A case study of leading fire and safety manufacturing company in u.a.e
Summer Internship Project Report
OPTIMIZING SUPPLY CHAIN PERFORMANCE:
A CASE STUDY OF LEADING FIRE AND SAFETY
MANUFACTURING COMPANY IN U.A.E
MBA – General (Batch 2012-2014)
Under the supervision of
DR. Anita Mirchandani
Faculty of Management Sciences
Submitted In Partial Fulfillment of the Requirements for the
Degree of Master of Business Administration - General
AMITY UNIVERSITY DUBAI
P.O. BOX NO 345019
Title of the Project Report: OPTIMIZING SUPPLY CHAIN PERFORMANCE: A
CASE STUDY OF LEADING FIRE AND SAFETY MANUFACTURING
COMPANY IN U.A.E.
a) That the work presented for assessment in this Summer Internship Report is my own,
that it has not previously been presented for another assessment and that my debts
(for words, data, arguments and ideas) have been appropriately acknowledged.
b) That the work conforms to the guidelines for style and presentation set out in the
Place: Dubai AUD0260
Date: MBA – General (Batch 2012-2014)
Amity University Dubai
I, Dr. Anita Mirchandani hereby certify that Ms. Anu Damodaran student of Master of
Business Administration – General at Amity University Dubai, has completed the
Summer Internship Project Report on “OPTIMIZING SUPPLY CHAIN
PERFORMANCE – A CASE STUDY OF LEADING FIRE AND SAFETY
MANUFACTURING COMPANY IN U.A.E.”, under my guidance.
Place: Dubai Dr. Anita Mirchandani
Date: Faculty of Management Sciences
Amity University Dubai
I, Ms. Anu Damodaran, sincerely thank and acknowledge the valuable inputs and
guidance extended to me by Dr. Anita Mirchandani, Faculty of Management Sciences,
Amity University Dubai, toward successful completion of this summer internship project
report on “OPTIMIZING SUPPLY CHAIN PERFORMANCE – A CASE STUDY
OF LEADING FIRE AND SAFETY MANUFACTURING COMPANY IN U.A.E.”.
I extend my sincere thanks to Mr. Amin Bekai, Senior Management Team, Managers,
Staff and all Employees at Fire and Safety Manufacturing Company in U.A.E. for their
support and help during my summer internship which has proved to be very fruitful
toward completion of this report.
Ms. Anu Damodaran
MBA – General (Batch 2012-2014)
Amity University Dubai
TABLE OF CONTENTS
Sno TOPIC Page No
1 ABSTRACT 1
2 OBJECTIVE 2
3 CHAPTER – I 3
I.1 INTRODUCTION 3
i. COMPANY PROFILE 3
ii. GOALS 4
I.2 CONCEPTS AND RELEVANT INFORMATION – SUPPLY CHAIN
i. BACKGROUND 5
ii. DEFINITION 5
iii. DECISION PHASES 6
iv. SUPPLY CHAIN 6
I.3 SUPPLY CHAIN EFFICIENCY AND RESPONSIVENESS 7
i. DEFINITION 7
ii. INDICATION 7
I.4 IMPROVING SUPPLY CHAIN EFFICIENCY AND RESPONSIVENESS 9
i. STRATEGIC FIT 9
I.5 IMPACTS OF IMPROVING SUPPLY CHAIN EFFICIENCY AND
i. PERFORMANCE MEASUREMENT SYSTEMS 12
ii. PERFORMANCE MODEL - SCOR MODEL 14
iii. OPTIMIZATION 15
I.6 CHALLENGES AND RISKS IN IMPROVING SUPPLY CHAIN
EFFICIENCY AND RESPONSIVENESS
I.7 CORRESPONDING INFORMATION THAT IS RELEVANT TO SUPPLY
i. INFORMATION TECHNOLOGY SYSTEMS 18
ii. INFORMATION AND COORDINATION 19
4 CHAPTER II 23
II.1 LITERATURE REVIEW 23
i. INTRODUCTION 23
ii. FLOW COORDINATION, INFORMATION SHARING AND
iii. PERFORMANCE MEASUREMENT 30
iv. CONCLUSION 32
v. RESEARCH PROBLEM AND QUESTIONS 32
5 CHAPTER III 34
III.1 RESEARCH METHODS AND PROCEDURES 34
i. PURPOSE 34
ii. RESEARCH DESIGN 34
iii. METHODS OF DATA COLLECTION 34
iv. SAMPLING 34
v. PARTICIPANTS 34
vi. TYPE OF DATA COLLECTED 35
vii. DATA ANALYSIS 35
viii. FINDINGS 35
ix. LIMITATIONS 38
x. CHALLENGES 38
6 CHAPTER – IV 40
IV.1 ANALYSIS 40
i. TOWS ANALYSIS 40
IV.2 EXISTING SUPPLY CHAIN PROCESS FLOW CHART 42
i. AS-IS MODEL 42
ii. OUTCOMES FROM THE ANALYSIS OF THE AS-IS MODEL 42
iii. OPPORTUNITIES FOR SUPPLY CHAIN IMPROVEMENT 42
IV.3 TO-BE MODEL 43
i. FOUNDATION 43
ii. MATURITY MODEL 44
7 DISCUSSION 51
8 SUGGESTION 52
9 CONCLUSION 55
APPENDIX A FOR AS-IS MODEL
APPENDIX B FOR BEST PRACTICE MEASURES
LIST OF TABLES
Sno. TABLE NAME Page No
COMPARISON OF EFFICIENT AND RESPONSIVE SUPPLY
IMPACT OF SUPPLY SOURCE CAPABILITY ON SUPPLY
CLASSIFICATION OF PRODUCT INFORMATION (HUANG, LAU
ET AL 2003)
Table 4 COMPARISON OF TRADITIONAL V.S. INNOVATIVE PMS 32
LIST OF FIGURES
Sno. FIGURE NAME Page No
Figure 1 THE RESPONSIVENESS SPECTRUM 10
Figure 2 FINDING THE ZONE OF STRATEGIC FIT 11
Figure 3 END-TO-END PROCESS CHAIN 24
Figure 4 SCPM3 ( SOURCE: RESEARCH DATA) 45
Figure 5 VALUE CHAIN PLANNING 47
Figure 6 SUPPLY CHAIN MANAGEMENT 47
Figure 7 THINKABLE CHANGES TO EXISTING PROCESS 48
Figure 8 EXAMPLE PROCESS FLOW 49
Figure 9 POSSIBLE VARIATION POINTS 50
OPTIMIZING SUPPLY CHAIN PERFORMANCE – A CASE STUDY OF LEADING
FIRE AND SAFETY MANUFACTURING COMPANY IN U.A.E
The purpose of this study and report is to know some of the current developments in the
theory and practice of supply chain management and to highlight the challenges,
prospects and developments. This report is based on two month learning of supply chain
process from the internship in a Fire and Safety Manufacturing Company1
Around 8 highly qualified and experienced managers and 20 experienced staff across
various functions of the supply chain were interviewed and observed. Data has also been
collected from published papers, working papers and books. The report and case study
tells that supply chain management is still evolving in terms of both theory and practice.
