Supply Chain Management: An International Journal

Managing supply chains for competitiveness: the Indian scenario

B.S. Sahay Jatinder N.D. Gupta Ramneesh Mohan

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B.S. Sahay Jatinder N.D. Gupta Ramneesh Mohan, (2006),"Managing supply chains for competitiveness: the Indian scenario",
Supply Chain Management: An International Journal, Vol. 11 Iss 1 pp. 15 - 24
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Research paper

Managing supply chains for competitiveness:

the Indian scenario
B.S. Sahay
Institute of Management Technology, Raj Nagar, India

Jatinder N.D. Gupta

Department of Accounting and Information Systems, University of Alabama in Huntsville, Huntsville, Alabama, USA, and

Ramneesh Mohan

Downloaded by Ambedkar University At 02:55 05 August 2016 (PT)

Center for Global Supply Chain Management, Institute of Management Technology, Raj Nagar, India
Abstract
Purpose The paper aims to analyse research conducted for assessing the current state of supply chain management practices followed by Indian
organisations and identifying important areas that need to be addressed in order to increase their competitiveness.
Design/methodology/approach The paper begins by proposing a framework for evaluating the supply chain strategy of an organisation along the
three key dimensions supply chain objectives, supply chain processes, and management focus on supply chain activities. Data collected through
survey questionnaire for the three dimensions have been used to assess the alignment of supply chain strategy with the overall business strategy
through statistical analysis.
Findings The research findings reveal that most of the Indian organisations have aligned their supply chain objectives with their business objectives.
They are now on course of aligning their processes and management focus. Enhanced level of competitiveness would require Indian organisations to
manage the three-dimensional alignment of achieving the agenda set by the business strategy.
Research limitations/implications Further research work should focus on: assessing the current level of supply chain processes; identifying critical
supply chain focus areas for the business; and establishing specific performance measures for continuous measurement of supply chain efficiency
improvement.
Practical implications This paper provides a detailed study to help supply chain managers improve supply chain efficiency through alignment of
supply chain objectives with business objectives, supply chain processes with management tools and supply chain focus areas with management focus.
Improved supply chain efficiency will help Indian organisations maintain competitiveness in a rapidly globalising economy.
Originality/value The supply chain alignment model suggested in this paper provides a framework for realising true supply chain efficiency and
competitiveness. Different organisations will align their objectives, processes and management focus as per the focal areas of their organisation
depending on their capabilities and market situation. However, in every case Indian organisations need to act fast to capitalise on these opportunities to
be competitive with the world market.
Keywords Competitive strategy, Information management, Inventory management, Supply chain management, India
Paper type Research paper

acquired advantages in terms of competitiveness? Three

different bodies assign three different grades to India:
(1) The 1999 World Competitiveness Year Book, compiled by
the Switzerland-based International Institute for
Management Development (IIMD), shows that Indias
ranking in international competitiveness, evaluated by
applying 287 criteria, has gone up by two points from
being 41st out of 46 countries in 1998 to 39th out of 47
countries in 1999 (Nancy, 1999).
(2) The survey conducted by the Geneva-based World
Economic Forum (WEF) for 1999 puts India in 53rd
position of 59 countries in its Global Competitiveness
Report, down from 50 in 1998, and 45 in 1997 and 1996.
It uses 179 indicators under eight heads (openness,
government, finance, infrastructure, technology,
management, labour and civil institutions).

1. Introduction
1.1. Indias competitiveness
Over a decade has passed since India embarked on
liberalisation. There has been no dearth of fervent
declarations affirming Indias determination to acquire the
capabilities that will add to its competitiveness and enable it
to be counted among other recognised global players (Gupta,
1998). However, has India been able to cash on inherent and
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Managing supply chains for competitiveness

Supply Chain Management: An International Journal

B.S. Sahay et al.

Volume 11 Number 1 2006 15 24

(3) The World Bank, which appraised the competitiveness

46 countries in 1999, places India in the 40th rank.

has been written with the objective of developing an

understanding of the existing scenario of supply chain
management in Indian industry. It assesses the direction in
which supply chain management is heading, and gauges its
alignment with the business strategy. Thus, this study of
supply chain practices in the Indian industry takes a strategic
perspective rather than an economic one.
The paper is organised as follows. The rest of this section
describes the business challenges facing Indian organisations,
supply chain management as a new paradigm to address those
challenges and the motivation for undertaking this research.
Section 2 proposes a comprehensive research framework for
linking supply chain strategy with business strategy. This is
followed by section 3 on the research methodology,
development and testing of the survey instrument and the
profile of responding organisations. Section 4 details the
results of the survey conducted as part of the research. These
are presented in five sub-sections namely: supply chain
objectives; supply chain processes; management focus on
supply chain activities; inventory management; and
information technology and management. Section 5
describes the analysis of the survey findings. The analysis
proposes what Indian organisations should be doing to
enhance competitiveness in the given scenario, followed by
the conclusion.

