CHAPTER 1: ORIENTATION

1.1 Introduction Supply chains (SCs), the network of firms that contributes both inbound and outbound products and services along an industry value chain, have drawn increasing attention from organisation theorists since the 1980s (Miles & Snow, 2007:459). The following authors, namely Childhouse and Towill (2003:17); Moberg et al (2002:755); Power, Sohal and Rahman (2001:248-249); and Tan, Lyman and Wisner (2002:614), as cited by Li et al (2006:107) all agree that as competition in the 1990s intensified and markets became global, so did the challenges associated with getting a product and service to the right place at the right time at the lowest cost. Organisations began to realise that it is not enough to improve efficiencies within an organisation, but their whole supply chain (SC) has to be made competitive. A SC is an integrated process wherein a number of various business entities (i.e., suppliers, manufacturers, distributors, and retailers) work together in an effort to: acquire raw materials, convert this raw material into specified final products, and deliver the final products to retailers (Guo & Tang, 2008:129). According to Hwarng and Xie (2008:1163), a SC is a complex system which involves multiple entities encompassing activities of moving goods and adding value from the raw material stage to the final delivery stage. Gu, Li, Zhang, Meier and Kroll (2009:21) are of the opinion that a SC is a chain and most likely a network of different organisations, which work together in order to develop a product or a service, which is brought to the end customer. Wang, Wang, Vogel, Kumar and Chiu (2009:1040) extend the understanding of the SC concept to a global level. They view a SC as worldwide network of organisations and their associated activities that work together to produce value for the customer. Firms in a SC network are more dependent on access to the resources of other firms. It is believed that competition underwent a paradigm shift from firm versus firm to SC versus SC as a result of the business market dynamism (Vonderembse et al, 2006:223; Ketchen & Guinipero, 2004 and Boyer et al, 2005, as cited by Ketchen & Hult, 2007:573). Coyle et al (2008:20) add to the above that in today s environment, global SCs compete against global SCs, which means that the cost and value at the very end of the SC are what is important. They argue that if a competing SC is offering a comparable product at a lower cost and higher value, it does not matter if a company is effective and efficient but in the middle of another SC (Coyle et al, 2008:20). Lambert (2008:6) is of the view that managing the entire SC is a very challenging task. Managing all suppliers back to the point-of-origin and all products/services out of the pointof-consumption might appear to be overwhelming. According to Baltacioglu et al (2007:106), by effectively managing a SC, firms can benefit from reduced costs, boosted revenues, increased customer satisfaction, improvements in delivery and product or service

quality. These benefits arise from a number of factors achieved by SCM. Christopher and Gattorna (2005:5) mention that the need to take a SC view of cost is further underscored by a major trend that is observable across industries worldwide towards outsourcing. For more companies today, most of their costs lie outside their legal boundaries. Activities that used to be performed in-house are now outsourced to specialist service providers. Mowen and Hansen (2008:8) are of the view that companies need focused, accurate information on the cost of the products and services they produce. Anklesaria (2008:2) points out that managing cost is more than mere price reduction, because it is a longer term strategy that requires a more holistic view of the business. He adds that cost analysis is necessary to understand the cost structure in the supplier s price in order to determine whether the price is fair and reasonable (Anklesaria, 2008:13). 1.2 Supply chain management and Cost reduction 1.2.1 Supply Chain Management This study will focus on cost and an effort will be made to develop a SC cost-reduction model for the South African mobile phone industry, but insight into the concept of SCM is necessary. SCM as a philosophy or a management approach has many dimensions that will be discussed in the following paragraphs. SCM has developed into a major conceptual approach inside management and business administration (Seuring, 2008:129). Lambert (in Neelly, 2007:4) defines SCM as the integration of key business processes from end user through original suppliers that provide products, services, and information that add value for customers and stakeholders. For Chopra and Meindl (2001), as cited by Koh, Demirbag, Bayraktar, Tatoglu and Zaim (2007:104), SCM includes a set of approaches and practices to effectively integrate suppliers, manufacturers, distributors and customers for improving the long-term performance of the individual firms and the SC as a whole in a cohesive and high-performing business model. Mehta (2004:842), as cited by Emuti, Minnis and Abebe (2008:151) underlines that the use of SCM will efficiently integrate suppliers, manufacturers, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations, and at the right time in order to minimise system-wide costs while satisfying service level requirements of the customers in the entire SC. Evans and Collier (2007:358) highlight that the unique characteristic of SCM is that while material and logistics managers typically focus on activities within the span of their purchasing, manufacturing, and distribution processes, SCM requires a clear understanding of the interactions among all parts of the system.

