Valahia University of Târgovişte

ECR Department Faculty of Economic Sciences

http://ecr.valahia.ro www.ecouvt.ro

SUPPLY CHAIN MANAGEMENT

JOURNAL

SUPPLY CHAIN MANAGEMENT FOR

EFFICIENT CONSUMER RESPONSE
SCM 4 ECR

Issue 1, 2010
 Supply Chain Management Journal

SUPPLY CHAIN MANAGEMENT JOURNAL

Editor-in-chief: Prof. VIRGIL POPA Ph.D.

Deputy Editor: Associate prof. LEONARDO BADEA Pd.D.

Editorial Board:

Prof. KATE ANDREWS Ph.D. (Argosy University, USA)

Associate Prof. DANIELA CORODEANU Ph.D. (Al.I. Cuza University, Iaşi, Romania)
Prof. IOAN COSMESCU Ph.D. (Lucian Blaga University, Sibiu, Romania)
Prof. IOAN DIMA Ph.D. (Valahia University of Târgovişte, Romania)
Prof. LUIGI DUMITRESCU Ph.D. (Lucian Blaga University, Sibiu, Romania)
Prof. IANUSZ GRABARA Ph.D. (Politechnika Czestochowska, Poland)
Prof. GHEORGHE GH. IONESCU Ph.D. (West University of Timişoara, Romania)
Prof. VICTOR RAÚL LÓPEZ RUIZ Ph.D. (University of Castilla – La Mancha, Spain)
Prof. ing. VLADIMIR MODRÁK CSc. (Tehnical University of Košice, Slovak Republic)
Associate Prof. ADINA NEGRUSA Ph.D. (Babes-Bolyai University, Cluj, Romania)
Prof. DOMINGO NEVADO PEÑA Ph.D. (University of Castilla – La Mancha, Spain)
Prof. VALENTIN NITA Ph.D. (Al.I. Cuza University, Iaşi, Romania)
Prof. Ing. JOZEF NOVÁC-MARCINČIN Ph.D. (Tehnical University of Košice, Slovak Republic)
Prof. PCz. Dr. hab PIOTR PACHURA (Czestochowa University of Technology, Poland)
Prof. THEODOR VALENTIN PURCAREA Ph.D. (Romanian-American University, Bucharest, Romania)
Associate prof. MARIE-PASCALE SENKEL Ph.D. (University of Nantes, France)
Associate Prof. MARTA STAROSTKA-PATYK Pd.D. (Czestochowa University of Technology, Poland)
Prof. DORINA TANASESCU Ph.D. (Valahia University of Târgovişte, Romania)

Young Editorial Board

Assistant Prof. NELU FLOREA Ph.D. (Al.I. Cuza Univerity, Iaşi, Romania)
Assistant Prof. MARIA CLAUDIA SURUGIU Ph.D. (Politehnica University, Bucureşti, Romania)
Assistant Prof. BOGDAN SAVU Ph.D. (Valahia University of Târgovişte, Romania)
Assistant Prof. DENISA TRANDAFIROIU Ph.D. (Valahia University of Târgovişte, Romania)
Assistant Prof. CRISTINEL VASILIU Ph.D. (Academy of Economic Studies, Bucureşti, Romania)

Editorial secretary

MĂDĂLINA BARNA

A4 Issue 1/2010
 Supply Chain Management Journal

Dear readers,

Why a new journal - Supply Chain Management Journal?

We have some pillars and several key achievements that empower us to take this
challenge.
The extraordinary opening since the early 90s of the new field of the collaborative
management strategy for the Efficient Consumer Response started from the Supply Chain
Management philosophy in FMCG. The extraordinary development of tools, techniques and best
management practices in SCM, FMCG and retail industries, spread after 2000 to other areas such
as defense industry, automotive industry and other industries.
The development of collaborative management practices has been supported by the
strongest consulting firms worldwide that have developed: CRM, SRM, ERP, e-Business, RFID &
EPC technologies and many other such new concepts.
Academia began, after 2000, to organize symposiums and conferences on this area. In
the same period, conferences in logistics turned into SCM conferences.
The founding of the ECR Department (Efficient Consumer Response) from the Valahia
University of Târgovişte in 05.09.2000 was a great opening in academia and business in Romania
and, to our knowledge, even in Eastern Europe.
The work performed by the ECR Department focused on supporting scientific material
disseminated and its own applications to various national and international scientific events, the
organization and the sustainment with news of the website http://ecr.valahia.ro and, most
importantly the organization and implementation the three symposiums (2005, 2006, 2009) ECR
- Academic Partnership Romania (continuing after another two national ECR conferences
organized in collaboration with CRD and the RESCOPA company, for business, consulting and
academia – 1996, 1997) and the Faculty of Economic Sciences introduced new university courses
such as SCM, CRM and Category Management, since the academic year 2003-2004.
These and many other factors lead to a maturity this year when it was organized the 4th
Symposium ECR - Academic Partnership Romania on: Supply Chain Management for Efficient
Consumer Response - SCM4ECR, which expanded from the previous through the participation of
many academics in Romania and abroad, and consulting firms. All works of the symposium were
synthesized in a Proceeding (B +)
It is realy important that we start with a very strong, professional Editorial Board team,
ambitious to publish the best papers in SCM.

What it wants and for whom? SUPPLY CHAIN MANAGEMENT JOURNAL

Our mission is to achieve a specialized magazine with the best professionals in the field,
Ph.D. students, members of academia and those who practice supply chain management in
business, in Central and Eastern Europe, through the collaboration with organizations of
excellence, promoters in the innovation of best management practices in Western Europe.

Issue 1/2010 A5
 Supply Chain Management Journal

When, where will it be? SUPPLY CHAIN MANAGEMENT JOURNAL

Our vision is to become a recognized journal in Romania, in the academic field, in

research and training of career practitioners in supply chain management for efficient consumer
response. We want it to be an excellent journal, listed by academic and business environments.
To do that, we want to focus all the editorial team and everyone participating with
articles (the ones selected from the symposiums or sent directly) on the principles and values
such as:
- The originality of the papers;
- Applicability of ideas;
- The style of presentation;
- Written communication;
- A rigorous research;
- The impact of ideas;
- Business orientated papers;
- Works focused on reducing costs, time, increased quality and agility / flexibility of
SC processes and organizations.

Our strategic objectives

1. To be a listed specialized magazine in a 5-year perspective;
2. To be a journal whose articles are cited by specialized academics in the Central and
Eastern-Europe;
3. To be recognized by the alumni of our university working at transnational
companies;
4. To be a magazine that receives feedback from the business world with good
management practices;
5. To be a commune place for future Ph.D. students in the SCM 4 ECR field.

We start this new magazine with a set of scientific articles resulting from the extension of
the best papers presented at the 4 th SCM4ECR Symposium.

Supply Chain Management Journal is a biannual magazine.

Editor in Chief,

Professor Virgil Popa Ph.D.

Member of ECR- Europe Academic Partnership

Member of Supply Chain Management Professionals, USA
Member of the Board of ECR România
Member of the Board of Romanian Distribution Committee

A6 Issue 1/2010
 Supply Chain Management Journal

CONTENT

Gheorghe Gh.IONESCU
The Business Ethics and the Efficient Consumer Response Strategy of Supply
Chain ………………………………………………………………………………………………………………………..…. 1

Theodor Valentin PURCĂREA

Building a True Partnership by Making Operational Innovation Work at the
Level of SCM for ECR……………………………………………………………………………………………….…… 7

Janusz K. GRABARA, Marta STAROSTKA-PATYK

Reverse Logistics Concept in Industrial Waste Management………………………………….... 16

Virgil POPA
Supply Chain Excellence Through Practicing Collaborative Business Process
Standards………………………………………………………………………………………………………………….….. 20

Adina NEGRUŞA
Retailers’ Innovation Strategies for a Better Position on Romanian Market………….….. 35

Valentin NIŢĂ, Daniela Tatiana CORODEANU AGHEORGHIESEI

Challenges for Great Retailers – Problems in Labor Force and Consumer Focus …….. 45

Cristinel VASILIU
Increasing Competitiveness by Moving From Logistics to Supply Chain……………….…… 51

Dorina TĂNĂSESCU, Denisa TRANDAFIROIU

Electronic Commerce Versus Traditional Commerce. Factors Affecting the
Choice in Lights and Lighting Fixtures Market…………………………………………………….……… 63

Angel Ciprian CORMOŞ, Valentin IORDACHE

Standards for Telematics Systems - Exchange of Traffic Data……………………………….…. 76

Aurora Aurelia DIACONEASA, Nicoleta MANEA, Sorin OPREA

Modeling Costs Using Time Driven ABC Method in Logistic Activities……………………….. 88

Maria Claudia SURUGIU, Ionel PETRESCU

Radio-Frequency Identification - The Modern Solution in Management
Of Commercial Vehicles………………………………………………………………………………….……………. 98

Gabriela PĂUNESCU, Viorica ŞTEFAN

The Role of Social Responsibility and the Quality of Human Capital in the
Consolidation of the Consumer’s Loyalty……………………………………………………………………. 109

Issue 1/2010 A7
 Supply Chain Management Journal

A8 Issue 1/2010
 Supply Chain Management Journal

The Business Ethics and the Efficient Consumer Response Strategy of Supply Chain

Gheorghe Gh. IONESCU

Faculty of Economics and Business Administration
West University of Timişoara

Abstract
The ECR is a happy mixture between management, marketing and ethics.
The relationship between ethical conduct an law sometime is confusing. Some would rationalize that
actions within the law are therefore ethical and perfectly justifiable. But an “if it’s legal, it’s ethical”
attitude disregards the fact that the law “codifies only that part of ethics which society feels so
strongly about that it is willing to support it with physical force”.

Key Words: changing, business ethics, legal behavior, ECR

Introduction which is a new way of looking at organizations

Many practices are within the law, such
as firing an employee just before retirement
benefits becomes vested, or charging a naive
customer more than a fair price: yet many
people would see these as unethical practices.
Can actions be ethical but illegal?
Violating the fair trade laws, which at one time
prohibited retailers from offering certain
brands bellow a designated price, is a case in
point. If a firm engages in illegal price cutting,
is this unethical? Many people see these acts
as ethical, even though they are against the
law.
The numerous relationships between
marketing intermediaries present many
opportunities for conflicts and disputes, some
of which may be related to ethical or unethical
behaviors. Manipulating a product’s availability
for purposes of exploitation and using coercion
to force intermediaries to behave in a specific
manner are particularly serious ethical issues
in the distribution sphere. For example, a
powerful manufacturer can exert undue in
distribution sphere influence over an
intermediary’s choice of whether to handle a
product or how to handle it.
“Virtues such as honesty are not self
evident when applied to complex marketing
decisions” (O. C. Ferrel University of Memphis).
The vision of Efficient Consumer
Response philosophy is “Working together to
fulfill consumer wishes better, faster and less
cost” this in my opinion require three essential
issues, first changing nature of managerial
work, second changing nature of marketing,
third a strong business ethics.
1. Changing of Managerial Work
Among the many changes affecting
managerial work today, the concept of the
“upside-down pyramid” is one of the most
symbolic. In Figure 1 is described this view
and the people in them.
The operating workers are at the top of
the pyramid: they are supported in their work
efforts by managers located at the bottom.
These managers aren’t just order –givers, they
are there to help other people serve customer
needs. The implication of Figure 1 are dramatic
for day-to-day work in all settings. From this
perspective, each individual is a value-added
worker – someone who must do something
that creates eventual value for organization’s
customers or clients.
The whole organization is devoted to
serving the customer, and this is made
possible with the support managers.
Many trends and emerging approaches
to organizations, such as the upside-down
pyramid, require new thinking from the people
who staff them. We are entering a time of
knowledge management when the best
managers are known more for “helping” and
“supporting” than for “directing” and “order-
giving”. Of course, even in this age of high
technology IT and “smart machines”, the
human resource is indispensable for its
knowledge’s.
Worker involvement and empowerment
are critical building blocks of organizational
success.
Full human resource utilization
increasingly means changing the way work
gets done organizations by pushing decision-
making authority to the point where the best
information and knowledge exists with the
operating workers. Jobs in the New Work place
are less clearly defined; there is more
emphasis and teamwork and people move from
project to project as their skills and expertise
are applicable. Increasingly, even the title of
“manager” is being replaced in the organization
charts by “coordinator”, “coach”, “team leader”
or “knowledge-leader” as.

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 Supply Chain Management Journal
Figure 1. The upside-down pyramid view of organizations
2. Changing Nature of Marketing
The nature of marketing is changing.
New insight, new tools, new opportunities and
new challenges are emerging as we step in to
21st century. And so too are our customers
ready targets for new global competitors. New
pressures also emerge as managers operate in
delay red organizations, stripped of supporting
services and yet freed from the quagmire of
tier upon tier or management. This means
more managers need to understand marketing
which, itself, is changing.
Marketing has moved from “customer
acquisition” (wining new customer) through
“customer” (keeping customers for life)
towards “customer deselection” (dumping
unprofitable customers while selectively
seeking and keeping the more profitable ones).
This is sometimes called “adverse selection”. It
is becoming obvious that some customers are
promiscuous non-legal bargain hunters who
exploit any sales promotion and move on the
next supplier as and when the next special
offer appears.
These customers cost a lot for very
little return, in fact, most of them are
unprofitable. Given the some estimates
suggest that new customers cost five times
more than existing customers or, another way,
selling to existing customers can be five times
more profitable than winning new customers,
you can see how it pays to know and love your
customers, particularly the loyal and profitable
ones. Some customers became loyal because
they prefer our product or service, other want
a stable relationship with one supplier, other
spend more, pay more quickly require less
service. Although recovery strategies (for lost
customers) are important, some defectors are
not worth saving. Carefully designed customer
selection strategies can leave the competition
2 Issue 1/2010
as with nothing but undesirable customer
segments the fight over.
Marketing is changing. New tools, such
as data mining and the much misunderstood
internet, offer a host of dynamic opportunities
beyond selling. Change is rampant, particularly
in marketing. Even the traditional suppliers, or
agencies, are changing. Apart from changing
the services they offer, they are changing their
names to reflect changes in the marketing
services market place. Burson Marsteller, in
1999, the world’s biggest PR agency, has
dropped “Public Relations” from his name, and
Saatchi and Saatchi has dropped “advertising”
from its name.
Managers too have to change – accept
the need for “life hang learning”, and
continually update and improve themselves
with new skills, new insights, new tools.
Before looking at the “strong business
ethics” consider briefly marketing. A simple
dictionary definition of marketing reveals:
“Marketing means the business of moving
goods from the producer of the consumer”.
Goods can be taken to mean good or services.
The Chartered Institute of Marketing in
the UK defines marketing as: “The
management process responsible for
identifying, anticipating and satisfying
customer requirements profitably”.
Some years ago the American
Marketing Association spent time and effort
considering the appropriateness and accuracy
of their definition of marketing. Their new
definition incorporated one major change –
they took “profit” out, possibly because it
excluded the vast armies of marketing
professionals who work for charities an other
non-profit-making organizations. Also perhaps
now it’s very important that all peoples
involved in business “win”, now the old slogan
 Supply Chain Management Journal
“win-loss” or “winner-loser” is changed in
“winner-winner-winner”. So in the UK definition
perhaps be better replace “profitably” with
“efficiently” or “in a way that meets the
organization’s goods”.
A simpler definition can be “marketing
is the selling of goods that don’t come back to
people who do”. “Goods that don’t come back”
emphasizes the importance of matching the
promise (made by, say, the advertising or the
packaging) with the reality of the product’s or
service’s quality, i.e. the level of quality should
match that which is advertised. In the long
term it does not pay to cheat the customer.
Real marketing success depends on
repeat business, and that is where “people who
don’t come back” embraces the customer’s
“lifetime value” concept. Customers do not buy
just one cun of beans, one car, or one
photocopy machine. They buy thousands of
cuns of beans, dozens of cars and dozens of
photocopiers during their “lifetime”.
There the marketing challenge lies in
attracting and retaining profitable customers
efficiently. A move away from the “one-off
sales syndrome” allows marketing horizons to
broaden to lifetime customers and lifetime
strategies. And today marketers are really
interested in separating unprofitable from
profitable customers, so that those customers
who really do contribute to the bottom line can
be nurtured. Lifetime customers are built
through strong relationships which, in turn,
require relationship marketing skills. Another
set of relationship skills is also emerging in the
form of marketing marriage. Marketing
marriages such as joint promotions, shared
databases, shared distribution network and
strategic alliance offer new opportunities for
existing markets, but also offer new routes into
global markets previously inaccessible because
of an organization’s limited resources.
Foul – smelling mountain – small
portion in life.
The tinned cat food market in the UK is
huge. To put it in perspective imagine, if you
can, the entire Albert Hall filled from floor to
ceiling in cat food. Remove the shall of the
building, like a giant jelly mould, to leave a
quivering mountain of pull smelling, jellied
meat and you have a vivid picture of the
amount of food that cats in this country much
their way through every two months – amazing
when you consider that only 23 percent of
homes in the UK have a cat (Ivan Pallard,
Media Planning Director BMP DDB Needham).
Conclusion: Marketers must view
customers as lifetime values beyond short term
horizons.
Ethics are our beliefs about what is
right and what is wrong. The planning process
recognizes responsibilities to consumers,
Issue 1/2010
channel members, and the company. This
responsibility is accomplished by designing a
marketing strategy to satisfy the needs of each
of these groups. The law and general public-
policy issues also come into play. However,
personal beliefs about what is right and what is
wrong should also constrain our decision
making. It is called exercising ethical standard.
Ultimately, marketing planners must
live with their professional behavior and
decisions in the some way that they must live
with their personal behavior and decisions.
An implication of the theory of
competitive rationality is that the ethics and
values of marketing planners greatly influence
society. Because supplier behavior shapes
consumer behavior that values of marketing
planners expressed in what they make and
how they sell set a moral tone in and beyond
the market place. The ethical dilemmas can be
complex.
2.1 The Law is a minimum Ethical
standard
Why do we need ethics when we have
the law, which tells us what we can and cannot
do? One answer is that the letter of the law is
generally considered to be only a minimum
ethical standard. Another answer is that the
law often does not work the way it should be.
As aptly state in the code of ethics of
Caterpillar Tractor, the law is a floor, and must
not serve as the only basis for individual and
corporate ethics.
2.2 Competition, ethics and
efficiency
Social Darvinism was used to excuse
the sharp trading practices of the so-called
robber barons who dominated American
business at the turn of the century. These
industrialists, financiers and entrepreneurs
helped make the United States a superpower.
They left endowments that built some of the
finest universities in the world. But they were
also quite unscrupulous at times. On a similar
theme, some marketers and economists have
used Adam Smith’s economic philosophy to
argue that it is right to pursue self interest
(read selfish interest) in the market place,
using any means within or around the law. It is
true that competition makes the market
efficient, but only in an ethical environment.
For example, if suppliers conspire to
reduce competition, then competition ceases to
exist. Competition is also reduced if suppliers
are not honest in their product or service
claims. If advertising is deceptive or
contractual promises are non kept, then the
competitive pursuit of “self-interest” will no
longer be efficient and serve the interest of
consumers and society. When ethics do not
3
 Supply Chain Management Journal
exist, the visible hand of government
regulation must ensure that competition works
honestly and openly.
2.3 The categorical imperative
Emanuel Kant’s famous categorical
imperative offers an alternative to situational
ethics. His approach is to ask whether the
proposed action would be right if everyone did
it. What would happen to the social fabric?
What would happen if you were constantly on
the receive and of such ethics? This approach
takes most of the situation or context out of
the ethical evaluation and, in that sense, is
more explicit than the utilitarian principle. But
the categorical imperative still requires the
decision maker to see the universal wrong or
evil in the act of everyone did it. Immoral or
amoral individuals, caring nothing for society,
may answer that yes it would be fine for
society and that others are welcome to act in
the some way toward them. Both situational
ethics and the categorical imperative still
require a basic set of values. Such values are
normally based a religious beliefs.
2.4 The religious foundations of
marketing ethics
It is no accident that both primitive
and advanced civilizations have ethical and
moral codes that constrain group and
individual behavior. The enlightenment of a
civilization is often measured by its underlying
ethics. When ethical codes break down,
societies cease to function and ultimately
collapse from within (for example, the decline
and fall of the Roman Empire) or under
external pressures (for example, the defeat to
the Third Rich in the World War II). How such
ethical codes do came about? The history
civilization reveals that they are based on a
society’s predominant religious creed. As the
obvious source of a marketing decision maker’s
code of ethics is the society’s general code of
ethics, this suggests that marketplace ethics
will have a religious basis.
The predominant religion of the USA is
Christiany. The Judeo-Christian creed has
greatly influenced the constitution common law,
and the system of justice in the USA. Thus, it
can be argued that marketers in USA should at
least evaluate, if not adapt, a code of
marketing ethics based on Judeo-Christian
religious beliefs.
Conflicts can results when this theory
is applied to societies in which freedom of
worship and thought is a right. It is to be
expected, and appropriate, in a free society
that a believer of another religion will apply his
or her religious ethics to all situations,
including marketing decision making. This
exercise of a different religious beliefs and
4 Issue 1/2010
values increases the variability. In ethics that
Americans are likely to observe in the
marketplace.
One reason Americans should use the
predominant religion’s values as the common
case for American society’s ethics enable
Americans to anticipate the likely behavior of
other parties in the market. This anticipation
leads to an increase in trust and sense of
confidence and control that the market is
orderly and fair. If the clearly dominant and
underlying religious creed in American society
is not to be used as the foundation for a
generally difficult to argue than some other
religious or moral philosophy should be
substituted.
2.5 Ethics and the law
The relationship between ethical
conduct and the law sometimes is confusing.
Some would rationalize that actions within the
law are therefore ethical and perfectly
justifiable. But an “if it’s legal, it’s ethical”
attitude disregards the fact that the law
“codifies only that part of ethics which society
feels so strongly about that it is willing to
support it with physical force”. Many practices
are within the law, such as firing an employee
just before retirement benefits became vested,
or charging a naïve customer than a fair price,
yet many people would see these as unethical
practices.
Can actions be ethical but illegal?
Violating the fair trade laws, which at one time
prohibited retailers from offering certain
brands below a designated price, is a case in
point. If a firm engages in illegal price cutting,
is this unethical? Many people see this act as
ethical, even though they are against the law.
Ethics concerns standards for decision
making and right conduct. Unfortunately, there
is little agreement as to what constitutes
ethical behavior. At the extremes, of course,
there is not much dispute. For example most
observers would consider representing used
goods as new as unethical and a “no questions
asked” refund policy as ethical.
But many other practices fall into a
“gray area”, which is not clearly unethical and
not illegal, yet perhaps not entirely ethical.
- Using handicapped or poor people to sell
products through emotional appeals.
- Using high-pressure tactics in persuading
people to buy.
- Misleading customers into thinking they are
getting a bargain.
- Entertaining clients with call girls.
- Disclosing confidential information about one
customer to other customer.
- Cheating on expense accounts.
- Making false or disparaging remarks about a
competitor.
 Supply Chain Management Journal
Disagreement about ethical conduct
arises particularly regarding the amount and
veracity of information that should be supplied
potential customers in making their buying
decisions. This is, of course, less of a problem
with industrial buyers and professionals than
with consumers. In recent years increasing
pressure has been applied for direct legislation
for tree standards, unit prices, truth in
packaging and the like, and has resulted in
some legislation the conviction is even growing
that anything less than full disclosure is
unethical. Yet many sellers still see nothing
unethical in extolling their products, “virtues”
Figure 2. Perspective of ethical and legal behavior
Figure 2 represents the perspective of
ethical and legal behavior, reflecting some of
the issues presented. Although most people
would consider certain actions as ethical or
unethical, legal or illegal, other behavior falls in
the gray area.
In the Figure 2., plot examples of
questionable practices from the preceding list.
Several points are already established in this
figure. Representing used goods as new is
equal to point “C” and would be both unethical
and illegal. Selling a medicine without recipe
for an especially situation is pleated as point
“A” is illegal but ethical.
Firing an old employee shortly before
retirement benefits become vested night best
be plotted as “D”, being legal but likely
unethical. And a “no questions asked” refund
policy certainly would be both legal and ethical
and would be plotted as “B”. Now were would
we plot using handicapped people to sell
through emotional apples using high pressure
tactics, misleading customers, using call girls,
violating confidentiality, expense-account
cheating, and disparaging a competitor?
Firing an old employee shortly before
retirement benefits become vested night best
be plotted as “D”, being legal but likely
unethical. And a “no questions asked” refund
Issue 1/2010
(perhaps with enthusiastic exaggeration
commonly known as “puffing”), while
maintaining complete silence on any known
inadequacies. This is simply part of the selling,
they claim.
Unfortunately we can not represent on
the some continuity both conducts ethical and
legal, because their extremes are not in the
points, in this situation a model about
relationship between ethical conduct and the
law can be represent only on the coordinates
axis system as in Figure 2.
policy certainly would be both legal and ethical
and would be plotted as “B”. Now were would
we plot using handicapped people to sell
through emotional apples using high pressure
tactics, misleading customers, using call girls,
violating confidentiality, expense-account
cheating, and disparaging a competitor?
2.6 Ethics and profits
Many business people assume that the
more strictly are interprets ethical behavior,
the more profits suffer. Certainly, the muted
sales efforts that may result from tanning
down products claims or resisting customer
hints and even demands (especially in some
foreign countries) for bribes or kickbacks may
hurt profits. Yet, a strong argument can also
be made that scrupulously honest and ethical
behavior is better for business and for profits.
Well-satisfied customers tend to bring repeat
business. An unbending disavowal of the
unethical practices of bribery and kickbacks
may help to restore a health or business
environment for an entire industry. Using call
girls, violating confidentiality, expense-account
cheating, and disparaging a competitor?
The firm’s representation for honest
dealings can be a powerful competitive
advance. Ethical conduct is compatible with
5
 Supply Chain Management Journal

maximizing profits in the long run, although in
the very short run, disregard of high moral
principles may yield more profits.
References
Kathryn M. Bartol, david C. Martin (1999),
Management, McGrow Hill Inc., New York,
London, Toronto.
John R. Boatricht (2000), Ethics and the
Conduct of Business, Prentice Hall, New Jersey.
George D. Chryssi and John H. Koler (1993),
An Introduction to Business Ethics, Chapman &
Hall, London, Tokyo, Melbourne.
Sally Dibb, Lyndon Simikin, William M. pride, O.
C. Ferrell (1997) Marketing: concepts +
strategies. Houghton Mifflin, Boston, New York.
O. C. Ferrell, George Lucas “An evaluation of
progress in the development of definition of
marketing”, Journal of the Academy of
Marketing Science, Fall 1987.
Richard De George (1995), Business Ethics,
Prentice Hall, Englewood Cliffs, New Jersey.
Michael Levy, Barton A. Weitz (1992), Retailing
Management, IRWIN, Homewood IL, Boston.
Stephen P. Robbins (1999), Management,
Prentice-Hall International Editions, New Jersey.

6 Issue 1/2010
 Supply Chain Management Journal

Building a true partnership by making operational innovation work

at the level of SCM for ECR

Theodor Valentin PURCĂREA

Romanian – American University

Abstract
SCM is a concept presupposing to engage the customer, to consider the enabler and to think
creatively, developing and deploying a sustainability strategy, the corporate strategy being a pattern
of converging decisions and actions of the firm in order to improve key process capabilities. Today
there is an increasingly critical influence on the strategic business outcomes of the supply chain
strategy and execution, being critical to focus the supply chain team on driving value across the
enterprise and being necessary to build an adequate supply chain. Supply chains have become
increasingly complex and time-sensitive, the economic success of the company being intertwined with
the actions of its suppliers and applying value chain principles creating customer value and
competitive advantage thanks to an adequate combination of a superior supply chain, committed
customers and loyal consumers. At the level of the new partnership between producer - distributor -
consumer it is pledging for identifying a set of capability standards to ensure both shopper satisfaction
and organizational effectiveness. Assessing strategic options in the today evolving business
environment presupposes taking into account the supply chain design as the ultimate core
competency of an organization, by designing and redesigning the company’s chain of capabilities for a
series of competitive advantages. ECR means simultaneously increasing value to the consumer, while
improving supply chain performance for distribution channel members by a better coordination
between marketing, production, and replenishment activities. By reducing lead-times, improving
service levels and decreasing costs, collaboration can improve the number of satisfied customers. If
the organizational success is depending on the role of supply chain management, consumer behavior
brings also an essential factor toward future organizational viability, so that it is important to sense
the demand, being close enough to the consumer as to receive its preferences and signals as early as
possible. In these times of financial stress and related recessionary pressures there is a real need: to
become more demand-driven; to make fundamental changes in the way of thinking about the supply
networks; to treat supply chain thinking as a philosophy that pervades the entire company.

Key Words: value chain, ECR, SCM

1. Supply chain executive’s agenda for

Outline
1. Supply chain executive’s agenda for 2011
and the continuous firm’s alignment with its
environment. Shaping the firm’s context via
cooperative relationships within the
development of Markets-as-Networks
2. The challenge of creating more nimble
supply chain operations that deliver results.
Making brand “right” merchandise available to
customers through energized retail
experiences. The new retail world governed by
„acting vertical” solution. Building the network
of the future on the strong foundation of a well
crafted inventory strategy
3. The new marching orders and the context of
SCM 4 ECR Symposium 2010
4. SCM4ECR, a real challenge
5. The Future Value Chain and the imperative
of true collaboration, of new capabilities, and
of new measurements
6. The most important promise of SCM4ECR
and the greatest team challenge
2011 and the continuous firm’s alignment
with its environment. Shaping firm’s
context via cooperative relationships
within the development of Markets-as-
Networks
On November 3rd , 2010, “Romanian
Distribution Committee Magazine” Website
launched an interesting question: “Are you
ready for a challenging case study? Anne
Hampton & James Rowell, Hot Melts: A New
Global Strategy” (Hampton, 2010). The case
study - brought into discussion by two
representatives of the Business School,
University of Buckingham, UK (James Rowell,
specialized in Operations & Supply Chain
Management, is also Member of the Editorial
Board of the Romanian Distribution Committee
Magazine) - was researched with a leading UK
SME, a manufacturer and distributor of
industrial adhesive products, Beardow Adams
(whose products are supplied to over fifty
independent distributor companies around the
world, its international business accounting for

Issue 1/2010 7
 Supply Chain Management Journal
over two-thirds of revenues). The case
explores: the company strategy to harness the
capabilities of its distributor network to win
business with large multi-national customers;
the issues relating to the capabilities of the
company to support its on-going international
development. It is showed that the objectives
of the case (also considering the development
of capabilities, within Beardow Adams and its
Distributors, to support its aims of winning new
business) are to explore and discuss
international/supply channel issues within the
organization, further insight being required to
understand the market place (types and
location of prospective multi-national
customers) and the need for establishing clear
activities and processes to win business with
those companies.
A year before, in October 2009, Nari
Viswanathan (Viswanathan, 2010) from
Aberdeen Group argued that, in this whole
different world now, complexity has risen in
multiples, there are results in loss of control
and visibility, and demand-supply networks
compete with each other rather than individual
enterprises. According to a research of
Aberdeen Group (“Turn to Aberdeen for
Research with Results”), “The Top 2 SCM
pressures” looks as follows: economic and
financial volatility (37%); rising business
complexity of managing an increasingly global
business network (36%); rising supply chain
management costs (35%); escalating customer
service demands (32%); significant decrease
in demand for our products (21%); increased
supply chain risk exposure
(security/environmental/ financial instability or
other risks (18%); regulatory compliance
mandate (8%); other (2%). While “Top SCM
actions targeted at combating recession” looks
as follows: reduced inventory at all levels (54);
restructured the supply chain organization to
increase efficiencies (45%); shifted focus from
strategic to more tactical, short-term
improvement projects (45%); changed
financial arrangements with customers or
suppliers, e.g. stopped extending payment
terms for the customers, etc. (34%); laid off
people from the supply chain organization
(32%); closed distribution centers/warehouse
(21%); reduced SCM process improvement
budget (20%).
There were underlined three key
process capabilities: supply chain visibility and
responsiveness leading to better risk-
management; closed loop inventory
management; integrated business planning.
Competing in the global supply chain,
according to Supply chain summit 2009,
presupposes: to understand that SCM is a
concept and not an organization; to
understand that business as usual does not
8 Issue 1/2010
work; to engage the customer; to extend
metrics across the supply chain (use it enable
accountability); to embrace “AND” – matrix
management + dotted lines; to think fast
(flexibility and agility); to consider the enabler;
to think creatively (working capital
optimization – supply chain finance); to have a
single point of contact for supply chain; to
develop and deploy sustainability strategy.
In february 2010, Filipe J. Sousa
(Sousa, 2010), from Social Sciences
Competence Centre, University of Madeira,
Portugal, has made a major review of Markets-
as-Networks theory (MAN theory - the
European alternative to the dominant American
view of B2B markets - describing and
explaining the inner workings of business
networks and the vertical cooperative
relationships between firms that these
networks include) published so far (with the
financial support of Science and Technology
Center of Madeira, through the European
Union’s Social European Fund). Sousa
concluded that thanks to a set of distinctive
features (e.g., informality, continuity,
symmetry, complexity, adaptations,
coopetition, social interaction, and routinization)
exhibited by the vertical cooperative linkages,
these business relationships are capable to
perform a diversity of functions (e.g., access,
control, efficiency, innovation, stability, and
networking, business networks being self-
organizing and evolving aggregates of business
relationships and firms), thus allowing the firm
to obtain benefits in excess of sacrifices (i.e.,
relationship value).
The rapidly changing context of the
firm includes, argues Sousa, all the entities
with which develops the corporate linkage (i.e.,
suppliers, customers, suppliers’ suppliers,
customers’ customers, and even competitors),
the corporate strategy being a pattern of
converging decisions and actions of the firm
with a twofold purpose: the (mostly passive or
reactive) fit to a slowly changing, and largely
faceless and intractable environment; the
(primarily proactive) interrelation with and
shaping of context.
In what concerns the development
process of business relationships, Sousa notes,
for example, that: there is a trade-off between
attractiveness and freedom of choice; business
relationships evolve over time as reciprocal
investments made by parties, trust,
commitment, and the expectation of future
interaction going hand in hand; the nature and
role of business relationships change over time
owing to firm’s internal change or of
counterpart, to shared initiative of parties, and
to change taking place elsewhere; if the
stability of is a prerequisite to
 Supply Chain Management Journal
change, in turn, is vital for stability,
connectedness of business relationships
implying that any change is propagated in a
non-deterministic chain effect throughout the
business network.
In september 2010, Nari Viswanathan
(Viswanathan, 2010) showed that in order to
grow their company and present a market
strategy differentiator, the Supply Chain
Organization is required to deliver innovative
cost reduction strategies (the top pressure
according to 68% of respondents). At the end
of the year, the same Nari Viswanathan
(Viswanathan, 2010) underlined that
sustainable supply chain management and
supply chain risk management are among the
top three areas for improvement for the
organization, the results of the „Strategic
Supply Chain Planning: Priorities of the Chief
Supply Chain Officer, September 2010”also
highlighting the growing importance of
establishing sustainability initiatives across the
end-to-end supply chain.
It is significant to note within this
context the theme of the 5th Aberdeen Supply
Chain Management Summit, March 29-30,
2011, Chicago: that “From Strategy to
Execution: Priorities of the Chief Supply Chain
Officer”. It is highlighted: the increasingly
critical influence on strategic business
outcomes of the supply chain strategy and
execution; that it’s critical to focus the supply
chain team on driving value across the
enterprise as supply chains evolve into
Demand-Supply Networks that need to be
integrated from an end-to-end visibility
perspective (because due to the rapid pace of
outsourcing the organizations are grappling
with loss of control and visibility); that is
necessary to build an interconnected, resilient
and intelligent supply chain embracing growth
opportunities and leveraging innovation to
create competitive advantage. The specific list
of topics that will be covered in this 5th
Aberdeen Supply Chain Management Summit’
sessions speaks for itself: Emergence of the
Chief Supply Chain Officer; Integrated
Business Planning; Demand Management;
Closed Loop Inventory Management; Trading
Partner Integration and Collaboration; Shelf
Driven Demand Planning: Retail and CPG
integration; CPFR: Bridging Retail and CPG
Supply Chains; Global Trade Management,
Compliance, Risk and Security; International
Transportation Management; Domestic
Transportation Management; Warehouse
Management and Material Handling; Lean
Supply Chains; Sustainable Supply Chains;
From Onshoring to Offshoring – Network
Strategies and 3PL alliances in a Global Supply
Chain; End-to-End Supply Chain Visibility-from
Source to End-Consumer.
Issue 1/2010
2. The challenge of creating more nimble
supply chain operations that deliver
results. Making brand “right” merchandise
available to customers through energized retail
experiences. The new retail world governed by
„acting vertical” solution. Building the network
of the future on the strong foundation of a well
crafted inventory strategy.
In December 2008, a representative of
Kurt Salmon Associates, Jack Horst (Horst,
2008), pointed out (on the basis of a KSA’s
exhaustive research conducted of over 100
leading retailers) the incredible pace of change
in supply chain challenged by the need of
accelerating the supply chain performance
improvement through a real visionary and
game changing collaboration delivered by the
very best retailers and their suppliers and
service providers. As a result, these „acting
vertical” can replicate the efficiency and
responsiveness of supply chains in which one
company controls all aspects of:
merchandising, product development &
sourcing, logistics and store operations.
According to this KSA’s approach:
a) Einstein’s Energy (e = mc2) becomes KSA’s
Excellence (an „Act Vertical” framework
adoptation permitting a significantly better
performance over a 10-year period compared
to those companies which do not adopted),
defined by: market share, margin, inventory
performance;
b) Einstein’s mass becomes merchandising,
combining the elements of enhanced strategic
assortment planning with the engineering of
memorable customer experiences to capture
share;
c) Einstein’s c2 (the speed of light) becomes
increased speed of bringing product to market
by the best retailers which drive results by
putting trend-fresh product on shelves,
manufactured in quantities tied more closely to
customer demand.
Jack Horst underlined that VPs (vice
president) of Distribution have evolved into
SVPs of Supply Chain and Chief Supply Chain
Officers, entering “talking vertical” stage in
which representatives of merchandising,
product development & sourcing, logistics and
store operations share in the responsibility of
proactively working to retrofit infrastructure to
support the more flexible product movement
requirements of this new „acting vertical”
world. And according to this vision must be
made enhancements to: upstream
(merchandising, product development &
sourcing) and downstream (store-level)
processes and systems to enable the benefits
of the turbo-charged distribution chain network
to be delivered.
Within the context, Horst signaled that:
this involves the whole organization analyzing
9
 Supply Chain Management Journal
three fundamental elements of supply chain
strategy: flexibility, visibility and control,
execution; we have to take into account a
fortunate coalescence of several factors simply
driving the retail industry to change
(„enhanced merchandising and supply chain
systems are expanding in capability and
growing in deployment; vendors are
collaborating with retailers like never before to
bring product to market that meets shared
goals; solution and service providers have
consolidated, expanding capabilities that
enable the construction of more flexible supply
chains; we’re dealing with a customer, and in
an economy which just keeps getting more and
more challenging”).
At the beginning of 2009, Evelyn Hum and
Ray Marciano, while approaching the
examination of the Supply Chain Network of
the future (Hum , Marciano, 2009), have
argued that retail supply chains must rapidly
evolve to optimize inventories and support
complex logistics flows. As the shopper of the
21st Century demands more, retailers face a
real challenge in:
- retooling their supply chains to successfully
service complex, multi-channel operations
featuring increasingly localized store
assortments (determining first the optimal
inventory strategy for each item in their
assortment and only then configure network
infrastructure to support these complex flows);
- finding out (thanks to the proper interaction
across departments: Merchandising, Product
Development and Sourcing, Distribution and
Transportation, Store Operations and IT) the
adequate answers related to how the
intersection of demand variability and volume
relate to optimal flow path (source of supply,
transportation pipeline, product packaging,
service strategy and so on);
- paving the way (thanks to this resulting
inventory strategy) for the tactical
development and execution of an inventory
optimization plan, incorporating a number of
key elements, as shown in the chart below.
Evelyn Hum and Ray Marciano showed
that the most obvious flows of the rethinked
infrastructure (capable of supporting the
specific combination of flows) are: „DC
Bypass” (vendor shipment directly to customer,
store or individual); „Cross Dock” (dock-to-
dock handling of pre-allocated “floor ready”
receipts); „DC Hold & Flow” (initial store set is
cross docked with replenishment held at
distribution channel – DC); „Replenishment”
(all merchandise is received and held in the DC
for pull-based store replenishment). And taking
into account the complexity of designing a
supply chain network in today’s environment
(while needing: to maximize savings across the
company; to work towards a shared set of
10
metrics; to support tangible top-line growth),
retailers must make adequate decisions about
in-house versus outsourced operations for each
distribution channel. The required well crafted
inventory strategy within is executed at
SKU/category level, which will likely drive very
different operating processes for key
merchandise categories.
Starting with inventory first it will drive
significant savings while pointing the way to
the combination of existing and new flows
which are created to provide efficient and cost
effective paths for each category of
merchandise and channel of distribution.
3. The new marching orders and the
context of SCM 4 ECR Symposium 2010
At the end of April 2010, on the
occasion of a Conference, the creator and
Executive Editor of the “Supply Chain Matters
Internet blog”, Bob Ferrari (Ferrari, 2010),
underlined that B2B centric is moving toward
more mass-market centric supply chain models:
“As businesses now turn their attention toward
growing top-line revenue and customer growth,
a dual challenge of continued cost reduction
along with insuring business process agility are
the new marching orders. Who could have
predicted a complete stoppage of all European
air traffic because of the effects of a volcano,
or the increasing frequency of so many supply
chain disruptions? ” In Ferrari’s opinion, the
singular most important capability that SCM
professionals should be focusing on consists in
continuing to challenge traditional thinking,
being able to sense and respond to the many
changes (change becoming a constant across
global supply chains) that will occur over the
coming months.
Some days after SCM 4 ECR
Symposium at Valahia University of Târgovişte
(11-12 June 2010), took place in London, on
23rd – 25th June 2010, the first “Annual
Summit of The Consumer Goods Forum” (ECR
Europe being a supporter and active member
of). And, next year, on 5-6 April 2011, “ECR
Europe Forum & Marketplace” will take place in
Brussels.
As we all know, the Consumer Goods
Forum is a new, independent, global parity-
based Consumer Goods network created in
June 2009 by the merger of CIES/The Food
Business Forum with the Global CEO Forum
and the Global Commerce Initiative (GCI), two
global retailer and manufacturer collaborative
platforms. Starting from the need of working
together in new ways, within a large context
from predicting technology and market trends
to managing conflicting and controversial
choices, the announcement of 2010 Global
Summit of the Consumer Goods Forum is
exciting: “Re-shaping the world. Winning in a
Issue 1/2010
 Supply Chain Management Journal
consumer-led future. So, what’s new? “What’s
new about your organization?”
Some years ago, in 2007, the well-
known Donald J. Bowersox (Bowersox, 2007)
stated that more than 40 years after Peter F.
Drucker’s approach “Physical Distribution: The
Frontier of Modern Management” (April 6,
1965), he still agrees with and believes
Drucker’s comments, being convinced that the
“Golden Age of Supply Chain Management” is
still to come. Bowersox added that he foresees
a day when “we will fully capture the potential
of many-to-many, real-time communication
networks in the design of supply chain
systems”, the attention shifting increasingly to
“implementing responsive supply chain
solutions capable of exploiting extreme
postponement strategies”. For instance,
today’s multi-channel retail world calls for a
radically new strategy for evaluating supply
chain network design (Hum, Marciano, 2009).
4. SCM4ECR, a real challenge
Some years ago, Soonhong Min and
John T. Mentzer (Min, Mentzer, 2004) argued
that while the supply chain management (SCM)
extends the concept of functional integration to
all the firms in the supply chain, Efficient
Consumer Response become one of the widely
adopted SCM practices within obtaining
competitive, real competition being rather
supply chain against supply chain as
Christopher suggested in 1992. “They’ll
compete networks. Not silos”, added in 2010
Greg Johnsen, Executive Vice President of
Marketing, and Co-founder of GT Nexus
(Johnsen, 2010).
Indeed, Christopher constantly argued
that: individual companies no longer compete
with other standalone companies because
working independently means that costs and
inefficiencies tend to build up at the interfaces;
supply chain effectiveness becomes an
essential prerequisite for marketplace success;
focusing on the value proposition forces the
marketer to define clearly “what you give” and
“what you get” from the point of view of the
customer; the focus of marketing strategy
must be on differentiation through superior
customer and consumer value, the task of
marketing being expressed in terms of the
creation and delivery of this value (Christopher,
1996).
According to Andrew Fearne (Professor
of food marketing & supply chain management,
Kent Business School, University of Kent and
Adelaide Thinker in Residence) (Fearne, 2008),
there is a clear business goal: to add more
value (process effectiveness), at lower cost
(process efficiency), faster than the
competition (responsiveness), responsibly
(CSR). Value, as perceived by consumers,
Issue 1/2010
means benefits (“solution to my problem”)
minus costs (“financial and opportunity costs”)
minus risks (“unfulfilled promises”). Value
chain management means - according to
Global Supply Chain Forum, 2002 - “The
integration of key business processes from end
user through original suppliers that provides
products, services and information that add
value for customers”.
An effective way to extend the line of sight can
be the “supply chain mapping” (Lambert,
Cooper, Pagh, 1998) (analytical tool,
communication tool, catalyst for change,
“seeing the whole”). The fundamental enablers
of the value chain management are: strategic
alignment; drives resource allocation and
process integration; value chain visibility;
information flow (extends the line of sight);
relationships (a strategic approach to supply
chain management involves shifting the
emphasis from internal processes to external
relationships and the integration of key
business); consumer insight. And that means
co-innovation (development of new value
added goods/services; process improvement
for existing goods/services), which is
demanded by sustainable competitive
advantage. It is also worth to remember that
from the point of view of the value chain
visibility, real time sharing of information
enables rapid response (agility) and efficient
operations (lean), while greater understanding
of consumer behavior enables alignment of
innovation process with consumer demand.
As I wrote last year, the 14th annual
ECR (Efficient Consumer Response) Europe
Forum & Marketplace, 3-5 June, 2009, in
Barcelona, underlined that as the needs of
shoppers (consumer different needs being
obviously a key driver) are changing, the
consumer goods industry has to keep pace.
ECR is a performing strategy based on today’s
technology tools - that causes fundamental
changes in the business process - which
provides more added value to consumer. The
three pillars of ECR are: providing consumer
value, removing costs that do not add value,
maximizing value and minimizing inefficiency
throughout the distribution chain. Successful
retailing involves making sure that stores are
stocked with the right products at the right
prices at the time the consumer wants them
and this aim can be achieved by implementing
ECR strategy. To implement ECR, distributors
and suppliers are making fundamental changes
in the business process using today's
technology tools. Their goals are clear: provide
consumers with the products and services they
want; reduce inventory; eliminate paper
transactions; streamline product flow. ECR
allows companies to seek a competitive
advantage by demonstrating their superior
11
 Supply Chain Management Journal
ability in working with trading partners to add
value for the consumer.
Assessing strategic options in the today
evolving business environment presupposes
taking into account the supply chain design as
the ultimate core competency of an
organization, by designing and redesigning the
company’s chain of capabilities for a series of
competitive advantages.
5. The Future Value Chain and the
imperative of true collaboration, new
capabilities, and new measurements
A report called “2016 - The Future
Value Chain”, from October 2006, published by
the Global Commerce Initiative (GCI) explored
a comprehensive view of trends and identified
key areas where trading partners must
collaborate to manage the value chain in 2016.
The newest version targeted 2018, focusing on
the information sharing among vertical trading
partners to create a more effective and
efficient value chain for the benefits of the
ultimate consumer. The “Future Supply Chain”
project has been started by GCI with the
objective to: model flows of the Supply Chain
representing possible alternative supply chain
scenarios; create a Supply Chain Framework
for collaboration in the 2016 Supply Chain. The
2016 Vision took into account the followings:
greatly reduce lead time over entire value
chain; improved mechanisms to synchronize
production with demand; real-time, flexible
and standardized information sharing (within
the framework called New Ways of Working
Together); emerging home-shopping and
neighborhood distribution. The new report
focused on the future physical supply chain
and the critical role that collaboration will play
moving forward
The conclusions expressed within
underlined that true collaboration will be
imperative and that supply chain managers will
need new capabilities, being required new
measurements. The call to action of GCI
Project underlined the importance of working
together with ECR Europe to help resolve
implementation issues and of measuring the
progress of implementation through ( e.g. the
Global Scorecard).
It is also worth to mention the key
trends driving the 2016 Platform in blending
CO2 and the economy (Dachs, Riveiro, 2009),
key trends identified by Roland Dachs and
Agustin Riveiro on the occasion of ECR Europe
Conference Barcelona in June 2009: increased
urbanization; regulatory restrictions;
economics of supply chain; innovation. It was
underlined that trust and common structures
are critical success factors for collaboration and
that collaboration projects take time.
12
Within the same framework was also
expressed the point of view of Patrice Minzolini
(Cadbury), Agustin Riveiro (Carrefour) and
Jean-Michel Rothier (Coca Cola) regarding the
fact that “The future supply chain is
sustainable and being implemented in France”.
According to their opinion, the best solution for
tomorrow is not the one of today and
collaboration is the output of a supply chain
strategy, the challenge being sustainable
development: consumers’ satisfaction, citizens’
wellness, planet protection and durability of
the industry.
As we all know, efficient distribution
(distribution efficiency requires finding out
inventory, location and transportation savings)
facilitates innovation in the distribution process,
new technology implementation, and also low
price products’ at high quality and high service
for the client. In the case of FMCG, for example,
consumers obtain the marketed products by
requiring them while visiting retail outlets,
retailers selling in many different formats
(physical location or virtual space) and using
multiple distribution methods.
At the beginning of 2009, approaching
the challenges faced by retailers, Evelyn Hum
and Ray Marciano (Hum, Marciano, 2009)
argued that “the supply chain of the future is
designed on the foundation of a comprehensive,
enterprise-wide inventory strategy (executed
at a very granular level - SKU/category, which
will likely drive very different operating
processes for key merchandise categories) in
which representatives of key functional areas
come together to critically evaluate all factors
impacting inventory performance.”
Let us remember the words of Martin
Christopher: “The supply chain is there to
support the company's marketing strategy”.
You need to design it not from manufacturing
outward but from the customer inward” (Kerr,
2007). Knowing better what is happening at
the level of the store and wanting to improve
the category management, while the
manufacturers need theirs point of view, the
retailers can ensure the necessary feedback
which represents the synergy of the
partnership’s knowledge in which are involved
the producer, the distributor and the consumer
(Purcărea, Raţiu, 2008).
6. The most important promise of
SCM4ECR and the greatest team challenge
According to Alan Braithwaite and
Martin Christopher, “Supply chains hold the
future for everyone”(Braithwaite, 2009), a
critical success factor in the survival and
success of the supply chains being how well
the firms manage their assets in the supply
chain, this micro-economic performance
Issue 1/2010
 Supply Chain Management Journal
making all the difference at the national level
in the long run.
At the end of 2006, Bob Belshaw
(Belshaw, 2006) has reminded us again that
applying value chain principles creates
customer value and competitive advantage,
SCM (a marketing system consisting of both:
primary marketing institutions, manufacturers,
wholesalers, retailers taking title to the goods
as they move through the marketing channel;
facilitating marketing institutions, ensuring
specialized assistance in the marketing
process) being challenged by five external
forces: consumer behavior, competitor
behavior, socioeconomic environment,
technological environment and legal and
ethical environment. It is argued that the
major reason in SCM (coordination is the
essence of SCM) is a new solution and
technique in increasing the competitive of
business to enterprises, within this framework
being underlined, for instance, that a quick
response system can help an enterprise to
reduce the time of processes in B-2-B or B-2-
C in a supply chain, being possible for the
enterprise involved to link quickly “upstream
and downstream of industries, and to find and
solve the problems of customers in anytime
and anywhere”. While at mid March 2009, the
Executive Director of the Supply-Chain Council
stated that: “Supply chains have become
increasingly complex and time-sensitive, and
leading supply chain executives recognize the
importance of benchmarking their SCM
(supply chain management) best practices
against those of their peer”. On the other side,
in the same year, Richard Reeves and John
Knell (Reeves, Knell, 2009) draw attention on
the fact that supply chain management (SCM)
“has become a vital source of strategic and
tactical value to businesses”, underlining that
SCM is “the undisputed king of business
integration”, the supermarket sector being
one of the most commonly cited example.
But we must not forget, especially
during these times of downturn, that - as
Patrick Dixon argued - the biggest ethical test
for every culture and every nation is to create
a better world, improving life for people, this
core value being the key to all effective
management, marketing and motivation. In
Dixon opinion, making life better at a price you
can afford constitutes the most important
promise of every business, the purpose being
to deliver on the promise (the profit coming
from delivering on the promise).
Dixon pledges for taking into account
that running out of cash is what kills business
and that is important to have an eye on
recovery, also considering the fact that
motivation represents the greatest team
challenge in a downturn.
Issue 1/2010
There is a real evolution of the
consumer behavior, social media influencing
consumers’ interaction with one another and
with brands and the supply chain networks
(reacting to the recession and changing
consumer behavior) impacting the economy
and the society as a whole. Collaboration and
adaptation are key in focusing on customer
empowerment, supply chain networks facing
the challenge of combining the advantages of
leanness and agility (leagility), up streaming
from the decoupling point to achieve
economies of scale and down streaming to
achieve consumer responsiveness.
ECR means simultaneously increasing
value to the consumer, while improving supply
chain performance for distribution channel
members by a better coordination between
marketing, production, and replenishment
activities. By reducing lead-times, improving
service levels and decreasing costs,
collaboration can improve the number of
satisfied customers. If the organizational
success is depending on the role of supply
chain management, consumer behavior brings
also an essential factor toward future
organizational viability, so that it is important
to sense the demand, being close enough to
the consumer as to receive its preferences and
signals as early as possible. This includes
encouraging online consumer communities to
contribute to the design and development of
new products and enabling retailers and
consumer goods companies to exploit social
intelligence and to adjust their supply chains
accordingly. There are consistent challenges
such as quickly understanding the impact of
the rapid changes and optimizing the response
to these changes, while fighting both against
the bullwhip effect caused by increasing
demand uncertainty and for supporting product
innovation, demand management, supply
management and response management. In
these times of financial stress and related
recessionary pressures there is a real need: to
become more demand-driven; to make
fundamental changes in the way of thinking
about the supply networks; to treat supply
chain thinking as a philosophy that pervades
the entire company.
There is indeed a continuous real
challenge for the value chain, because
“commerce is a not simply about
manufacturers selling directly to the end-
consumer”, and taking into account the
number of interdependent actors working
within the value chain, it is also necessary, for
instance, to “move towards mass-
marketisation of microgeneration technologies
by utilizing key actor groups within the value
chain”.
13
 Supply Chain Management Journal
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you_ready_for_a_challenging_case_study_Ann
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 Supply Chain Management Journal
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15
 Supply Chain Management Journal

