SUPPLY CHAIN MANAGEMENT - OPPORTUNITIES AND CHALLENGES

SUPPLY CHAIN MANAGEMENT- OPPORTUNITIES AND CHALLENGES

SYNOPSIS

Of the Thesis SubmittedTo

SRI VENKATESWARA UNIVERSITY

In the partial fulfillment of the requirements for the award of the degree of

DOCTOR OF PHILOSOPHYINBUSINESS MANAGEMENT

ByB.NAGARJUNA, B.Tech., MBA.

Under the Research Supervision ofDr. B. SUDHIR B.Tech., MBA., M.Tech., Ph.d. ProfessorDepartment of Business ManagementSri Venkateswara University, Tirupati.

SVU COLLEGE OF COMMERCE, MANAGEMENT ANDCOMPUTER SCIENCESSRI VENKATESWARA UNIVERSITYTIRUPATI-517502ANDHRAPRADESH, INDIAFEB: 2013

I. INTRODUCTION

1.1 SCM -Supply Chain Management:Todays world is moving in turbulent economic environment, firms are striving for ways to achieve competitive advantage. One of the approaches is to manage the entire supply chain to reduce costs and improve performance to create competitive advantage and business success. The Supply Chain Management philosophy appears to have its origin in the organizational extension theory described by Mallen (1963). Mallens theory has developed the principles within the marketing frame work and advocated extending the organization to include all members of the distribution channel. Supply Chain Management advocates a similar approach but takes a production management view. Articles, specifically about Supply Chain Management began appearing in the late 1980s (Tyndall, 1988, Stevens, 1990) as the focus on opportunities for competitive advantage began shifting from inside the manufacturing plant to relationships with suppliers and then closer relationships with customers.In summarizing the results of the purchasing Futures Research Project, carter & Narasimhan (1990) identified Supply Chain Management as one of the primary future trends for purchasing and supply management professionals in the 21st century.

1.2 Supply Chain: All the necessary activities required for creating and developing products and services to customers constitute the Supply Chain. A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. A supply chain consists of all parties involved directly or indirectly in fulfilling a customer request. The supply chain includes all functions involved in receiving and fulfilling a customer request. The supply chain not only includes the manufacturers & suppliers, but also transporters, warehouses, retailers and customers themselves.

1.3 Supply Chain Management: This includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, distribution across all channels and delivery to the customer (Supply Chain Council, 2001).According to the Council of Supply Chain Management Professionals (CSCMP), Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion and logistics management. It also includes the crucial components of coordination and collaboration with channel partners which can be suppliers, third party service providers and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.1.4 Increasing role of Supply Chain Management:Improving Supply chain Performance has been a main concern for both practitioners and researchers. Substantial work in the area of supply chain improvement has focussed on information sharing, better coordination and joint optimization (Cachon and Fisher, 1997, Clerk and Hammand, 1997, and Fisher et al 1997). But hardly the works have focussed on integration of the entire supply chain or viewing the entire supply chain as whole. Increasing domestic and international competition has put manufacturers scrambling for new ways to gain competitive advantage. In the mid 1990s, manufacturers embraced Supply Chain Management philosophy and practices in an effort to achieve both cost and time efficiencies. This new focus on management of the supply chain elevated purchasing and logistics functions to the levels of manufacturing and marketing. (Porter, 1997; As brand, 1997, Pauland Weng 1997) investigated the appropriate relationship between the manufacturing and supply functions.

