environmental sustainability and supply chain management

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Environmental Sustainability and Supply

Chain Management A Framework of Cross-Functional

Integration and Knowledge Transfer

Dorli Harms

Leuphana University [email protected]

ABSTRACT:The purpose of this paper is to discuss mechanisms of intra-organizational knowledgetransfer within sustainable supply chain management (SSCM). Through a conceptual study design,the focus of this paper is on the transfer of SSCM-associated information and knowledge betweenfunctional units. Furthermore, the external stakeholder perspective is taken into account. Tosupport this conceptual framework, the knowledge-based theory provides a theoretical foundationin order to study a companys ability for knowledge sharing. Within this perspective one approachdistinguishes between internal and external structures and the individual competence. Thesendings will be used as a basis to further develop a framework of intra-organizational SSCM

knowledge and information transfer as well as cross-functional integration.

KEYWORDS

Conceptual Paper, Cross-Functional Integration,Knowledge-Based Theory, Sustainable SupplyChain Management

I. INTRODUCTION

The linkage between sustainability managementand conventional supply chain management (SCM)has gained an increasing amount of interest in theacademic and business community (Carter andRogers; Sarkis, Zhu, and Lai; Seuring and Mller) tothe extent that sustainable supply chain management(SSCM) is now seen as an established researcheld (Seuring). Theoretical approaches refer, for

instance, to the differentiation between product- and

process-oriented perspectives on SSCM (Bowen etal.) or internal and external relationships (Harland;Lambert, Cooper, and Pagh). Nevertheless, currentstudies still address the need for further research,in particular with regard to an advanced buildingof SSCM theory and development of new concepts(Carter and Easton; Seuring). Overall, researchindicates (Pagell, Wu, and Wassermann) that thereis a potential shift from conventional SCM andpurchasing to more sustainability-oriented efforts. This shift can be described as a decisivemove for a companys current and future procurementand supply management activities because acompany often faces a high level of complexity.Such complexity can be triggered by the necessityto manage a large number of suppliers in diverse


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122 Journal of Environmental Sustainability Volume 1 2011

socio-economic contexts or by a growing demandfor an integration of environmental and socialcriteria in supply chain management (Halldrsson,

Kotzab, and Skjoett-Larsen; Seuring and Mller).This integration is demanded, for instance, bycustomers or media (Andersen and Skjoett-Larsen;Carter and Dresner; Walker, Di Sisto, and McBain).If a company is not able to meet these requirements,it may risk a reputation loss. In contrast, however,SSCM can also create opportunities such as productand process innovations, which t the increasing

market for environmental-friendly and sociallyresponsible products and services (Carter andJennings; Geffen and Rothenberg; Kassinis and

Soteriou). As a consequence of these challenges andopportunities, the purchasing department is involvedin a dialogue not only with its suppliers, but alsohas to exchange information and knowledge withother departments within the same company suchas research and development (R&D), production, orthe sustainability department. In this process, supply chains can bedivided into external (inter-organizational) andinternal (intra-organizational) components.Externalsupply chains (upstream and downstream; Vachon

and Klassen, Extending Green Practices) arecharacterized by the ow of materials, capital, and

information between the different external partners(e.g. suppliers, focal company, retail, consumers,disposal/recycling), whereas internal supply chainsencompass the interaction among the differentfunctional units within the (focal) company(Harland; Lambert, Cooper, and Pagh; Seuring andMller). Combining both supply chain perspectivesimplies that functional units have to exchangesustainability-relevant information internally to

meet the requirements of external stakeholders (e.g.information about human rights compliance) or tocomply with internal quests (e.g. reduction of CO

2

emissions across the supply chain). In this paper, focusing on the necessity of

transferring internal SSCM-related informationand knowledge raises the following question: Howdoes cross-functional integration play a role in

intra-organizational transfer of SSCM-relevantinformation and knowledge?

To answer this question, a conceptualframework has been developed. Although, thereis a considerable interest for SSCM and for newtheoretical approaches from both academic andpractitioner sides (Matos and Hall; Reuter etal.; Simpson, Power, and Samson), the SSCMliterature is limited with regard to a discussionof intra-organizational alignment from a theory-based perspective (e.g., Gattiker and Carter). In

order to help ll this gap and to investigate SSCMwith the focus on cross-functional collaborationand knowledge transfer, the knowledge-basedtheory (Grant; Sveiby) has been deemed suitablefor this paper. This theory emphasizes the roleand relevance of knowledge for a companythecreating, storing, and applying knowledge (Dyerand Nobeoka 345)to gain competitive advantage(Grant; Spender). Sveiby applies this knowledge-based approach of the rm (in the following simply

referred to as the knowledge-based view) to explore

a companys internal and external transfer as wellas conversion of knowledge. However, Sveibydoes not explicitly portray the intra-organizationalintegration or refer to sustainability issues so hismodel will be modied conceptually with regard to

intra-organizational SSCM characteristics. The paper is divided into ve sections.

After the introduction, the second section gives anoverview on the background literature regardingsustainable supply chain management and cross-functional integration. The third section sketches

the knowledge-based view with focus on intra-organizational aspects. In the fourth section, aconceptual framework of cross-functional integrationin intra-organizational SSCM is developedand discussed with regard to corresponding


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Environmental Sustainability and Supply Chain Management A Framework... 123

measurements. The nal section draws a conclusion

and points out areas for future research.

