proves to be
a strong driver of performance in this case even by far the
strongest (f2 = .38). This nding empirically conrms the impor-
tance of business process management in an SCM context: effective
management of processes in terms of dening, improving, and,
most importantly, adhering to the right processes strongly con-
tribute to improving operational performance and efciency (e.g.,
Benner and Tushman, 2003). Although the importance of process
adherence is hardly surprising, it is interesting to observe that it still
has a dominant effect on DiMs performance relative to other prac-
tices. The extent to which processes in distribution are successfully
managed and adhered to still varies signicantly across compa-
nies, providing an explanation for much of the variation in DiMs
performance. The effect of warehouse management also turned out
to be signicant, albeit moderate, compared with DiM adherence
(f2 = .10). Recalling the individual items that were used to oper-
ationalize this construct, we can conjecture that optimization of
warehouse facilities and processes coupled with sufcient levels
of automation have a positive impact on distribution performance.
Although transportation management is a frequent subject of dis-
cussions in SCM and accounts for a substantial share of overall
supply chain cost (Thomas and Grifn, 1996; Gunasekaran et al.,
2001), we do not nd any effect on DiM performance in our model
(b = .08; f2 = .01). This may be a manifestation of good transportation
management increasingly becoming a commodity for both high
278 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281
and low performing supply chains. Another potential reason for
the negligible effect might be that companies no longer have full
transparency of their transportation, as it is frequently outsourced
(Trunick, 2008; Dean, 2009). Looking at our sample, we nd sup-
port for this argument: more than 70% of the participants state that
they have outsourced a substantial share of their transportation
activities, of which more than half have outsourced 75% or more.
Overall, we observe that the traditional practices of DiM are
already relatively mature and, thus, do not appear to be strong
levers for achieving competitive advantage. Since we nd that even
companies with comparably moderate supply chain performance
are quite advanced in managing their distribution, supply chain
managers should view DiM more as a pre-condition and not as a
lever for superior supply chain performance.
Revisiting the performance effects we observed for both the DiM
and DeM practices, another interesting managerial implication sur-
faces: ranked by strength, they provide managers with a priority
list that indicates where to concentrate activities and resources
rst in order to achieve substantial improvements quickly. In this
sense, strong adherence to the DeM and DiM processes consti-
tutes the most impactful lever for generating superior supply chain
performance. Considering the relative importance of the different
practices, our results suggest that it is more important to have well-
managed processes that are strongly adhered to than to pursue
higher levels of sophistication in individual practices.
4.3. The (missing) link between DeM and DiM
As mentioned in the above, it would be reasonable to consider
good DeM as an enabler that enhances DiM performance. However,
our data does not provide statistical evidence to support this con-
jecture. The inuence of DeM performance on DiM performance is
weak (b = .09) and not statistically signicant (see Table 4). More-
over, the coefcient of correlation between the two constructs
of .46 is comparably moderate (see Table 3). This implies that
companies that excel in DiM do not necessarily exhibit high DeM
performance and vice versa. To shed some more light on this nd-
ing, we separately analyzed the top and bottom 25% of our sample in
terms of supply chain performance. We observe that the top group
has higher average construct scores for DeM/DiM performance
(3.75/4.33) than the bottom group (2.70/3.58) as well as lower
standard deviations (.80/.52 vs. .97/.74), resulting in substantially
different correlations between the two performance constructs
(coefcient of correlation of .55 for top 25% vs. .19 for bottom
25%). From these results we conjecture that the top performers
indeed tend to show good distribution performance in conjunction
with good performance in DeM, while this relationship is diluted
in our model by the low performing group. Naturally, we cannot
infer causality from the correlation of the construct scores and we
are therefore unable to conclude that high DeM performance is
an enabler for high DiM performance. We do, however, observe
that some companies in our sample are able to achieve high lev-
els of performance in both dimensions. In light of these results, an
interaction effect between DeM and DiM performance could also
be conceivable. We tested for the existence of such an interaction
effect in a competing model. The results, however, did not provide
any statistical evidence in favor of an interaction effect.