Reverse Logistics Concept in Industrial Waste Management

Janusz K., GRABARA

Marta, STAROSTKA -PATYK
Faculty of Management
Czestochowa University of Technology

Abstract
Waste management has come to stay as one of the most controversial, well researched and
analyzed subject of the modern industrial world. With production and commercial activity on an
incessant rise, it is natural fallout for the quantity and the nature of waste products to change
dramatically, raising a global concern. Nowadays problems connected with waste and their impacts on
natural environment are very important, especially because of raising volume of industrial waste. So
there is a strong need to take up activities allowing for industrial waste management, which state for
proper waste managing. Industrial waste management is the collection, transport, processing (waste
treatment), recycling or disposal of waste materials, in an effort to reduce their effect on human
health or local aesthetics or amenity. A sub-focus in recent decades has been to reduce waste
materials' effect on the natural world and the environment and to recover resources from them. The
reverse logistics concept is modern solution using in industrial waste management. By realization of
logistics processes in waste management it is organized in better way and allows for receiving
materials which are going back again to the forward logistics processes as an input.
This paper analyses the main definitions of waste and characteristics of industrial waste, with
statistical data for Poland. Than it presents waste management conception After that the Authors
show main ideas of reverse logistics and proof that proper realization of its processes support and
improve industrial waste management.
Problems presented in this article are quite new and modern, because logistics literature
studies shows that there is lack of connections between reverse logistics and industrial waste
management and such topics are taking up very rare.

Key Words: reverse logistics, waste, industrial waste,
.
Introduction
For decades, both in Poland and other
European countries, is experiencing intense
economic development. The growth of
industrialization, diversification of activities
carried out production and service, and a
significant increase in consumption is not
without adverse ecological effects. Therefore,
the need is to create legal and organizational
instruments that will be aimed at reducing the
impact of civilization on environmental
degradation and to control the levels of
emerging contaminants in the environment. As
the waste, especially industrial and hazardous
wastes, are particularly harmful and
detrimental to the environment, it is necessary
first to take any action to reduce their negative
environmental effects, and then concentrate on
their correct disposition.
Waste, and the consequences
associated with their presence in the
environment in recent years become a major
problem in the environmental field. Hence,
interest in the subject comes to waste
management increasingly wider
scale. Significant progress is observed in
advanced technologies that not only enable the
waste management, reuse resources
minimization of pollutants generated, but also
allow for redevelopment or disposal of waste.
1. Waste definitions
Wastes are defined as products of
living or dead nature, which is not used at any
given stage of human development or because
of their conviction of the uselessness, or lack of
appropriate methods and technologies for their
utilization. Substances encountered a substrate
or product of the process and only the degree
of willingness and human consciousness
depends on whether they are classified into
useful substances or waste (Wandrasz,
Zielinski, 1994).
With such an identification emerges
waste their first feature related to their
uselessness. Because the wastes are
substances that are redundant with the feature
of their inadequacies appears the second
feature - environmental performance and for
man. This is due to the dynamics of
development processes that cause continuous
increase in mass of waste and enrich them
with hazardous ingredients by making the
environment more dangerous to the
environment while reducing the possibility of

16 Issue 1/2010
 Supply Chain Management Journal
natural absorption of the waste (Grabowski,
1994).
In the European Union after 25 years
of uniform rules on industrial waste is defined
in accordance with Council Directives 91/156
and 91/692, amending Directive 75/442 on
waste as substances or objects in the
categories identified in Annex I which the
holder discards or intends to carry out the
removal or disposal is required under national
law (Girczys, Sobik-Szołtysek, 2002).
Waste under the Waste Act is all items,
and solids, and non-sewage liquid substances
resulting from business activities or human
existence and unsuitable place and time in
which they arise, as waste is also considered
sludge (Dz. U., 2001).
All the waste can be divided into three
groups depending on their origin and character.
Distinguished here (Przywarska, Żygadło,
1998):
• Municipal waste from dwellings and
households, urban and rural settlements,
the market places, town squares and
streets, services and small craft.
• Industrial wastes from large industrial
plants, waste disposed at landfills by its
own means of transport and the cost of
industrial plants, also allows for storage of
municipal waste in landfills.
• Hazardous waste from industrial plants, as
well as of urban infrastructure facilities
(such as hospitals, sewage treatment
plants), these include: phosphogypsum,
sediments, sewage treatment, the paint
industry, waste, sand, and tar acids after-
refining, medical wastes, hydrocarbon
contaminated soil, etc. Act defines
hazardous wastes as wastes which because
of their background, the composition of
chemical, biological characteristics and
other factors pose a risk to human life or
health or environmental.
In addition to this, the most popular
classification of waste, it is also necessary to
distinguish three levels of harmful waste to the
environment (Grabowski, 1994):
• Biological - the waste is greater or lesser
extent infected (mostly municipal)
• Chemicals - results from the ability to
create harmful chemicals. The industrial
waste can accumulate soluble compounds
Tabele 1. Total waste and industrial waste generated in Poland in 2000-2007 years.
2000 2005
In thousends tones
Total waste 137 710 133 956
Industrial waste 125 484 124 602
Source: Own elaboration based on Polish statistic data.
Issue 1/2010
such as nitrates, arsenic compounds, zinc,
manganese, which, without the use of
appropriate protection measures are
spreading into the environment,
• Physical - causes environmental pollution
due to solid and are persistent components
of the waste - put into the environment of
changing its structure and may deprive the
general characteristics.
Industrial wastes contaminate the soil,
water and air. The diversity of their biological,
chemical and physical properties of industrial
waste causes the need for individual choice of
method for removal and disposal of various
wastes (Grabowski 1994).
2. Characteristics of Industrial Waste
Industrial waste is waste that is by-
products resulting from the business. They are
formed in each, even the organizational
structure of small industrial, manufacturing or
service. The amount of industrial waste
produced depends primarily on the degree of
civilization, the industrial structure, the types
used in the production techniques and
technologies, and ultimately the development
of waste management, which can ensure the
development of the formation of markets for
recyclable materials and processes through the
use of logistics management waste streams,
the proper functioning of the activities related
to waste management.
Industrial waste accounts for over 90%
of the total amount of waste generated in
Poland. Over 80% of industrial waste in Poland
is produced by the mining industry, mainly
mining and energy industry and iron and steel,
and therefore in the regions of Silesia, Lower
Silesia and Lesser Poland, which is located in
the mining, metals and energy, generates the
largest quantity of waste (Szołtysek, 2009).
In Poland in 2007 has produced
134,500,000 tonnes of waste (GUS, 2008), of
which 124.4 million tonnes of industrial
waste. Comparing these figures with previous
years (Table 1) There is a noticeable small but
nevertheless important from the standpoint of
environmental protection, the upward trend in
relation to data from 2006 and downward in
relation to other data for the industrial waste
volume.
2006 2007
133 340 134 497
123 463 124 414
17
 Supply Chain Management Journal
In addition, there should be noted that
with the declining trend in the quantities
produced Polish industrial waste clearly draws
the growth of industrial plants that produce the
waste. In 2007, industrial waste plants were
recorded in 1848, a year earlier, in 2006 there
were 1686, 1596 and in 2005. Comparing
these figures with the year 2000, where
establishments producing industrial wastes
were 1408 and 1990, when they were in 1436,
can be seen that a significant increase in the
number of factories took place after 2005,
when these companies started to grow at a
much higher rate. However, despite this
upward trend for the number of establishments
producing industrial wastes, as mentioned
above, the amount of industrial waste has
been decreasing compared to previous years.
3. Waste Management
Waste management is the collection,
transport, processing, recycling or disposal,
and monitoring of waste materials. The term
usually relates to materials produced by
human activity, and is generally undertaken to
reduce their effect on health, the environment
or aesthetics. Waste management is also
carried out to recover resources from it. Waste
management can involve solid, liquid, gaseous
or radioactive substances, with different
methods and fields of expertise or each.
Waste management practices differ for
developed and developing nations, for urban
and rural areas, and for residential and
industrial producers. Management for non-
hazardous residential and institutional waste in
metropolitan areas is usually the responsibility
of local government authorities, while
management for non-hazardous commercial
and industrial waste is usually the
responsibility of the generator.
4. Reverse Logistics
In the early nineties was formulated
first formally accepted definition of logistics
management of waste streams by Council of
Logistics Management, according to which the
logistics management of waste streams is the
term often used in relation to the role of
logistics in recycling, waste managing and
management of hazardous materials in a
broader sense applies to all issues related to
logistic activities undertaken in order to reduce
the use of raw materials, recycling,
substitution, reuse of materials and
management (Council of Supply Chain
Management ). This formula definition strongly
emphasizes aspects of the recovery and reuse
of waste as the action built in the logistics
management waste streams. This definition is
18
general and wide and constructed with a
reference point for management (Kopicky and
co., 1993).
When describing in a concise manner
logistics management of waste streams,
while giving the full nature of this discipline is
necessary to cite found that logistics
management of waste streams is the way to
maximize the value of waste (Sarkis,
2001). Under this definition, the determination
of waste can also be applied to products in the
flow of logistics management of waste streams,
which in most cases are treated as defective,
or waste products.
5. Reverse Logistics Usage in Industrial
Waste Management
Waste management in enterprises
engaged in industrial waste based on a system
of logistics management waste streams and
consists of four main processes:
• the collection of waste,
• waste storage,
• waste management,
• waste transport.
The process of collection the industrial
waste involves from its collection, segregation,
and the development of relevant
documentation relating to them. It consists of
residues of the Unification movement designed
to increase their purity, together with a
simultaneous reduction of their number, hence
the importance of proper organization of the
process. In addition, no less important are the
regulations on proper identification and
documenting the flow of industrial waste
collected. It is essential to the pursuit by each
generator of industrial waste, waste
registration cards, which contain data on the
types and weight of waste generated at a
given time, the mass of waste and used
independently provided for the utilization of
appropriate individuals, data on recipients of
waste, the date and location of waste reception
by the public and their quantity and type of
information sheets and the weight of the waste
in a landfill and during their storage (records
maintained at the same time that their own
company managing industrial waste).
In the process of storage is necessary
to take into account the economic lot size for
transport, since those costs are less significant
due to the low value of industrial
waste. Storage of industrial waste is focused
on providing sufficient space for waste and the
appropriate treatment of them in due time to
the most efficient possible use or
disposal. Warehouses in the logistics
management processes of industrial waste
streams are used to concentrate waste from
various sources, allocate them according to
Issue 1/2010
 Supply Chain Management Journal

their land use decisions, facilitate the against competition that could not take over
formation of transport chains, as well as the technology and did not reach a better
provide security for the disposal of waste, position in the market. Therefore, the strategy
taking into account the requirements of the law. for implementation of recovery processes may
Waste management is the process of also be part of building the image of the
having a close connection with the types of organization and improve relationships with
waste held. The decision about how their customers and suppliers. Thus, the economic
management is not dependent on the holder of impact oscillates around other direct and
the waste, because all the issues involved are indirect goals of the organization, streamlining
governed by the law. At the discretion of the its operations comprehensively and functioning
holder of waste in this regard is only to decide of the market.
the ultimate point to which he would send the
waste that has, or decide what to plant and References
equipment provide industrial waste suitable for
recycling, and waste transfer to landfill for Council of Supply Chain Management,
disposal of this type. In addition, the http://cscmp.org/, 28.05.2008
management of industrial waste holder is Girczys J., Sobik-Szołtysek J., (2002), Odpady
obliged to provide for recovery or disposal of przemysłu cynkowo-ołowiowego. seria
hazardous waste, or any hazardous wastes monografie nr 87, wyd. Politechniki
must first be subject to processes that remove Częstochowskiej, Częstochowa
their hazardous properties, as well as pre- Grabowski J., (1994), Problemy ochrony
treatment processes to effectively reduce środowiska. Politechnika Świętokrzyska, Nr
weight and density of waste above all those 116, Kielce
that provide storage, which is aimed at Kopicky R. J., Berg M. J., Legg L., Dasappa V.,
minimizing the negative impact on the Maggioni C., (1993), Reuse and recycling:
environment. reverse logistics opportunities. Council of
Specificity of transport processes in the Logistics Management, Oak Brook, IL
system of logistics management of waste Przywarska R., Żygadło M., (1998), Odpady,
streams is the heterogeneity of transport źródła powstawania i zagrożenia. [w]
facilities, high risk of environmental pollution in Planowanie, Zarządzanie i Ochrona Środowiska,
case of failure and eliminating empty red. A. Kowalkowski, M. Żygadło,
carriage. These features cause a high degree Wydawnictwo Politechniki Świętokrzyskiej,
of complexity of transport services for the Kielce
industrial waste, which has a significant impact Sarkis J., (2001), Greener manufacturing and
on transport costs. In addition, the transport of operations. From design to delivery and back.
waste requires appropriate marking of vehicles, Greenleaf Publishing, Sheffield UK
training drivers in the safe transport of waste Statistical data from report of GUS Ochrona
and methods of action in case of Środowiska 2008, Warszawa 2008.
accident. When transportation of industrial Szołtysek J., (2009), Logistyka zwrotna.
waste is also required, relevant documents as Reverse logistics. Instytut Logistyki i
evidence of such destruction or evidence of Magazynowania, Poznań
hazardous waste market have to be made. Ustawa o odpadach Dz. U. z 2001, nr 62,
poz.628.
Conclusions Wandrasz J., Zieliński J., (1994), Procesy
fluidalne utylizacji odpadów. cz. I, podstawy
Taking into account the economic teoretyczne; wyd. Zakład Narodowy im.
conditions of the logistics management Ossolińskich, PAN – Katowice – Komisja
processes, waste streams should be noted that ochrony środowiska człowieka regionów
their use can bring direct benefits to the przemysłowych; Wrocław
organization by reducing consumption of raw
materials for production, adding value to the
process of recovery or disposal cost
savings. Even if these benefits is not very clear
and known not to be achieved in a short time,
organizations engaged in the pursuit of
logistics management of waste streams
because of marketing issues, strategic and
competitive, which are indirect benefits
expected. For example, can be implemented a
strategy to recover the value of adapting to
future changes in legislation. Engaging in
recovery, the organization also protects

Issue 1/2010 19
 Supply Chain Management Journal

Supply Chain Excellence through Practicing Collaborative Business

Process Standards

Virgil POPA
ECR Department
Valahia University of Targoviste

Abstract
Collaboration takes place when people from different organizations (or from units of
organization) produce something together trough effort, resources and common decisional processes
and share product or final service responsibility.
The future evolution of collaborative excellence in the consumer products value chain will likely
reside in the attainment of new growth structures founded on innovation.
Strategic alliances are associations between more independent companies which choose to
administrate a project or a particular activity trough coordinating of competencies.
To create synergy, we require more than a concept and a strategy. The enterprise value
proposition defines the strategy for value creation trough alignment, but do not describe how to
achieve it. The alignment strategy must be completed with an alignment process.
Supply Chain Management encompasses the planning and management of all activities
involved in sourcing and procurement, conversion, and all logistics management activities.
ECR – Efficient Consumer Response: Working together to fulfill consumer wishes better, faster
and at less cost (ECR Europe).
Business process management is a complex management practice that many organizations
find difficult to implement and progress to higher stages of maturity.
SCOR combines elements of business process engineering, benchmarking, and leading
practices, into a single framework. Under SCOR, supply chain management is defined as these
integrated processes: PLAN, SOURCE, MAKE, DELIVER, and RETURN from the suppliers' supplier to the
customers' customer, and all aligned with a company's operational strategy, material, work, and
information flows.

Key Words: collaborative management, collaborative excellence, alignment processes, Supply Chain
Management, Efficient Consumer Response, Business Process Management, Process mapping,
redesign process project, business process maturity, SCOR Model, return process

1. Collaborative management obtain benefits from costs, and transform fix

Collaboration takes place when people from
different organizations (or from units of
organization) produce something together
trough effort, resources and common
decisional processes and share product or final
service responsibility.
Consumer goods producers passed, in general,
through three fundamental phases of
collaboration development and, adding each
phase, there is a new potential regarding news
value creating and profitability growing.
Phase 1 – Spreading of transactional
relationships
This phase focuses on cost efficiency obtaining
when consumer goods producers enter short
term contracts, including transactional
agreements. During this phase, business
processes are distinct, having a limited
integration between involved companies. The
growing trend of outsourcing for business
function, as IT, production and storage allows
the companies to focus on their core business,
costs into variable costs in order to have
greater control and flexibility for financial
structure. There is a limited opportunity for
adding value beyond price in transactional
phase and having decreasing margins,
reaching a profitable grows being a difficult
process. This leads organizations beyond
transactional relationships, in order to develop
collaborative relationships to reaching mutual
gain, productivity and extended capabilities.
Phase 2 – Collaborative relationships –
partnerships
This phase is characterized by co-existence of
transactional and collaborative relationships
which focus on further improving of
productivity and utilization of extended
capabilities of knowledge, assets and
resources. Relationships from this phase focus
on common promoting, marketing and selling
activities. This is the point where we could
start to identify suppliers and customers as
strategic partners.

20 Issue 1/2010
 Supply Chain Management Journal
To consumer goods producers satisfying the
demands of “new world thinking” needs
developing of collaborative relationships which
allow companies to grow with reduced costs,
supplying in the same time a increasing value
for customers. The relationships from value
chain which evolved in time either based on
short term market transactions, or developed
in long term proprietorship solutions.
Phase 3 – Transformational collaboration vs.
other business models
Although there are some advantages
connected to costs, those types of relations
don’t offer enough flexibility for a competitive
environment of today. In an effort of
transformation of adversity relationships into
collaboration relationships, sharing knowledge,
mutual assistance and business growing,
consumer goods producers focus more and
more on identifying and developing of strategic
relations with suppliers, distributors and
customers. Such of relationships tend to rely
on smaller number of key partners which
benefit from longer term contracts (Thompson,
Jennifer & Co., 2006).
Nowadays, the companies focus on developing
of collaborative transformational innovating
relationships in order to obtain long term
growth and profitability for everybody involved.
These collaborative partnerships are based on
the following ideals:
• Collaborative decision process and generation
of new ideas;
• Bi-directional data, knowledge and
experience exchange;
• Engagement in sharing the knowledge
database and extension of thinking beyond
organizational limits to accomplish a win-win
scenario, which offers more value adding
than every single partner may obtain
separately;
• Development of long term strategic plans
(the collaboration is switching from
operational level to strategic level). Need to
switch from the easy of “price advantage” to
the hard way of “value for customer” and
seeing businesses combined from client
perspective.
1.1. Collaborative excellence - the next
dimension
The future evolution of collaborative excellence
in the consumer products value chain will likely
reside in the attainment of new growth
structures founded on innovation. These will
result in more rational profit and loss
strategies based on shared models, which will
be essential for achieving new value equations.
In this context, the concept of collaborative
Issue 1/2010
excellence will extend to consumers / and
value chain partners.
Consequently, consumer products
organizations and retailers are turning their
collaborative efforts towards creating a
multidimensional environment.
The transition required from a one-to-one
collaborative model to the creation of a one-to-
many collaborative environment. If consumer
products companies are able to achieve this,
there is the possibility to create “collaborative-
scale economies” for productivity enhancement
that will enable organizations to develop,
define, apply, and optimize a common set of
collaborative best practices for multiple
partners. One outcome of this will be that
companies will realize further benefits through
efficiency improvements, cost optimization,
and resource allocation.
There is also the potential to create
“collaborative scale of scope” for innovation
and value creation, whereby consumer
products companies can apply
multidimensional collaborative schemes to
pursue a high level of innovation through new
product development and customer intimacy.
Key to achieving enhanced collaborative
excellence in the value chain is the ability to
collectively pull together, analyze, and use
real-time consumer demand information to
create innovative products that meet consumer
needs and add value. This allows companies to
go beyond today's excellence in efficiency,
productivity, and resource allocation to reach
the next level of collaborative excellence in
“continuous consumer value creation” (for
increased share of wallet), which includes
consumers in the collaborative scenario. This
multi-dimensional perspective will add
complexity but it has the potential to make
collaborative partnerships and value advantage
much more powerful (Thomson, Jennifer & CO,
2006).
1.2. Internal and External Strategic
Integration
As supply chain members begin to work
together, integration must occur between
functions both internal to the organization
(i.e., purchasing, engineering, manufacturing,
marketing, logistics, accounting, etc.) and
external to the organization (i.e., end
customers, retailers, distributors, warehouses,
transportation providers, suppliers, agents,
financial institutions, etc.). Internal strategic
integration that all company members, have
access to an integrated information system,
spanning multiple functions and locations. This
is often accomplished through a company-wide
ERP system which links internal groups via a
single integrated system. External integration
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 Supply Chain Management Journal
refers to the systems that link external
suppliers and customers to the focal company.
External integration allows supply chain
members to share critical information such as
forecast demand, actual orders, and inventory
levels across the supply chain. Systems used
to integrate supply chain members include
advanced planning systems, internet linkages,
network communications, and Electronic Data
Interchange (EDI).
1.3. Collaboration with Suppliers and
Customers
Strategic alliances are associations between
more independent companies which choose to
administrate a project or a particular activity
trough coordinating of competencies, means
and required resources instead of:
1. Implementing the project or the activity in
an autonomous manner, solely enduring the
risk and solely confronting the competition;
2. Merging with each other or proceeding to
ceding or acquisition of activities.
The partner companies remaining independent
keep their own interests and objectives.
 They must agree with some common goals,
more or less explicit, which are precisely
the objectives the accomplishment of which
caused the alliance forming. This common
goals are more partial objectives for each
partner and some time can get into conflict
with their more fundamental interests.
 There are three main elements of
collaborative strategies: formation, control
and inter-organizational learning processes.
Beyond the alignment of internal business and
service units, an enterprise can exploit
additional alignment opportunities by
formulating plans and scorecards that define
relationship with it’s board directors and
external partners, such as customers,
suppliers, and joint ventures (Kaplan, S.
Robert, Norton, P. David, 2006).
In the next stage of evolution, a company
must change the nature of its alignment and
collaboration not only with first-tier customers
and suppliers, but throughout its supply chain.
In the future, the best supply chains will win
and managers must be aware of the actions
and requirements for critical customers and
suppliers in the network. Accessing this
information is difficult unless the scope and
nature of relationships with key supply chain
member organizations is established and
maintained.
This is not to say that every relationship should
be a "long-term strategic alliance." However,
the relative importance of the
supplier/customer on value and overall supply
chain performance should be determined. This
assessment should be a primary determinate
22
of the type of organizational relationship that
should be pursued for the organization in
question. This means that one should have a
basic understanding of the performance
metrics for the key supply chain member,
based on technology, potential for growth, and
profitability. It means that the performance of
key suppliers in terms of quality, delivery, and
technology should be described in financial
terms that directly relate bottom-line impact.
It also means that key supply chain partners
should be aligned with your organization's
internal strategies in order to exploit their
expertise and knowledge in creating value.
Finally, collaborative sharing of forecasting and
demand information can better help plan long-
term.
1.4. Managing alignment as a process
Each of the activities we have identified
is an opportunity to create synergy and value.
Most organizations attempt to create synergy,
but in a fragmented, uncoordinated way. They
do not view alignment as a management
process. When no one is responsible for overall
organization alignment, the opportunity to
create value through synergy can be missed.
To create synergy, we require more
than a concept and a strategy. The enterprise
value proposition defines the strategy for value
creation trough alignment, but do not describe
how to achieve it. The alignment strategy must
be completed with an alignment process. The
alignment process, much like budgeting,
should be part of the annual governance cycle.
Whenever plans are changed at the enterprise
or business unit level, executives likely need to
realign the organization with the new
direction.
Are the eight alignment checkpoints for
corporate, business units, and support units of
typical multi-business organizations to hit
during the annual planning process:
1. Enterprise value proposition: The corporate
office defines strategic guidelines to shape
strategies al lower levels of the organization;
2. Board and shareholder alignment: The
Corporation’s board of directors’ reviews,
approves, and monitors the corporate
strategy;
3. Corporate office to corporate support unit:
The corporate strategy is translated into
those corporate policies that will be
administered by corporate support units;
4. Corporate office to business units: The
corporate priorities are cascaded into
business unit strategies;
5. Business units to support units: The
strategic priorities of the business units are
incorporated in the strategies of the
functional support units;
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 Supply Chain Management Journal
6. Business units to customers: The priorities
of the customer value proposition are
communicated to target customers and
reflected in specific customers feedback and
measures;
7. Business support units to suppliers and
other external partners: The shared
priorities for suppliers, outsourcers, and
alliance partners are reflected in business
unit strategy;
8. Corporate support: The strategies of the
local business support units reflect the
priorities of the corporate unit support
(Kaplan, S. Robert, Norton, P. David, 2006).
1.5. SCM 4 ECR. Supply Chain
Management for Efficient Consumer
Response
Supply Chain – all the organizations
and processes which refer to products and
services from the view of buying organization.
Supply Chain Management (SCM): as defined
by the Council of Supply Chain Management
Professionals (CSCMP): "Supply Chain
Management encompasses the planning and
management of all activities involved in
sourcing and procurement, conversion, and all
logistics management activities. Importantly, it
also includes coordination and collaboration
with channel partners, which can be suppliers,
intermediaries, third-party service providers,
and customers. In essence, supply chain
management integrates supply and demand
management within and across companies.
Supply Chain Management is an integrating
function with primary responsibility for linking
major business functions and business
processes within and across companies into a
cohesive and high-performing business model.
It includes all of the logistics management
activities noted above, as well as
manufacturing operations, and it drives
coordination of processes and activities with
and across marketing, sales, product design,
finance and information technology."
ECR – Efficient Consumer Response: Working
together to fulfill consumer wishes better,
faster and at less cost (ECR Europe).
Efficient Consumer Response (ECR) is a joint
trade and industry body working towards
making the grocery sector as a whole more
responsive to consumer demand and promotes
the removal of unnecessary costs from the
supply chain.
The ECR movement beginning in the mid-
nineties was characterized by the emergence
of new principles of collaborative management
along the supply chain. It was understood that
companies can serve consumers better, faster
and at less cost by working together with
trading partners. The dramatic advances in
information technology, growing competition,
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global business structures and consumer
demand focused on better choice, service
convenience, quality, freshness and safety,
made it apparent that a fundamental
reconsideration of the most effective way of
delivering the right products to consumers at
the right price was much needed. Non-
standardized operational practices and the rigid
separation of the traditional roles of
manufacturer and retailer threatened to block
the supply chain unnecessarily and failed to
exploit the synergies that came from powerful
new information technologies and planning
tools. In other words, ECR allows companies to
seek a competitive advantage by
demonstrating their superior ability in working
together with trading partners to add value to
the consumer.
2. Through Business process
Improvement to Business Process
Management
Business Process Improvement (BPI) is
a systematic approach to help any organization
make significant changes in the way it does
business. The organization may be a for-profit
business, a non-profit organization, a
government agency, or any other ongoing
concern.
BPI works by:
-Defining the organization's strategic goals and
purposes (Who are we, what do we do, and
why do we do it?)
-Determining the organization's customers (or
stakeholders) (Who do we serve?)
-Aligning the business processes to realize the
organization’s goals (How do we do it better?)
The goal of BPI is a radical change in
the performance of an organization, rather
than a series of incremental changes (compare
TQM).
Every organization is defined by the
many different business processes that
describe the way it conducts its business.
Some of the processes are mission critical and
essential to the success of the organization and
its competitive advantage. Others may not be
mission critical, but still important for the
stakeholders of the organization. These
business processes are the nervous system of
the organization. Like the human nervous
system, business processes collect information
about the status and needs of the internal
employees and external customers of the
organization and process it into meaningful
actions that can satisfy these needs. The
health of business processes is as vital to the
success of an organization as the health of the
nervous system is to the success of the human
body. Speed of response and clarity of
decision-making are the two most important
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 Supply Chain Management Journal
measures of the health of business processes
as well as the human nervous system.
Business process management (BPM)
uses a fascinating technology designed
specifically to manage business processes.
These new BPM systems are rapidly coming to
the forefront of business innovation because of
the dramatic potential for improving the
productivity and agility of organizations. BPM
addresses the problems and challenges faced
by every business person in every
organization. Despite this broad applicability,
BPM and its underlying technology is still
shrouded in mystery.
Organizations have numerous business
processes that involve people as well as
automated systems. A business process can be
simply defined as "a sequence of tasks that are
performed in series or in parallel by two or
more individuals or computer applications to
reach a common goal." Common examples of
business processes that are readily
recognizable include:
■ Order processing that dictates how
customer orders will be received, entered,
manufactured, shipped and invoiced;
■ Claims processing that specifies how an
insurance company will receive, review and
process claims;
■ Performance renews that define how, when
and by whom employee performance will be
reviewed;
■ Customer complaints processing that
describe the mechanisms for handling
complaints issued by customers;
■ Loan processing that defines how a bank
will process loan applications and the rules and
approvals that must be obtained;
■ Purchase Order processing that lays out the
rules and paperwork that must be processed in
order to control the acquisition of goods and
services (Jeston, John & Nelis, Johan, 2006).
2.1. Strategic alignment of the processes
Strategic alignment is defined as the tight
linkage of organizational priorities and
enterprise processes enabling continual and
effective action to improve business
performance. The five principle capability areas
to be measured as part of an assessment of
strategic alignment capabilities, as they relate
to business process management. These
capability areas reflect the average perceived
importance weighing assigned by the experts.
1. A strategy-driven process improvement plan
captures the organization's overall approach
towards the BPM initiative. The process
improvement plan is derived directly from the
organization's strategy, and outlines how
process improvement initiatives are going to
meet strategically prioritized goals. The
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process improvement plan provides
information related to the targets for the
process improvement project, together with
planned review and monitoring processes.
2. A core element of strategic alignment, in the
context of BPM, is the entire bi-directional
linkage between strategy and business
processes.
3. An enterprise process architecture is the
name given to the highest level abstraction of
the actual hierarchy of value-driving and
enabling business processes. Well-defined
enterprise process architecture clearly depicts
which major business processes exist, how the
industry-company-specific value chain looks,
and what major enabling processes support
this value chain. Well-designed process
architecture derives from a sound
understanding of organizational structures
from a process viewpoint. In addition, it serves
as the main process landscape and provides
the starting point for more detailed process
analysis.
4. In order to be able to evaluate actual
process performance, it is important to have a
well-defined understanding of process outputs
and related key performance indicators (KPIs).
A hierarchy of cascading, process-oriented and
cost-effectively measured KPIs provides a
valuable source for translation of strategic
objectives to process-specific goals, and
facilitates effective process control. Relevant
KPIs can be of differing nature, including
financial, quantitative, qualitative or time-
based, and may be dependent upon the
strategic drivers for the specific enterprise
process. Often equally important, but more
difficult to measure, are KPIs related to
characteristics of an entire process, such as
flexibility or reliability.
5. Finally, we recognize that strategies are
typically closely linked to individuals and
influential stakeholder groups. Thus, how well
BPM is aligned to the actual priorities of key
customers and other stakeholders such as
senior management, shareholders, and
government bodies and so on should be
evaluated. (Jeston, John & Nelis, Johan, 2006)
Business Process Management (BPM) is the
intersection between management and
information technology, encompassing
methods, techniques and tools to design,
enact, control, and analyze operational
business processes involving humans,
organizations, applications, documents and
other sources of information.
The term operational business processes refers
to repetitive business processes performed by
organizations in the context of their day-to-day
operations, as opposed to strategic decision-
making processes which are performed by the
top-level management of an organization.
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 Supply Chain Management Journal
BPM differs from business process
reengineering, a management approach
popular in the 1990s, in that it does not aim at
one-off revolutionary changes to business
processes, but at their continuous evolution. In
addition, BPM usually combines management
methods with information technology.
PM covers activities performed by
organizations to manage and, if necessary, to
improve their business processes. In short,
Business Process Management is a solution;
management model that allows the
organizations to manage their processes as
any other assets and improve and manage
them over the period of time.
2.2. Process Mapping
Process mapping is a fundamental tool for
understanding supply chains. A processes
defined “as is” a logical series of related
transactions that converts input to results or
output. The business process is a chain of
logical connected repetitive activities that
utilizes the enterprise's resources to refine or
transform an object (physical or mental) for
the purpose of achieving specified and
measurable results or output for internal or
external customers.
All business processes have a customer, either
internal or external to the company. Examples
of common business processes include:
• New product development;
• New customer identification;
• Procurement;
• Inbound logistics;
• Production planning and control;
• Manufacturing and assembly;
• Sales;
• Customer order processing;
• Outbound logistics;
• Customer service and after-sales support;
• Product research and development.
Improving business processes is at the
very core of supply chain management. For
one thing, the performance level of most
processes tends to decrease overtime, unless
forces are exerted to maintain it. In addition, if
an organization does not improve its business
processes, its competitors, surely will. Finally,
today's customers are becoming more and
more demanding. The quality of currently
available products and services is improving.
This causes customer expectations to rise.
Thus, what a customer might have considered
quite satisfactory a few years ago, today may
not meet his or her requirements. It is
therefore irrelevant to discuss whether we
must improve processes; the question is rather
how much and how fast the improvement
should be.
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How do we go about improving processes? The
process improvement cycle "plan, do, check,
act" developed by W. Edward Deming provides
an effective approach:
• In the "plan" phase, the firm identifies and
analyzes the problem and plans activities to
remedy it;
• In the "do" phase, the firm carries out the
activities planned In the previous phase. The
purpose is primarily to experiment with the
• In the evaluation, or "check" phase, the firm
measures whether the corrective activities had
the desired effect on the problem;
• Finally, in the "act" phase, the firm modifies
the process to fit the activities that were
confirmed to give results. After the firm has
performed the four phases, the process is
considered improved.
Deming noted that in the first phase of
the process improvement activity, the firm
must document the process. As a general rule,
if you want to improve something, you must
first determine current performance. If you do
not truly understand the process and its
current performance, it will be very difficult to
know which improvement initiatives can be
started and whether they will ever work at all.
Documenting the process should therefore
always be the first step in any improvement
activity. A key part of understanding and
documenting a process is accomplished
through the development of a "process map."
Development of a process map serves several
purposes:
• It creates a common understanding of the
content of the process: its activities, results,
and who performs its different steps;
• It defines the scope of the process, as well as
the boundaries of the process relevant to
adjacent processes;
• It provides a baseline against which to
measure improvements in the future.
3. The redesign process project
Central to BPR is an objective overview
of the processes to be redesigned. Whereas
information needs to be obtained from the
people directly involved in those processes it is
never initiated by them. Even at its lowest
level, BPR has a top-down approach and most
BPR efforts, therefore, take the form of a
major project. There are numerous
methodologies proposed, but all share common
elements. Typically, the project takes the form
of seven phases:
Discover
This involves first identifying a problem
or unacceptable outcome, followed by
determining the desired outcome. This usually
requires an assessment of the business need
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 Supply Chain Management Journal
and will certainly include determining the
processes involved, including the scope,
identifying process customers and their
requirements, and establishing effectiveness
measurements.
Establish redesign team
Any organization, even a small
company, is a complex system. There are
customers, suppliers, employees, functions,
processes, resources, partnerships, finances,
etc. and many large organizations are
incomprehensible - no one person can easily
get a clear picture of all the separate
components. Critical to the success of the
redesign is the make-up of a redesign team.
The team should comprise as a
minimum the following:
• senior manager as sponsor;
• steering committee of senior
managers to oversee overall;
• re-engineering strategy;
• process owner;
• team leader;
• redesign team members.
It is generally recommended that the
redesign team have between five and ten
people; represent the scope of the process;
only work on one redesign at a time; and is
made up of both insiders and outsiders.
Insiders are people currently working within
the process concerned who help gain credibility
with co-workers. Outsiders are people from
outside the organization who bring objectivity
and can ask the searching questions necessary
for the creative aspects of the redesign. Many
companies use consultants for this purpose.
Analyze and document processes
Making visible the invisible,
documenting the processes through mapping
and/or flowcharting is the first crucial step that
helps an organization see the way work really
is done and not the way one thinks or believes
it is done. Seeing the process as it is provides
a baseline from which to measure, analyze,
test and improve.
Collecting supporting process data,
including benchmarking information and IT
possibilities, allows people to weigh the value
each task adds to the total process, to rank
and select areas for the greatest improvement,
and to spot unnecessary work and points of
unclear responsibility. Clarifying the root
causes of problems, particularly those that
cross department lines, safeguards against
quick-fix remedies and assures proper
corrective action, including the establishment
of the right control systems.
Innovate and rebuild
In this phase the teams rethink and
redesign the new process, using the same
process mapping techniques, in an iterative
approach involving all the stakeholders,
26
including senior management. A powerful
method for challenging existing practices and
generating breakthrough ideas is “assumption
busting”- see later section.
Reorganize and retrain
This phase includes piloting the
changes and validating their effectiveness. The
new process structure and operation/system
will probably lead to some reorganization,
which may be necessary for reinforcement of
the process strategy and to achieve the new
levels of performance.
Training and/or retraining for the new
technology and roles play a vital part in
successful implementation. People need to be
equipped to assess, re-engineer, and support -
with the appropriate technology -the key
processes that contribute to customer
satisfaction and corporate objectives.
Therefore, BPR efforts can involve substantial
investment in training but they also require
considerable top management support and
commitment.
Measure performance
It is necessary to develop appropriate
metrics for measuring the performance of the
new processes, sub-processes, activities, and
tasks. These must be meaningful in terms of
the inputs and outputs of the processes, and in
terms of the customers of and suppliers to the
processes.
Continuous redesign and
improvement
The project approach to BPR suggests
a one-off approach. When project is over, the
team is disbanded, and business returns to
normal, albeit a radically different normal. It is
generally recommended that an organization
does not attempt to re-engineer more than one
major process at a time, because of the
disruption and stress caused. Therefore, in
major re-engineering efforts of more than one
process, as one team is disbanded, another is
formed to redesign yet another process.
Considering that Ford took five years to
redesign its accounts payable process, BPR on
a large scale is clearly a long-term
commitment.
In a rapidly changing, ever more
competitive business environment, it is
becoming more likely that companies will re-
engineer one process after another. Once a
process has been redesigned, continuous
improvement of the new process by the team
of people working in the process should
become the norm (Oakland, S.John, 2004).
3.1. Business process maturity
Business process management is a
complex management practice that many
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 Supply Chain Management Journal
organizations find difficult to implement and
progress to higher stages of maturity.
Maturity models are used as an
evaluative and comparative basis for
improvement, and in order to derive an
informed approach for increasing the capability
of a specific area within an organization. They
have been designed to assess the maturity
(i.e. competency, capability, level of
sophistication) of a selected domain, based on
a more or less comprehensive set of criteria.
Therefore, a BPM maturity model is a tool that
can assist organizations in becoming more
successful with BPM, resulting in the
achievement of greater operational and
business performance benefits. In addition, the
increased success of BPM adoptions will
contribute to positioning BPM as an enduring
Figure 1. The Capability Maturity Model (CMM)
Low maturity
• Un-coordinated,
5. Optimized
isolated projects
• Low BPM skills 4. Managed
• Key personnel
• Reactive 3. Defined
• Manual
• Internal focused
2. Repetable
• Low resourcing
• Naive
• Static 1. Initial level
The Capability Maturity Model (CMM)
describes an evolutionary improvement path
from an ad-hoc, immature process to a
mature, disciplined process. This model applies
to new product development as well as
software development. The five product
development process CMM levels are:
Initial Level (ad-hoc, immature): At the initial
level, the organization typically does not
provide a stable environment for developing
new products. When a organization lacks
sound management practices, the benefits of
good integrated product development practices
are undermined by ineffective planning,
reaction-driven commitment systems. Process
short-cuts and their associated risks, late
involvement of key disciplines, and little focus
on optimizing the product for its life cycle. The
development process is unpredictable and
unstable because the process is constantly
changed or modified as the work progresses
opr varies from one project to another.
Performance depends on the capabilities of
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management practice. In particular, maturity
models can be used for three purposes:
1. As a descriptive tool enabling an “as-is”
assessment of strengths and weaknesses;
2. As a prescriptive tool enabling the
development of a roadmap for improvement;
3. As a comparative tool enabling
benchmarking to assess against industry
standards and other organizations.
Unlike other existing models, the BPM
maturity model discussed in the following
sections has been developed to enable each of
these three purposes.
The proposed BPM maturity model
adopts the five maturity stages of CMM in an
attempt to differentiate various levels of
sophistication of a BPM initiative
•Coordinated BPM activity
•High BPM expertise
•Organizational wide
involvement
•Proactive
•(Meaningful) Automation
•Extended organization
•Efficient resourcing
•Comprehensive
understanding
•Innovative
individuals or teams and varies with their
innate skills, knowledge, and motivations.
Repeatable Level: At the repeatable level,
policies for managing a development project
and procedures to implement those policies are
established. Effective management processes
for development projects are institutionalized,
which allow organizations to repeat successful
practices developed on earlier projects,
although the specific processes implemented
by the projects may differ. An effective process
can be characterized as practiced,
documented, enforced, trained, measured, and
able to improve. Basic project and
management controls have been installed.
Realistic project commitments are based on
the results observed on previous projects and
on the requirements of the current project. The
project managers and team leaders track New
Product Development (NPD) costs, schedules,
and requirements; problems in meeting
commitments are identified when they arise.
Product requirements and design
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 Supply Chain Management Journal
documentation are controlled to prevent
unauthorized changes. The team works with its
subcontractors, if any, to establish a strong
customer-supplier relationship.
Defined Level: At the defined level, the
standard process for developing new products
is documented, these processes are based on
integrated product development practices, and
these processes are integrated into a coherent
whole. Processes are used to help the
managers, team leaders, and development
team members perform more effectively. An
organization-wide training program is
implemented to ensure that the staff and
managers have the knowledge and skills
required to fulfill their assigned roles. Projects
tailor the organization's baseline development
process to develop their tailored process which
accounts for the unique characteristics of the
project. A well-defined process can be
characterized as including readiness criteria,
inputs, standards and procedures for
performing the work, verification mechanisms,
outputs, and completion criteria. Roles and
responsibilities are clearly defined and
understood. Because the software process is
well defined, management has good insight
into technical progress on all projects. Project
cost, schedule, and requirements are under
control, and product quality is tracked.
Managed Level: At the managed level, the
organization establishes metrics for products
and processes and measures results. Projects
achieve control over their products and
processes by narrowing the variation in their
process performance to fall within acceptable
boundaries. Meaningful variations in process
performance can be distinguished from random
variation. The risks involved in moving new
product technology, manufacturing processes
and markets are known and carefully
managed. The development process is
predictable because the process is measured
and operates within measurable limits. This
level of process capability allows an
organization to predict trends in process and
product quality within the quantitative bounds
of these limits. When these limits are
exceeded, action is taken to correct the
situation. As a result, products are of
predictably high quality.
Optimized Level: At the optimized level, the
entire organization is focused on continuous
28
process improvement. The organization has
the means to identify weaknesses and
strengthen the process proactively, with the
goal of preventing the occurrence of defects.
Data on the effectiveness of the development
process is used to perform cost benefit
analyses of new development technologies and
proposed changes to the organization's
development process. Innovations that exploit
the best integrated product development
practices are identified and transferred
throughout the organization. Product
development teams analyze failures and
defects to determine their causes.
Development processes are evaluated to
prevent known types of failures and defects
from recurring, and lessons learned are
disseminated to other projects. Improvement
occurs because of both incremental advances
in the existing process and by innovations
using new technologies and methods.
3.2. Process Classification Framework and
process modeling
In establishing a core process
framework, many organizations have found
inspiration in the Process Classification
Framework developed and copyrighted by the
American Productivity and Quality Center
(APQC). The intent was to create a high-level
generic enterprise model that encourages
businesses and other organizations to see their
activities from cross-industry, process
viewpoint rather that from a narrow functional
viewpoint.
The process classification
Framework supplies a generic view of business
process often found in multiple industries and
sectors – manufacturing and service
companies, health care, government,
education and others. As we saw earlier, many
organizations now seek to understand their
inner workings from a horizontal, process
viewpoint, rather than from a vertical,
functional viewpoint.
The process Classification
Framework seeks to represent major processes
and sub-processes, not functional, through its
structure and vocabulary. The framework does
not list al processes within any specific
organization. Likewise, not every process listed
in the framework is present in every
organization (Oakland on Quality Management)
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 Supply Chain Management Journal

