Research paper

Managing supply chains for competitiveness: the Indian scenario

B.S. Sahay
Institute of Management Technology, Raj Nagar, India

Jatinder N.D. Gupta

Department of Accounting and Information Systems, University of Alabama in Huntsville, Huntsville, Alabama, USA, and

Ramneesh Mohan
Center for Global Supply Chain Management, Institute of Management Technology, Raj Nagar, India
Abstract Purpose The paper aims to analyse research conducted for assessing the current state of supply chain management practices followed by Indian organisations and identifying important areas that need to be addressed in order to increase their competitiveness. Design/methodology/approach The paper begins by proposing a framework for evaluating the supply chain strategy of an organisation along the three key dimensions supply chain objectives, supply chain processes, and management focus on supply chain activities. Data collected through survey questionnaire for the three dimensions have been used to assess the alignment of supply chain strategy with the overall business strategy through statistical analysis. Findings The research ndings reveal that most of the Indian organisations have aligned their supply chain objectives with their business objectives. They are now on course of aligning their processes and management focus. Enhanced level of competitiveness would require Indian organisations to manage the three-dimensional alignment of achieving the agenda set by the business strategy. Research limitations/implications Further research work should focus on: assessing the current level of supply chain processes; identifying critical supply chain focus areas for the business; and establishing specic performance measures for continuous measurement of supply chain efciency improvement. Practical implications This paper provides a detailed study to help supply chain managers improve supply chain efciency through alignment of supply chain objectives with business objectives, supply chain processes with management tools and supply chain focus areas with management focus. Improved supply chain efciency will help Indian organisations maintain competitiveness in a rapidly globalising economy. Originality/value The supply chain alignment model suggested in this paper provides a framework for realising true supply chain efciency and competitiveness. Different organisations will align their objectives, processes and management focus as per the focal areas of their organisation depending on their capabilities and market situation. However, in every case Indian organisations need to act fast to capitalise on these opportunities to be competitive with the world market. Keywords Competitive strategy, Information management, Inventory management, Supply chain management, India Paper type Research paper

1. Introduction
1.1. Indias competitiveness Over a decade has passed since India embarked on liberalisation. There has been no dearth of fervent declarations afrming Indias determination to acquire the capabilities that will add to its competitiveness and enable it to be counted among other recognised global players (Gupta, 1998). However, has India been able to cash on inherent and
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acquired advantages in terms of competitiveness? Three different bodies assign three different grades to India: (1) The 1999 World Competitiveness Year Book, compiled by the Switzerland-based International Institute for Management Development (IIMD), shows that Indias ranking in international competitiveness, evaluated by applying 287 criteria, has gone up by two points from being 41st out of 46 countries in 1998 to 39th out of 47 countries in 1999 (Nancy, 1999). (2) The survey conducted by the Geneva-based World Economic Forum (WEF) for 1999 puts India in 53rd position of 59 countries in its Global Competitiveness Report, down from 50 in 1998, and 45 in 1997 and 1996. It uses 179 indicators under eight heads (openness, government, nance, infrastructure, technology, management, labour and civil institutions). 15

