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Understanding Process Re-Engineering, Integration and Collaboration in Supply Chain

Management

Author

FRANCIS A. KISSINGER

Email; fkakissinger@gmail.com>

Co-Author

DAVID KIARIE MBURU

Email; dmburu77@gmail.com

P.O BOX 7020 -00300 NAIROBI

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KEY WORDS

Business process, Supply Chain Management, Transaction Cost, procurement, Operations

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INTRODUCTION

1.1 Background

Saunders, (1997) argues that the transformation of industrial organization in the world has been

profound and marvelous for quite a long time. Given the development of new manufacturing

systems, new styles of industrial relations and the adaptation of new framework for product

development, systems engineering and marketing, a key component is the realignment of the

buyer-seller relations and the adoption of new supply practices by organizations across the globe.

This has given rise to the concept of business systems reengineering as a better way of enhancing

the value of supply chain and its overall performance.

Pandey et al, (2010) defines supply chain as a coordinated and well managed supply system

consisting of all players involved directly or indirectly in fulfilling a customer request. It

includes not only the manufacturer and suppliers, but also transporters, warehouses, retailers and

even customers themselves. Within each organization, the supply chain includes all functions

involved in receiving and filling a customer request. The functions include but are not limited to,

new product development, marketing, operations, distribution, finance and customer service. A

supply chain is dynamic and involves the constant flow of information, product and funds

between different stages with the goal of maximizing value creation.

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According to (Saunders, 1997), purchasing and supply can no longer be treated as a second order

function. Towards the end of the decade of 1990, the interest began growing in the concept of

business process re-engineering which questioned the basic approaches of how technology and

people could be combined to carry out particular activities and how individual elements couldbe

interlinked to best achieve the key purpose of the organization. The way forward therefore, lies

with integrated materials management, pulling together the tripartite of suppliers, production and

distribution. In the years ahead, those who have not got their purchasing and supply operations

right will not be competitive, argues the writer. On the global scale, experts predict shifts in

global demographics and economic power in the not-so-distant future. The world is rapidly

transforming and new markets are emerging such as Latin America, Africa, Asia and Eastern

Europe. Supply chain management links the supply integrating organizations in an integrated

two-way communication system to manage high quality inventory in the most efficient manner,

(Burt et al, 2003).

A further outcome of this new approach is the flattening of managerial hierarchies, as levels in

the structure of organizations are removed. Responsibility is pushed down to the lowest levels

that seem to be feasible. In the modern times, emphasis is placed upon teamwork and horizontal

relationships associated with inter-organizational boundaries, and indeed across such horizontal

interdependencies between activities. Thus multi-functional teams are appearing, which include

purchasing and supply personnel, as well as design, process and production and distribution

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operations. Representatives of both customer and supplier organizations may also be treated as

members of such teams (Saunders, 1997)

The average manufacturing organization spends about 52% of every sales shilling on raw

material, components and maintenance repair and operating (MRO) purchases. This therefore

puts forth the need for supply chain integration and effective management, coordination and

control for maximum efficiency and profitability by all parties involved.

1.2 Supply Chain Structure and Organizational Performance

A company’s supply chain structure has three components namely external suppliers, internal

functions of the company and external distributors, (Leenders et al, 1993). External suppliers

constitute the inbound logistic. They are the providers of raw materials to the firm. Internal

functions include activities involved in processing of the raw material into consumable products

while external distributors transport the products from the manufacturer to retail grocers, where

the products are sold to the customer.

Pandeyet al, (2010) says that the objective of every supply chain should be to maximize the

overall value generated. There is a close connection between the design and management of

supply chain flows namely product, information and funds and the success of a chain. According

to the author, the value (also known as supply chain surplus) a supply chain generates is the

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difference between what the final product is worth to the customer and the costs the supply chain

incurs in filling the customer’s request.

For most commercial supply chains, the supply chain surplus will be strongly correlated with the

supply chain profitability; the difference between the revenue generated from the customer and

the overall cost across the supply chain. For instance a customer purchasing a wireless router

from a dealer pays Ksh 1000.00, which represents the revenue the supply chain receives.

Customers that purchase the router clearly value it at or above Ksh. 1000.00. Thus, part of the

supply chain surplus is left with the customer. The rest stays with the supply chain as profit.

The dealer and other supply chain stages incur costs to convey the information, produce

components, store them, transport them, and transfer funds and so on. The difference between

the Ksh. 1000.00 that the customer paid and the sum of all costs incurred by the supply chain to

produce and distribute the router represents the supply chain profitability.

The higher the supply chain profitability, the more successful is the supply chain. Supply chain

success should therefore be measured in terms of supply chain profitability and not in terms of

the profits at an individual stage.