II. SUSTAINABLE SUPPLY CHAINMANAGEMENT AND CROSS-

FUNCTIONAL INTEGRATION

As SSCM is already seen as an established researcheld (Seuring) and cross-functional collaboration

has been discussed since the 1980s (Takeuchi andNonaka), the following section provides an overviewon related literature and ndings in these two elds

so far.

II.I. SUSTAINABLE SUPPLY CHAINMANAGEMENT

SSCM can be understood as a further development ofthe conventional SCMextended by the integrationof the three (environmental, social, and economic)dimensions (Carter and Rogers; Seuring andMller). In order to outline the underlying meaning ofthe management concepts, this section sketches theirmain characteristics.

The traditional notion of supply chainmanagement encompasses both the demand-oriented(downstream) and supply-oriented (upstream) processes(Cooper and Ellram; Esper et al.; Vachon and Klassen,Extending Green Practices), although the term literallyfocuses on the suppliers side. SCM aims at deliveringenhanced customer service and economic value (Mentzeret al, with reference to La Londe). This term refers to themanagement of the

activities associated with the ow and

transformation of goodsas well as the

associated information ows. Supply

chain management (SCM) is the integration

of these activities through improved supply

chain relationships, to achieve a sustainable

competitive advantage(Handeld and Nichols 2).

This denition implies that SCM can be rather

complex, especially when regarding the differentstages of the supply chain. The focal company has

to manage not only the ow of materials and goodsbut also the ow of information. To achieve a proper

ow, a company can use information system tools,

such as enterprise resource planning (ERP) softwareor face-to-face interaction with external and internalmembers of the supply chain (Pagell).

Externalmembers are the different suppliers(1st tier, 2nd tier, etc.) on the supply side, whereascustomers (e.g., wholesalers), consumers, andwaste disposal recycling companies, respectively,are members on the demand side. Furthermore,

the buying, producing, moving, storing and sellingof a company are core activities that characterizethe internal supply chain (New; Sweeney). Alldepartments that require purchased productsor services are, in the wider sense, a part of theinternal supply chain. In a narrower sense, these arethe functional units that participate in the internalsupply chain (e.g. purchasing, manufacturing, sales,and distribution) (Harland S63). In addition to theseinternal supply chain members, Lambert, Cooper, andPagh (2) included the departments R&D as well asnance. First and foremost, the purchasing and logistics

departments play the central role in the managementof supply chains since they create an interface withexternal suppliers (Cooper and Ellram).

For several years, SCM also has beendiscussed with regard to environmental and socialissues (e.g., Carter and Easton; Carter, Ellram, andReady; Sarkis, Zhu, and Lai). Referring to Jayaraman,Klassen, and Linton as well as Cruz, the authorsPagell, Wu, and Wassermann (58) argue with regardto SSCM that

evidence is growing that the eld is reaching

a critical tipping point where wide-scale

adoption of sustainable sourcing practices may

potentially become a dominant dynamic in the

supply chain context.


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This further development of SCM leads to a morecomprehensive understanding of SSCM. In linewith the triple bottom line approach and the notion

of sustainable development (Elkington; Kleindorfer,Singhal, and van Wassenhove; Schaltegger andBurritt, Corporate Sustainability), Seuring andMller (1700) dene sustainable supply chain

managementasthe management of material, information and

capital ows as well as cooperation among

companies along the supply chain while taking

goals from all three dimensions of sustainable

development, i.e., economic, environmental

and social, into account which are derived

from customer and stakeholder requirements.

In sustainable supply chains, environmental

and social criteria need to be fullled by the

members to remain within the supply chain,

while it is expected that competitiveness wouldbe maintained through meeting customer needs

and related economic criteria.

Their denition is illustrated in Figure 1. As shown,

there are several internal and external stakeholderswho deal with sustainable supply chain managementissues. For instance, there are external stakeholderssuch as the (national and international) legislation(Carter and Dresner; Walker, Di Sisto, and McBain)

and competitors (Klassen and Vachon; Zhu and

Figure 1: Sustainable internal and external supply chain (according to the understanding of Harland S63;

Salzmann et al. 15; Seuring and Mller 1700).


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Sarkis), investors and rating agencies as well asNGOs and the general public (Koplin, Seuring,and Mesterharm; Salzmann et al.; Svensson;

Wycherly). In addition, suppliers and customersare external stakeholders (Carter and Dresner;Klassen and Vachon). Due to the fact that in recentyears the amount of stakeholder requirements hasincreased for corporate responsibility as well as forenvironmental-friendly and socially responsibleproducts and services (Carter and Jennings; Kassinisand Soteriou; Sarkis, Zhu, and Lai; Seuring andMller), the importance of the company internalknowledge transfer between functional units such aspublic relations (PR) or the sustainability also has

risen.After a summary of different elements and

links within sustainable supply chains, an overallobjective of SSCM can be formulated as

to make the supply chain more sustainable

with an end goal of creating a truly sustainable

chain. When we refer to a sustainable supply

chain we are in essence referring to an outcome

for that supply chain (Pagell and Wu, BuildingTheory 38).

