An Investigation Into the Supply Chain for Frozen Peas in Austria
Total Page:16
File Type:pdf, Size:1020Kb
An Investigation into the Supply Chain for Frozen Peas in Austria By Tarek Moussa 2006 A Dissertation presented in part consideration for the degree of “MSc Operations Management” Abstract Supply chain management has become increasingly important for companies in modern-day competitive markets. Competition in modern markets does not involve individual companies but entire supply networks. The performance of multi-national companies is greatly dependent on the efficiency and reliability of their suppliers and logistics providers. Supply chain management in the food industry has become an essential task due to the unique characteristics of this sector. Rapid deterioration of fresh foods and the need to maintain controlled conditions for frozen foods has important implications for supply chain efficiency. Failure to meet the logistical requirements for supply chains in the food sector can result in severe damage to physical products and brand reputations. This investigation analyses the supply chain of the leading frozen food supplier to the Austrian market. The market for frozen foods is experiencing rapid growth due to the convenience of frozen goods in modern- day lifestyles. The analysis focuses on frozen peas and investigates the flow of goods and information from farming to the display of finished products at the retailer. The aim of this study is to identify inefficiencies and all forms of supply chain waste that may exist in processes and activities. Once sources of waste have been located and quantified, the impact on products, companies and consumers is assessed and evaluated. In order to perform the analysis, data regarding the duration and cost of supply chain activities was collected through interviews with relevant stakeholders as well as through direct observations of supply chain operations. The analysis of the gathered data indicates that the supply chain for frozen peas contains several sources of operational waste such as lengthy transportation processes, extensive storage of excess inventory at several locations and improper material handling activities leading to quality deterioration of finished goods. These sources of supply chain waste can be traced to operational inefficiencies however, the lack of collaboration and integration of supply chain activities proved to play a significant role. An insight into the relationships between supply chain members revealed a lack of information-sharing, the absence of institutional trust and an overall fragmented sequence of processes. In order to successfully implement supply chain improvements, integration of supply chain processes as well as long-term collaboration between supply chain partners is of utmost importance. Once the supply chain operates as a single entity, operational improvements can be developed and implemented to increase efficiency and eliminate waste from processes and activities. Table of Contents Introduction…………………………………………………………………….. p. 1-2 Literature Review…………………………………………………………….. p. 3-24 Introduction………………………………………………………………………... p. 3 Austria, IGLO and the Frozen Food Sector……………………………………... p. 4-7 The Philosophy of Lean Operations…………………………………………… p. 7-10 The Evolution of the Lean Philosophy……………………………………….. p. 11-12 Criticism of Lean Operations…………………………………………………. p. 12-13 Benefits of Lean Thinking……………………………………………………. p. 13-16 Value Stream and Process Mapping………………………………………….. p. 16-17 Value Stream Mapping in the Food Sector…………………………………… p. 17-23 The Supply Chain Time and Cost Mapping Toolkit………………………….. p. 23-24 Summary…………………………………………………………………………. p. 24 Methodology…………………………………………………………………. p. 25-29 Definition of the Project Scope……………………………………………….. p. 25-26 Data Collection…………………………………………………………………… p. 26 Process Mapping…………………………………………………………………. p. 27 Cost Collection…………………………………………………………………… p. 27 Time-Based Analysis…………………………………………………………….. p. 28 Translation Cost Matrix… …………………………………………………….p. 28-29 Cost Time Analysis………………………………………………………………. p. 29 Evaluation of Findings and Recommendations for Improvement……………….. p. 29 Data Analysis………………………………………………………………… p. 30-51 Supply Chain Structure of IGLO Peas………………………………………... p. 30-36 Process Mapping……………………………………………………………… p. 37-39 Cost Collection………………………………………………………………... p. 39-40 Time-Based Analysis…………………………………………………………. p. 41-43 Cost Translation Matrix………………………………………………………. p. 44-45 Cost Time Analysis…………………………………………………………… p. 45-48 Quality Control……………………………………………………………….. p. 48-51 Demand Uncertainty……………………………………………………………… p. 51 Evaluation of Scenarios fro Improvement………………………………… p. 52-66 Outcome of the Investigation………………………………………………… p. 52-55 Recommendations for Improvement…………………………………………. p. 55-62 Evaluation