In all these three evaluations, the rankings on certain specific

parameters are more worrisome than the overall figures.
Indias weakest areas in all the surveys include: uncertainty
in government policies; infrastructural deficiencies;
unsatisfactory corporate and financial management of both
private and public sector enterprises; inept corporate boards;
insufficient attention to human development; low
productivity; undependable quality; inadequate customer
orientation; and negligible investment on R&D, with special
reference to information technology.
India is the fifth largest country in terms of gross national
product (GNP) and purchasing power parity (PPP). It
constitutes one of the fastest growing markets in the world
and is counted among the richest with regard to cheap skilled
labour, scientific and technological resources, and
entrepreneurial talents. Therefore, the above image of India
is quite enviable.
A comparative analysis of customer orientation carried out
for ten different countries by the IIMD and the WEF is
depicted in Table I. The comparisons are based on five
parameters: product quality, product design, on-time delivery,
after-sales service and managing distribution. India ranks last
(tenth) on the parameters of product quality, design and ontime delivery and ninth in the case of after-sales service and
managing distribution. Table I clearly shows that India still
has a long way to go to improve its competitiveness.
To improve the competitiveness of Indian organisations on
product design, quality and on-time delivery it has become
necessary for them to look for innovations that produce
maximum efficiency both within and beyond their operations
(Sahay, 2000; Zylbersztajn et al., 2003). Supply chain
management is an integrating philosophy to manage the
total flow of a distribution channel from supplier to ultimate
customer (Ellram and Cooper, 1990). It is the management of
upstream and downstream relationships both within and
beyond their operations with suppliers and customers to
deliver superior customer value at less cost to the supply chain
as a whole (Martin, 1998; Weber, 2002). Effective supply
chain strategies for creating competitiveness revolve around
the on-time delivery of competitive quality goods and services,
at a reasonable cost, involving the right business partners
(Hewitt, 1994; Hobbs et al., 1998; Easton, 2002). The paper

1.2. Business challenges in the twenty-first century

The information age competition has ushered in a new set of
challenges for business competitiveness (Luftman, 1996).
These include:
.
Understanding customers. There is no escaping the fact that
the customer in todays marketplace is more demanding,
not just of product quality, but also of service. As more
and more markets become in effect commodity
markets, where the customer perceives little technical
difference between competing offers, the need is for the
creation of differential advantage through added value.
Hence, it is increasingly becoming important to
understand customers needs and wants and to translate
these into a unique value-added business mission.
.
Managing time compression. Time is the primary
competitive motive of business in the 1990s. This does
not mean, however, that other motives such as cost,
quality, and service can be ignored. In fact, these are prerequisites to sustain competitiveness. But the winning

Table I International comparison of customer orientation

Parameters
Brazil
Canada
France
Germany
India
Japan
The Netherlands
South Korea
Thailand
USA

Product quality

Product design

On-time delivery

After-sales service

Managing distribution

52.39
68.13
55.94
92.50
41.08
92.68
72.89
60.71
63.00
59.67

56.62
58.06
66.96
71.39
34.05
81.46
63.11
48.57
58.50
69.84

36.34
62.19
44.64
88.06
30.27
93.17
69.78
59.29
57.00
62.62

39.15
62.50
45.56
78.61
41.08
89.76
68.44
47.14
54.00
57.70

51.83
66.45
66.09
75.83
52.43
72.20
74.76
57.14
66.50
74.43

Note: Companies are rated 0 poor to 100 excellent

Source: Mishra (1999)

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Volume 11 Number 1 2006 15 24

factor is provided by time-based competition, which

becomes the highest priority to gain responsiveness and
flexibility. Product life cycles are shorter than ever before,
industrial customers and distributors require just-in-time
deliveries, and end-users are ever more willing to accept a
substitute product if their first choice is not instantly
available.
Mastering mass customisation. The driving force behind the
importance of responsiveness and flexibility is the need
and the wish to respond to virtually any customer request
just in time. Mass customisation offers a viable solution. It
involves the delivery of a wide variety of customised goods
or services quickly and efficiently at low cost. The key to
making mass customisation work is highly-skilled and
autonomous workers, processes, and modular units, so
that managers can co-ordinate and reconfigure these
modules to meet customer specific customer request and
demands. Mastering mass customisation is the step
towards gaining a competitive edge and is driving new
business models.
Undertaking globalisation. There is an increasing trend
towards globalisation. Almost every sector of business is
influenced by global forces due to globalisation. In the
global business, materials and components are sourced
worldwide, manufactured offshore and sold in many
different countries, often with local customisation. The
challenge for the global company, then, is to achieve the
cost advantage of standardisation while still catering for
the local demand for variety. This has given rise to intense
competition blurring the boundaries between domestic
and global markets.

