Building lean and agile supply chains for food fast moving consumer goods manufacturers and

144 Pages·2015·3.25 MB·English

by  Selepe Phetla

Building lean and agile supply chains for
food fast moving consumer goods manufacturers
and food retailers in South Africa

Selepe Phetla
29644951

A research project submitted to the Gordon Institute of Business Science, University of
Pretoria, in partial fulfilment of the requirements for the degree of Master of Business
Administration.

09 November 2015
ABSTRACT

Supply chain is one of the important pillars driving business competitiveness, and its
performance is critical for the success of the organisation. This research aimed to investigate
the applicability of the sand cone model with regard to improving supply chain performance
to being more lean (efficient) and agile (effective), within South African food fast moving
consumer goods manufacturers (FMCGs) and food retailers. The sand cone model says one
must implement and embed agile initiatives first before implementing lean initiatives to
create high performing supply chains.

The research was conducted using a qualitative research methodology. Eight supply chain
managers from six FMCGs and two retailers, with a total sample size of eight, were
interviewed to find out what initiatives their companies have implemented. The Interviews
and the inductive thematic data analysis that followed thereafter, aimed to find what
initiatives companies have implemented, and also to test if those initiatives have decreased
or increased the effectiveness (agility) and/or efficiency (lean) of the value chains.

The results indicated that for a company to build an effective and efficient supply chain it
does not necessarily need to embed agile initiatives before implementing lean initiatives.
Companies can implement initiatives that primarily drive both agility and leanness, and
thereafter (or concurrently) initiatives that drive only agility or lean. Key initiatives that drive
both effectiveness and efficiency are: collaboration with suppliers and customers,
standardisation of products and processes, supply network redesign, and improving visibility
and sharing of information through enterprise resource planning (ERP) systems. More
importantly the study recommends that prior to implementing agile and lean initiatives
companies should build strong foundation that supports those initiatives. The foundation
should be made of: business and supply chain strategy alignment, strong safety and quality
culture, sales and operational planning (S&OP) process or integrated business planning
(IBP) process, and skills gap analysis to drive people development. Furthermore companies
should inculcate the culture of doing continuous improvement to remain competitive.

KEY WORDS

Agile, Effective, Efficient, Lean, Leagile, Supply Chain
ii
DECLARATION

I declare that this research project is my own work. It is submitted in partial fulfilment of the
requirements for the degree of Master of Business Administration at the Gordon Institute of
Business Science, University of Pretoria. It has not been submitted before for any degree or
examination in any other University. I further declare that I have obtained the necessary
authorisation and consent to carry out this research.

Name: Selepe Mpho Phetla

Signature: _______________________

Date: 09 November 2015

iii
DEDICATION

To my parents Nkoane Moses Phetla and Mapenene Dorcas Phetla. What more can a son
ask for! You have given me all I needed for life – great upbringing, love, knowledge of God,
and education.

To my siblings Julia Maamane Phetla, Morentho Cornelia Phetla, Chologi Rudolph Phetla,
Ramogole Neo Sophia Phetla – it has been a pleasure growing up with you, you are
awesome and I love you lots.

To Lesedi – I hope you will grow up to treasure education like your mom and grandparents
and may grow to be the best you can be; uncle loves you.

To Molebogeng Lentsoane – you have been a great teacher and aunt to me – an ever-
burning lighthouse for my path.

To Gert Muller, Keith Bateman, Frances Degbor, Ruth Grantham, Chantelle Wilson, Laurie
Amm, Craig Bryson, Thuli Maelane, Roger Blunden, Charles Hopkins, Lawrence Brown,
Hein Huyser and Lucky Mogashana – your guidance through my journey of working in
supply chain field over the years is invaluable and appreciated.

iv
ACKNOWLEDGEMENTS

I would like to thank the following people without whom this research would not have been
successful.

