5th International & 26th All India Manufacturing Technology, Design and Research Conference (AIMTDR 2014) December

12th–14th, 2014, IIT

Guwahati, Assam, India

Integrated Decision Making in Supply Chain Management and Its

Relevance to Industrial Practice
1 2*
Amandeep Singh , Sandeep Singhal
1*
Department of Mechanical Engineering, NIT Kurukshetra, Kurukshetra, Haryana,

India-136119, amandeep2391@gmail.com

2*
Department of Mechanical Engineering, NIT Kurukshetra, Kurukshetra, Haryana,
India-136119, sandeep_singhal_reck@rediffmail.com

Abstract
Supply chain management is one of the prime business strategy opted by many organization, therefore it is essential
to take suitable decision in supply chain. It has always been the intention of supply chain engineer to invent or
produce the best product possible and in the best possible way. Many design techniques have been introduced over
the course of decades that try to fulfill this intention. Unfortunately, no technique has succeeded in combining
decision making on supply chain considering the supply chain objectives as well as the corporate strategy. This
paper not only defines the concept of Integrated Decision Making in Supply Chain Management but will also
evaluate its relevance industrial practice by comprehensively reviewing Decision Making and Supply Chain
Management literature. An efficacious decision making model for supply chain management is developed in this
paper by modifying “Robin’s model for decision making”. A case study of a firm that is a leading brand in beverage
industry is presented to better illustrate the concept and theme of the model and their treatment in industrial practice.
Based on our research, the model so developed is used to provide the best possible integrated decision making in
solving supply chain troubles considering the supply chain objectives as well as the corporate strategy.
Keywords: Decision Making, Supply Chain Management

1 Introduction
Effective supply chain management should
focus on developing; objectives and policies for the
supply chain, the shape of the supply chain in terms
of facilities and locations, and the outline of the
organizational structure so that it supports and
integrates the supply chain effectively. To establish
an Effective SCM It is important to develop a supply
chain strategy in alignment with the corporate
strategy to enable supply chain management to make
an optimal contribution to business success. This can
be achieved by systematically translating the strategic
priorities of the company into supply chain
management objectives. For example, if the company
strategy puts a priority on rapid delivery it makes no
sense to primarily reduce stock which can become a
disadvantage of delivery. The key competitive
capabilities in supply chain strategy are broadly
expressed in terms of (1) low cost, i.e. logistics costs,
infrastructure and inventory, (2) flexibility, explained
by managing changes and uncertainties, (3) quality,
in the sense of meeting higher customer demands, (4)
delivery reliability, meaning punctuality and delivery
reliability rate and (5) delivery lead time referring to
delivery times and high fill rate.
To have a supply chain strategy in alignment with the
corporate strategy is important, but it is also
important that the supply chain strategy is consistent
across all supply chain members, as displayed in
figure 1. The consistency in supply chain strategy
across the supply chain members does not imply that
each firm’s strategy needs to be the same, rather, that
the strategies should be complementary across firms
to support overall, shared supply chain objectives. It
is important to create structures, processes and
relationships that improve the cross-organizational
behavior between supply chain members that share a
common vision and objectives.
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Integrated Decision Making in Supply Chain Management and Its Relevance to Industrial Practice

Figure 1: Supply Chain Strategy Aligned

with Corporate Strategy

2 Methodology
Robbins rational decision making model is
slightly modified to develop the following decisive
model which is further used to evaluate a case study in
an Indian industry
Step 1: Define the problem – The problem is a discrepancy
between an existing and a desired state of affair. In this step it is
crucial to define the desired as well as the existing state clearly,
to give a complete description of the decision situation.

2.1 Flow Chart of the Developed Model Step 2: Identification of concerned Supply Chain Members -
All the concerned members are mapped and a small grouped
together as key people. The key people can then be consulted as a
Step 1 Define the problem group when evaluating the decision alternatives in step 5.

Step 3: Identify the decision criteria – Ensure that the supply

chain objectives are aligned with the corporate strategy and set
Step 2 Identification of concerned Supply Chain the decision criteria in accordance with the supply chain
Members objectives.

Corporate
Step 3 Identify the decision criteria Strategy

The
Step 4 Allocate weights to the criteria Aligned Decision
Criteria

Step 5 Develop the alternatives Supply Chain

Objectives

Step 6 Evaluate the alternatives

Figure 2: SC Objectives Aligned with Corporate Strategy to
Deliver the Decision Criteria

Step 7 Conclusions – Selection of Best

Step 4: Allocate weights to the criteria – Decision criteria are
Alternative weigh as per their importance based on their after affects. This
step is difficult to follow as these decisions criteria are directly
derived from Supply Chain objectives, therefore it is a hard task