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(3) The World Bank, which appraised the competitiveness 46 countries in 1999, places India in the 40th rank. In all these three evaluations, the rankings on certain specic parameters are more worrisome than the overall gures. Indias weakest areas in all the surveys include: uncertainty in government policies; infrastructural deciencies; unsatisfactory corporate and nancial management of both private and public sector enterprises; inept corporate boards; insufcient attention to human development; low productivity; undependable quality; inadequate customer orientation; and negligible investment on R&D, with special reference to information technology. India is the fth largest country in terms of gross national product (GNP) and purchasing power parity (PPP). It constitutes one of the fastest growing markets in the world and is counted among the richest with regard to cheap skilled labour, scientic and technological resources, and entrepreneurial talents. Therefore, the above image of India is quite enviable. A comparative analysis of customer orientation carried out for ten different countries by the IIMD and the WEF is depicted in Table I. The comparisons are based on ve parameters: product quality, product design, on-time delivery, after-sales service and managing distribution. India ranks last (tenth) on the parameters of product quality, design and ontime delivery and ninth in the case of after-sales service and managing distribution. Table I clearly shows that India still has a long way to go to improve its competitiveness. To improve the competitiveness of Indian organisations on product design, quality and on-time delivery it has become necessary for them to look for innovations that produce maximum efciency both within and beyond their operations (Sahay, 2000; Zylbersztajn et al., 2003). Supply chain management is an integrating philosophy to manage the total ow of a distribution channel from supplier to ultimate customer (Ellram and Cooper, 1990). It is the management of upstream and downstream relationships both within and beyond their operations with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole (Martin, 1998; Weber, 2002). Effective supply chain strategies for creating competitiveness revolve around the on-time delivery of competitive quality goods and services, at a reasonable cost, involving the right business partners (Hewitt, 1994; Hobbs et al., 1998; Easton, 2002). The paper Table I International comparison of customer orientation
Parameters Brazil Canada France Germany India Japan The Netherlands South Korea Thailand USA Product quality 52.39 68.13 55.94 92.50 41.08 92.68 72.89 60.71 63.00 59.67 Product design 56.62 58.06 66.96 71.39 34.05 81.46 63.11 48.57 58.50 69.84

has been written with the objective of developing an understanding of the existing scenario of supply chain management in Indian industry. It assesses the direction in which supply chain management is heading, and gauges its alignment with the business strategy. Thus, this study of supply chain practices in the Indian industry takes a strategic perspective rather than an economic one. The paper is organised as follows. The rest of this section describes the business challenges facing Indian organisations, supply chain management as a new paradigm to address those challenges and the motivation for undertaking this research. Section 2 proposes a comprehensive research framework for linking supply chain strategy with business strategy. This is followed by section 3 on the research methodology, development and testing of the survey instrument and the prole of responding organisations. Section 4 details the results of the survey conducted as part of the research. These are presented in ve sub-sections namely: supply chain objectives; supply chain processes; management focus on supply chain activities; inventory management; and information technology and management. Section 5 describes the analysis of the survey ndings. The analysis proposes what Indian organisations should be doing to enhance competitiveness in the given scenario, followed by the conclusion. 1.2. Business challenges in the twenty-rst century The information age competition has ushered in a new set of challenges for business competitiveness (Luftman, 1996). These include: . Understanding customers. There is no escaping the fact that the customer in todays marketplace is more demanding, not just of product quality, but also of service. As more and more markets become in effect commodity markets, where the customer perceives little technical difference between competing offers, the need is for the creation of differential advantage through added value. Hence, it is increasingly becoming important to understand customers needs and wants and to translate these into a unique value-added business mission. . Managing time compression. Time is the primary competitive motive of business in the 1990s. This does not mean, however, that other motives such as cost, quality, and service can be ignored. In fact, these are prerequisites to sustain competitiveness. But the winning

On-time delivery 36.34 62.19 44.64 88.06 30.27 93.17 69.78 59.29 57.00 62.62

After-sales service 39.15 62.50 45.56 78.61 41.08 89.76 68.44 47.14 54.00 57.70

Managing distribution 51.83 66.45 66.09 75.83 52.43 72.20 74.76 57.14 66.50 74.43

Note: Companies are rated 0 poor to 100 excellent Source: Mishra (1999)

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factor is provided by time-based competition, which becomes the highest priority to gain responsiveness and exibility. Product life cycles are shorter than ever before, industrial customers and distributors require just-in-time deliveries, and end-users are ever more willing to accept a substitute product if their rst choice is not instantly available. Mastering mass customisation. The driving force behind the importance of responsiveness and exibility is the need and the wish to respond to virtually any customer request just in time. Mass customisation offers a viable solution. It involves the delivery of a wide variety of customised goods or services quickly and efciently at low cost. The key to making mass customisation work is highly-skilled and autonomous workers, processes, and modular units, so that managers can co-ordinate and recongure these modules to meet customer specic customer request and demands. Mastering mass customisation is the step towards gaining a competitive edge and is driving new business models. Undertaking globalisation. There is an increasing trend towards globalisation. Almost every sector of business is inuenced by global forces due to globalisation. In the global business, materials and components are sourced worldwide, manufactured offshore and sold in many different countries, often with local customisation. The challenge for the global company, then, is to achieve the cost advantage of standardisation while still catering for the local demand for variety. This has given rise to intense competition blurring the boundaries between domestic and global markets.

