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In today's competitive era, supply chain management (SCM) is chosen as the global operations strategy for achieving competitive advantage. Organizations are attempting to find ways to improve their responsiveness and flexibility and in turn competitiveness in their business processes by changing their operational strategy, methods and technologies that include the implementation of information technology. Much of the literature proposes that for creating a competitive advantage in an organization, it is vital that their supply chain processes and information technology must be aligned. It has been evident from the previous literatures that information technology can control the complexity of the supply chain effectively and improves the supply chain agility. Although, implementation of information technology improves the supply chain agility, there are some sectors that are not completely adopted those new technologies. This is seen especially in Indian Fast Moving Consumer Goods (FMCG) sector, which operates in a complex and competitive supply chain environment. Therefore, it is essential to know that how those organizations utilize IT in their supply chain to meet their objectives. Accordingly, the research was conducted using secondary data to identify IT usage, IT investment and technology adoption in Indian FMCG supply chain. Based on the review and analysis, recommendations have been made for Indian FMCG companies regarding their areas of improvements.
First, and foremost, I would like to thank my supervisor, Ms. Ann Mulhaney for her valued advices, guidance, and inspirations towards the finalization of my dissertation. This research would not been possible without her valuable comments, support, and critiques.
I would like to express further gratitude to my ex-colleagues Surya Prakash, Sharat Chandra and Sreeshma for supporting my goals and assisting in any way. I have learned much from them through countless discussion and debates.
I would like to take this opportunity to thank Prof. Dr. Roger Levermore, Ms. Elaine Eades and other business school staff who taught me at MBA for their contribution.
I want to specially thank my good friend Prabhu Punniamurthy for his support throughout the program. I also want to thank my other friends Srikanth Thiraviam, Sherin Deepak, Rasika Priyanath, Gururaj Mayanna, Sumitha Mani and Isvarya Umapathy, and other master's students for their professional and personal support.
Finally, I would like to thank my parents and brother for all their endless support, love and understanding throughout the dissertation process, and for all their help in ensuring the submission of the final dissertation.
CHAPTER I: INTRODUCTION
1.1 Overview of the Topic
Businesses today have become extremely complex and challenging. The interaction of three Cs, namely "Consumers, Competition and Convergence", has thrown a new challenges for the organizations across the global (Sahay, 2000). The consumers have become more discriminating in their selection of products and services. The high pressure of competition has accelerated the product changes and advanced by shortening product and development in the technology lifecycle. The convergence has shifted the balance of power towards consumers favor by giving way to globalization of the businesses and integration of world economies. Although all these may have thrown an excess opportunities for all - in the form of choice and variety; but, at the same time it has highest degree of volatility and uncertainty to the business processes. To battle these challenges and risks to gain the competitive advantage, the organizations have to reorganize and streamline their supply chain.
In search of competitive edge in dynamic environment, the organizations must give priority to gain an advantage over the competitors. The competitive advantage can be realized by providing greater value to the consumers either through offering more benefits that justify highest prices or by lowering the prices (Kotler et al., 1998). Thus supply chain plays the vital role in achieving the competitive advantage in the organization (Ballou, 1999). The task of supply chain is not only to make sure of raw material purchase, manufactured and distributed to right place, at right quantity, and at right time, but also to create a value and help the enterprise (Dong & Xu, 2002).
The successful supply chain processes requires real-time information regarding order processing and repossession, the products delivery status, immediate notification on delivery delays, production schedule, sales and communication among all supply chain partners. Nowadays, members involved in supply chain activities are more convinced about the potential benefits of external and internal information sharing and comprehend that gain attained by such interfaces can offset any possible losses in the supply chain (Schachtman, 2000). In realization of those interfaces, Information Technology (IT) plays a dominant role in supply chain. Here, IT is defined as the software, hardware, network communication instruments and other information technologies, investment and design to ease the processing and exchange of information (Closs & Xu, 2000). The availability of accurate and timely information allows the firms to coordinate more effectively in their inter-organizational activities and enhance firms' capabilities for rapid development in their processes, manufacture and distribution of goods (Bowersox & Daugherty, 1995).
The businesses now operate in a swiftly evolving market environment and have become more dependent on the Information systems (IS) and the deployment of IT in order to support them in achieving the business objectives. The organizations have comprehended the importance of developing an IT strategy, which has become the most crucial support for the business strategy. Luftman (2000) defines strategic alignment as "applying IT in an appropriate and timely way, in harmony with business strategies, goals and needs." It is very common that organizations explore different ways to increase their sales by applying new strategy, so as to react to the changing environment rapidly.
According to Hu and Huang (2004) view, the impact of IT has improved the business performance and further said that each year more number of organizations is in the pace of investing in IT in order to improve their competitive advantage and eventually their business objectives. The IT mainly helped in three Cs of business - communication, collaboration and coordination. It has been said that IT-based supply chain is the major driving force behind the progress of industrial and competitiveness in the global market. The changes in market environment brought by new technologies are very essential in shaping the future economies (Ulengin & Uray, 2005).