Collaboration is a key to creating efficient SCs (Jonsson, 2008:372). The purpose of an efficient SC is to coordinate the material flow and services to minimise inventories and maximise the efficiency of the manufacturers and services providers in the chain. This SC model best fits the environment in which demands are highly predictable, forecasting error is low, product life cycle is long, new product introductions are infrequent, product variety is minimal, production lead-time is long and order fulfilment lead-time is short (Li, 2007:13). According to Min (2001:396), as cited by Mentzer, Myers and Stank (2007:428), interfunctional coordination is defined as working together in close relationships across functions or departments to achieve common company goals. For Kahn and Mentzer (1998:54), as cited by Mentzer et al (2007:429), inter-functional coordination requires both interaction and collaboration to achieve high performance. Simatupang and Sridharan (2008:402-403) considers SC collaboration as the process of working together among independent firms (two or more companies) along a SC in delivering products to end customers for the basic purpose of optimising long-range profit for all chain members and creating a competitive advantage. Fu and Piplani (2004) and Mentzer et al (2000), as cited by De Leeuw and Fransoo (2009:721) note that SC collaboration is often seen as a powerful instrument in achieving effective and efficient SCM. Sarimveis, Patrinos, Tarantilis and Kiranoudis (2008:3531) are of the view that enterprises have shown a growing interest for efficient SCM due to the rising cost of manufacturing and transportation, the globalisation of market economies and the customer demand for diverse products of short life cycles, which are all factors that increase competition among companies. They argue that an effective SCM can lead to lower production cost, inventory cost and transportation cost and improved customer service throughout all the stages that are involved in the chain Sarimveis et al (2008:3531). Mangan, Lalwani and Butcher (2008:250) highlight that while SC integration is the alignment and interlinking of business processes, collaboration is a relationship between SCs partners developed over a period of time. Mentzer et al (2007:430) view collaboration as a common understanding of what drives each function towards the company s overarching goals. According to Leat and Revoredo-Giha (2008:398), the development of collaborative SC relationships within which decision making is integrated, invariably involves the development of inter-organisational relationships. Such relationships, if they are to be sustainable, should be stable and mutually beneficial. Li (2007:17) underlines that the lack of collaboration in SC leads to inefficient production, redundant inventory stock, and inflated costs. Greasley (2009:404) believes that at the level of an individual product or service, the amount of integration in the SC can be characterised as an analysis of the costs and risks in either making a component in-house or buying it from a supplier, termed as a make-or- buy decision. He adds that at a strategic level, SC integration decisions should be related to the way that the organisation competes in the marketplace (Greasley, 2009:404). Lambert

