The Effect Of Ict To Collaboration Strategies Commerce Essay

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Nowadays, in competitive market environment has forced firms to respond more quickly to customer needs through faster product development and shorter delivery time. While the demand from customers for product variety particularly in the case of short life-cycle products such as food supply chain makes it difficult for manufacturers and retailers to predict demand and supply properly to the market. To be successful in matching demand with supply, manufacturers and retailers need to collaborate in the supply chain (Simatupang and Sridharan, 2002). Collaborative supply chain deal with transparency of information internal and external organizations propose to maximize profit. Therefore, the use of Information and Communication Technology (ICT) can support the need for collaboration strategy in order to success in the supply chain in many ways included primary data from end consumers to manufacturer and improving customers services at lower costs (Van der Vorst et al, 2005). Firm apply collaboration strategy in order to share risks and benefits. The main objective of collaboration is to achieve higher performance than operating individually (Min et al, 2005 cited Lambert et al, 1999). In this report will focus on the benefit of using ICT in collaboration strategy focus on agri-food supply chain.

Collaboration Strategies

Anthony (2000) suggests that supply chain collaboration occurs when "two or more companies share the responsibility of exchanging common planning management, execution, and performance measurement information". He goes further by suggesting that "collaborative relationships transform how information is shared between companies and drive change to the underlying business processes" (Barratt and Oliveira, 2001 cited Anthony, 2000). Zacharia et al (2009) also stated that "Collaboration has become a critical factor for the smoothly functioning of a productive supply chain". The level of collaboration can sort from a low level collaboration to a high level collaboration. High level of collaboration requires a high level of commitment, numerous joint activities, overlapping operations and an open exchange of information and ideas. While a low level of collaboration, the collaboration among the firms in decision making process are not jointly made and little information is shared. Zacharia et al (2009).

According to Barratt (2004), there are two main categories of collaboration (see Figure 1). These are vertical collaboration and horizontal collaboration. Vertical collaboration includes the collaboration with customers, internally (across functions) and with suppliers. Horizontal collaboration includes collaboration with competitors, internally and with non-competitors, for example: sharing manufacturing capacity. In this paper will study focus on vertical collaboration only.

Figure 1 : The scope of collaboration: Generally

Even though, Barratt (2004) stated that "Collaboration is not just about developing close information exchange based relations at an operational level of activity, but also needs to be implemented at tactical and strategic levels in the organizations across the supply chain" but it is not possible to say that sharing of information in collaborative supply chain is unnecessary. As one of the key to be successful in collaboration supply chain is transparency of information cross-functional and cross-organizational (Simatupang and Sridharan, 2002).

Especially in Collaboration Planning, Forecasting and Replenishment (CPFR) which is a concept aimed to integrate demand management within supply chain. The need of improving information management and timely transmission of demand data is a basic of developing collaboration across the supply chain (Taylor and Fearne, 2006). The use of electronics tools and activities such as forecasting, replenishment and planning are now carefully created, thus, accessibility in sharing and distribution of information through the supply chain are also important (Cassivi, 2006).

Why do Agri-food supply chain need to collaborate?

Consumer shopping habits tend to have higher demand at the end of week (Friday and Saturday) than during weekdays. This causes to difficulties for suppliers regard to capacity planning. For instance, employees in the suppliers' factories work five days per week while retailers increase their order in order to response to consumer demand on weekend (Taylor and Fearne, 2006). As pointed out by Taylor and Fearne (2006), "Overproduce" to build stocks for the end of the week seems to be the logical way to deal with this problem; however, demand management for food supply chain is more complicated because of shelf-life limited of food products. Van de Vorst et al (2005) categorized food supply chained into two groups. These are food supply chain for agricultural products and food supply chain for processed food products. Food supply chain for agricultural products such as fresh vegetables, flowers and fruits. In general, these chains included farmers, auctions, wholesalers, importers and exporters, and retailers. The major tasks are the handling, conditioned storing, packing, transportation and especially trading of these goods. Food supply chain for processed food products such as snacks, canned food, portioned meats and desserts). In these chains, manufacturers use raw materials from agricultural products to produce consumer products. The processes will add higher value to products. It can be seen that not only simply making consumer sales data available but food supply chain also required a good collaboration within supply chain as well. For example, in food supply chain for agricultural products and processed food products, it is important to have a well collaborate between these two supply chains. A well collaborate will help these two supply chains to have better performance to respond to end consumer demands as they can plan and work harmonically.