Figure 2. Process classification

OPERATING PROCESSES

1.0 2.0 3.0 4.0 5.0

Develop Vision Design and Market and Sell Deliver Products Manage
and Strategy develop Products Products and and Services Customer Service
and Services Services

MANAGEMENT AND SUPPORT PROCESSES

6.0 Develop and Manage Human Capital

7.0 Manage Information Technology
8.0 Manage Financial Resources
9.0 Acquire, Construct and Manage Property
10.0 Manage Environmental Health and Safety (EHS)
11. 0 Manage External Relationships

12.0 Manage Knowledge, Improvement and Change

For the process “Deliver products benchmarking, I recommend using the

and services I propose an analyses of its
maturity on sub-processes and activities using
the Benchmarking instrument (Figure 2). To
make an analyses and an improvement for the
processes by measuring the level of maturity
(Scorecard) imposed as a step by the
approach of project management to redesign
this project. In the Figure 4 we generate, using
Microsoft Project, from the Gantt Chart (Figure
3), the WBS (Work Breakdown structure)
(Figure 4).

Figure 3. Gantt Chart of Deliver process (SCOR Model)

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 Supply Chain Management Journal

Figure 4. Work Breakdown Structure of Return process (SCOR Model)

3.3. SCOR Model Here's what's included in each of these process

elements:
Supply Chain Processes Management uses PLAN. Assess supply resources; aggregate and
SCOR Model (Supply Chain Operation prioritize demand requirements; plan inventory
Reference). for distribution, production, and material
SCOR model has four level of particularization, requirements; and plan rough-cut capacity for
the first three of them – processes, sub- all products and all channels.
processes and activities – being described in SOURCE. Obtain, receive, inspect, hold, issue,
the model. Operational processes, or level 4, and authorize payment for raw materials and
are tasks detailed of working flux level and are purchased finished goods.
always particularized to strategy and specific MAKE. Request and receive material;
requirements of the organizations. In this way, manufacture and test product; package, hold,
they are not included in the published version and/or release product.
of the model. DELIVER. Execute order management
SCOR combines elements of business process processes; generate quotations; configure
engineering, benchmarking, and leading product; create and maintain customer
practices into a single framework. database; maintain product/price database;
Under SCOR, supply chain management is manage accounts receivable, credits,
defined as these integrated processes: PLAN, collections, and invoicing; execute warehouse
SOURCE, MAKE, DELIVER, and RETURN from processes including pick, pack, and configure;
the suppliers' supplier to the customers' create customer-specific packaging/labeling;
customer, and all aligned with a company's consolidate orders; ship products; manage
operational strategy, material, work, and transportation processes and import/ export;
information flows. and verify performance.

Figure 6. SCOR framework.

Plan

Source Make Deliver

Deliver Source Make Deliver Source Make Deliver Source

Return Return Return Return Return Return Return Return

Suppliers’ Supplier Your Company Consumer Consumers’

Supplier Consumer

Internal or External Internal or External

SCOR Model

Source: Supply Chain Council, 2003

30 Issue 1/2010
 Supply Chain Management Journal
RETURN. Defective, warranty, and excess
return processing, including authorization,
scheduling, inspection, transfer, warranty
administration, receiving and verifying
defective products, disposition, and
replacement.
3.3. Return Process of SCOR Model
The return process ensures that previously sold
products are supported, collected, and
dispositional according to business policies and
customer agreements and covers all activities
from return authorization to financial
settlement. The primary drivers behind return
differ by industry but typically include the
return of defective, wrong, or unsatisfactory
products; maintenance, repair, and overhaul
(MRO) based on service agreements; excess
channel inventory returns; and
recycling/refurbishment/reuse.
Different activities may be associated with
each of these return "types."
Return is a reverse supply chain process and
has specific requirements and characteristics
that differ from the forward supply chain. For
example, return involves capturing item-level
data from the point of return, tracking a
product until disposition, and managing
warranties for the complete product life cycle.
It also requires capturing a range of analytics,
including the causes of returns, originating
locations, costs, and credits.
In addition, the return physical network entails
specific challenges.
For example, returns typically feature small
volumes of many different items with irregular
frequency. Companies must find a way to
collect, sort, and distribute this array of items
as efficiently and economically as possible.
Often, central collection points provide a way
to aggregate volume in a cost effective
manner.
For return process excellence, follow these four
key principles:
• Create a distinct supply chain for return, such
as deciding whether a product can be returned,
how it will be disposed of, and how to manage
supplier or customer credits and other financial
transactions. Return requires a separate supply
chain, with its own end-to-end processes,
information systems, performance scorecard,
and organizational responsibilities.
• Feed back return information quickly. Provide
timely information on returns to guide both
Issue 1/2010
disposal and preventive actions. For example,
procurement will deal with suppliers
appropriately, based on return information.
Production, engineering, and logistics will learn
from return information and use it to take
corrective action in their respective areas.
Return managers will use data on costs,
credits, and revenues to manage reverse
supply chain operations.
• Base returns policies on total cost of returns.
Set up an explicit return policy for each item
sold, whether manufactured internally or
purchased for resale. Consider using an
external returns specialist depending on the
nature of the return, the total costs of the
return—including assessment, collection,
sorting, and disposal— and your company's
existing return capability.
• Maximize revenue opportunities. Define your
company's return processes and policies with
an eye toward revenue enhancement.
Identify multiple revenue-generating disposal
paths, including resale, supplier return for
credit, recycling, auction, and so forth.
For purchased items, disposal policies should
integrate business rules that are present with
suppliers.
To be effective, your company's return process
must be integrated with other supply chain
processes. For example, by integrating with
the, plan
process, return makes sure that the resources
it needs are available. By integrating with the
source and make processes, return can provide
information on defects and faults to ensure the
quality of purchases and manufacturing.
Return also provides information to deliver on
products to be picked up from customers and
brought into the reverse supply chain. For MRO
items, return provides information to source,
make, and deliver for execution of the
activities needed to process returns according
to customer agreements.
An effective return process also requires
integration with other core business processes.
For instance, integrating return with the
technology, product, and service development
process ensures that information on product
defects and poorly understood product features
is used to improve existing products and
develop better new products. Integration with
the marketing and sales process ensures that
returns policies are consistent with customer
terms and conditions.
31
 Supply Chain Management Journal

Figure 7. Work Breakdown Structure of Return process (SCOR Model)

Figure 8. Gantt Chart of Return Process (SCOR Model)

Figure 9. Benchmarking of Return process (SCOR Model)

for the sub-

Hierarchical
the process

Manufacturer
importance

process in

Analytical

Level of maturity
Level of

Process

LIDER
Sub-processes Activities

0% 25% 50% 75% 100%

5.1.1. System Integration

5.1. Receiving
5.1.2. Inspection/Analysis
and
5.1.3. Quarantine
Warehousing
5.1.4. Disposition
5.2.1. End User
5.2. Transport
5.2.2. Channel
5.3.1. Product Being
Returned to Customer
5.3. Repair and 5.3.2. Product Going to
Refurbishment Refurbishment Stock
5.3.3. Disassembly/Used
Parts Stock
5.4.1. RMA Processing
5.4.
5.4.2. E-Commerce
Communicate
5.4.3. Call Center
5.5.1. End-User Returns
Management
5.5. Manage
5.5.2. Channel Returns
Customer
Management
Expectations
5.5.3. Financial
Transactions

32 Issue 1/2010
 Supply Chain Management Journal

Conclusions Also, very interesting pragmatic

Excellence in supply chain
management can be achieved by:
1. Understanding and practicing collaborative
management philosophy by all organizations
and especially the component of the pairs
(supplier-producer, producer/distributor,
distributor-retailer)
2. Leadership oriented to teamwork as
organizations
3. Generating a commune strategic plan
4. A perfect determination of the processes in
each organization
5. A level of maturity of the return process by
comparing (benchmarking) with the best
companies that have the best practices and
excellent results.
6. An alignment of the collaborative processes
of these organizations through Business
Process.
Redesign for a performance of the
whole logistic chain compared with other
chains (Supply Chain).
To succeed and to have a chain of
excellence, each organization, and both of
them in commune, can and must use
instruments like: CMM (Capability Maturity
Model), Process Classification Framework for
Process Modeling, SCOR Model and others.
Using project management thinking, through
WBS (Work Breakdown Structure) we can use
Microsoft Project to refine the architecture
processes - sub-processes - activities - sub-
activities
Using project management help us
with specific tools (WBS, Gantt) to ordering
activities and we believe the benchmarking tool
may be useful in measuring the maturity level
of activities and sub-processes (0 - processes
/ activities inexistent in the organization until 4
- processes / activities of excellence).
The project provides the organization
with an alternative way of achieving results
where the work to be done is likely to cross
functional boundaries. The project is a powerful
mechanism for achieving success, is something
special by its nature and by the fact that is
perceived as being outside normal operations.
It may be defined as a collection of linked
activities carried out in an organized manner
with a clearly defined start point and finish
point, to achieve specific results that satisfy
the needs of an organization as derived from
the organization’s current business plans.
Successful project management uses
planning techniques to define the project
objectives in sufficient detail to support
effective management of the project. The work
breakdown structure (WBS) provides the
foundation for defining the work to its
complexion.
conclusions can be obtained using
Benchmarking for processes.
Our proposal of instruments is
centered on the SCM process in the case of
raw materials flow - product and reversive SCM
– for RETURN process.
References
Cook, Sarah & Macaulay, Steve Change
Management Excellence, Kogan Page, London,
2002.
ECR Europe – Collaborative POS Data
Management, Deloitte, 2003.
ECR Europe - Jointly Agreed Growth. New ways
of working Together in Europe, Report, 2008.
Global Commerce Initiative – 2016 The Future
Value Chain, 2006.
Global Commerce Initiative – 2016 Future
Supply Chain Report, 2007
Global Commerce Initiative –How to succeed in
a volatile market: The 2018 Future Value
Chain, 2008.
Global Commerce Initiative – New
Ways Of Working Together. Why is it
important to prepare our people for the New
World, 2009.
Global Commerce Initiative – Information
Sharing Report, 2009.
Handfield, Robert B.; Nichols, Ernest L.
- Supply Chain Redesign: Transforming Supply
Chains into
Integrated Value Systems, Financial Times
Prentice Hall, 2002
Harrington, James H., & Co – Business
Process Improvement Workbook,
McGraw-Hill, New York, 1997
Jeston, John & Nelis, Johan – Business
Process Management, Butterworth-
Heinemann, Oxford, 2006
Kaplan, S. Robert, Norton, P. David –
Alignment, Harvard Business School,
Publishing Corporation, USA, 2006.
Kerzner, Harold – Strategic Planning for Project
Management using a
Project Management Maturity Model, John
Wiley & Sons, New York, 2001
Levy, Michael & Weitz, Barton, A., - Retail
Management, VIIth edition, McGraw-Hill-Irvin,
New York, 2009.
Markides, Constantinos, GameChanging
Strategies, Jossey-Bass,New
York, 2008. Oakland, S. John – Total
Organizational Excelence, Butterworth-
Heinemann, Oxford, 2001
Oakland, S. John – Oakland on Quality
Management, Butterworth- Heinemann,
Oxford, 2004
Pietersen, Willie – Reinventing
strategy, John Wiley & Sons, Inc. New

Issue 1/2010 33
 Supply Chain Management Journal

York, 2002 value chain, EXECUTIVE OUTLOOK,

Robert, Michael – The New Strategic Elsevier Food International, Volume 3,October
Thinking, McGraw-Hill, New York, 2006. 2006.
Segil, L., Goldsmith, M., Belasco, J., Templeton College - The contribution
Partenering, AMACOM, USA, 2003. of Food Retailing to Society and the
Stanford, Naomi – Organization Economy, Templeton College, University of
Design: The Collaborative Approach, Oxford, 2004.
Oxford, Elsevier Butterworth-Heinemann, Urban, Sabine et Vendenini, Serge –
2005. Alliances strategiques cooperative
Supply Chain Council – Supply Chain europeennes, De Brek Universite, Bruxelles,
Operations Reference Model, Ed. Supply Chain 1994.
Council, 2003. Wahyuni, Sari – Strategic Alliance
Thomson, Jennifer, Ivano, Ortis & Development, Labyrint Publication,
Giorgio, Micheletti – Collaborative Capelle, The Netherlands, 2003.
excellence, in the consumer products

34 Issue 1/2010
 Supply Chain Management Journal

Retailers’ Innovation Strategies for a Better Position

on Romanian Market

Adina Letiţia NEGRUŞA

Facultatea de Business
Universitatea Babeş-Bolyai Cluj-Napoca

Abstract
Modern trade in Romania in the last five years experienced a great evolution, both as number
of units, eg. from 3 hypermarkets in 2003 to 108 in 2010, as well as number of customers and
market share. Diversification of retail activity and increased of Romanian customer interest for these
new forms of retail concepts were threatened for the first time in 2009. Starting with this year general
tendency was to maintain the level of sales and market positions obtained.
The actual situation of the market brought at international level radical changes in business
environment for retailers as well as for thier suppliers. The most important ones reffered to the type
of buying process and consumers behaviour. A set of studies on the consumer behaviour showed that
84% from them were forced to changed their buying behavior in the last year. In this recesion time
not only the spending bugets for fast movement goods will be lower, but their behavior will be focused
on product with high value aded, along with maintaing in the future of tendency toeard discount stores.
The objective of this paper is to understand that nowadays the competition in retail market
should be judged not in terms of relationship between prices and costs at a point in time but rather in
terms of the capacity to innovate over time leading to longer-term gains in quality, convenience and
price. Surveys have shown that convenience became first consideration in determining whether a
consumer maintains or switches loyalty from one supermarket or type of shopping to another.
Thus supermarkets and hypermarkets are facilitating reductions or qualitative improvements
in the un-costed time expended by the consumer through the growth and rapid development of
infrastructure for home shopping. In order to outline the most important directions of applying
innovations by Romanian retailers in production activities, for revolutionising logistics of supermarkets
activity or for reorganizing supply I used several types of analytical methods based on data from
marketing studies and I applied comparative analyse with situation and evolution of modern trade
businesses from other different countries.

Key Words: innovation capacity, modern trade, market share

Introduction hypermarkets and discount stores, while

The changes on retail market in
Romania is extremely important both in terms
of consumer behaviour, a number of
environmental pressures manifested on its
purchase behaviour and in terms of market
structure, changing the balance of competitive
forces within its power. In this sense the paper
aims to explore the competing factors of
current and main directions of innovation that
will bring value to consumers and will ensure
market share. The research is based primarily
on an analysis of key results of market studies
and research conducted in this field of business
by organizations specialized in the diagnosis of
markets, on national statistics, articles and my
analysis.
1. Romanian Retail Market Evolution
Since 1996, the year when group
Metro AG brings the new concept cash&carry in
Romania, we can say that it started also the
restructuring of retail market in two broad
categories: traditional and modern trade.
Modern trade is represented by supermarkets,
traditional trade involves diverse stores from
groceries and specialized stores like: bakeries,
butchers, clothing, footwear and proximity to
the hospitality specific channels.
After Polish and Hungarian markets
saturation, Romanian market became target
for investment of major European retailers.
Low level of development of modern
commercial networks in Romania in early 2002
meant an opportunity that allowed investors to
benefit fully of this potential. The top of 10
investors on the Romanian retail market are:
Metro Group,Hyparlo Rewe, Auchan, Spar,
Delahize, Lidl&Schwartz, WCO and Agip. The
period of time with the strongest growth of this
sector was 2006, with a growth rate of 23%.
Even if this rate has slowing down, the
Romanian market still presents an opportunity
for investors. According to a report by Eurostat
(Newson, B., 2009) , Romania recorded in May
2009 the fourth rate increase in the retail
sector among EU countries, given that only

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 Supply Chain Management Journal

four countries reported a positive growth of
this sector.
For a quick and strong market
penetration foreign investors used two
strategies. The first one involved replacing the
supermarket with hypermarket in large cities,
so in this case could compete successfully with
cash&carry networks, offering superior quality
products and a wide assortment. The second
strategy involved the development of discount
stores in small towns in order to attract rural
areas consumers which were clients for
cash&carry and traditional trade stores.
Since from the entering on the
Romanian market in 2001, the hypermarket
has registered a rapid evolution, monopolized
the consumer attitude and becoming an
important actor in the market. In the last five
years hypermarket network has increased from
5 to 109 units and a market share of 18-19%
of FMCG market. They drew most of the
Romanian consumer budget, as a study by AC
Nielsen (Shopper Trends 2009) showed that
93% of food budget was spent in modern
commerce, where hypermarket held a
comfortable position.
Throughout this period traditional trade
recorded a constant decrease both as number
of units, as well as sales value of FMCG market

Figure.1. Traditional trade stores number evolution

As can be observed from figure above,
since 2005 traditional trade show a downward
trend in number and the same trend was
observed for the share in total sales value of
the sector in favour of modern commerce. In
2004, major retailers presented on Romanian
market, decided to expand their network
outside the capital, Bucharest, and for this
reason launch the new concept of discount
store. Therefore, in this period numerically
speaking modern commerce has experienced a
growth rate up to 34% in 2006. In the end of
2006 12 foreign retailers were operating in the
grocery Romanian market. Currently the
overall retail market in Romania has reached a
value of 90.5 billion EUR, through a number of
640 stores in modern trade, 109 hypermarkets,
161 supermarkets, 304 discount stores and 44
cash&carry units.

Table.1. Modern vs. Traditional trade sales value ponder evolution

Year 2002 2003 2004 2005 2006 2007 2008 2009

Traditional trade 88% 87% 78,90% 75% 71% 61% 59% 57%
Supermarket 3% 4% 7% 7% 8% 12% 14% 13%
Hypermarket 4% 5% 9% 10% 11% 15% 18% 19%

Discounter 0% 0% 1% 2% 4% 5% 6% 9%
Source: Shopper Trends 2009

Romanian consumer has identified the
benefits of modern trade, but remained loyal to
traditional stores for some particular groups of
products, like fresh products, due to prices,
quality or availability reasons. Competition in
modern trade has intensified starting with
2007, along with the entrance of 2 new
commercial networks, Auchan and Spar. This
led to the penetration of small towns by
retailers and development of programs for
building consumer loyalty. For long term this
competition struggle led to price cutting and
competitive prices on surface distribution for
new product ranges. Romanian retail market in
the end of 2008 had the following structure,
table 2, being observed a concentration of
30% of the market on the top of 10 retailers.

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 Supply Chain Management Journal

Table.2. The most important retailers in Romanian market

Revenue registered in Number of Market share in

Type of retailer Origin
2008( USD mil) operational units 2008
Metro – cash&carry German 2005 24 7.66
Carrefour – hypermarket French 1267 22 4.84
Selgros – cash&carry German 1054 18 4.03
Kaufland – hypermarket German 955 45 3.65
Real - hypermarket German 881 24 3.37
Cora - hypermarket Belgian 490 4 1.87
Penny – discount German 419 93 1.60
Billa - supermarket German 397 45 1.52
Auchan – hypermarket French 342 7 1.31
Plus – discount German 340 96 1.30
Mega Image –
Belgian 162 48 0.62
supermarket
Profi – discount Belgian 147 67 0.56
Source: Revista Piata, Novembre 2009

After a period of steady growth, in
2009 was registered first drop in the retail
sales value, caused by the reduction of non-
food sales and decline of the value of
purchased food goods.2009 meant for the
entire Romanian retail market, and not only,
the year when arisen first major obstacle which
replace and restructuring retailers’ offer and
behaviour. With a decrease of the FMCG
market the competition grows. Still Romanian
retail market is in an early stage of
development, highly fragmented where 15
largest groups active in retail accounted in
2009 an estimated 17% of the country’s total
retail sales.

Figure 2. Evolution of Romanian retail sales value

*2010, 2011 – forecasting values

Source: Report Retail in Romania 2010, PMR Publications, 2010

2. Financial Crisis Determined More 2010) on consumer behaviour during crisis

Competiton
The crisis has affected consumption in
general in 2009, but the most affected was
non-food segment. Durable goods market fall
with a 34% rate was followed by sales of
consumer goods. Consumers are focused on
necessity products, given that the shopping
budget decreased slightly from 738 RON
(January 2009) to 719 RON (November 2009).
The GfK survey results, conducted in 25
European countries (Magazinul progresiv,
time, showed that 84% of Romanian
participants said that they were forced to
change their consumer behaviour. They have
indicated in the top of the things that have
dropped in the last year: clothing and shoes,
vacations and trips, savings and went out.
Very important is that the influence of
crisis on consumption was achieved different
on consumer segments. Results of GfK survey
(Ion, 2010) showed that consumer segment
with high income increased from 12% in 2008
to 14% in 2009, for which monthly expenses

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 Supply Chain Management Journal

for food amounted to 972 RON, while middle-
class segment registered a slight decrease
from 45.6% in 2008 to 44.6% in 2009.
Shops visiting frequency for modern
commerce was maintained at the same level in
2009 and 2010, with slight decreases for
hypermarket and supermarket, and a small
growth instead for discount stores, which
meant an average of once a week.
Although in the late of 2009 and 2010
Romanian consumer faced with a substantial
increase in food prices, however much of them
remain loyal to the brand. Using of promotions
and special offers could attract customers and
focus them to a different brand, but with the
exception of personal care products and coffee,
which enjoys a strong loyalty. At the same
time also a polarization of consumer took place
on premium and value segments. The first one
involves a niche with high value and price. The
second envisages an assortment based on low
priced products available only in large volumes.
As an influence of crisis situation the most
affected segment was mainstream, due to the
new constraints on budget spending. Retailers
have tried to muster in extreme areas of the
market for the best targeting of it.

Figure 3. Brand loyalty on products type

Based on this background consumer optimize cost and revenue effectiveness in

behaviour distributors were quickest crushed in
their businesses being somewhere in between,
because producers’ intention was to push
merchandise in commercial establishments and
retailers’ situation was characterized by low
liquidity and impossibility to pay. All market
players have learned in a very short time that
a key element in maintaining the position in
the market is providing an adequate level of
liquidity, which requires additional effort to
sales to offset declines sales. This involves
analysis of product stock rotation speeds and
eliminates those with low turnover and
expanding product ranges from entry level
price.
Changing of consumer behaviour led
also to a slow down of the pace of
development of retailer’s network and for some
of them to apply divestiture strategy.

Table 3. Number of closed units in 2009

Source: Revista Capital, december 2009

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 Supply Chain Management Journal

The type of store that responded best
to the new conditions of the market has been
of hard-discount concept. These networks, in
Romania are: Penny Market, Plus Discount,
MiniMax Discount, Profi, they are having an
important market share also in Germany and
Nordic countries. They are characterized by
small areas of sales, lower implementation
costs, reduced number of assortments, with
one-two products in each range and high
speed of stock rotation.

Figure 4. Evolution of discount stores in Romania

Although recorded in 2009 the most 3. Innovative Strategies

attractive for consumers and for 2010 is
expected to increase as market share, hard-
discounter sector is still characterized by an
intensify competition. Pending for the arrival of
Lidl on the Romanian market, every discounter
attempts to consolidate its market position. For
example Plus has set the objective to optimize
operations and cost structures by completing
the new storage areas for frozen products and
a new logistic depot. Penny plans to adapt its
assortments structure to their customer’s
needs and enhance their loyalty by introducing
a loyalty card.
3.1. Logistic centralizing
Distribution infrastructure was an
important element in developing the retailers
on Romanian market and in obtaining a
competitive advantage. Specific for the
Romanian market is the existence of importers
and distributors who supply directly to retail
networks and have developed their own
logistics system.

Figure 5. Types of intermediary in products flow on Romanian market

EXPORTER

IMPORTER DISTRIBUTOR

CASH&CARRY
WHOLESALER

HYPERMARKET/ SMALL STORES/

SUPERMARKET/ KIOSKS/
DISCOUNT STORE FOOD STORES

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 Supply Chain Management Journal

Logistical innovations were required Romanian launch major investments in

due to technical point of view by the need to
extend the product range of fresh and chilled
products. A supply chain management for
retailers involves understanding and balanced
weighting of three elements (Lund, J., Wright,
C., 2006):
 Availability,
 Inventory,
 Costs
Given that in the total costs of retailer
share of logistics activities is the larger one,
clearly it is important to be interested by their
efficiency. Consequently companies on retail
have tree options: outsourcing logistics
activities, the development of their logistics
centres or a combination of both. Based on this
idea starting with 2004 all retailers present in
distribution segment. The majority of them
chosen to centralize distribution process and
built large regional logistics centres, which
starting be created also outside of the capital,
in Cluj, Deva, Ploiesti, in order to facilitate the
flow of goods to consumers.
Logistics Centre is an important link in
the supply chain to ensure stores with the right
quantity of products, at the right time and
controlled quality. By definition a logistics
centre is a unit where different operators
performed in a centralized system transport,
logistics and distribution operations (Ballou,
2004). This location must be equipped with
necessary facilities for each activity.

Figure 6. Structure of logistics centre

LOGISTICS CENTER
Opetations and maintainence of Development and implementation of
facilities/building new activities/facilities

Independent Transport Added Value

Business Unit Companies Services
- General cargo terminal - Carters - Customs
- Distribution center - Forwarders - Port
- Storage hotel - Shipping firms - Post Service
- Container terminal - Shipbrokers - Veterinary
- Cold store terminal - Stevedores authorities
- Combi terminal - Hauliers - Weights and
- Technical equipment - Rail operators Measures Dept
- Service center - Shipowners - Bank
- Computer and - Air freight - Trailer rental
communications center - Terminal operator - Filling Station
- Transport research & - Repair facilities
training - Welfare facilities
- Hazardous goods store
- Assembly & Packaging

Source: Best Practice Handbook for logistics centres

Evolution of the concept of logistic  Collecting and sorting waste (paper,

centre led to a variety of services and activities cardboard, plastic) and sending them to
(Rimiene & Grundey, 2007): materials recycling points.
management and product distribution, import A logistics centre must be organized in
and inbound transportation, receiving goods, an open manner which should allow access to
cross docking, inventory management and all companies involved in the activities that I
control, supply planning, order processing, already set up above. In this way the types of
goods packaging, labelling , documentation services provided by logistics centre are
preparation, transport and export, etc. Also the depending on the predominant function, size
logistic centre provides a range of benefits and range of operation (Meidute, Vasiliauskas,
(Miller, C., Reardon, J. and McCork, D., 1999) 2005). Based on these criteria we can divide
in the supply and distribution like: them into:
 Management of stocks of goods from all a. International logistics distribution
suppliers centres – intermediary cell for
 Centralization and coordination of all international markets/ companies
logistics b. Regional logistics distribution centres –
 Preparation of deliveries to each store intermediate link in the logistics
 Reducing the risk of losses through the network channels
transfer of goods from one shop to c. Local logistics distribution centres –
another end links of a distribution network
 Reducing storage space in stores d. Industry distribution centres – offer
 Use of own transport system services only for one industry or for a
single large company

40 Issue 1/2010
 Supply Chain Management Journal
Most retailers, Metro, Carrefour, have
used a strategy of development of logistics
centres after they created the stores network
or simultaneously, like MiniMax Discount.
Other operators, such as Schwartz group,
started from the idea that logistics is a key
element in developing their network of stores
which provide low expenditure and therefore
lower prices, as they have invested in
achieving logistics centre before opening first
store. Certainly new investments in logistics
hubs of major commercial networks are
expected in 2010, because this strategy will
lead to cost efficiency and an important
competitive advantage in crisis time.
Due to relatively large number of
specific business units present in traditional
trade, distributors still will play an important
role in the retail market. But also we can
identify a concentration and consolidation of
them in 2010, by the elimination of distributors
who had not enough resources to meet the
growing demands of retailers.
The reasons which determined an
increasing of the logistics centres in Romanian
economy were:
• Tendency to centralize inventories in one
location
• Tendency to outsource logistics services
• Growth of the logistics services market
in Romanian economy
• Integration in European logistics
networks
3.2. Services with added value
Romanian consumer appetite reduction
in time of crisis is one factor which led to the
current retail market competition and
intensified the efforts to enhance customer’s
loyalty. Trend Shopper study conducted by
Nielsen in 2009 showed that a major factor in
maintaining buyer’s attractiveness is the
convenience of the store. Also, some other
factors like price level, price/quality ratio,
quality and diversity of assortment of products
offered, business unit availability have
increased as importance. These results were
indurate by another study done in 2010 by
MEDNET on the customers from Bucharest.
Based on this the convenience of the store
(location near to consumers home or place of
consume) come in the top of the criteria used
for choosing the grocery units. Other relevant
results for retailer are:
 The quantity to be purchased influence the
choice of retail unit, thus for small
quantity customers prefers traditional
stores placed near to their homes, that
were used. For high volume of
commodities they prefer the nearest
hypermarket or supermarket.
Issue 1/2010
 Trade flow of the retail unit is another
important factor which influences the
customers’ behaviour. High turnover of
goods attracts more and loyal clients.
 High assortments and attractive price level
are the main factors which attract
customers in hypermarkets and
supermarkets.
The concept of hypermarket was build
based on the idea to add value for customers
through a diverse offer of services in the same
unit. Thus in the same location are combined
supermarket, department, discounts and
specialty stores. The basic principle of a
hypermarket is expressed in French as “Tout
sous le meme toit” which means “Everything
under the same roof”. Now the services offer
inside of the hypermarket diversified in a
manner that addresses to the entire members
of the family. Also were added food services,
shopping area in speciality stores and personal
take care services and for entertainment. In
this way the hypermarket tries to assure an
added value trough out the concept itself.
Time dimension plays an important
role in sales situations and might change
consumers’ shopping behaviour. Thus the
travel time to the store influences the
shoppers’ purchasing outcomes (Nicholls,
Roslow and Dublish, 1997). Accrodingly
shoppers who have to spend more time for
travelling to the store are more likely to spend
more money than people which are near store
location. In accordance with Simons’ results
(1990) also people which puchased for
immediate consumtion have narrower choices
in comparison with those which purchase for a
loger period of cunsumtion. In conclusion a
limited purchased time can conduct to a fewer
number of products purchased, so time spent
shopping will determine how much shooper will
buy. Also Undehill (1999) shows that if the
shopper remains for a longer period of time in
the store will determined to purchase more
items and spend more money.
Availability of supermarkets and
hypermarkets has meant not only a struggle to
build the most attractive discounts or negotiate
to reach the lowest price, but a constantly
improving the range of services offered to
clients, thereby to increase the value added
offered its purchasing process. Thus a first step
in which retailers were thought to increase
value of their services was to reduce the time
spent by customers in the buying process. This
added value is more wanted by customers both
because of the need for economy and reducing
the transportation costs. For example the
French group Carrefour has launched in
Belgium a shopping platform enabling
customers to establish online shopping cart
before going to stores and taking them. The
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 Supply Chain Management Journal
retailer believes that this service responds to
the modern customer requests, pressed for
time which needs much of convenience of the
offer.
In this way classic retailers started to
add to their web sites the possibility to book
online some products in national network or
even to shop online, in order to gain more
reduction costs on inventories and transport.
Home deliveries will mean, along with online
sales, innovative benefits in this period, given
that operational costs are at an extremely low
level. Hypermarkets and supermarkets with
tradition in the market will have the
opportunity to raise market share by
developing online commerce, or online selling
services.
Another result of the increased
Romanian customer interest for store
availability led to a new way of organizing
product range, according to purchase routes.
Selgros is pioneering this new concept on the
Romanian market on Cluj and Bucharest units.
3.3. Investment in own brands
Brands often provide the primary
points of differentiation of competitive offerings.
Branding strategy is important not only for
manufacturer but also for retailers. The added
value given by a good brand, called brand
equity, offer to retailers two distinct
advantages: a competitive advantage through
Figure 7. Market share for private brands
Source: Cote de piata record in Europa pentru marcile private, Revista Magazinul Progresiv
42
the loyality of consumers and second the
ability to endure environmental changes.
As a result of the retailers focusing on
developing own brands in order to increase the
added value for their customers, their brands
registered in 2009 an amazing growth of the
market share. According with the annual report
of PLM Association (plmainternational.com) the
retailers own brands gained new market share
in 14 European countries from 20. Private
brands from Switzerland are in the top with
53% of the market share, followed by United
Kingdom with 47%. Also the highest pace of
growth was registered by the market shares of
private brands from Spain and Turkey with
almost 3% comparing with 2008. The retailers’
reason starting to invest more in their own
brands is correlated with the evolution of retail
market. Once market saturation occurs then
differentiation strategies become indispensable
for a continuous growth. In this context the
own brands are the easiest way to differentiate
from the competitors and also a tool for
reducing or rationing the costs.
Using of own-brands products had
been a method of introducing price discounts
without undermining the prices of
manufacturers. In this way retailers gained
higher profit margins from own-brands
products than from branded goods.
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 Supply Chain Management Journal
Development of the modern trade
forms meant in the same time the promotion
of their brands in the Romanian market. They
were developed in the commodities: oil, flour,
canned, processed meat, ketchup, mustard etc.
These products do not have a very strong
image among consumers, because either are
not known by them or were not associated
with the retailer.
However awareness of retailer’s brands
increased, thus, according to Nielsen Shopper
Trends, the rate of consumers which declared
that do not know any retailer’s brand
decreased from 11% in 2006 to 6% in 2009.
So far these brands did not represent an
important market segment, but for the future
most of the retailers have set the objective of
increasing their market share with 15%. Thus
in 2010 the most advertised own brands
(MEDNET Research Company, 2010) were of
the Real hypermarket and those which
registered the highest notoriety are of the
Metro group.
All retail networks identify in own
brands an important opportunity to growth in
the market, so all of them applied this strategy
for development own brands for both food and
non-food segment on entry level, respectively
the lowest price, for example: Carrefour
( Marca 1), Metro (Metro Aro and Quality), Bill
(Clever), Cora (Winny), Mega Image (365) and
Kaufland (K-Classic) etc. Customers rate who
have bought retailers brands in the total buyer
shop shows that the most popular brands are
those of Billa supermarket, with a rate of 50%,
of the hypermarklet Auchan (44%) and Metro
Cash&Carry store (41%).
Although their brands have become at
present very attractive due to price level, they
are not considered in qualitative terms at the
same level with conventional brands. Some
retailers consider that starting with the
maturation of Romanian consumers, they will
become aware that the price difference
between conventional and retailers brands is
not always related to the quality, but especially
as their image on the market. Retailers brands
entered also on the premium segment, many
products were developed on organic or bio
segment. These are currently an opportunity
for sales growth, so that hypermarkets and
supermarkets have been receptive and have
arranged special areas for them.
Retailers interest for own brands can
be identified based on the investments made
to increase or improve their product quality or
conditioning. These efforts were noticed by
consumers and for many of them also meant a
change in their purchase behaviour. In a study
done by Nielsen in 2009 on the attitude of
customers toward retailers brands, resulted
that 71% of the consumers consider that
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private brands packaging looks as good as the
brands of manufacturers. Also 67% of
consumers believe that private brands have
the same quality level with conventional top
brands. It was observed that customers’
opinion is that as the best of retailers is also its
own brand will be better in the market.
The fast pace of expansion of hard
discounters, such as Aldi and Lidl, and
generalized tendency to apply discount concept
as a result of financial crisis, will further
contribute to the growth of private brands,
especially on the economy segment. Moreover,
the advantage of private brands over
manufacturer brands, in terms of price, is seen
in the imbalance between market share
volume and value. In the national markets
where private brands were used only as a
competitive tool against aggressive
competitors in correlation with a pricing policy,
the difference between the value and volume
of the market share is smaller.
Conclusions
Putting these different aspects together
the consequences of this innovation strategies
are important for restructuring the retail
market and gaining a more competitive
position on it. In the competitive struggle will
be important for retailers, in the next period of
time, to exploit better the following directions:
 Attract new customers
 Offer valued added services
 Development of own brands
 Expansion with low costs
 Strenghthen the customers’ loyalty
 Entering on profitable niche
 Efficient distribution process
One of the major and most innovative are
of change has been the development of
distribution system. Logistical innovations were
required due to technical point of view by the
need to extend the product range of fresh and
chilled products, but also generated an
acceleration of stock flows.
The competition is on both price and an
unpriced convenience. Thus supermarkets and
hypermarkets are facilitating reductions or
qualitative improvements in the un-costed time
expended by the consumer through the growth
and rapid development of infrastructure for
home shopping.
Development of the modern trade forms
meant in the same time the promotion of their
brands in the Romanian market. All retail
networks identify in own brands an important
opportunity to growth in the market, so all of
them applied this strategy for development
own brands for both food and non-food
segment on entry level.
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 Supply Chain Management Journal
References
Ballou, R.H. (2004) Business Logistics. Supply
chain management, 5th edition, Pearson
Education, New Jersey
Lund J., Wright C. (2006) „Integrating the
Supply Chain: Industrial relations implications
in US Grocery distribution”, Supply Chain and
Total product systems: A reader, Blackwell and
The Open University, USA, pp.95-114.
Meidute, I., Vasiliauskas V.A. „Significance of
logistics Centres for Development of
Intermodal Transport Services in Lithuania”,
Procedding of the 5th International Conference
RelStat, may 2005 Riga, pp.271-275.
Miller, C., Reardon, J. And Mc Corkle,
D.(1999), „The effects of competition on retail
structure: an examination of intratype,
intertype and intercategory competition,
Journal of Marketing, vol.63,
Newson, B., „Industry, Trade and services”,
Eurostat Report Statistics, 88/2009,
http://epp.eurostat.ec.europa.eu
Nicholls, J.A.F., Roslow, S., Dublish, S. (1997)
„Time and companionship: key factors in
Hispanic shopping behaviour”, Journal of
consumer Marketing, 14 (2/3), pp 194-205.
Prada, S, Banat Business, nr 185, octombrie
2008
Rimiene, K. And Grundey, D. (2007) „Logistic
centre concept trhough evolution and
definition”, Engineering Economics, no. 4 (54),
pp.87-95
Simons, I. (1990) „The effect of purchase
quantity and timing on variety-seeking
behaviour”, Journal of Marketing Research, vol
27, no.2., pp.150-162.
USDA Foreign Agricultural Service (2010)
„Retail Market” Gain Report RO 003.
Report Retail in Romania 2010, PMR
Publication
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http://www.pmrpublications.com/press_room/
en_Romanian-retail-market-_-challenging-
prospects-for-businesses.shtml
Cotele de piata ale princiaplilor retaileri din
Romania, Revista Piaţa, november 2009, online,
www.revista-piata.ro/.../cotele-de-piata-ale-
principalilor-retaileri-din-romania.html
Discounterii au acoperit in 2009 doua treimi
din deschiderile din retailul modern, Revista
Capital, decembrie 2009, online,
http://www.capital.ro/articol/capital-
129735.html
Selgros deschide un magazin cu un nou
concept, Revista Piaţa, august 2009, online,
http://www.revista-piata.ro/articole/stirile-zilei
Shopper Trends 2008, Revista Magazinul
progresiv, octombrie 2008, online,
http://www.magazinulprogresiv.ro/articol/71/S
hopper_Trends_2008.html
Shopper Trends 2009, Revista Magazinul
progresiv, aprilie 2010, online,
http://www.magazinulprogresiv.ro/articol/1191
Studiu GfK: Consumatorul român se întoarce
acasă, Revista Magazinul progresiv, mai 2010,
online,
http://www.magazinulprogresiv.ro/articol/1277
Studiu OCT 2010: Proximitatea a devenit
principalul criteriu de alegere a unui magazin,
Revista Magazinul progresiv, octombrie 2010,
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Europa pentru marcile private, Revista
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http://www.magazinulprogresiv.ro/articol/1559
.html
Issue 1/2010
 Supply Chain Management Journal

Challenges for Great Retailers – Problems in Labor Force and Consumer Focus

Valentin NIŢĂ
Daniela Tatiana CORODEANU AGHEORGHIESEI
Alexandru Ioan Cuza University of Iaşi

Abstract
The retail sector in Romania has developed as a successful business especially after the setting
up of large sales areas. The evolutions on the market are profound and have an impact on the
structure of the market, consumer behavior and the usage of labor force. Beyond the positive effect of
the emergence of new jobs (new in denomination, as well as content) problems specific to
development have also emerged: the market’s insufficient capacity to supply competent employees,
the lack of specialized managers, training, too great a difference between superior level salaries and
inferior level salaries. Companies were forced to manage in this difficult context and to innovate in
many cases in order to sustain their own development. Despite the economic crisis manifested at
global level, the great retailers must deal with the challenges of finding a balance between increasing
labor productivity, reducing costs and improving the consumer’s experience.