(2008:2) is of the opinion that SCM offers the opportunity to capture the synergy of intraand inter-companies integrations and management. In that sense, SCM deals with total business process excellence and represents a new way of managing the business and relationships with other members of the SC. 1.2.2 Cost reduction The word cost means different things to different people in the SC (Anklesaria, 2008:2). Hansen and Mowen (2006:35) view cost as the cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future benefit to the organisations. For Ferryanto (2006:23), cost involves expenses and losses to meet product performance targets. According to Reeve and Warren (2008:9), the cost of a manufactured product includes the cost of materials used in making the product, as well as the costs incurred in converting the materials into a finished product. Hilton, Maher and Selto (2006:48) underline that an understanding of cost concepts is absolutely critical to cost management and different perspective on costs are important in different managerial situations. According to Kees (2005:32), although cost management, by definition, involves analysing the costs of a particular product or service bought from a company s supplier, the goal of cost management is to maximise the value of that product or service. Value maximisation depends on finding the right balance among price, quality, and service. Eldenburg and Wolcott (2005:9) write that strategic cost management refers to a simultaneous focus on reducing costs and strengthening an organisational s strategic position. It has been reported that executives experience tough business conditions and as a result they have taken direct actions to reduce costs (Anon 2009:33). Anon (2009:33) adds that companies that innovate generate new revenue, improve differentiation from competitors and drive down costs. This enhances their customers experience through better products, decreased lead times and low costs. According to Strategy Report (2009:36), integrating improvement solutions together with collaboration concepts into a cohesive model will provide the future SC architecture that will help bring new efficiency and cost reduction for the industry. Bader (2008:50) argues that SCM has an increasing role to play within corporate organisations, with business improvement, demand planning, delivery channels and cost reductions, amongst others, all having large cost implications. As SCM has evolved, it has come to refer to the entire process of getting a product to customer, from obtaining raw materials through manufacture to distribution. By effectively managing this process, the theory holds, companies can create efficiencies in many places along the SC and significantly cut costs (Paulson, 2007:14). Industry week website Page (2009:50) notes that driving costs out of the SC remains a key objective for many corporations, especially given the challenges of the current economy. Sourcing clearly is a major enabler of cost reduction across the SC.

According to Farahani and Elahipanah (2008:229), satisfying customers demands on time is very important, both from a cost reduction perspective and for its role in increase the service level of customers. Strategy (2009:37) confirms that most SCs today are measured by key performance indicators (KPIs) such as availability to the consumer (percent in-stock) and cost reduction, as well as financial KPIs like return on investment (ROI), return on brand equity and inventory. Wagner, Erhun and Gross-Ruyken (2009:30) highlight that other cost reduction efforts in the field of SCM would add value and bring new business benefits: first, process efficiencies drive costs down as teams find best practices and streamline the end-to-end system of supply and delivery, taking cost out wherever possible. Second, shorter cycle times and visibility across the SC increase responsiveness and customer satisfaction, reduce customer turnover and help to retain valuable customers. Third, lean techniques reduce waste and non-value-adding steps, assuring best processing across the enterprise. Fourth, asset utilisation and elimination of unnecessary assets reduces the need for working capital. Finally, lower inventory levels that more than closely meet the actual demand will reduce working capital needs and minimise carrying costs. Based on different dimensions of SC cost-reduction, Wisner, Tan and Leong (2009:27) mention that considering again the objectives of SCM, cost-reduction is clearly on the list of priorities. Cost-reduction can be achieved throughout the SC by reducing waste, by reducing purchasing and product distribution costs, and by reducing excess inventories and nonvalue-adding activities among the SC participants. As SCs become more mature, they tend to improve their performance in terms of these cost-reduction activities through use of continuous improvement efforts, better SC communication and inventory visibility, and a further integration of processes. 1.3 Cost models SCs face sundry cost pressures today (Aberdeen Group, 2007:1). As the outsourcing trend continues, companies will not merely compete against each other, but in the entire SCs (Kumar & Zander, 2006:7). Rushton and Walker (2007:4) define the term outsourcing as the strategic use of external specialised service providers to execute and manage activities or functions that are normally seen as non-core to business. Vincente-Brown (in Ayers 2006:305) indicates that cost is a consequence. Costs are a result of company and SC processes. Improving these processes is the only way to reduce these costs. According to Kumar and Zander (2007:1), total cost of ownership (TCO), activity-based costing (ABC) and activity-based management (ABM) as business management models to analyse and control SC costs. The three abovementioned SC cost models will be briefly described in order to throw light to this study.

