A Study to find the Impact of the Deterministic Parameters of Supply chain management

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CHAPTER 1:

INTRODUCTION

Overview

Businesses depend on their supply chain for obtaining better performance. In the modern business world every business body can be distinguish into single or multiple supply chains activities. Supply chains cover the business and their activities which are required to plan, make, distribute and utilize a product or service. As markets are evolving spontaneously and with the advent of new and serendipitous discoveries in the business arena, compelling members to respond to these changes has made increasingly efficient and effective supply chains a vital part of a business strategy. As a result, companies design and implement the best supply chain that could have a significant competitive benefit in their relevant markets. Companies could significantly augment their operations by concentrating on interrelationships among business units. These strong bonds are substantial opportunities to decrease costs or increase differentiation in effect to any action in the value chain.

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Today, there is continuous competition. Rapid change in the technology is also taking place and an organization operating in an environment is changing as well. Firms have to do a lot more to survive in the industry. Geographical expansion is taking place and it is extremely vital to be known about the performance of the firm. Performance measurement is an ongoing process in the organization and has a very critical role for the success or failure of a business.

Problem statement:

This study aims to find the impact of the deterministic parcmeters of supply chain on the supply chain performace in the city of Karachi. The deterministic parameter, supply chain inforamtion sharing wether with the supplier or it is with customer, what are its effects on the performance of the firms in karachi? What effects design of the of supply chain has on the performance of the supply chain? What effects supply chain integration has on the performance of the supply chain.

1.3 Research Hypotheis

The supply chian deterministic parameters comprise of idependent variables of the study, while the supply chain performance is the dependent variable of the study.

H0: A significant impact supply chain design has on the performance of supply chain.

H1: A significant impact supply chain sharing of the information has on the performance of supply chain.

H2: A significant impact integration in the supply chain has on the performance of supply chain.

1.4 Outline of the Study

This thesis work focuses on under develop countries. Focusing specifically on the Pakistani scenario. Pakistan is currently suffering from destabilization, so this study is under such circumstances. The outline of the study is, the study of some deterministic parameters of supply chain performance. Three deterministic parameters supply chain design, supply chian information sharing and supply chain integration were taken for this study. Now here it had been seen that does the design of the supply chain determines the performance? If yes, then it was important for the companies to design the supply chain in a way that is more simple and in locations where there is no trouble. Because when any facility is located in a place where there are regular strikes or fighting between different groups, businesses would face problems in supplying the material to their target location. The material can get damaged or destroyed. In the same way integration is a very important aspect for the supply chain. Without integration can we obtain the desired results? Probably the more integrated supply chain is, the more better performance. Because when deparments are linked together through informaiton system then this would help in reducing the time for fullfillment of order. In this way demand and supply could be easily forcasted. Correct forcasting would help in improving the sales of the companies and would also bring profit to the firms. There may be many other deterministic parameters for the supply chain performance. Here we are taking only three of them. The third important variable for this study is information sharing. Information can be shared either with suppliers or can be shared with the customers. How much supplies are needed? When it is needed and how much inventory is sufficint at a time. When information is shared, the answer to these and many other questions relating to suppliers and customers may be identified. By sharing the information firms could come to know, if their performance is geting better.

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The dependent variables for this thesis was supply chain performance, which were divided in to three different variables. The first one is flexibilty performance, output performance and resouce performance. The performance is measured with the help of questionaire designed. Liquard Scale questions were used for measuring the performance of supply chain. The performance measure considers all these three variables as whole.

1.5 Definitions

SCM is a systems approach to manageing the entire flow of information, materials, and services from raw materials, suppliers through factories and warehouses (Leenders, et al 2004).

SCM can also be defined as the course of action of setting up, coordinating, and scheming the stream of services and supplies from vendors to final consumer or customers. This integrated approach incorporates suppliers, supply management, integrated logistics, and operations (David et al, 2002).

To know the easy definition, if one wants a simple definition, supply chain management (SCM) communicates two ways a coordinated management system providing all negotiations and the most effective links to organizations to actively manage high quality inventory (Burt et al, 2003).

CHAPTER 2: LITERATURE REVIEW

Integration in the supply chain, sharing of information and supply chain design variables used for this study are the independent variables, while supply chain performance measures (Flexibility performance, Resource performance, Output performance) are the dependent variables. Now here all the variables are explained in detail in the context of different authors' views.

SCM comprises all those entities that are involved in the fulfilling the order of customers, indirectly or directly. Not only producer and vendors are considered in the supply chain, but also, the tansportation, the distributers, the wholesalers and the customers themselves. In every organization, the supplychain involves all the functions that are engaged in fulfilling customers orders. (Chopra & Meindl, 2007). When SCM is handled, then one organize the supply chain, integrates logistics and operations in a pipline to keep the flow of products and services frequent.

