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This section provides the details about the methodology used in this research. Every methodology has advantages and disadvantages and justification about the chosen methodology of qualitative research method has been given. It will elaborate the interview questions were selected and designed to fulfill the objectives of the research of the dissertation as stated by Davidson (2001, p. 82) "[that is] appropriate to the circumstances surrounding any given study".
It gives a description about when, where and how the interview was conducted, who the interviewee was along with the subject's selection criteria.
Research Philosophy of the Study
The most apt methods to achieve a good acuity of the world is through research philosophies (Trochim, 2000). The research philosophy is categorized into two groups: positivist and phenomenologist. The group involving positivists deals with 'deductive and quantitative' approach to emphasize on the research objectives, while the phenomenologist group deals with 'inductive and qualitative study to address the research objectives (Ogba, 2003). Even so, it is critical to utilize the most appropriate method to understand the world through the research work (Trochim, 2000).
For this sole reason, it is vital to keep this kind of research in mind and, if feasible, the constraints to utilize certain research techniques that bind the theory and situations adjoining every research study (Davidson, 2001 and Crotty, 1998). Thus, it is quite apparent that the research strategies that are to be utilized have to be based on these methods.
Case study focuses on a specific case, such as institutions, events, organisations, social groups. Case study combines various methodologies to highlight different aspects of a particular case (Johansson, 2002). Case study methodology is best suited where thorough investigation and analysis is needed. According to (Tellis, 1997) case study contains different stages such as designing the case study, conducting the case study, analyzing the evidence gathered in the case study and developing conclusion, implications, and recommendations. Case study should be used when main focus in the study is answering "how" and "why" questions and investigators cannot influence the behavior of individuals involved in the research. However most common drawback of case study is that in most cases researcher tend to answer questions that are too broad or the topic that is chosen has multiple objectives. This can be prevented by carefully defining boundaries for the case in order to conduct effective research (Baxter and Jack, 2008). When gaining an insight of a particular case or problem case study can be a better option as it will focus more intensely on the main objective of the study. In this research case study method is chosen as a particular problem which is supply chain risks of Metro and Hyperstar. These risks are being addressed, with the motive to develop a mitigation plan to mitigate significant risks which can have various adverse effects.
Positivist Vs. Interpretivist:
The research paradigm occupies an important place when conducting any research. This section will begin by defining what do each of the paradigms mean and then by explaining what stance will be taken for this research. So according to (Malhotra and Birks, 2006), there are two major research paradigms used by marketing researchers, which are Positivism and Interpretivism. Moreover it has been explained by (Charles, 1982) that both paradigms interpretivism and positivism are legitimate in conducting marketing research and help to shape the nature of techniques that may be applied in their research. Therefore, following is the explanation of the role of positivism and its importance in marketing research.
Positivism research approach is basically applied when the nature of the research is quantitative. Moreover as (Malhotra and Birks, 2006) stated, that the vital belief of a Positivist position is a view that the study of consumers and marketing phenomena must be scientific i.e. in a manner of natural science. Also according to John et al. (2004) Positivism is a form of philosophical realism in close relation to the deductive method in research. Research studies have always been guided by a concept that helps the researcher to advance his studies in the manner that will lead to legitimate results. So in effect he is guided by theory in most of the cases that will help him determine which variables should be investigated, how they may be operationalised and how the research design and sample should be selected (Malhotra and Birks, 2006). Thus as theory plays an important role this approach is essentially positivist where a scientific approach is followed to marketing research which enable him to establish causal laws that lead him to the prediction and explanation of the marketing phenomenon (Malhotra and Birks, 2006). The scientific method therefore involves systematic observation and description of phenomena within a model or theory, the presentation of hypotheses, the execution of tightly controlled experimental study, the use of statistics to the test hypotheses, and finally the interpretation of results in light of the original theory. So the primary goal of positivist researcher is an explanation that will lead to the prediction and control of phenomena Joseph (2005).
But at the other end of the picture lies the interpretivist philosophy where the emphasis is on learning from each step of the research process and adapting the research design as the research develops (Malhotra and Birks, 2006). Here theory is used initially but as the research design evolves the emphasis is on developing new theory and researchers don't wish to be too focused on the existing ideas (Malhotra and Birks, 2006). Findings play an important role as because if found lacking, its legitimacy becomes questionable. (Silverman, 2000) stresses that the interpretivist focuses on the dynamic, respondent-constructed and evolving nature of reality, recognising that there may be a wide range of interpretations of realities or the social acts. In interpretivist research, the task is to realize the nature of the values of the respondents and how they affect the questions and moreover how the questions may be interpreted by them. For this purpose the interpretivist use theory initially as a guide to the issues they want to explore in the context of their investigation.