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5th International & 26th All India Manufacturing Technology, Design and Research Conference (AIMTDR 2014) December 12th–14th, 2014, IIT Guwahati,
Assam, India
to weigh them against each other. But they can be
aligned as per their importance and effectiveness.
Step 5: Develop the alternatives – Generate possible
alternative solutions that could succeed in resolving the
problem. Following Figures Should be kept in mind
when evaluating the best alternative.
Figure 3: Analytical Toolboxes Used to Evaluate
Decision Alternatives
Step 6: Evaluate the alternatives – Analyze and
evaluate all the alternatives and select the best suited
alternative that is most aligned with the criteria.
Valuation can be done on the basis of cost analysis, quality
subjects or external macro environmental analysis.
Step 7: Select the best alternative – Select the best alternative on
the basis of evaluation. Further the selected alternative should be
analyzed
3 Case Study: Warehouse Selection to Meet the Increased
Demand
Step 1: Define the Problem
Company’s main goal is to grow and consequently, there is a
need for the material supply capacity to expand. To handle an
increased demand of the plan-driven material, the warehouse
capacity needs to grow. To summarize the problem, Company’s
existing state is that the capacity is reaching its limits, and the
desired state is to have enough capacity to be able to meet the
increasing future demand. The decision situation is how to reach
the desired state.
Step 2: Identify Concerned Supply Chain Members
In this step all the affected supply chain members will be
identified. Furthermore, key people representing all the
concerned stakeholders will be selected to enable us to get
everyone’s perspective regarding the decision.
• Supply Chain Members Affected by the
Decision
Company’s supply chain consists of suppliers,
Company third part logistics partner, factories, distributors and
end consumers. In this evaluation, only the supply chain
members connected to warehousing management were identified
to be affected.
• The suppliers currently on-boarded in Warehouse, i.e.
supplying plan-driven components to the warehouse.
• Warehouse Operations, the department is operationally
responsible for Warehouse through buying the material from the
suppliers and selling it to the manufacturing sites.
• Forecast and Control, the department is responsible for creating
the Warehouse forecasts to the suppliers.
• Data Management Group, the department is responsible for
computing data in to the information system.
• IS/IT (Information System and Information Technology), the
department is responsible for configuring the information system.
Step 3: Identify the Decision Criteria
In this step it is important to ensure that the supply chain
objectives are aligned with the corporate strategy and set the
decision criteria in accordance with the supply chain
objectives, see figure 1. The supply chain objectives, i.e. the
strategy set by the Supply Chain Operations department at
Company was compared with the corporate strategy to ensure
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Integrated Decision Making in Supply Chain Management and Its Relevance to Industrial Practice

that these are aligned. Table 1 below demonstrates External Analysis of the Supply Chain
the corporate strategy and the supply chain • P – Company should keep in mind that Uttar Pradesh is
objectives. an unstable society where regulations can change
rapidly.
Table 1: Company’s Corporate Strategy and • E – In the current situation there is a risk of Company
Supply Chain Objectives reaching the volumes more than they are expecting and
hence, the capacity increase is necessary.
SUPPLY CHAIN CORPORATE • S – Existing location will not affect the work ethics of
OBJECTIVES STRATEGY the plant.
Availability/Flexibility/Gr Company must grow at
• T – For customer utmost satisfaction it is necessary to
owth all time introduce certain changes time to time which require
Customer Satisfaction Differentiation introduction of new technologies.
generates Defendable
• E – Company should be aware of the debate covering
market positions
green supply chains since the alternatives will both
Customer satisfaction signify increased transportation.
Cost and Capital Excellence must be the
Efficiency standard for everything • L – The new land purchase laws make it hard for
we do Company to put up a new warehouse near plant
according to all of their conditions.

Internal Analysis of the Supply Chain

Consequently the decision criteria are set to be:
• Increased capacity
• Shortened lead times
• Cost efficient
Step 4: Develop the Alternatives
In this step alternatives that could succeed in
resolving the problem are generated. To generate
and develop alternatives for solving the problem, a
brainstorm was conducted together with the original
Warehouse project team at Company. Thereafter
two alternatives, described below, were selected to
be further investigated.
• Alternative 1 – Increased Capacity in
existing warehouse
Alternative 1 is to increase the capacity of
the existing warehouse
• Alternative 2 – Parallel Warehouse near
existing Plant
Alternative 2 is to set up a parallel
warehouse with the same capacity as the
one in the existing warehouse.
An internal analysis was made in order to find out the
implications on the two alternatives in terms of changes in
structure, process and relations.
• Structure- A new warehouse set up signifies largest
structural changes for the suppliers, since they need to
replenish two warehouses instead of one.
• Process- The processes within the Warehouse operation
will not change significantly. The information flow will
increase some, providing the suppliers with a better
insight on where their material is being consumed.
• Relationships- The relationships in the supply chain
might be affected if an additional warehouse would be
set up in near existing Plant.
Total Cost Analysis
To be able to perform the total cost analysis we have had access
to invoices, price lists and data from the enterprise resource
planning system at Company. When calculating the costs we
made one assumption, that all prices will increase with the
inflation and will have the same relative impact in the future as
now, hence we have used current prices.

Step 5: Evaluate the Alternatives

In this step the alternatives will be critically
analyzed with the help of the analytical toolbox
consisting of; external macro-environmental
analyses of the supply chain, internal strategic
analysis of the supply chain, and total cost analysis,
see figure3.