In the above mentioned interviews with companies A, B and the
consultant, we also asked our interview partners to comment on the
(missing) link between DeM and DiM performance. In general, all
three were not surprised to see an only weak and insignicant rela-
tionship in our model. All three respondents attributed the missing
link between DeM and DiM performance to the fact that DeM was
just one factor and not the most important one inuencing
distribution performance. Instead, the efciency of production (or
procurement in case of retailers/wholesalers) was argued to be a
much more important factor for the delivery of goods and thus the
moderator between DeM and DiM. For instance, if there was not
enough short-term capacity (or supply of goods) available or pro-
duction management was not exible enough, DeM could be highly
efcient; however, its effect would be limited by the production (or
supply) capabilities. In such situations the company would observe
low DiM performance despite a well-performing DeM. This argu-
ment is closely related to what was previously stated about S&OP: if
the individual functions in SCM (especially DeM, production man-
agement, DiM) are not aligned, the company will neither achieve
the potential benets of S&OP nor will good DeM translate into
higher levels of DiM performance. Thus, the potential explanation
for the missing link between DeM and DiM performance may be
that DeM and DiM are not closely integrated within SCM, without
a seamless ow of information and close synchronization of inter-
related decisions (Lapide, 2007b). This synchronization is the major
task of S&OP (Croxton et al., 2002), which, in our sample, exhibits
on average the lowest score among all latent variables (mean of
3.25, see Table 5). On the one hand, we observe that the compara-
bly weak effect of S&OP on performance (see Section 4.1) and the
missing link between DeM and DiM performance may have very
similar roots. On the other hand, it is also reasonable to assume
that both (non-) ndings are closely related: a well-dened and
implemented S&OP process would, among other things, synchro-
nize demand, production and distribution management activities.
Hence, low levels of cross-functional process integration (reected
by our results regarding S&OP) provide a potential explanation of
the missing link between DeM and DiM performance. Based on
these results, we should be careful about drawing quick conclu-
sions about the absence of joint effects. Our data only captures
the current status for our sample companies and, as previously
mentioned, there is substantial correlation between DeM and DiM
performance for the top performing companies. Thus, as such man-
agement practices become more established (as they are in DiM)
and better integrated, we may very well observe stronger effects.
5. Conclusion and further research
In an era of globalized competition, effective management of
the customer interface is key to sustainable supply chain success.
A review of the relevant literature shows that the most recent
approach to customer-facing SCM practices entails both traditional
DiM and DeM practices, but still lacks sufcient empirical evidence
regarding the impact of the two dimensions and their key practices.
Based on these premises, this paper endeavored to measure the
inuence of DeM and DiM practices on supply chain performance.
A structural equation model was developed based on an extensive
literature review and insights from practitioners. Based on survey
data obtained from 116 supply chain professionals, our analysis
provides evidence that efcient DeM and DiM positively impact
the performance of a rms supply chain. While the direct effect
of DeM is stronger compared with that of DiM, we could not con-
rm any substantial inuence of DeM on DiM performance. Among
the individual practices that constitute DeM and DiM, adherence
to DeM and DiM processes and demand segmentation emerged as
the major performance levers. The effects of other practices such
as warehouse management or S&OP turned out to be moderate at
best.