Keeping in mind the above mentioned facts, this research will follow the interpretivist paradigm as theory is not playing an important role here and conclusions will be respondent- constructed.
Qualitative research is known to be taken as a method to conduct social research without collection or generation of quantitative data. According to (Gubrium and Holstein, 1997) Qualitative research has four traditions.
Naturalism: It refers to understanding of social reality as the way it is and tends to provide description of people and interaction in natural settings.
Ethno methodology: Seeks to understand how social order is created through talk and interaction; has a naturalistic orientation.
Emotionalism: Exhibits a concern with subjectivity and gaining access to inside experience; concern with the inner reality of humans.
Postmodernism: there is an emphasis on 'method talk'; sensitive to the different ways social reality can be constructed.
Human capacity of learning from others is developed and cultivated through qualitative inquiry (Patton, 2002). According to (Merriam and Associates, 2002) qualitative research provides us knowledge about the sociohistorical environment in which we exist, and can also be used as a powerful tool to learn and gain insights about our lives.
The interpretivists seek to establish the legitimacy of their research by following the inductive method (Malhotra and Birks, 2006). This approach is followed to fulfill couple of purposes as mentioned by (Thomas, 2006), i.e,
(a) To condense raw textual data into a brief, summary format;
(b) Establish clear links between the evaluation or research objectives and the summary findings derived from the raw data; and
(c) Develop a framework of the underlying structure of experiences or processes that are evident in the raw data.
Inductive approach to analyse qualitative data, provides an easy and systematic set of procedures. It can be used as an advantage to extract and derive meaningful findings from raw data. Despite the advantages of the inductive approach to this research, some limitations may also have to be considered.
Quantitative versus Qualitative and Research approach:
Qualitative and quantitative methods are the basic themes of research strategy. (Corti and Thompson, 2004) States qualitative data aims to capture data from various disciplines in social science, it focuses on perspective of people, their experiences and how they interpret these experiences gained from the social world. (Ghauri and Gronhaug, 2002) Elaborates that deciding a technique or method depend upon the type of research, research problem, and the purpose it needs to fulfill. Procedures of data being collected from qualitative or quantitative research are distinctive, but there can be no doubt on the quality of results produced. Both of these methods cater to a different set of objectives and are different in nature. (Hammersley, 1992) stresses that qualitative data highlights the perspective of the people under study and considers their point of view rather than demonstrating it from researcher's perspective. As qualitative research is the study of social science it gives importance to the people and how they interpret their own behavior, in order to better understand the sensitive issues such as consumer behavior and attitudes. According to (Mack et al., 2005) qualitative methods grant flexibility to the investigator to dig deep into the initial responses of the participants and investigate the reasons such as why or how. Investigator should carefully pay attention to participant's responses and motivate them to elaborate their answers. As per (Silverman, 2000) qualitative approach provides a deep insight regarding social phenomena as compared to quantitative methods. In this study qualitative approach is used as data collected for the research mainly depends upon the experiences and observations of the concerned managers in Hyperstar and metro, and as per their observation significant risks and various problems associated with those risks are identified.
Even though there are several advantages of exploratory approach according to which it is chosen as an appropriate method for this research, researcher may face some difficulties as well. (Liamputtong and Ezzy, 2005) further elaborate that some group of people assume that qualitative research is less authentic as it lacks clear and defined set of rules. Its interpretative nature lacks validity as well as reliability and contributes little value towards scientific knowledge. Building on this argument (Silverman, 2000) criticizes this approach by pointing out the problem of validity, as lack of validity questions the accuracy of results and findings deduced from this approach. Findings may rely too heavily on the perspective and views of the researcher that point out to the reliability aspect of this approach.
