"A Study on Impact of Inventory-Distribution Coordination on Supply Chain

Performance in Bata India Ltd"

Synopsis On

"A Study on Impact of Inventory-Distribution Coordination on

Supply Chain Performance in Bata India Ltd"

Submitted by:
Enrolment No.-
Name
MBA (Operation Management)
Under the supervision of: Sumit
Agarwal

FOR APPROVAL SUBMITTED TO School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY MAIDAN GARHI,

NEW DELHI - 110 068

In the partial fulfilment of the degree of
MASTER OF BUSINESS ADMINISTRATION (OPERATION MANAGEMENT)
Table of Contents
INTRODUCTION.................................................................................................................................... 3
1.2 RATIONALE OF THE STUDY............................................................................................................. 7
1.3 REVIEW OF LITERATURE................................................................................................................. 8
1.4 OBJECTIVES OF THE STUDY........................................................................................................... 10
1.5 RESEARCH METHODOLOGY.......................................................................................................... 11
 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

1.8 CONCLUSION................................................................................................................................ 15
REFERENCES:...................................................................................................................................... 16
INTRODUCTION
Supply chain has evolved very rapidly since 1990s showing an exponential growth in papers
in different journals of interest to academics and practitioners (Burgess et al. 2006). Supply
chains are generally complex with numerous activities (logistics, inventory, purchasing and
procurement, production planning, intra-and inter- organizational relationships and
performance measures) usually spread over multiple functions or organizations and
sometimes over lengthy time horizons. Supply chains tend to increase in complexity and the
involvement of numerous suppliers, service providers, and end consumers in a network of
relationships causes risks and vulnerability for everyone (Pfohl et al. 2010). The continuous
evolving dynamic structure of the supply chain poses many interesting challenges for
effective system coordination. Supply chain members cannot compete as independent
members. The product used by the end customer passes through a number of entities
contributed in the value addition of the product before its consumption. Also, the practices
like globalization, outsourcing and reduction in supply base have exacerbated the
uncertainty and risk exposure as well as more prone to supply chain disruption. Earlier
literature considers risks in relation to supply lead time reliability, price uncertainty, and
demand volatility which lead to the need for safety stock, inventory pooling strategy, order
split to suppliers, and various contract and hedging strategies (Tang 2006). But today's
supply networks have become very complex and vulnerable t

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 "A Study on Impact of Inventory-Distribution Coordination on Supply Chain
Performance in Bata India Ltd"

ovarious supply chain risks hence these issues have pulled attention of various academics and

practitioners for the last few years (Oke and Gopalakrishnan 2009). Uncertainty relates to the

situation in which there is a total absence of information or awareness of a potential event

occurrence, irrespective of whether the outcome is positive or negative. The terms risk and

uncertainty are frequently used interchangeably (Ritchie and Brindley 2007). As firms move to

leaner operating models and increasingly leverage global sourcing models, uncertainty in both

supply and demand is growing along with supply chain complexity. To improve the overall

performance of supply chain, the members of supply chain may behave as a part of a unified

system and coordinate with each other. Thus "coordination" comes into focus. There seems to

be a general lack of managerial ability to integrate and coordinate the intricate network of

business relationships among supply chain members (Lambert and Cooper 2000). Stank et al.

(1999) studied inter-firm coordination processes characterized by effective communication,

information exchange, partnering, and performance monitoring. Lee (2000) proposes supply

chain coordination as a vehicle to redesign decision rights, workflow, and resources between

chain members to leverage better performance such as higher profit margins, improved

customer service performance, and faster response time.

Coordinating Functions Across Supply Chain Members The supply chain members perform

different functions or activities like logistics, inventory management, ordering, forecasting and

product design involved in management of flow of goods, information and money. In traditional

supply chain individual members of supply chain have been performing these activities

independently. The supply chain members may earn benefits by coordinating various activities
 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

as discussed in following subsections. Logistics has traditionally been defined as the process of

planning, implementing, and controlling the efficient flow and storage of goods, services, and

related information as they travel from point of origin to point of consumption. The uncertainty

and complexity of decision making regarding logistics operations: diversified customers and

their different requirements, different resources required, increasing rate of unanticipated

change and level of goal difficulty among logistics provider and the customer (supplier,

manufacturer, distributor and retailer), geographically dispersed networks of multiple

manufacturing sites lead to the need of coordination in this process (Huiskonen and Pirttila

2002).