2.1 Sharing of information (suppliers or customers):

Information is a very important asset in today's business world. When companies have access to information then this becomes easy to know what should be supplied and purchased at what time, i.e. demand and supply could be accurately managed. When information is shared with the customer then the customers would be more confident to purchase the product of the company. Customers are likely to know which brands of the company exists in the market and what the company plans in the future? When information is shared with the customer he may feel happier that the firm is giving him more importance. By sharing the information the company can understand what customers want, what their preferences are? This would help them easy forecasting. In the same way sharing information with the suppliers is very significant. Getting the material at the right time is the key for any company. When information is shared with the supplier, this becomes easy for the supplier to understand their customer.

A research was conducted to know the importance of the timely information sharing in the supply chain management in which disruption is dealt with. Researchers have used DASN model and INet model. In various researches the Impact of disruption was quantified on the performance of supply chain. The impact of cost and time disruption is calculated by developing a detailed algorithm. The importance of timely supply information sharing is negotiated on the foundation of quantitative association of the flows of material. The model was then implemented in China where the performance of timely supply information sharing is compared with the cases where supply information has not been shared or if shared later. From this study was found that disruption at an upstream stage can be alerted by the firms at down stream stage and firms can get an accurate warning time quickly. To offset the disruption appropriate decisions are to be made.

Supply chain performance consistency gets improved by the information and also information sharing increases the alertness of the firms. This paper is at the starting stage of the knowledge of quantifying and knowing the significance of supply chain information sharing. This study points out the worth of timely information sharing to advance the performance of a supply chain (Li et al, 2006).

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A study had been conducted to know what impact information sharing has on the inventory and expected costs in a two level supply chain with multiple retailers. Three different levels of information sharing were introduced at first. Beneath each of these three levels of information sharing the optimal inventory policy was derived. The results proved that when the intensity of information sharing raises both the level of inventory and the expected cost of the manufacturer decreases ( Cheng & wu, 2005).

Study was conducted relating to radio frequency identification (REID) technology utilization where it was found that the performance of the firm does not improve directly. The RFID helps in information sharing and the information sharing then leads to the performance of the firm. So it is information sharing that has got very good role in the performance of the firm (Zelbst et al, 2010).

2.2 Integrating supply Chain:

The integration has to occur when the members of the supply chain start to work jointly. This integration occurs both between the in-house functions of the organization and the outside functions of the organization. The functions which are outside the organization are end customers, retailers, distributors, warehouses, agents, financial institutions, providers of the transportation etc. The functions which are in house of the organization are usually, purchasing, accounting, marketing, engineering, logistics, manufacturing, etc.

The Robert et al, (2003) says that for the integration to be inside the organization for strategic purpose there is need for every member of the organization to have access to an integrated information system, location and spanning multiple functions. The ERP system is used to integrate in-house groups through a single integrated system, which helps in accomplishing the objectives of integration for the supply chain. The integration external to the organization which links the customers and suppliers, helps the members of the supply chain for sharing of important information like the level of inventory, forecast demand, real orders etc, from corner to corner of the supply chain. There are systems that help in integrating the supply chain members. These systems are internal linkages, electronic data interchange, advanced planning systems and network communications (Robert et al, 2003).

A work was done on the topic of outling the value and advantages firms could obtain from supply chain integration. Operating with lower working capital and superior customer survice are mainly these advantages organization can get from supply chain integration. This work concentrates on the process of organizational transformation in steps.

To integrate supply chain, process integration, performance and structural intergration, a three level plan projected by the BPR group. Besides this the paper describes in detail those factor which are in some way influencing working capital requirements of firms. If the firms are observing control upon these factor, that the firm, how is it possible. This work involves indian organizations.

The results of the study showed that most of the organizations have aligned their supply objective with their busisness objectives. This was also addressed that in the future there is a need to look in to current stage of supply chain integration. To give customer a better service with the cheapest cost it is important to align strategy and structure.

This thesis work supports supply chain managers by providing details to improve their performance. Service level is improved. In the supply chain, planning orientation and organizational integration are resulted out of this study. Bpr has brought commitment for the integration of supply chain organization in this paper. This is also bringing new benefit to the firms re-engineering actions.

So here this was found that integrating different units could improve the peformance of the firms and firm could survive in the changing world of business. There has been 18 percent decrease in the inventories. The cost of the distribution has been reduced. This involves various factor, of which integration is also one of such factor for improving the performance of the firm. Information sharing which is also the study variable for the research paper along with integration made contribution to the achievement of organizaiton performance. Informaiton sharing can help in taking the strategic decisions. Framework of this paper is helpful for the transformation of organization( Sehgal et al, 2006).