Objective of research is to gather relevant and reliable data in order to identify most significant risks and to propose, and suggest action plan to mitigate those significant risks. Results and findings of this research may provide different companies relevant information about mitigating risks, which rely heavily on their supply chain departments for efficient business practices. To make sure that data which is gathered is reliable and valid, supply chain manager who is the most relevant and authoritative personnel regarding supply chain decisions was contacted. Supply chain manager answered various questions and queries which helped in understanding of knowledge being collected. Findings are carefully interpreted to maintain the reliability as it is a major aspect. Semi structured interview was conducted with questions to direct the theme of the interview, but different questions arising as interview was being were also added to deduce relevant information. Questionnaire was developed after conducting interview to rank and prioritize the most significant risks. Mitigation strategies are proposed by thorough analysis of information from the interview, questionnaire, and literature to achieve the research objective.
Department: Supply Chain
Designation: Supply Chain Manager
Respondent 1: Ali Zahid
Department: Supply Chain
Designation: Supply Chain Manager
Respondent 2: Kashif Jaleel
This chapter will include data and findings which are gathered through questionnaire and interviews from supply chain managers of Metro and Hyperstar. Current practices in Supply chain management of both retailers are elaborated. Supply chain risks encountered by management, and impact of these risks on retailers are discussed in detail.
Introduction to Metro and Hyperstar:
Retailers such as Metro and Hyperstar are the largest in Pakistan. Considering Pakistan as an emerging market many other large retailers are planning to tap this market segment as it still has potential to provide business and welcome new retailers. Metro and Hyperstar have wide variety of products, holding an estimated 35000 articles in their stores. Their objective is to provide customers with wide variety of products at affordable and reasonable prices as compared to their competitors. Metro focuses more on taping the commercial market such as, small retailers, restaurants, caterers etc. Wholesale prices are offered and various promotions are to encourage professional buyers, who depend on Metro to be their supplier. Competitive prices by Metro and various promotions increase the profitability of these commercial as well as professional customers adding towards their competitive advantage.
However Hyperstar taps all segments of the market such as individuals, commercial, and families. Promotions offered in Hyperstar are for all types of customers and their sales are mainly from non commercial customers. Hyperstar's main concern is to build good will and repute amongst its consumers by offering lowest prices as compared to its competitors such as metro and the small retailers, which are mainly controlling Pakistani market.
Supply chain management process of Metro:
Metro rely heavily on their supply chain departments or efficient business practices. Effective supply chain without disruptions and delays will add competitive advantage for these retailers. There are two sections of supply chain department at metro. Responsibilities of supply chain department are handled by commercial section and operations section. Coordination with suppliers, planning, and ordering are done by commercial section which is situated in the head office and operations section is in charge of receiving the products, arrangement of the products, display and dealing with customers and their queries if any.
Supply chain management process of Hyperstar:
The section manager is responsible for ordering the goods. The department head verifies the orders and then the business sector manager processes the orders. Once verification and processing is complete suppliers are then sent the orders who receive it and bring the items to the receiving area of Hyperstar. Receiving area manager checks and ensures that the products received are in lieu with the invoice. Receiving area manager then hands over the items to the concerned departments in the warehouse. Then the supervisor of the particular department in the warehouse, along with the section manager and stockers shelves the items on the shop floor for the customers to buy them.
Major supply chain risks and how they affect Metro and Hyperstar:
Various supply chain risks are identified after conducting interviews and questionnaire, which are faced by Hyperstar and Metro. Risks which are identified affect the supply chain process and have adverse affects on these retailers. Most risks are routine risks that have high likelihood of occurrence and will not have high impact, but others will have high impact even though their likelihood of occurrence is less.
Risks identified through interviews:
Wrong ordering risk
Fresh items risk
Lack of technical training
Display limitation risk
Late deliveries risk
WRONG ORDERING RISK:
Wrong ordering is one of the biggest risks that a retailer faces in today's market. When a large retailer places a huge amount of order with a supplier, there is a possibility that the wrong order has been placed. Wrong ordering can include over or under ordering the items needed, order variety and also wrong ordering can result in the incorrect receiving of product, e.g. if the order for a product has been exceeded by mistake, then it will lead to wastage. Furthermore, if a certain item quantity has been ordered less than required than it can lead to bad marketing and the supply chain department will not have enough products for shelving which can lead to the customer being dismayed with the store which can have far reaching consequence with the customer hesitating to return to the store for future shopping. This can have a huge impact on the sales of the retail store as customers have the power to sway opinions and a few bad experiences can lead to many a customer refrain from shopping at the store. Therefore, the retailer has to be in constant touch with the supplier so as to ensure that the correct orders are delivered as much as possible because if wrong orders have been received then the retailer will have no option but to either stock them or return them to the supplier and await the correct orders to arrive.