The challenges lie in managing the network complexities to collectively create value to the end

customer (Stank et al. 1999; Stock et al. 2000) and integrating the logistics with whole supply

chain with the help of electronic communication. The major decisions regarding inventory

management include: determination of the order quantity, the timing of order, reorder point and

the replenishment of inventory. The factors which are considered while deciding the inventory

policy are customer demand (deterministic and random), number of members in supply chain,

replenishment lead time, number of different products stored, length of the planning horizon,

service level requirements and costs comprised of cost of production, transportation, taxes and

insurance, maintenance, obsolescence opportunity cost, stock out, etc. The changes even in one

of the above factors affect the decisions regarding inventory policy. The factors related to

inventory policy are highly dynamic because of changing market condition, supply uncertainty;

different and conflicting inventory policies among supply chain members, and unavailability of

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 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

inventory information of other members. To face the dynamic situation, the members of supply

chain have realized the importance of coordination in inventory management. Production and

Distribution Coordination Integration of production and distribution processes may lead to a

substantial saving in global costs and to an improvement in relevant service by exploiting scale

economies of production and transportation, balancing production lots and vehicle loads, and

reducing total inventory and stock out. Chikan (2001) gave a theoretical background of

integrated production/logistics systems on the basis of institutional economics, discussed

business issues regarding integration of these two functions and how this connection is handled

in education.

Demand
uncert
ainly

Supplier Cwmlmai Buyer

ion
mechanis
m.1!
Coordinate as SC members are
part of one system to manage
uncertainty and so share risks
and reiiizftfr

Supply Chain Performance Improvement

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 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

Figure 1.1: Managing Supply Chain Uncertainty with Supply Chain Management

1.2 RATIONALE OF THE STUDY

3PL companies are playing ever increasing roles in extended supply chains transforming from

movers of goods to strategic value-added entities. Similarly, there has been an expansion in the

scope of services offered by 3PL firms by including recent value-added functions such as after-

sales support, customer service and reverse logistics. Firms such as United Parcel Services,

which began as a logistics company has expanded their repertoire of skills as being a global

systems integrator and a supply chain solutions company. 3PLs play a key role in facilitating

supply chain integration and in some cases even managing entire supply chains. Integrating

with 3PLs has been growing in importance in recent years.

Indeed, 3PL firms have transformed the roles of distribution centers from storage facilities to

channel assemblies by taking care of simple repair jobs that do not have to be sent back to

manufacturers. This study will examine the enablers of performance, and compares the factors

that influence performance in firms that integrate with inventory distribution coordination. This

study will also analyze whether there will be significant effect of information integration

efforts, relationship building, distribution selection criteria and distributors' evaluation on

supply chain performance.

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 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

1.3 REVIEW OF LITERATURE

It is interesting to note the following perspectives on supply chain coordination as reported in

the literature:

According to the study of Arshinder (2008) Supply chain coordination can be defined as

identifying interdependent supply chain activities between supply chain members and devise

mechanisms for manage those interdependencies. It is the measure of extent of implementation

of such aggregated coordination mechanisms, which helps in improving the performance of

supply chain in the best interests of participating members.

Thomas J. Kull et al., (2007) integrated extended supply chains, e-commerce and learning

curve theory. The authors argued that learnability index utilizing learning rate metrics can be

helpful for firms wishing to benchmark their supply chain's customer interface effectiveness.

Piero Migliarese & Vincenzo Corvello (2007) compared virtual enterprises with vertically

integrated firms and production networks. They argued that virtual enterprises are suitable for

firms producing complex, modular products, with frequent changes in components but of low

knowledge specificity.

Gunther Zapfel & Michael Wasner (2006) developed a heuristic solution concept for an

integrated reel warehouse sequencing of a steel supply chain to capture all dynamic situations

of the warehousing processes. Peter Trkman & Groznik (2006) analyzed the main aspects

needed for successful renovation, integration and operation of supply chains.

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 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

Kleindorfer and Saad (2005) asserted that continuous coordination, cooperation, and

coordination among supply chain partners are imperative for risk avoidance, reduction,

management and mitigation such that the value and benefits created are maximized and shared

fairly. Supply chain coordination is a strategic response to the challenges that arise from the

dependencies supply chain members.

J. Liu et al., (2005) developed a common integrated management system called Workflow

supported inner Supply Chain Management system (WSCM) for Nanjing Jin Cheng Motor

Cycle Corporation Limited and most of its suppliers to manage their inner processes.

S. K. Jain & Taruna Upadhyaya (2005) presented an integrated model for agile supply chain

considering elements such as inbound logistics, internal operations and out bound logistics to

reduce total pipeline time in order to minimize C2C cycle time. Ming Dong & F. Frank Chen

(2005) presented an analytical framework for integrated logistic chains used to model different

network topologies such as series, parallel and assembly structures. Performance measures such

as fill rates, expected number of back-orders, expected number of orders waiting in queue,

expected inventory level and stock out probability were analyzed using GI / G / 1 queuing

model.