comprehensive supply chain strategy and then linking this

strategy to the overall business strategy.
1.4. Motivation for this research
Is India on the right path of managing its supply chain to
enhance its competitiveness in this changing economic
environment? Addressing this basic question is at the heart
of this research. The research study is borne out of the felt
need by managers, expert professionals and academicians, to
address supply chain issues at the national level. A two-year
collaborative study titled Supply Chain Management
Practices in India was envisaged by the Management
Development Institute, Gurgaon, India and KPMG India.
The research team set out with the objective to not only trace
the reasons for high levels of inventories and logistics cost, but
also to gauge the current status of supply chain management
in Indian industry in order to address the felt concern of
Indian policy makers and managers.

2. Research framework
The present research study proposes a three-pronged
framework for evaluating the supply chain strategy of an
organisation. The framework uses the three key dimensions
supply chain objectives, supply chain processes and
management focus on supply chain activities to evaluate
the overall supply chain strategy of the organisation (Figure 1).
It is imperative for organisations to co-ordinate, synchronise
and integrate the three dimensions of supply chain objectives,
supply chain processes and management focus on supply
chain activities to evolve a synergistic supply chain strategy.
The co-ordination, synchronisation and integration
mentioned above optimise the supply chain function within
itself. However, throughout the process of managing a supplychain strategy for competitiveness, managers need to keep one
overarching consideration in mind: the companys overall
strategy and direction to compete. Logistics and supply-chain
decisions cannot be made that do not support or worse yet,
run counter to the broad business objectives. For
competitiveness, the supply-chain strategy must be in
synchronisation with the business strategy. One cannot
make decisions aimed at cutting transportation costs and
paring down the number of warehouses, for example, if the

Business, therefore, can no longer act as an isolated and

independent entity in competitive world, the real test of
competitiveness takes place in international markets
(Garelli, 1997; Salcedo and Grackin, 2000). There is a need
to create value delivery systems that are more responsive to
fast changing global markets and much more consistent,
focused and reliable.
1.3. Supply chain management: a new paradigm
Supply chain management is currently perceived as an
effective means to achieving successful international
competitiveness (Evans et al., 1996). Worldwide, interest in
supply chain management has increased steadily since the
1980s when organisations began to see the benefits of
collaborative relationships (Gattorna, 1998). The
management concept is, however, nascent in India.
Changes in the environment have remarkably been so
dramatic and sudden that Indian organisations have realised
the inappropriateness of competing effectively in isolation
from their suppliers and other associates of the supply chain.
Today, the Indian industry spends an exceptionally high
amount of 12 to 15 per cent of its revenue on logistics. Close
to 22 per cent of the aggregate sales in the industrial sector,
amounting to over US$25 billion , is tied up in inventories in
the supply chain network countrywide (CMIE, 2000).
Historically, Indian organisations have moved from physical
distribution to logistics management. They are now on course
to graduating to supply chain management, the preferred
name for actualisation of integrated logistics (Vrat, 1998).
As a result, more and more Indian organisations today have
embarked on the process of developing and implementing a

Figure 1 Framework of supply chain strategy

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B.S. Sahay et al.

Volume 11 Number 1 2006 15 24

key business driver is not to cut costs, but rather to enhance

customer service.
It is crucial, therefore, to align the supply chain
management process with all the other processes of the
organisation. Hence the need of organisations to align the
supply chain strategy with the overall business strategy. The
business strategy is the result of business objectives, usage of
management tools and the focus of top management. An
alignment of supply chain strategy and business strategy will
ensure that the supply chain strategy gels with the business
strategy at all the three levels strategic, operational and
tactical.
In simple mathematical terms, managing the supply chain
for competitiveness is the resultant of the vector sum of the
three vectors, namely supply chain objectives, supply chain
processes and management focus on supply chain activities
superimposed in the plane of business strategy (Figure 2).
The optimal strategic solution is ensured by a one-to-one
alignment of the three dimensions of both the supply chain
strategy and business strategy framework. Misalignment, even
along one dimension, sub-optimises the resultant and hence
the efficiency and effectiveness of supply chain management
for competitiveness.
The alignment of the business and supply chain strategic
frameworks yields business benefits of par excellence. Most
important of these is the effectiveness of the supply chain to
fulfil orders and meet consumer demand. In simple terms, it
provides a simple way to determine if an organisation has the
right supply chain for its products to meet consumer
demands, which is, in essence, the basis to compete.
Second, the alignment sets the direction of undertaking
supply chain initiatives in synchronisation with the business
initiatives so that the two complement each other. Last but
not the least, the alignment increases the responsiveness of the
supply chain to the changing business environment, and
hence the ever-changing basis of competition. It helps ensure
that the supply chain evolves with the changing requirements
of the business and is adaptive to the changing needs of the
consumer in the face of competition.