Key Words: retail sector, personnel management, consumer focused commerce

Introduction training programs”. This activity ensures that

Winners’ lesson in modern commerce:
employee improvement and client focus
A study on a group of 20.000
consumers carried out by the IBM Institute for
Business Value in 2007 brought to attention
the importance of assistance in creating the
consumer’s experience. However, this key
element enforces „a culture of informing and
empowering the employees in the store to be
able to make decisions when supporting
consumer satisfaction”. The first conclusion we
may draw is that labor selection and training
must be among the first preoccupations in the
management of retail market actors.
Another recent study, mentioned by
the same source, - “Enterprise Workforce
Management: Redefining the Boundaries of
Customer-Centric Retailing” organized through
an online investigation by the RSR Research in
November 2009 and January 2010 among 134
subjects, separates retailers in two categories -
“winners” and “laggards”, depending on their
position in sales increase rate, 3% above or
below industry average. This classification is
also used to illustrate to which extent
Workforce Management – WFM holds an
important position in their market strategy.
The „winners” are those confirming
that business development has also
determined an increase in labor needs (31%,
compared to „laggards” – 2%) – (RSR
Research, March 2010). They are those who
think, plan, act in a different manner.
Workforce Management implies „the
capacity to have in view job applicants, check
sheets, foresight and planning, performance
follow-up and management, conformity with
we have „the right person with the right job”,
personnel career management, proactive
overtime management, rapid response to
sudden market conditions. Alongside these
aspects, Workforce Management allows non-
sale functions to be optimized to the benefit of
focusing labor on sale activities and
communication with the client.
The analysis of the answers given by
the retailers participating in the respective
survey, with reference to the greatest business
challenges associated with labor management,
brings forward the importance of improving
employee performance and clients’ experience.
A competitive employee is one showing
self confidence, a friendly attitude, flexibility,
patience, respect, ability to „multi-task”, one
which is proactive, shows positive attitude and
empathy, and is capable of finding adequate
answers and giving information when required.
These are the „10 strong points” of a „first
hand” employee, meaning the one in direct
contact with the consumer.
Numerous examples show us that
retailers looking for sales increase, especially
in times of recession, understood in due time
that employees’ improvement is the secret
weapon they have at hand: J.C. Penney offered
bonuses to his employees to better promote
consumer assistance. The sales department
also planned a three day conference to
improve the managers’ selling abilities, hoping
that these will later on be discovered with their
subordinate teams: managers participate in an
hour session to learn how to sell products to
several categories in the Penny stores and
leave the conference with an action plan to

Issue 1/2010 45
 Supply Chain Management Journal
increase sales in each category. Home Depot
instructs its cashiers to pay attention if
customers find what they want, and if not, to
direct them to the according department
(Miller, 2010).
1. Modern Commerce in Romania and
Labor Market Challenges
One of the highly dynamic sectors in
Romania is commerce, and within it en detail
sales obviously come first. Retailing includes all
the transactions which aim the bought product
to be destined to personal consumption, family
consumption or own establishment. In this
type of transactions the buyers are the final
consumers.
In the analysis of this phenomenon
there is already a distinction between modern
commerce (which includes sales on large sale
areas, mainly supermarkets or hypermarkets
with self service as main type of sale) and
traditional commerce (which does not exclude
self service, but mainly refers to smaller sale
areas where counter sale or combined forms of
sale are still used). Although we may discuss
the matter of „monopole” when referring to the
term „modern”, taken over by a part of the
„actors” on this market, all studies and
analyses use these terms and they will be used
as such in the present study as well.
A sector in continuous development,
with sometimes spectacular upward trends,
needs increase „supports”: stimulating
economic politics, investors, investments,
financial support, including credits, a labor
market which may ensure employees in a
sufficient number, and also qualified for the
requested positions.
The companies in the sector have had
to deal with a certain „under-development” of
the human resources available in retail,
situation still maintained today.
A sector holding in Romania over
50000 employees at the beginning of the year
2008 had to generate problems when it came
to human resources management.
The present study plans on
approaching the problems that the retail
industry in Romania deals with, mainly from
the point of view of personnel, as they appear
in the declarations, articles and studies
referring to this subject: recruitment migration
and salaries.
The analyses and conclusions are
supported by the information compiled from a
vast bibliography, mainly based on studies and
communications from reunions and seminars
designed for specialists in the field.
46
2. Modern Commerce Development and
Human Resources Demand
The rapid development of retail
networks in Romania has been beneficial for
the companies themselves, as well as for the
local consumer, who presently enjoys a much
larger offer of products than a few years ago.
Large sale area stores have registered an
important increase in number, as well as actual
offered sale area. Statistics show that, despite
any economic crisis, the period 2010-2015 will
bring to the Romanian market new large stores:
in 2010 alone are to be inaugurated six new
hypermarkets, 23 supermarkets and 66
discount stores. Romania is like a magnet for
great retail groups, as long as forecasts based
on consumption monitoring point out the fact
that its inhabitants will leave at the cash
register nearly 7% more money than in the
year 2009, for food and non-food products,
meaning 23.5 billion Euros (Baird, 2010).
However, the impact of this
development on the human capital market
must be analyzed in context. Here, we refer to
creating a very large number of positions in
the area of client contact (and especially the
cash register, which requires average
educational level). Also, a major impact has
been manifested in the acquisitions’ area, on
different levels: assistant buyer, buyer, senior
buyer, acquisition / purchasing manager, etc.
The stores, (especially the ones with a large
sale area) have enforced positions such as
department manager. Besides these specific
positions, there are also others, in companies
from other domains: human resources
departments (human resources manager,
recruiting specialist – position which is
essential for development efforts, personnel
administration specialist, etc.), juridical
departments (in which type of structure we
may find juridical counseling positions and / or
Legal Manager / juridical department manager),
safety and security (for those companies which
choose not to externalize this service),
administrative (which may in certain situations
include safety and security, but generally deals
with everything that includes cleaning services
and other services in the administrative area),
warehouse / logistics (where we may find
positions such as warehouse manager,
merchandise manipulator, etc.).
A specific position determined by Romania’s
investment potential is that of Business
Development Manager (the denomination may
vary significantly depending on the company);
in this case we are referring to the person
actually developing the chain of stores
(identifies the location, traces all stages of the
project, etc.).
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 Supply Chain Management Journal
In the year 2007, the number of hiring
reached approximately 15000 people.
Presently, over 50000 people work in retail
chains, total comparable to the number of
medical doctors in Romania (approximately
48000) or the equivalent of half the personnel
hired in the army structures (“Piata” Magazine,
2007).
According to the information provided
by the marketing manager of Carrefour, when
this great retail group entered the market
there was a very large labor offer, but it
suffered the great disadvantage of not being
specialized or „disciplined”, in other words, not
prepared to work under strict regulations, this
final aspect being highly important in this
sector.
The statements from the managers of
Artima network enforce these pieces of
information: in small towns, with less than
200.000 inhabitants, Romanian employees are
not ready to work within large commercial
centers where there is great emphasis on
consumer focus, when it comes to attitude and
specific professional abilities. The solution
resides in including the employees in
professional training programs, which will also
lay emphasis on the way the private
companies’ organizational culture functions
(Roşu, 2006).
If we were to distribute jobs according
to positions, as stated by specialists in human
resources, in the field of FMCG (Fast Moving
Consumer Goods – goods that have an
increased speed in stock rotation), over 70%
of the positions are for middle management
and specialists, people with three to five years
of experience, hired to coordinate a small team
and a certain geographical area. People for top
management positions are sought in a
proportion of 20%, meaning sales managers,
country development managers.
The least sought are those with little
experience, entry-level, in a proportion of only
10%. Thus, potential has ever smaller
importance, the employers being in search of
trained people, specialized in the field, and less
in personnel that needs training within the
organization.
2.1. Personalized solutions for a
general problem: personnel training
Companies had to learn how to deal
themselves with solving a situation which could
not be postponed for long.
For example, Carrefour Romania had to
deal with this problem. The solution was to
train the personnel within the company,
through certain training programs. 40 young
economy graduates from Romania were sent to
France for a full year. There, they learnt how
to be a department manager and, also, they
Issue 1/2010
completed a few courses within an institute
specialized in company management. Today, of
those 40 specialized in France, a few have
reached the position of director in their careers.
In order to cover the need for
management personnel on a long term,
graduates from several universities in the
country are being recruited periodically and
integrated in „Carrefour school”.
In other situations, as well as in the
case of other sectors recently developed in
Romania, the retail solution has been „learning
on the fly”, method also supported by certain
courses held by the employer. The slogan
„stealing the trade” is valid as long as the
employees being mentored at work actually
have a person to learn from, but there are also
risks because there is the possibility that the
manager of the store does not have himself
the necessary training or mentor abilities.
Unfortunately, the human resources
lack of experience has as main effect a low
productivity and more mistakes than on a
market already mature.
2.2 For and against promoting
personnel
Internal promotion is to the advantage
of the companies, because they do not have to
spend time and money on personnel
recruitment and, at the same time, it
represents a suitable means of maintaining,
devoting and rewarding good employees which
are thus offered the chance to develop their
career within the company (“Piaţa Magazine,
2007”). The person promoted to another
position is already familiar to the organization,
knows the field very well, the team, the
partners and the work procedures. In addition,
the employees already have solid knowledge
on the company and are loyal to it. Other
advantages for promotion: the absence of the
risk of having incompatibilities between the
employee and the company, the period for
adaptation to the new position is shorter.
The companies which hire people from
outside the company consider that they need
to „re-youth” their labor force. For this
particular reason, some employers complete
their internal promotion politics with external
market recruitment, especially for positions
with a specialization requirement not met
among the people already in the company.
Companies which hire people from
outside the company consider they need
people with different views, who have
experimented other work systems, different
issue solving methods. External recruitment,
though more expensive and with many
„downsides”, refreshes the company’s value
system and generates a beneficial competitive
message.
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 Supply Chain Management Journal
Recruitment from outside the
organization is a practice more common for top
management positions. In this case, already
specialized people are „hunted”, with
experience in management and with an
extremely valuable active that „social capital”
earned through relations with customers,
services suppliers, and various partners.
2.3 The main problem: personnel
migration
A phenomenon that no retail company is
safe from is the migration of the personnel to
rival companies on the market, or to newly
entered ones. In most cases, the determining
factor is the salary.
Besides the tempting salary offers,
migration from one store to another also
depends on the atmosphere at the respective
work place, on the leadership of the store
manager (“Piaţa” Magazine, 2007).
However, there is also another
perspective to this migration, as moving from a
company to another may also be to the
disadvantage of the employees, especially for
those who transfer to a similar position and not
a superior one.
The lowest value of the personnel
migration rate is registered in the industry
sector (approximately 13%), whereas in
sectors such as retail or consumer goods
(FMCG), the personnel migration rate goes up
to 58%, respectively 38%, according to the
Saratoga - Human Capital Benchmarking study,
finalized in 2007 by PricewaterhouseCoopers
Romania, monitoring the comparative
measurement of a large number of human
capital efficiency indicators (Răuţă, 2008).
Companies in retail and FMCG have
difficulties especially in preserving operational
personnel, in which case migration reaches 50-
70%. Among the causes we may consider the
fact that retail employees find various personal
and career development opportunities on the
market, as well as financial advantages. [idem]
The phenomenon constantly noticed by
the human resources consultants is that the
most stable employees are very seldom the
young, meaning those who would theoretically
have the greatest chances of rapidly advancing
within a company. On the contrary, they prefer
to „multiply their experience” and are more
sensitive to better salary offers.
Against the background of personnel
crisis, of migration outside the country and of
10% fluctuation in retail, at middle and top
level management, the employers have no
problem with „stealing” employees from the
competition. Most motivate their leaving by
superior salary packages; others by career
advancement, but there are also more special
situations, when people take a year or two off,
48
and then go from executive management in a
company, to enterpriser.
2.4 Salaries – a constant problem
According to a recent salary study
„Total Remuneration Survey” from the Mercer
consultancy company, the biggest salary
increase on the local market in 2008 has been
registered in the retail sector. In the consumer
goods segment, the best paid positions are
those of sales director and marketing director,
which may reach salary packages of 10-14.000
Euros.
Workers from inferior levels
(commercial workers, administrators, cashiers)
receive payment equal to the averages wages,
between 140 and 420 Euros. For specific
positions: acquisitions responsible, buyer,
department manager, logistics coordinator,
warehouse manager, store director, salaries
begin from 800 Euros, whereas board level
salaries begin at 2500 Euros.
The most frequent benefits granted to
employees in middle and top management are
company car, company phone, and medical
insurance and private pension. Also, some
managers receive long term benefits as well,
the most frequent long term benefit offered by
local companies being the right to own shares
of the company. On our market, only 29% of
the companies participating in the Mercer
study offer share packages to managers.
According to the study made by
PricewaterhouseCoopers, in the year 2007, the
fixed salary represented 69% of the total
income, the variable bonuses 17%, the fixed
bonuses 4%, whereas benefits represented
10%.
As to what the company car is
concerned, according to the Mercer study, in
2008, 86% of the companies from the local
market have offered this benefit to their
employees.
Another benefit on the increase on the
local market is the private pension,
approximately 10% of the managers receiving
private pension from the company.
On mature markets, top managers can
choose the type of benefits they are interested
in and they can negotiate long term benefits –
such as a certain percentage of the company’s
earnings.
This method of adapting the benefits
packages to the individual needs of each
employee tends to gain shape on the
Romanian market as well, more and more
companies beginning to adopt variable benefits
programs. They represent an efficient means
of payment, without forcing the organization to
make long term commitments, but also
because these bonuses represent efficient
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 Supply Chain Management Journal

means of maintaining and motivating possibilities especially for in-depth analyses.

employees. Still, if studies concerning the tendencies on
the market or those concerning the changes in
the Romanian consumer’s behavior remain
Conclusions interesting, we must not disregard the
Obviously, companies have taken over employees who represent the companies in the
the initiative in retailing, being forced to direct relationship with the consumer.
innovate in the field of positions vocabulary, as Starting from the negative phenomena
well as content for the new positions (going as of the human resources usage (some stated
far as the job description). within this article), researches concerning the
The recruitment process for inferior employees profile, demands and motivations
level positions brought along no problems in could, in the future, offer solutions for the
terms of identifying potential employees, but it companies facing increasing competition. A
did because of their lack of qualification for quality employee may be an advantage in the
specific positions. The temptation for strategies for differentiation on the market.
employers appeared immediately: small Some interesting conclusions may be
salaries. This has generated a phenomenon useful to future researches: recruitment and
that eventually all employers complain about: selection are difficult processes for companies
migration to impressive rates, which because there is a lack of qualifications for the
sometimes go beyond 50 %. new positions, especially at inferior and middle
The recruitment process for middle levels of the organizational structures; superior
management positions has as particularity the level managers are hard to find and hard to
training offered by companies immediately maintain in the company (immediate
after selection (most of the times for 6 consequence: their earnings are substantial,
months), after which the person selected will much above economy average); migration is a
occupy the respective position. general phenomenon, hard to control;
Managers can be simply characterized promotions waver between internal and
by big salaries. „Guilty” for these big salaries in external; the difference between the minimum
Romania is the lack of managers and wage and the maximum wage in the sector is
specialists on the local market. Thus, if in most significant.
European countries the employers seldom
consider studies as a problem, in Romania the References
manager position comes third in the top of the
most difficult positions to occupy within Bratton J., Gold J., (1994), Human Resources
companies (according to the study Management. Theory and Practice, MacMillan
accomplished by the human resources Press
recruitment and consultancy company Bunch J. Kay, (2007), Training Failure as a
Manpower). In other cases, the deficit is also Consequence of Organizational Culture, Human
generated by the Romanian managers’ Resource Development Review, Vol. 6, No. 2,
relocations abroad (relocations within the same 142-163
company) most of the times for better Udechukwu I. Ikwukananne, Mujtaba G.
earnings than in the country. Despite these big Bahaudin, (2007), Determining the Probability
salaries, the migration phenomenon is no That an Employee Will Stay or Leave the
stranger to managers. The continuous Organization: A Mathematical and Theoretical
expansions of great networks, always in search Model for Organizations, Human Resource
of top managers, as well as the deficit on the Development Review, Vol. 6, No. 2, 164-184
market sometimes determine personnel Roşu, R. Resursele umane in contratimp cu
movements at short intervals of time. dezvoltarea magazinelor,
Either to maintain personnel, or, on the http://www.retailforum.ro/resursele-umane-in-
contrary, to attract it from other companies, contratimp-cu-dezvoltarea-magazinelor.php
there is a „competition” in increasing earnings Răduţă, A., Angajaţii legaţi pe vecie de
for managers, additional to the salary: fixed companie, 30 iune 2008,
and variable bonuses, company phone and car, http://www.businessmagazin.ro/analize/resurs
participating in benefits and even private e-umane/angajatii-legati-pe-vecie-de-
pension or offering shares of the company. companie.html?5538;2748788
As to what middle management Business Standard, Managerii din retail şi auto,
recruitment is concerned, companies waver în topul creşterilor de salarii,
between external recruitment (hiring) and 5.08.2008,http://www.banknews.ro/stire/1981
internal recruitment (promotion). 0_managerii_din_retail_si_auto,_in_topul_cres
The spectacular evolution of the retail terilor_de_salarii.html
sector in Romania is far from being over. It will *** Revista Piaţa / nr.27 / ianuarie 2007
continue to offer numerous research *** Revista Piaţa / nr.34/august 2007

Issue 1/2010 49
 Supply Chain Management Journal
Popa, D., Mişcările de personal din 2008: miza
jocului, Revista Piaţa / nr.47 / septembrie
2008
*** Revista Piaţa / nr.48 / octombrie 2008
*** „Românii vor da aproape 10 miliarde de lei
în acest an pe cumpărături”,
http://www.ziare.com/bani/euro/romanii-vor-
da-aproape-10-miliarde-de-lei-in-acest-an-pe-
cumparaturi-1005577
Baird, N., Kilcourse, B. (RSR Reasearch),
Enterprise Workforce Management: Redefining
the Boundaries of Customer-Centric Retailing
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Benchmark Study: March 2010,
http://www.retailsystemsresearch.com/_docu
ment/show/1076
Miller, A., The 10 essential strengths of front-
line retail employees,
http://www.retailcustomerexperience.com/arti
cle/21563/The-10-essential-strengths-of-front-
line-retail-employees
Anderson, G., Retailers Try Selling Stuff,
04.10.2010,
http://www.retailwire.com/Discussions/Sngl_Di
scussion.cfm/14445?
Issue 1/2010
 Supply Chain Management Journal

Increasing Competitiveness by Moving

from Logistics to Supply Chain

Cristinel VASILIU
Faculty of Commerce
Academy of Economic Studies from Bucharest

Abstract
In the current economic crisis, superimposed on that of overproduction, which takes more
time, more companies are facing serious financial difficulties. Oversupply is sent to markets
increasingly contracted, increasing the difficulty of selling their products. Income population is reduced,
leading to lower demand. Already many companies have exhausted internal growth opportunities.
Such conditions affect the approach to address market. Without building real partnerships, long-term,
based on trust is difficult to conceive of success in business.
A specific type for partnership in business is the supply chain. Originally, it appeared as a
solution for better organization and coordination of activities of large companies, currently are
developing between organizations, with purpose to increase the competitiveness of firms involved.
With technological progress in contemporary competitiveness relies significantly on the price at which
products are offered in markets. For similar products the price is becoming increasingly a tool of
differentiation. As such, designing a supply chain as a value chain contributes to obtain competitive
prices for products by eliminating unneeded or unnecessary activities, or by outsourcing activities
inefficient. Concentration of companies upon supply chain activities for which they have distinctive
competence leads to reduced overheads. Therefore, the consequence is the possibility of obtaining
lower-cost products, a prerequisite for lower prices and greater competitiveness.
At present, power of retailing companies is very large, dominating in many cases firms from
other sectors. Conflicts between the major distribution groups and their suppliers are known.
Authorities seek legislative solutions to problems, but they mostly do not lead to real benefits for
consumers, leading to other complaints. Construction of supply chains based category management is
a viable, proven business success achieved by larger companies. Assortments design, internal
arrangements of the retailing firms, organization on new principles of activities based on new
relationships between retailers and suppliers in terms of consumer interests are solutions to increase
the competitiveness of firms involved.

Key Words: supply chain, competitiveness, category management, outsourcing, integration, flow

Introduction Today, logistics has grown becoming

Logistics is an area of activity which
has seen strong development after the Second
World War and especially in the last three
decades about the role and forms of operating
in the economy. In this sense, the concept of
logistics covers all activities aimed at further
harmonization of time and space with goods
and people, through their adequate grouping.
Thus, logistics is defined by the integrated
planning, organizing and controlling all flows of
goods and materials, together with related
information flows, from suppliers through the
steps of creating value by delivering products
to customers, including recycling and disposal.
In recent decades, under cover logistics term
pools a wide range of activities. Long, she was
limited to external flows, i.e. transmission and
distribution. With the development of
information technology, logistics management
upset in a significant way the manner in which
companies manage their business today
(Pimor, 2001).
an independently sector. This boom is mainly
due to logistics outsourcing phenomenon by
industrial enterprises and increased complexity
of transport services and logistics. It has
become a new economic area, which includes
without transportation the storage, handling,
real estate management, consultancy and
information services, etc (Baglin, 2005).
- 70 years is characterized by the
beginning of logistics business, which remains
a domestic work of the company, evidenced by
work on the operation and logic flows pushed.
The concern of industrial enterprises is to
respond to a mass demand that leads to the
existence of significant storage capacity. This
development has determined a sharp increase
in transport demand, which has led to a
rationalization of freight transport, which puts
the problem of management in this area and to
establish travel routes. It is the time when
logistics of proximity grows, based on a
network of local and regional warehouses.

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 Supply Chain Management Journal
Strong development of transport infrastructure
has allowed the opportunity to meet demand.
Transportation becomes a primary activity,
direct negotiations between carriers and
shippers being necessary.
- 80 years marks the start of the supply
chain which aims to coordinate the various
functions of the enterprise, who has as
characteristics integrated flows management
and distribution logic based on cost reduction
target. At this stage appear logistics functions
and occupations and the existence of upstream
logistics (flow pushed by production) and the
downstream (flows attracted by customers).
Switching to attract flows determine the need
for more rapid distribution of products. Is the
period when „just-in-time” system is gradually
extending where it is possible. Optimal location
of warehouses and platforms becomes
essential and national platforms appear. In
these conditions are necessary more and more
quality and reliability in terms of logistics
services.
- 90 years is characterized by logistics
strategies based on the organization and
optimize the supply chain between the
different partners. Logistics becomes a value-
added service for customer. Number of items is
in strong growth and there is a diminishing of
weight of deliveries. Following these trends are
increasingly outsourcing the transport activity,
with increasing distance delivery, with related
services in warehouses - packaging, post-
production, production operations, etc.
- 2000 years highlights the emergence
of specialized companies in logistics (4th Party
Logistics) and Supply Chain Management
spring (SCM). Appear new informatics tools
due to Internet and greater customization of
product. As such, it rationalizes the number of
warehouses, to define the quantities stored,
which means an increase in transport demand
in frequency and distance. It occurs
accelerating of flows of goods, it optimizes
transport, it monitories through GPS. It is
necessary to consider a number of technical
aspects - clearance operations, transfer of
ownership of goods, goods traceability etc.
1. The Evolution of Logistics to Supply
Chain
Logistics is an evolving area, which has
known and knows many changes caused by
the economic environment features in which
are inserted. Therefore, we are witnessing to
the transition of logistics from a business
operational at a tactical and even strategic. In
this way, it was to expand logistics outside the
firm and to outline the concept of supply chain
(supply chain).
52
A supply chain is a network of suppliers,
manufacturing companies, warehouses and
distribution channels appear organized to
acquire raw materials, transforming them into
products and distribute them to customers.
Design and efficient operation of a supply chain
is a component of the planning undertaken at
both strategic and tactical. Planning at the
strategic level of supply chain involves
decisions concerning the network configuration,
number, location, capacity, technology of
facilities, etc. Tactical level planning of supply
chain operations involves decisions concerning
acquisition, processing and distribution
products.
The goal which governs all efforts in a
supply chain is to increase the competitive by
providing services accepted by customers at
minimal cost. Improving services can be
achieved in two ways (Florea & Clipa, 2005):
- development of organizations integration
and eliminate unnecessary or expensive
activities;
- better coordination of flows.
As such, supply chain management has
the burden of integrating organizational units
within it, to coordinate the flows necessary to
meet demand, in order to improve the
competitiveness of the chain as a whole.
Switching from approach who considers
logistics as internal part of company to its
expansion outside, culminating in the design
supply chain was produced by the action of
many influencing factors that affect the
conduct of business. Among these factors we
can mention the following:
 evolution of industry and trade
relationships;
 development of new information and
communication technologies;
 increasing competition through
oversupply;
 development of strategic business
functions as: supervising, planning,
forecasting, etc.;
 expansion of globalization;
 use more and more to outsourcing
and subcontracting.
We are in a period in which trade
dominates industry, especially by large points
of sales. These require many conditions to
manufacturing enterprises in the modalities of
products, packaging, labelling, especially in the
price and terms and payment deadlines. All
this leaves a little decisional freedom to
producing enterprises, with impact on their
overall performance.
Advances in information technology and
the media make possible the emergence of
new ways of conceiving the relations between
firms. Electronic data interchange systems
(EDI) are increasingly used, allowing real-time
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 Supply Chain Management Journal
communication of relevant information to
stakeholders. In this way, it can be removed
the negative consequences of "bullwhip effect"
and improves the competitiveness of products
through price, thanks to cost reduction.
Strong competition on the markets,
which are overwhelmingly consumer, puts the
problem of finding new forms through which
products reach their customers. Appear
partnerships linking stakeholders in new
associative formulas for long periods. These
partnerships lead to lower total cost of
products with higher earnings for firms than if
they had acted independently. Among these
partnerships an important place is setting up
logistics chains.
Strategic management adopted by
companies can no longer be confined to its
interior. No matter how well this approach
would be done inside, the company is not
isolated in the economic environment and as
such, interdependencies that link to other
participants do their influence to bear. As such,
the specific functions of strategic management
must be designed in a general way, what
exceeding firm that lead to undertaking an
approach through supply chains to achieve
synchronization of their activities with those of
firms with which it interacts. In fact, this is all
the more necessary as decisions are based on
a multi-approach, which often exceed the
enterprise boundary (Hamon, 2004).
Globalization is becoming more intense
as the big companies do, in developed
economies, to relocate activities related to
various business functions (especially
production) in areas where they can be made
more competitive. The relocation place, puts
the problem of delivery of various components
of a product to assembly plants (often located
far away), flows which be synchronized,
leading to formation supply chains.
Outsourcing and subcontracting are the
consequences of the previous process, closely
associated with it. Outsourcing various
business activities (including logistics) enables
it:
- focus on their skill;
- to achieve financial gain by transforming
fixed costs into variable costs;
- to issue a series of financial assets;
- to transfer part of their risks associated
with outsourcing activities;
- to have more flexibility on logistics service
and especially to control it.
It is interesting that the incidence of
outsourced activities in logistics is the most
variable, namely:
- transport and auxiliary transport operations;
- warehousing, storage, preparing orders,
rental deposits;
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- processing of goods and completion of
production operations;
- comercial transactions (especially
procurement);
- computing operations;
- logistics consulting, etc.
- However most outsourced function remains
transport, which according to some statistics
would achieve a 72% share of work outsourced
by companies (in the distribution area this
percentage is even higher, going from 90%).
All these elements lead to the need for
construction and operation of supply chains, as
opportunity to achieve activities in an effective
and efficient manner.
2. Strategic Stake of Logistics
The term logistics arose during the 80
sent to the notions such as storage, handling,
transport, etc., most often used separately.
The main European association founded in
1984, European Logistics Association (ELA),
gives his own definition to this activity: "The
organization, planning, control and achieving of
goods flows from development and
procurement until production and distribution
to end customer, to meet market requirements
with minimum cost and minimum capital”.
In the mid '90s the term supply chain
has been imposed under the influence of
software producers, which proposed the tools
for a coordinated and integrated supply chain
management extended from upstream and
downstream of the enterprise. Since then,
supply chain management aims to increase
overall performance and consistently placing
the customer as the engine and center of the
device. Flows are extending from downstream
to upstream and vice versa, thanks to new
communication technologies and, especially,
the development of the Internet.
If information is dematerialized, does
not mean that physicals operations are less
important. Transportation in a globalized
economy faces major constraints of speed and
time. Handling control, with its various
operations - fragmentation or consolidation of
lots, prepare the order, picking operations,
packaging, etc. - requires rigorous and
effective organization to produce productivity
gains. The strategic positioning of storage
places condition the quality of service and
tenuity of transport from upstream and from
downstream.
For a product to be offered in a store
at an acceptable cost, it must that logistics
infrastructure of distributor, manufacturer and
their suppliers to be connected, due to
interdependence in a continuous chain, whose
stake is the customer satisfaction. In addition
to its operational function, logistics will acquire
53
 Supply Chain Management Journal
a tactical dimension too, which consists of
programming flows and their modes of
treatment, and a strategic dimension, which
aims to define the means needed to meet
enterprise objectives.
This strategic approach lend
significance to logistics location in enterprise
and gives way to a set of ideas about manner
of integration of a function in an activity area,
even in a geographical area can be extended to
a group countries. It is necessary to act from a
global perspective, taking into account several
factors:
- The globalization of trade;
- Multiplying the number of actors in the
logistics channel that requires the
integration of new supply chain tools;
- Competition (companies are
differentiating through services, which rely
heavily on logistics);
- Speed and flexibility, the basic criteria of
the effectiveness of a supply chain;
- Logistics as cross function requires
cooperation of all entities involved;
- Many partners that it involves.
Logistics accompanies the product at
all stages of the intra-plant movement, but
also beyond. Not all the proposed services are
important in volume, but are critical to the
good working of operations. Example, we
present a typology of logistics services related
to the live of a product, namely:
- services related to product setup –
sampling, test products, product samples;
- services specific to market launch period
- commercial launch, merchandising
racks;
- services performed in steady state or
services in response to unforeseen events
– scheduled commands, flows of
packaging treatment, promotions (special
offers), merchandising racks, commercial
returns;
- services to stop the sale - processing
returns.
3. Designing a Logistical Activities
For better management of this activity
should be specified since the logistical
operations of a product design. This approach
can cut into 5 phases:
 concept itself, i.e. assessment of needs
for the product (suppliers, maintenance,
support, packaging) and related logistics
flows, taking into account the
commercial forecasts;
 analysis and setting targets based on the
level of service, quantity, costs,
competition and logistic family (definition,
sorting and grouping of references);
 achieving information system in the form
of technical databases, products,
54
customers, choice of processing
programs, telecommunications network,
electronic data interchange (EDI) and
coding;
 physical definition of logistics services or
network architecture, its implantation,
the formation and transport stocks to
their location;
 management system development, with
prediction, resource allocation rules,
priorities, procedures and instrument
board.
In the current global economic context is
talking about global enterprise, not merely
a business exporting or importing. Such an
organization is purchasing from various
countries with many resources, also
produces, and markets in different countries
worldwide. So, such an enterprise it is
necessary to integrate very different
consumer expectations, striving to convince
them. Such an approach represents an
opportunity to extend product life in their
home market which can be in decline. Thus,
this type of enterprise works on regional
layers, cross-geographical areas, taking into
account demographic, social and economic
data. To take advantage from benefits of a
global market it has to centralise a range of
activities including purchasing, production
and distribution and therefore, the logistics
of company.
Given the set list some criteria may be
involved in major guidelines of a logistics
strategy:
 need for implantation of specialized
factories;
 purchasing policy which allows
economies of scale;
 implementation of integrated
systems for command and transport;
 ability to migrate to a product in
one market to another in case of
unforeseen events;
 develop some forms of electronic
commerce (e-commerce);
 possibility of extending a tested
solution on a market to new ones;
 centralize research and
development and reducing the specific
costs of logistics.
Whether globalization is viewed from a
macroeconomic perspective, is the
microeconomic perspective, the implications on
logistics field are numerous. In the first case,
there are imbalances and disparities that affect
structures. In the second case, there is
marketing policies that seek to reconcile the
needs of very disparate customers and size
effects or to optimize the development and
communication, with direct influence on
logistics providers.
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Besides domestic markets, almost all
enterprises are found in the same areas where
competition is tightened to the point of
suffocation. For this reason, the cost
differences in the supply or increase volume,
or what constitutes a competitive advantage is
canceled and these companies are forced to
seek other ways of product differentiation,
marketing and commercial concepts to react,
anticipate and impose. They must differentiate
themselves not only through innovative
products, but also strategies for attacking
these markets, given their local the specificities,
with the ultimate goal of creating value for the
consumer.
Local and global marketing are in turn
used in a complementary sense. For each
product must be examined which of the two
types of marketing is more relevant. There are
products sold on global marketing concepts on
a planetary scale, such as McDonald's, Coca
Cola, Swatch, Mercedes, Benetton etc. Others
may suffer local influences, as is the case with
pizza or a car. Flexibility and standardization in
all combinations are possible. However, it
appears that consumers increasingly show
more similar applications in the world and that
they would rather prefer a "global" product at
a lower cost than a product adapted, but more
expensive.
The organization must find economies
of scale by dragging the components of
marketing - product, advertising, packaging,
distribution, promotion, price – to position a
product family.
The development of a global marketing
policy is one of the most complex and delicate.
Assuming a global market share for products
that the company should have created
structures of communication and distribution to
reach the consumer wherever he is.
If labour cost is an outstanding reason
is not the only criterion considered in the
relocation of production but also logistics and
accompanying services. Among the important
factors include:
• size of salaries;
• flexibility of workforce;
• social legislation;
• report skills/overall cost of labor;
• advantageous duties custom;
• facilitating financial transfers;
• tax regimes;
• qualified human resources, trained and
operational (able to provide the quality
needed by Western standards);
• transport and telecommunications
deregulation.
Relocation of production areas
determines a supra-cost logistics, compared to
domestic production, which should be
evaluated before taking any decision:
immobilizations in transport capacity, duration
of air or sea transport, eventually duty
customs on entry into national territory,
unexpected delays etc.
For a relocation to be interesting it
must obey the following inequality:
(labor sub - cost ) − (logistics over - cost ) > 0
There are attempts to develop global
indices, leading to the ranking of countries
according to their degree of attractiveness. For
example, in services area has been made a
survey by consulting firm AT Kearney, based
on analysis of 40 developing countries and
developed countries, on account of the
following criteria: financial structure, economic
environment and the quality, availability and
skills of human resources. By aggregating the
three criteria AT Kearney has built a global
index of localization services, which permit
assessment of the attractiveness of a country
which offers to enterprise a tool to clarify their
decisions.

Table 1. Distribution of location of internationalforces for service activities between 2004-2005

Nr. Financial Economically Population and Global

Countries
Crt. structure environment its skills Index
1. India 3,47 1,26 2,14 6,87
2. China 3,21 1,17 1,76 6,14
3. Malaysia 2,95 2 1,12 6,07
4. Philippines 3,58 1,05 1,16 5,78
5. Singapore 1,62 2,67 1,44 5,73
6. Thailand 3,27 1,51 0,94 5,72
7. Czech Republic 2,57 1,9 1,12 5,58
8. Canada 1,1 2,4 2,03 5,52
9. Brazil 2,91 1,23 1,36 5,50
10. USA 0,54 2,22 2,74 5,49
11. Egypt 3,55 3,55 0,98 5,47
Source: AT Kearney Offshore Survey, December 2005

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 Supply Chain Management Journal

4. Main Elements for Configuring Logistics  stock production. It is considered an ideal

Structures
Strategic management of logistics is to
introduce innovations not only for the sake of
innovation. It is about creating a configuration
that will drive the strategic objectives (Ducreux
and Marchand, 2004). To fully exploit the
supply chain should be checked five essential
elements of the configuration:
- Operations strategy;
- Outsourcing strategy;
- Distribution strategy;
- Customer service strategy;
- Assets strategy.
Decisions on these items and how they
will be articulated with each other will
determine the overall logistics strategy.
Treated so far isolated, these interdependent
components make up an integrated assembly
that can make from logistics supply chain a
strategic asset.
Choosing the way to obtain the
products determines the operations strategy.
This leads, in fact, human resource needs, way
of operation of factories, warehouses and order
management services and support expected of
processes and information systems. There are
several ways of obtaining products:
strategy for standardized products, sold in
large quantities. Production of large
batches help to keep production costs low
and keeping these items in stock provides
an opportunity to respond quickly to
customer demand;
 production to order. This strategy applies
to customized products or with a lower
demand, but high value. Enterprises which
use it make finished products only after
receiving an order. This allows to keep a
limited stock, and to propose many
different options;
 configuration command. It is a hybrid
strategy in which the manufacturer firstly
made a generic product to complete after
receipt of order. This strategy applies to
products offered in multiple versions, it
seeks to restrict the stock of finished
products and faster delivery with a
"production to order";
 conception order. Very close to the
production to order, this strategy is open
to enterprises that develop and produce
on the extent of each customer.