Supply Chain Integration And Collaboration In A Global Context

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Globalization is the worldwide integration of economic, technological, political, cultural and

social aspects between countries. Economic globalization involves trading in investing between

countries. The growth in information technology has made the world to become a global village

whereby both companies and individuals are interacting from their countries/homes. The global

competition has forced organizations to operate in a ‘networked’ business environment. It is

noted that there has been unprecedented increase in globalization across all industry segments.

The supply chain has consequently become highly complex and global in scope. The factors

which has given rise to supply chain network are as follows; outsourcing and offshoring,

increased supply chain risks due to longer lead times, reduction in the time available to build

products and increasing customer demands, the desire to lower distribution and transportation

costs, customers who has information about the real value of products which is shrinking

customer loyalty and requiring customer service ,levels too expensive for companies that are

unable to manage supply chain efficiencies. Adaptive supply chain networks are the key to

supply chain collaboration. These networks seamlessly connect supply, planning, manufacturing

and distribution operations to critical enterprise applications and provide visibility across the

supply network, thereby enabling rapid decision making and optimal execution.

Collaboration in supply chain management (SCM) focuses on joint planning, coordination and

process integration between suppliers, customers and other partners in the supply chain.

Organizations are moving toward collaborative supply chain management in order to reduce the

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information imbalances that result in the dreaded ‘bullwhip effect’, (lee et al, 1997), while

increasing the responsiveness to market demands and customer service (Mentzer et al, 2000).

Supply chain integration focuses on improving the information flow between links in the chain.

Effective supply chain integration and synchronization among partners can eliminate excess

inventory, increase sales and improve customer service (Anderson and Lee, 1999). According to

Vachon and Klassen (2006) supply chain integration offers one means by which uncertainity can

be moderated or reduced for operation, whether or not the demand side or supply side of the

supply chain. An integrated supply chain involved both upstream and downstream partners in

activities such as exchanging information, making decisions, and sharing benefits in what have

come to be called “ outward facing organizations” (Frohlich and Westbrook, 2001) which

processes “transcending the company’s boundaries and extending back to supplier and forward

to customers” (Hamner, 2007).

Frohlich and Westbrook, (2001) showed that an integrated supply chain approach leads to

performance improvement, reasoning that “better coordination in the supply chain reduces

uncertainty throughout the manufacturing networks” and that tighter coordination helps eliminate

any non-value-adding activities from internal and external production process”

Kumar, 2001 states that collaborative SCM goes beyond mere exchanging and integrating

information to include tactical joint decision making among partners in areas of planning,

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forecasting, distribution and product design. Collaborative SCM will also result in reduction in

waste in the supply chain, increased responsiveness to customer satisfaction and competitiveness

among members of the partnership (Porter, 1985).

The first step toward supply chain collaboration is to look beyond any immediate costs or

benefits and to focus on the long term. Organizations should remember that it is impossible to

collaborate with everyone in their supply chain. They need to identify those partners who are

willing and able to collaborate and who will create the biggest benefits (mutual). Then they

should select key initiatives to begin with. These initiatives should be evaluated based upon their

importance to the supply chain's competitive advantage, the degree to which enablers are in

place, and the level and intensity of any impediments.

The success of supply chain collaboration arises when an organization develops a mutual trust

with partners as well as the willingness to share information that is beneficial to the partners. It is

a function of how well people work internally and with their supply chain partners. Although

technology is a powerful enabler, it is not the key to supply chain collaboration. The key to

collaboration lies with the people.

Supply Chain Management (SCM) became popular in the early nineties. The intent of SCM was

to eliminate and remove barriers between organizations to facilitate synchronous flow of product

and information. A supply chain comprises of two parallel and opposite flows .On the one hand

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is product flow, comprising a sequence of business processes that deliver a product or service

from the supplier through manufacturing and distribution to the end customer. On the other hand

is the flow of information from the customer back to the manufacturer and suppliers.

The emergence of SCM highlighted the gross inadequacies of Enterprise Resource Planning

(ERP) systems. ERP systems are transaction management systems focused exclusively on the

internal functions of an organization, e.g. accounting, marketing, and human resources. Over the

last two decades organizations have spent millions of dollars implementing and re-implementing

ERP systems making it the most prevalent enterprise application software. ERP systems provide

a standardized platform to integrate the transactional processing needs of an organization.

Furthermore, organizations are applying information technology softwares such as EDI,

electronic data interchange, VMI, vendor managed inventories, MRP, Manufacturing resource

programming and JIT, just in time as a means of integrating and collaborating within the supply

chain which extends to the global context.

1.2 Forms of Collaboration

Supply network collaboration can take place upstream between the organization and its suppliers

and outsourcing partners, downstream between the organization and its customers, and within the

four walls of the organization, as follows:

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Supplier and contract manufacturer collaboration refers to a collaborative business process

between the manufacturer and its suppliers in a typical buy-sell relationship. The increase in

globalization and outsourcing has rendered supplier collaboration to be more complex. It is

possible for a manufacturer to work with several contract manufacturing suppliers who may also

be collaborating with a number of component suppliers, who may also be providing goods not

only directly to the manufacturer, but also to some of its contract manufacturing suppliers. This

creates a complex web of connections that can make it difficult for all parties involved to share

essential data regarding shipments, supplies on hand, quality, manufacturing capacity, and other

factors that impact productivity.