 Dr Ken Mathu – for supervising this research and for your guidance.
 Prof Margie Sutherland and Kerry Chipp – for all the research workshops you conducted
to guide us.
 Supply chain managers who were interviewed and contributed to the content of this
research; without your knowledge and willingness to share there would not have been
any research to write home about.
 Kgothatso Phaahla – for your great and speedy transcribing services.
 To the MBA 2014-15 Yellow Group – for all the encouragement to energise me when the
going was tough.

v
CONTENTS
Page
ABSTRACT ........................................................................................................................... ii
KEY WORDS ......................................................................................................................... ii
DECLARATION .................................................................................................................... iii
DEDICATION........................................................................................................................ iv
ACKNOWLEDGEMENTS ...................................................................................................... v
LIST OF FIGURES ............................................................................................................... xi
LIST OF TABLES ................................................................................................................ xii
LIST OF ABBREVIATIONS ................................................................................................ xiii
CHAPTER 1: INTRODUCTION TO RESEARCH PROBLEM ................................................ 1
1.1 Introduction .............................................................................................................. 1
1.1.1 Research Background ................................................................................................................................ 1
1.2 Research Problem .................................................................................................... 3
1.3 Research Title ........................................................................................................... 3
1.4 Research Objectives ................................................................................................ 3
1.4.1 Primary Objective ........................................................................................................................................ 3
1.4.2 Secondary Objective ................................................................................................................................... 4
1.4.3 Empirical Objectives ................................................................................................................................... 4
1.5 Research Motivation ................................................................................................ 4
1.6 Research Relevance ................................................................................................. 5
1.7 Research Scope ....................................................................................................... 6
1.8 Research Report Structure ...................................................................................... 6
CHAPTER 2: LITERATURE REVIEW ................................................................................... 8
2.1 Introduction to Food FMCGs and Food Retailers Supply Chains ......................... 8
2.2 Supply Chain Management and SCOR Model ........................................................ 9
2.2.1 Supply Chain Reliability ............................................................................................................................ 10
2.2.2 Supply Chain Responsiveness ................................................................................................................. 11
2.2.3 Supply Chain Cost Management .............................................................................................................. 11
2.2.4 Supply Chain Asset Management ............................................................................................................. 12
2.2.5 Supply Chain Agility .................................................................................................................................. 12
2.2.6 Lean Supply Chains .................................................................................................................................. 13
2.3 Supply Chain Fitness and Sand cone Theory ...................................................... 13
2.3.1 Sand cone Theory – Prioritising between Effectiveness and Efficiency .................................................... 14
2.4 Building Supply Chain Agility ................................................................................ 16
vi
2.4.1 Supply Chain Visibility and Collaboration .................................................................................................. 16
2.4.2 Increasing Supply Chain Speed ................................................................................................................ 17
2.4.3 Postponement ........................................................................................................................................... 17
2.4.4 Strategic Stocks ........................................................................................................................................ 18
2.4.5 Flexible Sourcing ...................................................................................................................................... 18
2.4.6 Flexible Transportation ............................................................................................................................. 19
2.4.7 Cross-Docking .......................................................................................................................................... 20
2.4.8 Supply Chain Redundancy ....................................................................................................................... 21
2.5 Building Lean Supply Chains ................................................................................ 21
2.5.1 Value Stream Mapping (VSM) .................................................................................................................. 21
2.5.2 Demand-Pull ............................................................................................................................................. 22
2.5.3 Just-in-Time (JIT) ...................................................................................................................................... 22
2.5.4 Strategic Sourcing ..................................................................................................................................... 23
2.5.5 Inventory Reduction .................................................................................................................................. 23
2.5.6 Product and Process Standardisation ....................................................................................................... 23