This goal seems to besimilar to the one ofsustainabilityrather abstract, since it cannot easilybe dened in terms of form and extent (Haake and

Seuring). In order to put SSCM in more concreteterms, Halldrsson, Kotzab, and Skjoett-Larsenevaluated related issues, such as the carbonmanagement in the supply chain, and developedpossible generic SSCM strategies. The integratedstrategy is considered when sustainability issuesbecome consistent with SCM. Within the alignmentstrategy, sustainability is complementary to SCM,

and in the replacement strategy, the conventionalSCM is substituted by full implementation of asustainability-oriented approach. Whereas thesestrategies differ widely with regard to the extent ofchange, the integrated strategy currently seems to be

the most probable in terms of practicability. According to the above-mentioned SSCMdenition by Seuring and Mller, companies have

to manage material, information, and capitalowswithin their internal and external sustainablesupply chains. This means the various stakeholderrequirements, such as the customers demand formore sustainable products and services or the needfor compliance with norms and regulations onsustainability issues have to be taken into account(e.g. Bowen et al.; Seuring and Mller). Theserequirements are relevant since they are linkedto risks such as possible reputation damages orthey are related to opportunities, such as a market

potential due to sustainability-oriented innovationsand product developments. As a consequence, thedifferent functional units are supposed to worktogether in order to meet the mentioned requirementsand to take the different disciplinary perspectives(Wagner). Such cross-functional cooperation (Hsu andHu) demands a transfer of information and knowledge.According to Schaltegger and Burritt (ContemporaryEnvironmental Accounting 404), such managementof information can be understood as the creation ofpurpose-oriented knowledge. Key characteristics of

cross-functional integration are displayed in the nextsection in order to improve the understanding of howand which information can be transferred between thefunctional silos.

II.II. CROSS-FUNCTIONAL

INTEGRATION IN THE CONTEXT

OF SSCM

As previously described, SSCM is not just an issuethat affects procurement but also departments

such as marketing, R&D, or production (Carterand Dresner; Sarkis, Zhu, and Lai). Addressingseveral sustainability issues (e.g. waste reduction,health protection, or energy savings) that can berelevant for more than just one functional unit, this


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phenomenon is, in fact, encompassing sustainabilitymeasures since these often cover at least two of thethree (environmental, social, and economic) aspects

(Darnall, Jolley, and Handeld; Schaltegger et al. 6).For instance, waste reduction can be both a matterhandled by the purchasing and in the human resourcesdepartments since the employees might have to betrained how to avoid waste in the most efcient and

effective way. Nevertheless, every functional unit withina company covers its own area of specialization inorder to fulll particular tasks that are associated with

appropriate qualications. From the perspective of the

knowledge-based view, specialization is needed since

bounded rationality is recognition that humanbrain has limited capacity to acquire, store

and process knowledge. The result is that

efciency in knowledge production requires

that individuals specialize in particular areas of

knowledge(Grant 112).

However, it has to be taken into account thatspecialization increases interdependencies andthe need for coordination between the separatefunctional units (Olson, Walker, and Ruekert). As

a consequence, a balance should be kept betweenbenets derived from specialization and the

integration costs incurred (Galbraith 118119;Thompson, 64; Turkulainen 16). Looking at the SSCM literature, somescholars emphasize that SSCM may be facilitatedby cross-functional collaboration and with thepartners working in unison (Bowen et al.; Gold,Seuring, and Beske). However, there is indicationthat cross-functional collaboration sometimes isjust wishful thinking (Pagell) and barriers do exist

(Carter and Dresner; Moses and hlstrm). Thesebarriers lower the potential of transferring internallyor externally (sustainability-oriented) informationfrom one member of the supply chain to another.Moses and hlstrm found problems in cross-

functional processes of sourcing decision making,such as the interdependency between the functionalunits, strategy complications, and functional goals

that are not aligned. In order to hurdle these barriers,Moses and hlstrm recommend that all functionalgoals should be strategically coordinated so thatthe purchasing strategy is in line with the sourcingdecision processes. Regarding these sourcingdecision processes, they also stress the necessity ofupdated information (Leenders, van Engelen, andKratzer; Pagell) as well as the risk of informationoverload (Olson, Walker, and Ruekert). Therefore, it has to be assumed that theright management of information and knowledge

is crucial for a successful SSCM. A lack ofknowledge might be an explanation for no or partialcross-functional integration (Pagell). For this reason,the knowledge-based view is used to expose thepotential of cross-functional interaction. Moreover,the application of this theory-based approach is anattempt to help overcome the mentioned challengeswithin sustainable supply chains, such as risk ofa reputation loss and demand for environmental-friendly and socially responsible products.

III. KNOWLEDGE-BASED VIEW

FROM AN INTERNAL SSCM

PERSPECTIVE

The importance of knowledge transfer is discussed ininter-organizational contexts (e.g., Dyer and Nobeoka;Martinkenaite), intra-organizational contexts (e.g.,Gattiker and Carter), or both (e.g., Cousins andSpekman; Frazier). Information can be dened as

purpose-oriented knowledge (Schaltegger and Burritt,

Contemporary Environmental Accounting 404),whereas knowledge can be understood as whichis known (Grant 119). Although there are variousdenitions of knowledge and of associated concepts

(e.g., for a typology of knowledge management, cf.Geisler, Lavergne and Earl), this paper refers principally


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to the understanding of knowledge provided in Grantsknowledge-based view. Based on the resource-basedtheory (Barney; Wernerfelt), knowledgeis considered

a very important strategic resource that can promisecompetitive advantage to the rm (Gold, Seuring, and

Beske; Grant; Kogut and Zander).For setting up the foundations of the theory,

Grant (110112) describes ve characteristics of

knowledge that are relevant for the applicationwithin a company:

Transferability: The knowledge has to betransferrable with regard to time, space, andbetween individuals. For a more precisedetermination regarding transferability,

knowledge can be distinguished intotacit and explicit. Tacitknowledgealsoknown as knowing howis what implicitlyexists through its application. Its transferis uncertain and can be costly and slow(Kogut and Zander).Explicitknowledge,in contrast, is the knowing about.Regarding SSCM issues within a company,corresponding explicit knowledge can betransferred by communication between thedifferent functional units.