3.1. Research instrument

The survey questionnaire was designed with the knowledge of
previous survey reports and questionnaires as well as in
consultation with practising managers. It quantified the extent
of deployment of supply chain strategies, the structure of
supply chain in various companies, the problems encountered
in organising supply chain systems and the path being taken
by organisations in strengthening supply chain management
for competitiveness.
The six-section questionnaire was designed to capture facts,
figures as well as qualitative responses about the supply chain
practices in organisations. Section I of the questionnaire
profiled the company, section II covered business objectives
and supply chain strategy, section III focused on the
components of supply chain management, section IV
captured supply chain costs, section V dealt with IT
applications in supply chain management, and section VI
looked into supply chain implementation. The respondents
were requested to respond from the perspective that best
captured the supply chain and logistics issues faced by their
organisation. Quantitative responses were measured using a
five-point Likert scale ranging from 1 strongly disagree to
5 strongly agree.
3.2. Pre-testing
A pre-test was conducted with eight organisations before the
questionnaire was revised to avoid inapplicable questions,
ambiguous wording, and its appropriateness for executives in
Indian organisations. Clear instructions were provided at the
beginning of the sections. After pre-testing and further
revisions, the survey questionnaire was produced in final form
and used to collect data.
3.3. Data collection procedure and sampling
The target population for data collection consisted of the top
1,733 organisations, drawn from the list of Confederation of
Indian Industries (CII) and ASSOCHAM, in various industry
segments in India. Despite the repeated mailing and the
follow-up by phone, responses were received from 168
organisations. A total of 12 responses were incomplete, and
hence were not considered for the analysis. A total of 156
valid responses were used for further analysis, producing a
return rate of 9 per cent, which is considered adequate for this
type of survey in India (Saxena and Sahay, 2000).

3. Research methodology
In the backdrop of the research framework, a comprehensive
survey questionnaire was designed to fulfil the research
objectives. Details of its design, testing, and use are discussed
in this section.

3.4. Profile of responding organisations

The 156 responding organisations were distributed over 16
industry sectors including Agricultural Products, Automotive,
Chemicals/Fertilisers, Computer Hardware, Consumer
Durables, Engineering, FMCG, Metals, Oil/Gas,
Pharmaceuticals, Retail, Services, Telecommunications,
Textile/Apparel and Transportation. However, the majority
of the respondents were from Engineering, Chemicals/
Fertilisers, Automotive, FMCG, and Consumer Durables
(Figure 3).
The respondent organisations represented a combined
turnover of US$250 million in the financial year 1999-2000.
With a GDP of US$355 billion in the financial year 19992000 (Indian economy (CMIE, 2000)), the resulting research
sample can be viewed as representative of the Indian supply
chain scenario.
The questionnaire was mainly filled in by senior
management of the responding company, with the majority

Figure 2 Alignment of supply chain strategy with business strategy

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Volume 11 Number 1 2006 15 24

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Figure 3 Classification of respondents by industry

4.1. Alignment of objectives

Supply chain objectives are derived from business objectives
(Gattorna, 1998). As a first step, this study set out to capture
two important prioritisation issues:
(1) First, the importance of overall business objectives; that
is the prioritisation of business objectives by Indian
organisations.
(2) Second, the importance of supply chain objectives; that
is the prioritisation of various supply chain objectives by
Indian organisations.
4.1.1. Business objectives
All the organisations were asked to prioritise their business
objectives on a five-point scale, with a score of 1 indicating
not important and a score of 5 indicating very important.
These strategic objectives included maximising profits,
turnover, return on investment, earning per share, value to
shareholders and customer satisfaction.
The objective of increasing customer satisfaction has
surpassed objective of maximising profit or delivering
highest value to shareholders (Table III). The companies
have realised that short-term profit making does not lead to
achieving long-term growth and profit maximisation and
hence have started to emphasise their efforts on customer
satisfaction.

being director/general managers (28 per cent). It is interesting

to note that 14 per cent of the questionnaires were filled up by
the chief executive officer (CEO)/chief operating officer
(CFO)/chief financial officer (CFO)/president themselves.
The profile of the respondents is represented in Table II.
A further analysis of the respondents indicates that the
responses from public limited companies constituted nearly
three-quarters (75 per cent) of the total sample, followed by
private limited (18.6 per cent) and public sector (6.4 per cent)
organisations. Out of 93.6 per cent responses from private
and public limited companies, 32.8 per cent responses were
received from multi-national companies (MNCs).