The results of our study raise a number of interesting questions
and reveal a need for further research in several areas. In partic-
ular, there is a clear need to examine more closely relationships
that managerial intuition would predict to have positive perfor-
mance effects, but for which our data did not provide sufcient
statistical support. In-depth case studies could, for example, help
to better understand why such an important task as S&OP does
 D. Rexhausen et al. / Journal of Operations Management 30 (2012) 269281 279

not (yet) unfold its full potential or which practices are important Appendix A. (Continued. )
antecedents of successful S&OP. In addition, further research should
investigate and identify other SCM dimensions impacted by DeM, DeM performance
PDe1 Achieving desired Our DeM delivers the desired
and why good DeM performance does not appear to enhance DiM
performance performance within our
performance directly, and there, in particular, whether this might supply chain
be attributable to the existence of functional silos or production PDe2 Meeting operational Our DeM meets the
management performance being the moderator of this relationship. business needs operational needs of our
Other starting points for further research arise from limitations business
Warehouse management
regarding methodology and scope. First, the sample population
WM1 Achieving desired Our warehousing facilities
was drawn from the members of the German logistics associa- performance of facilities and processes are designed
tion BVL. Although this sample covered a wide range of rms in and processes to deliver the desired
terms of industry, size, and geography, we cannot claim that the performance
results of this research can be generalized without restrictions. WM2 Sufcient warehouse Our warehousing processes
automization are sufciently automated.
Thus, future research may need to include an even broader pop- WM state-of-the-art WMS We use a state-of-the-art
ulation to validate our results. Moreover, the analyses performed Warehouse Management
in this study were based on a self-assessment of the participants. System (WMS)
Objective data could complement our study in future research. Transportation management
TM1 Optimization of transport We have optimised the
Finally, the scope of our study is limited to DeM and DiM prac-
modes and routes transportation modes and
tices. Future research could embed this into a broader model that corresponding routes within
also includes purchasing and production management practices our given distribution
in order to investigate the magnitude of and interrelationships network
between these SCM practices. Despite these limitations, this study TM2 Optimization of scheduling We have optimised
and routing transportation scheduling
paves the way for researchers and practitioners to more fully under- and routing across our
stand the positive impact of customer-facing SCM practices on distribution network
supply chain performance. DiM adherence
DiP1 Consequent measurement We regularly monitor and act
upon DiM KPIs
DiP2 Clear process denition Our DiM processes are
Appendix A. Questionnaire clearly dened
DiP3 Strict process execution Our DiM processes are 100%
executed and followed by
Demand segmentation our staff
DeS1 Customer segmentation We have an up-to-date DiM performance
segmentation of our PDi1 Achieving desired Our DiM delivers the desired
customers according to performance performance within our
their service-level supply chain
requirements PDi2 Meeting operational Our DiM meets the
DeS2 Product segmentation We have an up-to-date business needs operational needs of our
segmentation of our business
products according to their Supply chain performance
specic supply chain PSC1 Supply chain cost How would you rank your
requirements supply chain cost
Demand forecasting performance relative to your
DeF1 Clear-cut forecasting We have implemented a best competitors?
process clear-cut forecasting PSC2 Supply chain service level How would you rank your
process supply chain service level
DeF2 Regular measurement and We regularly measure and performance relative to your
modication modify our forecasting best competitors?
process PSC3 Supply chain exibility How would you rank your
DeF3 Monitoring and acting We consequently monitor supply chain exibility
upon accuracy forecast accuracy and act relative to your best
upon inaccuracies competitors?
Sales & operations planning
SOP1 Fully integrated S&OP We have fully integrated
processes processes for end-to-end
sales and operations
planning that are aligned
with customer Appendix B. Overview of indicators and references
requirements
SOP2 Organization follows S&OP Our organisation rigorously
Indicators References
processes follows the dened sales
and operations planning Demand segmentation
processes DeS1 Customer segmentation Lambert and Cooper (2000),
SOP3 Decision makers The decision makers Lockamy III and McCormack
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meetings sales and operations DeS2 Product segmentation Lambert and Cooper (2000),
planning meetings Lockamy III and McCormack
DeM adherence (2004), Lapide (2008)
DeP1 Monitoring and acting We regularly monitor and Demand forecasting
upon demand KPIs act upon DeM KPIs DeF1 Clear-cut forecasting Lockamy III and McCormack
DeP2 Clear process denition Our DeM processes are process (2004), Croxton et al. (2002),
clearly dened Mentzer (2006)
DeP3 Strict process execution Our DeM processes are DeF2 Regular measurement and Lockamy III and McCormack
100% executed and modication (2004), Croxton et al. (2002),
followed by our staff Mentzer (2006)
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