Capacity for aggregation: Knowledgecan be transmitted, receipted, andaggregated. However, knowledge transferis dependent on the recipients capacityto gain knowledge. If there is a commonlanguage, this capacity is expanded. Acompanys internal job rotation system canbe a possible way to increase a personscapacity to acquire new knowledge.For instance, job rotation can meanthat a purchasing manager works in the

sustainability department or in marketingand sales. By rotating jobs, he or shewill have the chance to better understandthe tasks and processes within the otherfunctional units. Furthermore, he or she can

become familiar with the specic language

and culture in the other functional units(Turkulainen 136).

Appropriability: Regarding theappropriability of knowledge, a distinctionshould be made between the alreadymentioned tacit and explicit knowledge.Tacit knowledge cannot be appropriated,as it is stored within individuals; however,explicit knowledge might be acquired.As a consequence for cross-functionalintegration, Matos and Hall recommendthat collaborative teams should use bothtacit and explicit knowledge so that they

cover a diverse spectrum of skills andexpertise (Matos and Hall 1097).

Specialization in knowledge acquisition: Asalready mentioned (cf. II.II.), individualshave limited capacities for acquisition,storage, and processing knowledge.Hence, specialization helps personsand organizations to manage profoundknowledge. However, this specializationrequires coordination between the differentemployees and functional units within a

company (Turkulainen 58). Knowledge requirements of production:

Finally, the knowledge transfer startsfrom the assumption that the criticalinput in production and primary sourceof value is knowledge (Grant 112). Thisstatement refers to the understanding thatknowledge is a prerequisite for people to beproductive. Therefore, they have to possessand apply knowledge to, for instance,construct or operate a machine (Grant).

As indicated, these ve described characteristics

of knowledge have to be taken into account whenSSCM-relevant information and knowledge areexchanged between the different members of the


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internal supply chain.

Knowledge within sustainable supply chains

Regarding sustainable supply chains, detailedinformation about environmental, social, andeconomic impacts and performance across the entire(external and internal) chain has to be collected andprocessed (Foster and Green). This requirement is dueto the fact that external stakeholders, such as customersor media, are interested in product properties (e.g.product carbon footprint) or production conditionsat the companys and suppliers sites (e.g. humanrights compliance). As a consequence, the different

functional units have to exchange correspondinginformation (Carter and Dresner; Foster and Green).For example, the purchasing department requiresenvironmental information from its suppliers, such asleft out hazardous substances. This information has tobe submitted to the production department, and nally,

sales and marketing can provide this information tothe companys customers. Such typical informationow within a supply chain can be associated with

the product life cycle perspective (Birou, Fawcett,and Magnan; Carter and Dresner; Hayes and

Wheelwright). According to this perspective, severalmembers of the internal and external supply chainare aligned so that there is a greater cooperationacross functional boundaries (Birou, Fawcett, andMagnan 37). This collaboration requires transmittingand receiving knowledge within the cross-functionalcooperation.

Transfer of knowledge in SSCM

In order to coordinate the transfer of knowledge,

Grant points out that the differences betweentacit and explicit knowledge (Nonaka) have to beconsidered. As a consequence, the more informalknowing how and the quite formal knowingabout have to be merged so that the specialized

knowledge of the different functional units can beintegrated. Here, Grant (114115) suggests fourmechanisms, where the rst three aim at reducing

communication and learning costs and the last oneaims at relying on communication:

Rules and directives: These mechanismspresent a standardized format ofcommunication (Van de Ven, Delbecq,and Koenig). In the context of SSCM,there exist the European directives onhazardous substances in the electronicsindustry (Preuss). In another example,some companies have created internalrules concerning purchasing restrictions to

suppliers who exploit child labor (Koplin,Seuring, and Mesterharm). Furthermore,rules can convert tacit knowledge intoexplicit (Grant).

Sequencing: According to Thompson,sequencing can be coordination byplans, meaning that knowledge and otherissues such as capabilities and activitiescan develop gradually and dynamically(Helfat and Raubitschek). Regardinga logistical integration, production

planning or inventory management couldbe measurements that affect energyconsumption across the entire supply chain(Vachon and Klassen, Supply ChainManagement).

Routines: In comparison to the mechanismsequencing, routines can be understoodas simple sequences (Grant 115).They can differ greatly (Pentland andRueter) and, within a company, theycan be used for simultaneous activities

(Hutchins). Examples are assessment ormonitoring routines that help to evaluatethe environmental performance within acompany (Klassen and Vachon; Simpson,Power, and Samson).


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Problem solving by groups and decision

making: Since problem-solving processesby groups are communication intensive,

they can be rather resource consuming(regarding time and capital). Thus, thebuilding of cross-functional task forceteams should focus on unusual, complex,and important tasks (Grant 115). Productdevelopment (Pagell) or crisis management(Hutchins) are two such examples of cross-functional teams.

With reference to product development activities,Pagell states there are a considerable number of

related studies that emphasize the importance ofcross-functional team work (e.g., Wheelwrightand Clark). Although Pagell expresses a needfor internal cross-functional integration in suchoccasional tasks, he also stresses that repetitivetasks require other approaches. Such approaches,in turn, can be connected to Grants rst-mentioned

mechanisms, the rules and directives, sequencing,and routines.