comprehensive supply chain strategy and then linking this strategy to the overall business strategy. 1.4. Motivation for this research Is India on the right path of managing its supply chain to enhance its competitiveness in this changing economic environment? Addressing this basic question is at the heart of this research. The research study is borne out of the felt need by managers, expert professionals and academicians, to address supply chain issues at the national level. A two-year collaborative study titled Supply Chain Management Practices in India was envisaged by the Management Development Institute, Gurgaon, India and KPMG India. The research team set out with the objective to not only trace the reasons for high levels of inventories and logistics cost, but also to gauge the current status of supply chain management in Indian industry in order to address the felt concern of Indian policy makers and managers.

2. Research framework
The present research study proposes a three-pronged framework for evaluating the supply chain strategy of an organisation. The framework uses the three key dimensions supply chain objectives, supply chain processes and management focus on supply chain activities to evaluate the overall supply chain strategy of the organisation (Figure 1). It is imperative for organisations to co-ordinate, synchronise and integrate the three dimensions of supply chain objectives, supply chain processes and management focus on supply chain activities to evolve a synergistic supply chain strategy. The co-ordination, synchronisation and integration mentioned above optimise the supply chain function within itself. However, throughout the process of managing a supplychain strategy for competitiveness, managers need to keep one overarching consideration in mind: the companys overall strategy and direction to compete. Logistics and supply-chain decisions cannot be made that do not support or worse yet, run counter to the broad business objectives. For competitiveness, the supply-chain strategy must be in synchronisation with the business strategy. One cannot make decisions aimed at cutting transportation costs and paring down the number of warehouses, for example, if the Figure 1 Framework of supply chain strategy

Business, therefore, can no longer act as an isolated and independent entity in competitive world, the real test of competitiveness takes place in international markets (Garelli, 1997; Salcedo and Grackin, 2000). There is a need to create value delivery systems that are more responsive to fast changing global markets and much more consistent, focused and reliable. 1.3. Supply chain management: a new paradigm Supply chain management is currently perceived as an effective means to achieving successful international competitiveness (Evans et al., 1996). Worldwide, interest in supply chain management has increased steadily since the 1980s when organisations began to see the benets of collaborative relationships (Gattorna, 1998). The management concept is, however, nascent in India. Changes in the environment have remarkably been so dramatic and sudden that Indian organisations have realised the inappropriateness of competing effectively in isolation from their suppliers and other associates of the supply chain. Today, the Indian industry spends an exceptionally high amount of 12 to 15 per cent of its revenue on logistics. Close to 22 per cent of the aggregate sales in the industrial sector, amounting to over US$25 billion , is tied up in inventories in the supply chain network countrywide (CMIE, 2000). Historically, Indian organisations have moved from physical distribution to logistics management. They are now on course to graduating to supply chain management, the preferred name for actualisation of integrated logistics (Vrat, 1998). As a result, more and more Indian organisations today have embarked on the process of developing and implementing a 17

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key business driver is not to cut costs, but rather to enhance customer service. It is crucial, therefore, to align the supply chain management process with all the other processes of the organisation. Hence the need of organisations to align the supply chain strategy with the overall business strategy. The business strategy is the result of business objectives, usage of management tools and the focus of top management. An alignment of supply chain strategy and business strategy will ensure that the supply chain strategy gels with the business strategy at all the three levels strategic, operational and tactical. In simple mathematical terms, managing the supply chain for competitiveness is the resultant of the vector sum of the three vectors, namely supply chain objectives, supply chain processes and management focus on supply chain activities superimposed in the plane of business strategy (Figure 2). The optimal strategic solution is ensured by a one-to-one alignment of the three dimensions of both the supply chain strategy and business strategy framework. Misalignment, even along one dimension, sub-optimises the resultant and hence the efciency and effectiveness of supply chain management for competitiveness. The alignment of the business and supply chain strategic frameworks yields business benets of par excellence. Most important of these is the effectiveness of the supply chain to full orders and meet consumer demand. In simple terms, it provides a simple way to determine if an organisation has the right supply chain for its products to meet consumer demands, which is, in essence, the basis to compete. Second, the alignment sets the direction of undertaking supply chain initiatives in synchronisation with the business initiatives so that the two complement each other. Last but not the least, the alignment increases the responsiveness of the supply chain to the changing business environment, and hence the ever-changing basis of competition. It helps ensure that the supply chain evolves with the changing requirements of the business and is adaptive to the changing needs of the consumer in the face of competition.