Table 2. Strategies of operation

Strategy When it chooses this strategy Advantages

For standardized products sold in
stock production
large quantities
configuration command For products with many variants
For customized products or for
production to order
those with small rotation
For complex products, which
conception order responded to the unique
specifications
Low production costs, rapid
response to customer demand
Adapting to client, reduced
inventory, better levels of service
offered
Low stock, the importance of
customer choice options, simplified
planning
Allows to reply to a client's specific
needs

She responds to questions about the selling

Like other elements of supply chain
configuration, operations strategy is dynamic.
Product life cycle is essential. After changes in
demand for products, companies can move
from stock production to production to order,
reducing the risks of stock, ensuring
availability at a competitive price. The number
of variants of a product is another important
factor. It rarely happens that 80% of the
volumes of products shipped hardly cover 20%
of references, possible configurations. In this
context, a hybrid strategy that links the stock
production with that on order is sometimes
preferable.
The distribution strategy determines
circuit to sell products to buyers or end users.
methods chosen (direct or indirect). Decisions
will depend on market segments or regions
that the company intended. Knowing that the
profit rate varies depending on the mode of
distribution should be chosen the most
powerful and established rules that define the
priorities of the various sales channels in case
of shortages or strong demand.
The decision to choose a distribution
strategy determines the performance in terms
of cost and enterprises assets as well as pricing,
sellers pay rules, promotional campaigns and
other commercial terms.
Distribution strategies are based on a
distribution network can be (Kotler, 1997):

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 Supply Chain Management Journal
- extensive or open, when sales of the
product can be granted to a large
number of intermediaries, aiming at
wide dissemination of the product on
the market;
- selective, when taking a few
intermediaries, carefully chosen,
usually specializing in the sale of
certain products;
- exclusive, it is used when a single
vendor with a contract is concluded
exclusively on sales in a given area or
for a specific customer.
Outsourcing decisions are based on
analysis of existing knowledge and skills.
Outsourcing should only relate to activities of
low strategic importance or those for which a
third party may provide superior results, faster
or at a lower cost.
Outsourcing allows companies to
quickly increase or reduce their level of
production, creation of new products or
repositioning in the market, taking advantage
of the knowledge and skills of another entity.
In the current context of globalization,
increasing flexibility and agility can lead to
strong differentiation from competitors. But
outsourcing allows enterprises to focus
particular efforts on their skills and to improve
their competitive position.
External partners can present three
partial benefits:
- economies of scale. Third party providers
often provide service less expensive, because
they have a very wide customer, which allows
them to maintain a capacity utilization rate
very high and very low unit cost. Partners can
also help enterprises to rapidly increase their
production level, not that they invest in new
industrial capacity;
- geographical coverage. For companies
wishing to enter new markets or new areas,
partners may be a means of penetrating
markets where the creation of internal
resources may be too expensive compared
with the current workload;
- technological means. Sometimes
outsourcing partners control the technology of
a process or a product that would require a
significant investment in the interior too.
Before deciding to outsource activities
should consider the following elements:
1. source of differentiation. Do not be
outsourced product or process technology if it
is its source of competitive differentiation;
2. workload. Outsourcing activities to
reduce overall fixed costs is common practice
in many markets;
3. nature of the work. When processes or
product features are unique or have some
special features is possible not rely on
outsourcing;
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4. market power. It is important that the
balance of power between the firm wants to
rely on outsourcing and its suppliers. It could
not be obtained the services at a competitive
price if the volume of business activity is not
important enough.
Customer service strategy is an
essential element configuration. It is based on
the relative value of the turnover and
profitability which it wants the company and
the knowledge of real customer expectations.
In most cases, it achieves a ranking of
customers according to their importance. Most
important are provided with priority desired
services, while servicing other clients can call
on other service providers. It is necessary to
adapt customer service strategy in order to
obtain a cost/service rapport which on
customer segment can decisively contribute,
especially if the supply chain is defined to
make it a strategic lever (Paché and Sauvage,
2004).
Assets strategy regrouping decisions on
plants, equipment manufacturing, order
management services, service centers etc.
which is the linchpin of his business. The
location, size and mission of these assets have
a major impact on supply chain performance.
Most companies choose one of three
models shown below, relying on such factors
as company size, customer service needs, tax
advantages, the ability of providers, local
government regulations and labor costs:
 global model. A given product line is
manufactured in a certain place for the whole
world market. This model is chosen primarily
for close research and development activities
to production closer to control manufacturing
costs per unit, as it incorporates a high-tech
products to achieve or have highly specialized
skills in production;
 regional model. The products are
mainly manufactured in the region where
they are sold, although there are flows
between different regions which follow a
specializing of production centers. The choice
of this model is often influenced by factors
such as customer service levels, size of
import duties and the need to adopt products
to regional or national specifics;
 national model. The products are
mainly manufactured in the country are sold.
This model fits, in particular of goods whose
transport cost is prohibitive. Other factors
that need to be considered are taxes and
duties customs, market with access reserved
for products manufactured domestically.
By combining various elements results
for the 5 elements results supply chain
strategies, summarized in the table below:
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 Supply Chain Management Journal

Table 3. Supply chain strategies

Set up supply chain to:

2. outsourcing 3. distribution 4. services 5. assets
Criteria 1. operations strategy
strategy strategy strategy strategy
a. without
a. stock production; a. world model;
outsourcing; a. exclusive; a. high level
Options

b. production to order; b. regional

b. reduced b. selective; of service;
c. configuration model;
outsourcing; c. extensive b. low level
command; c. national
c. extensive (open). of service.
d. conception command. model.
outsourcing.

5. Criteria for the Development of Good  synchronized with the power company;
Strategies Supply Chain  adaptable, because a competitive
advantage is temporary and market
Configuration items (operations evolves.
strategy, distribution strategy, outsourcing An effective business strategy begins
strategy, customer service strategy and with a strategic vision that allows a firm
strategy of assets) are building blocks that delineation activities to highlight what is and
underpin supply chain strategy (Dornier and what it does, but what is and what doesn’t, the
Fender, 2001). However, to achieve strategic situation shown schematically in the figure
objectives and gain a real competitive below.
advantage, these elements and decisions which To convert a business strategy in an
rely on must be: effective action plan requires good
 synchronized with business strategy; communication and great discipline.
 synchronized with customer needs;

Figure 1. Strategic enterprise vision

Customer needs

Market size and Strategic

competition positioning

Internal Strategic
External vision
Financial
objectives
Skills

Company
policies

The following table presents an
overview of the four tools of business
competitiveness (innovation, cost, service and
quality), also called strategic axes. The table
shows how supply chain contributes to
performance depending on the choice of the
strategic axis. From the perspective of supply
chain, each strategic axis requires a structure,
processes, information systems and different
skills.

Table 4. The contribution of the supply chain to enterprise strategy

Main Advantage Strategic axis The main supply chain factors

strategy source contributing to the strategy
Innovation Mark and unique Attractive and innovative Time to reach the market and time to
technology products create the output required
Cost Low-cost operations Lowest price of the product Effective and less costly
line infrastructure
Services Unique or hard A service designed to meet Services designed specifically for the
reproducible services specific customer needs client
Quality Products safest and Products that can be relied Reliability of supply chain processes
most reliable and quality control

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 Supply Chain Management Journal
If a company can meet the needs of
those most profitable customers through a
service level acceptable and reasonable cost
through a single supply chain when it should
be done. If the priorities of performance as
cost, time, control of operations and supply
various components and products are really
contradictory can be designed many partially
or totally separate supply chains.
A good supply chain strategy is based
on realistic assessment of power and influence
in relation with customers and suppliers. Power
can come from the volume of activity,
company brands, experience, tradition in the
field, market image, financial strength, etc. It
is not always possible control over the supply
chain, leading to the need for collaboration
with other stakeholders. In this way, it is
necessary to focus on key customers and
suppliers to explore how the interaction with
them leads to lower costs, improve productivity,
increase satisfaction and generate a higher
value.
Adaptation is especially necessary
because change is inevitable. Markets turn,
business strategies evolve and new
technologies appear that can rapidly aging
supply chain strategy.
In conclusion, the supply chain
strategy is composed of multiple
interdependent components, and hundreds of
decisions, more or less important. While an
isolated activity may be copied, a set of
activities that constitute a system is impossible
to replicate. This translates in supply chain
strategy. In this case, the assembly is
composed of choices that create its own supply
chain, the source of competitive advantage.
Approach to develop logistics strategies should
be based on the general aspects that
characterize the current environment, to focus
on specific conditions in which enterprises
operate.
6. Partnerships Between Producers and
Distributors – Case of Category
Management
In the 90s of the last century occurred
3 modern concepts that test new forms of
partnership between producers and distributors,
which marked a significant relationship
between trade and industry. These are Trade
Marketing, Category Management and Efficient
Consumer Response (ECR). These three
concepts are completed, extend and intertwine
in the evolution of companies from 2 industries
and haven’t accidentally emerged and spread
(Benoun & Helies-Hassid, 1998). Trade
Marketing marks the moment when for
producer not only the final consumer is the
only source of creating the turnover and profit,
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but the distributor, which exceeds the passive
role that hitherto achieved, becoming a
facilitator of success in the foreground sales.
ECR is based on the importance that
manufacturers and traders a joint attaches
consumer welfare into a mutually profitable
transaction. Category Management is
translating the idea that organization the shop
through consumer eyes is more effective than
a specialization on the first trading company
and then producer.
To better understand the context in
which change occurred that affected
commercial establishments need a history that
starts from the past existence of a sector
composed of many small business trade size
and with an organization reduced to a situation
where a trade organization in 2002 to reach
the largest world organization (the American
company Wal-Mart). Trade has become an
evolving sector is a reflection of the
environment in which it operate. As such,
studying and understanding the trade cannot
be understood only in conjunction with this
environment.
Trade in its evolution was influenced by
various factors, among which may be
mentioned: production, consumption, transport
conditions, technology, facility services
(banking, logistics, marketing firms performing
various studies, consulting companies, etc.).
Production influenced the development
of trade by offering ever more abundant and
more diversified, which means market
expansion and the need to expose an
increasing number of products.
Consumption has evolved under the
action of demographic factors - population size
and development, average life, household size,
etc. - economic - purchasing power, income
size, etc. - and sociological (Vasiliu, 2002) -
the circulation of subjects related to
environmental and health concerns,
appearance, safety, etc.
Transport conditions were modified by
extending long-distance arrangements (air, rail
and inland), which seats close the production
to consumer, but the use of vehicle, which is a
factor that favored the migration of population
towards the periphery of cities, and its demand.
As such, trade is located near major urban
areas, which led to changing consumer habits
and lifestyles.
Technological progress is evident in
trade through using the computer, the scanner
and telecommunications media. This led to
changing management practices, modes of
management products and stocks, the
relationships between business partners, to
new applications in various related areas -
logistics, marketing, training, recruiting, etc.
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 Supply Chain Management Journal
Turn facility services are evolving. It is
changing nature of the relationship between
trade and financial institutions in general and
banks in particular – hire-purchases, collection
with credit cards, various loans, etc. Transport
and logistics firms closely follow trade
developments, closely linked to it. In turn,
marketing and consulting firms develop tools
for trade and propose appropriate solutions to
the sector.
As result of action of these factors,
trade is an area with a high capacity for
innovation in terms of concepts, ways of
business management, the proposed offers to
customers, selling methods, types of
businesses, etc.
In this context it may be better
understood relations between producers and
traders, which we summarized as they were
after the 2 - World War until today.
• The first phase, starting in the '50s
and '60s with a strong growth and start mass
production. During this period appears the first
supermarket. Distribution in this period
remains less concentrated, as producers who
have greater negotiating power resulting from
higher power and as such, are those who
require the utmost conditions. Marketing of
this period is geared specifically to an optical
production. Producers are concerned about
product placement on market segments using
a mass marketing. Distributors are seen as
passive entities, act as a means to move
products from producers to consumers.
Follows a period of gradual rebalancing
the relationship between producers and
distributors in which the latter favors low price
strategies. Manufacturers adopt a marketing
based on sales.
• The second phase begins with the
crisis of the '70s, when growth slows and
strengthens the bargaining power of larger
trade companies due to increased power of
distribution companies. During this period
there is a real explosion of large point of sales
and trend of concentration of major companies.
As such, the purchase conditions change,
strongly increasing in importance the role of
purchasing center. Marketing focus on
consumer begins to be accompanied by
marketing that has the focus on trader. It is
expanding the department administration and
management of sales space, becoming
fashionable words such as merchandising, key
accounts, assortments management, etc.
• The third phase begins in the 90s
when trade marketing concept emerged as the
common desire of manufacturers and traders
to move from some previous conflict to
relations of cooperation. Interdependence
between the two forces them to declare that
each needs the other hand, cannot ignore the
60
existence and interests of other parties.
Acknowledges the role of traders and
producers, as such, those policies are a
marketing target first. Manufacturers are
beginning to regard as strategic partners with
retailers to be collected and maintained
relationships. Manufacturers expand individual
promotional campaigns, made plans focus on
customers seeking the development of
intensive cooperation with distributors. The
results of this phase are not spectacular
because manufacturers often use the discount
only for pushing their products on the shelves
of retailers. Cooperation between the two
partners actually occurs only in advertising
campaigns.
• The fourth phase is called
"partnership." Partnership is an umbrella
concept covering the full flow of information
and supply chain management, opening a vast
field of cooperation. Partnership is not a
unilateral option, but is initiated jointly by
producers and distributors. It occurs when the
Category Management and ECR.
Category Management is considered a
natural continuation of ECR, is concerned by its
demand side. This concept comes from
distributors’ initiative, aimed at optimizing
sales and profits. Category Management aims
to manage the sales of product categories.
A product category is a set of related
articles and interchangeable with each other,
although technically different, manageable in
store and grouped into strategic business units
in the worlds of consumption or use (Nielsen
Marketing Research, 1992). Therefore, a
product category can be seen, for example,
that for drivers, including auto parts, auto
electrical, car accessories (upholstery, rugs,
etc.), tools and measuring instruments, air
fresheners, brake fluids, the washer systems,
etc. In other cases, a product category
includes both food and non-food items,
perishable and durable - for example, the
breakfast category may include coffee, tea,
jam, sweet, bread, biscuits, croissants, juices,
cereals, but also machines toasters, blenders,
food processor, adapted cutlery and crockery
etc.
Methodology to achieve Category
Management process involves the following
steps (Visean, 2004):
1. define categories. Each item in a
store must be included in a category. Criteria
for composition of a category can be the way
of use by consumer or type of packaging of
items (Pinto, 1999);
2. determining role achieve by product
categories. In this regard, categories can be
grouped into:
 Destination categories, which serve to
distinguish the articles which include to
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 Supply Chain Management Journal
competition through higher value for
consumer - for example, coffee, pasta,
soft drinks, some perishable goods, etc.;
 Routine categories, which are regularly,
bought from the store - for example,
juices, dairy products, detergents, etc.;
 Occasional/seasonal categories include
specific products to some seasons and less
frequently purchased - for example,
condiments, tanning, etc.;
 Proximity categories, which include
products that the buyer purchases from
the nearest point of sale due to their
quality, although there are differences in
price than other stores - auto, automotive,
bakery, confectionery, etc.
3. assessment categories. Based on
information from consumers, distributors,
suppliers and market is done the category is
divided in sub-category breakdown, segments,
brands and stock keeping unit of the article.
4. achieve a ranking of categories
based on market share, turnover, net income,
etc.
5. prepare strategy for each category,
setting targets as such increasing customer
traffic in the placement category, increasing
transactions, increasing the profit share of
category in total profit firm, engendering cash
flow, creating a favorable image of the
company etc.;
6. choice of tactics for each category.
Transposition of tactics aims to creating an
optimal assortment, appropriate pricing,
display products, developing promotional
campaigns, etc.;
7. fixing action plan for each category.
This stage envisages the allocation of tasks,
setting timetable, resources required, stating
specifically who, when and how to implement
the provisions of the action plan;
8. analysis of product categories. At
this stage the prosecution is done, measuring
and eventually correct the action plan for each
category.
For the success of this approach is
necessary the direct involvement of top
management, development and integration of
various strategies in the enterprise - sales
strategy, product strategy, functional strategy,
etc.-, considering the product categories as
strategic business units by distributors,
development strategies by suppliers and
internal processes to enable categories and
their brands to align to roles of categories
established by the distributors (Gruen, 2006).
Manufacturer and distributor earnings
result from increased turnover of a category by
the increased attention to customers' needs
and reducing failures of the two partners by
better analysis and management of cost
structure (Varley, 2001).
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In conclusion, Category Management is
based on supply management through the
product category, customer satisfaction in logic
to buying (by way of defining the categories),
organizing in a marketing optical distribution
involving a range of skills of distributor -
purchase , logistics, marketing, sales, etc.- to
define the best mix of products in the shop,
proper movement of information, etc.
Between the 3 concepts there are
many similarities but also differences. Among
the similarities we mention that they are forms
of partnership between the manufacturer and
distributor, conducted under intense
cooperation and avoid any disputes and
strained relations that follow the end customer
satisfaction - even if this objective is explicitly
for ECR and Category Management and
implicitly for Trade Marketing. Their differences
are even more numerous and come from
changes in overall trade-provider relationships
that marked, in fact, even appearance. In this
respect, the ECR concept is broader, covering
both supply-side and demand-side of
distributor, while Category Management is
demand-side of ECR and the limited field of
cooperation between the two partners exists in
Trade Marketing. However, areas of
involvement of Trade Marketing and ECR are
the same - assortment, product policy with
emphasis on new products, merchandising,
logistics and promotion - on the Category
Management involves developing the
purchasing function based distributor of
enhanced skills and commercial activity
management by product category.
Finally, it should be noted that these
three concepts marks the stage of
development of relations between producers
and traders, based on developing cooperation
between them. But their emergence and
expansion does not necessarily mean that
resolve tensions between them. In the
negotiations for the initiation and development
of these concepts the role of balance of forces
between those involved is an important factor
involved in the agreement.
Conclusions
One can appreciate that logistics can
play an important role in the economy, which
is positive appreciated but not always. Thus,
deployment of logistics activities may dislike
people, since it can lead to deterioration of
quality of life - traffic congestion, noise,
neighborhood problems, pollution, hazardous
materials storage, etc. However, positive
influences prevail, by favoring the creation of
direct employment (persons engaged in jobs
related logistics activities) and indirect
(subcontractors, construction companies,
sanitation, etc.) leading to increase population
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 Supply Chain Management Journal
and consequently, the stimulating demand for
public services (schools, public transport,
hospitals, etc.).
We found that logistics management
features are influenced by the nature of
relations with suppliers. A review of major
stages of post-World War II, in economic
development has allowed us to shape the
evolution of relations between trade and
industry, now reaching a period where the
need for building partnerships two sectors. In
this respect, at the level of trading company
we could define specific types of partnership
with suppliers the Trade Marketing, Category
Management and Efficient Consumer Response
(ECR). Such partnerships, built on win-win
principle require management systems tailored
to specific methodologies for implementation.
In the current economic climate is
difficult to understand business activities only
in an internal perspective. Interdependence
that exists in the economic environment is
exacerbated by globalization. Solutions are in
the growth of cooperation agreements by
building sustainable partnerships. Synchronize
material, financial and information flows and
market needs is the way to ensure
competitiveness of the market. Remain to be
overcome traditional barriers of mind to get
financial gains with less economic
independence.
References
A.T.Kearney, 2005. Global Services Location
Index 2005. [online].Disponibil la :
http://www.goeknowledge.com/GSLI_Figures.
pdf.[accesată la: 25.04.2010].
Baglin, G. et al., 2005. Management industriel
et logistique – conception et pilotage de la
supply chain. 4e édition. Paris : Economica.
Benoun, M. & Héliès – Hassid, M.L., 1998. ECR,
l’ombre d’un doute. Décisions Marketing, No 15,
pp. 77-82.
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Dornier, P.P. & Fender, M., 2001. La logistique
globale – enjeux, principles, exemples. Paris :
Edition d’ Organisation.
Ducreux, J.M. & Marchand - Tonel, M., 2004.
Stratégie – les clés du success concurrentiel.
Paris: Edition d’Organisation.
Florea, N. & Clipa, C., 2005. Supply Chain
Management - introducere, bazele, edificiul şi
istoricul SCM, prezentat la Simpozionul
„Strategia ECR şi managementul lanţului
logistic”, Târgovişte, [online],
http://ecr.valahia.ro accesat 13.09.2008.
Gruen, T.W., 2006. Le category management,
nouvelle science de la distribution, Les echos,
[online], www.lesechos.fr
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équipe commerciale. Paris: Dunod.
Hotler, P., 1997. Managementul marketingului.
Bucureşti: Teora.
Paché, G. & Sauvage, T., 2004. La logistique –
enjeux stratégiques. 3e édition. Paris: Vuibert
Pimor, Y., 2001. Logistique – techniques et mis
en œuvre. 2e édition. Paris : Dunod.
Pinto, M. P., 1999. Les univers de
consummation: application du principe de
catégorisation. Décisions Marketing, No 17, pp.
37-44.
Varley, R., 2001. Retail Product Management –
Buying and Merchandising. London: Routlegde
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Publishing Group Inc., Illinois, p. 9.
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 Supply Chain Management Journal

Electronic Commerce versus Traditional Commerce.

Factors Affecting the Choice in
Lights and Lighting Fixtures Market

Dorina TĂNĂSESCU
Denisa Cornelia TRANDAFIROIU
Valahia University of Târgovişte

Abstract

Distribution systems can be sources of competitive advantage for manufacturers of goods and
services, for national and local economies. In designing these systems must be analyzed the factors
that make buyers choose the place and the way of making purchases. In a general approach, we can
consider the buyer being in a position to choose between buying goods in a traditional store or
through e-commerce.
The results of certain studies presented in this paper were analyzed in terms of e-commerce
merchantability of products, and customers need for information and value creation possibilities.
Based on these facts, companies can create different types of e-commerce sites, taking into account
as well the client’s expertise.
Depending on the value that manufacturers aim to provide to customers, it might be
necessary to redesign distribution processes and create a close collaboration among participants in the
supply chain management.

Key Words: commercial merchantability, economic merchantability, added value, site interactivity,
client expertise, data safety, information security, new information and communication technologies

Introduction have a chance to bid. The more buyers there

In the elaboration of their supply
strategies, good and service producers choose
to valorize their products by means of
traditional stores and/or by means of e-
commerce.
Definition: E-commerce refers to
carrying out the specific business environment
activities in an integrated automatic system for
the exchange of information using electronic
means (computer networks). This commerce
involves:
- inter-corporate relations;
- the relations between manufacturers and
public administrations;
- the relations between manufacturers and
consumers.
The three main elements of e-
commerce are:
 business-to-consumer
 business-to-business
 the transactions and business processes
that support selling and purchasing activities
on the web
Other categories include: consumer-to-
consumer and consumer-to-government.
In business-to-business e-commerce,
business organisations buy and sell goods and
services to and from each other. In this type of
e-commerce, buyers can place their requests
for new bids for suppliers on their e-commerce
sites, and the sellers from all over the world
are, the better off sellers will be and vice versa.
More buyers means sellers will have more
customers for their products and services.
More sellers means there will be more choices
for buyers. The more sellers, the better it is for
all sellers, especially when they can learn from
each other or produce complementary products
or services.
In business-to-consumer e-commerce,
business organisations sell to consumers.
These are retailing transactions with individual
shoppers. The advantage of this type of e-
commerce is that consumers have access to
the 'electronic shops' 24 hours everyday. The
consumers also do not face any queues
anytime they go shopping! Also there is almost
no limit to the number of goods that an on-line
retailer can display on its 'electronic storefront
or mall'. Furthermore, the sellers also get an
opportunity to collect rich data about their
customers while they are interacting, and use
it to 'personalise' service for these customers
and, in case of some goods bought
electronically, such as music and computer
software, they can be received instantaneously.
Since the consumers can interact from their
home computers, they can shop electronically
in the privacy of their homes.
In consumer-to-consumer e-commerce,
consumers sell to other consumers. Since there
could be a large number of consumers who

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 Supply Chain Management Journal
want to sell different goods, as well as a large
number of consumers who want to buy these
goods; the cost to sellers and buyers of finding
each other could be exorbitant. The solution is
to have an intermediary. Rather than having
an exchange in this case, 'electronic auction
houses', such as eBay, act as an intermediary
among the buyer and seller consumers.
We can talk about a traditional e-
commerce and an e-commerce via the Internet.
The first includes a large number of system
applications, such as: videotext, teleshopping,
sales catalogues on CD-ROM, the corporations'
own networks. The reasons for adopting e-
commerce in the most important countries of
the world, according to an OECD (Organisation
for Economic Cooperation and Development,
2005) report, are:
- extending the already existent goods and
services market;
Figure 1. The dimensions of electronic commerce
The Internet has changed the nature
and structure of competition. In the past, most
businesses had to compete within a single
industry (such as groceries) and often within a
specific geographic area, but the Internet is
blurring those boundaries. An example is
Amazon.com. The company began as an online
bookstore but quickly expanded into new
products and markets such as music, videos,
home improvement supplies, and even the
auction business. Through the Internet,
customers can purchase products from
virtually anywhere in the world (Figure 2).
A traditional business may have large
overhead costs associated with maintaining a
storefront. But a web-based business does not
necessarily have that type of overhead, which
may mean that continued growth becomes
easier. With eelectronic commerce, businesses
can move more quickly and usually less
expensively to reach a worldwide audience.
64
- improving the coordination of clients and
providers;
- carrying out new businesses and/or
penetrating on new markets;
- both consumers and providers have
requested it;
- most competitors carry out online
businesses;
- meeting the conditions needed in order to
participate to public acquisition auctions;
- facilities and encouragements coming from
the political-legal environment.
There are three dimensions of
commerce (traditional or electronic) as we can
see in Figure 1:
• the product (service) sold (physical or
digital;
• the process;
• the delivery agent (or intermediary)
An important difference between
traditional business and electronic commerce is
the elimination of the middleman, known as
disintermediation. Businesses and consumers
can communicate directly to carry out
transactions, which can help entrepreneurs
market their products or services without the
cost of salespeople or product representatives.
Despite some consumer wariness, due
in part to reports of hackers breaking into
allegedly secure web sites and downloading
credit card information, businesses have found
that financial transactions on the Internet can
actually be more secure than in traditional
retail environments. Much credit card fraud is
caused by store employees who mishandle
card numbers. Most consumers do not seem to
realize their credit card numbers are vulnerable
every time they hand their cards to waiters,
place orders by phone, or toss out receipts.
The encryption of card numbers for online
transactions protects both the consumer and
the business from credit card fraud.
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Finally, the Internet is revolutionizing
competition in the area of pricing. At any point,
a business may choose to simply give away a
service, free of charge, that others sell. One
example was when Microsoft began to include
a "free browser" with Windows software. Such
businesses generate income through other
means, such as by selling ads or products and
services related to the give-away item. Such
strategies can help business attract customers.
In addition, when "products" do not require
manufacturing and packaging, as is the case
with software downloaded via the Internet by a
user, the reduction in business costs can be
passed on to customers.

Figure 2. A Typical Customer Query Interaction in an E-commerce Activity

Traditional commerce perhaps started
before recorded history when our ancestors
first decided to specialise their everyday
activities. Instead of each family unit having to
grow crops, search for food, and make tools,
families developed skills in one of these areas
and traded some of their production for other
needs. It started with bartering, which
eventually gave way to the use of currency,
making transactions easier to settle. However,
the basic mechanisms of trade were the same.
Some body created a product or provided a
service, which somebody else found valuable,
and therefore was willing to 'pay' for it in
exchange. Thus, commerce, or doing business,
is a negotiated exchange of valuable products
or services between at least two parties and
includes all activities that each of the parties
undertakes to complete the commercial
transaction.
Any commercial transaction can be
examined from either the buyer's or the
seller's viewpoint. These two sides of a
commercial transaction are shown in the
diagram given below.

a) Buyer's Side of Traditional Commerce

Identify specific buying need

Search for products or services that will satisfy the specific need

Select a vendor

Negotiate a purchase transaction, including delivery, logistics, inspection, testing and acceptance

Receive product/ service and make payment

Perform regular product maintenance and make warranty claims.

b) Seller's Side of Traditional Commerce

Conduct market research to identify customer needs

Create product or service that will meet customers' needs

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Advertise and promote product or service

Negotiate a sale transaction including delivery logistics, inspection, testing, and acceptance

Dispatch goods and invoice customer

Receive and process customer payments

Provide after-sale support, maintenance, and warranty services.

More rigorously, electronic commerce - improving the coordination with the

is buying and selling over digital media. It
includes electronic trading of physical goods
and of intangibles such as information. This
encompasses all the trading steps such as
online marketing, ordering, payment, and
support for delivery. It includes the electronic
provision of services, such as after-sales
support, as well as electronic support for
collaboration between companies, such as
collaborative design.
The New Information and
Communication Technologies (NICT) play a
special role in electronic commerce
development, both for producers and for users.
These technologies have implications on:
- the electronic commerce (for example on
line buying and selling);
- online (e-business) solutions related to the
supply chain management (operations
concerning the acquisition of different
products, providers' coordination, demand
foresight, use of online catalogue and
marketplaces, etc.);
- digital transmissions (sending and/or
receiving information).
One of the goals of a firm adopting
NICT is represented by the desire to attract
new clients; this desire can be met by
introducing the site on search engines, portals,
banners, etc. Beside attracting new clients, the
benefits of adopting NICT on the organization
of the corporate activity of a firm willing to be
present online can be the following (Orzan,
2001, 2007):
- getting in touch with potential business
partners;
- increasing one's fame and market share;
- providing information on the firm's activity,
the products and goods achieved,
publishing different pieces of news in real
time;
- increasing the efficiency of the internal
processes (increasing the processing speed,
simplifying the tasks);
- improving the competitive position;
- improving service quality (especially
concerning the information);
providers and the way clients are served;
- increasing productiveness;
- cost reduction (for supply and inventory
activities);
- providing answers to the clients' needs or
complaints;
- maintaining the relation with the sales force
– often the agents of the firm that are out
in the field need the latest piece of
information in order to sign a deal;
- providing the possibility to penetrate on the
international market;
- assuring continuity in business.
In relation to the distribution channel,
the organizations can face a series of
difficulties in adopting NICT, related to the
coordination, the integration, the
harmonization and the standardization of the
processes, when the organizations adhere to
NICT. Accepting these technologies, both
upstream and downstream, along the
distribution channel, cooperation becomes
essential to assure the operations' success. In
general, the difficulties can be considered as
follows:
- merchantability of goods and services for
online transactions;
- availability of internal and external means;
- infrastructure and implementation costs;
- preoccupations (fears) in relation to
personal data protection and security;
- barriers concerning the legal regulations.
1. Determining Factors in The Choice of E-
Commerce
In France, the Dia-Mart company –
specialized in carrying out studies and giving
consultancy in the domain of distribution –
concluded in 1999 the work “E-commerce:
strategia canibalului” / E-commerce: the
cannibal's strategy (Ristea, 2005), where it
attentively analyzed the cannibalization and
internal contradiction risks concerning Internet
sites and a company's own stores.
From the beginning it was accepted
that the traditional/ physical distributors avail
themselves of advantages that ore not
negligible when selling online:

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- fame, • Fifth-stage e-commerce sites are fully

- credibility,
- know-how proven in practice.
The researchers involved in this study
have analyzed the Internet's potential by
taking into account two evaluation criteria:
1) virtual store merchantability and
2) added value for the products provided
by it.
Based on these two criteria is
determined the type of site that deserves to
develop better according to the products'
nature. So, on the Internet there are multiple
types of e-commerce sites (Stone, Jacobs,
2001,). Not all the companies need a fully
equipped commerce site.
Classification of e-commerce sites
• The companies oriented towards the
product begin with the first stage, brochures.
Their sites represent a one-way communication
focusing on goods and services.
• The sales-oriented companies move on
to the second stage. Their sites include
information concerning their goods and
services, including the way and the place from
where a potential buyer can buy them (for
instance, maps indicating the location of retail
stores). There is no possibility to dialogue or to
make an online order.
• Third-stage e-commerce sites are
usually created by the companies that rely on
data. These firms carry out commercial
operations on their sites, but they do not
connect their sites with their offline systems.
These lines take on online orders; they have a
section for frequently asked questions admit e-
mail communications for good or service
demand. Most e-commerce sites fall into this
category.
• Fourth-stage e-commerce sites are
well-implemented. Their online and offline
databases can be interconnected. The users
that sign in can personalize their profile. The
databases are interconnected.
implemented, and their creation and
maintenance costs millions of dollars.
Compared to the fourth-stage firms, they have
personalization systems for users' experience.
These can help build the relations with the
client. They provide chat services and online
vocal operators.
Site interactivity and client
expertise
The companies can implement one of
the above-mentioned sites, or a mix of them,
according to the type of product on sale, on
the Internet-user client expertise, and on the
experts that they can turn to in building the
site. These elements determine the so-called
site-interactivity, analyzed through the prism
of the interaction between the degree of
expertise of the Internet-site-user client and
the site's prescriptive capacity (Table 1). This
prescriptive capacity of the site is fundamental
to explain the way of interactivity: on the one
hand, not all the sites provide the same kind of
help to the client, and on the other hand, there
are different forms of interactivity, the most
successful being that of structuring the offers
to facilitate the choice during the machine-man
interaction.
In case the site has a strong
prescriptive capacity, and the client is less
expert, he/she could be guided in his/her
choice process: yet, on a less prescriptive site,
the same client would have to make a choice
having little information. The theories
concerning the consumer's behavior in respect
to trading marks indicate that a client that has
little confidence in his capacity of choice will
turn to well-known trading marks, to be sure
that he/she has made a good choice, or to the
lowest prices, to limit the risks or the gravity of
a mistaken choice.

Table 1. The interaction between client expertise and the site's prescriptive capacity
Site's prescriptive capacity
Weak Strong
Weakly reasonable choice, importance of Strong need for counseling, choice of
Weak the price and of the trading mark, the side according to the basic criteria
reluctance to taking risks (except for the (price, trading mark). Interactivity
Client very cheap merchandise). Interactivity possible if the client's expertise is not
expertise impossible. too weak.

Interactivity almost impossible, or if there is “Competition among experts”. The

any, it is superficial. The client says what
Stron he/she wants. The site managers can learn
g from the clients.
Source: David, Saïd-Kabèche, 2006
client will evaluate the sites and will
appreciate their prescriptive capacity in
his research. A strong interactivity is
manifested between clients and the
site's experts.

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For certain products, such as lights and and discuss about the products provided. As
lighting fixtures, the client has the possibility to far as Internet use is concerned, this study has
look for information before buying, searching shown that consumers that have frequently
through the information available on the web looked for online information engage easier in
sites. They can provide technical and economic web pages acquisitions. This tendency is
information, the possibility to talk about the confirmed by the general acquisitions and for
products or answers to certain questions that all the categories of goods under analysis.
are asked. Unlike the results of other previous
Determining factors in e-commerce studies, this study has shown that age does
analysis not play an important role in online buying, an
As far as the analysis of the goods that exception being online computer buying. As far
can be sold via the Internet is concerned, some as the differentiation in point of gender is
American researchers (Kwak, Fox, Zinkhan, concerned, men are more susceptible to
2002) have considered a two-dimensional become online buyers, compared to women. In
system, namely: relation to incomes, as one could have
- the popularity of online shopping for the expected, the ones on the increase generate
respective products (product more frequent Internet acquisitions for most of
merchantability) and the products. The level of education does not
- the need for information in order to buy represent an important influencing factor for
them. online buying. One of the reasons why age and
The results of their study have shown education do not influence online acquisitions
that electrical and electronic products is the fact that an increasing number of people
(including connected services), educational “surf” on the Internet.
services and travel prove to be products for As it can be noticed from Figure 3,
which much information is needed (Figure 2). consumers consider that electrical products
At the same time, these products are not so have a quite low merchantability on the
popular on the Internet. They have recorded a Internet. However, the need for information
low transaction level on the web. The potential tends to be high, which means that potential
buyers try to get as much information as consumers will try to find information using the
possible with a view to buying these products. Internet before buying these products from
In this sense, within a site can be added chat traditional stores.
services, so that potential buyers may interact

Figure 3. Consumers' perception concerning online acquisitions

Low ← Merchantability of the products on the internet → High

Square 1 Square 2

*Books

*Computers
*Music

*Education

*Tourism
*Leisure time
activities *Electrical and electronic
Square 3 Square 4

Low ← Need for information → High

Source: Adaptation from Kwak, Fox, Zinkhan, 2002

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The potential of development of e-
commerce radically varies according to the
type of products. In another approach, three
factors are determining for analyzing
traditional versus electronic commerce:
commercial merchantability, economic
merchantability and added value (Ducrocq,
2006).
• Commercial “merchantability” represents
the consumers' tendency to buy the product
on the Internet, in other words, without
seeing, touching, trying it, based on a
description and on a photo, delivered in a
certain pre-established time interval.
Commercial merchantability is effective in
the case of certain products, such as the
disks (CD, DVD) for which the title and the
author are enough when choosing the
product, and the one buying such products
will be exposed to a minimum purchasing
risk. Seeing the product before buying it is
not necessary, immediate availability is not
indispensable. At the same time, it is
efficient for frequently bought products (or
FMCG – Fast Moving Consumer Goods).
• Economic “merchantability” – refers to the
cost of the distribution on the Internet
compared to the cost of the distribution in a
store. This merchantability depends, first of
all, on the products' value and on the cost
of stocking them in a store. The economic
merchantability is effective in the case of
disks (the price of delivery by post is
sustainable taking into account the
product's value) or in the case of large,
bulky electrical products, these being
delivered at the clients' door whether they
are bought via the Internet or from the
store, because many traditional stores
provide home delivery for these products.
Economic merchantability is at the same
time effective for dematerialized goods (like
music that can be downloaded, financial
services, etc.) but ineffective for foods
(preparing the order plus home delivery
represents a too high cost compared to the
price and the plus value obtained).
The combination between these two
factors allows the determination of a product's
global merchantability, namely the capacity of
e-commerce to compete with store distribution.
This merchantability represents an important
advantage of the e-commerce development.
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Another factor conditioning the e-
commerce development and especially the
forms of this development is added value. In
other words, the possibility provided by the e-
commerce to create clients without proposing
them to buy from stores. The most obvious are
non-stop and home purchasing.
Yet, it is possible to combine the
advantages of e-commerce with those of store
selling. For instance, in the case of selling Do-
It-Yourself products, the Internet allows the
preparation of the store visit and the effective
use of the products. One of the best domains
for e-commerce is that of office furniture.
Nevertheless, for certain products, the
value added on the Internet is small: such is
the case of frequently bought products or disks.
For others, it is considerable: Do-It-Yourself,
travels, etc. Combining merchantability and
addend value within the Internet determine the
distributors' strategies. They can fall into one
of the following categories (Figure 4).
Case no. 1. The products sell well from
a distance and the Internet contributes to a
bigger added value for the clients. The
potential of e-commerce is high. The logical
strategy is to develop sales and service sites.
However, the risk of cannibalization between
stores and sites is maximal and the sites
increase the level of the minimal service that
the stores should propose. The investments'
coaching will occur between the costly and
disturbing sites on the one hand and the stores
can do nothing else but to evolve, yet in a
profitable way, on the other hand. The strategy
of cannibalization cannot be avoided: the
conflicts of interest are inevitable and should
be managed as well as possible.
Case no. 2. The products sell well from
a distance, yet the Internet does not add much
value compared to the stored. The advantages
brought by the Internet are the facility of
buying from a distance, 24/24 and possibly the
price that can be a little lower. The firms
selling this type of goods must create rapidly
sales sites to redirect the traffic, having a
vision of gain in the short/average run. The
risk of cannibalization with the classical stores
is real, yet the stores have advantages in
terms of added value that, when well exploited,
allow to assure an effective complementariness.
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 Supply Chain Management Journal
Figure 4. Merchantability and added value on types of products
Source: Ducrocq, 2006
Case no. 3. The products are hard to
sell from a distance, yet the Internet can
contribute to new added values. The Internet
can consolidate the relation between the firm
and its clients. The relational sites are the
logical strategy. They are marketing's arm in
the service of the shops. Adding commercial
functions is possible, to serve the client to a
bigger extent than for the development of the
turnover.
Case no. 4. The products are hard to
sell from a distance and the store answer
better the clients' expectations. The logical
solution is to create corporative sites
(containing general data, advertisements,
information on the stores' whereabouts,
editorial content, recruitment, etc.), without
selling any specific service.
To conclude, e-commerce represents a
means of significant sales increase only in
certain activity sectors. Yet, even in those
sectors, the firms have to face the
cannibalization risks, which, though limited
now, can become stronger in time.
As far as most of the firms selling
products with a low merchantability on the
Internet are concerned, e-commerce will
probably be viable if it shall constitute a
significant marketing instrument, rather than
an axis for the increase of the firm’s sales. In
this sense, the Internet could be used to
investigate the consumers’ needs, to inform
them about the new products, or about
eventual promotions, about the way to acquire
these goods, etc. The e-commerce
implementation strategies (David, Saïd-
Kabèche, 2006) can be of three types:
70
- “editorial” strategies that suppose the use of
the Internet exclusively as a communication
and information channel;
- complementariness strategies for which the
Internet is a supplementary channel for sales
and services offered to the enterprise’s
traditional clients;
- the strategy within which the offer is meant
exclusively for the internauts for and
according to their specific needs.
Numerous studies emphasized the fact
that an internaut client is expecting a
privileged service relation and the enterprise
needs to exploit the ICT potential for direct
marketing, pre- and post-sales services, in
order to grasp and, as much as possible, to
satisfy these expectations that are at the same
time factors that ensure the clients’ loyalty and
factors that attract new clients.
Serving the internaut client:
attaining client loyalty as a main concern
The contribution of logistics to
attaining client loyalty in distance selling has
been studied by the specialists in logistics from
France (Lote, 2002, David, Saïd-Kabèche,
2006), the results being synthesized in a list of
the logistic performances expected by a client
in distance selling, especially by an “e-
consumer”:
- the performance criteria expected by an
internaut client are essentially saving time
and avoiding to have to go out to get the
product or service. This client will appreciate
the possibility to return or change the
product;
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- for the internaut client one can add the
delivery dependability criteria, a faster
delivery, the choice of the place of delivery,
delivery expenses, etc.
The offer of goods on the internet is
especially an offer of services. So, the types of
criteria pertaining to the internauts’
expectations in point of services condition their
loyalty. To obtain the clients’ loyalty via the
Internet channel represents a major stake: the
clients can very easily compare the products’
prices and features and can immediately leave
the site.
The studies’ conclusions can be
synthesized as follows: “cyber-traders” who
desire to obtain the loyalty of the existing
clients and to attract new ones must meet the
above-mentioned criteria. The online
consumers’ criteria orbit around several key
criteria such as: choice, delivery interval until
the product becomes available (the shorter,
the better), warranties granted (the possibility
to return the product), respect for the
products’ quality and conformity, transaction
security and price.
Most of the companies developing e-
commerce initiative aim to improve client
satisfaction and loyalty. In order to reach these
goals it is necessary to redesign the company’s
business processes.
2. Typology Of Retail Traders On The
Lights And Lighting Products Market
Retail traders on the lights and lighting
fixtures (LLF) market have been the focus of
several studies, carried out in different
countries. So, a first study (CSIL Milano, 2001)
highlights the buying process for this kind of
goods in Italy, the research being carried out
by interviewing 420 families. In this sense, the
researchers identified, for Italy, the following
distribution channels for lights and lighting
fixtures (LLF):
- retail traders specialized in interior design;
- traditional lights & lighting fixtures traders;
- retail and wholesale traders specialized in
providing electric materials;
- hypermarkets, supermarkets, general stores,
trading centers and DIY (Do It Yourself)
products stores;
- other forms, such as: direct sales (after an
order has been received by post or via the
Internet), antiquities stores, present stores.
The study also highlights the fact that
it is necessary to consider the consumers’
lifestyle, which can be examined based on the
socioeconomic model, of the value systems
models, on the cultural and leisure time
activities, which influence the decision-making
process within the family, life conditions, type
of furniture.
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Another study which analyzed the
lights and lighting market in Russia highlighted
the most important distribution channels for
lights and lighting, namely:
- fairs and exhibitions taking place in different
towns;
- stores specialized in selling electrical products;
- interior design stores;
- online stores and Internet portals, including
producers’ websites.
Following the analysis of the European
market (CSIL Milano, 2005) for lights and
lighting and correlating with the results of
other studies, it is possible to identify the
following typology of the distribution formulas
for lights and lighting fixtures on the European
market:
- specialized stores of electrical
equipments;
- specialized stores of lights and lighting
products;
- furniture and lights & lighting stores;
- general stores, trading centers, malls;
- Do It Yourself stores;
- hypermarkets, supermarkets, discount
markets;
- proximity stores;
- mixed stores (especially in the rural
areas);
- specialized stores for goods of long-
term use (especially specialized in lighting
and light fixtures);
- stores specialized in personal and
leisure time goods – we refer to those
products that create a pleasant
atmosphere in the house (for instance, a
lighting device producing light effects);
- e-commerce, sales based on a catalog,
tele-shopping.
3. E-Commerce Versus Traditional
Commerce – Comparative Analysis For
Lights And Lighting Fixtures –
We will analyze the most important
factors influencing channel-choice: online
versus conventional for the buyers who want
to acquire lights and lighting products.
A study (Tse, Yim, 2001) led by two
Hong Kong University professors, the
Marketing Department, has tried to identify the
important factors influencing the choice of the
clients opting for one of the two types of
channels: online versus conventional. The
results have shown that the most important
factors influencing the buyers’ decision for the
online channel are:
- the possibility to make better choices;
- maximization of the access to information;
- development of data safety systems and
information security systems, reducing in
this way the fraud problems.
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According to the study, the most The comparative analysis of e-

important factor prompting buyers to purchase
from traditional stores is the capacity to “see” /
try the product. The value offered by
traditional commerce mainly consists in the
level of service, the easy possibility to try the
product.
Starting from the results of the above-
mentioned studies, we can consider that the
potential buyers analyze a set of goals,
simultaneously, when they decide to buy a
product from a certain channel, and meeting
the respective goals will create value. So, the
consumers will choose the channel that meets
their goals the best way possible (Table 2).
We must take into account the fact
that the goals pursued do not all have the
same level of significance for a potential buyer:
so, we considered a scale from 1 to 10
measuring the importance given by the buyers
to the goals pursued. According to these goals,
we then evaluated the two forms of commerce
for lights and lighting products. The alternative
channels are evaluated on a scale from 1 to 10.
Weighing the goals’ importance and their
degree of accomplishment, we obtained certain
values according to which we analyzed the two
types of channels.
commerce versus traditional commerce for
lights and lighting fixtures relied on the buyer
experience and also on the surfer experience of
those who checked the sites providing these
products (producers’ and distributors’ sites,
etc.). A part of the buyers’ objectives are
presented in detail below.
Minimizing fraud: it refers to the
protection against fraud, by discouraging or
preventing fraud. Assuring system security
means maximizing the security of the
transaction, the security of the use of credit
cards and online payments.
A better security system. Potential
buyers are very concerned with the issue of
data security when it comes to using credit
cards for online buying and paying. If they
perceive the credit card use as unsure and
risky, then they will not make online
acquisitions, even if they are aware of the
other advantages provided by this channel.
This fact should determine online stores
managers to try and assure the users that the
payment system is secure and they have no
reason to be concerned.