2.5.7 Total Productive Maintenance (TPM)........................................................................................................ 24
2.5.8 Customer Relationship Management (CRM) ............................................................................................ 24
2.6 Conclusion of Literature Review ........................................................................... 24
CHAPTER 3: RESEARCH QUESTIONS ............................................................................. 26
3.1 Main Research Proposition ................................................................................... 26
3.2 Supplementary Research Propositions ................................................................ 26
CHAPTER 4: RESEARCH METHODOLOGY...................................................................... 28
4.1 Introduction to Research Methodology ................................................................ 28
4.2 Research Design .................................................................................................... 28
4.3 Data Collection ....................................................................................................... 28
4.3.1 Interview Schedule .................................................................................................................................... 29
4.3.2 Interview Schedule Pre-Testing ................................................................................................................ 29
4.4 Population ............................................................................................................... 29
4.5 Unit of Analysis ...................................................................................................... 30
4.6 Sampling ................................................................................................................. 30
4.6.1 Sampling Frame ........................................................................................................................................ 30
4.6.2 Sampling Technique ................................................................................................................................. 31
4.6.3 Sample Size .............................................................................................................................................. 32
4.6.4 Measurement Instrument .......................................................................................................................... 32
4.7 Data Analysis .......................................................................................................... 32
4.8 Ethical Considerations ........................................................................................... 34
vii
4.9 Limitations .............................................................................................................. 34
4.10 Research Reliability ............................................................................................... 35
CHAPTER 5: RESULTS ...................................................................................................... 36
5.1 Introduction to Results .......................................................................................... 36
5.2 Sample Description ................................................................................................ 36
5.2.1 Distribution of Results by Respondents .................................................................................................... 37
5.3 Results of Research Proposition One – Lean and Agile Initiatives Increase Both
Supply Chain Efficiency and Supply Chain Effectiveness .............................................. 38
5.3.1 Introduction ............................................................................................................................................... 38
5.3.2 Initiatives that drive both Lean and Agility ................................................................................................. 39
5.3.3 Initiatives That Primarily Drive Agility ........................................................................................................ 54
5.3.4 Initiatives That Primarily Drive Lean .......................................................................................................... 61
5.3.5 Additional Initiatives Build Lean and Agile Supply Chains ........................................................................ 68
5.3.6 Summary of Results to Research Proposition One ................................................................................... 85
5.4 Results of Research Proposition Two – All Lean Initiatives Increase Supply
Chain Efficiency ................................................................................................................. 86
5.4.1 Introduction ............................................................................................................................................... 86
5.4.2 Results of Results of Proposition Two ...................................................................................................... 86
5.4.3 Summary of Results to Research Proposition Two ................................................................................... 87
5.5 Results of Research Proposition Three – Agile Initiatives Decrease Supply
Chain Efficiency ................................................................................................................. 87
5.5.1 Introduction ............................................................................................................................................... 87
5.5.2 Results of Research Proposition Three .................................................................................................... 87
5.5.3 Summary of Results to Research Proposition Three ................................................................................ 89
5.6 Results of Research Proposition Four – All Agile Initiatives Increase Supply
Chain Effectiveness ........................................................................................................... 89
5.6.1 Introduction ............................................................................................................................................... 89
5.6.2 Results of Research Proposition Four ...................................................................................................... 89
5.6.3 Summary of Results to Research Proposition Four .................................................................................. 92
5.7 Results of Research Proposition 5 – Lean Initiatives Decrease Supply Chain
Effectiveness ...................................................................................................................... 92
5.7.1 Introduction ............................................................................................................................................... 92
5.7.2 Results of Research Proposition Five ....................................................................................................... 92
5.7.3 Summary of Results to Research Proposition Five ................................................................................... 93
5.8 Results of Research Proposition Six – Food Retailers Implemented Mostly
