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1. Name: Lalrinawma Zadeng 2. Student Id: 0631871 3. Full Title of Paper: A study of relationship between supply chain actors in the context of developing food supply chains and its affect on the performance of actors and reflection on downstream customer demand: A comparative study between actors in the semi-short chains of cottage industry and the semiconventional chains of low-tech food packaging industry. 4. BBS Doctoral Symposium 23rd & 24th March 2009 1 ABSTRACT There are many researches that dwell on the affect of supply chain collaboration on performance of actors in the chain and downstream customer satisfaction. However, the majority of such works are based on modern supply chain in developed economies. This research project, on the other hand, aims to look at such variables in the context of a developing economy (the Mizoram state of Northeastern India); on supply chains that are basically low-tech and traditional and on consumer demands that are basic. By investigating the nature of relationships between actors in the chain, it aims to identify the role collaboration plays towards enhancing actors’ performance as well as meeting consumer demands, all in the context of a developing food supply chain. 2 WHAT IS THE RESEARCH: Title: A study of relationship between supply chain actors in the context of developing food supply chains and its affect on the performance of actors and reflection on downstream customer demand: A comparative study between actors in the semi-short chains of cottage industry and the semi-conventional chains of low-tech food packaging industry. Aims and objectives: • To study and compare the nature of relationship in the food supply chain between the cottage industries and the low-tech packaging industries. Hence, in the context of a relatively young and traditional supply chain. • To identify the link between the nature of relationship in the chain and its affect on the performance of actors in the chain. • To identify how end consumer demands are reflected or otherwise in the supply chain. • To develop a best-fit framework that can be adopted to improve the chain configuration and ultimately the performance of the chain. 3 WHERE Mizoram Overview Mizoram is one of the 28 states of India and is part of the seven-sister states of Northeast India. It is one of the youngest states, one of the smallest states and also the second most sparsely populate state in India (Khongsdier, 2008). Its economy is largely land based and the existing industries are mostly local and cottage based while the more conventional packaging industries are also emerging. In an agricultural context, the widely adopted shifting (or Jhum) cultivation is seen as a major obstacle to development. The government have pursued various efforts to reduce this by encouraging a shift from primary to secondary sectors by way of developing rural industries such as handloom/handicraft and other village and cottage based industries which are met with some success. Meanwhile, within the primary sector itself, the government is proactively promoting plantation crops, fruits and vegetables ahead of grain production. Hence the recent emergence of food processing and packing industry (bottled squash, juices, tinned foods, jams, etc) is of no coincidence. This research project is particularly interested in two types of food supply chain present in the region. The first one is the semi-short food supply chain that exists within the local cottage industry and its route to local markets. A wide variety of local food products (mostly traditional foods) are channeled through this medium which may be considered semi-short due to the relative simplicity of its route to the market (i.e. grown locally, processed locally and sold locally). The second one is the semiconventional food supply chain where produces are transported from various areas 4 across the region, processed/packaged in a factory and sold across the region. These are mostly cooperative owned and may be considered semi-conventional as they resemble those in business linkages but not quite in technological and contractual sophistication. These two chains however, can only be considered competing indirectly as their final product to the market are not entirely of the same food product but within the same category and of crops (e.g. soybean products). While the semi-short chain found in the region is characterized by its informality, the semi-conventional chain is not much regulated either particularly when compared to conventional chains in developed economies. This led Thanchungnunga (1998) to suggest how necessary it is to create an institutional hierarchy which is large enough to exploit economies of scale and this research is interested to know not only if such objectives (cost factors) are met by the existing supply chains in the region but also how appropriate it is to the market (i.e. customer satisfaction). Hence, by looking at the nature of relationship/linkages in the food supply chain in the region and how these correlates or otherwise throughout the chain on actors performance as well as consumer benefits, the writer aims to highlight a supply chain framework best fit for such economical context. A study will be carried out between actors in both sets of supply chain identified in the region with the aim of identifying the significance of their relationship for themselves as practitioners, as well as for the good of the market. 