Table 2. Comparative analysis of traditional versus electronic commerce for lights and lighting
fixtures

No. Importance of Evaluation of the type of channel

Buyers’ goals the factors for (degree of accomplishment of
(analyzed factors) the potential the goal)
buyers of lights Traditional E-commerce
and lighting commerce (1 – 10)
fixtures (1 – 10)
(1 – 10)
1. Minimizing (eliminating fraud); security in 10 10 8
buying
2. Access to information 9 9 10
3. Securization of personal information 7 9 7
4. Realizing a comparison between products 10 6 10
5. Variety of products (array of choice) 9 6 10
6. Product availability 7 8 6
7. Possibility to try, to test the product; 4 10 0
facilities provided to choose the product
easier
8. Personal interaction 7 10 0
9. Cost reduction 10 6 8
10. Easiness in buying the product 9 7 10
11. Time spent to buy the product (distance 8 5 9
covered)
12. Assuring the “pleasure” of buying (having 5 10 7
fun while buying)
*
These goals have been adapted after the study Tse, Yim, 2001

Access to information. It is about the personal information, the buyers fear that once
information related to products, eventual they have bought a product via the Internet,
promotions, information concerning the the possibility that their personal data might
availability of the products in certain sales be used increases.
locations, etc. Related to the protection of

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Personal interaction refers to the - making comparisons between products is a

store’s personnel offering support to the
potential buyers. The latter are provided
specialized information concerning the
products on sale. Certain people have more
trust in the information provided by a natural
person, compared to the information provided
by a computer (even if there is the possibility
to ask an authorized person via the Internet or
to chat and exchange impressions about a
product’s features).
Comparing the grades given to the two
types of commerce, we can analyze the
following aspects:
very important goal for lights and lighting
fixtures buyers, and it is fulfilled the best way
possible by e-commerce. The same can be said
about the access to information.
- Traditional commerce obtained high grades
for assuring the fun during the buying
(although this aspect is not of great
significance for the buyer), for the testing
possibility and for minimizing fraud.
The degree of meeting the goals and
the scores obtained by the two forms of
commerce are presented in Table 3.

Table 3. Evaluation of the accomplishment of the buyers’ goals by the traditional commerce
versus e-commerce for lights and lighting fixtures

Evaluation of the type of channel (degree of

No. Buyers’ goals accomplishment of the goal)
(factors under analysis) Traditional commerce Electronic commerce
1. Minimizing fraud; security in buying 100 80
2. Access to information 81 90
3. Securization of personal information 63 49
4. Realizing a comparison between products 60 100
5. Variety of products 54 90
6. Product availability 56 42
7. Possibility to try the product 40 0
8. Personal interaction 70 0
9. Cost reduction 60 80
10. Easiness in buying the product 63 90
11. Time spent to buy the product (distance 40 72
covered)
12. Assuring the “pleasure” of buying (having 50 35
fun while buying)
TOTAL EVALUATION SCORE 737 728

Analyzing the data in Table 3, we can 4. Adoption of New Information And

state that we cannot talk about one channel’s Communication Technology (Nict) In The
primacy in front of the other. Yet, buyers can System Of Distribution Of Lighting
find information on the Internet (being able to Fixtures
compare products, prices, technical mentions)
before buying from traditional stores. Distribution systems can be sources of
The lights and lighting fixtures industry competitive advantage for businesses, national
has been deeply influenced by the increase of and local economies. New Information and
the Internet’s role. The Internet triggered Communication Technologies (NTIC) plays an
modifications in design development, important role for both producers and users.
marketing (especially inside the business to They have implications for:
business market – relations with fitters, with - electronic commerce (eg online purchases
clients). and sales);
An important role of the Internet is - online business solutions (e-business) related
that it provides information (on trading marks, to delivery supply chain management
models, prices, etc.) and by means of a (operations on the purchase of various
software for lighting design it is possible to products, coordination of suppliers, demand
simulate different situations, especially in the forecasts, using catalogs and online market
domain of architecture. places, etc.);
- digital transmission (sending and / or
receiving information).
Customizing, we believe that
manufacturers of lighting fixtures and sources

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 Supply Chain Management Journal
must make the following changes in the
organization of distribution in the market:
- The integration between the actors of the
same channels, by: developing centralized
distribution platform and continue developing
flows, developing collaborative processes
(business to business e-commerce);
- Outsourcing; it is necessary to have a better
vertical integration to provide quality products
and services (that accompany it), also
specialized firms can provide an increased
flexibility of logistics activities;
- Mastery of information flows: information
systems integration, traceability.
Manufacturers and distributors must
overcome logistical constraints induced by
electronic commerce. These constraints are
found both upstream and downstream
distribution channel. In the upstream
distribution channel for businesses to develop
an online tenders, covered two possibilities:
- or delivering orders from existing stocks in
their stores “traditional”;
- or build (or acquire) an entity specializing in
pre-ordering online and develop a separate
logistics.
Distribution chains and large
manufacturers of electrical (or sources and
luminaires) can build specialized distribution
centers. But experience shows that it is still
difficult to reduce distribution costs sufficiently
to achieve margins. Downstream channel
distribution, the constraints are related to the
management of orders whose volume and unit
value is reduced and irregular, with
geographically dispersed locations of delivery,
all within the shortest delivery time.
Deposits are no longer places where
goods are stored for long periods. Nature of
activities and opportunities offered by
information systems adopted causes logistical
infrastructure to create cross-docking platform.
The principle is to manage flows and not stocks.
Researchers (in chariot study by OECD,
op. cit.) consider that differences between
countries and industries (on different level of
adoption of NICT) occur as a result of learning
and experience. Thus, it is generally observed
that companies which have not yet adopted
electronic solutions for online sales barriers
facing much larger than those that already sell
through this channel. Those who do not yet sell
online products tend to see lack of consumer
demand nonmerchandibility as main barriers.
Cultural distance is not so much an
impediment in implementing new technologies
in international marketing channels, as shown
by the results of a study (Rosenbloom, 2003).
But companies that implement NTIC must take
into account the fact that these technologies
must be supported by a greater involvement of
human factor in the communication process in
74
international marketing channel members in
business to business.
Performing a combination of
information obtained from a series of studies
(Surcel, Dinu, 2007), we conclude that, in
general, consumers consider electronic
commerce as one of the best selling systems
due to factors such as price, extra time spent
for purchasing and information on particular
characteristics of products and services that
may be ordered. However, this system has
some disadvantages but on: the interval
between order and receipt of goods, security of
payments, the ability to assess product quality,
especially confidence in the security of
personal data during transfers of electronic
transactions.
Conclusions
In order to carry out efficient activities
in the domain of distribution, it is important to
have enough information on the products
(their origin, their description, and their
destinations). The participants in the supply
management chain should be able to monitor
and track the products in each point of their
road from the raw matter providers to the
consumers. So, all the participants involved
should be able to check on the Internet the
availability of the products and the stage of
their orders. All these can be achieved if the
information on the transactions is simplified,
automatic and fully harmonized between these
participants that can be from different
countries. It is necessary to have management
systems allowing a global monitoring, from one
end to the other of the information exchange.
In this sense, the governments, the
international community and the private sector
should cooperate.
The need for information represents
therefore an essential element both for the
providers of goods and services and for the
potential buyers when making the decision to
buy. In this sense, the Internet represents an
important means of communication. At the
same time, the potential buyers must take into
account the products' merchantability, when
they decide to buy online or from traditional
stores. Both of these types of channels need to
offer added value to attract and maintain their
clients. It is advisable to project the e-
commerce sites in agreement to the products'
typology and the level of expertise of the
potential client.
Concerning the commercialization of
lights and lighting fixtures, a combination
between e-commerce and traditional
commerce is recommended. The potential
buyers should be able to find information on
the Internet concerning these products, should
be able to make simulations, and the final
Issue 1/2010
 Supply Chain Management Journal
acquisition should be made possible in
traditional stores in order to benefit of the
specialized sellers' recommendations and
pieces of advice.
References
David, A. et Saïd-Kabèche, D. (2006) L’impact
des TIC. Logistique, transport, relation de
service, organization, La Documentation
française, Paris.
Ducrocq, C., (2006) La nouvelle distribution.
Marketing, management, développement: des
modèles à réinventer - 2e édition, Dunod,
Paris.
Kwak, H., Fox, R. J. and Zinkhan, G. M. (2002)
“What products can be successfully promoted
and sold via the internet?”, Journal of
Advertising Research, January-February.
Lote, O., (2002) “Contribution de la logistique
à la fidélité du consommateur client de la vente
à distance : le cas du commerce électronique.
Proposition d’un cadre conceptuel”, Actes de la
7e journée de recherche en marketing de
Bourgogne, JRMB 7, Dijon, le 13 novembre.
Orzan, Gh. (2001) Sisteme informatice de
marketing, Editura Uranus, Bucureşti.
Orzan, Gh. şi Orzan M. (2007) Cybermarketing,
Editura Uranus, Bucureşti.
Ristea, A.-L., Ioan-Franc, V., Purcărea, Th.
(2005) Economia distribuţiei. Marketing,
management, dezvoltare, Editura Expert,
Bucureşti
Issue 1/2010
Rosenbloom, B. (2003), Communication in
international business-to-business marketing
channels. Does culture matter?, Industrial
Marketing Management No 32, North-Holland
Rosenbloom, B. (2003), Guest editorial:
Behavioral Dimensions of E-Commerce:
Augmenting Technology and Economics,
Psihology & Marketing, No 20.
Stone, B., Jacobs, R. (2001) Metode de succes
în marketingul direct, Editura Arc, Chişinău
Surcel, T., Dinu, V. (2007), Auditul comerţului
electronic în relaţie cu protecţia consumatorilor,
Revista Amfiteatru Economic, Nr. 21, Februarie,
2007
Tse, A., Yim, F. (2001) “Factors Affecting the
Choice of Channels: Online vs. Conventional”,
Journal of International Consumer Marketing,
Vol 14 (2/3)
*** Process of lighting fixtures purchasing in
Italy (2001), CSIL Milano, December
*** The European Market for lighting fixture
(2005) – CSIL Milano
*** OECD – Organisation for Economic
Cooperation and Development (2005)
“Working Party on the Information Economy”,
the volume Digital delivery in distribution and
logistics
*** UNCTAD (2005), Information Economy
Report, New York şi Geneva
75
 Supply Chain Management Journal

Standards For Telematics Systems - Exchange Of Traffic Data

Angel Ciprian CORMOŞ

Valentin IORDACHE
POLITEHNICA University of Bucharest

Abstract
Telematics systems market for Road Transport and Traffic Telematics (RTTT) involving
telecommunications, particularly cellular telephony, has gained momentum due largely exponential
growth in the number of developers of systems, solutions and applications, and diversity of mobile
terminals. Mobile providers will be involved in transport, develop various products and services in
order to succeed in a competitive market. Objectives of standards in this area include providing a
means of communication (common language on technical and contractual issues), public protection,
increased health, hygiene and environmental issues, promoting trade and reducing consumer
spending targets that are protected by stringent specifications. Since the standards have considerable
potential in terms of efficiency, safety and improving user comfort, organized action is necessary to
promote standardization in these areas.

Key Words: telematics, standard, road, communications, traffic, geographic localization

Introduction determining the operating environment of a

system. Often in this process there are
Transport telematics systems are systems in developers who win and developers who lose,
which both vehicles interact with each other and in such conditions often system designers
and with smart infrastructure, improving road prefer to adopt de facto standards. For
safety and capacity of the system. Many such telematics systems, many services can be
systems have not yet been widely defined only in collaboration. Producers who
implemented or are in testing phases, did not participate in the standards
development or research, most of which development process will be disadvantaged
require communication between vehicles, and their products will reach market in a much
vehicles and infrastructure and infrastructure - longer time or be forced to participate in this
infrastructure, sometimes using wireless process to be able to certify the goods or
technologies. services. Cooperative standardization process
For telematics systems can provide many thus offers significant financial benefits by
services, two factors must be considered: sharing research and development costs and
• communication means reducing the risk of failure.
• service performance Producers want common standards to reduce
Standardization in the telematics systems is an costs by purchasing sub-assemblies and
essential component of their operation and will components, and to ensure that the networks
be directed by one of these elements. It should will continue to be interoperable. Standards
enable services on multiple platforms, help create an effective marketing language
regardless of borders. and the appropriate tests and certifications are
Some services are already defined, considered a way to generate trust between
implemented and operable. Others are in business partners.
advanced stage of design, other in research The main organizations involved in
and development stage or even defined in the standardizing telematics systems for road
architectural or conceptual way. The transport in Europe are:
development of standards necessary to provide • CEN - European Committee for
communications between systems requires a Standardization, which is involved in all
description of services, understanding their areas, except the electrotechnical. It was
requirements. legally established in 1985 and was based
Lack of clearly defined standards and industry on the standards of 19 European countries
fragmentation for telematics systems may and the six member organizations. CEN
hinder efforts to create effective solutions in established Technical Committees (TC), to
terms of cost and compatibility. coordinate and support the work of their
Traditionally, standards have been developed groups (WGS), which set and write
with the development of technologies or when standards. Technical committees relevant to

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 Supply Chain Management Journal

RTTT (Road Transport and Traffic • ICTSB (Information and Communication

Telematics) are:
• TC278: RTTT standardization - which
coordinates working groups for road
telematics systems;
• TC224: card readers, interface devices
and operations specific to their;
• TC287: geographic information;
• TC226: road equipment;
• TC320: transportation services.
• CENELEC - European Committee for
Electrotechnical
Standardization, established in 1973 as a
non-profit organization, including 18
European countries. This committee
structure has two technical committees with
ties to CEN/TC278. They are:
• TC9X: electrical and electronic
applications for railways;
• TC214: electrotechnical equipment for
surface transport (inactive at the time
of writing this paper).
• ETSI - European Telecommunications
Standards Institute, a non-profit
organization created in 1988. This is an
open forum attended by 647 members from
49 countries, with the objective to
determine and develop telecommunications
standards. ETSI produces voluntary
standards, some of which will be adopted
by some European Union countries as a
basis for technical regulations and
directives. One working group of ETSI is
relevant for RTTT related standards:
• TC ERM: Electromagnetic and Radio
Compatibility, a group that works with
CEN/TC278 WG9 creating standards for
Dedicated Short Range Communication
and Autonomous Intelligent Cruise
Control systems.
Worldwide, ISO (International Organization
for Standardization) is the most important
organization to coordinate standardization
activities, with active working groups:
• TC204: information and control systems
for transport;
• TC22: road vehicles;
• TC104: freight containers;
• TC211: geographic information;
Between ISO and CEN is a permanent
exchange of information and jointly develop a
series of works.
Other organizations involved in the
standardization for road transport telematics
systems:
• ANEC (European Association for the
Coordination of Consumer Representation in
Standardization) as its name implies, is
meant to represent consumer interests in
standardization processes. ANEC is a extended to other modes (transport means), or
member of CEN, CENELEC and ETSI.
Technology Standards Board), it was
established by CEN, CENELEC and ETSI and
coordinate information standardization for
super-highways.
1. Exchange Of Traffic Data And
Geographical Location
In urban areas there is a need to establish
geographic location to satisfy requirements for
data exchange between UTC (Urban Traffic
Control) and other TCC (Traffic Control Center),
public transport management (vehicle tracking)
and for data exchange between vehicles and
UTC (link between ACC - Adaptive Cruise
Control - and control of traffic lights, etc..).
In interurban areas major problems for traffic
management are data exchange, traffic
monitoring, development of traffic
management plans and providing information
and instructions to users.
This means that are necessary links with urban
traffic management systems and other nearby
interurban traffic management systems,
otherwise the system would act in
isolation. Regarding the exchange of traffic
data are required agreements between parties
(eg neighboring road authorities, police, etc..)
for type of data exchanged, their quality,
transfer methods and purposes
whatsoever. DATEX is a useful tool in this
regard, especially for cross-border exchange of
data, the protocol for message encoding being
language independent. Similarly, these parties
must agree on measures such as traffic
management plans, reconfiguring routes in
case of incident, congestion, or inclement
weather.
Traffic management involves providing
instructions and advice to drivers and other
transport users, through signs (permanent or
temporary signs or variable message signs) or
by systems installed in vehicles (radio, RDS-
TMC, GSM, digital display, etc. ).
A priority is to expand traffic data dictionary,
which currently covers only interurban
situations, to cover urban road network. This
enlargement must take into account the need
to exchange in urban areas in particular basic
data between different systems, rather than
compiled data. WG1 ISO204 produced a
"Glossary of Terms" which is a starting point
for any such dictionary.
In addition, especially in urban areas, data
exchange should cover all modes of transport,
not just road traffic. If multimodal centers are
involved, there could be a greater need for
standards. DATEX (Data Exchange) could be
may be adopted a CORBA / Java platform
(developed by project TRIDENT), allowing data

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 Supply Chain Management Journal
exchange without the need for a common
dictionary.
It also needs to improve the interface between
urban and interurban networks in most
European countries, for example by extending
the DATEX to urban traffic control centers.
In addition to technical standardization is also
necessary organizational standardization
regarding data senders and recipients (TCC,
police, local authorities, operators of highways,
etc..), data type, by what means and under
what terms is the transmission realized
(subsequent use of data, costs, etc..). These
issues are best dealt with through bilateral
data exchange, as a European standard would
involve too much bureaucracy in this case and
would not take into account local and national
circumstances. Joint activities could develop a
model agreement for sharing data used by all
organizations involved, a model that would
streamline and simplify the procedure and can
be modeled considering local circumstances.
1.1 Vehicle - infrastructure
communication systems, including
emergency calls and EFC applications
Vehicles priority requests must have a certain
level of standardization in terms of
communication systems to ensure
interoperability with systems
infrastructure. System requirements call for
use of a short-range radio communications,
DSRC possible, which is the subject of
standardization activities in the EFC (Electronic
Fee Collection).
Taking into account the DSRC is a need to
study the influence of metal windscreens on
the On Board Units (OBU) based on DSRC
(Dedicated Short Range Communications) for
ITS (Intelligent Transportation System) and in
particular for EFC. European car manufacturers
have started introducing metallic windscreens
widely in Europe and this may undermine the
proper functioning of communications for the
EFC. However, CEN/TC278/WG9 started to
address this problem in a matter of working on
DSRC - Physical Integration of OBU in vehicles
for the EFC.
Another aspect of the DSRC is the need to
meet European, North American and Japanese
cooperation with ISO/TC204/WG15, a group
responsible for harmonizing ISO DSRC Level 7
- Application Layer.
A standard is needed for a protocol for
application identification and the possible
distribution between these applications of
components such as location and time.
The communication vehicle/driver - control
center should also include applications for
emergency calls.
78
There is no obvious need for the existence of a
regulation regarding the provision of
emergency calls on the market. Regulations
should only need to be for licensing of network
operators. However, as regards the
implementation of Pan-European emergency
call, ERTICO partners have identified needs
and problems that need attention from both
the emergency authorities and the network
operators.
In terms of pan-European distribution of
emergency services, WAP (Wireless Application
Protocol) is a possible solution in terms of
transport mechanisms, but does not define the
application (for example, format and content of
messages). One possibility could be using a
GATS application (Global Automotive
Telematics Standards) in combination with
WAP.
Some car manufacturers are now studying
automated generation of emergency calls in
case of an accident by which information from
different sensors could be embedded in the
message of emergency, so that emergency
services could get a better picture of the type
of accident.
Information like geographic location is
necessary for teamwork, as well as other
standard information (time, direction of travel,
etc..). In this field standards would be
necessary to define minimum data.
1.2. Control Center - Roadway
communication systems
NTCIP (National Transportation
Communications for ITS Protocol) deals in the
U.S. with links between control centers and
roadside units. Many European countries have
developed their own protocols, and now are
investigating whether they could adopt
NTCIP. In Europe a common approach is
necessary.
However, many implementations use TCP/IP (a
de facto standard) and a proprietary data
dictionary. Using this solution involves,
therefore, the need for further work to fill in
the data dictionary, the development of
protocol messages (to allow sharing of
communications infrastructure with other
services) and, most importantly, the
standardization of geographical location.
1.3. Control Center - Vehicles
communication systems
CEN/TC278/WG3 priorities for standardization
include the exchange of data between vehicles
and control centers or service providers using
the DAB (Digital Audio Broadcasting), TETRA
(Terrestrial Trunked Radio) and GSM (Global
System for Mobile Communications), data
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 Supply Chain Management Journal
exchange between authorities and public
transport control centers, and, to enable
prioritization of public transport in junctions,
standardization based on the concept of "smart
intersections" for the exchange of data
between traffic servers and vehicles.
In addition, due to increasing environmental
concerns in cities, should establish links with
external systems responsible for monitoring
weather conditions. These connections must
take into account the exchange of data in both
directions, for example, to develop
management strategies aimed at mitigating
traffic emissions, data are required on current
emissions and projected emissions. To
estimate the level of pollution, data on current
and projected traffic are equally useful.
These types of exchanges have been, so far,
considered as internal for traffic management
system. European ITS Framework Architecture
clearly identified different functions in different
areas, taking into account that traffic and
environmental responsibility can be taken by
different authorities. standardization of data
exchange between UTC and those responsible
for monitoring weather conditions is to be
proposed.
1.4. Vehicle - Vehicle communication
systems
In this area the following issues require
attention:
• Communications between vehicles to warn
the driver, information exchange, etc.., for
which can be considered
telecommunications carriers such as CDMA,
or Bluetooth.
• Communications between vehicles, which
requires more secure data carriers and
large bandwidth. This domain includes
applications for platoons of vehicles, vehicle
tracking applications, etc.
In both cases more effort in standardization is
needed.
1.5. In-vehicle systems
In this area, most of the items are still in
research and evaluation. Some systems are
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independent while others require
communications or interactions with the
infrastructure and/or other vehicles. Depending
on the selected solutions, they should provide
a different level of priority for standardization
work.
Currently, the emphasis must be placed on the
integrity of data communications because it is
a common topic for various systems.
Key interfaces where standardization would
have a positive impact are those related to
smart cards and vehicle data bus between the
inside and the outside world.
2. Traveller Assistance And Guidance
Traveller Assistance and Route Guidance
(TARG) are systems that provide assistance
while traveling. The purpose of these systems
is to allow users to travel in a most efficient,
safe and comfortable way. A specific example
of TARG system is RDS-TMC, although it has
limited functionality.
2.1. TARG System
Traveller support systems can help the traveler
both before and during its journey. TARG ideal
systems should include all modes of transport,
such as Dynamic Guiding Systems that may
suggest the driver to use facilities such as
"park and go" than to drive the car to the city
center.
The standardization in this area tends to focus
on data delivery mechanism, rather than on
applications. All systems have similar features
and content, but differ in the information
format, the protocols used to define the
location of items (types of digital maps and
types of location) and the degree of processing
required (e.g. if the route is calculated at the
central level or local in vehicle).
To identify and clarify standards work in this
area, the diagram context can be used as
shown in the European ITS Physical
Architecture. In this way, the protocols
developed in standardization activities can be
associated with the identified interfaces, as
shown in Figure 1.
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 Supply Chain Management Journal

Figure 1. Context diagram for the Traveller Assistance and Route Guidance Systems

Vehicle Renting Planned Event Bookable Service Geographic Financial

Agency Organiser Provider Info Provider Clearinghouse

Multi-Modal Travel Parking

Info Pr. Operator

General Info 2
Provider Traveller Related Road
Support System
Center
Static Traveller Location Data
Source
1 3
Traveller In-vehicle
Assistant Device

Dynamic Driver
Traveller

However, the chart is complex because it connections and interfaces developed in the
intends to cover all possible combinations area of standardization.
between passengers, service providers, devices
and applications. A simplified context diagram
(Figure 2) will be sufficient to explain the

Figure 2. Simplified context diagram for TARG systems

Service
Service Providers Providers Financial
Clearing House

Service
Providers

Map Supplier
Support Center

In-vehicle Device Traveller

TARG systems includes three subsystems: complexity and functionality, where the
1. Traveller Assistance subsystem (TA), which variation between a memory box and an
is a "personal assistant" to the passenger intelligent processor, but basic functionality
and includes an intelligent processor or is user identification, easy access to the
memory box with the ability to TSC and support for personalized travel
communicate with the Traveller Support planning. More advanced features include
Center (see below TSC ) to define routes saving information such as interruptions or
and collect all information of interest. TA reservations, and reuse of travel
can exist in a number of levels of information from previous guidance. The

80 Issue 1/2010
 Supply Chain Management Journal
description distinguishes between static
travel (preparing their trip) and dynamic
ones (any user in the journey, using TA,
except for drivers who use In-Vehicle
Device).
2. Traveller Support Center subsystem
(TSC), which is a terminal type, with a
collection of relevant data and the ability
to establish links with various other types
of systems for obtaining information. It
acts as an intermediary information
system, offering passengers access to a
range of information without having to
know where that information is located,
how to access and how to combine it. TSC
is linked to a region and can access
information from outside its region, using
its links to provide comparable information
from other areas. If desired, tourist and
even shopping information can be
delivered.
3. In-Vehicle Device subsystem (IVD), which
consists of a device inside a vehicle that
can be coupled with TA. Allows gathering
information and for more advanced
devices, communication with external
systems, such as equipment or radio on
the roadside for collection of the latest
available data.
Table 1. The Italian system RDS-TMC – context
Terminal - Traffic
Terminal
Management System
Related road systems
Operator
External service provider
Data Source Location
The driver receives information from external
RDS-TMC service providers and is therefore not
included in the system.
The system includes the following subsystems:
• Subsystem for access portals to data
providers
• Subsystem for standard data change
• Subsystem for Data Collection and
Management
• RDS-TMC coding subsystem
Each data transmission technology for TARG
systems claims that its protocol is
"independent of communication technology"
and there is not a desire for development and
adoption of protocols that are used wholly
independent of any technologies. Thus, each
side develops a separate protocol, which
fosters an environment of
communication. However, there is a desire to
use common sets of messages with GATS
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2.2. RDS-TMC
RDS-TMC (Radio Data System - Traffic
Message Channel) is closely related to
passenger assistance and guidance and its
implementation in Europe is based on an area
where there is a common communications
architecture with well-established standards, in
agreement.
EU has focused on implementing RDS-TMC
services, as part of the TEN-T (Trans-European
Network-Transport) planning international
implementation, with the ability to disseminate
information in several languages. The aim is to
create a continuous service, compatible and
interoperable with the benefit that the user can
use the same certified receiver in any
European country to receive standard
information in a language of their
choice. Currently there are several regional
and national services, while others will begin to
broadcast shortly.
The system described in the European ITS
physical architecture is the Italian RDS-TMC
service, whose links with other systems and
with the outside world (terminals) are shown in
the table below:
Interface
Traffic Management System -
Terminal

 

 
protocol for RDS-TMC message set Alert C, and
TPEG (Transports Protocol Experts Group) is
developing its set of messages so as to be
compatible with the sets Alert C and DATEX.
There is no definition for the interfaces
between service providers, support centers and
their responsibilities. In many cases data,
communication and service providers are
covered by a single organization. It is unclear
whether architectures take this into account.
New elements have been identified and there
have been suggestions for progressing the
work of WG4 - Traffic and Travel Information:
• generate work items (Information for
Travelers and Traffic through Digital
Carriers with Fast Data Transfer) to
produce final drafts about TPEG syntax,
semantics and framing structure and the
Road Traffic Messages (RTM);
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 Supply Chain Management Journal

• associated group will continue to develop
messages for other applications such as
public transport and status-oriented
messages, checking that there is overlap
with other working groups.
Traffic data are important inputs required by
RDS-TMC system and that is why links are
created with monitoring applications and data
exchange applications.
Location reference is also a problem that
should be addressed as RDS-TMC data should
be used for navigation systems that use
detailed models of localization.
WAP appearance brings new problems, such as
the need to send data related to a location in a
common format to a center (for example, a
provider of information on the Internet), which
may differ depending on the country in which
the user travels.
Another problem relates to charging for
directions and information services (whether
and how to be made).

2.3. Standardization activities underway for the interfaces between service providers - in-
vehicle device.

Table 2. Standards for data transmitted RDS

ISO ENV 1998 Traffic and Traveller Information (TTI) -- TTI messages via traffic
12313-1 message coding -- Part 1: Coding protocol (updated status as EN ISO
14819-1)
ISO 2003 Traffic and Traveller Information (TTI) -- TTI messages via traffic
12313-2 message coding -- Part 2: Event and information codes (updated status
as EN ISO 14819-2)
ISO ENV 1999 Traffic and Traveller Information (TTI) -- TTI messages via traffic
12313-4 message coding -- Part 4: Protocols for ALERT+
ISO ENV 1999 Traffic and Traveller Information (TTI) -- TTI messages via traffic
12313-5 message coding -- Part 5: Location coding for Alert +
ISO EN 2003 Traffic and Traveller Information (TTI) -- TTI messages via traffic
14819-1 message coding -- Part 1: Coding protocol
ISO EN 2003 Traffic and Traveller Information (TTI) -- TTI messages via traffic
14819-2 message coding -- Part 2: Event and information codes

Table 3. Standards for Dedicated Short Range Communications (beacons) - Withdrawn standards

ENV 12315- 1997 Traffic and traveller information (TTI). TTI messages via dedicated
1 short-range communication. Data specification. Downlink (roadside
to vehicle)
ENV 12315- 1997 Traffic and traveller information (TTI). TTI messages via dedicated
2 short-range communication. Data specification. Uplink (vehicle to
roadside)

Table 4. Standards for data transmitted over cellular systems

CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-1 General specifications
CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-2 Numbering and ADP message header
CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-3 Basic information elements
CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-4 Service-independent protocols
CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-5 Internal services
CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-6 External services
CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-7 Performance requirements for onboard positioning
CEN/TS 2003 Traffic and Travel Information (TTI). TTI messages via cellular networks.
14821-8 GSM-specific parameters

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Table 5. Standards for data transmitted through Digital Carriers with High Data Rates (including
Internet and Digital Audio Broadcasting (DAB))

ISO ENV 2006 Traffic and Travel Information (TTI) -- TTI via Transport Protocol Expert
18234-1 Group (TPEG) data-streams -- Part 1: Introduction, numbering and versions
ISO ENV 2006 Traffic and Travel Information (TTI) -- TTI via Transport Protocol Expert
18234-2 Group (TPEG) data-streams -- Part 2: Syntax, Semantics and Framing
Structure (SSF
ISO ENV 2006 Traffic and Travel Information (TTI) -- TTI via Transport Protocol Expert
18234-3 Group (TPEG) data-streams -- Part 3: Service and Network Information
(SNI) application
ISO ENV 2006 Traffic and Travel Information (TTI) -- TTI via Transport Protocol Expert
18234-4 Group (TPEG) data-streams -- Part 4: Road Traffic Message (RTM)
application

2.4. Standardization activities underway for Map Providers - Support Center - In-vehicle
Device.

Table 6. Standards for RDS data

ENV 12313- 2000 Traffic and Traveller Information (TTI) -- TTI messages via traffic
3 message coding -- Part 3: Location Referencing
ENV 12313- 2000 Traffic and Traveller Information (TTI) -- TTI messages via traffic
5 message coding -- Part 5: Coding Protocol using ALERT+

Table 7. Standards for relations Support Center – User

CEN ISO/TS 2008 Traffic and travel information -- Messages via media independent
14823 stationary dissemination systems -- Graphic data dictionary for pre-
trip and in-trip information dissemination systems

there is no default method of taxation. It is

Regarding WAP, ITSWAP project is studying questionable whether issues relating to
different business models, including service taxation is an area that standardization
charge. activities should be focused on - normally,
In addition, DATEX Leadership and each operator must collect their own fees for
Management Committees (described above) the use of traffic information. However, the
studied DATEX-Net, and RDS-TMC forum interfaces between users, debt cancellation
promotes and supports this type of media. offices and service providers are important in
RDS-TMC is one area where standards exist, terms of interoperability.
but implementation is slow for other reasons In the standardization in the field of
such as lack of enthusiasm from the geographical information (CEN/TC287), a
commercial companies for the development structured set of standards was conducted
and implementation. which specify a methodology for defining,
Regarding Dynamic Guide Systems, CEN and description and transfer of representations of
ISO working groups have not conducted any the real world. This will help in understanding
standards. Systems that have been placed and using digital information from any
have priority data interfaces, routing location. The objective is to facilitate the use of
algorithms and HMI (Human Machine digital information relative to real world
Interface), many of which have data interfaces locations. This standardization activity will
and can accept RDS-TMC and GATS influence and be influenced by developments in
messages. However, standardization is not a information technology. A location in the real
priority in this area because the information is world can be represented by coordinates, text
transmitted in ASCII format and language of description or a code name.
the user. In the medium term should consider the
There is no research for standardization of following aspects:
payment methods for Traveller Information • consistent messages to the concept of
Services. GATS is based on a mechanism of traffic information door to door, in which
taxation via GSM, TPEG is attached to a information is retrieved from multiple
mechanism of charge if needed (but this has databases (linked to the earlier suggestion
not been developed yet), but for RDS-TMC for Public Transport);

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 Supply Chain Management Journal

• criteria to assess the quality of • vehicle fleet maintenance.

information;
• data for driving vehicles: data collection,
criteria for service performance;
Although the reference location rules have
been developed in the WG7, they are still a
problem for RDS-TMC, specifically for
integration with other more elaborate
reference location systems used for navigation.
3. Freight And Fleet Management Systems
Such a system is composed of the following
subsystems:
1. Fleet Management Sub-system, which
provides centralized functionality. It is
divided into modules responsible for:
• preparation, planning and centralized
control of fleet operations;
2. Freight Management Services Sub-system,
which is responsible for business functions
(customer relations, negotiations, etc.).
These subsystems are interconnected as in
Figure 3.
To comply with regulations or market
requirements, there is a growing number of
commercial vehicle systems produced by
different manufacturers. This proliferation of
systems creates problems in terms of
interoperability and usability and is therefore a
need for standardization of architecture.
Standards in the field of fleet and freight can
be regional (e.g. national or European
standards for the vehicles fleet, regulations,
etc..) or global (e.g. container, which can be
shipped worldwide).

Figure 3. Distributed freight management system

cc.Principal Operator Driver Operator Vehicle

Freight Fleet
Managment Managment
Services Sub- Sub-system

Location Data Law

Multi-Modal
Enforcement
System Source
Agency

A European Parliament resolution in February vehicles, concerning transport orders,

1999 included a request for the Commission to tasks management, status reports, etc.;
"initiate the harmonization or co-ordination of • issues related to human-machine
national and/or modal technical, operational interfaces (HMI);
and administrative standards in order to • emergency and safety in-vehicle systems,
ensure interoperability and the free flow of automatic vehicle identification, tracking
goods and loading units, and of the data and and detection;
communications required in the intermodal • positioning, navigation and route
transport chain". This underlines the link optimization;
between freight and fleet management • management of freight, e.g. goods and
systems and multi-modal freight issues and the vehicles weighing and
need to develop standards to enhance planning/optimization of the load points at
interoperability and intermodality of goods terminals.
transport. There is no real standard in the freight and
Key elements for standardization include: fleet management area. Working Group 2 of
• integrating electronic tachograph in CEN TC 278, dealing with Freight and Fleet
physical and communication architecture Management Systems, issued a reference
for freight and fleet management; architecture and terminology in 1997, but
• tachograph information structure; there has been no reaction from the industry
• messages transmitted by mobile Electronic players. Since then, the Working Group has
Data Interchange (EDI) to and from been largely dormant.

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 Supply Chain Management Journal
Applications that use smart cards and bar
codes are relevant for freight and fleet, being
handled by the Technical Committees of CEN
224 and 225.
Several activities have been developed in this
area through a series of projects and could
therefore provide diverse experience and
issues for the formulation of standards. These
activities include MIST (Multi-Industry
Scenarios for Transport) and national and
European projects. In addition, links between
the work done by ISO TC22 and specifications
for electronic tachograph can provide a
purpose for reactivation of standardization
activities in this area.
The COMETA project (COMmercial vehicle
Electronic and Telematic Architecture - EC-DG
IST of the 4th Framework Telematics Project)
has developed modular associations of on-
board functions for commercial vehicles,
allowing effective interfacing with global
transport telematics systems and has
developed some proposals for harmonization
and standardization.
KAREN and FLEETMAP projects have been
taken into account (a problem for future
standardization of communications between
base and vehicle) to develop an open system
architecture for on-board freight, fleet and
cargo management systems, with standardized
interfaces for applications in Europe.
Fleet Application Protocol (FAP) deals with
standards for the location of vehicles,
exchange messages, calls for assistance and
traffic information. Its purpose is to allow a
standardized communications protocol to make
interfaces between in-house applications and a
concept of "fleet protocol server" to avoid the
need for companies to have several systems
installed in parallel.
Standards relating to the FAP are:
SR ISO/CEI 8824 2006 Information
processing systems - Open Systems
Interconnection Specification of abstract
syntax notation - 1 (ASN.1):
• Part 1: Specification of the Basic Notation
• Part 2: Information Object Specification
• Part 3: Constraint Specification
• Part 4: Parameterization of the ASN.1
Specification
ISO/IEC 8825 2002 Information processing
systems - Open Systems Interconnection
Specification of ASN.1 encoding rules:
• Part 1: Basic Encoding Rules
• Part 2: Packed Encoding Rules
• Part 3: Distinguished Encoding Rules
GATS Standards:
• GATS 1: Event coding
• GATS 2: Geo-coding
Data Transfer Protocol for MicroPross
(MDTP105) is a file format that uses ASCII
Issue 1/2010
code and is composed of a frame header
(identifying the file type, sender, etc..) Data
records (listing events, vehicles, drivers, data
sources of information, etc..) and an end frame.
Standard DIS106 (Delta Industrial Service)
provides an interface between main suppliers
of freight and fleet management solutions
(Volvo, Thomson, ICS, Transics, etc.) and DIS
software (Scan4 and Visio-Truck) - this
standard is principally related to tachographs
issues and content, the driving time, rest time,
distance covered, etc, but also areas such as
refueling and costs.
Development of standards in freight and fleet
management requires a high level of support
and commitment among the users of the
freight and fleet reference
architecture. However, the key objective
should be to shape the standards in this area,
rather than create new ones and to treat both
deficiencies and links/overlaps between areas.
CEN TC278 WG2 should be reactivated.
For EDI messages (status reporting, task order,
etc..) structured information standards are
needed to remove unprocessed information
(e.g. free text), similar to what was obtained
for DATEX-Net data exchange.
The development of standardization and
harmonization measures (if not current
standards) for HMI is important for
easy/ergonomic use, interoperability and
security.
Standardization in terms of integration of
tachographs in vehicles is required, including
standardized information and
connecting/disconnecting components to and
from the system board, regardless of
manufacturer.
In-vehicle systems such as WAP, GPRS and
UMTS will soon become relevant to freight and
fleet management, as the logistics systems
become available on the Internet. Problems
are therefore similar to the standardization of
information during the journey (e.g.
information content, definitions, etc.).
4. Tipuri De Comunicaţii Vehicul-
Infrastructură
A key area of road transport telematics
systems on standardization is that of vehicle to
roadside infrastructure communication. This is
relevant for a wide range of services, including
the EFC, emergency systems, systems to give
priority to public transport, etc. Types of
information available for this, modes of
transmission involved, technical specifications
and standardization in the protocols adopted
are presented in Table 8.
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 Supply Chain Management Journal

Table 8. The main features of the vehicle - roadside infrastructure communication standards

Working Group
Frequency Transmission
Media Data Rate Protocol or Technical
band Mode
Committee
Analogue stereo
Analogue FM radio 87.5 to 108 MHz Broadcast ISO/TC 204
channel
RDS – TMC (Radio Sub-carrier at ALERT-C for
Raw: 1187.5bps Broadcast ISO/TC 204
Data System - 57kHz combined events
Traffic Message with FM
Efficient: 300bps Traffic information. CEN/TC 278
Channel) analogue carrier ALERT + for status
Sub-carrier at
Raw: 16 kbps
DARC (Data Radio 76kHz combined ALERT-C and
Broadcast ETSI
Channel) with FM ALERT +
Efficient: 6.8kbps
analogue carrier
433.055 to Point to point or
434.785 MHz multicast. Subject to
RF 433 MHz 2-10 kbps Non standardized
69 channels by interference from
step of 25 kHz other users.
DVB-T (Digital Video
Broadcast – on-
Broadcast - 5-31 Mbps 240 to 870 MHz ETSI
going experiments.
Terrestrial)
Digital broadcast TPEG (Transport
Raw: 2.3 Mbps
Currently, Protocol Expert ISO/TC 204
DAB (Digital Audio L-Band
deployment limited Group)and MOT
Broadcast) Efficient: 0.6-1.7 1.5 GHz
to several major (Multimedia Object ETSI
Mbps
cities. Transfer)
DECT (Digital Not suited to high
Domestic cordless
European Cordless speed mobile ETSI
telephone
Telephone) communications.
Point to point –
GSM data
agreement between
DCS 1800 9.6 kbps WAP CEN/TC 278
operators for
900 MHz roaming services
ETSI
GSM Phase
1800 MHz 2+:group calls, pre-
GSM-SMS (Short 100 bit/s (length ACP - GATS - ISO/TC 204
emption, etc.
Message Service) of 140 bytes) ViaSat
900 MHz,
GPRS (Global Packet 14.4 – 170 kbps 1800MHz (EU
WAP + IP (full
Radio Service) bandwidth) or Point to point ETSI
internet)
EDGE 384 kbps 1900MHz (North
America)
144 kbps in rural
areas V<500km/h
UMTS or IMP-2000 Point to point
384 kbps in 2 GHz
(Universal Mobile +multicast Roaming
suburban areas IP (full internet) ETSI
Telecommunication between European
V<120km/h 2 (1.92 – 2.025)
System) and global operators
Mbps in urban
areas V<10 km/h
CEN/TC 278
512 kbps beacon
DSRC (Dedicated Point to multipoint ISO/TC 204
to vehicle. DSRC + ISO
Short Range 5.8 GHz Electronic tolling,
256kbps vehicle to 14906
Communication) multi-applications ETSI
beacon.
IEEE
SMS at 9.6kbps
Packet switching Point to point + New ETSI
TETRA 380-400 MHz ETSI
mode up to multicast standard
28.8kbps
Global 700kbps if
range <4m, 75
kbps up to <10m Special Interest
Local dynamic
Lanes: 64 kbps in Group of industrial
network for office
Bluetooth synchronous mode 2.4 GHz and telecom IEEE/802.15
computing and in-
and up to 721 companies (1883
vehicle networking.
kbps in members to date)
asynchronous
mode

86 Issue 1/2010
 Supply Chain Management Journal
Conclusions
Due to complexities of telematics systems is
absolutely necessary to standardize this area
to ensure systems interoperability and access
to all categories of users to necessary
components of their development. In this
regard, most institutions have started
standardization activities to develop standards
and draft standards for various aspects of
telematic systems.
Standards must become close instruments
which transporters can use easily and that
support their work. The economic health of any
company depends on its ability to become an
active supporter of standardization and the
ability to use standards so that they become
everyday tools.
Traders are the backbone of economic
dynamism and employment growth by
supporting labor. They should be concerned
about the competitiveness of the
standardization work. As standardization is of
prime importance in
the competition on the market, traders have to
worry about adequate training in this area.
Standardization process provides considerable
benefits to businesses, consumers and society,
driving innovation and enhancing economic
competitiveness. This process is not yet fully
understood by most potential participants and
its beneficiaries. Understanding and early
involvement in this process will lead to
obtaining benefits with lower efforts than in
case of postponement decision.
Initially, the increasing problem of traffic
congestion has determined the development of
telematic systems. Today objectives cover
various purposes and applications,
incorporating a wide range of technologies
from sensors to computers and communication
networks. This area includes now industrial
consortia, companies and standard
development organizations.
To make roads safer by reducing accidents,
improving traffic and reducing pollution is
necessary to standardize telematics systems. A
major challenge for successful implementation
of telematics systems is the interoperability
and extensibility of these systems. Future work
of standards development organizations can
provide an answer to these challenges taking
into account the needs and requirements of
users, vehicle manufacturers and service
providers.
Issue 1/2010
References
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 Supply Chain Management Journal

Modelling Costs Using Time Driven ABC Method in Logistic Activities

Aurelia Aurora DIACONEASA

Nicoleta MANEA
Sorin OPREA
Valahia University of Targoviste

Abstract:
Time-Driven Activity-Based Costing (Time-Driven ABC) was introduced in 1997 by Kaplan and
Anderson in order to provide more precise information on costs and profitability of products / services
and allows, as its promoters claim, to understand better and lower the costs, complexity of the
activities of an enterprise using the "equations of time."
This paper presents the results of a case study on the implementation of Time-Driven ABC in a
distribution company from Dambovita, concluding that the method can be used for complex
and dynamic activities, which characterizes the logistics of distribution companies.