There was this work done with the purpose to know that the firms who integrate exclusively with those partners who are equivalent to them in the supply chain display supply chain performance and practice different than the partners in the supply chain who are more remote and they integrate as well. Organizations that have extensive distance of integration concentrate on the placement with customers and suppliers. They have extra concentration on the supply chain then those of a thin length. Higher level of performance is attributed to supply chain performance. ( Kannan & Tan, 2010)

2.3 Drawing of the supply chain:

The design when more simple to understand is better for any project, business etc. similarly the design has its contribution in getting the product to the hands of customer with the lowest possible cost. The design of the supply chain actually tells that how quickly the customer can get the product.

In the design phase companies decides about the pricing and marketing related plans of the products. Company also decides about the organization of the supply chain for the coming years or for the furture years. The company make its decision wether to go for the in-house production or outsouring the production. Where the resources would come from and the decisions regarding warehousing, facility location, how the product would be manufactured and where the product would be kept and how much space it would require.

Besides this is also decided that the form of transport to be used and the variation in the mode of transporation on the way till the reach of inbound or outbound logistics to its destination. The information system to be used is also decided. this is to be made sure that the supply chain efforts come out to be adding great value to the profit of the firm.

The decision which are taken in the suppply chain design are basically for the strategic decisions. The decision taken in the design period are for the longer period of time and that's it has a high cost to be altered. While taking the supply chain design decision it is very important for the companies to take into account any uncertain event which may come under way in the years to come (Chopra & Meindl, 2007).

By using the supply chain design two problems are overcomed like costs minimized, two polices in the supply chain like make-to-stock and assemble-to-order are compared (Raghavan et al, 2000).

To encourage the performance of firm, corresponding design in purchasing management has to be facilitated with a firm's product competitive strategy (David, et al, 2002).

Organizations that want to improve their performance, they when work in difficult cutthroat situation generally observes high intensity of performance. In addition the hurdles in the way of integration in the supply chain can in reality strengthen the organization's capability to get better organization performance as the organization is in condition to put more hard work to undertake the hurdles to supply chain integration and build up successful supply chain connections (Richey et al, 2009).

CHAPTER 3: RESEARCH METHODS

3.1 Method of data collection

Data was collected through questionnaire by visiting at companies personally and through email.

3.2 Sampling Technique

Convenience sampling has been used as a sampling technique.

3.3 Sampling Size

The sample size for this was of 40 firms which come in under the area of Karachi. The sample size is kept so small because it comprises only the supply chain managers in the Karachi. It is not easy to approach so many supply chain managers.

3.4 Instrument of Data Collection

Questionnaire was used as an instrument for data collection. Questionnaire consists of six parts. Questionnaire is given in the appendix.

3.4.1 Validity and Reliability test

Figure: 1

Reliability Statistics

3.5 Model Developed

Figure: 2

Supply Chain integration

Supply chain info. Sharing

Supply chain Design

Supply chain performance

=

Flexibility performance

+

Resource performance

+

Output performance

The above figure has been taken from the study of (Sezen, 2008)

3.6 Statistical tool used

In this research simple Linear Regression is used and the dependent variable is summation of the other varibales that's why its nature become scale and regression is suitable to apply on the varibales that are scale in nature. Enter method was used to develop the final results.

CHAPTER 4: RESULTS

4.1 Finding and Interpretation of the Results

H1: Supply chain sharing of information has a significant impact on the supply chain performance

TABLE 4.1

Form the above table we can observe the value of the R Square is .200 or 20%. It means that one unit change in the set of independent variables brings out the 20% change in the variation of dependent variable. The R Square explains that how much change would occur in the dependent variable variation due to the changes occur in the predictors.

TABLE 4.2

From the above table we can observe that the significant value of the above ANOVAs model test is less that 0.05 that is the value is 0.004. It means that the data is suitable for the application of regression model. Enter method was used to run the multiple linear regressions that finalized the results.

TABLE 4.3

The above Coefficient table explains the relationship among the dependent variable and the predictors. From the above table this could be observe that the Supply chain sharing of information significant value is 0.004 that is less than 0.05 means that supply chain sharing of information has a significant impact on the performance of supply chain, therefore, our hypothesis is not rejected. The beta value of the supply chain sharing of information is 0.433 means that there is a positive relationship exist in between the performance of supply chain and supply chain sharing of information. More the companies share their information with the supply chain firms integated in their supply chain there are more chances that the performance of supply chain of the firms increase.

H2: A significant impact supply chain design has on the performance of supply chain

TABLE 4.4

Form the above table we can observe the value of the R Square is .143 or 14.3%. It means that one unit change in the set of independent variables brings out the 14.0% change in the variation of dependent variable. The R Square explains that how much change would occur in the dependent variable variation due to the changes occur in the predictors.