Based on Grants knowledge-based view,Sveiby aimed at expanding the eld of knowledge

transfer by focusing on strategy formulation. Hiswork will be outlined in the following section.

Strategies toward knowledge transfer

In his work, Sveiby distinguishes between threedimensions of intangible assets (Sveiby 346347) of a company: external structures (e.g.relationships with suppliers, customers, andthe companys image), internal structures (e.g.staff, infrastructure, and patents), and individualcompetences (e.g. competences of the companysemployees). All three dimensions are linkedreciprocally to each other. When knowledge istransferred within a company, its value can becreated (Lavergne and Earl; Sveiby). Furthermore,

the knowledge transfer can occur in differentkinds of activities within the internal structure.For instance, such activities can focus on using

comprehensive database or ERP software (Pagell;Sveiby). The enabling of these activities is thebackbone of a knowledge strategy (Sveiby 348).

In the following section, Sveibys model(347) will be used and adjusted in such a way asto focus on the particularities of sustainable supplychains and the companys internal perspective.After having set this framework on intra-organizational SSCM, potential measurements willbe discussed in regard to facilitating knowledgetransfer in internal SSCM.

IV. FRAMEWORK OF

INFORMATION AND

KNOWLEDGE TRANSFER IN

SSCM

When Sveibys model is modified with regardto SSCM, three different kinds of knowledgetransfer can be depicted (Figure 2): (1) theintra-organizational knowledge transfer withinthe companys internal structure; (2) the inter-

organizational transfer of knowledge withexternal stakeholders; and (3) the transferbetween individuals and the internal structure.

Knowledge transfer within internalstructures(1) implies that SSCM-relevant tacit and

Figure 2: Knowledge transfer in sustainable supply

chains (modied from Sveiby 347).


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explicit knowledge can be shared and spread withinthe internal boundaries of the company. Activitiessuch as using a common database (Sveiby), tools to

improve interactive IT communication (e.g. intranet,companys internal wiki), or holding meetings on aregular basis can support such knowledge transfer.Furthermore, cross-functional collaboration canfacilitate the transmission and receipt of informationand knowledge. Since an internal structure is relatedto a manifoldness of economic, environmental,and social problems and solutions, the integrationof different functional units is proposed (Sweet,Roome, and Sweet). The idea is to

capture this system complexity by integrating

information from different sources, and relatingthis information to the unique environmental and

business contexts within which it arises (Sweet266; with reference to Roome, SustainabilityStrategies, Taking Responsibility).

Furthermore, information and knowledge transfer isnot only necessary within the internal structure butalso with external stakeholders (2). Regarding theentire supply chain, a company has to consider bothdirect stakeholders, such as suppliers and customers,

and indirect stakeholders, such as legislative bodies,NGOs, and media (cf. II.I., Figure 1). While Fosterand Green focus on the information ows and links

for sustainability-oriented innovation processes,they also refer to consultants and universitiesas possible external collaboration partners forinnovations. Thus, it is worth noting that a lot ofdifferent ows generally are related to sustainability-

oriented product and process innovations (Hansen,Groe-Dunker, and Reichwald). Furthermore, inaddition to the sheer quantity of information, thevariety of information and knowledge ows to and

from the different stakeholders has to be taken intoaccount. For the purpose of transferring knowledge,collaborative teams can be built by internal andexternal supply chain members (Matos and Hall).

These cross-boundary spanning teams are able tocombine their expertise and exchange ideas, andthey have to develop specic goals and strategies

as well as tasks. Nevertheless, such extensive teamwork can consume many resources (e.g., time,capital). This option is only of interest if the effortsare reasonable with regard to the benets, such

as new product development and effective crisismanagement (Hutchins; Pagell). The information and knowledge transferfromindividuals (3) to internal structures might involvethe integration of an individuals competences in thecompanys structure (Sveiby). Since every employeepossesses his or her own skills, knowledge, and

experiences (Bowen et al.; Mller and Gaudig; Sweet,Roome, and Sweet), these skill sets can lead to a greatdiversity of capabilities, which, in turn, can createcompetitive advantage (Gold, Seuring, and Beske).With regard to the diversity of capabilities and companysize, research indicates that larger companies do notonly have more resources, but also a wider variety ofthem at their disposal (Gupta and Govindarajan; VanWijk, Jansen, and Lyles). Nevertheless, it can be morechallenging than in smaller companies to managethese different kinds of specialized knowledge

(Turkulainen 141). After having outlined the constituent partsof the framework of information and knowledgetransfer in internal SSCM, the section below focuseson measurements on how the transfer can take place.

IV.I. MEASUREMENTS TO

FACILITATE KNOWLEDGE

TRANSFER IN INTERNAL

SSCM

The measures that facilitate knowledge transferwithin and into internal SSCM can be structuredas levels of knowledge transfer in SSCM andcoordination mechanisms (Table 1). Whereasthe levels of knowledge transfer refer to the


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classication proposed by Sveiby, the categorization

of the coordination mechanisms is based on thework of Grant. Within this paper, both perspectives

are placed in the context of internal SSCM. Given the matrix above, 12 categories canbe distinguished with regard to how SSCM-relevantinformation and knowledge can be transferredwithin and into a company. In order to relatethese categories to practical application, the set ofpotential measurements will be discussed by usingappropriate examples in the following.