In addition, consumers in many parts of the world increase demand for "verifiable evidence of traceability as an important criterion of food product quality/safety" (Opara, 2002). As in recent events, there are many problems happened to the food supply chain such as BSE crisis in the United Kingdom and the Swine fever and Avian Influenza in among others the Netherlands; this made producers concern to the necessity of controlling and intensification chain co-operation (Simatupang and Sridharan, 2002). Moreover, Matopoulos et al (2007) claimed that nowadays consumers are more concerned in having healthy food and are labeled by higher levels of food safety. In combination of those aforementioned factors, "it has increased public pressure for transparency, traceability and "due diligence" throughout the agri-food supply chain (Matopoulos et al, 2007 cited Fearne et al, 2004)" and has increased the need for collaboration within the agri-food supply chain partners (Matopoulos et al, 2007). Therefore, a high level of information sharing, teamwork, cooperation and collaboration are required in agri-food supply chain in order to respond to consumers' trend effectively (Taylor and Fearne, 2006).

To sum up, the relationships in Agri-food supply chain relate to three main actors which are suppliers-retailers-consumers. Collaboration between suppliers and retailers is to satisfy end consumers in order to maximize profit and minimize cost. The objective of collaboration in agri-food supply chain is based on "win-win" strategy which is both suppliers and retailers can increase their benefit based on consumers' satisfaction. Increasing in demand for quality and fluctuated demand require suppliers and retailers to improve infrastructure within processes. As a result, the implementation of ICT system in agri-food supply chains becomes more importance in planning, forecasting and filling the stocks (Szymanowski, 2007 cited Ross, 2003).

ICT in Agri-food supply chain

Trends for information sharing in food supply chains have been defined by Wolfert (2009) that the increasing of information becomes a competitive factor (Wolfert, 2009) Information sharing & ICT in agri-food. As consumers tend to demand for short lead time and more frequency of small batches due to agri-food product life cycles are short. Consumers satisfy with fresh and safety products. To respond to the demand, food supply chains, therefore, require a very flexible production and organization and supply chain. In order to achieve that goal, the sharing of information need to be undertaken within the supply chain partners effectively. As aforementioned that the sharing of information will allow collaboration strategy in agri-food supply chain successful. ICT system can link the information within the supply chain Van der Vorst et al (2005).

Van der Vorst et al (2005) described the definition of ICT as all available technical facilities and the users which allow organizations to communicate and exchange information. Technical facilities included computers, systems software, application software, procedures, technical, message, and etc. that are used and necessary for transferring information processing. The use of ICT can lower information cost and improve customer services as explained by Setboonsarng et al (2009) in the table 1 about the key processes that ICT can support to both input data, as well as to share or output data compare to the traditional style.

Table 1 : Traditional method VS ICT method

Operations

Technologies Already Used

ICT Technologies Applied Recently

Identification of food

Stamping with ink

Printing technology (inkjet printing, affixing printed labels)

•

Data input

Handwritten or manual input

Auto identification technology such as bar codes, two-dimensional bar codes (quick response [QR] codes), or the experimental\radio frequency identification (RFID)

Global positioning system (GPS) Hand-held sensors to scan and record data

Data transfer

Fax

Disclosing information to customers through websites

Exchanging data electronically among food business operators

Verification

Onsite visual inspection

Software that automatically calculates and compares total volumes received and released. Examination technology such as DNA examination

In term of collaboration strategy, the use of ICT in data input, data transfer and verification process will provide real-time data from end consumers to suppliers without delay. As the high level of technologies can range from simple software on a computer, data sharing through mobile phone technology, or an internet-based data input website, to complex sensors using global positioning system (GPS) technology. As a result, the operations in the supply chain such as inventory management, production planning, transportation planning and etc. can be traced by all supply chain partners, thus, the planning and management can be controlled effectively.

Case Study

The concept of CPFR has been widely used over the time. In this paper will report six case studies from Taylor (2006) paper. The six chains as shown in table 2 involved a major UK retailer including Tesco, Asda, Sainsbury, Waitrose and Somerfield. These companies involve the use of CPFR in their supply chain. It can be seen that in each products have their own supply chains which start from farmers to supermarkets. Along these relationships need a well collaborated in order to be effective in planning, forecasting and replenishment. After studied, I found that the cause of the problem is variable in demand as aforementioned in the section 2, "why do agri-food supply chain need to collaborate?" that agi-food has short life-cycles, thus, it cannot overproduce in advance in order to respond to rapid demand increasing.

