Supply chain management in operation

Published Date: 23 Mar 2015

INTRODUCTION

Background

The term 'supply chain management' was first used in the early 1980s to refer to the concept that manufacturing firms should think of their own internal operations as an included whole, rather than as separate departments such as purchasing, stores, production, finished good warehouse, distribution and so on. It was quickly extended to cover relationships with suppliers and with immediate customers - the idea being that working more closely and co-operatively with these counterparts would enable a kind of mixing and co-ordination that would lead to reduced inventory, better quality and delivery performance and reduced cost for everyone involved.( Skjoett, L,T. 1999) Today, supply chain management is an important concern in large organizations, and is among the most active areas of research in the academic operations management community.

In modern business environments characterized by ever-increasing competition and economy globalization, supermarket companies have been exploiting innovative technologies and strategies to achieve and sustain competitive advantage. As an effective business philosophy, supply chain management has gained a tremendous amount of attention from both the academic and practitioner's community in the recent years. (Burnes, B. and New, S.1996). Nowadays, more than ever, companies face an increasing pressure of customer's requirements in product customization, quality improvement and demand responsiveness. On the other hand they need to reduce the production cost, shorten lead time and allow inventory level to ensure profitability. In order to survive under these pressure more and more enterprise are serving to develop long-tern strategic partnership with a few component suppliers and collaborate with then in product development, inventor control and non-core process outsourcing. Moreover various value-adding process from materials purchasing, production and assembly to distribution and customer order delivery are integrated and synchronized to achieve the common goal of enhancing customer satisfaction. (Beamon, M. B. 1999)

A narrow view of supply chain management would restrict it to relatively high-volume industries such as retailing and manufacturing, and would focus on the use of close, ‘partnership' style relationships to optimize inventory and production planning, and to eliminate quality problems arising from poor inter-organizational communications. (Haag, S. Cummings, M. McCubbrey, D. Pinsonneault, A. & Donovan, R. 2006). It also tends to neglect the service sector and the purchasing of things other than inputs to the final product facts that organizations often spend a large proportion of their total spend on such inputs.

Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. It is the combination of art and science that goes into the way of a company finds the raw components it needs to make a product or service and deliver it to customers. (Chopra, S, Meindl, P. 2003) Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. It is all about managing the flow of information, materials, services and money across any activity, in a way which maximizes the effectiveness of the process. This is a continuous process, not a one-time fix. (Chandra, C. & Kumar, S. 2000). Supply Chain Management helps to reduce the costs of both clients and suppliers, while sustaining or improving added value and margins. Consequently, companies that have effective supply chains are most successful. The definition one America professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. (Giannakis, M, Croom, S. 2004)

Supply chain management deals with the management of materials, information and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers. The coordination and integration of these flows within and across companies are critical in successful supply chain management. It is important that the information, material and financial flows are coordinated effectively in a supply chain. Material flows involve both physical product flows from suppliers to customers through the chain, as well as the reverse flows via product returns, servicing, recycling and disposal. Information flows involve order transmission and delivery status. Financial flows involve credit terms, payment schedules, and consignment and title ownership arrangements. These flows cut across multiple organizations within a company as well as across companies and industries. In the last few years, the coordination and integration of these flows have attracted major interest on the part of researchers, management, consultants and practitioners in academia and industry. (Cooper, M, C, Douglas, M, Lambert and Janus, D, P, 1997).

Rationale

As we have the family business of superstores in Bangladesh, this study would help me to achieve the competitive edge for our own business. My decision to do dissertation on Supply chain management and the recent due to my desire to aim for a career in Bangladeshi Superstore Companies. This initiated from our own business in Supply chain, where I had the opportunity to experience the deeply fascinating influences of supply chain.

During my stay in Bangladesh I succeeded is establishing a pressure in our own business within a field I knew very little about. In fact, I manage to occupy myself in a supply chain where apart from being given a chance to be involved in the management of the business I was given an opportunity to test my creative skills, by creating a web page to promote the company.

Furthermore, the Business Management courses I attended during my stay at London School of Accountancy and Management gave me the opportunity to utilize and put into perspective the knowledge I had previous acquired through personal experience. This made me realize the effect that a Business School education would have upon me both as person and as future professional.

In addition to helping out and run my father's business more effectively in future and establish my own career, this project will help me to broaden my knowledge about supply chain management in Supermarket Company and also helps me to understand about the new innovation in supply chain management in SCM resulting improved in company performance.

Purpose of Study

The main purpose of this dissertation is to obtain an understanding of the term “Supply Chain Management” and its recent innovation.

To find out the different factors required to improve the supply chain management in International Business Environment.

To understand the fundamental issues of supply chain management in different organizations.

To suggest some recommendations and identify topics for further research to better tackle Supply Chain Management in multinational organizations.

Research Objectives

To determine the importance of supply chain management in British supermarkets.

To establish the role played by these new innovations in improve company relationship.

To determine critical success factors of recent innovation of SCM

To determine any limitation of SCM in British Supermarkets.

Research Questions

1) How important is supply chain management in today's business?

2) How SCM in different British Supermarkets solve problem's related to:

1) Proper Logistic management

2) Controlling Over Cost

3) Time efficiency

4) Proper way of exporting

5) Relationship with customers.

3) What are the new innovations in SCM? And how do these innovations in SCM can improve company performance?

4) What is the role of technology in SCM?

5) How SCM improve company performance?

Statement of Problem

The basic assumption was “the more integration - the better the management of the chain”. This study discusses what the term “management” in the concept of SCM stands for. The integration assumption as a “cure all” prescription for SCM is challenged, and questions raised as to when it is possible and desirable to exercise management in supply chains. The main thesis is that it depends very much on the “environment” of the supply chain and the power relations between the participants in the supply chain. Problem of integrating the individual activities into key supply chain processes.