4.1.2. Supply chain objectives

Similarly, all the responding organisations were asked to
prioritise their supply chain objectives on a five-point scale,
with a score of 1 indicating not important and a score of 5
indicating very important. The average rating for all
responding Indian organisations is represented in Figure 4.
Enhancing customer service/satisfaction outscores all other
objectives in terms of their effectiveness to the supply chain
management. At the same time, expanding sales revenue,
reducing inventory cost and improving on-time delivery
follow closely in terms of supply chain priorities.
Undoubtedly, all the four objectives stated above are the
most vital and basic criterion for any supply chain
management strategy to produce tangible results, which is
well understood by the top management. Improvement in
these metrics has a direct effect on the bottom line of the
organisation.

3.5. Method of analysis

SPSS for Windows 6.0 was used in data analysis. In addition
to the statistical analysis, each response received was validated
through personal interviews by the research team. The
research team also interacted with the top management of 52
of the responding organisations to gain an insight into the
business strategies and their focus towards supply chain in
achieving or enhancing competitiveness.

4.2. Alignment of processes

Davenport (1993) defines processes as a structured and
measured set of activities designed to produce a specific
output for a particular customer or market. The review of
literature (Hewitt, 1994; Cooper et al., 1997) concludes that
supply chain management covers the processes of demand
management, manufacturing, inventory management, order

4. Survey results
The survey results have been presented from three
perspectives, e.g. objectives, process and focus in order to
align supply chain strategy with business strategy.

Table III Importance of overall business objectives

Table II Participation by management level

Management level
Manager
Senior manager
Director/GM
Senior vice president/vice president
CEO/COO/CFO/president

Overall business objectives

Percentage of respondents

Maximise customer satisfaction

Maximise profit
Increase turnover (sales)
Increase return on investment
Deliver highest value to shareholders
Increase earning per share

16
25
28
17
14

19

Weighted score for

importance
4.82
4.46
4.37
4.28
4.27
4.02

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B.S. Sahay et al.

Volume 11 Number 1 2006 15 24

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Figure 4 Importance of supply chain objectives to top management

are demand management, inventory management and order

processing/fulfilment with over 40 per cent of the respondent
base in each category classifying them as most critical, that
is a score of 4 and above on the Likert scale. The supply chain
processes like customer service, demand management,
inventory management and order processing/fulfilment show
a sincere concern of the Indian organisations to improve
customer service as well as depict their increasing
understanding of the need to perfect customer-centric
processes.
The focus on inventory management is a testimony to the
realisation by the Indian industry that inventory levels will
have to be monitored and maintained at the lowest possible
level, without compromising on customer service, in order to
deliver superior bottom-line results. Surprisingly,
warehousing scores the lowest in terms of criticality among
all the supply chain processes, a process which needs to be reexamined because of the increasing importance of developing
superior warehouse management systems to back up the
inventory management systems.

processing and fulfilment, warehousing, transportation,

distribution management, import/export management,
product development, promotions planning, and customer
service. Having identified the processes, the research analysed
the processes for supply chain management vis-a`-vis the
management tools in use to address the need of these
processes. The research therefore evaluated the:
.
criticality of supply chain processes for Indian
organisations; and
.
usage of management tools by Indian organisations.
4.2.1. Criticality of supply chain processes
Respondents were asked to evaluate the criticality of these
supply chain processes on a five-point scale. A score of 1 on
the scale indicated not critical and a score of 5 indicated
very critical process for the organisation. Table IV presents
a weighted score for criticality of supply chain processes (on a
scale of 1 low to 5 high).
Customer service ranks as the most critical process (4.38 on
a scale of 5) for the respondents. Among these, as many as
63.8 per cent organisations rate it at a score of 5, that is being
very critical to their supply chain strategy. Following closely

4.2.2. Use of management tools

Respondents were asked to indicate the management tools
and length of their use. The weighted average scores for
length of use (with weights of 1 not aware of this, 2 not
being considered, 3 being considered, 4 in use for less
than one year, and 5 in use for more than one year) are
presented in Table V.
Total quality management (TQM), with a score of 4.05 on
a scale of 5, has been the tool that has been longest in use.
This finding can again be associated with focus of companies
emphasising customer service/satisfaction and offering good
quality product to keep the customer happy. The next most
used tools include benchmarking (BM), just-in-time (JIT)
and supply chain optimisation (SCO). A large number of
companies are continuously benchmarking themselves against
competitors, industry, or best in class companies to attain
higher levels of excellence in their processes.

