IT-ENABLED SUPPLY CHAIN MANAGEMENT: STUDIES IN SELECT INDIAN INDUSTRIES

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1 IT-ENABLED SUPPLY CHAIN MANAGEMENT: STUDIES IN SELECT INDIAN INDUSTRIES By SANJAY JHARKHARIA Department of Management Studies Submitted in fulfillment of the requirement of the degree of DOCTOR OF PHILOSOPHY to the Indian Institute of Technology Delhi January 2004

2 -IT- I. I. T. DELIA Ato.

3 CERTIFICATE This is to certify that the thesis entitled "IT-Enabled Supply Chain Management: Studies in Select Indian Industries" being submitted by Sanjay Jharkharia to the Indian Institute of Technology Delhi for the award of the degree of Doctor of Philosophy is a bonafide record of original research work carried out by him. He has worked under my guidance and supervision and has fulfilled the requirement for the submission of the thesis, which has reached the requisite standard. The results contained in this thesis have not been submitted, in part or full, to any other University or Institute for the award of any degree or diploma. ) (DR. RAVI SHANKAR) Assistant Professor, Department of Management Studies, Indian Institute of Technology Delhi, New Delhi (India)

4 ACKNOWLEDGEMENT My first and foremost appreciation goes to my supervisor Dr. Ravi Shankar, under whose guidance the thesis was written, for his superb mentorship and continuous support throughout the course of this research. I am greatly inspired by his work ethic and high standards. His passion for cutting-edge research has always been a major source of support and inspiration. I feel greatly privileged to be one of his students. I also sincerely thank Mrs. Shankar for her kind concern and affectionate encouragement during my research work. I am immensely grateful to Dr. S.G. Deshmukh, Prof. Mechanical Engineering Department and member of my student research committee (SRC). He not only provided proactive support during the course of this work but also paid personal attention even in the busiest of his schedule. His ever-ready support and smiling-face with constructive comments and appreciation have been a great source of inspiration for me. I am thankful to Prof. D.K. Banwet, Prof., Department of Management Studies and member of my SRC, for his help and support throughout the course of my Ph.D. I am also thankful to Prof R.K. Baisya, Head Department of Management Studies and Chairman of my SRC for his support during the course of this thesis. I express my gratitude to all the distinguished faculty members of Department of Management Studies, IIT Delhi for their moral support and encouragement throughout my Ph.D. In particular, I wish to thank Prof. Sushil, Prof V.S. Gautam, Prof. P.K. Jain, Prof. S.S. Yadav, Dr. M.P. Gupta and Dr. Kiran Momaya. I am thankful to Prof R.C. Saraswat, Director, BIET Jhansi for allowing me to do my Ph.D. at IIT Delhi. I am also grateful to Prof Pratap Singh, Head Mechanical Engineering Department, BIET Jhansi for his whole-hearted support during my Ph.D. I am thankful to the coordinator(s) and staff of Quality Improvement Program at IIT Delhi for their prompt support and action in addressing my needs during my stay at IIT Delhi. My time at IIT Delhi has been greatly enriched by fellow scholars. In particular, I am thankful to Mr. V. Ravi, Dr. A. M. Rawani, Dr. Govind Sharan Dangayach, Mr. Fouzul Azeem, Mr. Ritu Raj Sahu, Ms. Meenakshi and Mr. Biplab for their support and encouragement. I sincerely thank Mr. H.L. Narang, Mr. Sameer Bose, Mr. Jacob Devasia, Mr. Prem Singh, Mr. Dal Chand and all other staff members of Department of Management Studies. IIT Delhi for their cooperation and timely support in my official works. ii

5 I am thankful to all the respondents who responded to my questionnaire as a part of my research work. In this context, I pay special thanks to Mr. Udesh Kumar, Sr. Associated Vice President, YMIPL and Mr. Deepak Sehajpaul, Senior Marketing Executive, Dabur India Ltd. for their active support during the course of my Ph.D. No amount of formal acknowledgement can ever be sufficient for my wife Manisha and daughter Himadri, who tolerated my busy schedule and provided continuous emotional support at home. I thank them for their hearty support, patience, sacrifice and participation in accomplishing this task. I am also thankful to my in-laws, my brothers, and all the well-wishers for their direct or indirect support in the completion of my research work. At last, but of course not the least, I am grateful to my parents for their support and sacrifice during the course of this research. (Sanjay Jharkharia) iii