Key Words: activity-based costing, time-driven activity-based costing, distribution, time equations

Introduction and maintain (Kaplan and Anderson, 2004).. In

The notion of supply chain has been
existing since the businesses were organized in
such a way that finished products or goods be
delivered to the end customers while the
notion of suply chain management (SCM)
arose in 1982 and was developed by two
consultants: R. Oliver şi M. Webber. To get to
know the relationship between suppliers and
customers is crucial because of the two
reasons: first, the supplier can establish an
advantageous market by focusing on profitable
customers and second, the costing is used to
evaluate customers based on the services they
benefit from and also on the capacity to trace
and understand this costing by taking into
account the actual costs. This approach
enabled many companies to significantly
improve the price limits to their key
customers.
It is more than two decades since
companies have successfully developed
Activity-Based Costing Systems for the
logistics activities.The Activity based costing
(ABC) assigns organizational activity costs to
products, customers and distribution channels.
The links between them are not known in
advance and this is why the global
expenditures of each activity of a department
must be identified. Activity based costing first
assigns costs to the activities that are the real
cause of the overhead. With the very dynamic
and complex businesses, many of the
companies have abandoned activity-based
costing method since they most of the time
failed in identifying the complexity of each
activity involved ; also because the method
required a great deal of time to implement or
because it is much too expensive to build up
order to solve out this error, Kaplan and
Anderson introduced the notion of Time Driven
Activity Based Costing (TDABC). This is the
method that enables identification of complex
and special transactions in a simple manner by
the means of time equation.
The goal of this paper is to give an
answer to the following questions: Is TDABC
more capable to feature the complexity of
logistics transactions ? Does TDABC remove
the deficiencies of ABC method ? To answer
these questions, I will first have an overview of
ABC traditional method and focus on the
difficulties that might appear in its employment
and I will thereafter develop the mathematics
model based on TDABC.
In terms of how interesting this topic is,
we consider it can be summed up by this quote:
“A thing has no value because of its cost, as
one could assume, but it costs because of it
bears value.” - Etienne Bonnot Condillac -
Oeuvres Complètes - 1798. The analysis and
cost management were the subject of multiple
research efforts, which have led to significant
advances in this field. The most recent
methods, such as the TABC approach try to
solve the shortcomings of the traditional
methods of cost calculation.
Cost management is always a topical issue,
especially in Romania, because the cost is a
synthetic indicator, more difficult to be
analyzed than other quantitative indicators
which are closer to our mentality.
1. From ABC To Time-Driven Activity-
Based Costing
Logistic firms face ever-increasing
competition in today’s global marketplace.
Companies must react quickly to be successful
in this new environment. To make proper

88 Issue 1/2010
 Supply Chain Management Journal
decisions, senior managers must have accurate
and up-todate costing information. Traditional
costing systems based on volume-based
allocation of overhead have lost relevance in a
manufacturing environment that has seen a
sharp increase in overhead and a subsequent
decline in direct labor. These traditional costing
systems tend to distort product costs and lead
to poor strategic decisionmaking (Johnson,
1991).
One innovative costing method
designed to deal with the deficiencies of
traditional costing systems is Cooper, Robert
Kaplan, and H. Thomas Johnson (Cooper,
1988a; 1988b; 1990; Cooper and Kaplan,
1988; Johnson, 1990), is a costing
methodology used to trace overhead costs
directly to cost objects, i.e., products,
processes, services, or customers and help
managers to make the right decisions
regarding product mix and competitive
strategies. According to Turney, ABC can
radically change how managers determine the
mix of their product line, price their products,
identify the location for sourcing components,
and assess new technology (Turney, 1989).
Cooper describes two stages in the
ABC model (Cooper, 1987a; Cooper, 1987b).
In the first stage, costs are assigned to cost
pools within an activity center, based on a cost
driver. There is no equivalent step in a
traditional costing approach. In the second
stage, costs are allocated from the cost pools
to a product based on the product’s
consumption of the activities. This stage is
similar to a traditional costing approach except
that the traditional approach uses solely
volume related characteristics of the product
without consideration for non-volume related
characteristics. Some examples of cost drivers
not related to volume include setup hours,
number of setups, ordering hours, and number
of orders. Allocating non-volume related costs
using volume-based methods distorts the
product costs.
But the ABC method has been subject
to criticism, as there are certain impediments
in its implementation, such as activity
measurement errors; the model complexity,
which makes its relevance to become uncertain;
the time-consuming implementation and
update of the model.
Kaplan and Anderson argued that when
tasks were more complex, the ABC required
dividing them into smaller activities, which
would lead to an “inflation” of activities. An
excessive proliferation of activities is more
frequently seen when logistics and distribution
personnel functions are examined, since such
personnel executes less repetitive tasks than,
for example, the employees who work in a
shop (Innes, 1992).
Issue 1/2010
Kaplan and Anderson (2004) argue
that as the activity dictionary is expanding,
either to reflect more accuracy and precision,
or to encompass the entire enterprise, the
requirements imposed to the computer used to
store and process data are exponentially
increasing.
All these issues are even more
important in larger companies, if those intend
full implementation of the system in their
whole entity. In order to diminish these
difficulties, separate models for each
distribution channel or for each group of
products are often built. However, the
disadvantage is that it becomes almost
impossible to have a coherent vision of the pair
product / market return, if several ABC models
are used.
In order to remove these deficiencies
the Time-Driven Activity-Based Costing
method was proposed.
The Concept of Time-Driven ABC was
developed in 1997 by Steven Anderson and
used within his company, Acorn Systems, Inc.
In 2001, together with Robert Kaplan improved
the initial model requiring estimates of only
two parameters: the unit cost of supplying
capacity and the time required to perform a
transaction or an activity.
Estimation of the cost based on the
necessary time required for a certain supplying
capacity
Instead of interviewing the employees
with regard to the way they spent their time,
the mangers will first estimate the practical
capacity of the delivered resources as a
percentage of the theoretical percentage.
There exist many ways to do that but most
often it is measured that the practical capacity
of production is between 80 and 85% out of
the theoretical capacity. Therefore, if an
employee or a device is available 40 hours per
week, the practical capacity is between 32 and
35 hours per week. Generally speaking,
managers should allocate some smaller rate –
let’s say 80% - for the employees, based on
the estimation according to which a percentage
of 20% of the entire time is the breaks, arrival
and departure time, communications and
learning. As for the devices/tools, managers
should estimate that 15% is the difference
between the theoretical and practical capacity,
the timeleft being unseful time because of the
maintenance, repairs and program changes.
Estimation of time consumption
required by a resource group
After the calculation of the cost of
supplying capacity per time unit, managers
should determine the time taken by acertain
unit in each kind of activity. These figures can
be achieved interviews with the employees or
bydirect surveillance or –for large enterprises
89
 Supply Chain Management Journal

by the questionnaire. It is however important 6. Multiplication of the unit cost of resources

to be clearely understood that the question
does not focus on the timepercentage the
employees spend with a certian activity (such
as delivery) but it refers to the time spent to
achieve a certain unit of the respective activity
(the time required by the achievement of a
single unique delivery).
In essence, TDABC consists in
understanding the amount of effort required by
the processing of data and in attachement of
the cost to each specific transaction, this way
achieving the exact measurement of costs per
activity (process), products, customers (and/or
segments), channels.
Time-Driven Activity-Based Costing
consists in the following 6 steps (Kaplan and
Anderson, 2004):
1. Identifying the resource groups conducting
activities;
2. Estimation of the cost for each resources
group;
3. Estimation of practical capacity of time for
each groups of resources (ex: the available
working hours)
4. Calculation of the unit cost for each group
of resources by distributing the total cost of
the resource group to practical capacity;
5. Finding out the time required by each
episode of an activity based on time driver and
some other features of the actions;
by the time required for the activity
achievement.
Time-Driven Activity-Based Costing
provides the surveillance of cost and resources
groups by the means of the time drivers, as
one can see in Figure 1. TDABC Systems
follows the path of the costs of the resources
bases towards objects, based on the time
ecuation per each activity.
For instance let’s analyze the activity:
sales order processing. The total cost of
resources is 76,800 lei per week, which
connects to a practical time capacity of 9,600
minutes (80% of theoretical capacity of the 40
hours per week, for 5 employees). Thus, for a
group of resources, the cost per minute is 8.
The time required to process a standard order
is estimated at 3 minutes. Processing an order
for a new customer requires an investigation
task with adds 15
minutes more, so it takes 18 minutes. In the
TDABC model, the cost per order is 24 units for
existing customers and 144 for new ones. If
we do not use an driver (number of orders), in
the time required to process an order, the cost
per order can be determined depending on the
situation, without rebuilding the entire model.
Based on the characteristics of the order
processing, the first event could take 3
minutes, the second 18 min, while the third
event would again take 3 minutes etc.

Figure 1. Time-driven ABC

Resources Expenses Salary Depreciation Other
Expenditurest …
Resource Driver

Resource pools Administration Warehouse …

Unit cost per resource pool=
C1=RON/mi C2=RON/mi Cn=lei/min
total cost of resource pool
Order Ordering Sales
Activities entry
Invoicing

t activitate 1, k = β 0 + β1 * X 1 + β 2 * X 2 + ... + β p * X p
Time Ecuations with
t activitate 2, k = β 0 + β1 * X 1 + β 2 * X 2 + ... + β p * X p
time drivers … …
t activitate 1, k = β 0 + β1 * X 1 + β 2 * X 2 + ... + β p * X p
Time spent multiplied by unit
∑∑tj,k*C1 ∑∑ tj,k*C2 ∑∑ tj,k*C1
cost per resource

Direct Material
Direct Labor Product A Product B Product C

Source: Kaplan & Cooper (1998)

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2. Mathematic Model Tdabc processing is calculated for each specific event

As i mentioned before, the cost of an of this processing, based on the charactersitics
activity is generated by the time necessary for of k; this can be mathematically represented in
the respective activity multiplied by the cost the following model, based on the
per time unit. We should recall that the time charactersitics of a certain order:
necessary for the activity dedicated to order

Cost of an individual episode k of an activity j=Tj,k*Ci when:

Ci= unity cost expressed in minutes of I resources;

Tj,k= time consumed by episode k of j activity
Total Cost for all the episodes of all the activities is calculated by adding all the activity costs.
Total Cost of an object cost (customer, order, product) can be calculated by the meansof this
realtion:

Total Cost = + +
Where:
Ci= time unit cost (minutes) of the resource group
Tj,k= time consumed by episode k of j activity
N= no. of resource groups
M=no. of activities
L=no. of time activities performed, j

Using the time equations, the time
consumed by the episode of an activity (Tj,k)
can be expressed based on different
characteristics, namely the so called time
drivers. The time drivers are variables by the
means of which one can determine the time for
achieving a certain activity. The following
general time equation describes the necessary
time for an episode k belonging to j activity
and having p as time indicators. B represents
the time invariable, independently from the
activity characteristics, B1 shows the time
consume of a time driver X (this is when they
stay unchanged):

tjk = B0 + B1.X1 + B2.X2 + B3.X3+...+ Bp.Xp

where:
tjk= time necessay to perform activity j or episodel k
B0= the time invariable, independently from the activity characteristics
B1=consumption for a driver unit
X1=time driver 1.......Xp=time driver p
P=nuber of drivers that determine the necessary time to perform activity j

3. Time Equations depends on two time drivers: the type of

TDABC Method operates with complex
activities that comprise a number of
subactivities. Each of these has got a specific
driver and the number and time used by each
driver is different. It is obvious that the effort
made to conceive and use the TDABC model is
much greater under the conditions when time
equations and changing elements are not
correctly defined.
In order to ilustrate the ascertained
ones, we will take again as an example
“processing the sales orders”. This activity
customer (new or old) and the number of order
fulfillment lines. The time to insert an usual
order is of 3 minutes, for each order fulfillment
line it is required 1 minute and to add a new
customer takes 15 minutes. Therefore, we
have a time metric driver X1 for order
fulfillment lines and a binary time driver X2,
which value is 0 when the customer is not new
and 1 when the customer is new. The time
necessary for introdution of a new order will be
determined by equation:

tk = 3 + 1 * X1 + 15 * X2 (5)
where:

X1= number of order fulfillment lines;

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 Supply Chain Management Journal
X2= new customer(1)/existing customer (0)
Time equations also take into
consideration the interaction between time
drivers (for example the time to record the
new customer could differ based on the two
possible situations: the customer is on the
phone or data are provided by the sales
agent).
4. The Factors Of Success For Tdabc
Model
According to Kaplan and Anderson, the
TDABC simplifies the ABC method for three
reasons:
-The number of activities is reduced and the
analysis is made at the level of the
departments or of the processes. Kaplan and
T = 8 mn x X1 + 44 mn x X2 + 2mn x X3
With:
Mn = minutes,
X1 = number of orders to manage,
X2 = number of complaints,
X3 = number of invoices.
But if we go deeper into the analysis, a
second version of the TDABC method has to be
mentioned. It refines the ABC method in
analysing the tasks. Using equivalent-time
measures, the activities are divided into tasks
so that the method gains accuracy. Bruggeman
et al. (Kaplan and Anderson, 2007) describe a
TDABC experiment in an European company
where the value chain management is a key
T = 3mn + 2mn x X1 + 15 mn x X2 + 10 mn x X3
With:
X1 = number of orders lines,
X2 = number of new customers,
X3 = number of express orders.
The TDABC is founded on a strong
hypothesis. The cost generation is based on
the time consumption. This is the case only in
certain circumstances. It is the case for supply
chain management, some standardised
production processes, call centres, hospitals,
some consulting activities, … But it is not the
case for the research and development process,
the marketing one, some complex
productions, … In addition, some mistakes are
possible when
establishing the standards. Moreover, the
TDABC depends on internal time consumption
92
Anderson (2004) present a case study where
some 1200 activities have been reduced in 200
processes.
-The need to collect information from different
services is limited because of the use of
standards.
-The different types of drivers are expressed in
only one equivalent-time driver.
Let’s take the example of a sales
department where three activities are
performed: the management of sales orders,
complaints and payment. Instead of cutting
the department into three distinct activities
and allocating their costs with relevant costs
drivers, we construct a time equation based on
standards.
value factor. In this case, the activities are
divided into tasks and expressed with a time
equation. For example, they
decompose the activity “administration of the
customers’ orders” into three tasks: the input;
of an order line, of a new customer and of an
express order. They formulate the time
equation in this way:
measures. It deals with an internal constraints
approach. Maybe it would be useful to extend
the TDABC methodology to some customer
variables (spending time when phoning for a
request, distance to the first shop, …)
A lot of research has been undertaken
to determine which were the success factors in
implementing the TDABC model. Table 1
summarizes, in our opinion, the key studies in
this area.
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Table 1. Studies on the main success factors model TDABC

Author Type of study Objectiv study

Kaplan, R. S. and Examples of application TDABC The paper uses simple numerical
Anderson, S. R., (2004) examples to articulate the fundamentals
of timedriven ABC and provides several
examples of companies that have
implemented the approach.
Kaplan, R. S. and Book.Kaplan and Anderson offer a The authors show how managers can
Anderson, S. R., (2007), revised model where managers can build a TDABC system
estimate the resource demands
imposed by each transaction, product,
or customer, rather than rely on time-
consuming and costly employee surveys

Pernot, E., Roodhooft, F., Case study in a University Show how to perform a time-driven
and van den Abbeele, A., activity-based costing
(2007) analysis of inter-library service and
provide evidence of the benefits of such
an analysis.
Everaert, P. and Research model Exploring the underlying model TDABC.
Bruggeman, W. (2007),

Everaert, P. and Case study research was performed at a This case study illustrates that there are
Bruggeman, W. (2008), Belgian wholesaler. Interviews were logistics operations that cannot be
conducted. modeled using a single cost driver, as is
done with ABC.
Everaert, P. and Instructional case. To decide which system (ABC or TDABC)
Bruggeman, W. De the company SANAC INC should
Creus De Creus G, implement, to calculate profitability at
(2008), the order and the customer level.
Tse S.C M, . Gong Discussion on implications of Conversions of an ABC-based costing
M. Z (2009), recognising idle resources in TDABC and model to ones that are based on the
RCA models on developments, TDABC and RCA models, and the
maintenance and uses of cost resulting new
management systems. Hypothetical allocation of resource costs.
case
Dalic I, (2010). Interviews, direct observations, and The purpose of this paper is to show the
documentation collection were used to implementation of TDABC, in a Turkish
collect the data hotel.

4. Case Study 4.1 The need for a viable reliable cost

Methodology
In order to explore the applicability of
the TDABC method we choose a distribution
company called TRANS SRL MANOIL SC. The
data have been collected using various sources
(internal reports, business briefings, access to
the company data base, the access to the
billing program), but more often the interview.
The interviews were conducted both with the
employees and the manager, who also
completed the questionnaire. The next steps to
be followed are intended to offer answers to
the following questions: Is the ABC method
useful for MANOIL in taking the necessary
steps to calculate the costs in a relevant way?
Is TDABC a better solution than the ABC
method? What are the activity inducers
identified for the reception of goods and billing
work? What time equations can be building up
for the mentioned activities? Is TDABC a
solution for the complex activities?
system
The need for a more precise cost
system was given by the decrease of the
profitability rate. The goal of the company was
to go over the growth objective (that involved
a wide bigger range and stocks of goods, by
delivering in short time any order to a
customer, most of the time at the same price,
no matter how big was that one) to
profitability. MANOIL TRANS SRL SC wants to
find out the cost of the product, the customer,
the order, the order line and the supplier, all
for the same purpose to improve the services
and the privileges for the customers, that
generates a higher profit margin, even we are
forced to give up some of our customers and
suppliers.
The difficulties in evaluating the costs
using the ABC traditional method are given by
the seasonal sales trends that are making
difficult to define the normal capacity of the
activity cost inducers (50% of the sales are
done during the season), the diversity of goods

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and of the customers may involve the
supervision of too many activities, MANOIL has
1,772 clients, a portfolio of 742 goods and is
issuing 142,751 invoices.
4.2 The ABC and Time-driven ABC models
for the reception for merchandise activity
From the interview with the Head of
the Billing Office we found out that the
reception of the received goods it’s a
composed process made of several sub-tasks,
each of them being possible to be allocated
different cost inductors. So, at the arrival of
the truck (long vehicle) the driver is assigned
an unloading platform by each warehouseman
(the necessary time is 1 minute), then an
invoice employee is loading the invoice into the
computer using our own administration
program. Loading the general information is
taking 1 minute; the registration of each order
line is taking 10 seconds. Each pallet is
unloaded in 1.5 minutes. The pallets can be
returned to the suppliers; in this case they are
stacked in piles of 15 pallets that are loaded in
the long vehicle in 1.5 minutes. When the
truck (long vehicle) is unloaded the goods are
checked, using 0.05 minutes for homogenous
pallets and 0.10 minutes for non homogenous
ones. The last operation is signing the bill (the
duration is 0.2 minutes) (Figure 2).

Figure 2. The activity concerning the reception of goods.

PLATFORM ASSIGNMENT RAMPA

Introduce the bill in the Introduce the delivery

computer order comanda

N Y
Unloading
Unloading Unloading the
pallet/box
box/100 boxes pallet

Y
The return of the
Loading Pallets pallet

Boxes check N Pallets/box check Y Pallets check

Signing the expedition papers

It can be observed that they are not homogenous activities, for each sub/task existing a
different time inductor as it follows:

Activity Cost Inductors

Unloading platform allocation Number of deliveries
Introducing general information about the delivery Number of deliveries
Introducing the information related to each order line Number of the ordering delivering
lines
Unloading the Long Vehicle (Truck) Number of delivery pallets
Return of the pallets Number of the returned delivery
stacked pallets
Delivery Check Number of the homogenous
delivery pallets
Delivery Check Number of non-homogenous
delivery pallets
Signing the delivery invoice and of the bill. Number of deliveries

The ABC traditional Model, with a single activity inductor, in this case, the number of the
deliveries are presented bellow in Template No.1, but the information related to the costs offered by
the usage of a single cost inductor it does not providing the best information.

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Template 1. The traditional ABC Model for the “Reception of Goods” activity.

Amortization The Employee wage Other expenditures Resources

Reception Activity

No. of deliveries Cost Activity

Inductor

The rate of the cost

RON/Delivery
activity Inductor

Deliveries Cost Object

Source: Werner Bruggeman, Patricia Everaert, Yves Levant

Delineation of the sub-activities, part of a possible activity, as it can be observed in Template

2, can be difficult, especially the estimation by the manager of the total number of deliveries for each
month, of the total number of order lines and of the total number of pallets.

Template 2. The detailed ABC Model.

Warehouse amortization Warehouse’s pers. wages Extra costs

Assigning Introducing Introducing Sending the

delivery command Unloading The return Delivery Delivery invoice
unloading truck check check
information lines of the
platform pallets

Order lines
Order lines No. of
No. of No. of
No. of No. of
No. of not
not
Delivery
Delivery Delivery
Delivery Pallets no
Pallets no
No.
No. stacked
stacked unitary
unitary unitary
unitary Delivery
Delivery
No.
No. No.
No. pallets
pallets pallets
pallets pallets
pallets No.
No.

RON/delivery RON/Order lines

RON/Order lines RON/pallets RON/ stacked
RON/ stacked RON/unitary
RON/unitary RON/not
RON/delivery
RON/delivery RON/delivery RON/pallets RON/not RON/delivery
RON/delivery
pallets
pallets pallets
pallets unitary pallets
unitary pallets

The reception of goods

Source: Werner Bruggeman, Patricia Everaert, Yves Levant

4.4 The Time equations for each reception of goods activity

The reception of delivered goods activity is not controlled entirely by the number of orders as
it is has to be in the Traditional ABC Model, it is an activity entirely controlled by a multiple time
inductor (Template 3) and the Time Equation can be expressed as:
The Time reception/delivery = 1+1+ 0.10*X1 + 1.5*X2+ 1.5*X3/15 + 0.05*X4 + 0.10*X5 + 0.20, in
which:
X1 = the number of the order lines
X2 = the number of pallets
X3 = the number of the returned stacked pallets
X4 = the number of homogenous pallets
X5 = the number of non-homogenous pallets.

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Template 3 Time Inductors for the “Delivery of Goods” Activity

Sub-activities Time Inductors Time consumed on each Time Inductor

The allocation of the unload Number of deliveries 1 minute /delivery

platform
Introduce the general
information about the delivery
Introduce the information about
each ordering line
Unloading the Long vehicle
(Truck)
The return of the Pallets
Delivery Check
Delivery Check
Signing the bill and of the
delivery invoice
Number of deliveries 1 minute /delivery
Number of ordering lines/ 10 sec/ordering line
delivery
Number of pallets/delivery 1.5 minute/pallet
Number of the returned 1.5 minute/stacked pallets
stacked pallets
Number of homogenous 0.05 minute/homogenous pallet
pallets/delivery
Number of non-homogenous 0.10 minute/non-homogenous pallet
pallets/delivery
Number of deliveries 0.2 minute/delivery

In order to sustain the need to take 6 non-homogenous pallets with returning 10

into the calculation the multiple inductors we stacked pallets.
shall take as an example 3 different situations The cost per time unit can be
from the “A” analyzed activity: The reception determined as it follows: it is working 6 days a
of Goods Activity: week*8 hours/day, it is taking into
Goods Reception in Case “A”: the bill with 5 consideration a practical capacity of 80%, so
ordering lines, unloading 28 homogenous 9,240 minutes per month, the total estimated
pallets without returning them; costs (wages, store amortization, depose
Goods Reception in Case “B”: the bill with 10 amortizations, other costs) is about 11,800
ordering lines, unloading 20 homogenous and RON per month, resulting a cost per time unit
6 non-homogenous pallets without returning of about 1.27 RON/minute.
them;
Goods Reception in Case “C”: the bill with 10
ordering lines, unloading 20 homogenous and

Template 4. The time needed for the reception activity in the cases mentioned is about:
Reception Ordering Lines Homogenous Non-homogenous Returned Pallets
Pallets Pallets
A 5 28 0 0
B 10 20 6 0
C 10 20 6 10

Reception “A”: 1+1+0.10*5+1.5*28+0.05*28+0.2=46.1 minute

Reception “B“: 1+1+0.10*10+1.5*26+1.5*0+0.05*20+0.10*6+0.2=42.8 minute
Reception “C”: 1+1+0.10*10+1.5*26+1.5*10+0.05*20+0.10*6+0.2= 57.8 minute

Template 5. The estimated cost for the reception of goods activity through TDABC is:
Activity Unitary Cost Estimated Time The estimated time for the
reception of goods
A 1.27 46.1 58.54
B 1.27 42.8 54.35
C 1.27 57.8 73.46

It can be observed that are existing
significant time differences based on the
ordering lines and the homogeneity of the
goods.
5. In conclusion:
It can be concluded that it is too complex to
include a wide diversity of activities strongly
related and linked by distribution in a
traditional ABC Model and, also, you need
more time to maintain and execute the model.

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Specific for the MANOIL TRANS were the
season trends in sales that are bringing us to
the need to know and to the usage of usage of
the capacity reports from different
departments. Additionally, this company had to
deal with a strong diversity in resource usage
by different suppliers, customers, orders,
deliveries and routes of delivery that, for sure
could not be captured inside the “ABC
Traditional Model”. The example of the Time
Equation for the reception of goods is showing
the different type of complexities that are
found in the logistic operations.
All these types of complexities had
been difficult to be taken into consideration
using the traditional ABC method.
The problem of the different sub-tasks
with different time inductors can be resolved
by dividing and sharing of the activities. Also,
the interdependencies can be resolved in the
same way, but executing a big number of
activities, that is making difficult and less
precise the delegation of the resources on
those activities.
We had established based on the
research done by MANOIL TRANS SRL SC, that
in the TDABC distribution activity there is a
better alternative to the ABC Traditional
Method, but we still have the remained
following questions: is it easy to update the
TDABC Model, but keeping in mind the various
changes that can appear every day, the minor
changes that can multiply themselves based on
the repetition of the activity, that does not
need this update in total, bigger resources in
time? In order to simplify the TDABC Model,
but not in an extraordinary way, the creation
and the administration of the model is
continuing to be very difficult.
Both the traditional ABC and the
TDABC are following methods in distributing
the costs, in identifying of the cause-effect
relationship that can be used simultaneously in
an entity. ABC for the simple activities and
TDABC for the dynamic and complex ones.
References
Braescu M, Dumitru M. Paraschivescu,
Scientific Coordinator. (2007) Controllingul
costurilor si conducerea profitabila a january 2009.
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Briciu S., (2006) Contabilitate manageriala,
Aspecte teoretice si practice, Editura
Economica, Bucuresti.
Bruggeman W., Everaert P., Levant Y., Sanac
Inc.: From ABC to time-driven ABC (TDABC) –
An instructional case, Journal of Accounting
Education, Ed. 26 (2008)
Bruggeman W., Everaert P., Levant Y., La
contribution d’une nouvelle méthode à la
modélisation des coûts: le Time-Driven ABC Le
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cas d’une société de négoce; AFC. Lille.
Cãpusneanu S., Bazele organizarii contabilitatii
de gestiune si calculatiei costurilor prin metoda
ABC (Activity-Based Costing) în industria
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Costing- Part Two: When Do I Need an
Activity-Based Cost System?” Journal of Cost
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Costing”,Emerging Practices in Cost
Management. Boston:Warran Gorham &
Lamont, 1990.
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Right: Make the Right Decisions,” Harvard
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Moreels, K. (2007). Chapter 9: Sanac logistics:
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Costing, Harvard Business Review November
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Kaplan S.R, Steven S., Anderson R. (2007).
Time-driven activity-based costing: A simpler
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97
 Supply Chain Management Journal

Radio-Frequency Identification - The Modern Solution In Management Of

Commercial Vehicles

Maria - Claudia SURUGIU

Ionel PETRESCU
Department of Telematics and Electronics in Transportation
Faculty of Transportation
Polytechnic University of Bucharest

Abstract
The System Identification (RFID) is experiencing a great development in recent years been
used in various applications. Radio frequency identification gaining popularity because the systems can
be embedded (the readers can identify the label without colliding with obstacles such as paper, wood,
cement and RFID tags can be encapsulated in such objects), can be read / written by remote (along
with the ability to read, and data can be written on the label without the need for a physical link
between them) and can perform multiple readings (the information can be processed by multiple tags
simultaneously). The technology can be used to identify a wide variety of objects.
Radio frequency identification is used in many applications, including systematic campuses, airports by
identifying objects, traffic management and vehicle access control in private areas, service
management, the sorting conveyor, sorting on the conveyor belt, sorting by Lift etc. Microchip
technology and invention led to the design and use of passive RFID tags (tags that can be read
without the need for energy sources), thereby reducing costs.
In recent years identification systems are often used in the industrial machines, the transport
equipment and supplies, personnel and security administration, as well as any other field where
objects need to be identified.
In the paper will be presented some applications of RFID theology namely: service
management, sorting on the conveyor belt, sorting by Lift etc. All applications submitted sites using
passive tags. For application "Service Management", each device is installed in service took a tag,
which will be read by a reader, when brought into service for repairs.
Identification number is corresponding inventory. It is delivered to a computer where can
generate various reports and statements such as: file repair, cost per repair, and total cost of repairs,
replacement parts list and other.
Sorting on conveyor belt: Tags attached to products have sites whose code was coded
destination. Products can be sorted in any direction. They are randomly placed on the tape. The band
has a fork with a centrally placed separator. Sorting through more than two directions, each of the
two bands is divided into two other bands, for each screening is used the same method. For each
bifurcation is necessary each reader. The technique can be used in factories for sorting and delivery,
sort the luggage at airports, wherever there is sort of conveyor belt.
Sorting by Lift: Goods transported by train, boat etc. and unloaded in ports or stations must
be sorted by recipient. Transport trucks are made by recipients. Each package of goods has attached a
tag whose ID is encoded in the destination. Trucks lined the platform so readers can read the tags.
The advantages of these applications are: Using a computer for reception, entrance and exit to / from
the service is quick and without human error, reduce the cost of reception, screening times decrease,
eliminate human errors, fast delivery, etc..

Key Words: radio frequency identification (RFID), ID tags, RFID tags, antenna, wireless
communication

Introduction friendly aircraft from enemy aircraft. Large

Radio Frequency Identification (RFID)
systems are very often used in the last few
years in robotics, transportation or suppliers
industry, personnel administration, security
systems or in any area where people or objects
need to be identified by attaching a
transponder or an antenna.
The development of Radio Frequency
Identification system (RFID) has his early ages
in 1940's when was necessary of distinguishing
powered RFID tags, or transponders were
placed on friendly aircraft therefore when
interrogated by a radar signal; these ones
would give the appropriate response to
identify. This IFF (Identify: Friend or Foe)
system was the first obvious use of RFID and
present day aviation traffic control is still based
on IFF concepts.
The invention of the microchip and
subsequent technological advances led to the
design and use of passive RFID tags (tags that

98 Issue 1/2010
 Supply Chain Management Journal

could be read without the use of on-tag
power) reducing their cost.
A RFID system, as shown in the
bottom figure, is composed on:
• A reader, including an antenna- the device
that is used to read and/or write data.
• A tag - a device that transmits to a
reader the data.
• The communication system between
them.

Figure 1. - RFID System.

The identification device (tags) are Compared to other identification

attached to objects, each one has a certain
amount of internal memory (EEPROM) in which
it stores information about the object, such as
its unique ID number, or a few details
including manufacture date or product
composition. When these tags pass through a
field generated by a reader, they transmit this
information back to the reader.
When the reader is switched on, it
starts emitting a signal at the selected
frequency band (typically 860 – 915 MHz for
UHF or 13.56 MHz for HF). Any corresponding
tag in the vicinity of the reader will detect the
signal and use the energy from it to supply
operating power to its internal circuits.
Once the Tag has decoded the signal
as valid, it replies to the reader, and indicates
its presence in the reader field.
technologies like barcode and smart card, RFID
is gaining popularity due to its following
feature:
• Embeddable - The RFID reader can read the
tags without line-of-sight.
• Lack of contact for read/write - besides
reading capability, information can be written
wirelessly onto the tag.
• Multiple read - a number of tagged items can
be read at the same time.
RFID system is broadly divided into 2
categories, namely Near field RFID and Far
field RFID. With reference to Figure 2, the
reader emits a Radio Frequency (RF) wave by
creating an electromagnetic field in the air. The
dimension of the RFID tag antenna is
dependent on the frequency of operation.

Figure 2. - RF Propagation with Transitions from Near Field to Far Field

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Tags can either be active (powered by battery) or passive (powered by the reader field). The
communication frequencies used depends to a large extent on the application, and range from 125
KHz to 2.5 GHz, as it shows in the next figure:

Figure 3. - RFID System Classifications

Another useful method of classifying
tags used in RFID is by their capability to read
and write data. This leads to the following 5
classes:
• Class 0 – read only data tags, factory
programmed.
• Class 1 – write once and read only data
tags, factory or user programmed
• Class 2 – read and write data tags
• Class 3 – read and write data tags with
on board sensors. These tags can record
parameters like temperature, pressure or
motion and write those data into the tags
memory.
• Class 4 – read and write data tags with
integrated transmitters. These are
miniature radio devices which can
communicate with other tags.
In order to receive energy and
communicate with a reader, passive tags use
one of the two following methods shown in
Figure 4:
• Inductive coupling – near field;
• Propagating electromagnetic waves – far
field.

Figure 4. - Tags and a reader communicate by wireless signal in a process known as “coupling”

An RFID solution uses a radio (with an antenna), and a host. Much of the
frequency (RF) signal to broadcast the data criteria for RFID systems depend on the type
stored in an RFID chip. An RFID system is of tag that it use. Tags can be active, passive,
composed of three components: a or semi-passive. Overview of the different
programmable transponder or tag, a reader types:

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- An active tag has its own battery power to
contact the reader. Power from the battery is
used to run the microchip’s circuitry and to
broadcast a signal to a reader. An active tag’s
onboard power source enables the tag to
broadcast a signal out at great range by either
constantly beaconing a signal or broadcasting
only when the reader talks first. Some of the
more powerful active tags can communicate up
to 1 kilometer. Active tags are much larger and
therefore can carry a lot more memory
capability. Rather than simply having a unique
serial number on the tag, like a passive tag,
active tags often carry information such as the
full contents of a container, its destination, and
its origin. By carrying all the information on
the tag, you can retrieve information instantly.
For example, soldiers in battle usually can’t
look up a file associated with a tag on the
Internet, so soldiers use hand-held units to
scan containers with active tags to find out
what’s inside. Despite their cost, active tags
have proven a significant return on investment
(ROI) for many applications. Certain types of
active tags used in the railroad and shipping
industries can integrate with an onboard Global
Positioning System (GPS), cellular
communication network, or satellite system to
give exact whereabouts and provide constant
communication back to a tracking program.
One of the reasons active tags have not grown
to wide scale adoption is the lack of an open
global standard.
Figure 5: Loss contour map
In addition, tags come in different
classes and generations: Class 0, Class 1, and
Gen 1, Gen 2, and so on (which, for the
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- Semi-passive tags use a battery to run the
chip’s circuitry but communicate by drawing
power from the reader’s radio waves (like a
passive tag). Because these tags have a
battery, they’re larger and more expensive
than passive tags, but have greater
communication ranges. Some active tags can
also be made to monitor sensor inputs, such as
the temperature or movement, even without
being within an interrogation zone to power up
the tag.
- A passive tag does not require a battery.
Rather, a passive tag derives its power from
the electromagnetic field created by the signal
from the RFID reader to respond to the reader
with its information. A passive RFID tag
requires about 100 microwatts of power (or –
10 dBm) to generate enough power and
backscatter a signal to the receiving antenna
of a reader. For avoiding problems of reading
across multiple interrogation zones (like from
one dock door to another), is need to be sure
that the power levels are below the –10 dBm
level. This can be done by adjusting the power
or shaping the field with antenna choice and
direction or with shielding between the dock
doors.
The RF path loss contour map is an
important tool for designing the reader
interrogation zone. The ideal zone should be
an equal bubble around the center pole.
purposes of comparing RFID against the other
Auto-ID technologies, determines whether can
modify the data – see Table 1).
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Table 1.: RFID Interface Protocols

Protocol Corresponding Capabilities Advantages Disadvantages

Frequency
Generation 1 UHF This is a read-only Fast data Preprogrammed tags
Class 0 preprogrammed tag, which communication increase administrative
means that the end user protocol. and logistics cost of
can’t write a new number to affixing the correct tag
the tag. to the correct item and
also minimize a tag’s
flexibility.
Generation 1 UHF and HF Write once, read many Keep data in Can be written to only
Class 1 (WORM) sequential order; once.
manage data easier.

ISO standard LF, HF, and Read Only Tag Identifier Keep data in Does not account for
UHF with read, write, and sequential order; the data structure but
lockable user memory to manage data easier. only how the tag and
store object identifier and reader communicate.
information.
Generation HF and UHF WORM Keep data in Can be written to only
2.0 Class 1 sequential order; once.
manage data easier.
More globally
accepted protocol.

Characteristics of the tag: agreed on a single area of the UHF spectrum

- Modification of data: The ability to modify
data depends on the standard that it used.
Using the electronic product code standard
(EPC), the two classes are
o Class 0 tags: These are read-only, which
means that it uses the number that the
manufacturer writes on the tags.
o Class 1 tags: These are read/write tags,
which means that can be programmed a
number in the chip (often called
commissioning the tag) at the place of
business and then read them an infinite
number of times — write once, read many
(WORM).
- Security of data: Depending on the class and
generation of the RFID tag, they have the
ability to be encrypted so that others with
standard RFID readers cannot read the actual
data on the tag.
- Amount of data: Depending on the
manufacturer, these tags can contain 64, 96,
128, 256, or 512 bits of information.
- Costs: Costs, which range in volume from
20–50 cents per tag, are falling fast.
- Standards and regulations: RFID systems use
many different frequencies. International
governing bodies — such as the Federal
Communications Commission (FCC) in the
United States and European
Telecommunications Standards Institute (ETSI)
in Europe — regulate these frequencies.
Generally, the most common are low-
frequency (LF, around 125 kHz), high-
frequency (HF, 13.56 MHz), and ultrahigh
frequency (UHF, 850–930 MHz). UHF RFID
systems have been in commercial use only
since the mid-1990s, and countries have not
for RFID. Europe centers around 868 MHz for
UHF (increased some of the available power
and spectrum), and the United States centers
around 915 MHz. Radio waves behave
differently at different frequencies, so you have
to choose the right frequency for the right
application. As far as standards go, the
protocols that the tags and readers use to
communicate can be described as the air
interface protocol. The two primary ones are
the EPC standard and the ISO standard. Both
EPC Class 0 and Class 1 tags and ISO 18000-6
tags operate in the 860–930 MHz range. A new
standard called EPC Gen 2 is being developed
that will also work in the 900 MHz range but
will be a worldwide standard for data
communication.
- Life span: Having no need for a battery
makes the passive tag’s life virtually unlimited.
Active tags and semi passive tags last as long
as their batteries.
- Size: It is from cm to mm order.
- Reading distance: Passive tags communicate
in ranges from a few millimeters (called the
near field) all the way out to tens of meters.
Active tags can communicate more than 100
meters. The big benefit is that the tag can be
or not in line of sight to be read. Tags inside
containers, behind walls, in briefcases, and so
forth can still be read.
- Number that can be read at a time: A reader
can read hundreds of tags nearly
simultaneously.
- Potential interference: Various materials such
as metals and liquids can interfere with passive
tags. Active tags are less susceptible to
interference but still can have issues inside