1.5 Information Technology: An unrealized Potential?The rapid developments in Information Technology have influenced business processes in a big way in the last few decades. Among other things Information Technology has brought about a phenomenal change to Supply Chain Management throughout the world. Although India is catching upfast with IT, it has done little to Supply Chain Management in India. Many companies are yet to embrace Information Technology as a tool in their supply chains. But it is necessary togear up and utilize Information Technology tools in Supply Chain Management in order to remain competitive in todays business environment.During 1990s several organizations realized importance of information flow within an organization in the overall performance of the Supply Chain and have used Information Technology in their Supply Chain to cut costs and increase profits. Information Technology is a key supply chain opportunity and is considered a driver of Supply Chain as it serves as glue that allows the other supply chain drivers to work together with the goal of creating an integrated, coordinated supply chain. Also many companies today are finding the need of embracing information technology to meet the challenge of managing the explosion of data and information needs involved in domestic and international Supply chains.The modern trends and developments within the information technology and software engineering give unprecedented opportunities for integration and coordination. The modern computer networks have the ability to rapidly distribute information to all concerned entities of an enterprise. The network also present an infrastructure for coordination of planning and operational processes, not only within organizations, but also among them. Chee et al (7) states that there is an unrealized potential for using information technology in support of network coordination (1996). A survey was done on more than forty computer manufacturers. It was found that only about 15% of the partners were communicating through Electronic Data Interchange. It was also found that much of the coordination activity occurs above the operational level. Advances in Information Technology have focused the Indian firms to increase the use of the internet and other information based technologies like Electronic Data Interchange, Enterprise Resource Planning etc. Information Technology and its tools are seen both as an enabler and necessity for Indian firms to be competitive. Information Technology can bring great improvements in Indian Supply Chain Practices (Sahay et al, 2003). The ability to obtain real time information and the access to large computers systems is enabling firms to develop detailed supply chain models that can be utilized to make real time decisions. The Information Technology has created opportunities to integrate information and decision making across different functional units (Swaminadhan and Tayur, 2003). Information Technology in Supply Chain Management is viewed to have great opportunities ranging from direct operational benefits to the creation of strategic advantage. Porter and Miller (1985) advocate that Information Technology changes industry structures, rules of competition, creates the competitive advantage and new business opportunities. The most typical role of Information Technology in Supply Chain Management is reducing the friction in transaction between Supply chain partners through cost effective information flow. A number of research works have focused on the role of Information Technology in various functions of supply chain in developed countries. However, as far as the Indian Scenario is concerned, not many studies deal with the impact of Information Technology on Indian Supply Chain practices. India has its own set of peculiarities and complexities when it comes to supply chain practices. A big chunk has yet to tap the benefits of Information Technology ( Rahman, 2003).

1.6 Integration of Information Systems:Inorder to use the information systems effectively, Lee and Whang (2000), have highlighted the various systems such as SCSS (Sales Company Services Systems), ICSS (International Customer Service System), MPSS (Master Production Scheduling System) and MCSS (Manufacturing Customer Service System).

Supply Chain Management Information System (SCMIS) play an increasingly critical role in the ability of firms to reduce costs and increase the responsiveness of their supply chain (Chopra, Meindl 2001, Dagenais and Gautsch, 2002, Lee 2000). SCMIS are Information Systems (IS) used to coordinate information between internal and external customers, suppliers, distributors and other partners in a supply chain. Individual studies have explored the benefits and capabilities of different SCMIS such as Electronic Market place (Dagenos and Gautshic 2002; Kaplan and Sawhney 2000) or Enterprise Resource Planning (Enterprise Resource Planning) (Green 2001) system. However, there are few emperically derived models suitable for analyzing the organizational capabilities supported by the range of SCMIS alternatives. As a result, firms face complex and risky decisions in analyzing and selecting an appropriate SCMIS solution of ensuring that their implemented systems are aligned with their business strategies (Reddy and Reddy 2001).

1.7 Opportunities as drivers of Supply Chain Performance Supply Chain excellence has become a key driver of value and competitiveness in most of the industries and geographies. Companies today are exploring for opportunities and areas that have the potential to dramatically improve the supply chain performance and competitiveness. Some of the opportunities which act as the drivers of supply chain performance include strategizing and optimizing the facilities, inventory, achieving functional excellence through inventory management and reducing the transportation cost, integrating demand and supply, sourcing the capabilities intelligently, integrating the information across the supply chain using information technology and extending the supply chain.

