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SUPPLY CHAIN MANAGEMENT- OPPORTUNITIES AND CHALLENGES

SYNOPSIS Of the Thesis Submitted To

SRI VENKATESWARA UNIVERSITY In the partial fulfillment of the requirements for the award of the degree of DOCTOR OF PHILOSOPHY IN BUSINESS MANAGEMENT By B.NAGARJUNA, B.Tech., MBA. Under the Research Supervision of Dr. B. SUDHIR B.Tech., MBA., M.Tech., Ph.d. Professor Department of Business Management Sri Venkateswara University, Tirupati.

SVU COLLEGE OF COMMERCE, MANAGEMENT AND COMPUTER SCIENCES SRI VENKATESWARA UNIVERSITY TIRUPATI-517502 ANDHRAPRADESH, INDIA FEB: 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 Performance


Supply 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 Industry


Fast 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 LITERATURE


The 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.
1 2 3 4 5 6 7 8 9 10 11 12 13

Factors Studied in Supply Chain Management


Principles of Supply Chain Management in Marketing Framework Supply Chain Management as one of the primary future trends Information sharing, better coordination and joint optimization Relationships between the manufacturing and supply function Sales Company service system Supply Chain Management information system Electronic Data Interchange Electronic Market Place Enterprise Resource Planning Alignment of SCMIS solutions wish business strategies Information Technology in Indian Supply Chain practices Integrating information and decision making across different functional units Strategic Planning for Information Technology in Supply Chain Management Holistic view on potential positive impacts of Information Technology in Supply Chain Management Strategic advantage of Information Technology in Supply Chain Management

Authors Studied
Organizational Extension theory Mallen, 1963 Cortor and Narasimhan, 1990 Cachon and Fisher, 1997 Porter, Pauland Weng, 1997 Lee and Whang, 2000 Chopra, Mein dl, 2001 Lee et al, 1999, Mukhopadyaya et al, 1995 Dagenos & Gavstshic, 2002 Kaplon & sowhary, 2000 Green, 2001 Reddy and Reddy, 2001 Sahay et al, 2003 Swaminadhan and Tayur, 2003 Gunasekharan and Nagi, 2004 Simchi Levi (2003) and Chopra meindl (2001) Porter and Miller, 1985

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Information Technology as a key for strategic 16 advantage. Bowersox and Dougherty, 1995

17 18 19 20 21 22

Collaboration & Coordination of SC thorough information sharing Information Technology as one of the key cures for bullwhip effect Role of suppliers in adopting Information Technology tools Supply Chain relationships in modern information based era Evolution of Supply Chains towards online business communication Variability of Ordering

Simchi Levi, 2003 Lee et al, 1997 Slaight and Swon, 2000 Christopher and Juttner, 2000 Armstrong and Hagel, 1996 Yu et al, 2001

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Performance of Supply Chain System

Srinivasan et al,1994

24 25 26 27 28 29 30 31 32 33

International customer service System Ability of Information Technology in lowering coordination cost Benefits of Supply chain partnership Master production scheduling system How do suppliers benefit from Information Technology in Supply Chain Management Process improvements on supply chain performance Assembling internet usage in U.S. Business communication and electronic data interchange Role of internet in building commercially viable Supply chains Internet usage in Indian Companies

Lee and Whang, 2000 Elemons and Snow, 2000 Zhenxin et al, 2003 Lee and Wheng, 2000 Mani Subramani, 2004 Jayaram et al, 2007 Lancioni, Smith and Oliva, 2008 Philip and Pederson, 1997 Groham and Hardaker, 2000 Rahman, 2009

Critical Success factors in Information Technology 34 applications

Gunasekharan, Ngai, 2010

35 36 37 38 39 40 41 42 43 44 45

Developing an information model for Supply Chain information flow Decision support systems Impact of Information Technology in Supply Chain Management paradigm shifts Supply Chain coordination E- commerce in Supply Chain Management Information Technology towards Supply Chain Agility Information Technology in Supply Chain Management Role of Information Technology in Supply Chain Supply Chain Risk Management awareness Strategic impact of Information Technology on Supply Chain Supply Chain visibility

Abul Mukid, Mohammed Mukoddes, Javed Kaiser, June 2010 Peter trikman, March, 2010 Sunil Bharadwaj, 2011 Arun kanda, S.G.Deshmukh, 2011 Narid Nikathkar, 2011 Md. Jovonmardi, Ali Abdi, July, 2012 Yatish Ganganwar, 2012 Md.. Akhshabi, 2012 Jarekorn Filsinger, 2012 Hasan Kursat, 2012 Mike Giguere, Nov, 2012

III. RESEARCH GAP

From 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

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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 STUDY Advances 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. HYPOTHESES

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1. 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 METHODOLOGY


VIII.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.

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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.

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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 III

Discusses 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

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Chapter IV

Presents 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 V

Is 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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