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metal containers. The RFID pyramid is useful
for determining how things should be tagged
and, to a certain extent, where. The higher up
Figure 6. RF absorption
RFID is a business and technology tool
which replaces the existing identification
technologies like the bar code. RFID offers
strategic advantages for businesses because it
can track inventory in the supply chain more
efficiently, provide real-time in-transit visibility
(ITV), monitor general enterprise assets,
increase security of goods and more other. In
RFID system an item has a code named
electronic product code (EPC). The EPC is an
individual number associated with an RFID tag
or chip and unique to that tag. The EPC
protocol is universal to all EPC-compliant
systems and has two specific functions:
• Telling how data is stored on the tag, also
known as the numbering scheme.
• Determining how the tags and readers
communicate (also called the air interface
protocol).
Inventory maintenance as the
merchandise arrives from the supplier is the
first step in a company-wide tracking system
that knows where every item is throughout its
lifetime in the store. This tracking offers
retailers an overview on their inventory, which
enables those retailers to control costs and
reduce investment on inventory, which means
lower prices and better competition for
consumers. Having better information about
inventory offers retailers many benefits. The
retailers know how much inventory is still in
the warehouse, how much is on way to
distribution centers and stores, and how much
is currently in each stores. With this knowledge,
retailers have very good information’s for
measuring product consumption, customers’
behavior, and controlling inventory more
efficiently. Major retailers believe that a
comprehensive RFID program will generate
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the pyramid you go, the more stable the RFID
performance is.
savings of around 10 to 16 percent, based
simply on inventory cost reduction in each of
their distribution centers (DCs). The benefits
can extend to other applications beyond
retailers. Third-party logistics companies can
speed up their billing cycle and create a new
revenue stream with RFID; government
agencies can reduce loss and increase security;
museums can reduce cost to conduct inventory;
sports teams can increase sales at games and
the applications are limitless. The following
RFID attributes lead to those kinds of savings:
• Serialized data: Every object in the supply
chain has an unique identifying number
• Reduced human intervention: RFID allows
tracking automatically without needing
people to count or capture data or scan bar
codes, which means reduced labor costs
and fewer errors.
• Higher throughput supply chains: RFID
allows many items to be counted
simultaneously
• Real-time information flow: As soon as an
item changes state (off the shelf, out of a
truck, sold to customer), the information
can be updated across the supply chain.
• Increased item security: Tagging items
allows them to be tracked inside a confined
facility or space.
Tracking individual items with
serialized data
Serialized data means that each item
has its own unique identifier or serial number.
This helps an enterprise:
- Keep very accurate account of each item in
the supply chain or property list.
- Know which item was produced where, in
companies that produce the same item at
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multiple plants. This is critical for tracking total
quality, aiding in recalls, verifying warranties,
and so on.
- Prevent counterfeiting and diversion.
Serialized data allows items such as high-cost
drugs to travel through a supply chain while
recording every stop they make.
The benefit of serialized data is better
inventory control, reduced loss, reduced
carrying cost, and improved customer
satisfaction (customers at every level). Each of
these advantages over the existing system has
a benefit of reducing cost and improving
productivity. RFID tracks individual items by
associating the unique EPC number to a secure
database. This concept is often likened to
license plates. An RFID system can pull up a
limitless amount of information about a tag
based on its unique identifier. In some
instances, particularly with active tags, the
RFID tag allows all the critical information to
be stored directly to the tag. No need to look
to a database — all the info is right on the tag.
This technology can be very useful in instances
such as the shipment of military supplies to
overseas theaters, where accessing a central
database is nearly impossible.
Reducing human intervention
Thousands of applications require
humans to scan an object with a bar code
scanner or read information on a label. When
check out at the supermarket, the checker has
to pass each item in your cart over the lasers
that scan the bar codes. RFID technology has
the potential to eliminate this human
intervention. If all groceries had RFID tags, the
customer can walk straight out the door and
have all the items in his basket read
automatically as he passed by a portal, with no
need to take things out and scan them. Today,
someone scans each box one at a time with a
bar code scanner and often sticks a label on
the box as it leaves the truck. From a logistics
perspective, RFID can automatically verify a
shipment, optimize cross-docking and flow of
goods, and automate much of the pick-and-
stow functions. With RFID, things can move off
the truck by the pallet-load. Hundreds of items
can be read simultaneously, and the data can
immediately hit the inventory system as being
on-site, identifying what it is, where it came
from, where it’s going, and so on. The benefit
of having fewer human hands involved is
reduced errors, which produces reduced costs,
faster throughput, and reduced damage and
returns. The overall implication of reduced
human intervention, given the high cost of
salaries, benefits, and the cost of management
associated with crews of human workers, is a
dramatic reduction in operating costs.
Automated toll systems are a prime example of
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how the lack of human intervention saves both
time and money.
Moving more goods through the
supply chain
Supply chains that can move more
goods (also called higher throughput supply
chains) reduce processing time, which leads to
reduced costs, higher turn-around for billing
customers, improved cash flow, a better
bottom line, and, of course, reduced error
rates, which also contribute to improved
customer service. This leads to better
customer retention, higher sales, and an
increase in profitability and throughput
performance. Before RFID systems became a
viable Auto-ID technology, systems with high-
volume throughput (airline luggage handling,
package delivery, road race participants) all
had to be read one item at a time because a
bar code scanner can read only one bar code
at a time. Whenever only one item is read at a
time (manually or with a bar code), the
maximum throughput one. That was the
design goal of systems that required
optimization. RFID changes all that by allowing
a whole bundle of packages, a trailer of
luggage, or tens of runners to be read all at
once, greatly increasing throughput. With RFID,
it can be read hundreds of objects all nearly
simultaneously.
Capturing information in real time
Real-time information can help to
reduce costs, improve sales, increase cash flow,
allow for specialized servicing and
manufacturing for top customers, and thus
capture a larger market share and improve
overall capitalization per client and per
employee. An RFID system can also allow
machine-to-machine communication and
automated decision-making. Automated
decision-making is based on two principles of
RFID: lack of human intervention and real-time
information flows.
Increasing security
RFID’s increased security means
improved delivery and control and increased
anti-counterfeit measures, as well as theft
reduction, which leads to a significant
reduction in costs. The ability to permanently
affix a tag to every item of value in a location
and know exactly where that item is at all
times as it passes through various doorways is
something no other technology can offer. From
a security perspective, RFID’s ability to track
and trace property can help everything from
the war on terrorism to anti-fraud and anti-
counterfeit measures. Here are some examples:
- The pharmaceutical industry not only deals
with fake drugs being passed off as the real
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deal, but is fighting a multibillion-dollar issue
of diversion. Drugs have different price scales
for different buyers. Distributors know who
pays less for drugs — like hospitals and
nursing homes — and some less-than-
upstanding distributors take advantage of
these price differences to illegally turn a profit.
- Gray market items (items that are made in
the same plants or with the same markings as
a real product but sold much cheaper on the
black market) are another problem easily
solved with RFID: Embed a chip in every box
and can be able to tell the fake ones sold on
the street from the real ones sold at market.
Anti-collision techniques
Space Domains
In space-domain methods, tags are
placed in specific locations to achieve isolation.
The distances between tags are long enough
so that the energy from the reader can
activate just one tag at a time. Tags in space-
domain methods are identified by variation of
reader range (variation of power is transferred
to passive tags) and/or by using directional
antennas. Space-domain methods rely on the
number of tags in a reader’s range, if too
many tags are in the area, collision results and
reduce the reader’s ability to interpret any
signals.
Frequency Domains
Frequency-domain anti-collision
methods allow for robust wireless
communications but can add excessive
complexity and cost to an RFID system.
Frequency Division Multiple Access (FDMA)
systems divide the total available bandwidth
into fixed-width channels. FDMA is costly
because it requires accurate frequency sources
and band pass filters. Code Division Multiple
Access (CDMA) systems have many
advantages over FDMA systems. CDMA offers
better adaptability to varying traffic load,
increased capacity to read tags, and processing
gain. CDMA and other spread spectrum (SS)
methods are currently difficult and costly to
implement for RFID systems.
Time Domains
Most RFID anti-collision methods are
time-domain. In these methods, fractional
communications from tags are varied in time.
Time-domain methods can be classified into
synchronous and asynchronous schemes.
Synchronous schemes are those in
which a reader transmits a query to a specific
tag by using its UID (unique ID) number. This
is an effective anti-collision method because
tags do not have to take turns communicating
to the reader, and tags do not have to rely on
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a complete “uncollided” transmission to be
identified. A reader can poll through a list of
tags, but the polling method, also known as
tree walking or binary tree, is relatively time-
consuming and depends on the tag’s UID
number being known. Binary tree searches use
binary code for communication and basically
involve the reader actively sending a signal of
a 1 or 0 to a tag. If the reader sends the
correct number, the tag acknowledges it by
transmitting the signal back to the reader. If
the reader sends the wrong signal, the tag
awaits another signal. Eventually, the
computer deciphers the code of the tag.
Symbol Class 0 tags use this anti-collision
algorithm, and ODIN technologies lab research
has shown it to be an effective method for
interrogating multiple tags quickly.
Asynchronous schemes are those in
which tags in the reader’s field respond at
randomly generated times. This helps to
reduce the chance of collisions. The ALOHA
scheme is asynchronous and involves a node
transmitting a data packet after receiving a
data packet. If a collision occurs, a node
becomes saturated and transmits the packet
again after a random delay. The reader
transmits continuously until a collision does not
occur. A slotted ALOHA transmission is
performed in slotted times by making small
restrictions in the transmission freedom of
individual data packets. When packets collide
under slotted ALOHA protocol, they overlap
completely instead of partially, and this
significantly increases the efficiency of data
transfer. The slotted ALOHA is superior to pure
ALOHA. The newest EPC protocol, EPC Gen 2.0,
is a slotted ALOHA protocol.
Applications
1. Selection by elevator
The merchandise which are transport
by boat or train and unload in harbours or
railway stations must be selected to be
delivered to the recipients. The merchandise
are carried by trucks so the packs must be
loaded in an appropriate truck. Each pack has
attached a tag whose ID has coded the
destination.
1.1 System description
The system is shown in figure 2
consists of a RFID reader, a semaphore with
two lights, red and green and a data
processing unit, responsible for switching
traffic lights. The entire system is mounted on
a truck parked next to which. A single central
unit is needed for all readers. The data from
the RFID reader is transmitted to the
microcontroller assigning a pin for each RFID
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 Supply Chain Management Journal
reader or all readers can be multiplexed onto a
single pin. Sorted objects are equipped with
passive RFID tags.
1.2 Work description
The goods transported by train, boat,
etc. and unloaded in ports or stations must be
sorted to the recipients and are carried by
trucks. For a quick sort of cargo each package
has attached a tag with a unique ID who is
encoded in the destination and other
data. Each truck is parked near a RFID reader
and is aligned with the ramp so that the reader
can read one tag at a time. The elevator takes
one box and carries him through the front of
RFID reader of each truck. Initially all lights
are red. If the destinations ID from the tag
correspond with the destination of truck the
light will turn to green and the red light
become off and the truck is loaded with the
box.
Figure 7. Selection by elevator - Block diagram
2. Sorting on conveyor
The products have attached tags in
which ID the destination is encoded. The
products can be sorted in any number of
directions. They are placed randomly on the
tape. The tape shows a bifurcation with a
centrally placed separator. To sort in more
than two directions, each of the two bands is
divided into two other bands, for each one is
used the same method. Each bifurcation
requires a reader. It can be used in factories
for sorting and delivery the products, sorting
baggage at airports, wherever is sorting
conveyor.
2.1 System description
The system shown in Figure 3 consists
of conveyor belt with one or more bifurcations,
depending on the number of categories that
sorts objects. A RFID reader is necessary for
each bifurcation. The data from the RFID
reader is transmitted to the microcontroller
assigning a pin for each RFID reader or all
readers can be multiplexed onto a single
pin. Each fork is provided with a separator
106
The data processing unit contains a
microcontroller in whose data memory is coded
the destination. When reading the tag, the
code transmitted must be identical to the code
data stored in memory of the microcontroller
to switch on the green light and off the red one.
The system can be easily adapted to
sort the merchandise in trains. In this case,
RFID reader and lights are mounted on the
wagon. This system can be combined with a
system for tracking goods on route to the
destination. It is also important economically,
recovery and recycle the tags.
Benefits:
- quick sort;
- decrease the costs with sort and cargo
handling;
- Remove the human errors.
driven by a motor controlled by a
microcontroller. For motor control a
microcontroller pin is assigned for each engine
or can be multiplexed using a single pin. In
case of erroneous reading, the separator is
equipped with an automatic stop switch or the
product may be directed to a particular band
for this situation. Sorted objects are equipped
with passive RFID tag.
2.2 Work description
The objects have attached tags in
which ID is encoded the destination and can be
sorted in any number of directions. They are
placed randomly on the tape. Initially the
separator is positioned in the center of the
band. The reader is placed at a certain
distance from the bifurcation, calculated
according to the speed of band. Depending on
the code read the separator moves left or right
while turning on the next band (if not
started). After passing the package the
separator will turn back in a central position. If
case of wrong reading the object hits the
separator which will switch the stop button and
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 Supply Chain Management Journal
block the conveyor. The product will be
removed from the conveyor and will be
equipped with another tag.
For sorting in more than two directions,
each of the two bands is divided into two other
bands. It also is important economically to
recovery and reuse tags.
Benefits:
- the product can be tracked more efficiently to
their destination;
Figure 8 . Sorting on conveyor - Block diagram
3. Service management
automation
For this application, each device, bring
in service, has mounted a tag, which will be
read by a RFID reader when it is brought in for
repair service. ID is the number of inventory of
the household. It is delivered to a computer
where you can generate various reports and
statements such as: file repair, the cost per
repair, total cost of the repairs, replaced parts
list and others.
3.1 System description
Automatic management system shown
in Figure 4 is composed of an RFID reader and
a computer station to which it send the read
data. If a service firm has several outlets,
spread in the city or country, are needed for
each computer and a reader. All data is
centralized in a database. It is recommended
to be allocated a dedicated server. Must also
be ensured by the communication between
stations and servers. RFID tags used in this
application are passive.
3.2 Work description
Each device taken into service has
mounted tag. ID tag is the number of
inventory of the household.
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- lower sorting and tracking costs;
- lower screening times;
- elimination of human error;
It can be used in factories for sorting
and delivery the products, baggage screening
at airports, wherever can be used conveyor
with bifurcations. This system can be combined
with an automatic management system.
In association with ID tag - inventory
number it is assigned one or more tables in the
database are associated with the device that
recorded all the data necessary for good
management. On entering and leaving the
service, the tag is read by the reader and its
ID is sent to the computer station. The station
sends the ID to the server database
management. It processes data and generates
reports automatically at certain time intervals
or on request. It can be adapted to any
management activities of those objects can be
attached tags. It is also important
economically, recovery and reuse tags.
The following reports can be generated:
• the register card;
• the cost of each repair;
• total cost of repairs
• the list of components replaced;
• different statistics;
• Any other necessary reports.
Benefits:
• it is not necessary to provide a receptionist,
a computer is sufficient for the reception;
• entry and exit from the service is quick;
• elimination of human error;
• lower costs with reception;
• Can be easily adapted to other
management systems.
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 Supply Chain Management Journal
Figure 9. Service management automation - Block diagram
Conclusions
The applications presented above are
just three examples of the many uses of RFID
technology. Using the tag gives a total visibility
of goods throughout the supply chain, from
producer to buyer or user, which would not
have been possible using other technologies
such as barcodes. This leads to better
management of goods, their situation may be
known in real time. It is prevented congestion
and loss or error of goods chain. Increase data
acquisition speed and quality. All these
advantages lead to lower costs and increase
productivity. For a transmission error is used
as little FHSS technology and access to
communication channel technique uses CSMA /
CA or TDMA.
There are prevented congestion and
loss or error of goods chain. Increase speed of
data acquisition and quality. All these
advantages lead to lower costs and improve
productivity.
RFID technology is relatively easy to
interconnect with other technologies,
particularly for data transmission, with RS232
interface and TCP-IP. Now is testing the
interconnection RFID technology with wireless
data transmission. The combination between
GSM and RFID is done, using mobile readers
and data transmission via mobile network.
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RFID technology has not reached its
potential; its future is exciting and offers great
opportunities in the economic and logistical.
References
Bhuptani Manish, Moradpour Shahram, RFID
Field Guide: Deploying Radio Frequency
Identification Systems, Prentice Hall PTR, USA,
2005;
Wolf-Ruediger Hansen, Frank Gillert, RFID for
the Optimization of Business Processes, Wiley,
London, 2008;
Himanshu Bhatt, Bill Glove, RFID Essentials,
O'Reilly, USA, 2006;
Stephen B. Miles, Sanjay E. Sarma, John R.
Williams, RFID Technology and Applications,
Cambridge University Press, New York, 2008;
Monica – Anca Chiţa, Paul Şchiopu, Brânduşa
Pantelimon, Constantin Iliescu, Senzori şi
traductoare, Editura Universităţii din Piteşti
200;
Jeremy Landt Shrouds of Time. The history of
RFID,200;.
*** A basic introduction to rfid technology and
its use in the supply chain, January 2004;
www.mikroelectronika.co.yu;
www.microchip.com – datasheet;
www.tagmaster.com;
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 Supply Chain Management Journal

The Role of Social Responsibility and the Quality of Human Capital in the
Consolidation of the Consumer’s Loyalty

Gabriela PAUNESCU
Viorica STEFAN
Valahia University of Targoviste

Abstract
The new millennium’ s consumer is more informed, more aware of his rights, more concerned
with the effects of the unsustainable development, more suspicious but more eager for stability,
certainty and quality. Increasing consumers’ satisfaction, loyalty and enthusiasm will equally depend
on reasonable and fair costs of products and services as well as on added value, trust attached to the
organizational trademark. This change of the nature of relationships between business and society
determines companies to be more concerned with the creation of a durable competitive advantage.
The strategies of social responsibility oriented towards increasing the quality of human capital can
create a clear, coherent and reliable reputation which should stimulate consumers’ preference and
loyalty. Human values, “as contemporary coin of commerce”, imply a new strategic approach which
should aim at relevancy both for the consumer and for the other stakeholders of the organization,
through the creation of a chain of actions and interactions leading to social and economic
development.

Key words: ECR, social responsibility, quality, durable competitive advantage, strategy.

Introduction partners is represented, in our approach, by:

Expansion of the process of
globalization, more intense public display of
the activity of companies, through internet and
television, the occurrence on the market of
multinational companies, the increase of the
level of information and selectivity of
consumers marked an increase of pressures
both within and outside companies, a need for
change in the way of approach of business.
Globalization led to the occurrence on the
market of more and more similar products and
services which affects the strategic plans of the
differentiation of corporations (Oprea, 2005).
In the situation when rational factors like
quality and price become uniform and in the
media struggle rating has reached a saturation
level, satisfying consumers’ needs and creation
of an emotional relationship between
consumers and companies are equally
important, relationships which should stimulate
trust, preference and loyalty and, in the end, a
durable competitive advantage. The key of
success is, in our opinion, people’s quality and
commitment. Through social responsibility the
values and beliefs of the companies can reach
the area of symbolic words at the level of
individual experience, and the image of a
socially responsible organization, sustained and
validated by objective reality, can have a
motivational-affective role both for the
employees and for the stimulation of the
consumers’ preference.
The convergence point between social
responsibility and quality for creating
contentment of the organization’s interest
the importance attached to knowledge,
creativity and innovation, utilization of the
entire potential of the personnel, of external
partnerships.
A management of quality and social
responsibility which should contribute to the
increase of the level of satisfaction and loyalty
should offer both a strategic advantage for
companies and opportunity for real economic,
social and ecologic development.
1. Consolidation of the consumer’s
loyalty
The movement of the administration of
companies from the function of production to
the function of selling, oriented towards the
client (Lebas, Mévellec, Vingt, 1999) places the
client in the role of key element around which
the logistic chain is organized.
According to „Harvard Business Review”, the
clients’ demands tend to involve the next five
categories: time, quality, performance, service
and cost (Kaplan, Norton,1998).
These demands are also identified in recent
studies of Gallup Organization, being exposed
as very precise in terms of the services
offered, accessibility of products from the
perspective of time, location and the agreed
financial limits, of the partnership (with those
who serve the products and services offered)
and of counseling (Buckingham, Coffman,
2007).
The economic crisis determined the
modification of the client’s psychology as far as
the need for trust and information is

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concerned. Therefore the annual study
“Edelman Trust Barometers” 2010 achieved by
the global agency of public relations Edelman,
on an informed public (opinion leaders), from
over than 20 great economies, appreciates
that it is for the first time when trust and
transparency become as important as the
quality of products and services, for the
reputation of companies. “Edelman Trust
Barometers” 2010. This study offers us a
perspective of changes regarding the decisive
factors of trust, in favour of a socially
responsible behaviour, the most important
reputational factors being “practices of honest
and transparent business”, “a company I can
trust”, “quality products”. Richard Edelman,
president of Edelman Agency concludes that
there is a transition from “a world of
shareholders to a world of stakeholders” and
from the recommendations made to companies
for gaining opinion leaders’ trust, we bear in
mind the necessity of the existence of
managers who should treat trust as a business
line. According to R. Edelman, the stakeholders
want managers who should obtain
performances, on the one hand, and who
should communicate frequently and honestly,
to inform the public about the progresses they
record in their interest field and to always
consider the role of their company in society.
A survey, national representative this time,
accomplished by Community Relations
Association, ARC 2008, proves the consumers’
availability for choice of consumption
favourable to companies with a socially
responsible behaviour, decisive for the
reputation of the company.
Thus the reputation of the company is
regarded as an important criterion for the
acquistion of a product or service for 67% of
the consumers.

Figure 1.The importance of various criteria that the Romanians use when they choose the products of
a certain company

Source: survey, national representative, ©ARC 2008

89% of the individuals analysed, appreciate that a company also has a social dimension.

Figure 2. The dimension of requiring social involvement

Source: Survey, national representative, ©ARC 2008

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 Supply Chain Management Journal

As far as the opinions about social appreciate that “for the same price and quality
responsibility are concerned: correct it is better to buy from a company which
information, price and quality represent 70% donates for a social cause”.
of the vote of the consumers who attach
importance to correct information and who

Figure 3. Opinions about social responsibility

Source: Survey, national representative, ©ARC 2008

As can be noticed, the consumer’s loyalty According to Roland Berger&Partners (Roland

implies a continuous, long-term relationship
based on trust which should determine a
superior level of the consumer’s involvement
and create a special relationship between the
consumer and the offer of the company.
Berger&Partners,1999, cit Popa.Virgil, 2009),
the consumer’s involvement is structured on
three levels (Figure 4)

Figure 4. Levels of involvement of the consumer

The consumer’s enthusiasm

The company surprises the consumer through the anticipation or creation of needs, even
of those unexpressed.
The consumer’s loyalty
A continuous long-term relationship between the consumer and the offer of the company
is established. The consumer trusts the offer of the company

Satisfying the consumer

The company understands and meets the most important expectations of the consumer’
expressed needs.

We can notice that, in order to be competitive,
companies adjusts the products and services
“not only to the consumers’ explicit needs but
also to their values and expectations”
(Fitzgerald, 2000, cit. Oprea Luminita, 2005).
The quality of relationships, dialogue,
knowledge and information transfer between
the company and its important stakeholders,
counselling represent important elements for
consolidation of trust. This fact can also
contribute to the accomplishment of an
emotional connection based on mutual interest
between the company and consumer. For the
creation of enthusiasm it is necessary to have
proactivity from the company and implicitly a
qualitative creative and innovative human
capital which should surprise the consumer,
anticipating and creating needs or desires.
The challenge of companies during crises is to
obtain low costs without diminishing the
quality standard but also to have a socially
responsible behaviour which should meet the

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stakeholdres’ expectations and allow entering
competitive markets.
The highest level of the demands of the public
currently tends to be counselling because the
new clients want to be helped to make the best
choices and they feel connected to the
companies that succeed in gaining their trust.
Reaching this level can have an important role
in the success of durable development through
the market because acceptance of new
products by the public cannot occur when
mutual trust is lacking. Reliable companies can
contribute to the education and information of
consumers, to their counselling, to the creation
of a market for new products which should
favour the accomplishment of the objectives of
sustainable development.
Under the mentioned circumstances it becomes
obvious that classical marketing tools are not
enough and in order to generate growth
orientation towards the consumer is necessary
and for a sustained growth, the consumer
needs to be enthusiastic (Popa, 2009). The
consumer’s enthusiasm implies concern for
needs, values and expectations, trust and
transparency, honest and frequent
communication, accessible costs without
diminishing the quality standards, socially
responsible involvement and surprising the
consumer through anticipation of hidden needs
or the creation of new needs.
We can conclude that under the circumstances
of making the offers uniform in terms of the
price and quality of the products, a qualitative
human capital which should contribute to the
consolidation of trust, to the consumer’s
loyalty and enthusiasm, which should favour
the sense of development, “using experience
and knowledge in order to help clients to fulfil
the ecological responsibilities that they have”
(Trent, 2001, cit. Oprea, 2005) represents an
important tresource for generating a durable
competitive advantage within a strategy of
differentiation through quality and social
responsibility.
The current time corresponds to
companies that are “both co-creator of
competence and purveyor of personality” (Bell
, 2009).
2. Current trends regarding quality
and social responsibility
Placing the relationship with the stakeholders
at the centre of the concern of companies,
respectively, the relationship with the clients
112
beyond their explicit needs, the relationship
with the purveyors beyond the supply chain
and those from the company and society, leads
us to the analysis of the role of the quality and
social responsibility within this measures due
to their decisive role in the consolidation of
trust and the increase of the competitivity.
The current trends regarding quality and social
responsibility are connected to sustainability
being marked by the need for increasing the
flexibility of the companies and employees for
a fast and professional response to the
challenges of a society which continually
changes, by transition towards the knowledge
society in which information, creativity and
innovation acquire an essential role. Leading
change requires, from this perspective,
continuous modelling of current and potential
capacities, of necessary skills according to the
performances aimed at.
2.1. Current trends regarding
quality (the EFQM model)
Placing the concern for quality at the centre of
the actions of a company in order to lead to
long-term satisfaction of the clients, with the
purpose of gaining profit, leads us to the total
quality management (TQM) which represents
the strategic basis in the implementation of a
quality management. For the appreciation of
the progress reached by the organization on
the way to excellence, according to the
principles of Total Quality Management (TQM),
the EFQM model (European Foundation of
Quality Management), allows emphasis on
“strengths” as well as on “improvement areas”
necessary for an organization in its way
towards quality. The EFQM model (Figure 5)
bases on the principle according to which
excellent results regarding: performances,
clients, staff and society can be obtained
through leadership involving policy and
strategy, staff, partnerships, resources and
processes.
Development and consolidation of “the decisive
factors” of “outcomes” are assured through
learning, creativity and innovation.
The assessment and marking technique takes
into account especially the improvement and
integration in the every-day operations,
policies and strategies of the management of
the organization, of the aspects regarding the
social, economic and ecologic background.
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 Supply Chain Management Journal
Figure 5. The EFQM model
Enablers
Leadership People
Strategy
Partnership &
Resources
Source: EFQM Transition Guide, www.efqm.org.,2010
The basic principle consists in the self-
assessment process according to the nine
criteria grouped in Factors and Outcomes and
the offering of an appropriate score.
In order to highlight the aspects that matter in
the determination of quality we will briefly
refer to the 9 elements of the EFQM model
which are criteria of appreciation of the
progress of the company on the way of
excellence in quality:
(1) Leadership
In order to accomplish this criterion, the
leaders of the organization conceive and
facilitate the achievement of the mission and
vision of the company, developing the system
of values necessary for the long-term success
of the organization, implementing the values
through adequate actions and behaviour, but
also the personal involvement in the assurance
of the development and implementation of the
system of the management of the
organization.
(2) Policy and strategy
This criterion shows the necessity for the
existence of a strategy clearly focussed on all
the parts involved, supported by policies,
plans, objectives, target-values and adequate
processes through which the organization
implements its mission and vision.
(3) Staff
According to this criterion the organization has
to assure the management/ administration,
development and utilization of knowledge and
the entire potential of its staff – at the
individual level and in a team as well as at the
level of the organization but also a planning of
this activity in order to support the
accomplishment of its own policy and strategy
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Results
Processes, People Results Key Results
Products &
Services
Customer
Results
Society Results
Learning, Creativity and Innovation
as well as the effective functioning of the
organizational processes.
(4) Partnerships and resources
According to this criterion the organization has
to assure the planning and
management/administration of its external
partnerships and its internal resources, in
order to assure the support of its own policy,
its own strategy and the accomplishment of
the effectiveness of its own processes.
(5) Processes
Accomplishing the policies, strategy, meeting
the expectations of the clients and the other
parts involved in order to create the added
value, implies from the accomplishment of this
criterion, improvement of the processes for
reaching this desideratum.
(6) Outcomes regarding the clients
This criterion implies assessment through
indicators and performances regarding the
achievements of the organization as regards its
external clients.
(7) Outcomes regarding the staff
This criterion highlights the measures taken by
the organization in order to meet its staff's
demands
(8)Results regarding society
This criterion implies an analysis of the
performance of the organization in connection
with the local, national and international
society (according to the case).
(9) Outcomes regarding the essential
performances
According to this criterion the achievements of
the organization are compared with its planned
performances.
Therefore in order to obtain results regarding
“the interested parts” it is necessary to
formulate some strategies, policies, plans,
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 Supply Chain Management Journal
objectives, target values and processes which
should favour the accomplishment of the
mission and vision of the organization.
Under these circumstances, leadership has the
role to implement a system of long-term
values through the stimulation of the
accomplishment of adequate actions and
behaviour, to plan, administer, develop and
utilize knowledge and the entire potential of its
staff, to administer the external partnerships,
internal resources and processes in order to
support the accomplishment of the policies and
strategies of the company.
The changes in 2010 of the EFQM model
highlight the importance attached to the
adaptation of the companies to the demands of
a background which continually changes. Thus
one can notice a growing importance attached
to the criterion ‘clients and key outcomes’
(15%) compared to the other criteria (10%),
the increase of the role of creativity and
innovation alongside the importance of the
organizational flexibility, the importance of
partnerships and relationships with the
purveyors beyond the supply chain.
Organizational flexibility should allow the
organization to anticipate, to easily adapt to
the demands of the background, to have a
reaction speed higher than that of the
competition, decisive for the competitivity and
success of the organization. For the
consolidation of trust the organizations have to
be concerned with long-term performance.
Leading change requires, therefore,
improvement of the system, continual
modelling of current and potential capacities,
of the necessary skills, according to the
performances aimed at.
From our approach we regard as necessary to
highlight the importance attached to
knowledge, creativity and innovation,
utilization of the entire potential of the staff, of
external partnerships, for the support of
excellence in quality, leading to the satisfaction
of the interest partners of the organization.
We will find the answer to the accomplishment
of this desideratum, which we will develop
subsequently, also in Dr. Deming’s philosophy
of quality in “The Programme in 14 Points”.
According to Dr. Deming, the cause of
inefficiency and low quality is management
responsibility which should utilize modern
methods in training and managing staff in
order to remove fear and to encourage
communication and collaboration so that every
employee could present openly his/ her point
of view, in order to remove the barriers
between compartments, to encourage
teamwork and to remove all the obstacles that
prevent people from being proud of their work.
114
2.2. Current trends regarding
social responsibility
One of the definitions of CSR which has the
largest agreement on a European basis can be
found in a document published by the
European Community Commission, in July
2001, known under the name of “Green Card”,
social responsibility being: a concept through
which a company voluntarily integrates
concerns with social and environmental issues,
in the operations of business and in the
interaction with its own stakeholders
(European Commission, Green Paper, 2001)
As regards the dimensions of social
responsibility of the organizations, EC defines
two dimensions of involvement:
• internal dimension: human resources
management, health and safety at the
workplace, adaptation to changes, the
management of the environment impact and of
natural resources;
• the external dimension implies: partnerships
with local communities, partnerships with
business partners, human rights, global
protection of the environment.
The challenge launched to the business
background, through social responsibility is
defined by the World Council of Companies for
Durable Development as a continuous
voluntary commitment “to have an ethical
behaviour and to contribute to economic
development, at the same time improving the
quality of the life of the employees and their
families and of local community and society in
general.
The European Council from Lisbon in March
2000 highlights the importance of being aware
of social responsibility and popularization of
good practices regarding the organization of
work in order to favour continuous learning,
equality of opportunities, flexibility and social
inclusion for sustained development (Lisbon
European Council, Presidency Conclusions,
2000). EU strategy “Europe 2020”, which came
into force in June 2010, renews the concern of
the Lisbon Strategy and assigns the companies
the role of key element in “the employees’ and
consumers’ long-term trust assurance”, in
“raising the occupation of workforce”, in “the
development of competences and fighting
poverty” (The European Commission, The
Europe Strategy 2020, 2010).
Basically, for issues of European strategic
development: the resources issue, the
demographic issue, the unemployment issue,
social exclusion and poverty among children,
no correlation of competences with future
needs, decreasing clients’ and employees’ trust
in companies, the business background is
required to contribute to the development of
competences and knowledge, to the
stimulation of innovation and creativity.
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 Supply Chain Management Journal
The development of competences and
knowledge, the stimulation of innovation and
creativity are solutions taken into consideration
by strategies for: accomplishment of gaining
productivity, efficient services, increasing
opportunities for democratic participation and
expression, development of entrepreneurial
spirit. We have to admit that, in this way, the
starting of economic dynamism, especially
under the circumstances in which the tactics
margin regarding the budget is limited can
constitute a challenge to be considered
especially for emergent national economies.
Synthesising, the role of social responsibility is
to start the economic and social dynamism
through contribution to: the creation of a
competitive, connected and ecological
economy, the creation of knowledge through
value; the development of competences within
some societies which favour inclusion.
These aspects are also highlighted in the
Romanian national strategies regarding
durable development and competitivity. Thus,
the development of human resources alongside
innovation is considered “a national priority”,
the development of an economy based on
knowledge being “one of the key factors of the
increase of competitivity”.
On the other hand, social responsibility as a
business strategy, acquires an important role
for companies due to the pressure of the
external forces of the markets, of the
constraints generated by international
purveyors and by the growth of competition;
due to the pressure of the state, of
investments and community in connection with
the policies of responsibility, especially for the
case of companies rated at the stock
exchange; of the employees’ concerns and
expectations and especially of the clients’ and
consumers’ concerns which lead towards a
more thoughtful consideration of the ethics,
values and needs of all the shareholders,
employees, clients, community and
environment (Whitmore, 2008).
Moving from the area of strategic objectives
into that of the applicability of social
responsibility which aims at the business world
we return to the important role of knowledge,
creativity and innovation for the development
of the employees’ potential in order to allow
the clients’ counselling and education, the
increase of their trust and satisfaction as well
as the increase of trust and satisfaction of
other interested partners, with beneficial
effects upon the performance and the profit of
the company. For the companies from the
Romanian background in which social
responsibility means more like a charitable
activity carried out separately from the
business activity and not directly connected to
the strategy of the company, in which trust
Issue 1/2010
towards the business background is very low,
we consider it necessary to sustain and
promote some actions of social responsibility
invested strategically, which should be
quantified in terms of sustainable and durable
performance in order to generate added value
both for companies and society.
From the point of view of our approach, social
responsibility should be appreciated according
to the contribution of the companies to the
development of companies and knowledge
alongside the stimulation of creativity and
innovation both internally, within the
organization and in relationship with the
interest partners.
The stimulation of companies for the
development of these aspects and their
appreciation as demanded and expected social
responsibility can determine, in our opinion,
the growth of economic and social dynamism,
the development of partnerships for research-
innovation and stimulation of creativity
internally as well as in the relationship with the
interest partners.
Moreover, the development of competences
and knowledge, the stimulation of innovation
and creativity can be correlated with the
success of the contribution to solving some
social and environment issues, according to
the European strategic objectives with the
contribution of the company to the
development of own human capital, to the
consumers’ education and information.
In the countries from the European Union, the
model of reference of implementation of CSR,
which has the most votes, comes from the
extrapolation of the European model of
Excellence for quality, EFQM (European
Foundation of Quality Management) through
adequate adaptation to the standards of CSR.
Thus the EFQM model represents an adequate
theoretical and practical support which allows
the correlation of CSR with the strategies and
the way of managing the organizations with
their employees and clients.
3. Quality Management and Social
Responsibility for the Consolidation of the
Consumer’s Loyalty
Under the circumstances of a demanding,
complex, changing background, the durable
success of an organization is determined by its
capacity to fulfil the needs and expectations, to
create new needs for its clients and for the
other interest partners on long term and in a
balanced way through an efficient and effective
management of the organization. Management
should allow the flexibility of the internal
background through learning and adequate
application of improvement and innovation. As
a starting point, taking into consideration the
clients’ needs and expectations implies
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 Supply Chain Management Journal
balancing the two essential characteristic of
services: price and quality but also the
perception of the companies as being socially
responsible.
The convergence point between excellence in
quality and social responsibility for the creation
of the interest partners’ satisfaction is
represented, in our approach, by: the
importance attached to knowledge, creativity
and innovation, the utilization of the entire
potential of the staff and of external
partnerships. In order to get the consumers
loyal “the experience of trademark”,
determined by competent staff, capable to
counsel and educate the consumer should be
doubled by efficient communication regarding
a socially responsible attitude of the
organization towards improvement of the
employees’ abilities, knowledge and
competences and a clear purpose determined
by the contribution to the satisfaction of the
clients’ needs and expectations as well as to
the accomplishment of the objectives
characteristic to sustainable development.
Concern for the development and
administration of knowledge in order to
encourage creativity and innovation can offer
both the strategic advantage aimed at by
companies and the opportunity aimed at by
people.
3.1.The Management of Human
Capital in the Current Context
The application of professional management in
the Romanian economic background implies
openness towards employees and clients, a
reconsideration of the informational structures
and an analysis of their impact upon the
general economic efficiency. The efficient
manager is challenged to be concomitant and
democratic, namely to permanently prove that
his performance is able to bring wealth and
certainty both to the owner and to the
employees (Niculescu, Buda, 2000).
A study accomplished by the company of
consultancy in management Hay Group (2008)
which, for the past four years, has analyzed
the behaviour of Romanian managers,
especially those of multinational companies,
reveals that 62% of the Romanian managers
are authoritarian with their employees, which
leads to the creation of a demotivating working
climate in companies. Harry Meintassis,
general manager of Hay Group Romania,
asserts that “the majority of the Romanian
managers have a directive leadership style,
characterized by the need to obtain short-term
outcomes. It is a management style through
power, authority by which the employees are
forced to do certain things not because they
want to but because they are ordered to”. The
results of this study leads us to a statement of
116
the authors N.G.Niculescu, Steluta Buda
(Niculescu, Buda, 2000) who asserted that at
the managerial level the management style of
the former managers and political party
secretaries has been adopted and the new
managers with old mentality who do not
practice a real obstruction of information, leave
this impression though, generating in the
climate of the company, an atmosphere of
suspicion and lack of cooperation which has
unfavourable effects for the plan of economic
efficiency. According to the authors’
conclusions, underdevelopment is the result of
managerial incompetence and the lack of
informational technologies. According to the
general manager of the Hay Group Romania,
the most appropriate combination of leadership
styles “is a combination of the visionary style
in which the employees understand how
success looks like; they know what they have
to do in order to have performances and they
need feedback and the participative style (in
which the employees have to be encouraged to
find new ideas) and coaching which offers a
long-term development of the individual”.
(http://www.haygroup.com/ro/).
3.2. The Method of Determining
Responsibility as a Style of Modern
Management of the Human Capital
The method of determining responsibility is
regarded not only as a modern management
style of the human resources, by which people
are offered authority to make important
decisions and increased autonomy. Basically it
implies emphasis on knowledge, experience
and motivational force, which exist in people
but are rarely used, for increasing the level of
performance (Blanchard, Carlos, Randolph,
2007).
In the hierarchically structured organizations
which use traditional management practices, it
is considered that human resources are
revaluated to approximate 25-30% of their
capacities. The issue posed here is why is there
acceptance of this type of utilization in the
case of people unlike the case of tools in which
functioning at 25-30% of the capacity would
not be accepted. Ed Lawer and his team at the
Center for Organizational Effectiveness have
noticed that, when people are offered more
authority and responsibility as regards their
work, companies obtain a higher profit in sales
(10,3%) unlike the companies which do not
involve their people (6,3%) (Blanchard, Carlos,
Randolph, 2007). In order to reduce the
execution costs from the technological process
with 40%, maintaining a high quality of work,
two strategies of determining responsibility are
taken into consideration: the circulation of
information and team work (Blanchard, Carlos,
Randolph, 2007). The role of information is to
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 Supply Chain Management Journal

allow the understanding of the organization limits, the members of the team can decide
and its needs, contributing to the increase of what to do and how to act”. The premises for
trust and the degree of appurtenance to the the creation of a culture of determining
organization. Although it implies limiting the responsibility consist in offering an ideal
organizational structures, autonomy, which is combination of knowledge, information, power
necessary for a culture of determining and rewards.
responsibility, does not imply lack of The way in which leadership styles can
organization but a clear establishment of limits contribute to the development of people,
which should not obstruct behaviour. In a gradually increasing the level of responsibility
culture of determining responsibility, limits while performance increases are offered in The
become “specification of vision, of aims Model of Situational Leadership (Figure.6),
established in collaboration, of rules for initially developed by Paul Hersey and Ken
decision-making and of partnerships for the Blanchard in 1968.
administration of performance. Within these

Figure 6. The model of situational leadership

(High)
-------------SUPPORTIVE BEHAVIOUR------------

(Low) -------------DIRECTIVE BEHAVIOUR------------ (High)

DEVELOPMENT DEVELOPING

Development level of the individual

Source: Ken Blanchard, John P. Carlos, Alan Randolph, 1995

According to the model of situational individual development. The four leadership

leadership, for the transition from the level of styles: 1- guidance, 2- training, 3-
enthusiastic beginner to the level of fully encouragement, 4- delegation correspond to
responsible and autonomous employee it is the levels of development: 1- low competence
necessary for the manager to have a and high commitment, 2- low towards average
leadership style which should combine the competence and low commitment, 3- average
guiding behaviour and encouraging behaviour towards high competence and variable
according to the needs and the level of commitment, 4- high competence and high

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commitment in order to allow an individual to
make progress. For increasing employees’
competence and commitment different
combinations of guiding behaviour and
encouraging behaviour could be necessary.
When leaders adopt a guiding behaviour, they
focus on tasks, on the way these tasks are
accomplished and on outcomes. When they
adopt an encouraging behaviour, leaders are
concerned with the stimulation of
their initiative, attitude and feelings about the
task to be accomplished, encouragement being
regarded as vital for leading to commitment.
The guiding behaviour and the encouraging
behaviour need to adjust to a person’s current
level of competence and commitment. Thus,
when the competence necessary for the
accomplishment of a task is low the leader
expresses an authoritarian behaviour which
decreases while the competence necessary for
the accomplishment of a task increases.
Similarly, when the commitment necessary for
the accomplishment of a task is low (for
example when a person feels discouraged), the
leader needs to adopt an extremely
encouraging behaviour, the encouraging side
decreasing while the commitment towards the
task increases (Ken Blanchard, John P. Carlos,
Alan Randolph, 2007). It becomes obvious that
for various combinations of competence and
commitment it is necessary to have various
combinations of guiding behaviour and
encouraging behaviour and in order to obtain
the highest performances and to develop the
people’s aptitudes it is necessary to have the
appropriate combination of management
styles.
If the true essence of determining
responsibility consists in emphasising
knowledge, experience and the motivational
force which exist in people but are little used,
for increasing the performance level we can
add that the true essence of social
responsibility consists in the success of
development and administration of knowledge,
competences, creativity and innovation in
order to support the accomplishment of the
objectives of sustainable development as a
result of collaboration, involvement and
motivation of all the decisive factors for the
success of economic, social and environment
stimulation.
Conclusions
▪ Consolidation of the consumer’s loyalty
implies concern for needs, values and
expectations, trust and transparency, frequent
and honest communication, accessible costs
without diminishing quality standards, for
socially responsible involvement, for
anticipation of the consumer’s needs and
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surprising him through an offer of products and
services for hidden needs.
▪ The modification of the client’s psychology as
regards the need for trust, counselling and
information, due to the economic crisis,
alongside the need for low costs without
diminishing quality standards, leads us to the
importance of companies’ and employee’s
flexibility, to the importance of the growth of
the training level in order to meet the new
needs and current and future expectations.
▪ The quality of relationships, of the dialogue,
of knowledge and information transfer between
the company and its important stakeholders,
the counselling represent important elements
for the consolidation of trust, making a
contribution to the achievement of an
emotional connection which should allow the
differentiation of the companies from the
competition and create a sustainable
competitive advantage due to a combination of
quality and responsibility for people.
▪ For the creation of enthusiasm it is necessary
to have proactivity from the company and
implicitly a qualitative, creative and innovative
human capital which should surprise the
consumer, anticipating or creating needs or
desires.
▪ Consolidation of the consumer’s trust, loyalty
and enthusiasm can be accomplished “using
experience and knowledge to help the clients
fulfil the ecological responsibilities they have”,
competitive companies being “both co-creator
of competence and purveyor of personality”.
▪The most advanced level of the public
demands currently tends to be counselling
because the new clients want to be helped to
make the best choices and they feel connected
to the companies that succeed in gaining their
trust. Reaching this level can have an
important role in the success of durable
development through market because
acceptance of new products by the public
cannot occur when there is a lack of mutual
trust. The reliable companies can contribute to
the consumers’ education and information, to
their counselling, to the creation of a market
for new products, which should favour the
accomplishment of the objectives of
sustainable development.
▪ Excellence in quality leading to the
contentment of the interest partners of the
organization needs to attach an important role
to knowledge, creativity and innovation,
utilization of the entire potential of the staff, of
external partnerships.
▪ Through social responsibility integrated in the
operations of business and in the relationships
with the interest partners, companies are
offered the role of key element in “employees’
and consumers’ long-term trust assurance”, in
“raising the occupation of workforce”, in
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 Supply Chain Management Journal
“development of competences and fight
against poverty”, alongside knowledge and
social cohesion. The creation of value through
knowledge, development of competence,
increasing of innovation and creativity are
regarded as important resources for generating
intelligent, durable and inclusive growth at the
level of European and national strategies and
policies.
▪ From the point of view of our approach, social
responsibility should be appreciated according
to the contribution of the companies to the
development of companies and knowledge
alongside the stimulation of creativity and
innovation both internally, organizationally and
in the relationship with the interest partners.
▪ The stimulation of companies for the
development of these aspects and their
appreciation as demanded and expected social
responsibility can determine, in our opinion,
the growth of economic and social dynamism,
the development of partnerships for research –
innovation and the stimulation of creativity
internally as well as in the relationship with the
interest partners.
▪ Moreover, the development of competences
and knowledge, the stimulation of innovation
and creativity can be correlated with the
success of the contribution to solving social
and environment issues, according to European
strategic objectives, with the contribution of
the company to the development of own
human capital, to the consumers’ education
and information. The context of this
development should be assured, from the
perspective of our approach, by a “public
climate in which entrepreneurs are appreciated
not only for the fact that they have good profit
but also for the fact that they have contributed
through response to some social challenges”.
▪ The convergence point between excellence in
quality and social responsibility, for the
creation of the contentment of the interest
partners of the organization, is represented, in
our approach, by: the importance attached to
knowledge, creativity and innovation,
utilization of the entire potential of the staff, of
external partnerships.
▪ For leading change it is necessary to
continually model the current and potential
capacities, the necessary competences
according to the performances aimed at.
▪ From the recommendations made to the
companies for gaining the opinion leaders’
trust, we bear in mind the necessity for the
existence of managers who should treat trust
as a “business line”, through obtaining
performances, through frequent and honest
communication, through informing the public
about the progresses registered in their
interest fields, through taking into
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consideration the role of the company in the
society.
▪ In this context leadership has the role to
implement a long-term system of values
through the stimulation of the accomplishment
of adequate actions and behaviours, to plan,
administer, develop and utilize the knowledge
and the entire potential of the staff, to
administer external partnerships, internal
resources and processes in order to support
the accomplishment of the policies and
strategies of the company.
▪ For an efficient and effective management of
the relationships with the clients we regard it
important to emphasise that involvement has
to be accomplished not only at the level of the
marketing and the public relations department,
but also involvement at all the levels of the
organization needs to be accomplished,
implying the development of an organizational
culture which should have the client at its
centre. It is also necessary to know the client
and the specific characteristics of his purchase
demand and behaviour. The specialists
recommend that the objectives and strategies
of the organization regarding clients should be
differentiated according to the duration of the
relationship with the client and his products/
trademarks, according to the profitability of the
clients for the organization, but also according
to the common interests of the clients,
organization and society.
▪ For success assurance in the relationship with
the stakeholders of the organization it is
necessary to create a motivating working
climate, a proper combination of management
styles which should favour emphasis of
knowledge, experience and motivational force,
for raising the performance level.
▪ The strategies for determining responsibility:
circulation of information and team work have
the role to allow the understanding of the
organization and its needs, contributing to the
increase of trust and of the degree of
appurtenance to the organization but also to
allow an increased autonomy within the
responsible teams. Autonomy does not imply a
lack of organization but a clear establishment
of the limits which should not obstruct
behaviour. Within these limits, the members of
the team can decide how to act. The premises
for the creation of a culture of determining
responsibility consist in offering an ideal
combination of knowledge, information, power
and rewards.
▪ Concern for the development of human
capital can have a double role, that of resource
generating satisfaction for the clients, but also
that of a result of the social responsibility of
the company.
▪ The true essence of social responsibility
consists in the success of the development and
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administration of knowledge, competences, www.efqm.org.,2010, EFQM Transition Guide

creativity and innovation in order to support European Commission, Green Paper:
the accomplishment of the objectives of Promoting a European framework for
sustainable development as a result of Corporate Social Responsibility, Brussels, 2001
collaboration, involvement and motivation of Lisbon European Council, Presidency
all the decisive factors for the success of the Conclusions, Lisbon, 23/24 March 2000.
economic, social and environment stimulation. The European Commission, The Europe
Strategy 2020, Bruxelles 2010.
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