3.1. Research instrument The survey questionnaire was designed with the knowledge of previous survey reports and questionnaires as well as in consultation with practising managers. It quantied the extent of deployment of supply chain strategies, the structure of supply chain in various companies, the problems encountered in organising supply chain systems and the path being taken by organisations in strengthening supply chain management for competitiveness. The six-section questionnaire was designed to capture facts, gures as well as qualitative responses about the supply chain practices in organisations. Section I of the questionnaire proled the company, section II covered business objectives and supply chain strategy, section III focused on the components of supply chain management, section IV captured supply chain costs, section V dealt with IT applications in supply chain management, and section VI looked into supply chain implementation. The respondents were requested to respond from the perspective that best captured the supply chain and logistics issues faced by their organisation. Quantitative responses were measured using a ve-point Likert scale ranging from 1 strongly disagree to 5 strongly agree. 3.2. Pre-testing A pre-test was conducted with eight organisations before the questionnaire was revised to avoid inapplicable questions, ambiguous wording, and its appropriateness for executives in Indian organisations. Clear instructions were provided at the beginning of the sections. After pre-testing and further revisions, the survey questionnaire was produced in nal form and used to collect data. 3.3. Data collection procedure and sampling The target population for data collection consisted of the top 1,733 organisations, drawn from the list of Confederation of Indian Industries (CII) and ASSOCHAM, in various industry segments in India. Despite the repeated mailing and the follow-up by phone, responses were received from 168 organisations. A total of 12 responses were incomplete, and hence were not considered for the analysis. A total of 156 valid responses were used for further analysis, producing a return rate of 9 per cent, which is considered adequate for this type of survey in India (Saxena and Sahay, 2000). 3.4. Prole of responding organisations The 156 responding organisations were distributed over 16 industry sectors including Agricultural Products, Automotive, Chemicals/Fertilisers, Computer Hardware, Consumer Durables, Engineering, FMCG, Metals, Oil/Gas, Pharmaceuticals, Retail, Services, Telecommunications, Textile/Apparel and Transportation. However, the majority of the respondents were from Engineering, Chemicals/ Fertilisers, Automotive, FMCG, and Consumer Durables (Figure 3). The respondent organisations represented a combined turnover of US$250 million in the nancial year 1999-2000. With a GDP of US$355 billion in the nancial year 19992000 (Indian economy (CMIE, 2000)), the resulting research sample can be viewed as representative of the Indian supply chain scenario. The questionnaire was mainly lled in by senior management of the responding company, with the majority 18

3. Research methodology
In the backdrop of the research framework, a comprehensive survey questionnaire was designed to full the research objectives. Details of its design, testing, and use are discussed in this section. Figure 2 Alignment of supply chain strategy with business strategy

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Figure 3 Classication of respondents by industry