Customer collaboration includes the business processes that result when the manufacturer is the

seller and distributors, wholesalers, or retailers are the customers.

Collaboration within your organization is also a key to success. One often-talked-about but

not-necessarily-well executed interdepartmental discipline is the sales and operations planning

(S&OP) process. The S&OP process comprises a series of integrated and interdependent

business reviews that are structured and focused to ensure that the tactical plans in all of the

business functions and geographies are aligned and in support of the company’s strategy and

financial goals. If your organization lacks a comprehensive S&OP process and has not included

partner capabilities in the demand and supply plans that feed into your S&OP process, supply

chain collaboration can be crippled.

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A critical review of literature

2.1 Introduction

Studies have been undertaken to explain business process re-engineering in revamping business

performance but a few of them focus on supply chain management. The main purpose this

reform is to ensure efficiency and effectiveness in operations management within an organization

to maximize value and profitability through competitive performance. In the modern firms

especially where value for money has been emphasized, such reforms are essential. This chapter

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contains literature review on the variables, the conceptual framework, and summary and research

gaps identified.

2.2 Theoretical Framework

The study intends to deal more with institutional theory, principal-agent theory and bureaucratic

theory. (Eyaa et al 2011) observe that there is no single universally agreed definition of

institution or institutional theory. According to (Scott, 2004) as quoted by (Eyaa et al, 2011),

institutions are composed of cultural-cognitive and regulative elements that, together with

associated activities and resources give meaning to life. The three pillars of institutions include

regulatory, normative and cultural cognitive. The regulatory pillar emphasizes use of rules, laws

and sanctions as enforcement mechanism, with expedience as a basis for compliance. The

normative pillar refers to norms and values, social obligation being the basis of compliance. The

cultural-cognitive pillar rests on shared understanding. In this light, supply chain management is

guided by company rules, policies and guidelines issued by management from time to time.

The principal agent theory as advocated by (Donahue, 1989) explains that supply chain managers

play the relationship role. It helps to explain their role in discharging their mandate. (Prier,

undated) explains that an agency relationship is a contract under which one or more persons

(principals) engages another person (the agent) to perform some service on their behalf which

involves delegating some decision making authority to the agent. It is merely assumed that the

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principal and the agent do not share the same levels of information, and as such, the agent can

opportunistically take advantage of the situation, sometimes to the detriment of the principal.

Therefore, supply chain managers take on the role of agent for their organizations (Eyaa et al,

2011).

ANTICIPATORY BUSINESS MODEL

Since the industrial revolution ,the dormant business model has required anticipation of

what customers will demand in the future. Because information concerning purchase

behavior was not readily available and firms linked together in a channel of distribution

did not feel compelled to share their plans ,business decisions were driven by forecasts.

The typical manufacturer produced products based upon the market forecast. Likewise,

wholesalers, distributors and retailers purchased inventory based upon market forecast. These

forecasts were often wrong leading to considerable discontinuities in what firms wanted to

do, and what they, in fact, ended up doing. Such discontinuity typically resulted in unplanned

inventory. Because of high cost and risk associated with conducting business on an

anticipatory basis, prevailing relationships between trading partners was adversarial each

firm needed to protect its interest.

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It is against this background that organizations ought to collaborate externally with others in the

supply chain in order to address problems of forecasting and discontinuities occasioned by lack

of inventories.

RESPONSIVE BUSINESS MODEL

The availability of low cost life has created time based competition. Management is

increasingly sharing information to improve the speed and accuracy of supply chain

logistics. To illustrate, managers may share information to improve forecasting or even

eliminate forecasts in an effort to reduce anticipatory inventory deployment. This

transformation from anticipatory towards responsive business is possible because

managers have the information technology to rapidly obtain and share data and exercise

improved operational control. When all members of all supply chain synchronize their

operations, opportunities exist to reduce overall inventory and eliminate duplicate

practices.

In terms of time to execute order to delivery, contemporary responsive system is

substantially faster than traditional build-to-order manufacturing. It is becoming common

practice to replenish inventories of consumer products on a daily basis. Custom built

automobiles are being promised for delivery within ten days, with a goal to even further

reduce the delivery cycle.

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Responsive supply chains customize products on smaller orders. Direct connectivity with

customers via internet based customer connectivity is accelerating customization.