Significance of Study

This study has examined the supply chain management function in the British supermarkets. And how far are the recent innovations in supply chain management successfully achieving the SCM goals and objectives in improved company performance.

It has also delineated the changing way of doing supply chain management which is likely more technology based. To enhance the supply chain management in the super market industry the study has highlighted areas requiring innovation in supply chain management.

Building customer-supplier relationships:

SCM is the securing, coordinating and maintaining of formal links with all parties that perform a vital function. In order to do this, company needs first to develop a SCM process map describing the activities of all members involved in the supply chain and the relationships among them in successfully achieving the SCM goals and objectives. Information and communication technologies changed the way firms conduct transactions, particularly in understanding and restructuring relationships because relationship creation and maintenance helps to breed future success. Communicating benefits of relationships, clarifying customer needs and expectations, assisting in problem solving and conflict resolution, improving performance measures with suppliers, and creating competitive advantage help to maintain effective relationships (Foggin, J.H., Mentzer, J.T. 2003). Developing partnerships is one of the most important steps in building and maintaining customer-supplier relationships.

Implementing information and communication technology:

Information and communication technology (ICT) is a very important strategic factor in managing supply chains; it acts as the disseminator and enabler for process and product communication along with reducing paperwork and lead times.

Rapid developments in technology have created numerous choices from information technology software. However, the brand of technology used is not as important as how effectively it is coordinated with internal and external supply chain partners; along with its compatibility with other relevant technologies used by them. (Graham, G., Hardaker, G. 2000).

The role of transactional IT is to acquire process and disseminate raw data about the company's supply chain and to compile reports to summarize these data. This is particularly important because supply chain managers need timely and accurate information about existing and projected manufacturing capacities and costs, finished and semi- finished goods inventories, transportation costs, and customer demands across the firm's supply chain. Enterprise resource planning (ERP), manufacturing resource planning (MRP II), distribution resource planning (DRP), electronic data interchange (EDI), and other e-commerce systems are intended to provide supply chain managers the complete and accurate information of this transactional data. (Gunasekaran, A., Ngai, E.W.T. 2004). Thus analytical IT heavily involves problem solving modelling process and use of various descriptive and normative models to find solutions to various supply chain problems. The SCM managers need to know the form and purpose of these models before they apply them in their modelling process.

The development of web-based/internet applications is another tool to process information pertaining to supply chain such as processing procurement activities both operationally and strategically. Use of e-mail/faxes, worldwide web (www), EDI, electronic funds transfer (EFT), internet auctions, etc., are the few examples that web-based/internet technologies can offer to perform SCM activities more efficiently.. It is not expected that intranet use will fully replace the use of electronic data interchange (EDI) systems in the near future (Bharadwaj, A.S. 2000). Technologies including EDI are slower, but the efficiency with which it transfers information allows it to maintain its value. New technologies similar to EDI will increase the speed of operations, reduce cycle times and aid management of materials.

Re-engineering material flows:

Many practitioners of SCM have recognized that effectively managing the flow of materials across the supply chain as one of the important strategic success factor. This is because the costs involved of providing end customers and supply chain member organizations with the materials required, in the right quantities, in the desired form, with the appropriate documentation, at the desired location, at the right time, and at the lowest possible cost are very high. (Duclos, L.K., Vokurka, R.J., Lummus, R.R. 2003).

Quickly communicating with suppliers enhances the use of inventory management techniques as like just-in-time (JIT), which is an inventory system intended to minimize stock levels (White, R.E., Prybutok, V. 2001). Technology will help in managing inventory flow and supply within a given supply channel and is key in evaluating and in reducing resource consuming processes. The development of integrated SCM increased the importance of logistical activities to move materials in a timely and cost effective manner across the supply chain. A supply chain wide logistics strategy became an important strategic goal for many companies.

Implementing logistics strategy involving distribution networks, transportation modes, carrier management, warehousing, inventory management, order processing and fulfilment, and all other related activities encompassing the entire supply chain became a necessity to achieve this goal.

I am confident that this study will provide significant inputs to the innovations in supply chain management resulting in improves company performance as well as academicians towards unleashing the immense potential of the British super markets and enable to realize its rightful place in the global economic place.

Nature of Study

Nature of this study is more theoretical and depends more on secondary resources like literature reviews and case studies. The research methodology of this study entails a literature study, and survey with senior managers in some of the multinational companies in UK by questionnaire sent through mail survey methodology.

Assumptions and limitations

The research was limited by two factors: time and resources. Due to large expenses, the research was conducted on the limited number of companies in a relatively short period of time.

There might be some biases like sampling bias, response bias and questionnaire bias. Because of limited time I had to depend more on secondary resources like literature study and case studies.

2.0 LITERATURE REVIEW

2.1 INTRODUCTION AND OVERVIEW

The post-World War II supply chain was a set of linear, individualized processes that linked manufacturers, warehouses, wholesalers, retailers and consumers together in the form of a human/paper chain (Ganeshan, 2002, in his journal New Directions in Supply Chain and Technology Management, Strategy and Implementation,)

Beginning in the 1960s and 1970s, firms started to view themselves as closely linked functions whose joint purpose was to serve their customers. This internal integration was often referred to as material logistics management or materials management. During this period, SCM innovations such as material requirement planning (MRP) were developed (Lummus, R., Vokurka, R.,1999, in their journal Defining supply chain management: a historical perspective and practical guidelines,). Those firms that successfully integrated these functions did improve their performance. However, some constraints, such as customers' or suppliers' unresponsiveness did hinder the improvements. These constraints prevented the firms from instantly responding to market changes.