6 ABSTRACT For effective management of a supply chain, it is essential that the chain is integrated. Advanced information technologies have proved to be one of the major tools in improving the information sharing in a supply chain network and thereby integrating the enterprises in a supply chain. This research is aimed at examining the supply chain management (SCM) practices in the Indian industries with a focus on use of IT in the management of supply chains. A questionnaire-based survey has been conducted to gain insight of various issues related to IT-enablement of the supply chains in select sectors of Indian industries. Four sectors of the Indian manufacturing industry namely auto, engineering, process, and fast moving consumer goods have been covered. A literature review has been conducted to identify the gaps in SCM research especially in the Indian context. This research has attempted to fill some of the gaps in the contemporary research. Some hypotheses are framed and a questionnaire instrument is developed. The descriptive statistics from the survey, hypotheses testing, and three case studies of leading Indian companies provide us an insight about SCM and IT practices in the Indian industries. Due to increasing demand and importance of logistics outsourcing, an ANP-based framework has been developed for the selection of logistics service provider. Finally, Interpretive Structural Modeling has been used to identify the relationships among important barriers to the IT-enablement of supply chains. The major contributions of this research are as follows: A literature review has been conducted to identify various issues related to SCM in general, and use of IT in supply chains in particular. Thereafter, a questionnaire has iv

7 been developed to identify the issues related to IT-enablement of supply chains in Indian manufacturing industry. Various issues related to the IT-enablement of supply chains in Indian manufacturing industry have been identified and discussed on the basis of the empirical study. Eight hypotheses concerning common supply chain issues and sector-specific practices have been formulated and tested using statistical tools. Case studies of three Indian companies, which represent three sectors of the Indian industry, have been developed and analyzed using SAP-LAP methodology. These studies provide an insight about IT-enabled SCM. An ANP-based model has been developed for the selection of a logistics service provider. An Interpretive Structural Modeling-based framework has been developed to establish the relationships among important barriers to IT-enabled supply chain. These relationships are useful in managing these barriers. The present research focuses on various issues related to IT-enablement of supply chains. It provides a better understanding of the status of IT-enablement of supply chains in select sectors of Indian industries. Finally, the research provides an ANP-based framework for the selection of logistics service provider and an ISM-based framework for handling the barriers in the IT-enablement of supply chains. Key Words: Information technology, Supply chain management, Logistics, Analytic Network Process, Empirical Study, Interpretive Structural Modeling

8 vi TABLE OF CONTENTS CERTIFICATE ACKNOWLEDGEMENT ABSTRACT TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES LIST OF ABBREVIATIONS USED Page No. ii iv vi xi xiii xvi CHAPTER 1: INTRODUCTION INTRODUCTION SUPPLY CHAIN MANAGEMENT SCM issues in contemporary research Use of IT in SCM Issues in IT-enabled SCM Future trends in supply chain management AN OVERVIEW OF SCM PRACTICES IN INDIA MOTIVATION FOR THIS RESEARCH OBJECTIVE OF PRESENT RESEARCH RESEARCH METHODOLOGY RESEARCH OVERVIEW ORGANIZATION OF THE THESIS CONCLUSION 17 CHAPTER 2: LITERATURE REVIEW INTRODUCTION SCM versus Logistics AN OVERVIEW OF DEFINITIONS OF SUPPLY CHAIN 21 AND SCM 2.3 LITERATURE CLASSIFICATION SCHEME LITERATURE RELATED TO IT AND INFORMATION SHARING Types and levels of shared information Simple information exchange Formulated information sharing Modeled information exchange Role of IT in supply chain information sharing Bullwhip effect in supply chains IT tools in managing supply chains Decision support systems (DSS) in SCM E-business and electronic market Managerial issues in IT enablement LOGISTICS-RELATED ISSUES Outsourcing of logistics activities IT in logistics PARTNERSHIP RELATED ISSUES IN SUPPLY CHAINS Vendor-managed inventory (VMI) STATE OF THE ART PAPERS 42

9 2.8 REPORTED SURVEYS ON SCM PRACTICES STRENGTHS OF CONTEMPORARY RESEARCH IDENTIFIED GAPS IN LITERATURE CONCLUSION 57 CHAPTER 3: HYPOTHESES FORMULATION, QUESTIONNAIRE ADMINISTRATION, AND DESCRIPTIVE STATISTICS 3.1 INTRODUCTION HYPOTHESES FORMULATION Hypotheses on common SCM issues Related to buyer-supplier relationship and hypothesis Related to inventory management and hypothesis Hypotheses on dissimilarities among various sectors in 62 their approach on SCM Attitude of major stakeholder of the supply chain and hypothesis Incentives to supply chain partners and hypothesis Internal business activities and hypothesis IT-based product related information sharing with suppliers 66 and hypotheses 6 and Investment for the IT-enablement of supply chains and 67 hypothesis QUESTIONNAIRE DEVELOPMENT Structure and content validation of questionnaire QUESTIONNAIRE ADMINISTRATION Target sectors for questionnaire administration Questionnaire administration SURVEY RESPONSE AND RESPONDENTS PROFILE Non-response bias Reliability of the questionnaire survey OBSERVATIONS FROM THE SURVEY Related to supply chain strategy Related to types of information sharing in a supply chain Related to use of IT tools in supply chain activities Related to investment in IT tools Related to use of bar-coding Related to benefits of IT-enabled supply chain Related to barriers in the IT-enablement of a supply chain Related to the enablers in the IT-enablement of a supply chain Related to use of Internet in supply chains Related to use of IT in organizational activities Related to use of IT in purchasing activities Related to bullwhip effect Related to critical supply chain issues Related to supply chain performance measurement Related to performance measurement indicators USE OF IT BY SMALL, MEDIUM, AND LARGE SCALE 100 COMPANIES 3.8 DISCUSSION CONCLUSION 105 vii