COLLABORATIVE PLANNING, FORECASTING, AND REPLENISHMENT (CPFR)

CPFR is a business process model through which companies can optimize supply chain activities

and implementation in B2B. It is unlike any other business transactions over the internet, where

business transactions still remain the same way except that they are now executed over the

internet. The CPFR revolutionizes the traditional practices of confrontational business and

elevates the convention to a brand new stage. However, a CPFR solution must be integrated with

the enterprise systems of record that produce and consume demand and supply chain data (VICS,

2006). VICS, stands for Voluntary Inter-Industry Commerce Standards and is a U.S. industry

standardization organization.

According to the joint planning of CPFR, the retailer and manufacturer communicate with each

other and then update the initial bid on the trading platform.

CPFR is one of the standards for collaborative business activities. Retailers and manufacturers

need to collaboratively generate a joint business plan for better forecasting of products sales and

for adequately configuring a collaboration strategy. Efficiently and effectively managing the

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component suppliers and fair selection of the best-fit suppliers are of importance in supply chain

operation. When the suppliers replenish components by the projected date, cost is one major

concern for accomplishing this process.

GAME THEORY

Game theory may be divided roughly in two parts, namely non-cooperative game theory and

cooperative game theory. Models in non-cooperative game theory assume that each player in the

game (e.g. a firm in a supply chain) optimizes its own objective and does not care for the effect

of its decisions on others. The focus is on finding optimal strategies for each player. Binding

agreements among the players are not allowed. One of the main concerns when applying non-

cooperative game theory to supply chains is whether some proposed coordination mechanism, or

strategy, coordinates the supply chain, that is, maximizes the total joint profit of the firms in the

supply chain.

However, cooperative game theory assumes that players can make binding agreements. Here the

focus is on which coalition of players will form and which allocation of the joint worth will be

used. One of the main questions when applying cooperative game theory to supply chains is

whether cooperation is stable, that is, whether there exist an allocation of the joint profit among

all the parties in the supply chain such that no group of them can do better on its own. So far,

many researchers use non-cooperative game theory to analyse supply chain problems.

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The supply chains under consideration are so-called divergent distribution networks, which

consist of a single supplier and a finite number of retailers. In particular, focus is on two

important aspects of supply chain collaboration. The first focus is on inventory centralization,

also called inventory pooling. Here retailers may collaborate to benefit from the centralization of

their inventories. Such collaboration may lead to reduced storage costs, larger ordering power, or

lower risks, for example cooperative game theory may be used to find stable allocations of the

joint costs. Such allocations are important to obtain and maintain the collaboration among the

retailers.

2.3 Conceptualization

Saunders, (1997) says that the choice of organizational structure should be determined by the

initial position of the firm and the strategic decisions in relation to competitive advantage and

competitive scope. This coupled with effective information flow through the application of ICT

and effective change management can have desirable results on supply performance. (Birks et al,

2000) argues that e-procurement can be an invaluable tool for enterprise experiencing difficulties

in their supply chain. Concerning change, all successful changes involve changes in people and

culture, (Draft et al, 2008). This basically pertains to people’s mind-set, how employees think.

The introduction and management of changes is mandatory and necessary in any given

organization. The study conceptualizes that sound re-engineering reforms in the supply chain

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management can be realized through a well-blended environment where these variables are

proportionately integrated and carefully implemented.

Figure 2.1 Conceptual framework

2.2.1 Conceptual framework

Structural Factors

ICT Organization Performance

Change Management

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Supply chain integration is perceived both as the extent to which an organization manages its

intra- and inter-organizational processes to achieve effective and efficient flows of products,

services, information, money and decisions with the objective of providing maximum value to its

customers (Bowersox et al., 2002, Frohlich & Westbrook, 2001; Naylor et al., 1999), and as the

endeavor of removing barriers that impede the realization of the utopian, fully integrated,

seamless supply chain (e.g. Childerhouse et al. 2011). The focus of this research will be on the

challenge of achieving a seamless supply chain rather than on the state of the supply chains

investigated (the barriers in the supply chains). This paper has endeavored to establish the need

for integration and collaboration of the organizations as a means of achieving the competitive

advantage in the supply chain. This is achieved through linkages between partners, joint ventures

and strategic alliances. The uses of models such as responsive business, CPFR and game theory

have been discussed in perspective of integration and collaboration in the supply chain.

2.4.1 Organization Performance

According to (PPOA, 2010), supply chain management is one of the reforms of the public sector

finance management systems. Public procurement in Kenya has been undergoing reforms

consistent with the global trend since mid-1990s, notably within the periods covering 1997-2001

and 2005. Previous to these reforms, the framework governing public procurement was very

amorphous, inefficient, lacked accountability and transparency, easily manipulated and therefore

providing conducive environment for the perpetration of malpractice sin public procurement

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system. This included the endemic corruption that characterized the system leading to wasteful

use of public resources.

Leenderset al, (1993) argue that any coverage of the purchasing area should give due attention to

the unique problems of purchasing by individual organizations. The funds spent by purchasing

managers deserve the same serious attention as money spent for operational transactional

activity, since the source of these funds is the hard earned profits and even taxes for public

organizations. If funds are spent effectively and efficiently, benefits will accrue all those who

pay for and obtain benefits from the services provided by the organization.