In late 1970s and early 1980s, US firms faced fierce competition from their Japanese counterparts. Especially in the automobile industry, Japanese carmakers utilized just-in-time delivery to achieve efficient inventory management. Detroit's Big Three had to find ways to communicate with suppliers effectively. The solution at the time was to communicate through batch orders and via a standard called electronic data interchange (EDI) (Claycomb, C. Drogue, D. Germain, R. 1999)[1].

Since the 1990s, the pervasive adoption of Internet and Web technology have promised an omnipresent and less costly way to tie companies and their business partners together in the supply chain. The great collaboration made e-Commerce buzzwords like “B2B” and “B2C” known to almost everybody in business circles (McKeown, P.G. 2000, in his journal Information Technology and the Networked Economy). With the advancement of information technology, the collaboration of business partners will continuously improve the effectiveness of SCM.

Supply Chain:

Supply chain has become a vast and strong part of an organization, its work place with regards to creativity and sustainability. More importantly it was always regarded as just being a tool for distribution and logistics. But in the recent decade Supply Chain Management has evolved itself as part of the information and financial flow of any particular organization.

The work of Supply chain is to get the right commodity at the right place, at the right time with the required level of quality. “In the search for a solution to get the right product to the right place at the right time, there are five areas that companies should focus on to improve the synchronization of information flow through the supply chain: demand, supply, manufacturing/scheduling, transportation, and network optimization” (Lummus, R. Vokurka, R. 1999, in his journal Defining supply chain management: a historical perspective and practical guidelines).

Supply chain has been discussed in many different ways by different authors:

According to (Quinn F. J.,1997) the supply chain as “all of those activities associated with moving goods from the raw-materials stage through to the end user. This includes sourcing and procurement, production scheduling, order processing, inventory management, transportation, warehousing, and customer service. Importantly, it also embodies the information systems so necessary to monitor all of those activities.”

(Swaminathan, J.M., Smith, S.F. and Sadeh, N.M, 1996,in their journal multi-agent framework for modeling supply chain dynamics) defines a supply chain “to be a network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products”. [2] Dainty, A.R.J., Briscoe, G.H. and Millett, S.J. (2001) has a similar definition: “A supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system.” (Ganeshan, R. 2002) has yet another analogous definition: “A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.”

Supply Chain Management:

The famous way of defining SCM stated by (Cooper, M, C, Douglas, M, Lambert and Janus, D, P, 1997,in their journal Supply Chain Management: More than a new name for Logistics) where they defined SCM as: “The integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers”.

Supply chain management is described by (Ferguson, B.R. (2000,in his journal “Implementing supply chain management" Production & Inventory), as to being to “. . . remove communication barriers and eliminate redundancies through coordinating, monitoring and controlling processes”.

According to Professor (Martin Christopher,2005) “supply chain management is the management of upstream and downstream relationship with suppliers and customers to deliver superior relationship with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole”.

Supply Chain Management (SCM) is “an integrative philosophy to manage the total flow of a channel from the earliest supplier of raw materials to the ultimate customer, and beyond, including the disposal process” (Cooper, M, C, Douglas, M, Lambert and Janus, D, P. in their journal Supply Chain Management: More than a new name for Logistics”, The International Journal of Logistic Management, 1997).

Supply chain management is defined as the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer, J.T. DeWitt, W. Keebler, J.S. Min, S.Nix, N.W. Smith, C.D. Zacharia, Z.G. 2001).

Supply chain management is “treated as key to building a sustainable competitive edge through improved inter and intra-firm relationships” (Chopra, S, Meindl, P., in their book Supply chain management, strategy, planning & operation,2003) A range of benefits has been attributed to supply chain management, including reduced costs, increased market share and sales, and solid customer relations

From these definitions, a summary definition of the supply chain can be stated as: all the activities involved in delivering a product from raw material through to the customer including sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, delivery to the customer, and the information systems necessary to monitor all of these activities. Successful Supply Chain Management reduces the costs of both clients and suppliers, while sustaining or improving added value and margins. Consequently, companies that have effective supply chains are most successful.

{In recent times, the theory of purchasing and supply operations has been widely studied under a variety of labels and for a number of reasons. Each of these focuses on different operations within an organisation but SCM is the single most wide-ranging approach in its range of study in considering how "Firms utilise their suppliers' processes, technology, and capability to enhance competitive advantage (Houlihan, 1985; Cooper et al., 1993; DTI, 1995). Tan and Kannan (1998) consider how all strategic suppliers in the chain can integrate to act as a single entity and enhance overall performance in SCM. One definition of SCM is offered by La Londe (1998) as: `the delivery of enhanced customer and economic value through synchronised management of the flow of physical goods and associated information from sourcing through consumption. Johnston (1995) States it as: `The process of strategically managing the movement and storage of materials, parts and finished inventory from suppliers, through the firm and to customers. The various definitions which have been proposed indicate that SCM prescribes organisational restructuring, extended to the achievement of a company-wide collaborative culture. For Rich and Hines (1997), it embraces a strong sense of integration of all activities controlling the timing and synchronisation of material flows. With regards to SCM implementation, a study by-

Lambert et al. (1998), conveys the SCM implementation process as a more straightforward matter. In their view, senior management must address the process and they identify three closely inter related elements to aid the SCM task, namely: the supply chain network structure; the business processes; and the management components. For Bushnell (1999), implementing SCM requires a thorough understanding of the concept and its technology over a lengthy and diverse range of activities and organisations. He states: There is nothing worse than trying to train for a technology when employees do not really understand or fear the concepts that it supports. And there is nothing worse than managers pursuing a concept when they do not understand the importance of, or the difficulties related to, the technology on which the concept depends.

