supply chain management processes adopted by the local food manufacturers

1.6 Research questions

The research questions for the study will be following.

• What are the supply chain management processes adopted by the local food manufacturers?

• What are the challenges faced by the companies in food manufacturing in the implementation of supply chain management?
• What are the effects of these supply chain management challenges?

1.7 Significance of the study

The results from the study will assist supply chain management professionals in the food manufacturing industry to understand their supply chain management challenges and use such information to develop solutions on eliminating these challenges and transform them into productive elements for organizations. The study will assist customers to get quality products, superior service and competitive prices should the companies successfully implement supply chain management. Other companies in the supply network of the local food manufacturers will have sustainable business as the success of these food manufacturers will mean their success in terms of continuous business.

2.0 LITERATURE REVIEW

The food products that end up consumed get to final customers by the way of food supply chains through which it moves from producers to consumers. The flow is a two way such that producers get the money paid for the products and consumers get the products in return. All the stages involved in the supply chain, requires human and natural resources. Should one part of the food supply chain gets affected, such issues are then seen through price changes of the products produced. 

The purpose of this chapter is to analyze literature on supply chain management in the food manufacturing sector, looking at the supply chain management processes at disposal for companies to implement, and the literature on some challenges the industry faces when implementing supply chain management. This chapter will also look at the effects these challenges have on the industry.

2.1 The history of the food manufacturing industry

Food supply can be referred as the processes that describe how raw materials from the farms are transformed to food products that get consumed (Fantazy, Kumar, & Kumar, 2010). The processes that facilitate the transformation of the raw materials include production, processing, distribution, consumption and disposal (Apaiah, Linnemann, & KOOI, 2011). The food manufacturing sector has seen developments due to the dependency on energy at the industrial manufacturing stage.

The food manufacturing industry is said to be made up of companies that are in manufacturing and processing of raw materials and semi-finished products from primary activities which are supported by logistics and operations (Cousins & Scoones, 2010). Food manufacturing plays a major role when it comes to meeting consumer demands and contributes to the economy, including that of Eswatini. The largest production sectors of food processing industry are brewing, milling, baking, confectionery, animal and vegetable oils, sugar, dairy products, fruits and vegetables, soft drinks, fish and meat processing, ethyl alcohol distillation, sprit blending, wines, bottling of natural spring and mineral waters, among others (Beske, 2012).

Food safety, environmental and social standards have become key features in the Eswatini food processing. The Eswatini Standards Authority was established in 2003 to safeguard the interests of people and that of government when it comes to compliance of products. There has also been a drive by the international standards organizations to ensure companies conform to food safety. International organizations, government agencies, non-governmental organizations, corporations and industrial associations behind the formulation of these standards were originally defensive of efforts aimed at critically observing their impacts in diverse areas (Cummins, 2004).

2.1.1 Contribution of the Food Manufacturing industry

Food manufacturing companies find themselves dealing with a number of competing pressures alongside the challenges of sustainable production especially energy consumption reduction (Boiral, 2006). The industry has seen changes brought by the purchasing power, the necessity of packaging and extensive mechanization and factory processes development. In the past, consumers were buying and consuming fresh products and had no preferences of canned, pre-cooked or frozen products (Kepe & Tessaro, 2014).

Recent changes have seen people shunning away to fresh products and they are more likely to buy pre-prepared products due to the shelf life of these products as compared to fresh products although they also likely to be more expensive. Timing and availability of these products are now driving the choices and taste preferences of consumers. Companies are now putting more effort into presenting consumers with products that require less preparation time and less cognitive energy expended on deciding what to cook. Food specialists in the world markets have developed awareness including a wide variety of knowledge when it comes to waste management and disposal, food safety regulations and packaging (Johari, Ahmed, Hashim, Alkali, & Ramli, 2012).