TABLE 4.5

From the above table we can observe that the significant value of the above ANOVAs model test is less that 0.05 that is the value is 0.004. It means that the data is suitable for the application of regression model. Enter method was used to run the multiple linear regressions that finalized the results.

TABLE 4.6

The above Coefficient table explains the relationship among the dependent variable and the predictors. From the above table this could be observed that the Supply chain design significant value is 0.016 that is less than 0.05 means that a significant impact the design of the supply chain has of the perfomance of supply chain. therefore hypothesis is not rejected. The beta value of the supply chain design is 0.292 means that there is a positive relationship exist in between the supply chain performance and supply chain design. More the companies work on their supply chain module and design it will help in the increasing the supply chain performance. The companies have to focus to design their supply chain activities in a way that make their systems efficient resulting in better supply chain performance.

H3: A significant impact integration in the supply chain has on the performance of supply chain .

TABLE 4.7

Form the above table we can observe the value of the R Square is .012 or 1.2%. It means that one unit change in the set of independent variables brings out the 1% change in the variation of dependent variable. The R square explains that how much change will occur in the dependent variable variation due to the changes occur in the predictors.

TABLE 4.8

From the above table we can observe that the significant value of the above ANOVAs model test is greater than 0.05 that is the value is 0.497. It means that the data is not suitable for the application of regression model as the model is insignificant. Enter method was used to run the multiple linear regressions that finalized the results.

TABLE 4.9

The above Coefficient table explains the relationship among the dependent variable and the predictors. From the above table it can be observed that the Supply chain design significant value is 0.497 that is greater than 0.05 means that a significant impact integration in the supply chain does not have on the performance of supply chain, therefore, our hypothesis is not accepted. The beta value of the supply chain integration is 0.106 means that there is a positive relationship exist in between the performance of supply chain and integration in the supply chain but unfortunately found insisgnificant in the said study.

4.2 Hypotheses Assessment Summary

S.NO.

Hypotheses

Beta

SIG.

RESULT

H0

A significant impact supply chain design has on the performance of supply chain.

.378

.016

Accepted

H1

A significant impact supply chain sharing of the information has on the performance of supply chain.

.

.488

.004

Accepted

H2

A significant impact integration in the supply chain has on the performance of supply chain.

.110

.497

Rejected

CHAPTER 5: DISCUSSIONS, CONCLUSION,

IMPLICATIONS AND FUTURE RESEARCH

5.1 Conclusion:

This research has some significance in determining deterministic parameters of supply chain performance for the reason that it has a straight impact on the overall performance of the manufacturing organization. This has been observed that whenever relations of the deterministic parameters (supply chain design and supply chain information sharing) of the supply chain with supply chain performance of the manufacturing units have a good joint relationship then the organization produce better performance and results. Supply chain management is the major element which makes the performance efficient by the optimal use of supplier's ability and potential which enhance the company's performance. Supply chain integration being an important variable is not so important variable for the performance of businesses in Karachi in the context of supply chain according to our finding.

5.2 Discussions

The phenomenal value of the SCM philosophy can be achieved only if the cumulative performance of the entire supply chain is enhanced and it is possible when all the relations in the chain work as effective as possible all together as contrast to the consequential total performance when every entity link is independently optimized. The recent creation of papers on procurement and on extra topics primarily explains the questioning interest of researchers for this area. In addition to it, these studies mostly striving to better understand the impact of efficient procurement activities on different supply chain components. Strategic nature of procurement has altered entirely, its core goals have changed very little due to the competitive advantage and profitability (Bozartha et al, 1998).

5.3 Implications and Recommendation

To encourage the performance of firm, corresponding design in supply chain performance which need to be facilitated with a firm's product competitive strategy. Organizations that want to improve their performance, they when work in difficult cutthroat situation generally observes high intensity of performance. Integration in the supply chain could unfortunately not bring positive results. May be fully integration is not so important for many businesses. Because they think the way they are doing business right now is much better. Further there is need for the integration to be reviewed.

Today in manufacturing environment where there is an external and internal competition which involve in the industry, sourcing and supplier selection decisions are turn to be very crucial that is the reason the role of procurement in organizations have altered to strategic, from operational in order to reduce manufacturing cost, delivery schedule, increase the quality and assortment of the products . Strategic procurement results in obtaining elasticity, cost, reliability, and quality return over the rivalry has been draw attention by several researchers.

5.3 Future Research

For the future research this recommended that to develop and design a model for Supply chain procedures and the best practices for organizations which can be useful for them to attain the maximum implementation as per deterministic parameters of supply chain performance in order to get the competitive advantage over rivals. This study needs to be reviewed in future. There is a need for the supply chain variable to be thoroughly reviewed. A further research on the impact of supply chain integration on the supply chain performance in Karachi may be very useful. Also if this study is extensively carried out and all the big cities of Pakistan are included in it then this would be a great contribution in the field of supply chain.

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