The supply chain can be regarded as a business process to construct enterprise-wide methods. It is defined in many ways. The International Centre for Competitive Excellence defined it to be (S. Changchien, H.Y. Shen, 2002) ‘‘the integration of key business processes from end user through original suppliers that provides products, services and information that add value for customers and other stakeholders.'' With the implementation of supply chain management, the narrow focus of managers and the adversarial relationships between logistics providers, suppliers, and customers are replaced by strategic alliances and long-term cooperative relationships. Suppliers and customers are viewed as partners instead of adversaries with the objective of ‘‘maximizing competitiveness and profitability for the company as well as for the whole supply chain net-work including the end-customer'' (K. Patterson, C. Grimm, T. Corsi, , 2003) Levary (R. Levary, 2000) suggests that the benefits of a supply chain include:

(1) Minimizing the bullwhip effect,

(2) Maximizing the efficiency of activities,

(3) Minimizing the inventories,

(4) Minimizing cycle times,

(5) Achieving an acceptable level of quality.

The major success factors for a supply chain are effective management of strategic alliances, extensive data management capabilities, and advanced inter-organizational IS to enable better information exchange; this provides more up-to-date information and allows for more accurate inventory responses to change in demand and appropriate inventory levels

(M. Whipple, R. Frankel, 2000).}

THEORETICAL FRAMEWORK

Increasing global cooperation, vertical disintegration and a focus on core activities have led to the notion that firms are links in a networked supply chain. This strategic viewpoint has created the challenge of coordinating effectively the entire supply chain, from upstream to downstream activities. While supply chains have existed ever since businesses have been organized to bring products and services to customers, the notion of their competitive advantage, and consequently supply chain management (SCM), is a relatively recent thinking in management literature. (Carr, A.S. and Pearson, J.N., in their journal The impact of purchasing and supplier involvement on strategic purchasing and its impact on firms & performance, 2002) Although research interests in and the importance of SCM are growing, scholarly materials remain scattered and disjointed, and no research has been directed towards a systematic identification of the core initiatives and constructs involved in SCM. Thus, the purpose of this study is to develop a research framework that improves understanding of SCM and stimulates and facilitates researchers to undertake both theoretical and empirical investigation on the critical constructs of SCM, and the exploration of their impacts on supply chain performance.

To this end, I have analyzed over 40 articles and synthesize the large, fragmented body of work dispersed across many disciplines such as purchasing and supply, logistics and transportation, marketing, organizational dynamics, information management, strategic management, and operations management literature.

The following are five basic components of SCM.

1. Plan - This is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.

2. Source - Choose the suppliers that will deliver the goods and services you need to create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. And put together processes for managing the inventory of goods and services you receive from suppliers, including receiving shipments, verifying them, transferring them to your manufacturing facilities and authorizing supplier payments.

3. Make - This is the manufacturing step. Schedule the activities necessary for production, testing, packaging and preparation for delivery. As the most metric-intensive portion of the supply chain, measure quality levels, production output and worker productivity.

4. Deliver - This is the part that many insiders refer to as logistics. Coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.

5. Return - The problem part of the supply chain. Create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products. (Christopher, M., in his book Logistics and Supply Chain Management, 3rd edition, 2005).

Research Methodology

A literature survey was employed as one of the research methodologies in the study to develop a framework for best practices and innovations in supply chain management of British supermarket industry. The literature on SCM practices, application of IT and innovations was collected primary from journals in the areas of operations management, supply chain, operations research, and information systems. In addition to classifying the literature on SCM practices and innovations, the tools used to model and analyse various SCM environments are also presented.

The literature search included journals published by numerous publishers, in particular Elsevier, Emerald, and Taylor and Francis, together with journals such as Management Science and Operations Research.

The literature search was aimed at primarily helping researchers and practitioners in implementing a successful IT system for achieving an effective SCM. With this in mind, I looked at the literature that deals with IT-enabled SCM.

The primary aim of the literature search was to help researchers and practitioners develop an effective SCM practice. The literature on SCM and some associated references Ire classified according to this objective and are reviewed in the following sections.

This would be useful to researchers who are interested in modelling and analysis of various decision-making environments with reference to IT in SCM. The literature search has been conducted with the help of e-journals search engines available in The University of Wales online library. These include access to the journals published by a numerous publishers in particular Elsevier, EBSCO, Business Source Premier and Netlibrary.

Classification of the literature on SCM best practices, application of IT and Innovations in British Supermarket Industry.

The Literature Review was divided into four broad categories

1) Overview and Theoretical framework of SCM

In this section the concepts of supply chain, supply chain management and the definitions of SCM from different authors Ire reviewed to get an overview of the subject.

2) SCM in Sainsbury's

As I am working in the Sainsbury's, I had selected this company as a case study for my research. So in this section I reviewed the literature related to the supply chain management in Sainsbury's, JIT system in general and with respect to Sainsbury's as Ill and also the delivery management strategies adopted by Sainsbury's.

3) Role of Technology & Innovations in SCM

This was the main topic of my research. In this section, I reviewed numerous articles, books, research papers to investigate the role of various IT systems, technologies and innovations in supply chain management, especially in the British Supermarket Industry. In this section, I reviewed the literature on EDI (Electronic Data Interchange), Internet and E-commerce in SCM, contribution of technology in SCM.

4) Problems & Success Factors in SCM

In this last section, I tried to find out the most common problems firms are facing now a day in the supply chain management. And at last the attempt has been made to find out the most critical success factors in order to develop the best practice in SCM.

By this scope in mind, I conducted a search using library databases covering the major journals in management science and operations management, such as Decision Sciences, European Journal of Operational Research, Interfaces, International Journal of Operations and Production Management, International Journal of Production Economics, International Journal of Production Research, Journal of Operations Management, Management Science, Operations Research, Production and Operations Management, Transportation Research, etc. I also searched edited books and special issues on supply chain management in Production and Operations Management.

With an effort to be current on the research field, I only considered research articles published from 1995 to date. This could be substantiated by the timing of the emergence of SCM and IT concepts. I have looked at the other review articles on SCM, but none of them deals exclusively with a comprehensive review and analysis of best practices, IT and Innovations in SCM.