1.3.1 Total cost of ownership (TCO) Bloomsbury Business and Management Dictionary (2007), as cited by Naguib (2009:43) defines TCO as a structured approach to calculating the costs associated with buying and using a product or service. TCO takes the purchase cost of an item into account but also considers related costs such as ordering, delivery, subsequent usage and maintenance, supplier cost, and after-delivery cost. According to the Federal Electronics Challenge Web page (2007), TCO evaluates all costs, direct and indirect, incurred throughout the life-cycle of an IT asset, including acquisition and procurement, operations, and maintenance and end-of-life management. For Torabi and Hassini (2008:199), TCO is a comprehensive financial estimate approach which reflects all the resources consumed in performing the purchasing-related activities and measures all the costs and benefits associated with these activities within the company s value chain (i.e., the lifecycle costs of the purchased items/services). 1.3.2. Activity-based costing (ABC) ABC is a two-staged approach that initially attributes direct and overhead costs to business processes (Activity-Based Process Costing, ABPC) and finally to business objects (ActvityBased Object Costing, ABOC). The objects may be products, customers, or distribution channels (Beekman, 2008:39). ABC is a costing method that identifies activities in an organisation and assigns the cost of each activity s resources to all products and services that actually consume these resources. In this way, an organisation can more accurately establish the true cost of its individual products and services for the purposes of identifying and eliminating those which are unprofitable and lower the prices of those which are overpriced (Van Weele, 2010:377). ABC process assigns costs to products based on the resources they use. This method determines all activities performed to produce a product, and the resources used to perform the activities. It then traces the activities to the actual product which triggered the activity (Cooper & Kaplan, 1991; Horngren et al, 2000; Mc Nair, 2007, as cited by Vaughn, Raab & Nelson, 2010:1034-1035). Wang and Ding (2005) Hou, Sun, Zhang and Hou (2009:1) expound the ABC concept and point out that ABC is built on the basic concept of activity, which identifies and measures all activities involved in resources consumption of enterprises. Centring on activity, ABC will include the cost of consumed resources into the corresponding activity, then select the corresponding cost driver, account for the volume of cost driver, and distribute activity costs to the costing objects (cited in Hou, Sun, Zhang & Hou, 2009:1). 1.3.3. Activity-based management (ABM) Mc Watters, Zimmerman and Morse (2008:117-118) document that ABM extends ABC by analysing the management of activities, instead of simply calculating the costs of activities. The goal of ABM is to provide value to the customer, and at the same time provide profit to the shareholders. ABM links ABC to the strategy of the organisation. According to Khalid

(2005), as referred to by Ismail (2010:42), ABM refers to the use of ABC information to understand and make beneficial changes in the way institution do their business in an environment of limited resources and increasing demands. He argues that it is a strategic tool that allows managers to: quantify the value of products and services; use a common language for benchmarking; look at their activities with a process view; and choose courses of action based upon ABC information (Khalid, 2005, as referred to by Ismail (2010:42). Roztocki (2010:8) highlights that the ABM s managerial actions can be divided into two major categories: operational and strategic ABM. Operational ABM seeks to improve what is already in existence, while strategic ABM seeks major changes. He adds that operational ABM utilises the ABC analysis to identify the ways to perform the existing activities more efficiently. In contrast, strategic ABM uses the ABC analysis to shift the demand from activities that consume an excessive level of resources to those that consume only a minimal level while yielding higher output (Roztocki (2010:8). In addition to the abovementioned SC costs models or tools, Hicks (in Ayers 2006:342-343) identifies bottleneck cost as the fourth SC cost model. He notes that another concept related to SC cost visibility and its effect on clarity in decision making is bottleneck cost. This concept is the theory of constraints , or TOC. Heizer and Render (2011:323) define TOC as a body of knowledge that deals with anything that limits or constrains an organisation s ability to achieve its goals. Constraints can be physical (e.g., process or personnel availability, raw materials, or supplies) or non-physical (e.g., procedures, morale, and training). Kamauff (2010:59) advocates that TOC pursues the goal (global objective) of a system through an understanding of the underlying cause-and effect dependencies and variations in the system. TOC applies cause-and-effect thinking processes to understand and improve systems, including organisations. According to Schragenhein, Dettmer and Patterson (2009:191), the TOC supply chain concept is a fairly radical departure from accepted ways of managing production and distribution, which typically treat each element of the SC as isolated links. Successful creation of a robust TOC-based SC requires close, effective coordination among the links. It has to be indicated that the concept and philosophy of SCM, SC strategies (dimensions), SC cost and reduction models will be revisited respectively in points 3.3, 3.5, 5.2 and 5.3 of this research study to provide informational backgrounds. As mobile phone industry is part of the service industry that provides (sells) products (mobile phone handsets, SIM cards, mobile phone accessories, air time vouchers, and so on) and services (mobile connectivity, broadband services), the discussion in this research study will be on both tangible and intangible products. 1.4 The mobile phone industry The mobile phone industry has experienced an extraordinary growth rate due to the combination of various factors, such as technological change, market demand and evolution of competition. Approximately 95 percent of all nations have mobile phone networks, and