Table IV Criticality of supply chain processes

Supply chain process
Customer service
Demand management
Inventory management
Order processing/fulfilment
Manufacturing
Product development
Transportation
Distribution management
Import export management
Promotions planning
Warehousing

Criticality score
4.38
4.22
4.19
4.05
3.97
3.53
3.43
3.43
3.32
3.18
3.03

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Supply Chain Management: An International Journal

B.S. Sahay et al.

Volume 11 Number 1 2006 15 24

surrogate of the focus of management on issues related to

supply chain (Table VII).
Order fulfilment and quality were the areas for which
maximum time was allocated by supply chain personnel
reiterating the focus on customer service, throughout the
organisation, as an important constituent of business and
hence supply chain strategy. Quality has a direct correlation
with enhancing customer satisfaction and creating a lasting
positive impression. A comparison of the extent of time
devoted by supply chain personnel across the various
constituents of supply chain to the criticality scores of
supply chain processes reveals that the amount of time
devoted is a function of criticality as well as complexity of the
process under consideration.

Table V Usage of management tools

Management tools

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Total quality management (TQM)

Benchmarking (BM)
Just-in-time (JIT)
Supply chain optimisation (SCO)
Computer-aided design/manufacturing (CAD/CAM)
Business process reengineering (BPR)
Enterprise resource planning (ERP)
Total productive maintenance (TPM)
Activity-based costing (ABC)
Computer-integrated manufacturing (CIM)
Optimised production technology (OPT)

Weighted score
for length of use
4.05
3.91
3.63
3.50
3.50
3.49
3.45
3.40
3.28
3.22
2.74

5. Analysis of survey findings

The survey results have been analysed based on the research
framework drawn up in section 2. It examines the overall
alignment of supply chain strategy with business strategy
along the three dimensions of:
(1) aligning business objectives with supply chain objectives;
(2) aligning management tools with supply chain processes;
and
(3) aligning management focus with supply chain focus
areas.

About 33 per cent of the respondents were currently

considering adoption of BM, enterprise resource planning
(ERP), SCO, total productive maintenance (TPM) and/or
activity-based costing (ABC). Another 25 per cent were
currently planning to adopt TQM and/or business process
reengineering (BPR) for actualisation of business objectives.
The survey clearly reveals the increase in the deployment of
the mentioned management tools in days to come, because
the Indian organisations have now come to believe on the
success stories of these tools.

5.1. Aligning business objectives with supply chain

objectives
The weighted scores of various supply chain objectives were
grouped by their level of importance. The scores on supply
chain objectives were then compared to scores on business
objectives. The business objectives and the supply chain
objectives were then classified under three key focal areas
customer service, profit maximisation, operational excellence
as listed in Table VIII.
A closer look at the weighted scores of supply chain
objectives reveals that they are in congruence with the
business objectives. Customer satisfaction is clearly in the
minds of the top management while formulating the supply
chain objectives. A key criterion of customer satisfaction is the
quality of the product and on-time deliveries. Hence the high
degree of importance attached to supply chain objectives of having reliable product, best product performance and
improving on-time deliveries. Although the supply chain
objectives of best product performance and improving ontime deliveries fall below expanding revenues and reducing
inventory costs, in the level of prioritisation, they are very

4.3. Alignment of management focus

When looking at the framework for evaluating strategy, in
addition to examining the objectives and the management
tools deployed, it is important to study the direction being
pursued to achieve it. Therefore, this study investigated the
following two prioritisation issues:
(1) The focus areas of the overall business and the priority
attached to them by the management.
(2) The extent of time spent by supply chain personnel to
complete various supply chain activities.
4.3.1. Focus of top management
All the organisations were asked to prioritise the focus of the
top management. Interestingly, growth in market share ranks
at the top for Indian organisations followed by customer
centricity and cost reduction (Table VI). However, new
product development and digitisation take a back seat.
4.3.2. Extent of time spent on supply chain focus areas
Respondents were asked to rate nine supply chain focus areas,
on a five-point Likert scale, regarding the amount of time
devoted by supply chain personnel in addressing them. The
extent of time spent on supply chain focus areas was used as a

