SUPPLY CHAIN FLEXIBILITY STUDY UNDER SALES PROMOTIONS IN AN AUTOMOBILE INDUSTRY

Abstract

In the competitive business world of today, customer satisfaction and profit are the principal goals of any organization. These goals drive the organizations to develop many innovative strategies and resulted in high-quality cutting-edge products, mass customization, rapid introduction of new product and quick response to customer needs. Apart from this, an attractive and prominent competitive business strategy is to offer innovative sales promotional schemes (SPS), whose benefit is sudden ascent in sales. However, this abrupt increase in sales results in erratic forecasts, subjecting the supply chain to severe demand uncertainty. Hence, it leads to know and analyze various supply chain issues under SPS environment. A study has been conducted in the Indian automobile original equipment manufacturer (OEM) situated in the Northern part of India producing around five lac four-wheelers per year. Various operational planning and strategic aspects of the supply chain that enhances the competitive position of the organization under SPS environment have been identified and analyzed. Flexibility in the supply chain has been observed as the most significant parameter which paved the way for directing the further research on supply chain flexibility (SCF), a potential weapon to address uncertainties. This emphasis on SCF during SPS was also advocated by Manders et al. (2016) that sales promotions demand high flexibility in supply chains. To support the SCF study, descriptive and analytical survey are done in automobile OEMs across the country. The collected data are tested using a few statistical tools viz. CV-Index, Cronbach’s alpha and Kappa statistics. Applying different multi criteria decision making (MCDM) approaches, the contextual relationships between various SCF dimensions, their effect on the performance of the organizations and the barriers to implementing the SCF have been analyzed. Also, the sensitivity analysis is done for validating the stability of the results. As the supply chain management includes various flexibilities in diverse situations, the flexibility dimensions in SPS environment have been explored through the survey led in two OEMs. Applying the Fuzzy AHP approach, the identified dimensions are prioritized with volume flexibility, manufacturing flexibility, supplier flexibility and labor flexibility resulting in the top order. Using the ISM approach, their inter-relationships are established and a hierarchical model is developed. The MICMAC analysis is done to classify the dimensions into four categories viz. autonomous, dependent, linkage and independent dimensions, which are based on their driving and dependence powers. The ISM model brought out the dimensions of procurement and v operating systems functions as the most sensitive, i.e. any action on them will have a significant effect on all other functional dimensions. Also, findings show that a large number of dimensions are occupying the linkage category. This indicates that most of the dimensions are highly interlinked with each other, and so are highly sensitive. Further, by applying the Fuzzy DEMATEL approach, the dimensions are ranked based on their degree of influence and classified into cause/effect groups. The findings of Fuzzy DEMATEL model resulted in the elements of operating system and procurement functions of the supply chain like volume flexibility, manufacturing flexibility, and supplier collaboration flexibility, supplier flexibility having a high degree of influence on others. However, all the aforementioned three approaches resulted in the flexibilities at the operating system and procurement functional ends as the most important to be focused upon. In order to study the effect these SCF dimensions have on the performance targets of SPS, the performance measures pertaining to SPS environment have been identified by discussing with the field experts. An extended version of interpretive ranking process (IRP) approach has been applied to rank the flexibilities at various functional ends of the supply chain with respect to the performance measures. The results of this study along with the sensitivity analysis performed shows clearly that the flexibility at the procurement end should be given highest importance to achieve better performance during SPS. Although, depending on the goals and the market position the priorities for the SPS performance measures varies from the organization to organization, the stability of the results obtained in this study irrespective of the weights assigned to the performance measures in the sensitivity analysis conducted shows that this study is of relevance and importance to the supply chain managers of all automobile OEMs. To prove the efficacy of this proposed IRP approach, the results have been compared with the earlier versions of the IRP. Finally, barriers to the successful implementation of SCF have been identified and SCF barrier index has been developed using the graph theoretic and matrix approach (GTMA). The results of this study along with the sensitivity analysis performed indicates that the barriers in the procurement function are highly strong in inhibiting the SCF and thus should be dealt with care. Also, the GTMA model facilitates the organizations to assess their own performance by classifying the level of importance of these barriers. It also helps in the comparative performance of all organizations across the industry during the SPS. vi Although the flexibility in operating systems function was given the high importance in the findings of Fuzzy AHP, ISM, and Fuzzy DEMATEL approaches to overcome the demand uncertainty because of the sudden rise in demand during SPS, when it comes to the overall influence, these dimensions have on the performance targets of SPS, flexibility at the procurement end is given highest importance. Similarly, the results of the GTMA also shows that the barriers at the procurement end are most prominent and strong in inhibiting the SCF. This shows that although flexibilities at the procurement end have the highest influence on achieving the performance targets of SPS, there are also many barriers at this end to deal with. However, on the positive side, operating systems function, not only was assigned top priority in reducing the demand uncertainty but also has less significant barriers at its end. The thorough exposition of the developed models alongside the crosswise comparison of the results of all the studies offer valuable insights to the supply chain managers and helps the management to be flexible enough during SPS in order to stay ahead in the competitive market. Also, this work contributes to both the SCF and SPS literature by exposing the fronts on which they are lacking and by bridging these two independent research streams. Thus this work will be a strategic route map for the future studies. However, this work is specific to SPS environment based on the survey led in Indian scenario and hence cannot be generalized. As this work is limited to inputs from automobile OEM’s, the future studies may be extended to other similar industries.