1.8 Challenges as obstacles of Supply Chain PerformanceSupply chain excellence can provide a competitive weapon to deliver market advantage and achieve quantum leaps in cost and revenue performance. For a company to be competitive its supply chain must be cost-efficient, responsive, flexible, agile and must support customer requirements to receive the product they need, in the quantity they want and when and where they want it. Ensuring the presence of all these characteristics is difficult anywhere. The key to achieving strategic fit is a companys ability to find a balance between responsiveness and efficiency that best matches the needs of its target customer. In deciding where this balance should be located on the responsiveness spectrum, companies face challenges which act as obstacles for the SC improvement and performance. The challenges include increasing variety of products, decreasing the product life cycles, managing the explosion of data and information need to avoid Bullwhip effect, globalization and fragmentation of SC ownership.1.9 FMCG IndustryFast Moving Consumer Goods usually refer to non-durable products. Examples include soft drinks, toiletries, and grocery items. A consumer usually spends a minimum of effort to purchase them. However, much of astute marketing activities have evolved from this class of products, where consumers show how involvement get wider choice and allowed by a host of inducements.FCMG industry in India is one of the largest sector creating employment for more than three million people having 85000 Crore market. CRISIL anticipates FMCG may go up to 140000 Crores in terms of market value. The Indian FMCG industry is expected to grow at 12% over the next few years to reach a size of US $ 43 billion ( Rs. 20,6000 Crores) by 2014 and US $ 74 billon ( Rs. 3550000 Crores ) by 2018.II. REVIEW OF LITERATUREThe present research largely depends on the previous research works which highlight the significance of technology, Information technology and its impact on supply chain practices. The study covers a wide spectrum of literature available on information technology as a mechanism for streamlining or managing their supply chains of organizations. The present study is also based on the literature available on the improvement of supply chain performance through the information technology in different sectors in general and FMCG sector in particular.

S.No.Factors Studied in Supply Chain ManagementAuthors Studied

1Principles of Supply Chain Management in Marketing FrameworkOrganizational Extension theory Mallen, 1963

2Supply Chain Management as one of the primary future trendsCortor and Narasimhan, 1990

3Information sharing, better coordination and joint optimizationCachon and Fisher, 1997

4Relationships between the manufacturing and supply functionPorter, Pauland Weng, 1997

5Sales Company service systemLee and Whang, 2000

6Supply Chain Management information systemChopra, Mein dl, 2001

7Electronic Data InterchangeLee et al, 1999, Mukhopadyaya et al, 1995

8Electronic Market PlaceDagenos & Gavstshic, 2002Kaplon & sowhary, 2000

9Enterprise Resource PlanningGreen, 2001

10Alignment of SCMIS solutions wish business strategiesReddy and Reddy, 2001

11Information Technology in Indian Supply Chain practicesSahay et al, 2003

12Integrating information and decision making across different functional unitsSwaminadhan and Tayur, 2003

13Strategic Planning for Information Technology in Supply Chain ManagementGunasekharan and Nagi, 2004

14Holistic view on potential positive impacts of Information Technology in Supply Chain ManagementSimchi Levi (2003) and Chopra meindl (2001)

15Strategic advantage of Information Technology in Supply Chain ManagementPorter and Miller, 1985

16Information Technology as a key for strategic advantage.

Bowersox and Dougherty, 1995

17Collaboration & Coordination of SC thoroughinformation sharingSimchi Levi, 2003

18Information Technology as one of the key cures for bullwhip effectLee et al, 1997

19Role of suppliers in adopting Information Technology toolsSlaight and Swon, 2000

20Supply Chain relationships in modern information based eraChristopher and Juttner, 2000

21Evolution of Supply Chains towards online business communicationArmstrong and Hagel, 1996

22Variability of OrderingYu et al, 2001

23Performance of Supply Chain SystemSrinivasan et al,1994

24International customer service SystemLee and Whang, 2000

25Ability of Information Technology in lowering coordination costElemons and Snow, 2000

26Benefits of Supply chain partnershipZhenxin et al, 2003

27Master production scheduling systemLee and Wheng, 2000

28How do suppliers benefit from Information Technology in Supply Chain ManagementMani Subramani, 2004

29Process improvements on supply chain performanceJayaram et al, 2007

30Assembling internet usage in U.S.Lancioni, Smith and Oliva, 2008

31Business communication and electronic data interchangePhilip and Pederson, 1997

32Role of internet in building commercially viable Supply chainsGroham and Hardaker, 2000

33Internet usage in Indian CompaniesRahman, 2009

34Critical Success factors in Information Technology applications

Gunasekharan, Ngai, 2010

35Developing an information model for Supply Chain information flowAbul Mukid, Mohammed Mukoddes, Javed Kaiser, June 2010