It is imperative to note that the total value of public procurement in the central government is

currently estimated at 10% of the Gross Domestic Product (GDP), (Juma, 2010). Accordingly,

Kenya’s GDP in the year 2008 was estimated at Ksh. 2,099.79 billion putting the total

expenditure on procurement by the Government at around Ksh. 209.79 billion annually. Even at

10% savings due to improvements in procurement practices and controls would mean a yearly

gain to the exchequer of about Ksh. 21 Billions. The gains expected from a streamlined supply

chain operational system will allow for investment of more resources into other needy areas such

as health and education. This will improve the quality of life not only of the employees, but also

of the citizens, a venture that has the potential of greatly improving productivity and growth for

the organization.

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Ndung’u, (2010) on the other hand lays blame on the way supply chain operations are managed

as the stumbling block towards realization of the same. In this regard, operations management

assessment in the public sector by the PPOA which focuses on key indicators of compliance with

the Public Procurement and Disposal Act, 2005, such as procurement institutional arrangements

or structures, procurement processes, mandatory reporting to PPOA and stores, inventory control

and management has revealed numerous hiccups. According to the reviews and assessment

results, common areas of non-compliance include poor records management, documentation and

filing systems among other reasons.

Purchasing management should be managed in manner that ensures transparency, accountability

and provides ease of access to the purchasing information when need arises. Since material costs

may represent at least 50-60 per cent of the cost of goods, purchasing significantly affects

profitability, (Butt et al, 2003, Bowersoxet al, 2005). The authors advance the argument that

changes in product cost structure, with materials comprising the bulk of the cost of goods sold

have elevated the role of purchasing in many organizations and therefore increasing the effect of

purchasing on the organizations overall performance. Through the deployment of IT in its

purchasing operations, a company may be able to push down some purchasing costs associated

with lack of technology use such as communication costs, handling costs and holding costs

through the use of modern inventory management techniques. These techniques which are IT

based according to (Lysonset al, 2007) include Enterprise Resource Planning (ERP), Just-in-

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Time (JIT), Material Requirement Planning (MRP I), Electronic Data Interchange (EDI) and

Electronic point of sale (EPOS) inventory management techniques and philosophers.

To forestall the malpractices of buying common-user items at inflated prices due to collusive

practices and bid rigging by persons involved in the procurement process according to (Kirungu,

2010), an organization should develop a price reference guide that should be used across the

board in supply chain cost cutting endeavors. The subsequent impact assessment for use of the

pilot guide by the PPOA has established that the pilot entities have been able to procure the items

at an average 20% above the market rates, 40% down from the initial 60%. Currently, PPOA

with the support of the World Bank and in collaboration with the Kenya ICT Board is developing

a web-based market price index. This is envisaged to be an efficient way of updating the price

guide in real time. The author concludes that based on this, goods and services would be

procured at prevailing market prices so that millions of money savings can be used for availing

more services to Kenyans.

Baily et al, (2005) underscores need for accountability in procurement activities stating

considerable amount of money are spent annually on goods and services in commercial entities.

In efficient procurement processes, public sector purchasers are accountable to the public whose

money is being spent, including the disappointed tenderers and potential suppliers who are likely

to incur losses when incompetent decisions are made. Procurement personnel must therefore

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produce procedures and practices which will stand up either to scrutiny during audits or to the

challenge through the courts of any purchasing decision that has been made. The primary

purpose of accountability is to prevent abuse of the company financial resources, letting it be

seen that any such abuses have been prevented should come secondary. This is likely to promote

goodwill toward the buyer from its clients and thus better services will accrue benefits to the

organization.

Leenders et al, (1993) advance that if the total annual tax-supported budget of a given unit is say

$2 billion, purchased supplies, materials, services and construction probably account for

approximately $500 million which is much less the purchases/sales of the average industrial

firm. This therefore requires ethical management practices that will provide good care in

spending company’s hard earned money. If an overall 10% reduction in purchasing costs could

be effected through better management of the operations of purchasing function, it would

translate into savings of $50 million which is a significant amount. This gives rise to higher level

of service, lower tax rates or some combination. This is will augment the relationship between

the buying entity and the society at large in the contrary. Consequently, the role of procurement

in the economy will project more positive as a tool for economic growth.

The (Procurement Records Procedures Manual (PRMPM), 2008) says that breakdown of record

keeping system has serious consequences on the procurement process in an organization. The

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indicators of failure to manage records effectively include non-maintenance of an accurate,

comprehensive and complete file for each procurement; inappropriate, dilapidated and

inadequate filing requirements; existence of huge backlog of unfiled procurement documents;

absence of record keeping policy and regulations, officers’ keeping official records in personal

folders and desks, unauthorized access to, alteration or destruction of records, absence of reliable

records control systems, inadequate and weak file movement control procedures, huge backlog

of closed and unorganized files, fragmentation of procurement records, where different

documents pertaining to a single activity are kept by different officers, such accounts, registry

and stores section.