the majority of these countries have more mobile phone than landline subscribers, and probably today more mobile phones than TVs (Botelho & Pinto, 2004, as cited by Petruzzellis, 2010:615-616). The number of mobile users is growing twice as fast in developing countries as in developed countries, and Africa is now the fastest-growing mobile phone market in the world. According to the GSM Association, over 85 percent of the population will have network coverage by 2010, up from 10 percent in 1999 and 60 percent in 2007. The number of subscribers has grown from around 4 per 100 in 2003 to over 10 per 100 in 2005 (Sparks 2008:326). The mobile phone sector in Africa has seen the activation of 74 million new subscribers (Ghana Business News, 2009). With a network that is 99 percent digital and includes the latest in fixed-line, wireless and satellite communications, South Africa has the most developed telecommunications network in Africa (South Africa Online, 2010). Experts regard a mobile phone as a tool that will help Africa (and South Africa) bridge the digital divide and get them connected to the Internet. In South Africa, mobile phone adoption is extremely high, with more than 70 percent of citizens having access to a handset (Senne, 2007). In spite of the phenomenal successes that the mobile phone industry has experienced in recent years, it is of important to indicate that there are also challenges that the industry is facing. Electronics News (2009) points out that the cell phone (also known as mobile phone) industry faces, after 25 years of stellar growth, huge challenges this year from a poor economy and lack of new features. The bleak cell phone industry outlook is unprecedented with dramatic ramifications for device manufacturers, semiconductors, and mobile operators alike. While the cell phone industry has been generally unaffected by economy ups and downs, the near future is different. The current economic slowdown is more widespread and deeper than ever experienced during the cell phone s lifetime, and has spread through Europe, Asia, and America. In addition, this is the first year without any new major features being added, and last year s new feature, mobile TV, has only become popular in limited regions . A report on mobile telecommunication growth in Africa has identified high taxation, low income, illiteracy, unreliable electricity supplies and corruption as major challenges to the telecommunication sector s growth and development (Wanjiku, 2008). Coetzer (2008:4) is of the opinion that perhaps the main challenge to further increasing Vodacom s Bottom of Pyramid (BOP) clientele is high tariffs. Even discounted call rates in South Africa are comparatively expensive compared to other emerging markets: phone operators in India, for example, charge an average of $0.02 per minute, while in Africa the price is between $ 0.20 and $ 0.50 per minute. He continues to mention that the low cost of calls in India has been driven by fierce competition between mobile phone operators and international strategy to absorb a greater clientele through access to cheap communications, rather than expecting the need for communications by charging higher