SCM IN SAINSBURY'S

Sainsbury's is steadily ramping up its new distribution centers; by next spring, the projection is for about 60% of its volume to go through the new network, with 70% by next fall.

The relationship with Accenture has worked so well that Sainsbury's has chosen to extend its IT outsourcing contract for another three years, until 2010—a move that should allow the retailer to net additional cost reductions of more than $230 million by 2007.

Many of Sainsbury's warehouses have already incorporated wireless technology for mobile scanning, with good results. One depot is now able to service 33% more stores, with further potential for line growth. But wireless initiatives can further streamline the company's supply chain effectiveness—particularly as Auto-ID practices take hold. At that point, Sun will be well-placed to help because of the depth of its experience with wireless mobility initiatives. Microsystem Sun, in the article How Sainsbury's Transformed Its Supply Chain. Supply Chain Management Review,5/7/2004).

Sainsbury's has signed a five-year contract with IBM to revamp the system underpinning its supply chain.

The partnership will see legacy systems replaced by a platform based on technology provided by vendor we supply, which is based on the software-as-a-service model and will cover the supermarket chain's 4,000-strong supplier network.

According to Sainsbury's, the measures will improve stock availability as well as customer service.

“To support our continued growth, we were looking to enhance our collaboration with suppliers without a significant increase in cost, while continuing to introduce greater intelligence into our supply chain," said Sainsbury's director of supply chain operations Tim Goalen.

The IBM deal includes consulting services to support the setup, implementation and maintenance of the We supply systems, as well as the migration of suppliers to the new platform.

Five years ago, Sainsbury's had some well-documented problems with its outsourcing contract with IT services group Accenture. Issues with its supply chain system had left its stores with inadequate stock levels. The contract was cut short, and IT brought back in-house.

http://www.computing.co.uk/computing/news/2240171/sainsbury-transform-supply

The IBM solution involves the use of the Wesupply network solution. The Wesupply B2B Business Process Platform enables retailers like Sainsbury's to exchange data and manage business processes between their internal systems and those of their vendors. IBM will then manage the migration of vendors onto the system, providing Sainsbury's with enhanced communication across its network.

http://logistics.about.com/b/2009/04/13/sainsburys-supply-chain-shopping.htm

Sainsbury's has reported higher sales after supply improvements made more goods available for shoppers.

It said like-for-like sales had increased 3.7% during the 12 weeks to 26 March against a year earlier, while sales excluding petrol were up 1.7%.

The group has been working hard to improve stock availability, by tackling IT and delivery problems which had badly disrupted its supply chain.

Sainsbury's has been fighting hard to recover from years of underperformance.

Shares in the firm rose 6 pence, or 2.09%, to 293 pence.

Sales increased 7.2% during the three-month period - or 5.4% excluding petrol sales - against the previous three months, as the group managed to make more products available to shoppers.(BBC in the article Improved supply lifts Sainsbury's,24 March, 2005).

Just In Time (JIT)

Keeping too much inventory is expensive. Firms now pay more attention to inventory costs - and look to their suppliers for help in controlling them. This often means that a supplier must be able to provide just-in-time (JIT) delivery - reliably getting products there just before the customer needs them.

For example, to control the risk of transportation problems, JIT suppliers often locate their facilities close to important customers. Trucks may make smaller and more frequent deliveries - perhaps even several times a day. As this suggests, a JIT system usually requires a supplier to be able to respond to very short order lead-times. In fact, a supplier's production often needs to be based on the customer's production schedule. However, if that isn't possible, the supplier must have adequate inventory to meet the customer's needs. (Mara Bateman,in his article The Concept of Just-in-Time Delivery and Its Implications on the Marketing Strategy of a Company, 2007).

Europe is home to some of the most consolidated retail markets on the globe. And anyone who wishes to understand the ramifications of just-in-time (JIT)--or continuous product replenishment (CPR)--initiatives in the European beverage markets can likely find lessons in the supermarket industry there.

Throughout the 1980s, forward-thinking supermarket chains in Europe initiated programs to:

• Accelerate product throughput through their part of the supply chain

• Reduce order lead times

• Reduce operating and inventory costs

• Impose simplified and controlled delivery schedules to their outlets

Many retailers have achieved major financial benefits this way.

One of the first steps supermarkets took to streamline their supply chain in this way was to reduce--or eliminate--DSD for a lot of their suppliers...including beer and CSD suppliers. DSD was replaced by a delivery system that imposed fixed arrival times to the outlets and the distribution centers.

The system can be likened to a bus schedule: If you miss the 6:10 PM bus, you can wait for the next bus to pick you up. The effect of this imposition was that the number of weekly deliveries to an outlet of Albert Heijn, for example, has dropped by as much as 50 percent.

The next phase was to reduce order lead times. Tesco, which was inspired by the JIT experience in the Japanese automotive industry, managed to reduce its order lead time from about 15 days in 1983 to only 2 days in the late 1990s. At the same time, Tesco has managed to maintain--or even increase--service levels in order to keep out-of-stocks under control.

In partnership with major suppliers like Coca-Cola bottlers and Interbrew, leading supermarket retailers are now rolling out several forms of CPR (continuous product replenishment) and VMI (vendor managed inventory). It's happening now in the UK, France, Germany and Netherlands. The same type of partnerships is projected to roll out soon through additional European markets.

(Ref:-JIT IN EUROPE: RETAILERS SET THE AGENDA! By: Vuyk, Chris, Beverage World, 00982318, 12/15/2002, Vol. 121, Issue 12)

JIT AT SAINSBURY

As regards delivery management, the delivery management plan is provided below.