36Decision support systemsPeter trikman, March, 2010

37Impact of Information Technology in Supply Chain Management paradigm shiftsSunil Bharadwaj, 2011

38Supply Chain coordinationArun kanda, S.G.Deshmukh, 2011

39E- commerce in Supply Chain ManagementNarid Nikathkar, 2011

40Information Technology towards Supply Chain AgilityMd. Jovonmardi, Ali Abdi, July, 2012

41Information Technology in Supply Chain ManagementYatish Ganganwar, 2012

42Role of Information Technology in Supply ChainMd.. Akhshabi, 2012

43Supply Chain Risk Management awarenessJarekorn Filsinger, 2012

44Strategic impact of Information Technology on Supply ChainHasan Kursat, 2012

45Supply Chain visibilityMike Giguere, Nov, 2012

III. RESEARCH GAPFrom the above discussions it is understood that information technology has forced the Indian firms to increase the use of internet and other information based technologies like Electronic Data Interchange, Enterprise Resource Planning etc.Information technology can bring great improvements in Indian Supply Chain practices. (Sahay et al, 2003). The information technology has created opportunities to integrate information and decision making across different functional units (Swaminadhan and Tayur, 2003).There are research works which focused on supply chains in India. But when it comes to the literature which comprehensively deals with the issues of Information Technology and its impact when integrated with contemporary supply chain practices, the studies are few.This gap in literature provides areas of ample research in the field of analysis of impact of integration of Information Technology and Indian Supply Chain practices in various industries. There is a scope to study the profile of impact of Information Technology in each industry, comparing and contrasting different industries. Studies are required to be done to throw light on the impact and the potential benefits of the Information Technology which will help the companies to meet their objectives of their supply chains in maximizing their customers satisfaction as well as maximizing their profits.The research available till now discussed various issues focussing on the role of the information technology in various functions of Supply Chain Management in developed countries. However, as far as the Indian scenario is concerned, not many studies deal with the impact of Information Technology on Indian Supply Chain practices. A big chunk has yet to tap the benefits of information technology (Rahman, 2003).

IV. NEED FOR THE STUDY There are numerous articles on the strategies, techniques and technologies for the design & development of Supply Chain Management. Also, several literature survey papers which include taxonomy of Supply Chain Management, Modelling and analysis of Supply Chain Management are available. However, there are very few literature survey articles that deal with Information Technology in Supply Chain Management. However, it is impossible to achieve an effective supply chain without IT. Since suppliers are located all over the world, it is essential to integrate the activities both inside and outside of an organization. This requires an integrated information system for sharing information on various value-adding activities along the supply chain. Information Technology is like a nerve system in Supply Chain Management. The existing literature and articles on Information Technology in supply chain discusses only the implications of one or two aspects of supply chain, for example, strategies, tools and techniques, but not entirely. However, a comprehensive study of Information Technology in Supply Chain Management will be useful to identify the critical success factors of Information Technology for an integrated supply chain. Considering the importance of Information Technology in achieving effective Supply Chain Management, an attempt has been made in this research. This study tries to identify the impact of integration of supply chain and information technology in FMCG industry which can provide an answer to paradigm shift of the industry and helps to register the changes happened and changes to come.

V. OBJECTIVES OF THE STUDY To Examine the usage of information technology in Supply Chain Management in FMCG industry. To identify the implementation issues of information technology in Supply Chain Management in FMCG industry. To understand and measure the impact of information technology on Supply Chain Management in FMCG industry. To analyze the integration of information technology and Supply Chain with distributors and suppliers in FMCG industry.

VI. SCOPE OF THE STUDYAdvances in Information Technology have forced the Indian firms to increase the use of internet and other information based technologies like Electronic Data Interchange. The information technology will act as a key driver and glue to grab the opportunities and encounters the challenges in Supply Chain Management with the goal of creating an integrated, coordinated supply chain.The research focusses on Information Technology and its impact on Supply Chain Management to become more efficient and competitive in managing the explosion of data and information needs specifically in Fast moving consumer goods industry.