4.1. Alignment of objectives Supply chain objectives are derived from business objectives (Gattorna, 1998). As a rst step, this study set out to capture two important prioritisation issues: (1) First, the importance of overall business objectives; that is the prioritisation of business objectives by Indian organisations. (2) Second, the importance of supply chain objectives; that is the prioritisation of various supply chain objectives by Indian organisations. 4.1.1. Business objectives All the organisations were asked to prioritise their business objectives on a ve-point scale, with a score of 1 indicating not important and a score of 5 indicating very important. These strategic objectives included maximising prots, turnover, return on investment, earning per share, value to shareholders and customer satisfaction. The objective of increasing customer satisfaction has surpassed objective of maximising prot or delivering highest value to shareholders (Table III). The companies have realised that short-term prot making does not lead to achieving long-term growth and prot maximisation and hence have started to emphasise their efforts on customer satisfaction. 4.1.2. Supply chain objectives Similarly, all the responding organisations were asked to prioritise their supply chain objectives on a ve-point scale, with a score of 1 indicating not important and a score of 5 indicating very important. The average rating for all responding Indian organisations is represented in Figure 4. Enhancing customer service/satisfaction outscores all other objectives in terms of their effectiveness to the supply chain management. At the same time, expanding sales revenue, reducing inventory cost and improving on-time delivery follow closely in terms of supply chain priorities. Undoubtedly, all the four objectives stated above are the most vital and basic criterion for any supply chain management strategy to produce tangible results, which is well understood by the top management. Improvement in these metrics has a direct effect on the bottom line of the organisation. 4.2. Alignment of processes Davenport (1993) denes processes as a structured and measured set of activities designed to produce a specic output for a particular customer or market. The review of literature (Hewitt, 1994; Cooper et al., 1997) concludes that supply chain management covers the processes of demand management, manufacturing, inventory management, order Table III Importance of overall business objectives
Overall business objectives 16 25 28 17 14 Maximise customer satisfaction Maximise prot Increase turnover (sales) Increase return on investment Deliver highest value to shareholders Increase earning per share Weighted score for importance 4.82 4.46 4.37 4.28 4.27 4.02

being director/general managers (28 per cent). It is interesting to note that 14 per cent of the questionnaires were lled up by the chief executive ofcer (CEO)/chief operating ofcer (CFO)/chief nancial ofcer (CFO)/president themselves. The prole of the respondents is represented in Table II. A further analysis of the respondents indicates that the responses from public limited companies constituted nearly three-quarters (75 per cent) of the total sample, followed by private limited (18.6 per cent) and public sector (6.4 per cent) organisations. Out of 93.6 per cent responses from private and public limited companies, 32.8 per cent responses were received from multi-national companies (MNCs).

3.5. Method of analysis SPSS for Windows 6.0 was used in data analysis. In addition to the statistical analysis, each response received was validated through personal interviews by the research team. The research team also interacted with the top management of 52 of the responding organisations to gain an insight into the business strategies and their focus towards supply chain in achieving or enhancing competitiveness.

4. Survey results
The survey results have been presented from three perspectives, e.g. objectives, process and focus in order to align supply chain strategy with business strategy. Table II Participation by management level
Management level Manager Senior manager Director/GM Senior vice president/vice president CEO/COO/CFO/president Percentage of respondents

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Figure 4 Importance of supply chain objectives to top management

processing and fullment, warehousing, transportation, distribution management, import/export management, product development, promotions planning, and customer service. Having identied the processes, the research analysed `-vis the the processes for supply chain management vis-a management tools in use to address the need of these processes. The research therefore evaluated the: . criticality of supply chain processes for Indian organisations; and . usage of management tools by Indian organisations. 4.2.1. Criticality of supply chain processes Respondents were asked to evaluate the criticality of these supply chain processes on a ve-point scale. A score of 1 on the scale indicated not critical and a score of 5 indicated very critical process for the organisation. Table IV presents a weighted score for criticality of supply chain processes (on a scale of 1 low to 5 high). Customer service ranks as the most critical process (4.38 on a scale of 5) for the respondents. Among these, as many as 63.8 per cent organisations rate it at a score of 5, that is being very critical to their supply chain strategy. Following closely Table IV Criticality of supply chain processes
Supply chain process Customer service Demand management Inventory management Order processing/fullment Manufacturing Product development Transportation Distribution management Import export management Promotions planning Warehousing Criticality score 4.38 4.22 4.19 4.05 3.97 3.53 3.43 3.43 3.32 3.18 3.03