2.2 Conceptual framework

The term supply chain management as it is widely known today, can be traced back to the early 1980s and first appeared in a financial times article by Oliver and Webber in 1982 where they were describing the range of acts performed by a company in procuring and managing supplies (S. Li, Ragu-Nathan, Ragu-Nathan, & Rao, 2006). The early publications on supply chain management in the 1980s were focusing on purchasing and cost reduction related activities. Its major development and significant increase of publication in the areas of supply chain integration and supplier-buyer relationship came in 1990s when the concept as we know it today was gradually established (Zhou & Benton Jr, 2007). The interest in supply chain management has seen a steady increase since the 1980s after companies started recognizing the importance of integrating and aligning with their suppliers.

Supply chain management has been defined by a number of authors. According to (Wisner, Tan, & Leong, 2014) they identified that the common themes within the definitions relate to the coordination and integration between supply chain partners that are involved in the different activities related to products and services. It is no longer sufficient for companies to compete in isolation, they need to compete as an interacting web of supply chain.

(Chow et al., 2008) defined a supply chain as a network consisting of all stakeholders that are involved directly or indirectly in producing and delivering products or services to its ultimate customers. (Boyer & Hult, 2005) further identified manufacturers, suppliers, retailers and customers as the key stakeholders of a supply chain who are involved in the physical distribution, flow of information and finances. (Hofmann, 2013) came with a perspective that supply chain management involves sets of practices that integrate with suppliers, manufacturers, distributors and customers to improve the long-term business performance and the performance of their supply chain.  As such, supply chain management can be seen as a holistic approach to demand, sourcing and procurement, production and logistics process management (Mentzer et al., 2001).  Supply chain management is said to include procurement of materials, transforming them into intermediate goods and final products and delivering a product or service to the final customers (Swink, Melnyk, Hartley, & Cooper, 2017).

(Hong & Jeong, 2006) see supply chain management as composed by approaches that are applied to efficiently and effectively enhance collaboration of suppliers, manufacturers, warehouses and retailers. This collaboration ensures products are produced and distributed at the right quantities, to the right locations and at the right time, which assists in terms of reducing costs incurred by companies in the process of satisfying customers. Supply chain management considers the supply network and the companies in it as a single entity. It comes with a system that assist in understanding and managing the different activities needed to coordinate the flow of products and services to best serve the ultimate customer (Lee & Billington, 1995).

2.3 Supply chain management theories

Supply chain management theories includes sets of processes and practices that effectively integrate with stakeholders involved in a supply network in order to improve businesses operations (Linhares, 2009). Companies utilize a number of theories in the application or implementation of supply chain management. Some of the theories include Just in Time (JIT), the theory of constraints (TOC), total quality management (TQM), and lean manufacturing. These theories are briefly discussed below.

2.3.1 Just in Time

The Just-in-Time (JIT) concept is a Japanese management philosophy that they apply in manufacturing which requires having the right items of the right quality and quantity in the right place and the right time (Lou, Wang, Chen, Vatjanasaregagul, & Boger II, 2015). It is a concept that strives to minimize and possibly eliminate waste that can come from time, storage space, inventory and labour (Singh, Lai, & Cheng, 2007). It is basically a concept that enforces companies to produce what is required as and when it required.

2.3.2 Theory of Constraints

The Theory of Constraints (TOC) is all about the procedure for managing factors, production processes, company decisions and situations in which they present constraints to the current state of affairs (Widodo, et al., 2006). It links or connects all procedures involved in manufacturing. All companies are most likely to have at least one critical constraint that hinders production capacity (Reimers, 2014). A constraint is any restriction that occurs in a system and potentially prevents it from achieving optimal performance (Orlek, 2013). Through the application of TOC, companies can control the contribution margin and the product’s unit production cycle regarding its critical resources. 

The TOC can be applied in all stages of the supply chain to reduce inventory holding costs, improve production efficiencies and increase the responsiveness to changing customer needs (Watson, et al., 2007). The ultimate goal of TOC is to improve company performance throughout the whole system by ensuring that the system’s constraint is used to control the entire flow of materials and price from the beginning to the end of the production cycle. 