DELIVERY MANAGEMENT STRATEGIES

To the operation of the delivery management plan, these are as

* The Newbury process

* Delivery Vehicle Maneuvers

* Delivery Schedules for Sainsbury's Vehicles

* Delivery Communication Strategy for Sainsbury's Vehicles

* Gate Opening Strategy

THE NEWBURY PROCESS

Salisbury's has recently introduced a revised method of service yard operation; this is known as 'The Newbury Process'. The underlying basis of the process is to Increase and improve availability of products to the customer. This is achieved by the introduction or Increased emphasis on the following key targets:

• Improvements to or reductions in the number of processes.

• 24 hour ordering of stock, this is basically 'just in time' deliveries, which are designed to reduce the amount of stock being carried over All deliveries to be worked twice in each 24 hour period, resulting in stock being transferred to shelves quickly

• Service yard labor to be in place to suit delivery requirements

• External product holding areas shall be avoided where possible

• Service yard cleared on a daily basis

• Stores targeted on delivery vehicle turnaround

• Depots also targeted on delivery vehicle thus deliver faster, more effective operations in the store service yard, reduces time and congestion in those yards and improves product availability to customers.

DELIVERY SCHEDULE FOR SAINSBURY'S VEHICLES

Typical daily delivery programme for a Sainsbury's store is for the mixture of perishables, non-perishables, frozen and kitchen-line goods to be delivered throughout the day, beginning at 0700 hours and ending at2300 hours ¡in accordance with allocated time slots.: minimizes the time taken for vehicle turnaround, reducing

DELIVERY COMMUNICATION STRATEGY FOR SAINSBURY'S VEHICLES

All Sainsbury's vehicles are fitted with a recently developed paging transmitter that can be adjusted to trigger receiving device in the service yard at the store. The pager is programmed to transmit a signal when the delivery vehicle is 5 minutes from the store. When the signal is received ¡in the yard, this will be the cue for the entry gates to be opened, allowing the lorry to directly enter the yard without the driver having to pause (http://www.stroud.gov.uk/docs/planning/planning_application_view_binary.asp?)

ROLE OF TECHNOLOGY IN SCM

Companies make every effort to improve market share, grow corporate profit, and gain strategic advantage. In order to achieve these goals, supply chain capability must be placed at the heart of a company's business model. Firms realize that the competition is driven by customer demand. Effective supply chain management can offer customers high quality products and services with low prices.

Supply chain management (SCM) is also an important component of extended enterprise applications. SCM serves as the back-end application by linking suppliers, manufacturers, distributors, and resellers in an organized production and distribution network. Beyond the persistent adoption of ERP systems, which aim to facilitate internal operations and to increase productivity, firms are generating explosive demand for SCM applications. The network economy combines enhanced, transformed, and new economic relationships that are based on computer networks and human knowledge. Its connectivity is mainly realized through the intranet and extranet that exists within and across firms. SCM applications utilize these networks aiming to control costs, reduce paperwork, lower inventory, and shorten product cycles. Electronic data interchange (EDI) has been heavily used in industries. (Chandra, C. and Kumar, S., in their journal Supply chain management in theory and practice: a passing fad or a fundamental change, 2000), Nowadays, the Internet and the World Wide Web are widely accepted since they become wider the scope of connectivity among individuals and businesses. Web technologies allow firms to collaborate with business partners to gain the benefits of reducing costs, enhancing customer satisfaction, and retaining competitive advantages. It has often been suggested that technology should not be implemented merely for technology's sake, but rather to meet a specific business need. Then, the implementation of the technology can be closely aligned with business needs and the greatest advantages obtained (Hildebrand, 1998).

SCM AND INTERNET:-

Information technology (IT) contributed to the growth of world economy. In the network economy, business applications and management must hold the Internet in order to survive in the e-Commerce age.

Business-to-business e-commerce, Internet exchanges, e-supply-chain management: great claims have been made about the Internet's ability to revolutionize supply chains. Leading-edge companies are building advantage by pursuing one or more of the following strategies such as Actively collaborating with supply chain partners, Extending the company's reach up and down the supply chain, Changing the supply chain flow path, Growing revenue—not just cutting costs, Transforming capabilities into new businesses. By deploying creative, competitively focused Internet strategies, pioneering companies are transforming their supply chains into engines of durable competitive advantage.

IMPACT OF THE INTERNET:-

The Internet changes the way companies do business. The changes are permanent in the transition from the industrial economy to the network economy. SCM has been enabled by meeting, which refers to the integration of computer and communication technology (Short, D. 2002). The Internet-strengthened power of convergence can be depicted in two aspects:

(1) Ubiquitous and low-cost connectivity makes it possible for small and mid-sized companies to take advantage of SCM techniques.

(2) Speedy network transmission helps businesses realize seamless and real-time communications and transactions.

The potential challenges and impacts made by the Internet can be categorized as follows:

Shifting power to buyers: - Although many e-Commerce experts have deep arguments on the impact of the Internet, the simplistic impact on the supply chain is that the Internet is shifting power from the seller to the buyer for all time.(Garg, A.in his journal An application of designing product and processes for supply chain management, 1999) The search power for the buyer is now boundless. Suppliers also provide products and services information through their Web sites. Not only the consumer benefits from this power shift, but also purchasing agent within business and government enjoy this service.

Facilitating global interconnectivity: - The Internet not only provides businesses and individuals with the convenience and flexibility in transaction and communication, but also brings the competitions into the global field. The Internet facilitates companies to conduct business in the global village.

Enabling the trading partners to better coordinate and collaborate: - The Internet enables the trading partners within the supply chain to better coordinate and collaborate for mutual benefits. Technologies that are based on the Internet make faultless integration possible among business partners (McKeown, P.G., in his book Information Technology and the Networked Economy, 2000).