According to Handfield and Nichols (1999), IT has the potential to manage the supply chain flow and to impact in many dimensions such as cost, delivery, quality, flexibility and profit of the firm (Brandyberry et al., 1999). There is empirical evidence that impact of IT in supply chain, showing the development in their processes and lead to a better firm performance measured by return on equity (ROE), return of investment (ROI) and market share (Byrd and Davidson, 2003). Vickery et al. (2003) provided the empirical evidence that coordination and integration in the supply chain facilitated by the usage of integrated information technologies will have a direct impact on firm's financial performance.
Now, it is particularly important for the type of organization examined in this study. In terms of research problem, the type of organization employed is Fast Moving Consumer Goods (FMCG) companies in India. The conception behind the FMCG sector is that all products manufactured by the company have a rapid sales and turnover rate. Hence, the products have to produced constantly and distribute to retailers so that stores can maintain the availability constantly. There are number of FMCG firms continue to struggle in their efforts towards effectively integrating the information flow and physical goods in their supply chains.
In Indian FMCG sector, the companies face the very difficult task of developing a competitive advantage based on differentiation or low cost strategies in their supply chain (Kunc, 2005). Therefore, it becomes necessary for the FMCG firm's to constantly ensure that their strategic innovations are idiosyncratic in order to remain ahead of competitors. Hence, the firms need to remain flexible in their ability to rapidly changing the strategies in their supply chain, while achieving and maintaining strategic alignment. By adopting the strategic alignment of IT in supply chain would overcome the problems of Indian FMCG firms.
Shah et al. (2002) suggest that strategic initiatives and SCM practices taken by supply chain members require using information intensively. Thus, they require the inter-organizational information system support. Further, they argue that supply chain at different levels of coordination and integration require different level of IS integration. Henceforth, in order to achieve the competitive advantage in Indian FMCG supply chain, a high level of supply chain integration must be aligned with high level of IT integration. The example mentioned below clearly shows the importance of aligning supply chain management strategy (SCMS) with IT strategy to achieve better performance (Cohen and Roussel, 2005; Nickles et al., 1998; Jones et al., 2005). The example shows the Wal-Mart's IT usage to support their supply chain. "Wal-Mart has made significant investments in inventory control, materials management, point of sale integration, and inventory tracking RFID systems. These systems provide up-to-the-minute information on inventory and logistics, leading to rapid response to customer requirements, higher inventory turnover, and reduction of its labor and inventory costs; thus supporting the company's low cost supply chain".
1.2 Research Scope
The main purpose of the research is to identify the impact of IT adoption in SCM practices and its benefits to organization performance. The research also identifies the IT usage, investment and adoption of technology in the supply chain of Indian FMCG companies.
1.3 Research Methodology
To achieve the research purpose, the secondary data methodology was used in this qualitative study. The information on supply chain management, information technology and FMCG sector was majorly collected from multiple-source secondary data such as books, journal articles, newspapers, reports, and other internet sources. In addition, data regarding Indian FMCG firs were collected from case studies articles and survey-based secondary data.
1.4 Research Objective
As IT continues to increase in usage and importance in supply chain processes, the IT alignment with supply chain management and strategies has become very critical. The literature in this area is still emerging. Thus, this research attempts to make a significant contribution to the literature on the SCM and IT by addressing the following objectives.
1.4.1 Primary Objective
The primary objective is to identify the impact of information technology in supply chain management and its benefits to organization growth and it also identifies the usage of information technology in Indian FMCG supply chain.
1.4.2 Secondary Objective
The secondary objectives of the study, derived from the literature review and data analyzed;
Identify the types of information technologies currently in use in the supply chain processes.
Investigate the amount of information exchange among supply chain partners
Investigate on Indian FMCG sector market analysis, key trends and players in the industry
Investigate the importance of SCM practices in the organizations
Investigate the SCM practices in Indian businesses
Identify the organization's supply chain focus area
Investigate IT investment and IT adoption in Indian FMCG supply chain
Identifying of new information technologies used in supply chain processes
1.5 Outline of Proposed Chapters
The proposed research is presented in the following chapter layout, chapter one is the introduction to the orientation and rationale of the research study. It explains why research in this area is relevant and introduces the problem statement. Furthermore, it includes the research scope, objectives of the research and methodology. Chapter two describes the literature review on supply chain, SCM, SCM practices, IT strategy in SCM, and various information technologies used in the supply chain. It further adds an overview of SCM in Indian businesses, the FMCG industry and its product classification. Chapter three deals with research methodology and describes the research purpose, research approach and data collection methods used in this study. Chapter four contains Indian FMCG market analysis, sales trends, and its key players. It describes the importance of SCM in FMCG sector and its challenges in the supply chain processes. Furthermore, it provides the impact of IT in SCM and its benefits. And then data has been analyzed about Indian FMCG companies on their IT investment and usage in the supply chain. Chapter five includes the keys findings and discussions on data analyzed.
Conclusion & Recommendations
Findings & Discussion
Figure 1.1: Outline of dissertation chapters
Chapter six concludes the research by making necessary recommendations for further research, then limitations of this research, and finally, a conclusion for this study.