The report finds range of key hurdles and supports to supply chain management and it
also includes an assessment of the main trends. The study reveals the significant gaps
between theory and practice of supply chain management. The main challenge is
identified as who could or who should manage the supply chain. An attempt has been
made to suggest practical steps to overcome the challenges. This report is original in
drawing a systematic study to assess current theory and current developments. The study
tries to show the way for managers to meet the present and future challenges in supply
Keywords: Supply Chain Management
This will be referred as “The Company” in the following pages
a) To understand supply chain efficiency and responsiveness
b) To know how supply chain efficiency and responsiveness can be improved
c) To recognize the impacts of improving supply chain efficiency and
d) To identify the challenges to improve supply chain efficiency and responsiveness
e) To spot the risks in implementing efficient and responsive supply chains
CHAPTER - I
This report is based on my two month summer internship as a mandatory requirement of
the MBA degree program. The internship was carried out in “The Company”, Dubai. As
a part of the training program I was deputed to the following departments/functional
areas of the supply chain at “The Company”:
Dispatch and delivery
Procurement and purchasing
i. COMPANY PROFILE
The company is amongst the world’s largest manufacturers and full solution providers of
firefighting equipment, fire protection systems, fire alarm, security systems and safety
engineering under one roof. The company was established with a vision to be the world’s
most recognized fire Protection Company through quality and development to save lives
and properties. Headquartered in Dubai, UAE, the company has spanned the globe by
serving over 108 countries worldwide.
The company undertakes turnkey projects from design, supply, installation, testing and
commissioning of various systems like fire detection, fire alarm, fire suppression and fire
fighting systems. The company provides after sales service, spare parts and training. It
has a maintenance team that provides 24/7 service to ensure efficiency of the fire
protection systems for its clients.
The company’s product range includes different kinds of fire extinguishers, custom-made
fire cabinets, heavy-duty fire hoses and reels, high capacity powerful fire pumps, mobile
fire fighting systems including Compressed Air Foam Systems (CAF), fire-rated doors,
fire detection and alarm systems, Closed Circuit Television (CCTV), ambulances,
extendable mobile hospitals, platform vehicles, rescue vehicles, fire trucks, and most
advanced Airport Rescue and fire fighting (ARFF) vehicle.
“Mission of the company is to empower customer to secure life, property and business
by delivering high quality and innovative fire protection solutions and knowledge using
world class manufacturing processes through best engineering practice and expand
I was able to frame some learning goals during the internship with the guidance and
assistance from the industry guide.
To learn the basic concepts and relevant information about supply chain
To understand the processes and functioning of supply chain areas in the
To get experience and collect data in an environment that is new to me.
To identify the gaps in the existing process.
To review and analyse the existing process.
To propose changes that will improve the performance of existing process.
With guidance and assistance from the faculty guide, my goal was to use the skills and
knowledge that I gained at work, to organize and write the project report.
This report is organized as follows. Chapter I focus is on concepts and relevant
information that are related to supply chain management, supply chain efficiency and
responsiveness, improving supply chain efficiency and responsiveness, measuring
performance of supply chain, challenges and risks of supply chain management. Some
additional relevant information which is important to understand and to connect to the
topic of supply chain management has also been highlighted in this chapter. Chapter II
emphasizes on the literature review and research problem. Chapters III and IV describes
the research methods and analysis. Final part of the report comes up with discussion,
suggestion and conclusion on the topic of study.
I.2 CONCEPTS AND RELEVANT INFORMATION - SUPPLY CHAIN
Lot of confusion prevails about when and by whom the term "Supply Chain
Management" was first mentioned and used. There is some evidence about when it was
first seen in print. It was first seen in an article published in the German business
magazine "Wirtschaftswoche" in 1982. According to Partsch, in 1979/1980 a small
team of consultants in the Operations Group of Booz Allen & Hamilton in Europe
coined the phrase of "Supply Chain Management". A Pan-European Supply Chain
Strategy plus implementation project for the company Landis & Gyr (today integrated
into Siemens) in Zug, Switzerland was performed in the years 1980 - 1981 and later
published in the German business magazine "Wirtschaftswoche" in 1982. The term
“Supply Chain Management” SCM entered public domain when Keith Oliver, a
consultant at Booz Allen Hamilton, used it in an interview with the Financial Times in
APICS the Association for Operation Management defines supply chain management as:
“The design, planning, execution, control, and monitoring of supply chain activities
with the objective of creating net value, building a competitive infrastructure,
leveraging worldwide logistics, synchronizing supply with demand, and measuring
iii. DECISION PHASES
Decision phases required for a successful supply chain management
Design or strategy
In the design or strategy phase, decisions about resource allocation, processes to be
performed at each stage, location and capacities of production and warehousing,
outsourcing, transportation modes and the type of information system to be utilized are
The planning phase includes uncertainties in demand, exchange rates, competition etc. A
set of operating policies that govern short-term operations are defined as a result of the
The goal during the operation phase is to exploit the reduction of uncertainty so as to
optimize performance. In this phase, inventory or production is allocated to individual
orders, date is set against an order to be filled, pick lists are generated at warehouse,
allocation of order to shipping mode and shipment, setting delivery schedule of trucks
and placing replenishment orders take place.
iv. SUPPLY CHAIN
A supply chain means all parties which include suppliers, sales and marketing,
procurement, stores and purchase, transport and logistics, manufacturing, finance and
operations, human resources, information technology, quality control, distribution,
retailer, customer, customer care and service that are directly or indirectly involved in
fulfilling a customer request. Stages in a supply chain are connected by the flow of
information, products and funds in both directions. The objective of every supply chain
should be customer satisfaction. The strategic objective of every supply chain aims at
maximizing the overall shareholder value by maximizing return on investment made by
the investors. The fact is that the customer is the only source of revenue for any
I.3 SUPPLY CHAIN EFFICIENCY AND RESPONSIVENESS
A supply chain is considered to be efficient if the focus is on cost reduction and there is
no wastage of resources and also if there are no non-value added activities (Naylor, Naim
and Berry, 1999, p.108).
“The ability to react purposefully and within an appropriate time-scale to customer
demand or changes in the market place, to bring about or maintain competitive
advantage” can be defined as responsiveness (Holweg, 2005, p.605).
As products go through their life cycle there is a change in demand characteristics and the
needs of the customer segments being served. As the product and production
technologies mature the supply characteristics also change.
Beginning stages of a product’s life cycle:
Time is crucial to gaining sales
Product availability is crucial to capturing the market
Cost is a secondary consideration
In these situations responsiveness is the most important characteristics of the supply
Later stages of a product’s life cycle:
Demand becomes certain
Supply is predictable
Increase in competitive pressure
Price becomes a significant factor in customer choice
In these situations efficiency is the most important characteristic of the supply chain.
TABLE 1 - COMPARISON OF EFFICIENT AND RESPONSIVE SUPPLY
Efficient supply chains Responsive supply chains
Supply demand at lowest
Respond quickly to
Maximize performance at a
minimum product cost
Create modularity to allow
postponement of product
Lower margins because
price is a prime customer
Higher margins because
price is not a prime
Lower costs through high
flexibility to buffer against
Minimize inventory to
Maintain buffer inventory
to deal with demand/supply
Lead time inventory
Reduce, but not at the
expense of costs
Reduce aggressively even
if costs are significant
Select based on cost and
Select based on speed,
flexibility, reliability and
I.4 IMPROVING SUPPLY CHAIN EFFICIENCY AND RESPONSIVENESS
i. STRATEGIC FIT
Strategic fit refers to consistency between the customer priorities that the competitive
strategy hopes to satisfy and the supply chain capabilities that the supply chain strategy
aims to build.
There are three basic steps to achieving the strategic fit:
Understanding the customer and supply chain uncertainty
Understanding the supply chain capabilities
Restructure the supply chain or alter the competitive strategy
Uncertainty: Customer or demand uncertainty reflects the uncertainty of customer
demand for a product.
Demand uncertainty can be reduced by the following means:
Improve forecasting by using better market intelligence
Reduce replenishment lead time
Postponement of product differentiation to the point of sale in a multiproduct
Tailored sourcing – low lead time but costly supplier as a backup for long lead
time but low cost supplier
TABLE 2 - IMPACT OF SUPPLY SOURCE CAPABILITY ON SUPPLY
Supply source capability Causes supply uncertainty to
Frequent breakdowns Increases
Unpredictable and low yields Increases
Poor quality Increases
Limited supply capacity Increases
Inflexible supply capacity Increases
Evolving production process Increases
Source: Adapted from “Aligning Supply Chain Strategies with Product Uncertainties”
Hau L. Lee, California Management Review (Spring 2002), 105-19.