Breaking the old paradigms of inter-organizational boundaries: - The Internet changes the way supply chains are managed, planned and controlled. SCM-related information and decisions are integrated into the Web, breaking the old paradigms of inter-organizational boundaries. By implementing the Web-based SCM and CRM, companies can virtually eliminate the boundaries among business partners to form the extended enterprise (McKeown, P.G. 2000).

Sainsbury's and Internet

Technology applications in the supply chain and other key areas have helped British supermarket giant Sainsbury's keep the tills ringing throughout the recession. From fitting stores with self-scanning technology to replacing its warehouse and supply systems, the supermarket giant is busy revamping technologies.

One of the ways the retailer has helped bolster its bottom line is by implementing a new system called real-time supply, which ensures its stores are stocked with products. Information on store sales is fed straight from the till into the real-time supply system, allowing Sainsbury's warehouse staff to see exactly which stores need to be resupplied with which products.

As a result, stock availability has improved significantly. "We have made huge progress over the last five years," said trading director Mike Coupe at a roundtable event organized by supply chain standards organization GS1.

In-store, Sainsbury's is also in the middle of rolling out extra systems to allow shoppers to scan their own shopping. Self-scan systems will be fitted at 17 existing and 30 new shops this year.(Nick Heath, Business Week, Oct.2009)

Overall, the Internet offers the business community a variety of opportunities and challenges. Any companies willing to adopt Internet technologies and business models in a timely manner will clearly gain competitive advantages.

WEB TECHNOLOGY'S CONTRIBUTION:-

The Internet seems to be an extra distribution channel to most firms. In fact, the Internet and Web technologies can support the entire supply chain's operations. Internet-based supply chain operations are fast and inexpensive. Moreover, customers can instantly check the status of their orders by simply clicking their computer. Corporate executives and managers can conduct real-time access to firm's inventory level, and so do their suppliers and distributors.

Developing e-Commerce applications: - Web technology offers a variety of supports for online communications and transactions. Online procurement is an example of business transactions that fulfills e-Commerce applications.

XML-based information exchange and sharing: - Electronic data interchange (EDI) played an important role in the evolution of SCM. Trading partners used EDI for information exchange, such as sending requisitions and receiving purchasing orders.

However, EDI has not been progressed as rapidly as expected, mainly because it was difficult to implement and costly to maintain. EDI's inter-organizational standard on documents' format and structure make it difficult to follow. Another drawback of EDI is that it does not operate in real time (Graham, 2002). The XML (Extensible Markup Language) based Internet system allows organizations to exchange data on a transaction-by-transaction basis. Since implementing XML data transmission is cost efficient, small and mid-sized companies that could not afford EDI-based solutions will be able to benefit from the timely information exchange with trading partners.

Threats of EDI

On the other hand, although EDI has created a number of changes in the way commerce is conducted and has offered significant opportunities, it also has attracted new threats and potential exposures and increased the seriousness of some existing problems. Some examples of these are described below.

Absence of Human Intervention: this is often seen as an advantage, since computers can perform repetitive tasks more quickly and consistently than humans. From a security viewpoint, however, the removal of humans from the process also removes a degree of protection, since the computers are incapable of applying curiosity or common sense to instructions (Ian Walden, 1993).

Increased Exposure to Fraud: EDI reduces the segregation of duties and limits the number of personnel involved with individual transactions. Control of internal systems and procedures may be limited to a few people. This increases the risk of unauthorized transactions (Stanley Weiner, 1995).

Loss of Confidentiality of Sensitive Information: Proprietary information, such as customer lists, price lists, manufacturing schedules, etc., could fall into a competitor's possession (Stanley Weiner, 1995).

Software Failure: Should any part of the system fail, management would have to confront problems related to transactions that have to be completed by set due dates. Types of transactions that could impact the organization include cash payments, payroll, just-in-time inventory, and production schedules (Stanley Weiner, 1995).

These potential weaknesses have been exploited on a number of occasions, resulting in fraudulent purchase orders, delay in message deliver, denial of receipt of message and so on. Due to the unique nature of EDI, message contents should be kept confidential, integrity of the message must be ensured and the availability of messages and the associated transfer and processing systems must be maintained in an EDI environment.

Controls for the Threats of EDI

Proper controls need to be placed to protect EDI transmissions. Transaction authorization is a major concern in EDI environment. The accountant should attempt to ensure all transactions are properly authorized and that they are complete, accurate and, valid. Controls should apply to both inbound and outbound transactions.

Effective access control will prevent most attacks and the auditor will expect to see access restricted those who are properly authorized and have a genuine need to see or use the data. Traditionally, paper documents and signatures have been used to authenticate the data that constitute commercial transactions. Authentication of EDI transmissions requires different methods. A combination of passwords, tokens and even biometric techniques will typically be used. Specific countermeasures such as encryption can be applied to reduce confidentiality vulnerabilities and availability vulnerabilities can be reduced by introducing redundancy into the system.

Audit trail is another important countermeasure in an EDI environment. It is probably the only way of determining that a breach of other countermeasures has occurred. It is also crucial in the case of business disputes over transaction. In addition, physical security measures include storing backup files offsite and keeping equipment behind locked doors need to be addressed. Inadequate security is troublesome in entities that rely heavily on EDI for business transactions.

(Ian Walden, 1993)

Applications integration: - Applications integration is one of the most important IT strategies since it can create or modify the relations among related applications and to include canned software, legacy applications and Web services. Web services can set up software vendors' products to solve current integration needs (Ganeshan, R. 2002).

Partners' collaboration: - Collaboration among trading partners helps SCM participants gain great benefits from providing end customers with high quality, low cost products through flexible and efficient distribution. Web technology boosts the supply chain visibility by providing more real-time data from all links of the supply chain, resulting in greater collaborations among trading partners. (Graham, G., Hardaker, G. 2000).