(a) Within internal structures / Rules and

directives

In cross-functional collaboration, rules and directivescan serve as coordination mechanisms that minimizecommunication (Grant). These mechanisms can beuseful if there is no or little need for coordination.For instance, internal rules can refer to how IT

should be used. In such a way, internal policy cangovern how and when ERP systems are in operationand what kind of SSCM-relevant information should

be integrated into the system. Furthermore, Bowenet al. (177) suggest detailed purchasing policiesand procedures to formulate guidelines as to howsustainability issues can be implemented in day-to-day purchasing decisions. Rules and directivesdo not only help to organize recurring tasks, theyalso can facilitate an efcient mode of working in

collaborating with other functional units. Althoughrules and directives might be used with little effortand less communication once they have been issued,it can take time and can create a need for deliberation

for establishing them in the rst place.

(b) Within internal structures / Sequencing

Sequencing means it is already planned how differentfunctional units can share their expertise on SSCM-

Levels ofknowledge transfer

in SSCM

Coordination

mechanisms

(1) Within internalstructure

(2) From external to internalstructure

(3) From individualcompetence to internal

structure

Rules and directives (a) Setting rules on theuse of IT systems for

transferring SSCMinformation

(e) Issuing directives for suppliersabout information transfer between

suppliers and the focal company

(i) Establishing rules on howindividuals should behavein case of difcult SSCM

decisions

Sequencing (b) Transfer of infor-mation from internal

experts

(f) Learning from suppliers (e.g., jobrotation between suppliers and focal

company)

(j) Transmitting newknowledge (obtained in

seminars, trainings, etc.) into adatabase

Routines (c) Holding regularmeetings of differentfunctions (specic to

management level)

(g) Establishing knowledge-sharingroutines (exchange of information

between the focal company and itssuppliers on regular basis)

(k) Behaving sustainability-oriented (waste/energy

reduction)

Group solving (d) Setting up a taskforce group for internalimprovements (waste

reduction, health protec-tion, energy cost savings)

(h) Developing sustainability-oriented products; stakeholder-advisory boards/stakeholder

committees

(l) Providing experiences (withcrisis management)

Table 1: Measurements to facilitate internal knowledge transfer in sustainable supply chains


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relevant issues. For instance, if a new product hasto be assessed with regard to its environmentalimpact, the different functional units, such as

purchasing, R&D, and manufacturing, can transfertheir specic knowledge into a database. Since some

of this information is dependent on background datafrom other departments, this data collection can beorganized sequentially, meaning that a work ow is

generated. Alternatively, an (electronic) route cardcan be used to inform the several functional unitsabout the new product and its environmental, social,and economic characteristics so that the individualdepartments can also process this informationwithin their unit.

(c) Within internal structures / Routines

Within internal structures, routines can help to shareknowledge between the various functional units.Brief daily meetings of employees from differentdepartments can facilitate the transfer of up-to-dateinformation. In such cases, the emphasis is on basicinformation and on exchanging information betweenfunctional units, such as purchasing, sustainabilitydepartment, PR, manufacturing, R&D, marketing,

and sales. In addition to such daily cross-functionalactivities, monitoring and assessment routines alsocan help to estimate the environmental performancewithin a company (Klassen and Vachon; Simpson,Power, and Samson).

(d) Within internal structures / Group solving

Product development and crisis managementare potential application areas of group solvingprocesses (Hutchins; Pagell) within a company.

Group problem solving and decision making aremeasurements that require the most coordination andinteraction, when compared to the three activitiesexplained above (Grant). Therefore, it is reasonableto set up task force groups, whenever this effort

proposes a balance between the associated benet

and the expenditure of time and capital. In thiscontext, Grant (115) cites unusual, complex, and

important tasks as examples of problem solving bygroups and decision making. However, it is worthmentioning that task force groups can generateand exchange SSCM-relevant tacit and explicitknowledge. When they are brought together as across-functional team, members can learn from eachothers expertise and specialization.

(e) From external to internal structure / Rules

and directives

In the context of transferring knowledge fromthe external structure to the internal, rules anddirectives can be used to integrate the knowledgefrom external stakeholders (e.g. suppliers,customers, NGOs, universities). When a companynegotiates a cooperation agreement with one ofthese stakeholders, the company can set rules thatstipulate what kind of information and knowledgeshould be transferred to the company. For instance, acompany can be forced by its customers to transmitrelated information with regard to carbon footprint

management (e.g., the retail sector, which hasbegun to label products with information about thecarbon footprint; Halldrsson, Kotzab, and Skjoett-Larsen). As a consequence, the focal company itselfcan force its suppliers by directives to provide suchinformation.

(f) From external to internal structure /

Sequencing

In order to obtain external knowledge by sequencing,

companies and suppliers can establish a system oftransferring staff knowledge across rm boundaries.

This knowledge transfer may involve peopleactually working temporarily in the other company(Dyer and Nobeoka). The particular know-how of a


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staff member from the supplier can be used while heor she works within the focal company, or his or her(explicit) knowledge can be stored in documents and

IT systems. The latter alternative offers the chanceto integrate the knowledge sequentially at the timeit is required.

(g) From external to internal structure /

Routines

Dyer and Singh (1998) understand knowledge-sharing routines as one potential source to gaincompetitive advantage. Referring to Grant,they define a routine as a regular pattern of

interfirm interactions that permits the transfer,recombination, or creation of specializedknowledge (Dyer and Singh 665). Morespecifically a company and its suppliers, inthe context of SSCM, can create routines byinforming each other on a regular basis aboutthe latest developments in product innovationor about relevant legislative projects. Suchinstitutionalized processes can be advantageousdue to fact that the partners share unique anddetailed knowledge.