Lysonset al, (2006) argue that purchasing as part of the broader supply chain accounts for at least

60% of an organization’s total expenditure budget. This creates need for it to be efficiently and

transparently accounted for. Without an effective system to exert tight control on purchasing

operations, purchasing personnel may be tempted to misuse the financial resources under their

control to the detriment of the organization’s economic standing. At 60% financial consumption,

purchasing has a significant impact on a firm’s income financial statements, which unless wisely

managed can plunge an organization into serious economic woes.

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2.5 Structural Factors and Organization Performance

Saunders, (1997) says that the choice of organizational structure is affected by the initial position

of the firm and the strategic decisions in relation to competitive advantage and competitive

scope. According the author, increasing concern for horizontal interdependencies between

activities has focused attention on the development of coordinating mechanisms, such as matrix

structures, multi-functional teams and committees. Among the emerging trends in supply chain

management as a consequent of business process re-engineering in modern day organizations

include project management approach on regular basis.

Baily et al, (2005) on the other hand argue that there is no one ideal structure that organizations

can use forever. The more dynamic the environment, and the greater the growth of an

organization, the greater the need to re-examine purchasing and supply organization.This is

actually true especially with regard to the modern world business environment. Unless an

appropriate structure is implemented to support operations of the function, sometimes it has been

found that purchasing and supply staffs have their objectives frustrated because of poor

departmental design. The following are important factors to be addressed by management in

respect to structure related issues in respect to change implementation within a firm.

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2.5.1 Systems

Attention to the development systems and procedures is also an integral part of the problem

coordinating efforts to achieve key strategic purposes. The integration potential of computer

systems provides opportunities for managing chains of activities more effectively and coping

with linkages problems. This is one of the forces encouraging a radical reappraisal and redesign

of business processes, which affects job specifications and skill needs (Saunders, 1997).

2.5.2 Style

Development in ideas about organizational structures and more optimistic attitudes towards the

potential contribution of workers have influenced concern for more democratic and supportive

styles of management. Firms which implement the supportive style of management put more

emphasis on expertise being applied at the grass roots level and expect people to have more

influence over their work and to contribute ideas towards operations improvement in the

organization.

2.5.3 Shared Values

A more supportive style of management, which relies less on close control and looks to realize

the skills and expertise of workers as problem solvers may require other ways of achieving

support and commitment. The values of the organization with regard to such factors as mission,

objectives and approach to management take on extra significance especially with regard

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instituting effective change. These may be aspects of cultural environment of the firm. At the

heart of fundamental changes required by strategies may be need to change the culture of the

firm in order to support systems re-engineering.

2.6 Information Communications Technology (ICT) and organization Performance

Chopra et al, (2010) says that information is crucial to the performance of a supply chain

because it provides the basis on which supply chain managers make decisions. Information

Technology (IT) consists of the tools used to gain awareness of information, analyze this

information and execute on it to increase the performance of the supply chain. ICT serves as the

eyes and ears, and even sometimes, a portion of the brain of management in a supply chain,

capturing and analyzing the information necessary to make good decisions. It facilitates

knowledge management by transforming data into information and knowledge, and share all

across the enterprise, (Draft et al,2010). It is a key supply chain drive that glues and allows the

other supply chain drivers, to work together with the goal of creating an integrated, coordinated

supply chain. A supply chain can be effective only if all stakeholders within the supply chain

share a common reasoning about the information that they have to make decisions. Different

information with different stakeholders results in misaligned action plans that hurt supply chain

performance.

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In the GOK-ERS, (2003-2007), achieving organization’s objectives of systems re-engineering

require improvement in the reporting and accountability by establishing regular reporting flows

in and out of organization accounts, implementing the e-business and strengthening oversight

bodies and automating the internal audit function. Although the Integrated Financial

Management Information System (IFMIS) in the public entities was intended to automate and

seamlessly integrate key business functions in the public financial management reform effort,

many key activities are still undertaken outside the system albeit the IFMIS capabilities to

achieve full automation of these manual processes, (IFMIS Re-Engineering Strategic Plan, 2011-

2013). The Minister for Finance observes that the strategic plan seeks to identify the political,

administrative and capacity constraints that require rigorous interventions in order to secure the

buy-in and ownership attributes necessary within MDAs to facilitate effective implementation of

IFMIS and improve the confidence of all relevant stakeholders. The Minister adds that through

the IFMIS re-engineering process, the government hopes to also address the change management

and communication challenges previously experienced in the pilot phase of IFMIS

implementation which greatly contributed to the lackluster performance of the system.

There is a clear indication here of lack of adequate involvement of the human resources factor in

the roll out plan of the system which (Saunders, 1997) argues play an integral part in the process

of introducing technological change and can determine whether the efforts succeed or fail.