2.3.3 Total Quality Management

The total quality management (TQM)involves all stakeholders involved in the production of a product to meet or even exceeds customer expectations. The most common TQM practices include cross-functional product design, process management, supplier quality management, customer involvement, information and feedback, committed leadership, strategic planning, cross functional training, and employee involvement (Swink et al., 2017). All companies need to acknowledge the impact of quality it can have on the existence of a business; as such companies need to continuously work towards improving their standards to remain in business. A quality product is as a result of a quality process, thus quality should be imbedded in the production process (Medori & Steeple, 2000). 

2.3.4 Lean Manufacturing

Lean manufacturing can be referred to as the process of minimizing waste during the production process. A number of benefits are realized with the implementation of lean manufacturing which include reduction of labour costs and lead times. It can reduce the level of wastage and defects, and ensure production of products that do not cause harm to the consumer and the environment. It can also improve customer satisfaction by ensuring that companies produce quality products.

For the purpose of this study, the theory of constraints (TOC) will be adopted as the research concept. The theory was first developed by Eliyahu M. Goldratt in the 1980s (Stump & Badurdeen, 2012). It stresses the role played by constraints in hindering how a company performs and further suggests that these constraints should be identified and logically solved to improve the performance of the system (Esterhuizen & Stroebel, 2011). The food manufacturing industry includes companies that transform livestock and agricultural products into products used for intermediate or final consumption. There are a number of dynamics that support the growth of the industry, there are significant challenges that if not addressed they can derail the growth prospects of the food industry (Zeimpekis & Giaglis, 2006). This study seeks to identify the challenges companies in the food manufacturing industry encounter as they implement supply chain management and the TOC as a theory that will present ways in which these challenges can be dealt with for an effective implementation of supply chain management in food manufacturing.

2.4 Supply Chain Management processes

The Global Supply Chain Forum (GSCF) identified eight key supply chain management processes that companies need to implement across the supply chain networks. These processes were said to be the foundation of the success of supply chain management. The eight processes are discussed below; customer relationship management, customer’s services management, demand management, order fulfillment, manufacturing flow management, supplier relationship management, product development and commercialization and returns management. For the purpose of the study the below will be discussed.

2.4.1 Customer relationship management

Customer relationship management provides the structure for how relationships with customers are developed and maintained. It is the process that companies use to learn more about customers’ needs and behaviors in order to develop stronger relationships with them. This process has been a widely implemented strategy for managing a company’s interactions with customers, clients and sales prospects (Dadwal & Malik, 2018) including in the food manufacturing industry. Effective customer relationship management in food manufacturing, enables companies to secure and strengthen their brand values by ensuring that all trade promotions, campaigns and sales activities are executed with the right brand messages at all times (Dadwal & Malik, 2018).

The process of customer relationship management has become a critical business process as a result of: competitive pressures; the need to achieve cost efficiency in order to be a low-cost, high-quality supplier; a recognition of the fact that customers are not equal in terms of their profitability; and, knowledge that customer retention can significantly affect profitability (Lambert, Knemeyer, & Gardner, 2010).

2.4.2 Order fulfilment

Order fulfilment is one of the processes in supply chain management that food manufacturers can use. Customers’ orders are what start set the supply chain in motion. Order fulfilment has been recognized as an essential process to an organization success and a customer order is the catalyst that starts the order fulfilment order process and puts the supply chain in motion (Christopher, 2016) .In manufacturing it will be the customers that will demand a certain product which manufacturers would need to produce that particular product. It then becomes the company’s responsibility to ensure that the product is produced and supplied to the customers efficiently and effectively.

However, the order fulfilment process involves more than just filling orders. It is about designing a network and a process that permits a firm to meet customer requests while minimizing the total delivered cost. Order fulfilment can be described as the process that includes activities required to receive an order and delivering that order to the customer (Lambert et al., 2010). Food manufacturers considering the competitive environment they operate in, fulfilling customer demands remains key to their survival because failure to supply, customers will buy from competition.

