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SUPPLY CHAIN OPERATIONS ANDORGANISATIONAL PERFORMANCE A
STUDY OFTELECOM INDUSTRYIN INDIA
SYNOPSIS
Submitted in fulfilment of the requirement of the degree of
DOCTOR OF PHILOSOPHY
to
Manav Rachna International University, Faridabad, India
byVIJAY ARORAResearch Scholar
Under the supervision of
PROF. S.K. BEDI
SUPERVISOR
Faculty of Management Studies
Manav Rachna International University,
Sector 43, Faridabad, India
April 2013Registration No.13 / Ph.D/011
CERTIFICATE
This is to certify synopsis for thesis entitled “SUPPLY CHAIN OPERATIONS AND ORGANISATIONAL PERFORMANCE: A STUDY OF TELECOM INDUSTRY IN INDIA” by VIJAY ARORA, submitted in fulfilment of the requirement for the Degree of Doctor of Philosophy in SUPPLY CHAIN MANAGEMENT under Faculty of Management Studies of Manav Rachna International University, Faridabad, during the year 2013-14, is a bonafide record of work carried out under my guidance and supervision.
( )Prof S.K. Bedi
SupervisorFaculty of Management
Manav Rachna International University, FaridabadDated:
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ABSTRACT
Telecom sector plays a crucial role in infrastructure development of a country and its
economy Supply chain management is management of linkages of inter related or
inter woven activities of businesses for providing products and services to end
customers in a supply chain The study deals with supply chain management in
telecom sector The main idea of study is to show how the performance of the supply
chain can be improved by analysing various facets of supply chain in this sector Both
supply chain as a principle and telecom sector came into limelight in last 15 20 years
Due to sudden growth into the sector and pressure being on revenues, sales modelling,
network growth, and expansion across multiple technologies, industry could not enjoy
the fruits of optimisation of supply chain management and is not able to realise the
best value from its supply chain organisation. Study involves review of literature for
telecom sector with details on guidelines from regulatory authorities and supply chain
management with the objective of finding correlation between these two. Further
study shall try to review telecom industry’s dynamics, its challenges, and supply chain
dynamics of industry. Impact of supply chain bottlenecks and their impact on
competitiveness shall be reviewed. In the end summary of findings,
recommendations, and conclusion for further research shall be detailed out.
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CONTENTSContents....................................................................................................................................IV
List of Figures............................................................................................................................V
1 Introduction.........................................................................................................................1
1.1 Role of Telecom Sector in Country’s Development..................................................1
1.2 Evolution of Indian Telecom Industry......................................................................2
1.3 Present Status............................................................................................................3
1.4 Challenges Being Faced bythe Telecom Industry:....................................................5
1.5 Concept of Supply Chain Managment......................................................................9
1.6 Features of Supply Chain Management:.................................................................10
1.7 Importance of Supply Chain Management:.............................................................11
1.8 Critical Success Factors of Supply Chain:..............................................................13
1.9 Supply Chain Management Relationships...............................................................14
2 Literature Review.............................................................................................................14
2.1 Gaps inthe Existing Literature.................................................................................20
3 Description of Present Study............................................................................................20
4 Objectives and Hypotheses of Study................................................................................21
4.1 Limitations of Study...............................................................................................22
5 Methodology tobe Adopted..............................................................................................22
5.1 Tentative Chapter Plan............................................................................................23
6 Expected Outcome ofthe Research...................................................................................23
6.1 Social Impact..........................................................................................................24
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LIST OF FIGURES
Figure 1-1 Major Phases of Growth of Telecom industry..........................................................3
Figure 1-2 Yearly Growth Story of Telecom Industry...............................................................3
Figure 1-3 Telecom Sector Revenue (YOY) .............................................................................4
Figure 1-4 Global Cell Phone Package Comparisons ................................................................5
Figure 1-5 Subscriber Growth Trend..........................................................................................6
Figure 1-6 Mounting Debts in Telecom Industry.......................................................................7
Figure 2-1 Telecom Manufacturing Value Chain.....................................................................19
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1 INTRODUCTIONIndia today is the foremost focal point for global economies. According to
Bertelsmann Foundation and the Centre for applied research, Munich, Germany
Transformation Index (BTI) Rankings of 2010, India was ranked 26th and China
88th in terms of economic and political transformation. The dominant role
acquired by telecommunications in the global business management and its effect
on national economies has seen telecom service develop as a vital backbone and
utility service for business and industry. In fact, this service itself now stands
transformed into a full-fledged industry. It is universally agreed that telecom
sector contributes to the overall socio-economic development of a nation and that
the development of a country to its full potential can never be attained without
modern telecom services. World over telecommunication business is governed by
industrial and competition norms. The Indian telecom sector contributed
significantly to the growth of the Indian economy. Success story of telecom in
India has got only few parallels in the world. With just about 5.07 million
connections in 1991, when liberalisation started, it has grown to be the world’s
second largest network with a subscriber base of 846.32 million at the end of
March 2011.As a result of the policy and regulatory initiatives over the years, the
growth of subscribers connected to the Indian telecommunications network has
seen a compound annual growth rate (CAGR) of 44.66 per cent over last five
years. The number of connections is projected to grow to one billion by 2014
taking the tele-density to about 100 per cent. According to a KPMG report, the
sector currently has about five million jobs and this is number is expected to
increase to 20 million. With the introduction of upgraded technologies like third
generation (3G) and fourth generation (4G / LTE) in the near future, the data
consumption is likely to multiply manifold. The prospects of continued aggressive
growth and availability of a big pool of skilled manpower hold immense potential
for the sector.