VII. HYPOTHESES1. There is no relationship between company profile and usage of Information Technology in Supply Chain Management in FMCG industry.2. There is no relationship between company profile and implementation issues of Information Technology in Supply Chain Management in FMCG industry.3. There is no relationship between company profile and impact of information technology in Supply Chain Management in FMCG industry.4. There is no relationship between company profile and integration of Information Technology and Supply Chain Management with distributors and suppliers in FMCG industry.

VIII. RESEARCH METHODOLOGYVIII.1. Data Sources:The data sources required for the study include both primary and secondary. The primary data sources were the respondents in FMCG industry in Bangalore city. The secondary data sources were: relevant websites, journals, business magazines, books, dissertations and data bases for theoretical support.VIII.2. Research Design:DESCRIPTIVE research design is adopted where in the objectives are clearly established followed by design of questionnaire and analysis.VIII.3. Research Instrument:STRUCTURED QUESTIONNAIRE was used to collect the information from respondents in Bangalore city. Questionnaire used in this study was open ended, closed ended, multiple choice and dichotomous, scale ranging from strongly disagree to strongly agree using nominal, interval and likert five point scale.VIII.4. Sampling Frame:Sampling frame comprised of suppliers, manufacturers, distributors in FMCG industry in Bangalore city. Bangalore is the fastest growing city in Karnataka where the population is heterogeneous with diverse, cultural, religious and economic background. It has been a very good marketing centre for targeting various groups of customers. So the existence of FMCG industry is also more.

VIII.5. Sampling Design:Non Probability convenience sampling method.Sample size =200 respondents.The responses were collected during 2011-2012

VIII.6. Data Analysis:The research in this study is to explain the relative influence of Information Technology on Supply Chain Management in FMCG industry. The data is processed through an accepted statistical program SPSS 11.0. The respondents answers and data are coded after each scale. The data was analyzed using statistical techniques like chi-square test, ANOVA and correlation to find the relationship between variables.

IX. LIMITATIONS OF THE STUDY: The study was conducted only in FMCG industry in one location in Bangalore. The study focused only on information technology and its impact on Supply Chain Management.

X. FINDINGS:It is observed that in the recent times the concepts of supply chain design and management have become a popular operations paradigm. This has intensified with the development of information communication technologies to overcome the ever increasing complexity of the system driving buyer-supplier relationships.It is found that various characteristics of the companies like functional responsibility years of business attachment, industry experience, annual sales volume etc are associated with usage of Electronic Data Interchange with suppliers and distributors, priority for redesigning of information technology, implementation issues, business impact and supply chain coordination.As the market is electronically connected and dynamic in nature, companies are trying to improve their agility level with the objective of being flexible and responsive to meet the changing market requirements.

XI. SUGGESTIONS:Companies need to invest large amount of money for redesigning internal organizational and technical processes, changing traditional and fundamental product distribution channels and customer service procedure and training staff to achieve Information Technology enabled supply chain.To compete in a new market, organizations need to be capable of reconfiguring its resources to meet the changing requirements. This requires organizations to have an effective supply chain.

XII. FUTURE STUDY:The study can be extended to study the profile of impact of Information Technology in each industry comparing and contrasting different industries.

XIII. CHAPTERISATION:The present study has been divided into FIVE chapters. The chapter sequences and the topics dealt with are as follows.

Chapter I Provides introduction leading to the discussion on Supply Chain Management, Information Technology and its Impact on Supply Chain Management and FMCG Industry.

Chapter II Reviews the theoretical bases for this study, supported by discussion on major contribution of the existing literature. The objective of this chapter was to provide readers on overview of previous scholars who directly and indirectly contributed to the impact of Information Technology on Supply Chain Management. And the research gaps were identified based on the review.

Chapter IIIDiscusses background of the study, research question and research purpose, hypotheses and research methodology. The research methodology deals with description of study area, research approach, research design, instrument selection and data collection, analysis and hypothesis testing

Chapter IVPresents the data analysis, its results and related discussion in great detail related to the impact of Information Technology factors on Supply Chain Management in FMCG industry.

Chapter VIs the core of the dissertation in which research findings are presented conclusions are drawn, recommendations are made and offers implications for future research.

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