Supply Chain Learning and Spillovers in Vendor Managed Inventory

1. Introduction In recent years, supply chain technologies and processes (vendor managed inventory (VMI), continuous replenishment (CR), electronic data interchange (EDI), etc.) have become strategic imperatives for firms in increasingly competitive industries (Williams and Frolick 2001). Extensive research has examined the performance outcomes from these supply chain initiatives. For example, it has been well documented that EDI reduces transaction costs and errors (e. caution that performance benefits attributed to VMI at the Campbell Soup Company may have been achieved merely through information sharing. Moreover, anecdotal evidence has shown that the implementation of the supply chain initiatives often falls apart. For example, after experimenting with VMI programs for twelve months with its vendors, Spartan Stores, a Michigan coop , terminated this program, citing planning inefficiency by the vendors and increased costs (KPMG Report 1996). The mixed outcomes may, in part, be attributed to the complexity of the programs that involve not only multiple departments within an organization, but also multiple firms within a supply chain. Furthermore, since these initiatives are usually implemented over a prolonged period, the ability to adapt to and learn from implementation experience may be essential to the success of the programs. An important issue — the learning process during the implementation— has been largely ignored in the discussion of supply chain technologies. A large body of research has examined organizational learning. The fields of economics, operations, technology management, have all contributed to our understanding of an organization's learning capability. The research generally agrees that organizations are capable of creating, retaining, and transferring knowledge (e.g., Argote 1999; Argote et al. 2003). Knowledge (learning) spillovers, either within an organization or across organizations, are thought to be a source of productivity growth (e.g., Thornton and Thompson 2001). However, fundamental questions arise when the learning uses technologies that involve supply chain collaborations. For example, do supply chain partners transfer knowledge between firms? Do knowledge transfers between firms add significantly to the ability of firms to learn? In this paper, we treat firms as " learning " objects that wish to increase their understanding of supply chain technologies in order to improve performance. We examine three stocks of knowledge learned from different sources – (1) A firm's own experience with a particular technology; (2) A firm's own experience with another technology; and (3) A supply chain partner's experience with a technology – and compare how each stock of knowledge contributes to performance …