10 CHAPTER 4: HYPOTHESES TESTING INTRODUCTION HYPOTHESES TESTING Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis 8 (Revised) DISCUSSION CONCLUSION 125 CHAPTER 5: CASE STUDIES INTRODUCTION CASE METHODOLOGY Scheme for a case development CASE OF COMPANY Al (AUTO SECTOR) Company background Supply chain issues Introduction Forecasting, order taking and production planning Vendor management and inventory replenishment IT issues Introduction and IT history IT infrastructure ERP and SCM software E-business activities Miscellaneous IT-related issues Logistics, sales and distribution SAP-LAP analysis of company Al Situation Actor Process Learning Action Performance CASE OF COMPANY El (Engineering sector) Company background Supply chain issues Introduction Forecasting, order taking and production planning Vendor management and inventory replenishment IT issues at El Introduction and IT history IT infrastructure ERP and SCM software 152 viii

11 E-business Miscellaneous IT-related issues Logistics, sales and distribution SAP-LAP analysis of company El Situation Actor Process Learning Action Performance CASE OF COMPANY Fl (FMCG sector) Company background Supply chain issues Introduction Forecasting, order taking and production planning Vendor management and inventory replenishment IT issues Introduction and IT history IT infrastructure ERP and SCM software E-business Miscellaneous IT-related issues Logistics, sales and distribution SAP-LAP analysis Situation Actor Process Learning Action Performance CONCLUSION 175 CHAPTER 6: SELECTION OF LOGISTICS SERVICE PROVIDER: AN ANP-BASED APPROACH 6.1 INTRODUCTION LITERATURE ON LOGISTICS OUTSOURCING An overview of logistics outsourcing Services covered by the provider Selection criteria for the provider Alternatives for the selection of a provider Asset-based 3PL providers (AB) Non asset-based 3PL providers (NAB) Fourth party logistics service providers (4PL) METHODOLOGY: THE ANALYTIC NETWORK PROCESS ANP SOLUTION AND ANALYSIS Model development and problem formulation Pair-wise comparison of four determinants Pair-wise comparison of dimensions Pair-wise comparison matrices between component/enablers levels Pair-wise comparison matrices for interdependencies 191 ix

12 x Evaluation of alternatives Super matrix formulation Selection of the best alternative for a determinant Calculation of OWI 6.5 DISCUSSION AND MANAGERIAL IMPLICATIONS 6.6 CONCLUSION CHAPTER 7: IT-ENABLEMENT OF SUPPLY CHAINS: UNDERSTANDING THE BARRIERS 7.1 INTRODUCTION 7.2 BARRIERS IN THE IT-ENABLEMENT OF SUPPLY CHAINS 7.3 METHODOLOGY 7.4 ISM METHODOLOGY AND MODEL DEVELOPMENT Structural self-interaction matrix Reachability matrix Level partitions Classification of barriers Formation of ISM-based model 7.5 DISCUSSION 7.6 CONCLUSION CHAPTER 8: SUMMARY, LIMITATIONS AND SCOPE FOR FUTURE WORK 8.1 INTRODUCTION 8.2 SUMMARY OF RESEARCH 8.3 AN OVERVIEW OF THE RESEARCH FRAMEWORK 8.4 IMPLICATIONS OF THE RESEARCH Implications to academicians Implications to managers 8.5 LIMITATIONS OF THIS RESEARCH AND SCOPE OF FUTURE WORK 8.6 CONCLUSION REFERENCES APPENDICES APPENDIX A1: QUESTIONNAIRE APPENDIX A2: GLOSSARY OF THE TERMS USED IN THE THESIS APPENDIX A3: CORRELATION COEFFICIENTS FOR REGRESSION ANALYSIS APPENDIX A4: SAMPLE CALCULATION FOR REGRESSION EQUATION APPENDIX A5: LIST OF PUBLICATIONS FROM RESEARCH APPENDIX A6: BIOGRAPHICAL PROFILE OF RESEARCHER

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