According to the study of (Larsen 2000) Collaborative working for joint planning, joint

product development, mutual exchange information and integrated information systems, cross

coordination on several levels in the companies on the network, long term cooperation and fair

sharing of risks and benefits.

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 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

Simatupang and Sridharan (2002) in their study focused on a collaborative supply chain

simply means that two or more independent companies work jointly to plan to execute supply

chain operations with greater success than when acting in isolation.

According to the study of Sunil Chopra & Meindl P., (2001) Firms need to develop an entire

system of meaningful performance measures to become and then remain competitive. Many of

the world's businesses respond to increased competitive pressure by attempting to develop and

maintain an effective performance measurement system linking firm's strategy to operating

decisions. Performance criteria that guide a firm's decision making to achieve strategic

objectives must be easy to implement, understand and measure. They must be flexible and

consistent with the firm's obj ectives and should be implemented in areas that are viewed as

critical to the success of the firm and its supply chain.

1.4 OBJECTIVES OF THE STUDY

On the basis of the research formulation, following objectives will be considered for the study

which helps in giving the real outcome on the dimensions of supply chain performance.

Objectives are the base of any research and these make easier of the study to provide the right

path. Following objectives of this study will be:

1. Exploring the relationships between Information Integration Efforts and firm

performance,

2. Examining the relationship between relationship building & firm's performance.

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 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

3. Ascertaining the association between Distributor Selection Criteria & Firm;s

Performance
4. Measure the effect of Distributor Performance Evaluation on Firm's Performance.

1.5 RESEARCH METHODOLOGY

1.5.1 THE RESEARCH DESIGN

The present research is a Descriptive in nature. In this present research study the strategic

enabling factors of distribution coordination in supply chain management will be studied and an

attempt would be made to identify the intensity of the factors affecting the firm's performance.

This is a manufacturing and logistics sector based study in which various segments of

population would be sampled. The study is primarily based on preliminary data that is collected

from the field through questioning the respondents with the help of structured questionnaire

based on five point Likert scale. As per the research design manufacturing and logistics units

will be indentified for this study.

1.5.2 RESEARCH APPROACH

The deductive approach is based on the formulation of hypothesis in which specific decision is

to be made and for testing the hypothesis a strategic approach will be formed. But when the

problems of statements are open and the generalizations are made for reaching the conclusions,

this research approach is called inductive. In this approach theory will developed on the basis of

results. This research study will purely deductive in nature. All the results of the hypotheses

will come to an end and deal with some conclusions and implications.

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1.5.3 RESEARCH STRATEGY

In this study Survey Strategy through questionnaire will be chosen for collecting the data.

Collecting data from structured questionnaire is a common method in business research. This

Survey Method allows the opportunity of collecting data from a large sample size of

population. A survey allows for standardization of data which allows easy comparisons. In

addition, since this method is easily understood by the respondents, it is perceived as

authoritative. Furthermore, the survey method gives more control over the research process.

The principle instrument will be a questionnaire, on which each (respondent) will be asked to

give their responses these questions in a predetermined order.

1.5.4 SAMPLING PLAN

The study will be restricted to the manufacturing sector which is very vast for the study so the

researcher will be focused on the Inventory Distribution Coordination which is an integral part

of logistic units. All the leading manufacturing units of India will be included in the study.

Managers of Logistics Department & Manufacturing Units.

Sampling Unit: For the research total 300 respondents were selected.

Sampling Techniques: For the study of purposive, convenience and random sampling techniques will be

used.

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Supply Chain
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1.5.5. SCALING

A psychologist Rensis Likert developed this Likert-scale for measuring the degree, intensity,

perception on the level of agreement to disagreement. It is a psychometric scale commonly

used by researchers while constructing the survey questionnaires. It is interchangeable rating

scale. It has many parameters to quantify the data. Some researchers adopt five-point, seven-

point, three-point, ten-point or four-point depending on the need of the study. In this study five

point based likert scale will be applied in constructing the questionnaire.

1.5.6 SAMPLE SIZE

For the research 300 questionnaires were distributed to the target respondents of Central India

that covered the managers of firms who have inventory distribution coordination in supply

chain management and also 300 managers of those firms who do not have inventory

distribution coordination in supply chain management

1.5.7 DATA ANALYSIS TOOLS

The data coded in excel using Ms-Office package. The coded data will then analyzed using

graph chart . The data will be analyzed using descriptive statistics. First all questions will be

subjected to frequency analysis and item total correlation to check whether the scale is

measuring any variation or not. Thereafter, the reliability and validity of the scale will be done

using Cronbach's Co-efficient Alpha, Factor Analysis and Correlation analysis.