Another risk that is associated with supply chain is stacking. Stacking means to organize and shelve the items received in the warehouse in an orderly manner. Sometimes, employees do not pay much attention to stacking the items properly which can lead to the items being damaged or worse lead to sinkage. Sinkage is referred to as items stacked in the warehouse get damp, they become fragile or worse contaminated and this can make the items unusable. This can lead to the items having to be wasted and the store has to take a financial loss on the said items.
FRESH ITEMS RISK :
Customers nowadays try to find the cheapest as well as the freshest food items to consume. The sales in a store increase if the retailers are able to provide the fresh food on the demand of the customers. For this sole purpose, it is emphasized on the suppliers that all fresh food items are to be delivered on time and with care because fresh food items can get damaged enroute to the warehouse. Fresh food items are handled very differently in store as compare to meat items. The basic requirement of fresh food is temperature control and handling product which is possible if supply chain is more efficient and well managed to avoid the loss of shrinking products. Another risk is that once the items have been delivered, it is critical that they are categorized into First in First out (FIFO) so that items like milk, yoghurt and eggs can be shelved on the shop floor immediately so as to maintain their freshness. Temperature has to be controlled for the items whether they are stored in the warehouse or placed on the shelves on the shop floor, otherwise they may get wasted or perish.
Forecasting is an important and critical tool that organizations use in this day and age of modern supply chain for items that are not in their inventory. Suppliers will use the information that the retailers will provide them with to produce the items that the customers will consume without overproducing the items as it will cause not only inconvenience but also lead to loss for the retailers. Hence, forecasting is a risk that should be taken into account while placing an order with a supplier so as to ensure that the items are not over produced but equally the forecast must not fall short leading to the items being in short supply for the customers to consume. The cost of failing to maintain an accurate forecast can be financially significant. Forecasting is not a static tool but should be reviewed and maintained by managers on a regular basis. This is done to ensure that vital information regarding internal and external environment as well as future trends are taken into fed into the forecasting tools so as to give an accurate calculation.
Scheduling is an important and integral part of any supply chain. For instance, most of the fresh food items are delivered early morning so that customers can take them off the shelves as soon as they become available and their sales are consistently higher. Incase if fresh food items are not delivered on times, then customers will be forced to turn to other stores and this leads to the financial margin being slashed for the retail stores as well as the supply chain image being tarnished. Therefore, it is extremely vital that suppliers adhere to the schedule set for them to deliver these items. In order to avoid this kind of mishap, the supplier can email the concerned department of the retail store and make changes to his booking in the schedule so that other suppliers do not have to wait in the receiving area while the first supplier arrives with his products.
Another factor that has to be taken into account in scheduling is the work force for both the suppliers as well as the retailers. Employees being in low numbers that the amount required for loading, unloading the items as well as being absent or being lethargic can lead to the deliveries falling behind schedule. This can complicate the relationship between the suppliers and the retailers. Suppliers sometimes fail to show up for their scheduled deliveries and this can cause the retailer being short of the product and having to make do without the product.
LACK OF TECHNICALLY TRAINED STAFF:
If the suppliers do not have relevant technical training or experience for the job then he can sometimes deliver rotten or bad items, or issue wrong barcodes on the items sent or the quantity of the item is wrong.
For example, in case if there is an untrained stocker employed by the retailer, who does not have proper training regarding barcodes and a product which has been received has a wrong barcode on it, like a TV but with barcode of a DVD player, then the untrained stocker will be receiving a TV but with the barcode stating that a DVD player has been received which can lead to invoice as well as item count being wrong.
Another example is that if crockery set has been ordered but the items received has different design/pattern than the one ordered but since the stocker has no knowledge to notice the subtle change in design/pattern then it can lead to loss of product as well as money.
In case of fresh items that have to be placed in the refrigerators and chillers where the temperature control is critical but if the employees do not have technical knowledge about how to operate temperature control then it can lead to the items being rotten or perish. All of these factors can lead to financial as well as moral loss for the company as they will have to reinvest in not only the items but to train the employees again.