Capabilities: Supply chain capabilities can be understood by studying the supply
Respond to wide ranges of quantities demanded
Meet short lead times
Handle a large variety of products
Build highly innovative products
Meet a high service level
Handle supply uncertainty
FIGURE 1 - THE RESPONSIVENESS SPECTRUM
Highly efficient Somewhat efficient Somewhat responsive Highly responsive
Highly efficient - Production scheduled weeks or months in advance with little variety or
Somewhat efficient – Make to stock manufacturer with production lead time of several
Somewhat responsive – Delivering a large variety of products in a couple of weeks
Highly responsive – Changing merchandise mix by location and time of day
Increasing implied uncertainty from supply sources and customers is served best by
increasing responsiveness from the supply chain.
FIGURE 2 - FINDING THE ZONE OF STRATEGIC FIT (RESTRUCTURE)
Responsive supply chain
Zone of strategic fit
Efficient supply chain
Certain demand Implied uncertainty spectrum Uncertain demand
A given level of responsiveness can be achieved in a supply chain by adjusting the roles
of each stage of the supply chain.
It is important to remember that:
No supply chain strategy is always right
For a given competitive strategy there is a right supply chain strategy
Just like product life cycles, competitors can also change the setting. This calls for a
change in competitive strategy of the firm. When competitive strategy of the firm is
changed, the supply chain strategy must also be changed to maintain strategic fit. In this
context it is very crucial for managers to understand the impact of obstacles to achieve
strategic fit which is critical to a company’s ability to reap the optimum performance
from its supply chain.
The main obstacles are:
Increasing variety of products
Decreasing product life cycles
Increasingly demanding customers
Fragmentation of supply chain ownership
Difficulty in creating and executing new supply chain strategies
Currency conversions at different times
Data is unavailable
Data is available but in incompatible format
Different unit types of the data
Same information is recorded in different ways
Software specifications that rely on different internal data formats
Too much of unwanted and non-actionable raw data that misses the important
Data gaps especially of tracking between supply chain partners
I.5 IMPACTS OF IMPROVING SUPPLY CHAIN EFFICIENCY AND
The least expensive and least time-consuming activity that will show the improvement in
supply chain operations is by identifying, developing and implementing performance
measurement systems and performance metrics.
i. PERFORMANCE MEASUREMENT SYSTEMS
To develop and maintain a supply chain performance measurement is one of the main
challenges faced in supply chains. Supply chains most often consist of different
departments, each reporting to different supervisors and managers and they in turn having
its own top management. If this is the nature of supply chain, then metrics, measurement
and improvement system should be based on transparency to achieve supply chain
performance and profitability.
Some of the influential performance measurement systems are:
Balanced Scorecard Model (BSC)
Performance prism (PPR)
Productivity Measurement and Enhancement System (ProMES)
BSC model was created by Kaplan and Norton (1992) of the Harvard Business School.
This model complements the traditional financial performance measures with key
performance indicators (KPIs) in non-financial areas.
The building blocks of BSC are:
Financial – ROI, ROCE, EVA
Customer – Customer satisfaction and market share
Internal process – Processes that have greatest impact on customer satisfaction
and financial performance
Learning and growth – long term improvement through people, systems and
PPR is a three dimensional model in the shape of a prism developed by Neely and
Adams (2000). This model looks at five distinct yet logically interlinked performance
Stakeholder satisfaction – which are the key stakeholders and what are their wants
Strategies – what strategies are required to satisfy the wants and needs of the
Processes – what processes are required to execute these strategies?
Capabilities – what are the capabilities in terms of people, practices, technology
and infrastructure required to operate and enhance these processes?
Stakeholder contribution – what is the contribution needed from the key
stakeholders if we want to maintain and develop these capabilities?
ProMES was developed by Pritchard (1990). This system is built around the theory of
work behaviour and motivational forces. Motivational force of a person according to
Pritchard is the result of a person’s acts, products, evaluations, outcomes and need
satisfaction. ProMES is a bottom up approach where people are really involved in
designing the system. But the disadvantage is that the level of contribution is already set
and therefore it could result in non-alignment of PMS of business units with company’s
ii. PERFORMANCE MODEL - SCOR MODEL
The Swedish firm IKEA developed a performance model called “the product
management model”. This model consists of measures within five different areas:
A list of commonly used metrics that are endorsed by the SCOR model:
Delivery in full
Delivery on time
Delivery in specification
Fill rate for stock
Return processing costs
A company should focus on the metrics which reflects its customer needs and market
realities rather than focusing on best practice norms in the industry. The challenge is to
integrate functional performance measures to overall performance of the supply chain.
The management’s attention and willingness is required to share information with other
supply chain members. It must be understood that working together is the only way that
organizations can better satisfy customer requirements for quality, cost, product and
service which will enable optimizing the supply chain performance.
Optimization assures to develop a company’s supply chain performance in many
Reduced supply chain costs
Improved product margins
Increased manufacturing throughput
Enhanced return on assets
Some rules for supply chain optimization
Quantify and measure objectives
Required processes should be represented by models
Data should be accurate, well-timed and complete
Fully automated data transfer should be integrated
Solutions should facilitate execution, management and control
Algorithms should be capable to exploit individual problem structure
People expertise in domain and technology is required to support the models, data
and optimization engines
Process should have the ability to continuously improve and support optimization
Considering the total cost of technology, people and operations ROI should be
Companies will be at a significant disadvantage if they can’t tell in real time what is
happening in their supply chains.
They will be:
Unable to mitigate the bullwhip effect since they can’t recognize the disruptions
Forced to react to complex situations since they can’t recognize the full extent of
Companies can enjoy the following competitive advantages if they synchronize
supply chain and have real time data.
Minimize the bullwhip effect
Visibility to partner systems
Visibility allows collaboration and cooperation between partners
Back end processing, modifications and updates can happen as decisions are
Changes and expansion in supply chain software
Successful optimization of supply chains requires:
Technology that utilizes enterprise assets to synchronize data among various
operating units and trading partners in the supply chain
High speed, high performance, scalable, reliable data transfer and message
Strong security and governance quality that does not interfere with real time data
Solution that must be able to plug in all major supply chain management solutions
like CRM, SRM, and ERP manufacturing package, logistic pipelines, carrier data
systems and transportation planning systems
Solution that must be capable of integrating any legacy on custom planning,
manufacturing, distribution and accounting systems in to the supply chain
Business process automation, standardization, exception monitoring and reporting
Complex event processing technology for pattern recognition by measuring
against historical norms or metrics
Intelligent data presentation and visualization capabilities in concise and
actionable form in dashboard or in a portal, alarms, alerts, reports and data screens
by use of KPIs and scorecards
Integration of these displays with analytics packages for on the spot analysis
I.6 CHALLENGES AND RISKS IN IMPROVING SUPPLY CHAIN EFFICIENCY
Reliable end to end supply and demand planning has become increasingly challenging
because of erratic macroeconomic cycles of growth, contraction and recovery. Customers
are tightening their requirements in terms of throughput time and perfect order delivery
while simultaneously demanding cost reductions especially in B2B business
relationships. Supply chain executives face a range of challenges such as profitability,
cost management, supply chain flexibility, competitive pressures, customer requirements,
volatility, skills gaps and sustainability.
Top supply chain leaders have used these three drivers to cope with these challenges.
Perfect order delivery
Supply chain flexibility
Four distinct categories of supply chain risk
Macro-economic risks – Businesses are able to access less expensive labor and materials
and opening up new markets as a result of globalization. But globalization also increases
supply chain complexity and magnifies the impact of supply chain disruptions caused by
natural disasters, political turmoil, piracy and regional economic crisis.