2.4.3 Manufacturing flow management

Food manufacturers face a number of challenges that includes producing a product that would provide a solution to customer needs. Traditionally, food manufacturers have been producing products that they believe customers need. However, that has changed given the interest in innovative management theories such as total quality management, just-in-time operations, and continuous improvement that have been implemented by companies (Jacobs, Chase, & Lummus, 2014). Effective coordination of demand and production of products have presented an opportunity to save costs by companies. This is to say food manufacturing companies that have integrated procurement of raw materials, manufacturing and logistics activities are in a better position to save costs.

The manufacturing flow process is said to coordinate all activities food manufacturing companies undertake as they manufacture the products. The activities include obtaining, implementing, and managing the flexibility in the manufacturing process and also moving the products to the final customers (Lambert et al., 2010).

2.4.4 Product development and Commercialisation

Food manufacturers’ ability to successfully introduce new products is critically for their survival. There has been an increase in the importance of knowledge creation and its use to the companies’ global competitiveness has produced considerable experimentation with organizational designs for product development and commercialization over the last three decades, and this is more prevalent in food industry (Snow, Fjeldstad, Lettl, & Miles, 2011) This is so because customers are demanding new products that would satisfy their needs and food manufacturers’ needs to constantly seek ways to produce products that would comply with the market demand.

Product development and commercialization is the supply chain management process that provides structure and direction for developing and bringing to market new products jointly with customers and suppliers (Lambert et al., 2010). This is said to enhance the successful coordination movement of introduced products across the supply chain and also assists supply chain practitioners to properly coordinate manufacturing, logistics, marketing and other related activities to support the commercialization of the product (Lambert et al., 2010). This process requires effective planning and execution throughout the supply chain, and if managed correctly it can provide a competitive advantage for companies to successfully compete in the market. The development and commercialization of products from a supply chain management angle should integrate both customers and suppliers into the process in order to reduce the time a product spends in the market.

2.4.5 Supplier relationship management

The Global Supply Chain Forum (GSCF), which is a group of non-competing firms and a team of academic researchers, defines supplier relationship management as the supply chain management process that provides the structure for how relationships with suppliers are developed and maintained. Through the cross functional coordination, information from both the suppliers and customers are provided to the supplier relationship management activities (Handfield, Monczka, & Guinipero).

Supplier relationship management assists to have organized efforts to maintain a network of qualified suppliers. The effort includes activities that enhance and improve the current performance of suppliers which will in turn have a positive impact on the organizations supply chain. Supplier relationship management emphasizes on direct relationship and long term and encourages mutual planning and coordinates efforts to resolve problems along the supply chain. (Pavico, 2016) emphasize that a strategic partnership stresses on long-term relationship between suppliers and “promotes mutual planning and problem-solving efforts”. Supplier relationship management has grown to be a critical business process as a result of competitive pressures from other organizations. Organizations have seen the need to achieve cost efficiency in order to be cost competitive and also to develop closer relationships with key suppliers who can provide the expertise necessary to develop innovative new products and successfully bring them to market (Lambert et al., 2010).

2.5 Supply Chain Management challenges

Supply chain management professionals constantly face unique challenges as they try to align supply chain management strategies with the overall corporate business strategies, and seamless coordination is, therefore, rarely achieved in practice (Awad, 2010). Normally, the supply chain management related problems come from either uncertainties or an inability to co-ordinate several activities and partners (Otchere, Annan & Anin, 2013:132). On the other hand, customers have become more demanding in terms of better quality products, higher levels of service and reduced prices, (Sweeney, et al., 2011).