of Recommendations…………………………………………….. p. 62-66 Conclusion…………………………………………………………………… p. 67-72 Summary of the Investigation and Findings………………………………….. p. 67-71 Limitations and Implications…………………………………………………. p. 71-72 Appendix I…………………………………………………………………… p. 73-74 Appendix II…………………………………………………………………... p. 75-78 Appendix III…………………………………………………………………. p. 79-85 References……………………………………………………………………. p. 86-89 Introduction In the light of modern-day market competition, supply chain management has emerged as the main area of focus for companies involved in supply networks. In recent years it has become evident that market competition between companies stretches beyond individual organisations. Factors such as cost (and therefore price), product quality, speed to market and customer service are dependent on the efficiency of supply chains and the effort made to manage them. In most cases, there is one organisation in a supply chain that has a large part of the power and control over operations. However, if deliveries of components and finished goods are not on time or do not conform to customer specifications, then the supply chain leader will be unable to compete with supply chains that are highly efficient and can keep costs to a minimum. The sequence of operations in a supply chain and within individual processes is a key factor in terms of saving time and money. Therefore, supply chain management has become an extremely important task for modern companies who seek to optimise performance and profitability. The concept of improving the efficiency of supply chains is often referred to as ‘lean operations’. The basic activities that are involved in trying to achieve a lean supply chain include the identification and elimination of waste, activities that do not add any value to the product or to the customer, from all processes. The focus of this project is on the analysis of a supply chain from Unilever’s frozen food brand IGLO, in Austria. IGLO produces a wide variety of frozen foods however the focus of this project will be on the supply chain of frozen peas. The aim of this investigation is to identify any forms of waste in the supply chain, examine the impact that this waste has on operations and suggest possible solutions to reduce or eliminate these inefficiencies. Firstly, a literature review will introduce some of the main areas that are relevant to this investigation. The Austrian market and consumer habits will be discussed as well as facts about the IGLO brand itself and the frozen food sector in general. The review will highlight the current issues that exist in the frozen food sector, which is an important insight into the problems and obstacles that may appear from the investigation into the IGLO supply chain. The literature review will also discuss current theories that are significant in this project such as the philosophy of ‘lean thinking’. It is important to explore how this theory has been applied in practice and how it has developed over time. An insight into recent academic journals will highlight the main benefits and criticisms of lean thinking and describe some of the - 1 - main tools used to successfully implement a lean strategy. The heart of the literature will be an exploration of existing studies in the field of supply chain management and improvement. This particular section is aimed at investigating what work has been done in the past in this field of study and what conclusions have been drawn. An analysis of past work in this area is particularly important because, as the literature review will show, little work has been documented in the agricultural sector regarding supply chain analysis and improvement. The core of this project is an analysis of the IGLO supply chain for frozen peas. Firstly, a methodology will describe the step-by-step procedure of data collection and data analysis. This task will be undertaken according to an established framework. The main activities of this procedure include time and cost based mapping and analysis. The process of collecting data will occur through direct observation of operations in the supply chain, semi-structured interviews as well as the collection of materials such as videos, press releases and existing information from previous studies. The collected data will assist in the analysis and assessment of the supply chain, resulting in a measure of efficiency and an identification of waste. These results will be presented in various graphical representations such as charts and diagrams in order to illustrate the extent of operational inefficiencies that may exist. After supply chain waste has been identified and analysed, suggestions will be made that may help to solve or reduce the amount of waste in the supply chain by addressing the root causes. Any changes made to activities or processes will