Table 2 : Value chains on which the research is based

Chain

Focal Products

Companies/facilities in the chain

1

2

3

4

5

6

Pork chops

Cheddar cheese

Pork sausages

Beef brisket

Organic potatoes

Organic carrots

Supermarket-packing plant-abattoir-farms

Supermarket-packing plant-maturation store-dairy-farms

Supermarket-sausage producer-meat processor-abattoir-farms

Supermarket-packing plant-abattoir-farms

Supermarket-packing plant-farms

Supermarket-packing plant-farms

The main concerning is about data transferring. Data availability, data accuracy, sharing consumer demand data and lack of "on-shelf availability" data can lead to long lead time in information flow and forecasting problems. The need of point of sale (POS) data to be reported from the point of sale (supermarket) to the suppliers along the supply chain is vital. In these chains, they applied the use of EPOS to capture the demand movements.

In order to share data along the chains, ICT plays important role as shown in table 1. For example, RFID tag can also be used in agri-food supply chain to collect data from POS and transfer directly to devices in the system much faster than hand written or manual input and also more accurate. Additional, in terms of data transferring can also be speed up since the information will be sharing on internet system basis. In short, this can create information hub which every section in the supply chain can share together. This cans shorter time in transferring data compare to the traditional way; fax. The use of ICT in this case can support the concept of CPFR in long term relationships as well. When the data can transfer from retailers to farmers directly, it will effect to production planning. With regard to the case studies, there is no use of ICT in all the six chains to exchange data between farmers and retailers. In general, agricultural food has long lead time in production process. For example, sweet corn takes 65-90 days from planting to harvest (Iannotti, 2010). Farmers make their own decision about how much to produce without information from end-consumers. Farm production is essentially "push" system. With the benefit of ICT in CPFR will help farmers to obtain demand data which will be useful to make volume decisions at the start of the farming process (planting-harvest).

The objective of CPFR is covered to make their supply chains more responsive and keep all the supply chain members connect with end consumer demand, both in terms of product and its volumes. "Bullwhip effect" is a good example of bad communication. To establish end-to-end communication, it will allow supply chain partners to have a clear picture of the whole supply chain. The use of ICT can also support the concept of CFPR in Agri-food supply chain start from the planning till the replenishment stage, the whole supply chain will be prompted to respond to variable demand and make it more proactive rather than reactive. Generally, the goal of collaboration strategy is to create a high level of trust between trading partners, thus, the benefit of sharing information from ICT will be support CPFR in Agri-food supply chain perfectly.

Recently, the use of ICT in food supply chain is also widely use in terms of tracking and tracing product. The reason is to guarantee food safety and reduce the size of a product recall. The main objectives of tracking and tracing are the possibility to inform consumers and stakeholders about the origin of items of products, about their history. In case that there are any problems occur or bad feedback from consumers, it will be possible to find out sources of the problem.

Conclusion and Recommendation

As the nature if consumer demand in agri-food supply chain is variable and agri-food products have short-life cycle, as a result, planning and forecasting production is relatively complex. The objective of collaboration in agri-food supply chain is based on "win-win" strategy which is both suppliers and retailers can increase their benefit based on consumers' satisfaction. From the report, it can be seen that the use of ICT can support the concept of collaborative planning forecasting and replenishment (CPFR) in agri-food supply chain. Since ICT can help data transferring process much faster by providing real-time data and cut out manual processes such as hand written or fax by using ICT system such as RFID, Barcode, or web based information instead. Basically, the main problem in agri-food supply chain comes from inefficiency data transferring such as data availability, data accuracy, sharing consumer demand data and lack of "on-shelf availability" data. ICT provides real-time data along the supply chain partners which useful in production planning and forecasting for fulfillment effectively. Another important advantage of ICT in agri-food supply chain is that the direct information from end-consumers will allow farmer to make volume decisions at the start of the farming process more accurate. In terms of food safety trends, ICT can be a part of customer service with the tracking and tracing system. It will guarantee the customer about origin of products and in case there is any problems, the consumers will be notified the cause behind it. It can be assumed that ICT is the key of successful in CPFR as the benefit of ICT can respond to consumers' trend which helps to maintain customer satisfaction.

With regard to the case studies, there is the use of CPFR in those six food supply chains which collecting data base on electronics point of sale (EPOS) data. However, there is no information that any chains use ICT system to connect all information along the chains. As aforementioned, ICT can support the concept of CPFR. I would like to recommend agri-food supply chain partners to concern more about implementation of ICT in order to manage information system within the chain more effective. Even though, organizations have to invest in ICT system, but it is worth. As ICT can reduce time and documentation work which keep recording on paper-based. Compare to electronics record-keeping, keeping recording on paper based will cost more in long term.

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