are demand management, inventory management and order processing/fullment with over 40 per cent of the respondent base in each category classifying them as most critical, that is a score of 4 and above on the Likert scale. The supply chain processes like customer service, demand management, inventory management and order processing/fullment show a sincere concern of the Indian organisations to improve customer service as well as depict their increasing understanding of the need to perfect customer-centric processes. The focus on inventory management is a testimony to the realisation by the Indian industry that inventory levels will have to be monitored and maintained at the lowest possible level, without compromising on customer service, in order to deliver superior bottom-line results. Surprisingly, warehousing scores the lowest in terms of criticality among all the supply chain processes, a process which needs to be reexamined because of the increasing importance of developing superior warehouse management systems to back up the inventory management systems. 4.2.2. Use of management tools Respondents were asked to indicate the management tools and length of their use. The weighted average scores for length of use (with weights of 1 not aware of this, 2 not being considered, 3 being considered, 4 in use for less than one year, and 5 in use for more than one year) are presented in Table V. Total quality management (TQM), with a score of 4.05 on a scale of 5, has been the tool that has been longest in use. This nding can again be associated with focus of companies emphasising customer service/satisfaction and offering good quality product to keep the customer happy. The next most used tools include benchmarking (BM), just-in-time (JIT) and supply chain optimisation (SCO). A large number of companies are continuously benchmarking themselves against competitors, industry, or best in class companies to attain higher levels of excellence in their processes. 20

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Table V Usage of management tools

Management tools Total quality management (TQM) Benchmarking (BM) Just-in-time (JIT) Supply chain optimisation (SCO) Computer-aided design/manufacturing (CAD/CAM) Business process reengineering (BPR) Enterprise resource planning (ERP) Total productive maintenance (TPM) Activity-based costing (ABC) Computer-integrated manufacturing (CIM) Optimised production technology (OPT) Weighted score for length of use 4.05 3.91 3.63 3.50 3.50 3.49 3.45 3.40 3.28 3.22 2.74

surrogate of the focus of management on issues related to supply chain (Table VII). Order fullment and quality were the areas for which maximum time was allocated by supply chain personnel reiterating the focus on customer service, throughout the organisation, as an important constituent of business and hence supply chain strategy. Quality has a direct correlation with enhancing customer satisfaction and creating a lasting positive impression. A comparison of the extent of time devoted by supply chain personnel across the various constituents of supply chain to the criticality scores of supply chain processes reveals that the amount of time devoted is a function of criticality as well as complexity of the process under consideration.

5. Analysis of survey ndings

The survey results have been analysed based on the research framework drawn up in section 2. It examines the overall alignment of supply chain strategy with business strategy along the three dimensions of: (1) aligning business objectives with supply chain objectives; (2) aligning management tools with supply chain processes; and (3) aligning management focus with supply chain focus areas. 5.1. Aligning business objectives with supply chain objectives The weighted scores of various supply chain objectives were grouped by their level of importance. The scores on supply chain objectives were then compared to scores on business objectives. The business objectives and the supply chain objectives were then classied under three key focal areas customer service, prot maximisation, operational excellence as listed in Table VIII. A closer look at the weighted scores of supply chain objectives reveals that they are in congruence with the business objectives. Customer satisfaction is clearly in the minds of the top management while formulating the supply chain objectives. A key criterion of customer satisfaction is the quality of the product and on-time deliveries. Hence the high degree of importance attached to supply chain objectives of having reliable product, best product performance and improving on-time deliveries. Although the supply chain objectives of best product performance and improving ontime deliveries fall below expanding revenues and reducing inventory costs, in the level of prioritisation, they are very Table VII Extent of time spent on supply chain focus areas
Supply chain focus areas Weighted score for extent of time spent 4.20 4.11 3.83 3.58 3.57 3.49 3.35 3.21 3.18

About 33 per cent of the respondents were currently considering adoption of BM, enterprise resource planning (ERP), SCO, total productive maintenance (TPM) and/or activity-based costing (ABC). Another 25 per cent were currently planning to adopt TQM and/or business process reengineering (BPR) for actualisation of business objectives. The survey clearly reveals the increase in the deployment of the mentioned management tools in days to come, because the Indian organisations have now come to believe on the success stories of these tools. 4.3. Alignment of management focus When looking at the framework for evaluating strategy, in addition to examining the objectives and the management tools deployed, it is important to study the direction being pursued to achieve it. Therefore, this study investigated the following two prioritisation issues: (1) The focus areas of the overall business and the priority attached to them by the management. (2) The extent of time spent by supply chain personnel to complete various supply chain activities. 4.3.1. Focus of top management All the organisations were asked to prioritise the focus of the top management. Interestingly, growth in market share ranks at the top for Indian organisations followed by customer centricity and cost reduction (Table VI). However, new product development and digitisation take a back seat. 4.3.2. Extent of time spent on supply chain focus areas Respondents were asked to rate nine supply chain focus areas, on a ve-point Likert scale, regarding the amount of time devoted by supply chain personnel in addressing them. The extent of time spent on supply chain focus areas was used as a Table VI Prioritisation of focus of top management
Focus of top management Growth in market share Customer centricity Cost reduction Productivity enhancement New product development Digitisation Weighted score for importance 4.66 4.58 4.34 3.10 2.96 2.56