prices but still limiting their base, as has been the case in South Africa (Coetzer, 2008:4). South African mobile phone business environment poses challenges such as high tariffs and others as abovementioned. In addition, there is pressure on the South African mobile phone service providers to reduce cell phone charges for the final customers (Naidu & Pather, 2009; ecn, 2009; Mail & Guardian, 2009; Wanjiku, 2009). One of the most obvious ways in which they can counter the situation and stay profitable is to reduce input costs. In this endeavour companies needs the cooperation of their SC partners to reduce total costs throughout the SC. 1.5 Supply chain management (SCM) application to service industries According to Quinn (1998:38), as cited by Gourdin (2006:204), the SC represents all of the actors involved in conveying something of value to the final consumers. Thus, it includes vendors, producers, intermediaries, and logistics service providers, all working together to ensure customers receive more value than they might from a competing SC. Sengupta, Heiser and Cook (2006:5) report that recent SCM research in the manufacturing sector indicates that researchers have started to move beyond the initial classification and theory development stage to the theory validation stage. However, the transferability of the manufacturing SCM principles to the service sector organisations is in its infancy and is only now receiving increasing attention from practitioners and academics. So far only a limited number of studies have been conducted that specifically emphasise service supply chains (SSCs). It has to be noted that SCM application in services is extensively dealt with in chapter 6 of this research study. 1.6 Motivation for the study and formulation of the problem 1.6.1 Motivation for the study The focus of this study will be on cost and an effort will be made to develop a supply costreduction model for the South African mobile phone industry. From the above discussion, it is evident that there are unique circumstances in the mobile phone industry in the world and in Africa and in South Africa. Apart from legal, technical, environmental barriers, the mobile phone industry experiences severe business challenges. The study conducted in 2009 by Buys, Dasgupta, Thomas and Wheeler on the determinants of a digital divide in SubSaharan Africa finds that improving competition policy to the current levels of superior performers in the region would generate huge telecommunications connectivity benefits for the populations of the affected countries. The study backs the 2007 World Bank Report that suggested that countries may improve competition, lower prices, and broaden access through a variety of means, including privatisation of current operators, simplification of licensing regimes, lifting bars to market entry, and introduction of MNP and mobile virtual network operators (Buys, Dasgupta, Thomas & Wheeler, 2009:1502). The South African mobile phone industry faces the effect of network quality problems

(Hellkom, 2009), high tariffs (Gilwald, Esselaar, Burton & Stavrou, 2005; Theron, 2006:4; Coetzer, 2008:4; Business Times, 2009; Oboulo Web page, 2009), dropped calls, lost and delayed SMSs, network access troubles (Jones, 2009 & Pather, 2009), very high entry barriers in the industry (Oboulo Web Page, 2009) and disposable income (Singh, in Becker, 2008:1480), which negatively impact on the industry as a whole, in terms of services effectiveness SC-wide and affordability. These challenges impede the mobile phone industry to be highly competitive and lead to high service costs for the final consumers. There are pressure from the government, consumer groups and the public to decrease the tariff the consumers pay. A logical way for cell phone operator to be more efficient and service the final customer better is to decrease input costs. There is, thus, a need to decrease the total cost of ownership SC-wide. This study will be an effort to make a contribution in this area. This study, which consists of a developing a SC cost-reduction model for the South African mobile phone industry is important and should be done now because of the abovementioned challenges that the mobile phone industry in South Africa has been facing and the benefits that will accrue from this research study. As previously highlighted (in the section 2.2 of this study) by Wagner, Erhun and Gross-Ruyken (2009:30), the benefits of developing a SC cost-reduction model for the South African mobile phone industry might include: a. Process efficiencies as teams use best practices and streamline the end-to-end system of supply and delivery, b. Shorter cycle times and visibility across the SC that increase responsiveness and customer satisfaction, c. Assurance of best processing across the enterprise through the reduction of waste and non-value-adding activities, d. Reduction of the need for working capital due to the right and effective assets utilisation, e. Lower inventory levels. This study is new, in the sense that no one did such a study before as the available literature (research) can witness it. 1.6.2 Formulation of the problem It has long been recognised by some that the key to major cost reduction lays not so much in the internal activities of the firm but in the wider SC (Christopher & Gattorna, 2005:4). According to Paulson (2007:15), many utility companies seeking ways to cut costs in an increasing competitive environment while improving productivity and customer service, have started looking to the supply chain for efficiencies.