Table VII Extent of time spent on supply chain focus areas

Supply chain focus areas

Table VI Prioritisation of focus of top management

Focus of top management

Weighted score
for importance

Growth in market share

Customer centricity
Cost reduction
Productivity enhancement
New product development
Digitisation

4.66
4.58
4.34
3.10
2.96
2.56

Order fulfilment
Quality
Inventory reduction
Demand forecasting
IT applications
Transportation
Distribution
Lead time compression
Statutory requirements

21

Weighted score for

extent of time spent
4.20
4.11
3.83
3.58
3.57
3.49
3.35
3.21
3.18

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Supply Chain Management: An International Journal

B.S. Sahay et al.

Volume 11 Number 1 2006 15 24

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Table VIII Mapping supply chain objectives with business objectives

Focal areas

Business objectives

Supply chain objectives

Customer service

Maximise customer satisfaction

4.82

Profit maximisation

Maximise profit
Increase turnover (sales)

4.46
4.37

Operational excellence

Increase return on investment

4.28

much the guiding factors for customer satisfaction while

taking supply chain decisions and hence have been clubbed in
the respective focal area.
The importance of expanding sales revenue and reduction
of various costs and lead times falls under the focus of profit
maximisation. Profitability is the measure of sustainability of a
companys strategy in the face of ever-changing competitive
scenario. It requires a focus not only on costs, but also on
enhancing revenues.
The business objective of increasing return on investment
focuses on operational excellence. These are also matched by
the supply chain objectives of enhancing flexibility of
production mix and product volume, innovating new
product/services, reducing/rationalising supplier base,
expanding width/depth of distribution, offering a broad
product line and having products in stock in that order.

Enhance customer service/satisfaction

Highly reliable product
Best product performance
Improving on-time delivery
Expanding sales revenues
Reducing inventory costs
Lowest product cost
Reducing order to delivery cycle time
Reducing lead time
Reducing transportation costs
Reducing warehouse costs
Flexibility of production volume
Flexibility of product mix
Innovating new product/services
Reducing/rationalising supplier base
Expanding width/depth of distribution
Offer broad product line
Having products in stock

4.93
4.57
4.51
4.43
4.56
4.52
4.37
4.33
4.28
3.96
3.68
4.17
3.90
3.88
3.64
3.62
3.50
3.43

5.3. Aligning management focus with supply chain

focus areas
The scores of the focus of top management were then
compared to the scores of supply chain focus areas. They were
also classified under the three key focal areas customer
service, profit maximisation, operational excellence as listed
in Table X.
The management focus on customer centricity is supported
by the supply chain focus on order fulfilment, but not lead
time compression. Hence the speed to service customer
demand is offset by carrying inventory all along the supply
chain. Globally, while pull based systems are being much
talked about, 84.1 per cent of the respondents indicate use of
push-based inventory replenishment system in India. As a
result, Indian organisations carry huge inventory at every
point in the supply chain. At the same time new product
development, which does not score high on the agenda of
management to enhance customer service levels, is an area of
concern for the future. The focus on cost reduction is not
matched by the amount of time devoted by supply chain
personnel on inventory reduction. The research indicates
that, on an average, the Indian organisations carry a total of
33.41 days of inventories as raw material and 14.25 days as
work in progress (WIP). The 6.44 days of GIT, along with
16.09 days of finished goods, reflect the poor state of supply
chain infrastructure within the country.
Furthermore, the importance attached to IT applications by
supply chain personnel is not matched by the low importance
given to digitisation by the top management. Current levels of
IT budget in the organisation are even less than 0.1 per cent
of gross sales for 13.5 per cent of the respondents, 0.1 to 1 per
cent of gross sales for 42 per cent and 1 to 3 per cent of gross
sales for 23.5 per cent of the respondents. The dichotomy
would hamper the supply chains from integrating various
functions and supply chain partners resulting in lower level of
effectiveness of supply chain efforts. As a result, the IT
applications in use reveal that there is a clear bias of using
stand-alone modules instead of adopting integrated solutions.
A total of 61 per cent respondents are using software package

5.2. Aligning management tools with supply chain

processes
The weighted scores of the supply chain processes were
analysed and grouped by their requirement under three focal
areas customer satisfaction, profitability, operational
excellence identified earlier. The same was done for
management tool required for accomplishment of the three
focal areas. The classification of supply chain processes and
the management tools under the three focal areas is listed in
Table IX.
As per the mapping, the biggest area of concern is the
revelation that, although a high-degree of importance is
attached to demand management (4.22 on a scale of 5) and
inventory management (4.19 on a scale of 5), the same is not
matched by the importance attached to the adoption of
supply chain optimisation for profit maximisation. Indian
companies will have to bridge this vital gap over a period of
time to deliver superior bottom-line results. As stated earlier,
supply chain optimisation has both a strategic and operational
impact on managing supply chains for profitability and hence
holds immense potential in the changing Indian economic
environment.
22

Managing supply chains for competitiveness

Supply Chain Management: An International Journal

B.S. Sahay et al.