(h) From external to internal structure / Group

solving

In order to stimulate the development ofsustainability-oriented products, a focal companycan form cross-organizational teams with its suppliersand customers (Stank, Keller, and Daugherty;Vachon and Klassen, Supply Chain Management;Zhao, Selen, and Yeung). Moreover, companies canestablish groups with other stakeholders such as the

local community or NGOs. Stakeholder advisoryboards or corporate responsibility committees(Hansen 215) also are possible institutions to integrateexternal knowledge of sustainability-related issuesand concerns. The purchasing department can

organize these committees directly at the supplierssites to better understand the local conditions. Thisacquired knowledge, in turn, can improve risk and

opportunity estimating of purchasing requirementsand supply chain matters (such as product quality,working conditions, and avoidance of hazardoussubstances). However, it has to be taken into accountthat such inter-organizational collaboration mightbe challenging to organize since several companies(e.g. focal company, 1st tier, 2nd tier suppliers, etc.)and organizations (e.g. NGOs, universities, etc.)can pursue their own goals and strategies to achieveproduct improvements. Furthermore, the externalstakeholders have their own organizational culture

and structure that can considerably differ from thefocal companys traits. As a consequence, thesementioned barriers have to be considered wheneverthere are joint efforts to develop more sustainableproducts and processes. One option to avoid thesehurdles might be an open and regular communicationbetween the internal and external stakeholders.

(i) From individual competence to internal

structure / Rules and directives

Based on the assumption that critical SSCM decisionsexist, such as termination of the supplier relationshipdue to noncompliance with environmental or socialguidelines, a directive can require that multipleparties are involved for these crucial decisions. Thisapproach can be applied by employees of one singledepartment, or, in order to improve knowledgetransfer between functional units, it can also beused as a rule so that employees from differentdepartments such as purchasing and R&D have todecide collectively. Adopting such a directive might

allow a transfer of individuals knowledge to theinternal structure and across the internal supplychain. However, it has to be taken into account thatan individuals perception and acceptance of such adirective can be different depending on the personal


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and organizational context or situation he or she isin. As a consequence, it has to be considered thata successful application of rules and directives is

dependent on the attitude and behavior of everysingle employee, although in general, rules anddirectives might be of help to facilitate the transferof knowledge between functional units.

(j) From individual competence to internal

structure / Sequencing

With regard to SSCM and to the transfer of individualcompetences to internal structures, sequencing impliesthat an employee passes on information that he or she

has obtained in SSCM-associated seminars (such asseminars about handling toxic substances, evaluationof suppliers based on sustainability criteria, or usingcodes of conduct). In order to process this informationsequentially, the employee is enabled to transmit his orher knowledge into a database that offers open access forall employees in other departments across the internalsupply chain, or the employee is appointed as a contactperson for transferring the specialized knowledge. Asa consequence, these knowledge transfer methodscan encourage cross-functional collaboration since it

supports other employees to possess SSCM-relevantknow-how.

(k) From individual competence to internal

structure / Routines

Measurements, such as waste reduction orenergy savings, can be SSCM-related routinesof individuals that have an impact on the internalstructure. On one hand, this might be understoodas a kind of tacit knowledge since it is revealed

through its application (Grant 111). On the otherhand, this can demonstrate explicit knowledgeprovided the employee informs colleagues about hisor her activities.

(l) From individual competence to internal

structure / Group solving

If, for instance, an employee has gained experiencesin an exigency, such as an environmental accidentwithin the supply chain, he or she may transfer hisor her acquired knowledge to others within the sameorganization. This knowledge might refer to how theproblem was solved, what kinds of measurements weretaken to minimize the risk within the supply chain, andhow this environmental accident harmed the company.A pragmatic approach to convert this knowledgecan be that the employee plays an active role in acompanys internal training programs (e.g. during

seminars that deal with crises management). Althoughsuch seminars are be provided by external servicecompanies, an additional companys internal seminarcan be more specic with regard to the peculiarities

of the company such as its culture and structure.Furthermore, employees can be trained in specic

skills, such as being a mediator or intermediary, so thatthey can contribute to problem-solving processes bytheir specialized knowledge and experience. After proposing the application of the 12different measurements of knowledge transfer in

internal SSCM, the following section addressessome practical implications for cross-functionalintegration in the context of knowledge transfer.

IV.II. IMPLICATIONS FOR CROSS-

FUNCTIONAL INTEGRATION

IN INTERNAL SSCM

Based on the discussion of mechanisms to facilitateinternal knowledge transfer, this conceptualpaper offers practical implications. The outcome

of the widely conducted discussion can providesuggestions concerning the role of cross-functionalintegration with regard to the transfer of SSCM-relevant information and knowledge.


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Knowledge sharing

Knowledge-sharing routines with suppliers are seen

as one potential source to gain competitive advantage(Dyer and Nobeoka). This sharing of knowledgealso can be benecial in the intra-organizational

context. If the different functional units across theinternal supply chain spread their know-how andexperiences among each other, they can improvetheir understanding for internal and external SSCM-relevant information. Furthermore, these unitscan learn to speak a common language so thatsustainability-relevant information (e.g. about theproduct carbon footprint, necessary information

for cause-related marketing activities, or detailsabout standards and norms) can be transferred moreeasily between the different functional units. Sinceefciency of knowledge aggregation is greatly

enhanced when knowledge can be expressed interms of common language (Grant 111), it is usefulto take such appropriate measurements. Potentialmeasurements can be holding brief daily meetings,where persons of different functional units cometogether (cf. c), or setting up a task force group forinternal improvements (cf. d). In addition, incentive

systems can be an appropriate measurement withregard to integration since incentives can encourageindividual employees of the different departmentsto pursue one common goal (Pagell and Wu,Enhancing Integration). Such reward systemsmight include remunerations (e.g., when wastereduction is achieved within the company throughthe internal supply chain) or incentives when SSCMgoals (e.g., establishing a carbon managementsystem across the entire supply chain) are reachedcommonly by the different functional units.