Extended value chain risks – On one hand outsourcing has improved efficiency and
allowed businesses to focus more attention on their core competencies but on the other
hand it has also made operations more complex and exposed to third-party risks.
Operational risks – Although lean manufacturing, just-in-time inventory and capacity
rationalization have increased supply chain efficiency and responsiveness but by reducing
the slack in the network, and having reduced the error margin they still have amplified
the disruptive potential of whatever problems happen to arise.
Functional risks – are risks which are related to functions that support supply chain
activities, such as Finance and Accounts, Human resources, Legal and Information
Technology. Any disruption or breach in the critical applications and systems by which
the supply chains are enabled and accumulated can have an immediate impact on the
I.7 CORRESPONDING INFORMATION THAT IS RELEVANT TO SUPPLY
i. INFORMATION TECHNOLOGY SYSTEMS
Sharing the data to what is truly required can decrease investment in IT and can improve
the chances of successful collaboration. The task of supply and demand management is
often divided into different functions in most companies. Sales and marketing typically
manage demand while operations manage supply. It is important that these functions are
coordinated to plan for predictable viability together. During the process of getting new
IT systems running, a firm is forced to move from the old processes it used in its
operations in its IT systems. Problems can be found in both business processes and
technical issues. Most often, because top management is not actively involved in making
the transition it is difficult to get the entire organization on board with the changes
brought about by a new IT system. The new system may be unable to perform as
promised and may even perform worse than the old system if a firm moves to a new
system without proper integration.
Three points to keep in mind while implementing IT systems:
Install new IT systems in an incremental manner
Firms should run duplicate systems to make sure the new system is performing
Level of complexity should be only that one needs
Operational mitigation strategies include:
Data backup systems
Security software products
ii. INFORMATION AND COORDINATION
Information must have the following characteristics for making supply chain
Information must be directionally accurate
Information must be easily accessible
Information must be important and meaningful
Supply chain coordination requires that each stage of the supply chain should take in to
account the impact its actions have on other stages. When different stages of the supply
chain have different objectives or when there is delay or distortion of information
between stages then a lack of supply chain coordination occurs.
In order to achieve coordination of the supply chain, managers must monitor the
Align goals and incentives across functions
Improve information accuracy by sharing POS data, collaborate forecasting and
planning, design a single stage control of replenishment
Improve operational performance by reducing lot sizes and replenishment lead
Stabilize pricing by moving from lot size to volume based or rate of purchase
quantity discounts (If manufacturer does not incur a very high fixed cost per
order, it is better for the supply chain to have volume-based discounts)
Build cooperation, trust and strategic partnerships within the supply chain
Quantify the bullwhip effect
Get top management commitment for coordination
Focus on communication among stages of supply chain
Efficient use of technology to improve visibility and connectivity in the supply
Share benefits of coordination equally among stages and partners of supply chain
The key obstacles which managers should identify to help achieve coordination:
Information processing obstacles
Incentive Obstacles: When incentives are offered to different participants or stages in a
supply chain it leads to actions which increases variability and reduces total supply chain
profits. These situations give rise to incentive obstacles.
Information Processing Obstacles: occur when demand information is delayed or
distorted between various stages of the supply chain, leading to high variability in orders
within the supply chain. For instance, forecasting that is based on orders and not
customer demand and that lacks information sharing.
Operational Obstacles: When actions taken in the course of placing and filling orders
lead to an increase in variability it is called as operational obstacles. E.g. ordering in large
lots, large replenishment lead times, rationing and shortage gaming. Variability of orders
is magnified up the supply chain whenever a firm places orders in lot sizes that are much
larger than the lot sizes in which demand arises. A retailer will incorporate an anticipated
growth over two weeks when placing the order if he has misinterpreted random increase
in demand as a growth trend and at the same time faces a lead time of two weeks.
The rationing scheme is a game in which retailers try to increase the size of their orders
to increase the amount supplied to them. A manufacturer who uses orders to forecast
future demand will interpret the increase in orders as an increase in demand even though
customer demand is unchanged. The manufacturer will therefore respond by building
enough capacity to be able to fill all orders received. Once all orders return to normal
level the manufacturer is left with a surplus of product and capacity.
Pricing Obstacles: When an increase in variability of orders placed occurs as a result of
pricing policies. E.g. lot size based quantity discounts and trade promotion discounts.
Behavioural Obstacles: Problems related to the way in which supply chain is structured
and the way communication occurs between different stages are caused by behavioural
Some of the behavioural obstacles are:
Each stage views its action closely and separately
Each stage is unable to see the impact of its actions on the other stages
Stages of supply chain react to their current situations
Stages in supply chain do not try to identify the root causes of a situation
Different stages of supply chain blame each other for fluctuations rather than
working together as partners
Stages of supply chain do not learn from their local actions because the
consequences of their action occur elsewhere in the supply chain
Supply chain partners become opportunistic when there is lack of trust and it
results in duplication of efforts and lack of information sharing
All the above happens at the expense of supply chain performance
CHAPTER - II
II.1 LITERATURE REVIEW
The literature review shares limited insights and evidences that are fundamentally allied
to the research problem and questions that are summarized and proposed in the last part
of this section.
To successfully satisfy the needs and demands of customers means; the extent to which
the business can make the customers happy and delighted with their products and service.
Increasingly, companies today are realizing the financial gains of optimizing the supply
chain performance by integrating with suppliers and customers. The economic
uncertainty and global competition in today’s market scenario calls for a serious look into
the optimization of the supply chain performance.
It is a fact that there is a lack of availability of useful timely data, information sharing and
poor visibility across the supply chain which is indispensable for turning the supply chain
into a competitive benefit. It is also evident that there is a lack of systems to measure
performance and benchmark supply chains which results in failure to meet customer
expectations and satisfaction and optimization of a company’s performance. These are
some of the main conflicts that today’s Supply Chain Managers face in many of the
The objective of optimizing supply chain performance can be achieved when there is
coordination wholly at all stage of supply chain which is mainly based on information
sharing. The performance of any supply chain is often determined by three logistical
drivers which are facilities, inventory, transportation and the three cross-functional
drivers that are information, sourcing and pricing. The evolution of new forms of
organizations such as virtual enterprises, global manufacturing and logistics places flow
coordination and information sharing of supply chains as strategically the most important
element in managing the performance of any business.
FIGURE 3 – END-TO-END PROCESS CHAIN
ii. FLOW COORDINATION, INFORMATION SHARING AND VISIBILITY
A research conducted by Anand and Mendelson (1997) considers four coordination
(1) Centralized, using all data but none of the local knowledge;
(2) Decentralized, each market using all data and local knowledge;
(3) Fully distributed, all data are shared so that each branch can make decisions based on
its own knowledge and all available data in the system;
(4) No information, only local knowledge is used in decentralized decision environment.
Anand and Mendelson (1997) studied the impact of these coordination structures on the
performance of a firm. They found that fully distributed coordination structure does
better than decentralized and centralized system. The performance of decentralized
system dominates in a number of cases than the superior coordination of the centralized
system. The centralized system does better where local knowledge is of little value for a
small number of markets
Lee et al. (1997) suggested channel coordination, operational efficiency and information
sharing to improve the overall supply chain performance. Current research often
emphasizes a single coordination mode as the act of managing specific objects such as
interdependent processes, information and knowledge. Little attention has been given to
exposing different coordination modes and their interactions. An extensive study
conducted by Chen (1998) reveals that the costs of centralized information system are on
lower than the decentralized information system.