A number of studies on supply chain management challenges have discovered some can really hinder smooth implementation of supply chain management. (Groznika & Trkman, 2012) identified information sharing as one of the major challenge that faces food manufacturers. Information sharing in the industry is very important as it may lead to products not getting to the customers on time or the food products can get to the market by the wrong market. A study by (Hoffmann, Schiele, & Krabbendam, 2013) identified risk management as a source for the challenges. The risks can emanate from the suppliers, changing regulations and internal operational inefficiencies.

A study conducted by (Ian Stuart, Verville, & Taskin, 2012) highlighted the lack of trust amongst the supply chain network and supplier competency as other major challenges facing food manufacturers in the implementation of supply chain management. The question then that remains is that are these challenges generic to all companies in all sectors (Raut, Narkhede, & Gardas, 2017).

A study by (Pillay & Mafini, 2017) identified inadequate supply chain management skills and qualifications, procurement malpractices, ineffective supply chain integration, poor supply chain relationships and industry structure as some of the challenges prevalent in supply chains in developing countries, which Eswatini is part of those countries.

(Badenhorst-Weiss & Ambe, 2011) on their study when investigating the trends and challenges in the supply chain management in the South African automotive sector, they debated on various challenges such as technological, infrastructural, market, skills, cost, and relationships challenges. Road freight volumes, port delays, unreliability of rail transport, high fuel costs, high operating costs, high port charges and high prices of materials were also some of the challenges they face. These challenges were beyond the control of the manufacturers and they concluded that some of the challenges to some extent they can be viewed as opportunities for the manufacturers to exerts their efforts to become more competitive, such as replacing outdated assembly/manufacturing tools, finding new markets, dealing with the cancellation of customer orders, and improving service levels.

(Simpson & Havenga, 2010) touched on the costs involved in supply chains and how efficient those are allocated throughout the overall process in their study. Eswatini food manufacturers are also faced by the ever increasing costs of production which make it difficult to compete in the markets.

Poor infrastructure is another challenge experienced in supply chain management. It limits the size of the market and hinders trading internationally which has a potential of providing a viable opportunity for the food manufacturers to open new market segments (Linnemann, Benner, Verkerk, & van Boekel, 2006). Transit time is another factor that is increasingly being considered because it impacts on inventory carrying costs and inventory cycle time in supply chain management.

A study carried out by (Naude & Badenhorst-Weiss, 2011) explored the concept of the bullwhip effect in supply chains and illustrated empirically the presence of its effect in automotive supply chains. The study revealed that the automotive component manufacturers are dependent on demand-forecasting information from their customers. In the process they are faced with long lead times, inconsistent orders, customers canceling orders, excess and slow moving inventory and a lack of integration with suppliers and customers.  The manufacturers also experienced challenges when it comes to relationships and had a silo mentality. These challenges posed a potential of having major impact on companies’ costs, and knowing where to invest effort and resources should be the key strength for supply chain managers.

2.6 The effect supply chain management challenges

Challenges that emanate as the food manufacturers implement supply chain management, can affect the performance when it comes to competitiveness of the companies. When companies are faced with implementation challenges, the competitiveness of the companies may end up becoming dismal if the challenges are not adequately addressed.

Supply chain challenges are among the challenges that can adversely affect the performance of an organization and may even lead to closure of companies. These challenges if not attended to can also make it impossible for the companies to realize the six rights of a supply chain that is; right place, right product, right quality, right time, right cost and right delivery.

Food supply chain is the network of companies that are involved in the production and selling of fresh or processed products from vegetables, crops or animals (Van der Vorst & Beulens, 2002). For a smooth flow of materials, information and financials amongst the supply chain network, supply chains must be dynamic and flexible, built on cooperation, coordination, control and trust (Naspetti, Lampkin, Nicolas, Stolze, & Zanoli, 2011). Supply chains are vital in the drive to attain sustainability (Ageron, Gunasekaran, & Spalanzani, 2012) through changing buying practices and impacts on the natural environment (Wolf, 2011).