DISPLAY LIMITATION RISK:
METRO as well as Hyperstar have only a certain amount of items that they can display on the shelves on the shop floors. The impact of only a certain amount of items being displayed is considered a minor risk and the likelihood of its occurrence is unlikely because these retailers order only the amount of items that they need or at most can store in their warehouse. Display limitation does not have any significant affect on the sales or profit margins of these retailers because most of the items that are displayed are the ones that are sold the most and contribute the most in terms of sales.
COMMUNICATION GAP RISK:
Lack of information sharing between supplier and retailers like Hyperstar and METRO can sometimes cause a communication gap to appear which can have a moderate impact as the likelihood of occurrence of communication gaps is possible. This can occur when suppliers and retailers are not communicating about the orders sent and received regularly.
For instance in case of Hyperstar, communication gap can appear if an order was placed with a supplier for 240 items but the items received were only 200, then since the supplier did not communicate with the supply chain manager then Hyperstar has to receive whatever quantity that has been sent since it is the law. Once received, those items are ultimately returned to the supplier however with 12% rebate, with adjustments done in the next payment with Hyperstar gaining financial margin over the supplier. Since Hyperstar has gained an advantage due to the communication gap, this can lead to the relationship between the supplier and Hyperstar to deteriorate.
Another aspect of communication gap is human error. Human error can occasionally lead to wrong invoicing. For instance, if an item is in promotion sold at PKR 100 with a discount of 2% , and by mistake it is logged at PKR 100 then when invoice is received , it can lead to invoice difference.
For instance, METRO sometimes charges the supplier at primary rate, which is basically a discount on buying and on secondary which means the number of sales of a particular item. METRO mistakenly does it on primary whereas the supplier had stated that the discounts are to be done on primary, this can lead to wrong invoicing which prompts METRO to return the items.
LATE PAYMENT RISK:
In case if the supplier makes late payments then the relationship between the supplier and retailers like Hyperstar & METRO is affected resulting in the supplier being dropped. Since late payments are not directly related to supply chain therefore they do not affect the risks related to supply chain and are hence considered to be of minor risk.
UNDER / OVER INVOICING RISK:
In case the supplier puts wrong invoice and payment then the company's invoice litigation department comes into play. Invoice litigation means if any quantity differs from the invoice, then the audit personnel contact the litigation department. If the items ordered are not received accordingly or have been received with exceed quantity, and then the supply chain manager emails the supplier and intimates him about the mistake. Wrong invoicing has a moderate impact with the likelihood of occurrence being possible therefore this risk has to be taken into account while mitigating strategy for supply chain.
The supplier has to be careful that whatever items he sends should have the proper invoices pertaining to it with the purchase order.
For example, if the items sent are 8 instead of 10, then the payment will be done for 8 instead of 10, and the finance department will take up the issue with the supply chain manager to rectify the missing items inventory.
Another term that comes into play when order invoice is wrong is price litigation: if the cost price of an item is PKR 100, the supplier does not indicate the company about change in price, and quotes the price as PKR 120 but in the purchase order it remains as PKR100. Then the finance department intimates the supply chain department about the irregularity in price and asks what to pay the supplier. Since the supplier had not intimated about the change in price beforehand, then the price offered to him will still be PKR 100, with the section manager signing off on the purchase. These are some of the risks involved with under / over invoicing and the appropriate method to deal with it.
Mitigation strategies for risks identified:
Risks that are discussed above have likelihood of occurrence and Metro and Hyperstar encounter this risk in their daily operations. Impact of these risks are also high as they are related to operations and personnel involved in making purchase orders, receiving products, and negotiating with suppliers come across these risks. A simple error can result in ordering wrong quantity of required products causing excess quantities being ordered or shortage in quantity. Referring back to literature there are several measures these retailers should take in order to reduce the occurrence of this risk. Even though these risks cannot be eliminated, but taking effective measures can ensure mitigate them to reduce the adverse impact they have on these retailers.
Collaborative relationship with suppliers:
Hyperstar and metro need to stress more on building collaborative relationship with their suppliers and they should be taken into confidence regarding decisions that can have an impact on them. Efficient coordination among retailer and supplier will increase flexibility and will tend to reduce uncertainties that are faced while conducting routine operations such as ordering of products, receiving products, risks regarding expiry of products etc. (Nayaga, Whipple and Lynch, 2010) Conclude in their research that collaborative relationship with suppliers tends to increase the level of trust and commitment. Firms experience improvements in service levels, reduction in cycle time, enhanced visibility, and satisfaction level of final consumers is also increased.