Sainsbury's Supermarkets recently launched a new supply chain initiative to provide tighter collaboration with suppliers, higher profits, and better customer service. The new Internet-based information-sharing and collaboration system, created with the help of Microsoft® Certified Solution Provider EQOS Systems, Ltd., can eventually allow all 4,000 of Sainsbury's suppliers to work with buyers in planning, executing, and managing successful product promotions. The solution, the first retail system of its kind in the U.K. to be based on the Microsoft Value Chain Initiative, also has future potential for management and tracking of new product introductions, product returns, and product lifecycles.

John Rowe (Director of Logistics, Sainsbury's Supermarkets Ltd), realized that Sainsbury's needed far better, far more continuous communication with its suppliers. The company had moved from paper catalogs to electronic catalogs to a Web-based information service for suppliers. Now they needed to move to true online collaboration. Rowe says, “We saw the need for continuous information-sharing and joint decision-making.”

Sainsbury's evaluated several off-the-shelf collaboration applications and chose one called EQOS Collaborator from Microsoft Certified Solutions Provider EQOS Systems. Co-founder and managing director at EQOS Systems, Mike Quinn, says, “We decided to develop EQOS Collaborator using Microsoft technologies, because this enabled us to deliver a high degree of collaborative functionality very quickly. The wide range of Microsoft tools and available skills in the market was also an important factor. In addition, EQOS's vision of providing a unique collaborative software tool to enable supply chain integration is entirely consistent with the Value Chain Initiative. Working with Microsoft on VCI is enabling us to reach a wide base of companies who are looking toward innovative software solutions for their supply chain needs.” (http://download.microsoft.com/download/0/6/3/063d8ae9-42b3-4395-8616-de2a8538a4d9/sainsbur.doc. Accessed on 03/02/2010).

Sainsbury's is collaborating with suppliers to make the transition as smooth as possible. It has developed a system based on a sophisticated form of the Electronic Data Interchange (EDI) standard known as the Eaneom message standard, which can support foreign currencies, including the euro. And for small suppliers that cannot afford EDI, Sainsbury's has created a cheaper web-based system.

The company says its suppliers and haulers are welcoming the new system, but predicts that implementation will not be straightforward because each supplier currently operates different processes.

(http://www.iwr.co.uk/itweek/features/2086476/sainsbury-automates-delivery Accessed on 03/02/2010)

EDI And Sainsbury's

EDI provides both operational and strategic benefits. Operational benefits usually consist of cost reductions; enhancement of data accuracy and help in accounting/ billing. EDI strategic benefits take different forms, such as EDI-supported process reengineering (e.g. application of Just-In-Time delivery methods) and the enhancement of firm competitiveness and customer service. (Agi et al 2005).

In the food retail industry the documents transferred between a retailer and a food supplier are usually high in volume and highly repetitive. Therefore any benefits to be made from introducing EDI in this context, should result in a noticeable overall improvement in the organisation's performance. Although there are benefits to be had by both suppliers and retailers it is generally the retailers who initiate the implementation of EDI. Small suppliers cannot afford the high upfront costs, or the annual license and support charges (Dresner 2003).

Evidence suggests large organizations proactively adopt EDI and required their suppliers to adopt EDI in order to continue doing business with them. Suppliers who are dependent on the large organizations have to adopt EDI in a reactive mode regardless of whether adoption of EDI was consistent with their strategies or not. (Ahmad and Schroeder 2001).

Therefore the use of EDI is becoming increasingly important in the retail industry as suppliers are looking to miss out if they do not implement EDI. However the impacts of introducing this technology into an organization can vary depending on whether it was introduced pro-actively or reactively. Sainsbury's has been one of the longest-standing exponents of EDI and has been using it for many years with its suppliers.

In recent years, Sainsbury's has looked to increase supply-chain efficiency by introducing its Firewing project, which seeks to obtain advanced delivery information from suppliers and to return confirmation of receipt back to them. Sainsbury's has offered suppliers a web-based solution for this (Info link). http://www.freewaycommerce.co.uk/edi_trading_sainsburys.html

Web EDI allows you to receive orders and send invoices via Sainsbury's EDI. Just log in to view orders and send invoices as easily as checking your email. With Web EDI, there's no installation or configuration.

Simply sign up online to start using Web EDI straight away. http://blog.webedi.co.uk/2009/10/29/edi-with-sainsburys/

Five key benefits of Electronic Data Interchange (EDI)

The benefits of electronic trading are well documented.Here are the top five reasons why businesses adopt EDI.

1. BenefitOne: Remove document re-keying

2. Benefit Two: Eliminate paper

3. Benefit Three: Reduce lead times and stockholding

4. Benefit Four: Increase the quality of the trading relationship

5. Benefit Five: Competitive edge

It is no accident that the leading UK retailers all rely on EDI for placing orders and receiving invoices - they know the benefits they get and the costs that can be saved.

http://www.freewaycommerce.co.uk/edi_trading_sainsburys.html

CRM System in Sainsbury's

Sainsbury's is to escalate its promotional activities by using customer relationship management (CRM) solutions to generate vouchers at its cash registers.

The company will use CRM solutions to analyse data taken from customers' nectar cards and generate vouchers tailored for offers and promotions that are likely to appeal to specific customers.

In addition, the CRM solutions will analyse patterns and traits in the purchases customers have made on a given day to cater for people who don't have a nectar card.

Customers will be issued with vouchers that carry product discounts of up to 20 per cent and 535 stores throughout the UK will have the special printers installed over the next few weeks.

The supermarket trialled a mobile couponing programme several years ago that didn't catch on, but CRM solutions are proving increasingly central to sustaining good loyal customer bases in the current economic climate. (Outsourcery, Oct 2009)

Sainsbury's has started a new system that allows it to print out targeted, full-colour marketing communications to customers at the checkout.

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