Informal and formal communication

Cross-functional integration and knowledge transfercan occur in different modes of communication.

Grant points out the difference between explicitand tacit knowledge: explicit knowledge canbe transferred by communication, whereas tacit

knowledge cannot. Tacit knowledge, in fact, istransferred via its application. Tacit knowledge incross-functional collaboration refers to knowledgeof an individual person, e.g. an employee frompurchasing can know how he or she is able to nd

the most suitable supplier for components whena new product is developed and how to reacha compromise together with other departmentssuch as R&D as well as marketing and sales whenthere are conicting goals between the different

functional units about the components. In this

context, the employee from purchasing applies thisspecic knowledge without making it explicit, e.g.

through documented guidelines useable throughother individuals. Explicit knowledge, in contrast,refers to knowing about; this type of knowledge ismore easily transferred. Consequently, purchasingmay have knowledge about the properties of thepurchased component (e.g. its recyclability) andis able to transfer it to other departments. Thus,practitioners may wish to consider this differencewhen establishing communication channels

between the various functional units. This implies,on the one hand, that cross-functional meetingsare useful so that knowledge can be applied moreeasily and, on the other, that communication toolssuch as a database are helpful to store explicitknowledge and make it retrievable.

Furthermore, research suggests distinguishinginformal and formal communication. Informalcommunication is seen as an effective way toaddress problems in real time that occur in thedifferent functions across the supply chain. In

contrast, formal communication such as reportingsystems can help to exchange information in amore structured way (Daft 582; Pagell; Pagell andWu, Enhancing Integration). This recognitionof communication differences results in the fact


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that information and knowledge transfer mightbe communicated formally and be organized bymechanisms such as decision making (cf. d, h, l),

but informal communication also is necessary tocover all communication levels.

V. CONCLUSION AND FUTURE

RESEARCH

This conceptual paper argues that cross-functionalintegration assumes a substantial role in theintra-organizational transfer of SSCM-relevantinformation and knowledge. The knowledge-basedview is used to discuss different mechanisms and

levels of information and knowledge transfer. Inthe context of SSCM, there are various internaland external stakeholders whose requirementsare of relevance. In addition, to better understandthe implications with regard to cross-functionalintegration in SSCM, the differences between tacitand explicit knowledge, as well as the distinctionof formal and informal communication, needto be considered. For example, when a newenvironmentally friendly and socially responsibleproduct has to be developed, the different functional

units need to know how they can work togetherin order to meet the requirements adequately.Furthermore, they need to know about thedemanded properties of the new product. For sucha product development, on the one hand, formalcommunication can be of help to make knowledgetransfer across the internal supply chain explicit, onthe other, informal communication can be benecial

for establishing a common language across thevarious functional units. However, this conceptual framework,

like other research papers, also suffers fromlimitations. First, there are limits regarding thetheoretical underpinning of the knowledge-basedview. Knowledge cannot be common betweenall functional units (Grant). This fact involves the

assumption that every employee has his or herindividual background, and it might be difcult to

develop a similar understanding of what is relevant

information in SSCM. In addition, sustainabilityissues have a value-laden character, meaning everyindividual will have his or her own perception ofsustainability and related knowledge (Seelos;Linnenluecke, Russel, and Grifths).

Since entire supply chains are rathercomplex, this papers approach to develop atheoretical framework cannot cover all the specic

aspects such as the interdependencies betweeninternal and external stakeholders, the balanceof power, or the individuals ability to learn and

acquire new knowledge. Also, it should be noted thatsustainability is a rather complex construct (Seelos)that involves a great range of environmental, social,and economic concerns and knowledge. Therefore, in order to investigate morethoroughly the knowledge transfer and cross-functional integration in SSCM, future researchcould focus on the unique characteristics ofknowledge that is to be exchanged between thedifferent functional units. Hence, the question canbe raised, what are similarities and differences

of environmental, social, and economic-relatedinformation in the internal and external supplychain? Furthermore, the transfer of informationand knowledge might be inuenced by the

individual peculiarities of the transmitters andrecipients. Hence, it is worth asking who are theparticular persons and organizations that exchangeinformation? Within which structures and culturesdo they act? Based on the theoretical frameworkdeveloped in this paper, a case study or an actionresearch approach might be tting to better

understand the complex structures of knowledgeand information transfer between differentfunctional units in SSCM.


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VI. ACKNOWLEDGEMENTS

The author would like to thank the Department

of Civil Engineering Technology, EnvironmentalManagement and Safety (CETEMS) at RochesterInstitute of Technology (RIT) and, in particular, JohnMorelli and his team for providing the opportunityto participate in the Seventh InternationalEnvironmental Management Leadership Symposium2011 at RIT. In addition, the carefully helpful inputsmade by participants of the Symposium on anearlier version of the paper are acknowledged withgreat thanks. The author would also like to thankthe anonymous referees for the valuable comments

which helped to improve the paper.

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