Technology impacts on the development of business conditions and creates new opportunities for

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suppliers, producers and customers. The personnel in public procurement can determine the

extent to which firms take advantage of ICT. Failure to recognize and exploit such innovations

may jeopardize the future of an organization.

The (UN, 2006) says that for an organization to be able to successfully implement e-

procurement, those involved in the procurement function need to understand the e-procurement

concepts and tools so as to provide input into their development, use, evaluation and refinement

as a means of improving procurement efficiency and effectiveness. The study thus establishes

that procurement officers can make useful contribution to decisions about investment in, and

configuration and use of e-procurement tools in many ways including having general

understanding of the various e-procurement applications, understanding the sources of e-

procurement benefits and identifying the procurement processes that are effectively supported by

e-procurement. This requires a professional supply chain complete with technically qualified

personnel. Such staffs will have a better understanding of need to reform the system and offer

positive contribution toward the same course. The most successful e-procurement

implementations have been driven by those who best understand the procurement processes and

the outcomes to be achieved from deploying ICT in decision making. Unfortunately, (Burt et al,

2004) argue that it is common to ascertain that transaction-based procurement system has been

purchased, implemented, operated and maintained with almost no input or participation from

supply management. These systems may be acquired on the strength of purging costs of full time

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employees (FTE) which does not discriminate between individuals performing tactical and

strategic value-added activities. Such purging increases future problems since few professionals

are left to contribute during the critical requirements development process.

However, (Draft, et al 2010) conclude that information only becomes knowledge when a person

absorbs it and puts it to use. The government should therefore embrace knowledge management

as an effective tool for change if it intends to enhance its reform agenda. Despite deployment of

IT being a major boost for procurement reforms, (Choppraetal, 2010) opine that when

organizations switch over to new systems without proper integration, the new system is unable to

perform all that was, for the purpose of this study, expected. It may even perform worse than the

system being replaced. It therefore remains a delicate balance to actually make the transition

over to the newer ways of doing business.

Saunders, (1997) says that advances in technology have opened up new opportunities in the field

of storage, transport and distribution which exploitation has contributed to improved

performance in supply operations. Combinations of mechanization and automation have led to

the use of automated warehousing techniques. There is also improvement in shipping, road and

air transport which have adapted use of containers as a way of speeding up and reducing the

costs of material handling. The use of computers and bar coding has created the ability to track

and control the movements of goods and parcels more effectively thus enhancing supply chain

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performance. Changes in technology have also transformed administrative and office operations.

Application of IT have led to widespread use computer aided design (CAD), computer aided

engineering (CAE) in developing product designs. Other important applications include

computer aided production management (CAPM) and computer integrated manufacturing (CIM).

So to speak, technological change through its various manifestations impacts on the development

of business conditions and creates new opportunities for suppliers, producers and customers.

2.7 Change Management and Organization Performance

Saunders, (1997) argues that no economic sector been insulated from forces of change which

have as well confronted the world, whether public or private. The introduction and management

of changes is mandatory and necessary in these two parts of the economy as well. Accordingly,

the various reforms measures in the supply chain management signal a swing away from

processes of administration to the need for processes on management, which implies a number of

changes in approach. The management of cultural change, as organizations undergo fundamental

reforms and re-organization, becomes a significant activity in this endeavor.

All successful changes involve changes in people and culture, (Draft et al, 2008). This basically

pertains to people’s mind-set, how employees think. People change concerns just a few

employees, such as sending a handful of middle managers to a training course to improve their

leadership skills. Culture change on the contrary pertains to the organization as a whole. Large-

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scale culture change, which is a pre-requisite for reforms, is however not easy and thus the

reason for poor momentum in most business process re-engineering in operations management

and reforms initiatives.

According to Daft et al executives around the world invest heavily in change and innovation

projects but become disappointed with the results. However, (Baily et al, 2005) says that the

most important concern should be to first ask ourselves “are we doing the right things?” then ask

again, “are we doing them right?” (Armstrong, 2011) observes that it is important to bear in

mind that while those wanting change need to be constant about ends, they have to be flexible

about means. Employees resist change, many of them for no apparent reason. It is important to

get all stakeholders to understand the need for change as the first step in implementation.

Managers and employees who are not involved in a given innovation often seem to prefer the

status quo. This requires therefore that the change champions should seek to understand the

underlying reasons for resistance by other stakeholders, which can help them implement change

more effectively for better performance in organizations operational activities.