Order fullment Quality Inventory reduction Demand forecasting IT applications Transportation Distribution Lead time compression Statutory requirements

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Table VIII Mapping supply chain objectives with business objectives

Focal areas Customer service Business objectives Maximise customer satisfaction 4.82 Supply chain objectives Enhance customer service/satisfaction Highly reliable product Best product performance Improving on-time delivery Expanding sales revenues Reducing inventory costs Lowest product cost Reducing order to delivery cycle time Reducing lead time Reducing transportation costs Reducing warehouse costs Flexibility of production volume Flexibility of product mix Innovating new product/services Reducing/rationalising supplier base Expanding width/depth of distribution Offer broad product line Having products in stock 4.93 4.57 4.51 4.43 4.56 4.52 4.37 4.33 4.28 3.96 3.68 4.17 3.90 3.88 3.64 3.62 3.50 3.43

Prot maximisation

Maximise prot Increase turnover (sales)

4.46 4.37

Operational excellence

Increase return on investment

4.28

much the guiding factors for customer satisfaction while taking supply chain decisions and hence have been clubbed in the respective focal area. The importance of expanding sales revenue and reduction of various costs and lead times falls under the focus of prot maximisation. Protability is the measure of sustainability of a companys strategy in the face of ever-changing competitive scenario. It requires a focus not only on costs, but also on enhancing revenues. The business objective of increasing return on investment focuses on operational excellence. These are also matched by the supply chain objectives of enhancing exibility of production mix and product volume, innovating new product/services, reducing/rationalising supplier base, expanding width/depth of distribution, offering a broad product line and having products in stock in that order. 5.2. Aligning management tools with supply chain processes The weighted scores of the supply chain processes were analysed and grouped by their requirement under three focal areas customer satisfaction, protability, operational excellence identied earlier. The same was done for management tool required for accomplishment of the three focal areas. The classication of supply chain processes and the management tools under the three focal areas is listed in Table IX. As per the mapping, the biggest area of concern is the revelation that, although a high-degree of importance is attached to demand management (4.22 on a scale of 5) and inventory management (4.19 on a scale of 5), the same is not matched by the importance attached to the adoption of supply chain optimisation for prot maximisation. Indian companies will have to bridge this vital gap over a period of time to deliver superior bottom-line results. As stated earlier, supply chain optimisation has both a strategic and operational impact on managing supply chains for protability and hence holds immense potential in the changing Indian economic environment. 22

5.3. Aligning management focus with supply chain focus areas The scores of the focus of top management were then compared to the scores of supply chain focus areas. They were also classied under the three key focal areas customer service, prot maximisation, operational excellence as listed in Table X. The management focus on customer centricity is supported by the supply chain focus on order fullment, but not lead time compression. Hence the speed to service customer demand is offset by carrying inventory all along the supply chain. Globally, while pull based systems are being much talked about, 84.1 per cent of the respondents indicate use of push-based inventory replenishment system in India. As a result, Indian organisations carry huge inventory at every point in the supply chain. At the same time new product development, which does not score high on the agenda of management to enhance customer service levels, is an area of concern for the future. The focus on cost reduction is not matched by the amount of time devoted by supply chain personnel on inventory reduction. The research indicates that, on an average, the Indian organisations carry a total of 33.41 days of inventories as raw material and 14.25 days as work in progress (WIP). The 6.44 days of GIT, along with 16.09 days of nished goods, reect the poor state of supply chain infrastructure within the country. Furthermore, the importance attached to IT applications by supply chain personnel is not matched by the low importance given to digitisation by the top management. Current levels of IT budget in the organisation are even less than 0.1 per cent of gross sales for 13.5 per cent of the respondents, 0.1 to 1 per cent of gross sales for 42 per cent and 1 to 3 per cent of gross sales for 23.5 per cent of the respondents. The dichotomy would hamper the supply chains from integrating various functions and supply chain partners resulting in lower level of effectiveness of supply chain efforts. As a result, the IT applications in use reveal that there is a clear bias of using stand-alone modules instead of adopting integrated solutions. A total of 61 per cent respondents are using software package

