Creating Relevant Value Through Demand and Supply Integration Theodore P. Stank, Terry L. Esper, T. Russell Crook, and Chad W. Autry University of Tennessee F irms that pursue cost leadership strategies tend to focus on operational efficiency but sometimes fail to fully hear the ‘‘voice of the customer.’’ Alternatively, firms pursuing differentiation strategies tend to focus on the customer, but sometimes to the detriment of operational excellence. To help address such imbalances, an emerging stream of supply chain research has introduced the concept of demand and supply integration (DSI). DSI involves coordinating the activities and processes reflective of a firm’s customer focus, with the operational, supply-side activities that make demand fulfillment possible. This article contributes to this research stream by provid- ing researchable propositions intended to foster support of a new dominant logic in supply chain management thought, describing how firms can best achieve ‘‘relevant’’ customer value by coordinating supply- and demand-focused activities within and across their func- tional units. Keywords: demand and supply integration; cost and service trade-offs; relevant value; strategy ‘‘Our focus on the productivity loop helps ensure that we drive every day low cost, so we can deliver every day low prices across our business.’’ Michael Duke, CEO (2011) ‘‘In my five years as CEO of this great Company, we’ve sought to build on Disney’s legacy by focusing on three core strategic priorities: creating great entertainment that people want to experience; using new technology to maximize the quality and reach of that entertainment; and growing our businesses in promising international markets to extend the impact of that entertainment.’’ Robert Iger, CEO (2011) Both of these quotes suggest that businesses should focus on satisfying customers. However, when compared, they highlight two very different approaches toward achieving firm-level financial success through the generation of satisfied customers. Wal-Mart’s overarching strategic approach is to leverage operational excellence in order to provide affordable goods and services targeted toward mass markets. Alterna- tively, the strategic approach taken by companies such as The Walt Disney Company is to provide differentiated prod- ucts targeted toward select customers. Michael Porter (1980, 35) contrasts these two approaches as cost leadership and differentiation strategies, and he theorized that effectively implementing these strategies requires total commitment within an organization, including the alignment of customer- focused activities with the organization’s critical operational structures. Porter’s (1985, 35–36) theory advanced three important strategic implications. First, when pursuing a cost leadership strategy, he notes, ‘‘a great deal of managerial attention to cost control [in operational structures] is necessary.’’ On the other hand, when pursuing a differentiation strategy, he notes that managers need to recognize ‘‘a tradeoff with cost posi- tion.’’ Second, after deciding which strategy to pursue, man- agers need to adopt the requisite operational initiatives to support and align with the overall strategy. For cost leaders, this means adopting tight cost controls and reporting mecha- nisms aligned with customer values. For differentiators, this means adopting practices to help coordinate research and development, product development, and marketing because this yields better products or services more aligned with cus- tomer values. Third, Porter warned that if firms fail to pursue these strategies and adopt these initiatives, they are suscepti- ble to increased risk of being ‘‘stuck in the middle,’’ resulting in fewer customers and in poor performance. Porter’s (1985) ideas diffused rapidly through the popular press, and many practicing managers continue to espouse his views. However, in many cases managers still fail to adopt the internal structures that align with the strategies, or do so in a disconnected way. Firms pursuing cost leadership strate- gies tend to focus on the operation and efficiency but may fail to hear the ‘‘voice of the customer.’’ Alternatively, firms pursuing differentiation strategies tend to focus on the cus- tomer often to the detriment of operational excellence. Ulti- mately, many firms have become imbalanced in their strategic customer focus. To help address these imbalances, an emerging stream of supply chain management research has introduced the con- cept of demand and supply integration (DSI) (Ju¨ttner et al. 2007). As positioned in the emergent research, DSI provides a theoretical means of facilitating the integration of organi- zational strategy with structure, and of connecting the voice of the customer to that of supply chain operations within organizations (Esper et al. 2010b). Specifically, DSI involves coordinating the activities and processes reflective of a firm’s customer focus, with the operational, supply-side activities that make demand fulfillment possible. As such, DSI enables firms to maximize ‘‘relevant’’ revenue streams from ‘‘custom- ers of choice,’’ that is, those customers or customer ⁄ con- sumer segments whose value requirements best align with the organizations capabilities and generate the most profit (Esper et al. 2010b). With the DSI concept as its foundation, the Corresponding author: Terry Esper, College of Business Administration, University of Tennessee, 310 Stokely Management Center, Knoxville, TN 37996-0530, USA; E-mail: tesper@utk.edu Journal of Business Logistics, 2012, 33(2): 167–172 Ó Council of Supply Chain Management Professionals