Volume 11 Number 1 2006 15 24

Table IX Mapping management tools with supply chain process

Focal area

Supply chain process

Customer service

Customer service
Order fulfilment

4.38
4.05

Profit maximisation

Demand management
Inventory management
Manufacturing
Product development
Transportation
Distribution management
Import export management
Promotional planning
Warehousing

4.22
4.19
3.97
3.53
3.43
3.43
3.32
3.18
3.03

Operational excellence

Management tool
Total quality management
Benchmarking
Just-in-time
Supply chain optimisation

4.05
3.91
3.63
3.50

Computer-aided/design/manufacturing
Business process reengineering
Enterprise resource planning
Total production maintenance
Activity-based costing
Computer-integrated manufacturing
Optimised production technology

3.50
3.49
3.45
3.40
3.28
3.22
2.74

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Table X Mapping of management focus with supply chain focus areas

Focal area

Management focus

Supply chain focus areas

Customer service
Profit maximisation

Customer centricity
New product development
Cost reduction
Productivity enhancement
Digitisation

4.58
2.96
4.34
3.10
2.56

Operational excellence

Growth in market share

4.66

for materials accounting, the most widely used software in the

Indian environment. Software packages for ERP/MRPII and
sales and distribution are used by 48.6 per cent and 43.8 per
cent of respondents respectively. The biggest benefit of using
these packages is reaped when these packages are integrated
with demand management and shop scheduling software.
Presently 13.7 per cent and 19.2 per cent of respondents use
these for the areas stated above. Warehouse management,
supply chain management and demand management
applications are yet to percolate in Indian industry. The
applications and the per cent respondents using them are
presented in Table XI. It needs to be noted that supply chain

Materials accounting
ERP/MRPII
Sales and distribution
CAD/drafting
Shop scheduling and loading
Warehouse management
Supply chain management
Process control and optimisation
Demand management
Engineering data management
Manufacturing execution system
Computer-aided process planning

4.20
3.21
4.11
3.83
3.58
3.57
3.49
3.35
3.18

management solutions are used by only 17.1 per cent of the

respondents, which is an area of concern in developing supply
chain capabilities. It would require a higher degree of focus by
top management on digitisation.

6. Conclusions
India is one of the worlds fastest-growing economies with
diverse markets. Managing supply chain in such a vast
country is most challenging for any organisation because of
business practices, government regulations, technology
capability, transportation infrastructure, etc. The current
paper has explored Indian organisations for their current level
of supply chain management practices. It has outlined the
framework of achieving competitiveness by alignment of
supply chain strategy with business strategy giving due
coverage to three dimension namely objectives, processes and
management focus. The research findings reveal that most of
the Indian organisations have aligned their supply chain
objectives with the business objectives. They are now on
course of aligning their processes and management focus as
per the focal areas of customer service, profit maximisation
and operational excellence. An enhanced level of
competitiveness would require Indian organisations to
manage the three-dimensional alignment to achieve the
agenda set by the business strategy. The supply chain
alignment model suggested in this paper provides a
framework for realising true supply chain efficiency and
competitiveness. Different organisations will align their
processes and management focus as per the focal areas of

Table XI Usage of IT applications

Application

Order fulfilment
Lead time compression
Quality
Inventory reduction
Demand forecasting
IT applications
Transportation
Distribution
Statutory requirements

% respondents using IT
61.0
48.6
43.8
32.9
19.2
17.8
17.1
15.8
13.7
13.0
11.6
9.6

23

Managing supply chains for competitiveness

Supply Chain Management: An International Journal

B.S. Sahay et al.

Volume 11 Number 1 2006 15 24

their organisation depending on their capabilities and market

situation. Some will need to focus initially on the business
processes, others can move more quickly into the more
advanced optimisation with the support of top management
involvement. In every case, Indian organisations need to act
fast to capitalise on these opportunities to be competitive with
the world market.

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Corresponding author
Jatinder N.D. Gupta can be contacted at: guptaj@uah.edu

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