Cachon and Fisher (2000) study and compare two information-technology-related
sources of supply chain improvement and the value of sharing real-time demand
information. Results revealed that full information sharing reduces system. The authors
conclude that while information sharing reduces costs, flowing goods through supply
chain faster and in smaller batches gives much greater savings.
Repeated emphasis is given in literature to the increased importance of information
systems to support supply chain integration (Pant et al 2003, Bendoly and Kaefer 2004,
Gunasekaran et al 2004, Gunasekaran and Ngai 2004, Gunasekaran et al 2005, Kelle and
Akbulut 2005, Akyuz and Rehan 2009). The virtual integration of the entire supply chain
to facilitate the coordination among different functions is done by e-supply chain
management. (Gimenez and Lourenco 2004) refer to the impact that internet has on the
integration of key business processes that provide products, services, information and add
value for customers and other stakeholders from end user to original suppliers as e-SCM.
Lee and Whang 2000, Xu, Doug et al. 2001, Yu, Yan et al. 2001, have found great
influences on supply chain performance, particularly in reducing the bullwhip effect as a
result information sharing. Lee 2000, Mentzer 2004 says for companies to be more
responsive to customer’s demands there should be better management of information.
Cooper et al (1997) suggest that partners which companies want to be closely integrated
need to be carefully determined. Raghunatan (2003) found that when demands amongst
retailers are independent, the supplier will include more sharing partners because the
value of information sharing will significantly increase.
Lau et al (2002) examined four combinations of sharing demand and inventory levels.
The highest total supply chain cost when compared to no information sharing at all
occurred when demand and inventory levels were shared only between retailers and
distributors. In full sharing mode the gain was highest. It is noted that information sharing
did not benefit all firms.
Huang and Gangopadhyay (2004) studied and analysed three scenarios in a four stage
supply chain comprising of customers, retailers, distributors, wholesalers and
The three scenarios are:
1) No information sharing
2) Partial information sharing
3) Full information sharing
Decreased inventory levels at wholesalers were seen with higher degree of information
sharing. When demand is volatile the benefits are more.
Smaros et al (2003) studied a three level supply chain in which the manufacturer used a
combination of order data from non-vendor managed inventory customers and sales data
from vendor managed inventory (VMI) customers in its production planning. The study
showed that for products with low replenishment frequency, manufacturers benefit from
even a little increase of involvement and information sharing. Mentzer (2004) states that
all supply chain partners cannot be included in information sharing.
Huang et al (2003) classified product information into six categories pertaining to
product, process, resource, inventory, and order and planning.
TABLE 3 - CLASSIFICATION OF PRODUCT INFORMATION (HUANG, LAU
ET AL 2003)
Category Product information
Product Product structure
Material lead time
Lead time variance
Order transfer lead time
Order batch size
Order due date
Lee, So and Tang (2000) found that when demand correlation is high over time, highly
variable, or the lead-time is long then information sharing has more value. By sharing
forecasts of demand of products that have high demand variability significant benefits
can be achieved (Angulo, Natchmann et al 2004). The relationship between trading
partners influences the selection of the type of shared information. Part inventories can be
reduced without risking stock-outs by sharing production schedules with part suppliers.
Lee and Whang (2000) showed that new product development can be facilitated by
sharing information and close coordination between retailers and manufacturers. More
research is needed to identify what information should be shared with supply chain
partners that give most benefits.
Two main attributes of information identified by researchers are timeliness and
completeness of information. Bourland et al (1996) found that sharing demand
information daily can decrease supplier’s expected inventory cost especially if demand
variability is high. Companies might not want to share detail data with partners as they
fear that it might weaken a company’s negotiating position by leaking of data to their
competitors. Studies show that when trading partners are given incentives in various
forms such as lower wholesale prices, flexible payment terms etc. companies gain a lot
from sharing information (Bourland, Powell et al 1996; Yu, Yan et al 2001; Mitra and
Chatterjee 2004). Further investigation is needed to know how to share the benefits of
information sharing amongst partners.
Kulp et al (2004) did a survey and found that highest profit margin companies exchange
information and also continue it with close collaboration. Work realignment can be
effective once information sharing is in place. Work realignment is basically
redistribution of physical activities among members of supply chain. A cultural shift in
organization to treat supply chain partners as parts of organization is needed for work
realignment. When past behaviours such as functional thinking silos still persist with
people in the organization, significant benefits from information sharing will not happen.
People can impede or facilitate collaboration is argued by Mentzer (2004).
‘The bullwhip effect” is the phenomenon in which information is distorted in such a way
that it differs greatly from the end customer’s demand (Lee, H.L., V. Padmanabhan, and
S. Whang 1997). Better demand forecasting and more accurate production planning can
be achieved by sharing the actual sales data and inventory information with upstream
partners in the demand-supply network leads to (Lee, H.L., V. Padmanabhan, and S.
Whang 1997). Researchers agree that the performance of supply chain can be improved
by increased visibility (Cachon G.P. and M. Fisher, 2000, Lee, H.L. and S. Whang, 2000,
Grean, M. and M.J. Shaw, 2000, Kulp, Susan Cohen, Lee, Hau L., Ofek, Elie, 2004,
Raghunathan S.2003, Yu, Z., H. Yan, T.C.E. Cheng, 2001). They have proved the
benefits as improved inventory management, higher sales and better understanding of
“The sharing of all relevant information between supply chain partners, also over
echelons in the supply chain” is defined as end-to-end visibility (Lakervi, Helena, 2003).
As none of the supply chain partners have control over data, Points of sale (POS) data
represent independent demand. Data gathered from POS should be used as a basis to
forecast. is that, As items may not be scanned in the system on an individual level, or
returns may be handled improperly, the information collected may be inaccurate which is
the downside of using POS data (Fisher, M.L., A. Raman, and A.S.McClelland, 2000).
In many cases, is more important to suppliers give more importance to the visibility to
demand plans and production plans than the actual demand from downstream. The
bullwhip effect can be reduced but not completely eliminated by centralizing demand
information (Disney, S.M. and D.R. Towill 2003a, Disney, S.M. and D.R. Towill 2003b).
Frequent communication can help the supplier to plan its operations better as the
responsibility for replenishments is shifted from retailer to supplier (Kaipia, R., J.
Holmström, and K. Tanskanen, 2002). When compared to other information sharing
levels demand information-sharing can make it possible to reduce costs by 1-35% and
decrease inventory levels by 53% (Gavirneni, S., R. Kapuscinski, and S. Tayur 1999).
Forecast information-sharing is valuable to retailer and demand information-sharing is
not that beneficial if variance in demand data is high (Mishra, B.K., S. Raghunathan, and
X. Yue 2001). Information-sharing becomes more valuable with high production capacity
tightnesss (Zhao, X., Xie, J. and W.J. Zhang 2002). Christopher and Lee claim that
supply chain synchronization is possible by improved visibility which increases
confidence and reduces uncertainty in supply chain. When lead times are long visibility
to plans are especially important.
iii. PERFORMANCE MEASUREMENT
The measurement of performance in a supply chain is vital. Gunasekaran and Kobu
(2007) list the following as the purpose of a performance measurement system:
Better process understanding
Identification of bottlenecks
Identifying opportunities for improvement
Identifying if customer needs are met
Facilitation of open and transparent communication and co-operation
Performance measurement is “measuring actual results which is vital in strategy
formulation and communication and in forming diagnostic control mechanisms”
(Wouters 2009). A US case-based study conducted by Swafford et al (2008) reveals the
“domino effect” among IT integration, supply chain flexibility, supply chain agility and
competitive business performance. Domino effect means a small disruption anywhere in
the supply chain affects the entire chain. Inventory, cycle time and financials are the
performance measures discussed by Martin and Patterson (2009). Gunasekaran and Kobu
(2007) support and highlight the confusion to classification of metrics in literature and
lack of complete coverage of all performance measures. The need of a new performance
measurement and costing system is a direct justification of their work.