5 WHAT Comparing the food supply chain between the semi-conventional and the semishort networks – Theoretical Framework. Table 1. Characteristics of Interorganisational Relationships (NECTEC, 2006) The supply chain relationship that exists in both sets of the supply chain identified will be examined in order to identify their configuration within the above framework 6 (Table 1). Looking at both sides of the coin (i.e. the conventional versus the short chains) the depth of the relationship will be investigated with an attempt to identify its correlation with cost factors in the supply chain as well as consumer satisfaction. ‘Collaborative business relationships including strategic alliances, joint ventures, clusters, and consortia are popular mechanisms for dealing with resource constraints accelerating technological advancement, and heightened levels of competition in the global marketplace. Companies enter into such relationships in the hope of accessing resources, skills, or markets, and in doing so minimising the effect of their weakness or building and maintaining competitive advantages’ (Palakshappa and Gordon, 2007. p1). In particular, small-scale farmers as a group should have the greatest motives for these, they suggest, as they lack the resources to independently face market challenges and demand. However, they question the extent in which this intended benefit of supply chain collaboration is realised by the food supply chain network of small farmers and intermediaries, in particular to developing economies. Therefore, one of the focuses of this research project will be to identify the level of collaboration between actors in the identified chain and examine if resources and market benefits are met. In particular, to identify a framework that will incorporate such supply chain configurations and outcomes in the context of a developing and traditional supply chain. Although there is a growing body of work in the study of relationships which emphasizes the benefits of collaboration and the sharing of information between actors in the supply chain, Harland (1996) points out the weakness of many studies by highlighting how hard and objective measurements are not always suitable for such 7 studies and indicating the importance of softer measures. Secondly, he emphasize the need to design the measurement system in the perspective of a quasi-organization rather than a one sided organizational which can often be biased. Beamon (1998) identifies an important component in supply chain management which is the establishment of appropriate performance measures which helps in the determination of the efficiency and effectiveness of existing systems, or compare between competing systems. He broadly classifies these measures into two categories – quantitative and qualitative performance measures, and also highlights the importance of adopting a modern integrated approach of viewing the supply chain as a single entity in studies. Van Hoek (1998) shared this sentiment of an integrated approach in performance measurement as control is no longer based on ownership only, but rather on networking across interfaces. However, the research will also take heed of warnings from Suwanruji and Enns (2004) against any performance measures with multiple focus. They highlighted the possibility of trade-offs occurring between such measures, with one typically improving while the other deteriorates. Beamon (1999) highlights a shift in focus on performance measurement which used to rest predominantly on costs but has since moved on to a new framework of performance measurement which incorporates resources, output and flexibility (ROC) as shown in table 2 and figure 1 below. This framework of ROC will be adopted by this research project in the form of relationship, customer and performance where relationship will be the prime focus interlinking the other two variables. 8 Table 2. Goals of performance measure types (Beamon, 1999). Performance measure Resources Goal High level of efficiency Purpose Efficient resource management is critical to profitability Output High level of customer service Without acceptable output, customers will turn to other supply chains Flexibility Ability to respond to a changing environment In an uncertain environment, supply chains must be able to respond to change Figure 1. The supply chain measurement system (Beamon, 1999). R O F As can be seen from the above table and figure, R, O and C are all interlinked. The resources affect the output of a supply chain in terms of quantity and quality; and similarly determines the nature (flexibility) of the supply chain. Meanwhile, the flexibility of the chain will be reflected on the output in terms of accuracy to demand, which will also determine the resource requirements. Hence, the framework presents a combination of quantitative and qualitative functions. 9 A combination between qualitative and quantitative framework is important as Gunasekaran et al (2003) highlight that while financial performance measurements are more suitable for strategic decisions and external reporting, day to day controls of manufacturing and distribution operations are considered to be more suitable with non-financial measures. Meanwhile, this research also identifies the interconnectedness between qualitative and quantitative measures based on Troyer (1996) and Chan et al (1997), (quoted in Abuhilal et al, 2006) where significant cost savings are related to collaborations in the chain, researches which have influenced this project a great deal. Meanwhile, as Van Hoek (1998) and Osinga and Hofstede (2005) highlights, the role and contribution of various actors in the chain (which could differ) is of immense importance in the chain and would be investigated. Last but not least, as Chan (2003) advocates how consumers must be the ultimate focal point of any performance measures, this research will also attempt to highlight such interlinkage between the chain and consumers. It is therefore important to note that there is a vast array of comparative measures to choose from when comparing between different supply chains. The critical issue is the selection of the appropriate comparative method which will truly reflect what the research sets out to do with reasonable scale of input requirement. Based on the above observations, it is imperative that a combination of qualitative and quantitative measures are adopted for the study and that an integrated approach of studying the entire chain would provide the best results. 