The South African mobile phone industry has a vital role to play in the country. Quality service delivery and affordability are key drivers to the success or failure of the mobile phone industry in South Africa. Improving service delivery in terms of quality and affordability to meet the needs of the South African public would benefit the mobile phone industry, the public and national economy. This would increase the public s level of accessibility to the service which would impact positively to the industry s profitability and would make a meaningful contribution to the development of the national and international economies. The problem of this study can be formulated as follows: How can the South African mobile phone industry effectively reduce cost SC-wide? Or in other words, how can the South African mobile phone industry deliver quality services at a reduced cost SC-wide? 1.7 Limitations of the study 1.7.1 Theoretical limitations As indicated above, there is less research conducted in service supply chain management (SSCM) as this area is in its infancy stage. There is no literature witnessing previous research aimed specifically at the reduction of SC cost for the mobile phone industry in South Africa. In this research study, a SC cost reduction model is therefore developed based on the extant literature on both manufacturing and service industries as the mobile phone industry is part of service industry which provides products and services. 1.7.2 Empirical limitations This study will be subject to the following empirical limitations: a. This study will be conducted from the time period of 2007 to 2011 for the purpose of gathering a meaningful number of challenges that the mobile phone industry in South Africa has been facing which necessitate a particular attention in terms of remedy. b. This study will not attempt to explain the technical reasons for poor service delivery as the study will be qualitative. 1.8 Research objectives 1.8.1 Primary objective The primary objective of this study will be to effectively reduce the cost of services SC-wide within the South African mobile phone industry. 1.8.2 Secondary objectives The secondary objectives of this study will be: a. To explore the SC costs and cost models through a literature study;

b. To identify the SC participants within the South African mobile phone industry; c. To investigate the cost drivers and cost links in the South African mobile phone SCs; d. To determine SC key areas that necessitate cost-reduction within the South African mobile phone industry or to identify cost-reduction possibilities within the South African mobile phone industry; e. To determine service quality issues which require improvement within the South African mobile phone industry; f. To develop a SC cost-reduction model for the South African mobile phone industry. 1.9 Research methodology A questionnaire based on insights gained during the literature review will be constructed. The study will be qualitative in nature as structured interviews will be held with at least 15 managers of different South African mobile phone service providers from January 2011. The exact sample frame will be determined early in 2011 depending on the diaries of possible respondents. These interviews will also lead to exposing insights not gained through the literature review, as they may lead to open discussions. This study seeks to understand and interpret the meaning of cost reduction from the perspectives of the respondents. Such an approach is therefore generally inductive rather than deductive in its approach, that is, it generates theory from interpretation of the evidence, albeit against a theoretical background. The main focus of the interviews will be to determine which factors impact most on costs in the mobile phone industry and to uncover ways to reduce cost. Data analysis will be done through appropriate statistical software such as Atlas Ti. The trustworthiness criterion of validity is to be determined to assess the quality of interpretative inquiry. 1.10 Structure of the study The chapters envisaged for this research study will be as follows: Chapter 1: Orientation This chapter will contain the introduction, supply chain management and cost-reduction, cost models and the mobile phone industry challenges, application of supply chain management to the South African mobile phone industry, the motivation for the study (in particular supply chain costs) and formulation of the problem, the research objectives, research methodology and structure of the study. It is necessary to underline that the research proposal, with some minor alterations, will serve as a basis for this chapter. Chapter 2: Supply chain management In this chapter, the concept and philosophy of SCM will be revisited, supply chain processes, and supply chain designs will be dealt with as well.

Chapter 3: Supply chain cost drivers In this chapter, the supply chain elements will be dealt with. Chapter 4: Supply chain cost models Chapter will contain different cost models used in the supply chain environment. Chapter 5: Application of SCM to the South African mobile phone industry In this chapter, a focus will be on the application of supply chain management in a service industry. Chapter 6 will focus on the mobile phone industry. In this chapter, a supply chain cost-reduction model for the South African mobile phone industry will be developed. Chapter 7: Empirical research methodology This chapter will contain the information on the empirical research method. The research method, the scope of the research, sampling, the design of the questionnaire and the methods of data analysed to be used. Chapter 8: Research results In this chapter, the findings of the empirical research will be presented. These results will have reference to the understanding of the South African mobile phone industry of supply chain cost-reduction. Chapter 9: Development of a model or framework. In this chapter, a supply chain cost-reduction model for the South African mobile phone industry will be developed. Chapter 10: Conclusions and recommendations Based on the results of the primary research, interpretations and conclusions will be drawn. It is envisaged to recommend a supply chain cost-reduction model for the South African mobile phone industry.

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