Combining economic value added (EVA), the balanced scorecard (BS) and activity based
costing (ABC) is suggested as an integrated approach for measuring supply chain
performance, by Yao and Lin (2006). Bernardes and Zsidisin (2008) focussed their
investigation on the concept of embeddedness and network scanning in relation of
strategic supply chain to performance. Their work is supported by rigorous statistical
analysis involving a survey-based study made in US manufacturing. Embeddedness is
characterized by trust, open communication and joint problem solving. Network scanning
is related to scanning of internal and external business environment.
McCormack et al (2008) conducted a study that compares traditional versus innovative
performance measurement systems. The base for this study is the supply chain operations
reference (SCOR) model (plan, source, make, deliver) and the business process
orientation maturity model of McCormack and Lockamy (2004). All research in the area
of process maturity and performance relation provides clear evidence that there is still
search for models which have direct correlation with performance. The failure to develop
the performance measures and metrics needed to fully integrate supply chains to
maximize effectiveness and efficiency in many companies in today’s competitive age has
been highlighted by Gunasekaran et al (2004).
The main problems in performance management have been pointed out by Gunasekaran
et al (2004) and Gunasekaran and Kobu (2007). They are:
Being too much inward looking
Strategy and the measurement connect failure
Large number of metrics
Biased focus on financial metrics
Lack of balanced framework (some concentrating on financials and others
concentrating on operational measures)
Performance measurement and metrics that are incomplete and inconsistent
Cai et al (2008) state that these measurement systems cannot provide for a definite cause-
effect relationship among numerous and hierarchical individual key performance
indicators (KPIs). McCormack et al (2008) compare the traditional and innovative
performance measurement (PMS).
TABLE 4 - COMPARISON OF TRADITIONAL V.S. INNOVATIVE PMS
Traditional PMs Innovative PMS
Based on cost/efficiency Based on value
Trade-off between performances Compatibility of performances
Profit oriented Client oriented
Short term orientation Long term orientation
Individual metrics prevail Team metrics prevail
Functional metrics prevail Transversal (HR and training) metrics prevail
Comparison with the standard Monitoring of improvement
Aimed at evaluation Aimed at evaluation and involvement
Source: McCormack et al (2008)
The literature items mentioned above clearly shows that significant changes are required
over traditional performance measurement and the existence of deficiencies in the current
performance measurement systems
The above studies indicate that impact of coordination structures, information sharing and
visibility at all levels and partners and performance measurement of supply chain is a
very profitable area for further research. There is no single model and a standard set of
metrics which are tested and validated across different industries. Though many
investigations reveal the significant benefits of flow coordination, information sharing
and visibility in supply chains lot many questions need to be answered. All the research is
mainly theoretical and typically does not address the problems of implementing
information sharing and performance measurements in practice.
v. RESEARCH PROBLEM AND RESEARCH QUESTIONS
The research problem in question is of delivering products to customers as and when
they desire and demand at the lowest total cost and highest profit.
Based on the review of literature presented in the above section the following research
questions can be probed:
What is the impact of coordination structures on performance of a firm?
What are the information technology related sources of supply that helps in
Should information be shared with all or some select partners?
What information should be shared and how often and when should it be done?
Should detail information be shared or must be censored?
How the benefits of sharing information amongst partners can be shared?
What are the main barriers of implementation amongst partners?
How to implement information sharing?
How to measure the suitability and performance of information technology in
supply chain management?
What are the performance measurement tools and metrics in this era?
How can the performance measures be tested and validated?
How to suggest models to enable benchmarking supply chains?
The research questions should be considered and reconsidered time and again in a world
that is currently dominated by globalization, uncertainties, huge competition, customer
expectation and satisfaction.
CHAPTER - III
III.1 RESEARCH METHODS AND PROCEDURES
To identify the best way to learn about the supply chain management process
To gather information about the existing process
To establish a factual base for analysis centered on the understanding from the
To know how the process can be evaluated
To find a process improvement system based on a model
ii. RESEARCH DESIGN
Case study – Qualitative and Exploratory
iii. METHODS OF DATA COLLECTION
Face to face interviews (unstructured)
Assessment questionnaire for review
Section in charges
vi. TYPE OF DATA COLLECTED
vii. DATA ANALYSIS
Many functional areas do not make any forecasts
Few functional areas make their own forecast
Forecasts are made based on judgment and experience
Functional areas are unable to give a correct delivery date for delivery
Deliveries are managed in response to call of urgency from customer
Numerous iterations and modifications occur at the stage of sales order
Too many item codes are there for products, which causes difficulty and
confusion in identification
Item terminology is different at customer level, manufacturer level and supplier
All new products do not have new item codes
Non-moving items are still in the system which adds to the confusion at the stage
of sales order
No category for substitute items in the system
What is a nonstandard item – not defined
When does it cease to be a nonstandard item – not clear
When does a standard item cease to be moving item – not monitored
Cancellation of sales orders are not informed to the other functional areas in the
Delayed, duplicated and avoidable manual - control approvals have been observed
Lack of coordination and integration between functions and partners in the
System visibility and integration is inadequate
Converting option direct from purchase order to sales order is not there for all
Too many emails, phone calls and personal visits between functional areas have
Long supplier lead times
Raw material shortage
Packing material shortage
Occasional stock out of few standard items
Inventory holding of non-moving items is seen
No demand planning
No production planning and scheduling
Details of work order not visible in system for sales and operations
No time frame for each function
Information sharing at stages and between partners is inadequate
Catalogues are not updated
Catalogues do not have item codes
Prior information about change in government regulations, obsolete brand is
Material returns are relatively more
Reasons for material returns are replacement, item not required, changes in
drawing, unapproved items and balance items after project completion
Return items that are non-moving continue to be in warehouse
Time lag between delivered status in the system to actual shipment is noticed
Delays in custom clearance especially for Kingdom of Saudi Arabia (KSA)
There are conditions of time delay between pick status and invoice
There are cases of time delay between pick and delivery status of sales order
Manual copies of approved slips and orders are needed in most cases in spite of
ERP system in place
100% Quality check (QC) testing of few products is essential yet time consuming
Most of the customers do not prefer partial deliveries, even when few items are
available when approved sales order is ready
Bill of quantity is not incorporated through system
No partnering with customers
No collaborative planning with suppliers
Linear sequence of processing is too slow
Waiting times between chain segments are excessive
Existence of non-value added activities
Slow delivery of paper documents
Repeat process activities due to wrong shipments, poor quality
Batching; accumulate work orders between supply chain processes to get
economies of scale; save on delivery)
Learn about delays after they occur, or learn too late
Excessive administrative controls such as approvals (signatures
Lack of information, or too slow flow
Lack of synchronization of moving materials
Poor coordination, cooperation and communication
Delays in shipments from warehouses
Redundancies in the supply chain. Too many purchasing orders, too many
handling and packaging
Obsolescence of parts and components that stays too long in storage
Too many order management employees
Decentralized supply chain departments
Order communication cycle time is long
Order processing cycle time is long
Order routing is inadequate
Integrated firm wide data base is not there
No fully automated order management system
Component order selection is not there
Order queuing is not there
No delivery date guarantee
Customer service levels is poor
Back orders are many
Split orders are few
Sample orders are very few
Partial delivery is limited
Changes to sales order are more
Double check of sales order by superior or co-worker is not there
Short time frame
Busy managers and staff
Restrictions on data sharing
Single case study
Stocking locations, many, where?
Lead times, many?
Centralized or decentralized?
Order – daily, weekly, monthly, quarterly?