10 HOW Methodology: This research will adopt a method of an exploratory study in determining and investigating the phenomena and collecting, analysing and evaluating data. It will move on to an explanatory mode in interpreting these data and phenomena and will seek to formulate a theory with the knowledge in context (i.e. the link between the nature of relationship in the food supply chain and performance of actors and reflection of consumer demand). Primary Research: This stage of the research will take place on field locations in the Mizoram state of Northeastern India and is expected to be a three-folded process. Firstly in the study of relationship in the food supply chains, qualitative methods will be adopted. Methods such as informal discussions with employees or formal approaches on management/proprietors through in-depth interviews will be considered to study the nature of the linkage in the chains and what emphasis are placed by actors on their linkage with other actors in the chain. Attempt will then be made to identify these findings on NECTEC’s (2006) characteristics of interorganizational relationship framework to enable comparison between the two sets. Secondly, both quantitative and qualitative methods will be adopted to study the effect of collaboration as experienced by both sets of actors in the chains in terms of performance. Since this effect could range from sharing information to training, from price discounts to lending, it is imperative that both qualitative and quantitative methods are used. It is aimed that such effects would enable the formation of a 11 framework best fit for young and low-tech supply chains, albeit leaning towards either the traditional or conventional spectrum. Thirdly, on the study of how food consumer demand is reflected in the chain (i.e. how the chain actors take heed of consumer demand), a more quantitative approach in the form of questionnaire at the point of sale will be strongly considered. However the benefits of interviews, focus groups and observation are not overruled. If appropriate and robust, findings of other consumer survey and studies may even be considered. However, considering the supply chain and the market upon investigation are of such specificity that specially designed study may be best suitable. Secondary Research: The systematic review, summary, collation and/or synthesis of existing research, reports and publications takes place at University location and other learning institutions with relevant data for the project. Data collected are being and will continue to be carefully analysed and used to generate both qualitative and quantitative findings using the appropriate data analysis software. 12 BIBLIOGRAPHY 1. Abuhilal, L., Rabadi, G., and Sousa-Poza, A. 2006. Supply chain inventory control: A comparison among JIT, MRP, and MRP with information sharing using simulation. Engineering Management Journal. 18(2). 2. Beamon, B.M. 1998. Supply Chain Design and Analysis: Models and Methods. International Journal of Production Economics. 55(3). 3. Beamon, B.M. 1999. Measuring supply chain performance. International Journal of Operations and Production Management. 19(3) 4. Chan, F.T.S. 2003. Performance Measurement in Supply Chain. The International Journal of Advanced Manufacturing Technology. 21 5. Gunasekaran, A., McLaughlin, J., Motwani, J., Madan, M.2003. Using information technology to improve downstream supply chain operations: a case study. Business Process Management Journal. 9 (1) 6. Harland, C.M. 1996. Supply Chain Management: Relationships, Chains and Networks. British Journal of Management. 7 (Mar 1996) 7. Khongsdier, R. 2008. Increasing Urbanisation in Tribal States of Northeast India: Implications for the Prevalence of Chronic Diseases. Tribe and Tribals: Special Volume. 2 13 8. National Electronics and Computer Technology Center (Thailand). 2006. Interorganisational Standards (Online). Updated 2006. Available at: http://wiki.nectec.or.th/setec/Knowledge/InterorganisationalStandard 9. Osinga, S.A. and Hofstede, G.J. 2005. Transparency in the pork supply chain: Comparing China and the Netherlands. 99th EAAE Seminar, Bonn, Germany. Feb 2005. 10. Palakshappa, N. and Gordon, M.E. 2007. Collaborative business relationships: Helping firms to acquire skills and economics to prosper. Journal of Small Businesses and Enterprise Development. 14 (2) 11. Suwanruji, P. and Enns, S.T. 2004. Evaluating the performance of supply chain simulations with tradeoffs between multiple objectives. Simulation Conference, Winter 2004. University of Calgary, Calgary. 12. Thanchungnunga. 1998. Agarian Change and social transformation among the Mizo (tribal state in North-East India). International Journal of Social Economics. 25 (2/3/4). 13. Van Hoek, R.I. 1998. Logistics and virtual integration: postponement, outsourcing and the flow of information'', International Journal of Physical Distribution and Logistics Management. 28(7) 14