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5th International & 26th All India Manufacturing Technology, Design and Research Conference (AIMTDR 2014) December 12th–14th, 2014, IIT Guwahati,
Assam, India

have, with the help of the decision criteria, investigated in

which alternative we will recommend Company to choose.
Table 2: The Total Cost Calculations; Increased
Capacity versus a Parallel Warehouse Table 3: Selecting the Best Alternative

Alternative 1- Alternative 2- DECISION ALTERNATIVE ALTERNATIVE

Increased New CRITERIA 1: Increased 2: Parallel
Capacity in Warehouse Capacity of the Warehouse near
theexisting parallel to the Existing Dasna Plant
plant existing one Warehouse
Transportation 40% 50%
Increased Capacity Fulfilled Fulfilled
Cost
Order 0% 32% ShortenedLead Fulfilled Not Fulfilled
Processing and
Times
Information
Cost Efficient More Efficient Less Efficient
Cost
LotQuantity 0% 0%
Costs
Inventory 66% 201% Final Choice Best Option
Carrying Cost
Place/Service 6% 24%
Cost Making the Decision
The two analyzes demonstrate that the first
alternative, increasing the capacity of the existing
TOTAL 37% 84%
warehouse fulfills all of the three criteria. This
COST
compared to the second alternative, setting up a
parallel warehouse near existing one, which only, in
As can be viewed in table 2, the largest positions that our analysis, fulfills one out of the three criteria.
would affect the two alternatives are the warehousing Hence, the conclusion that we draw is that Company
and the inventory carrying costs. A set up of a should decide on alternative 1 in the current situation.
parallel warehouse would redouble the warehousing
cost since the new warehouse would have the same Conclusion
capacity as the existing one. The risk that Company
would carry additional inventory costs would The purpose of this paper is to adjust a structured
increase, due to the total increased inventory is rational decision-making model, making it applicable
placed in two warehouses. for effective decision-making in supply chain. An
underlying objective has been to test the model on a
Step 6: Select the Best Alternative suitable case. The rational decision-making model
used as a foundation in our model contains
appropriate steps for decision-making, however, there
In this step the alternatives will be evaluated
needs to be more flexibility in the sequences of the
according to how well they measure up to the
steps to accommodate for an ever-changing and
decision criteria set in step 3. This will be made
complex business environment. To optimize the
having the conducted analyzes from step 5 in mind.
model, we believe that an alternative could be to not
In step 3, the corporate strategy was viewed at from a
consider the steps as steps, but rather as categories. In
supply chain perspective and since the supply chain
this way, the information gathering could be
objectives were aligned with the corporate strategy,
conducted parallel instead of in sequence. We
three decision criteria were set:
consider that the content of the model is suitable for
effective decision-making in supply chain, and can
• Increased capacity
therefore be seen as a good start in attempting to find
• Shortened lead times
a hands on guidance for managers faced with
• Cost efficient
strategic decisions in supply chain.
After having set the criteria and made the evaluation
based on external, internal and total cost factors, we
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Integrated Decision Making in Supply Chain Management and Its Relevance to Industrial Practice

Marcus Brandenburg, Kannan Govindanb, Joseph Sarkis

Reference
Agnes Virlics (2013), “Emotions in Economic
Decision Making: A Multidisciplinary Approach
Elsevier Procedia - Social and Behavioral Sciences, Vol.
92, 1011–1015.
Christopher, M., and Towill, D. (2001) “An integrated
model for the design of agile supply chains” International
Journal of Physical Distribution and Logistics Management,
Vol. 31, No. 4, 235-246.
and, Stefan Seuring, (2014) “Quantitative models for
sustainable supply chain management: Developments and
directions”, Eurpoean Journal of Operational Research,
Vol. 233, No.2, 299–312.
Ramanathan, U. (2013) “Aligning supply chain
collaboration using analytic hierarchy process”
Omega-International Journal of Management Science, Vol.
41, No. 2, 431-440.
Stevens, Graham C, (1990) Successful Supply-Chain
Management, Management Decision, Vol. 28, No. 8, 25-31.

Elsevier Procedia - Social and Behavioral Sciences, Vol.

92, 1011–1015.
Christopher, M., and Towill, D. (2001) “An integrated
model for the design of agile supply chains” International
Journal of Physical Distribution and Logistics Management,
Vol. 31, No. 4, 235-246.
Marcus Brandenburg, Kannan Govindanb, Joseph Sarkis
and, Stefan Seuring, (2014) “Quantitative models for
sustainable supply chain management: Developments and
directions”, Eurpoean Journal of Operational Research,
Vol. 233, No.2, 299–312.
Ramanathan, U. (2013) “Aligning supply chain
collaboration using analytic hierarchy process”
Omega-International Journal of Management Science, Vol.
41, No. 2, 431-440.
Stevens, Graham C, (1990) Successful Supply-Chain
Management, Management Decision, Vol. 28, No. 8, 25-31.

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