CHAPTER - IV
i. TOWS ANALYSIS
Wide scope of
Market leader in
Gulf and MENA
No immediate and
Huge potential with
the introduction of
Unclear roles and
functions in silos
Ineffective use of
value added tasks
Poor integration of
Inadequate plan on
boom period in
Sales force training
Align planning with
on supply chain
threats by effective
KPIs for entire
IV.2 EXISTING SUPPLY CHAIN PROCESS FLOWCHART
i. AS-IS MODEL
Business process is a collection of related, structured activities or tasks that produce a
specific service or product for a particular customer or customers which is usually
visualized with a flowchart or process matrix. As part of the analysis of the supply chain
operations in the company an AS-IS Model which was derived is depicted in the
flowchart diagram in the appendix section of this report.
*Refer Appendix. A AS-IS Model
ii. OUTCOMES FROM THE ANALYSIS OF THE AS-IS MODEL
Lack of communication
Lack of planning
Lack of visibility
Lack of integration
Lack of coordination
Lack of transparency
Lack of information sharing
Lack of structured roles and responsibilities
Lack of Performance Measurement Systems
Lack of control and monitoring
Lack of the ability to see supply chain as a whole
Lack of proper utilization of available supply chain software modules
Complex and challenging supply chain
iii. OPPORTUNITIES FOR SUPPLY CHAIN IMPROVEMENT
Packaging and delivery
Inbound and outbound transportation
Reverse logistics (returns)
Inventory management and control
Vendor management program
Customer order processing
Invoicing, auditing and other accounting activities
Collaboration procedures with partners
Employee training and deployment
Use of teams and empowerment of employees
Automation of processes
Use of software for facilitating all the above
IV.3 TO BE MODEL
Before proposing a model it will be wise to have an understanding of the process models
for management of supply chains. It must be understood that all processes have
developmental stages or life cycles. These can be defined, measured and controlled over
time. Lockamy and McCormack, 2004; Poirier and Quinn, 2004; McCormack et al., 2008
point out that a higher level of maturity in any business process will result in:
Accurate forecast of goals, costs, performance
Effectiveness to achieve and improve the goals, costs and performance
Better control of results
The maturity model has been shown to be very similar to management approach concepts
like the Business Process Reengineering (BPR) (Chan and Qi, 2003; Gunasekaran et al.,
ii. MATURITY MODEL
Companies use the following main maturity models to analyse their supply chain
SCOR (explained in the earlier in this section)
Business process orientation maturity model
The CSC framework was developed by Computer Sciences Corporation (CSC) and
tested for the first time in 2003.
First level – company orders development of its functional process by integrating
the functional areas in the company and with each company
Second level – company focuses on activities and effectiveness of physical
Third level – company changes or reshapes its inter-organizational processes and
starts to develop networks with few carefully selected allies
Fourth level – company begins collaborative initiatives
Fifth level – company completes joining between agents throughout the supply
Companies which that reach greater levels of organizational performance and have a
better work environment have guidance for their business processes based on more
cooperation and less conflicts (Lockamy and McCormack 2004).
The business process orientation maturity model uses SCOR to identify maturity of
processes (Lockamy and McCormack 2004, SCC, 2003).
Ad hoc (first level) – is characterized by poorly defined and bad structured
practices. Process measures are not applied, performance is unpredictable, costs
are high, cross-functional cooperation and customer satisfaction is low.
Defined (second level) – the basic processes are defined and documented.
Linked (third level) – the organizational structures become more horizontal by
creating authorities to overlook the different functional units. Supply chain
managers and clients/ partners work as a team with the effort to continuous
improvement and better performance improvement.
Integrated (fourth level) – organizational structures and activities are based on
supply chain management principles. Performance measurements are used based
on collaboration. Good team spirit, reduced costs and customer satisfaction are
Extended (fifth level) – multi-organizational supply chain management teams
appear. The support base of the extended supply chain is built by trust and auto-
dependence. Investments and the return on investments in system’s improvements
Ideally a statistical analysis to study the relationship between variables and discussion of
the business process/ model is a prerequisite for making adjustments or changes to the
existing model. A model that has emerged from such analysis and discussion is suggested
for the company to have a clear understanding of where it stands.
FIGURE 4 - SCPM3 (SOURCE: RESEARCH DATA)
Level 1 (Foundation) - By considering restrictions of capacity and customer alignment
the critical business partners are identified and order management best practices are
Level 2 (Structure) – Implementation of control items in demand management
processes, production planning, scheduling and for distribution network management.
Level 3 (Vision) - Establishing process owners who in turn are responsible for its
management and performance results.
Level 4 (Integration) – The processes of suppliers and customers integrate with
organizational processes in a collaborative platform
Level 5 (Dynamics) – Continuously improving its processes by considering its key
performance indicators and reacting in a synchronized and fast way to the changes in the
competitive environment the chain behaves dynamically.
Based on all the above, the following steps may be used as a roadmap for process
improvement to optimize and maximize the return on investment in supply chain
Discovery stage – defines the scope of what needs to be evaluated and analysed
Knowledge stage – contextualizes the results obtained from discovery stage and
make recommendations for improvement
Reuse stage – planning and implementing the recommendations from knowledge
stage and preparing to restart the discovery – knowledge – reuse stages
Based on the above model the company should identify where it stands as of now and
where and how far it has to reach in order to achieve optimum results. The following
figure (5,6,7,8,9) give an understanding of the high end process and low end process
which may be followed and adapted by the company for moving toward having a
responsive and agile supply chain system.
FIGURE 9 – POSSIBLE VARIATION POINTS
Refer to Appendix. B for Best Practice Measures
The findings from the case study and literature suggest that executives, managers and
supply chains are under extreme stress as it is becoming more difficult to respond to the
challenges with the traditional supply chain strategies and designs. The challenges are in
terms of cost suppression, globalization, visibility, customer closeness and risks. New
designs and strategies are getting outdated even before executives can implement them
and hence the area of cost containment or suppression has become chaotic. Supply chains
that are flexible and agile can respond quickly to changing market conditions and are
seen as a remedy for cost instability. Despite visibility and collaboration being the top
challenges in supply chain management it is not getting much attention in terms of
programs and activities.
Executives and managers are emphasizing on continuous process improvement, strategy
alignment and cost reduction. In contrast, executives of top supply chains are more
focused on improving visibility and collaboration of supply chains. Such as collaborative
planning with suppliers, customer vendor managed inventory, collaborative planning
forecasting and replenishment (CPFR) programs with customers, continuous
replenishment planning and shared real time data. Most companies do not know that risks
and performance should be managed together. Executives mention the lack of
standardized processes, insufficient data and inadequate technologies as the core
difficulties that prevent effective risk management. For effective risk management there
should be process controls in operations and logistics, compliance programs with
suppliers and providers, risk management in supply chain planning and event
management to monitor disruptions. Most of the companies struggle to correctly detect
customer needs but some of them design products with their suppliers and customers.
Only few companies even with all the demand-driven hype in supply chain planning
include customer input, while most of them invite supplier participation. Companies
don’t bother and often ignore customer interactions because it is costly and time
consuming. But as the burdens of becoming more profitable increases, supply chains
can’t afford to carry excess inventory, lost sales and missed innovation opportunities
caused by lack of customer collaboration. It is found that top supply chains utilize
opportunities to synchronize plans internally and with external supply chain partners;
more so with their customers when compared to the less effective peers. Many companies
around the world are encountering problems with global sourcing, long lead times and
poor quality. But, of course, the financial advantages of globalization of markets and
operations overshadow these negatives.
The increased profits are not necessarily tied to lower costs but it is definitely tied to sales
increases. In many cases companies are experiencing increased costs as a result of
increased globalization. It can be said that globalization has contributed to revenue
growth and not efficiency. Top supply chains report overall performance (short lead time,
reduced costs, high service levels, and excellent quality), increased sales and improved
margins. It is very important for top executives to understand that it is not enough to
build supply chains that are demand driven, transparent and efficient but they must be
smart. The responsibility lies on the shoulders of executives who should become strategic
thinkers, collaborators and orchestrators and optimize complex networks of global
The Company should:
Have a true understanding of current supply chain performance and the actual
needs and wants of the customers.