A supply chain has a strong and deep impact on the natural environment because it deals with the resources needed for the production in the food processing industry (Min & Mentzer, 2004). The food industry faces difficulties that includes limited shelf life, perishability, weather variability, risk of infestation, rigid food quality and safety requirements, demand and price variability (Widodo, Nagasawa, Morizawa, & Ota, 2006);(Van Der Vorst, Tromp, & Zee, 2009).  The lack of information sharing amongst the supply chain networks coupled with the difficulties in the right choice of supply chain partners is a further significant element that affects the food supply chain (Hommes & Holmner, 2013).

Food safety is critical in the food industry and a major concern as the food supply chain network grows bigger. Incidents that have been reported in the past including the recent one of Listeriosis outbreak experienced on precooked food have highlighted the concerns over food safety. Despite being specifically regulated, the food industry still experience safety issues. The final consumers are becoming increasingly sensitive to the origin and conservation of the products they buy (Kolk & Van Tulder, 2002). The supply chains around this industry must show responsiveness, precision and transparency in order for consumers to have confidence on the products they distribute. The appearance of labels, continuous changes in international regulations as well as technological innovations have influenced and transformed the food supply chain and established principles like product traceability, cold supply chain control or hygiene and quality (Liu et al., 2012).

From the above studies that have been conducted, there were common challenges that companies encounter when implementing supply chain management in their businesses. This study will look at exploring the challenges companies encounter as they implement supply chain management. From the above literature it can be deduced that companies that have effectively implemented supply chain management they are in a better position to compete in the markets. Flexibility and dynamic supply chain remain key to the success of companies.

RESEARCH METHODOLOGY

Research is based on underlying different assumptions that establish a valid research and method that is appropriate for the development of knowledge in each investigation. This chapter will focus on the research design, the methodology and procedures to be used in the study. The chapter will highlight the method to be used for data collection to be used for primary data collection, the target population and the sampling. This will shed some light on how the actual research will be conducted to ensure authentic results are generated after data collection.

3.1 Research Approach

The research approach is about the method used to conduct a study. It is the strategy of enquiry, which moves from the underlying assumptions to research design and data collection. There are a number of distinctions in research approaches with the most common classification of research being the qualitative and quantitative approaches. Qualitative research is used to help understand how people feel and why they feel as they do. It deals with phenomena that are difficult if impossible to quantify mathematically such as beliefs, meanings, attributes and symbols and may involve content analysis (Babbie, 1998). According to (Walsh, Domegan, & Fleming, 2012) qualitative research aims to explore and to discover issues about the problem in hand, because very little is known about it. 

On the other hand, quantitative research utilizes questionnaires, surveys and experiments to gather data that is revised and tabulated in numbers, which allows it to be characterized by using statistical analysis (Neuman, 2013). Quantitative researchers involve the measurement of variables on a sample of subjects and express the relationship between them by using effect statistics such as correlations, relative frequencies, or differences between means; focusing mainly on the testing of theory. This approach is based on the approach known as logical positivism, a common paradigm in the social sciences (Babbie, 1998). In quantitative research, normally a deductive theory approach is used to guide the design of the study and the interpretation of the results (Neuman, 2013).

For this study, the quantitative research approach will be used. The study will involve many respondents hence the quantitative approach is deemed as the most appropriate approach, unlike the qualitative approach, which focuses on smaller sample sizes when examining any context. Also the quantitative is considered appropriate because it is clearer, more reliable, less time consuming and objective. Its use, will allow the researcher to make reliable deductions from the primary data to be collected during the study.

3.2 Research design

A research design is defined as the framework of a research (Pallant, 2011). It is referred to as the blueprint or the way in which a study is structured to conduct it successfully. It can also be described as the overall plan to which the respondents of a proposed study are selected, as well as the means of data collection or generation. It aims to highlight the methods and tools that are used during the research process. 

The descriptive survey design will be employed for the study. This type of design is used to collect information concerning the current state of the phenomena to describe “what exists” with respect to conditions in a situation as well as