2.8 Summary

In the rapidly changing environment, innovation is regarded as crucial to the sustainment of

competitive advantage. The prospects of an organization are affected partly by quality and speed

of innovations and change in other parts of the chain where stimulation of these innovations and

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the effectiveness of their adoption can be enhanced by purchasing and supply management

(Saunders, 1997). Supply chain operations therefore, continue to remain key economic player not

only for the established firms but also developing small economy enterprises. Literature

reviewed shows that procurement consumes between 50-60% an organization’s budgetary

resources in a given undertaking (Eyaaet al, 2011, Lysons, 2007) making it significantly

important in influencing organizational growth. Many companies have come up with business re-

engineering reforms to streamline their operations management (Eyaaet al, 2011). In order to

realize effective organizational change, that is reforms, (Draft, et al 2010) opine that ICT

systems facilitate knowledge management by enabling organizations to collect and store

tremendous amounts of data, analyze that data so it can be transformed into information and

knowledge, and share all across the organization for informed participative reform decisions.

2.9 Research Gaps

All the literature material that the study reviewed concur that business process re-engineering is a

significant player in the growth and performance of an organization. However, none seems to

specifically explain the rationale behind the reasons why the systems reforms in most

organizations including public entities (IFMIS Re-Engineering, 2011-2013) have mostly failed to

fully materialize to date. Most of the reviewed scholars, researches, legal and policy documents

share the opinion that supply chain operations reforms have slugged due to non-compliance with

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the regulations, inadequate professional capacity by procurement personnel, scarcity of

information on operational need due to information flow challenges and ineffective change

management in an organization. The study therefore seeks to establish the retrogressive forces

driving these shortfalls towards the realization of this noble intention.

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3.1 Conclusion

The ultimate goal of a supply chain and operations management is to maximize overall supply

chain surplus. This is the difference between the value generated for the customer and the total

cost incurred across all stages of the chain. Supply chain decisions have a large impact on the

success or failure of each firm because they significantly influence both the revenue generated

and the cost incurred. Successful supply chains manage flows of product, information and funds

to provide a high level of product availability to the customer while keeping costs low.

The organizations must seek to remain competitive if they have to relevant in the global

business arena. The realization of increased global competition coupled with the need for

global recognition by the organizations has served well for the integration and collaboration

both internally and externally in the supply chain. The integration and collaboration serves to

add value of the products and services supplied by the organizations. The organizations should

therefore invest heavily in information technology since sharing of information is critical to the

success of integration and collaboration. To advance along the evolutionary continuum

supply chain integration needs to move to supply chain collaboration through understanding

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supply chain management concepts in the real world exploring knowledge based concepts

from knowledge based literature.

This synthesis of literature explores the gap in supply chain integration through the adoption of

relevant theories and concepts, particularly from a knowledge management of literature. The

commonality of interest between supply chain partners and focusing on delivering value to a

customer. As a consequence of increased global competition, there is growing motivation for

supply chain partners to share knowledge and learn from each other. There are potential benefits

to sharing knowledge and the learning experience including risk reduction, transfer of ideas and

environmental sustainability.

Recommendations

There is no doubt that Strategic partnership based collaboration can increase the cooperation and

communication between functions and firms so as to balance production, synchronize logistics,

at the same time, shorten the time to market of new product globally remarkably.

Furthermore, the partnership strengthens the flexibility and agility in the fierce market by a

production mode of modularization, simplification and standardization oriented to high

customization. Virtual manufacturing and dynamic alliance are typical forms of strategic

partnership, which enhance the effect of outsourcing. However, it is not easy to establish and

maintain the relationship.

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The organizations should seamlessly cooperate, the partners should have consistent cultures,

uniform strategic insights and inter-supported operational philosophy, which can ensure their

core competencies are complementary to each other. This may be possible through common

strategy and operational vision; bi-directional performance evaluation metrics, and the formal

and informal feedback mechanism. First, define the strategy and operational goals all together,

and then trace, evaluate and update the goals often to achieve long-term improvements.

Secondly, transfer the strategic and operational goals into detailed traceable performance

measurements. The focal firm and their partners should decide the metrics and measure

frequency together. Meanwhile, the metrics should be bi-directional. Cultural integration and

adaptation is on the top of supply chain integration, which can be divided into integration within

focal firm and adaptation between focal firm and their partners. Within the focal firm, the

cultural integration should more strength the firm features, e.g. the values, the spirits, and the

philosophy.

At the operations level, different management models in supply chain should be analyzed to find,

integrate and develop suitable spirits and souls for supply chain integration. By integrating

management models, the improvement of employees’ quality is linked with the improvement of

supply chain competency, and a new incentive mechanism and supply chain culture that

employees’ fate is connected closely with the status of supply chain will be formed finally.

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Further;

1. There is need to make organizations an open system where information can be accessed

by all supply chain stakeholders without restrictions so that effective participation in

decision making can be enhanced.

2. ICT should be utilized to facilitate free and expeditious flow of real time information

within the supply chain to enable quick and timely access to the same by all the relevant

users for ensuring efficiency and effectiveness along the chain.

3. Environmental conditions are undergoing more rapid rates of change and organizations

should undergo fundamental changes in both management approach and organizational

structure in order to cope.

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