Have an understanding of what the customer is willing to pay.
Have a supply chain strategy which runs the technology.
Align supply chain strategy with company strategy.
Align incentives across supply chain functions.
Align incentives with external supply chain parties.
Support people with the right data.
Respond to actual demand and not rely on forecasts.
Identify the right process, strategy, procedures and knowledge for smooth
functioning of the supply chain.
Align internal business performance with external customer demand
Have reliable and accurate forecasting.
Have better understanding of new product demand.
Have a market-responsive process for new products or unpredictable demands.
Have better inventory and production planning.
Bear in mind that with a very large product range, uncertainty in supply chain will
have to be accepted.
Ensure that internal and external parts of the supply chain should have access to
Empower people to make decisions quickly.
Set up a committee for supply chain disruption risk management process.
Identify key processes likely to be affected by disruptions, e.g. new product
development, operations, manufacturing etc.
Identify key assets likely to be affected by disruptions, e.g. inventory, property,
brand image etc.
Provide data to supply partners on changes in supply and demand.
Track economic changes, political changes, technological changes, legal changes,
changes in government regulations etc.
Find more reliable vendors in different parts of the world.
Have a clearly defined need, based on supply chain strategy prior to application of
any new supply chain technology.
Have clear expectations about what the supply chain technology can or cannot do.
Understand the need of human intervention to work. E.g. how to feed good data
into the system, how and when to update information?
Be aware of the existing layers of supply chain systems which may sometimes be
connected and sometimes not connected.
Set up the supply chain system right so that the people do not end up disbelieving
Understand that it is very hard to calculate how much a new supply chain
technology can help.
Integrate order taking with product inventory levels
Make changes so that low inventory levels must trigger automatic ordering
Make changes so that order to manufacturing must generate a list of the needed
resources and their availability
See to it that changes in order must be transmitted automatically to suppliers and
Have tracking systems which is made available to customers so that they can
check the status of their orders
Have internal controls built in to manual/administrative process steps and/or
computer system procedures
Clearly document, enforce and regularly exercise the manual and administrative
Align with suppliers and customers and focus on processes
Have efficient and effective lines of communication and interfaces between
Use process flowcharts and process maps (software)
Study both internal and external process of the supply chains
Measure and compare the performance of existing supply chains
Benchmark the performance of supply chains
Do business process reengineering before a solution software is attempted and
Develop and maintain relationships with business partners and key employers in
Provide visual charts to employees
Provide real time access to inventory levels to sales representatives so that they
can set appropriate delivery expectations
Provide online access to order status to customer support representative to answer
customer order queries
For a supply chain to be efficient and responsive it should focus on cost reduction that is
aligned with speed of order fulfilment, service level and customer satisfaction.
Unfortunately companies are not able to achieve efficiency and responsive
simultaneously. Supply chain efficiency and responsiveness can be facilitated by use of
supply chain partners in design, development, planning, forecasting, replenishment,
identifying bottlenecks, developing corrective actions, identifying risks, improving
visibility and relations with customers and suppliers. The biggest challenge is to identify
the right supply chain strategy which varies for different products. The next challenge is
to align the corporate strategy with the supply chain strategy. Another major and obvious
challenge is that executives are grappling to have a better understanding of the key
drivers for their supply chain operations strategies. Supply chain optimization is the
current way of improving efficiency, responsiveness and profitability. This requires top
management commitment and sense of mission. Well informed and qualified
professionals and consultants are needed to maintain and rework the methods for facing
the ever changing challenges. Since uncertainty and volatility are here to stay it is
recommended to have a risk based efficient and responsive supply chain for companies to
have a sustainable long lasting competitive advantage. A recommendation to replace or
modify the present process with a better one should be made with proper justification.
The process must include systematic periodical analysis by reason and present suitable
information report that pinpoints the major reasons and trends for the top management to
take corrective actions to control exceptions and keep them within acceptable limits. The
main limitations of this study was in terms of data collection as all departments were
quite apprehensive in sharing information and difficulty to bring all departments together
to focus on processes. The next limitation is that departments are not aware of loss of
revenue with shortcomings in the process they follow. Last but not the least is to identify
the reasons for delay in order fulfilment.
APPENDIX B FOR BEST PRACTICE MEASURES
Construct name Question
Does the team have a supply chain strategy?
Does the team measure the impact of strategy on supply chain
Does the team use a supply chain performance measurement
Who is involved in selection of supply chain team members?
Does the team consider customer satisfaction or product profitability
Are customer priorities defined by the team?
Has the team defined product priorities?
Does the team participate in customer and supplier relationships?
Is a process owner identified for supply chain planning?
Is there a process owner for supply chain planning?
Is there a process owner for "promise delivery"?
Is there a process owner for “demand management”?
Is there a process owner for procurement management?
Is there a process owner for network management?
Is there a process owner for order management?
Is there a process owner for production management?
Is there a process owner for distribution management?
Is there a process owner for transportation management?
Is there a process owner for quality management?
Do you have a documented order commitment process?
Do you make order promises beyond your current inventory level?
Do you make changes in response to screams of urgency?
Do you make deliveries by bypassing the normal process?
Do you have documented production management process?
Do you have documented distribution management process?
Do you have documented procurement management process?
Do you have documented demand management process?
Do you have documented transportation management process?
Do you have documented supply chain process?
Do you have documented network management process?
Is the process supported and complemented by the information
Are all variability well agreed and standard?
Do you have strategic suppliers for all products and services?
Demand Does your current IT system support demand management?
management Do you analyze the demand variability for each of your products?
Is historical data used in developing the forecast?
Are you using mathematical models for demand forecasting?
Are forecasts done on a regular basis?
Do you do a forecast for each and every product?
Do you use customer information?
How often is the forecast updated?
Do you measure the forecast accuracy?
Do you use the forecast to make plans and commitments?
Is there a procurement team?
Does the team work closely with sales, marketing, manufacturing,
Does the team meet on a regular basis?
Do you develop a plan by collaborating with your suppliers?
Do you measure supplier performance?
Do you share information with your suppliers about planning and
Do key suppliers have their workers on your site?
Do you adhere to production plans and scheduling?
Do you measure adherence to plan?
Do you have plans at item level?
Do you have integrated and coordinated planning processes across
What methods do you use for planning/
Do you use constraint based planning methods?
Is shop floor scheduling and overall scheduling process integrated?
Do your current IT systems support the process?
Do you have the capability to respond to unintended orders?
Do your current IT systems support the order promise process?
Do you know the stock out situations?
Do you measure the out of stock situations?
Can you rapidly re-plan to respond to changes?
Do you measure customer requests to actual deliveries?
Do you measure customer satisfaction based on on-time deliveries?
Can you commit a firm quantity and delivery date for a given
Are your commitments to the customer credible?
Does your current IT support transportation and distribution
Are all the processes integrated with supply chain processes?
Do you have transportation and distribution measures in place?
Do you recognize and reward the process partners?
Do you have a operations planning team?
Are the supply chain functions and support functions represented in
Is there a documented operations planning process?
Do you make changes and adjustments as a result of team meetings?
Are finished goods inventory able to meet short-term customer
In the planning process Is supplier lead times given a major
Do you track the completed customer orders which are delivered on
Do the marketing and sales, production, procurement, planning,
transportation and distribution team up in the order commitment
Is the order commitment process aligned with the supply chain
Do you "make to order"?
Do you include your customer's planning and scheduling information
in your planning and scheduling?
Do you have formal documented approval process for changes?
Do you develop a forecast for each customer?
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