Agile Initiatives while Food FMCGs Implemented Mostly Lean Initiatives..................... 93
5.8.1 Introduction ............................................................................................................................................... 93
viii
5.8.2 Results of Research Proposition Six ......................................................................................................... 93
5.8.3 Summary of Results to Research Proposition Six .................................................................................... 94
5.9 Conclusion of Overall Results ............................................................................... 94
CHAPTER 6: DISCUSSION OF RESULTS ......................................................................... 97
6.1 Introduction to Discussion of Results .................................................................. 97
6.2 Discussion of Results to Research Proposition One .......................................... 97
6.2.1 Overall Comparison of Initiatives from Literature Review and Those Uncovered in Practice in South
African Food FMCGs and Retailers ....................................................................................................................... 97
6.2.2 Discussion of Initiatives that drive both Lean and Agility – That They Increase Both Supply Chain
Efficiency and Supply Chain Effectiveness ............................................................................................................ 98
6.2.3 Discussion of Initiatives that Primarily Drive Agility – That They Increase Both Supply Chain Efficiency
and Supply Chain Effectiveness ............................................................................................................................ 99
6.2.4 Discussion of Initiatives that Primarily Drive Lean – That They Increase Both Supply Chain Efficiency
and Supply Chain Effectiveness .......................................................................................................................... 100
6.2.5 Discussion of Additional Initiatives that Build Lean and Agile Supply Chains ......................................... 101
6.2.6 Conclusion .............................................................................................................................................. 101
6.3 Discussion of Results to Research Proposition Two ........................................ 102
6.3.1 Discussion Regarding Lean Initiatives Increasing Supply Chain Efficiency ............................................ 102
6.3.2 Conclusion .............................................................................................................................................. 103
6.4 Discussion of Results to Research Proposition Three ...................................... 103
6.4.1 Discussion Regarding Agile Initiatives Decreasing Supply Chain Efficiency .......................................... 103
6.4.2 Conclusion .............................................................................................................................................. 104
6.5 Discussion of Results to Research Proposition Four........................................ 104
6.5.1 Discussion Regarding Agile Initiatives Increasing Supply Chain Effectiveness ...................................... 104
6.5.2 Conclusion .............................................................................................................................................. 105
6.6 Discussion of Results to Research Proposition Five ........................................ 105
6.6.1 Discussion Regarding Lean Initiatives Decreasing Supply Chain Effectiveness .................................... 105
6.6.2 Conclusion .............................................................................................................................................. 106
6.7 Discussion of Results to Research Proposition Six .......................................... 106
6.7.1 Discussion Regarding Food Retailers Implementing Mostly Agile Initiatives while Food FMCGs
Implement Mostly Lean Initiatives ........................................................................................................................ 106
6.7.2 Conclusion .............................................................................................................................................. 107
6.8 Overall Conclusion to Discussion of Results ..................................................... 107
CHAPTER 7: CONCLUSION ............................................................................................. 108
7.1 Introduction to Conclusion .................................................................................. 108
7.2 Research Objectives Revisited ............................................................................ 108
7.3 Main Findings ....................................................................................................... 108
ix
7.3.1 Revised Model for Building Lean and Agile Supply Chains .................................................................... 108
7.3.2 Foundation Required for Building Lean Agile Supply Chains .................................................................. 109
7.3.3 Initiatives that Drive both Lean and Agility .............................................................................................. 109
7.3.4 Initiatives that Drive Lean Only ............................................................................................................... 110
7.3.5 Initiatives that Drive Agility Only .............................................................................................................. 110
7.4 Recommendations ............................................................................................... 110
7.4.1 Recommendations for Food FMCGs’ Supply Chain Managers .............................................................. 110
7.4.2 Recommendations for Food Retailers’ Supply Chain Managers............................................................. 111
7.4.3 Recommendations for all Supply Chain Managers ................................................................................. 111
7.5 Proposed Framework for Building Lean and Agile Supply Chains ................... 112
7.6 Limitations of Research ....................................................................................... 113
7.7 Recommendations for Future Research ............................................................. 113
7.8 Conclusion ............................................................................................................ 114
REFERENCES .................................................................................................................. 115
APPENDIX 1 – INTERVIEW SCHEDULE .......................................................................... 125
APPENDIX 2 – INFORMED CONSENT LETTER .............................................................. 128
APPENDIX 3 – LIST OF SOUTH AFRICAN FMCGs BY MARKET SHARE ..................... 129
APPENDIX 4 – ETHICAL CLEARANCE APPROVAL FOR THE RESEARCH ................. 130
APPENDIX 5 – SUB-THEMES UNDER COLLABORATION INITIATIVES ....................... 131

x