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Supply Chain
Performance in Bata India Ltd"

1.6 HYPOTHESES

H01: There is no significant effect of Information Integration Efforts on Firm's Performance.

H11: There is a significant effect of Information Integration Efforts on Firm's Performance.
H02: There is no significant effect of Relationship Building on Firm's Performance.

H12: There is a significant effect of Relationship Building on Firm's Performance.

H03: There is no significant effect of Distributor Selection Criteria on Firm's Performance.

H13: There is a significant effect of Distributor Selection Criteria on Firm's Performance. H04:
There is no significant effect of Distributor Performance Evaluation on Firm's Performance.

H14: There is a significant effect of Distributor Performance Evaluation on Firm's

Performance.

1.7 EXPECTED FINDINGS:

This study will be concluded that there will be a significant impact of inventory distribution

coordination on supply chain performance. Integration allows companies to automatically

coordinate their activities across firm boundaries and this increased coordination provides

benefits at several levels that impact mission-critical activities.

1. Integration enables reduced transaction process costs, increases the speed and accuracy with

which companies respond to trading partners. In addition, lowering total supply chain costs

increases overall profit, which benefits all the participants in the supply chain. 2. More efficient

shared work-flows: Collaboration tools structure processes, improves coordination by clarifying

what activities need to be done and at what time?

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Supply Chain
Performance in Bata India Ltd"

3. Improved supply chain planning: Integration allows firms to share information about sales

forecasts, promotions, capacity utilization, etc. CPFR efforts can both increase sales and reduce

inventory by percentages in the double digits.

4. Supply chain optimization: Integration allows firms not only to operate in the same way

more efficiently but also allows them to reconfigure how they operate together.

1.8 CONCLUSION
Many firms simply are unaware of the fundamental dynamics of supply chains, but even those

firms that are enlightened enough to understand these dynamics are often unable to realize inter-

organizational coordination. Often the most effective supply chains have a dominating

organization that sees the benefits of SCC and forces the rest of the supply chain to comply (i.e.,

global leader in retailing such as Wal-Mart). Many supply chains, however, either do not have a

dominant organization, or the dominating organization is unenlightened. In these instances,

coordinating the supply chain is most difficult. Typically, it is observed that the SCC problems

could be due to the conflicting objectives that leads to a short time relationships with SC

members, hence the environment and expectations changes frequently with dealing with new

members.

The research is required to explore the utility of contracts in multi-period cases. In multi period

model, the supply chain members are more expose to the uncertainty as they are dealing with

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Supply Chain
Performance in Bata India Ltd"

supply chain members frequently. How various coordination mechanisms can be allied in multi

period problems as well as can we evaluate coordination in such case?

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Unpublished doctoral thesis, Indian Institute of Technology Delhi, New Delhi.

2. Chikan A (2001) Integration of production and logistics - in principle, in practice and in

education. Int J Prod Econ 69(2): 129-140.

3. Huiskonen J, Pirttila T (2002) Lateral coordination in a logistics outsourcing

relationship. Int J Prod Econ 78(2):177-185.

4. Jayaraman V, Pirkul H (2001) Planning and coordination of production and distribution

facilities for multiple commodities. Eur J Oper Res 133(2):394-408.

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Oper Manage 14(1):53-68.

6. Lambert DM, Cooper MC (2000) Issues in supply chain management. Ind Mark Manage

29(1): 65-83.

7. Lee HL (2000) Creating value through supply chain integration. Supply Chain Manage Rev

4(4): 30-36.

8. Oke A, Gopalakrishnan M (2009) Managing disruptions in supply chains: a case study of a

retail supply chain. Int J Prod Econ 118(1): 168-174.

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 "A Study on Impact of Inventory-Distribution Coordination on
Supply Chain
Performance in Bata India Ltd"

9. Pfohl H, Kohler H, Thomas D (2010) State of the art in supply chain risk management

research: empirical and conceptual findings and a roadmap for the implementation in

practice. Logistics Res 2(1):33-44.

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11. Stank TP, Crum MR, Arango M (1999) Benefits of inter-firm coordination in food industry

in supply chains. J Bus Logistics 20(2):21-41.

12. Simatupang TM, Sridharan R (2002) The collaborative supply chain. Int J Logistics Manage

13(1):15-30

13. Simatupang TM, Wright AC, Sridharan R (2002) The knowledge of coordination for supply

chain integration. Bus Process Manage J 8(3):289-308

14. Simatupang TM, Sandroto IV, Lubis SBH (2004) Supply chain coordination in a fashion

firm. Supply Chain Manage Int J 9(3):256-268.

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role of fit. J Oper Manage 18(5):531—547.

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