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Table IX Mapping management tools with supply chain process

Focal area Customer service Supply chain process Customer service Order fullment Demand management Inventory management Manufacturing Product development Transportation Distribution management Import export management Promotional planning Warehousing 4.38 4.05 4.22 4.19 3.97 3.53 3.43 3.43 3.32 3.18 3.03 Management tool Total quality management Benchmarking Just-in-time Supply chain optimisation Computer-aided/design/manufacturing Business process reengineering Enterprise resource planning Total production maintenance Activity-based costing Computer-integrated manufacturing Optimised production technology 4.05 3.91 3.63 3.50 3.50 3.49 3.45 3.40 3.28 3.22 2.74

Prot maximisation Operational excellence

Table X Mapping of management focus with supply chain focus areas

Focal area Customer service Prot maximisation Management focus Customer centricity New product development Cost reduction Productivity enhancement Digitisation Growth in market share 4.58 2.96 4.34 3.10 2.56 4.66 Supply chain focus areas Order fullment Lead time compression Quality Inventory reduction Demand forecasting IT applications Transportation Distribution Statutory requirements 4.20 3.21 4.11 3.83 3.58 3.57 3.49 3.35 3.18

Operational excellence

for materials accounting, the most widely used software in the Indian environment. Software packages for ERP/MRPII and sales and distribution are used by 48.6 per cent and 43.8 per cent of respondents respectively. The biggest benet of using these packages is reaped when these packages are integrated with demand management and shop scheduling software. Presently 13.7 per cent and 19.2 per cent of respondents use these for the areas stated above. Warehouse management, supply chain management and demand management applications are yet to percolate in Indian industry. The applications and the per cent respondents using them are presented in Table XI. It needs to be noted that supply chain Table XI Usage of IT applications
Application Materials accounting ERP/MRPII Sales and distribution CAD/drafting Shop scheduling and loading Warehouse management Supply chain management Process control and optimisation Demand management Engineering data management Manufacturing execution system Computer-aided process planning % respondents using IT 61.0 48.6 43.8 32.9 19.2 17.8 17.1 15.8 13.7 13.0 11.6 9.6

management solutions are used by only 17.1 per cent of the respondents, which is an area of concern in developing supply chain capabilities. It would require a higher degree of focus by top management on digitisation.

6. Conclusions
India is one of the worlds fastest-growing economies with diverse markets. Managing supply chain in such a vast country is most challenging for any organisation because of business practices, government regulations, technology capability, transportation infrastructure, etc. The current paper has explored Indian organisations for their current level of supply chain management practices. It has outlined the framework of achieving competitiveness by alignment of supply chain strategy with business strategy giving due coverage to three dimension namely objectives, processes and management focus. The research ndings reveal that most of the Indian organisations have aligned their supply chain objectives with the business objectives. They are now on course of aligning their processes and management focus as per the focal areas of customer service, prot maximisation and operational excellence. An enhanced level of competitiveness would require Indian organisations to manage the three-dimensional alignment to achieve the agenda set by the business strategy. The supply chain alignment model suggested in this paper provides a framework for realising true supply chain efciency and competitiveness. Different organisations will align their processes and management focus as per the focal areas of 23

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their organisation depending on their capabilities and market situation. Some will need to focus initially on the business processes, others can move more quickly into the more advanced optimisation with the support of top management involvement. In every case, Indian organisations need to act fast to capitalise on these opportunities to be competitive with the world market.

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Further reading
World Economic Forum (1999), Global competitiveness prole of India 1999, The Global Competitiveness Report, World Economic Forum, Cologny.

Corresponding author
Jatinder N.D. Gupta can be contacted at: guptaj@uah.edu

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