1.1 ROLE OF TELECOMSECTORINCOUNTRY’S DEVELOPMENTTelecom sector plays a crucial role in infrastructure development of a country and its
economy. In last two decades sector continues to be key growth sector for all leading
economies. In present scenarios moving without telecom is beyond imagination. Page |
Thinking about the living scenario 10 to 12 years ago without mobile communication
seems quite impossible such as living without a mobile phone, negligible internet
connectivity. Following are key contributions from sector to development of country:
a. GDP contribution: As per UNCTAD (United Nations Conference of
Trade and Development) there is direct relation between mobile tele-
density and growth in GDP per capita in developing country. In 2010,
Indian telecom sector contributed three per cent to GDP.
b. Employment to native citizens: Being one of the key infrastructure sector
this sector involves employment to its citizens. With skilled expertise
available in the field these resources become global resources as well and
are considered assets for organisations globally.
c. Infrastructure development of country: Telecom has evolved as a basic
infrastructure like electricity, roads, water etc. Sector is connecting each
and every part of country like any other basic infrastructure.
d. Foreign direct investment: Foreign direct investment has been one of the
major sources of foreign exchange in the growth of the Indian economy
and therefore the need for higher FDI is felt across sectors in the Indian
economy. Today telecom is the one of major sector attracting FDI inflows
after services and computer software sector. In the telecom sector FDI up
to 49 per cent is allowed under automatic route and beyond that up to 74
per cent is permitted through the Foreign Investment Promotion Board
(FIPB), a government body. As per the current telecom services policy, the
sector has 74 per cent of equity on basic cellular, unified access services,
and other value-added services.
e. Growth of IT-ITES and Financial sector: Development of telecom
sector results into availability of inputs for basic infrastructures of IT-ITES
sector and telecom becomes back bone of this sector. With amount of
money resource required to manage the finances of telecom sector, growth
in financial sector is certain.
1.2 EVOLUTION OF INDIAN TELECOM INDUSTRYIndian telecom industry, though being 165 year old, was under government
ownership until 1984. Post 1984 private sector was allowed entry in telecom
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equipment manufacturing. Until 1990 the Government of India held a monopoly
on all types of communication because being driven by pre independence
Telegraph act of 1885. Post liberalisation era (1990-99) Indian telecom market is
one of the most liberalised markets in the world with private participation in all
segments. Growth in the sector was further spearheaded with announcement of
new telecom policy (NTP 1994 and NTP 1999) and with formation of Telecom
Regulatory Authority of India (TRAI-1997).
Figure 1-1 Major Phases of Growth of Telecom industry
SourceD & B Research, Overview of Indian Telecom Sector,Retrieved July 24, 2014, from https://www.dnb.co.in/IndianTelecomIndustry/OverviewTI.asp
Post 2000, Bharat Sanchar Nigam Limited was established and Videsh Sanchar
Nigam Limited was privatised (2002). With launch of mobile telephony 2002
onwards there was no look back for this sector and growth was fuelled further
with increase in limit of foreign direct investment (FDI) to 74 per cent in year
2005.
Figure 1-2 Yearly Growth Story of Telecom Industry
SourceGanesh, Soni, & Tirkey, Issues in Cellular Services in India, Retrieved July 24, 2014, from http://tejas.iimb.ac.in/articles/43.php
With explosive data growth, third generation (3G) and fourth generation (LTE)
technologies are now the key drivers for telecom sector now days.
1.3 PRESENT STATUSGlobalisation and progressive regulatory regime resulted into development of telecom
sector and sector became an integral part of Indian economy’s infrastructure. As per
TRAI data total gross revenue of Indian telecom sector after adjustment of intra Page |
operator interconnection charges increased from Rupees 1,859 billion in 2011-12 to
Rupees 2,020 billion in 2012-13, showing a growth of 8.68 per cent.
Figure 1-3 Telecom Sector Revenue (YOY)
Source TRAI multiple data base
Because of unprecedented growth in mobile telephony, the number of mobile
subscribers grew at unbelievable growth rate from ten million in 2002 to 867.80
million in 2013.The telephone density was a meagre 0.8 per cent in 1991 but now
stands at a respectable 69.29 per cent with urban and rural tele-density of 154.01 per
cent and 32.95 per cent respectively. The growth has so far breached several targets
set by the government and continues unabated. The target of tele-density of seven per
cent by 2005 and 15 per cent by the year2010 set in New Telecom Policy 1999 was
achieved in 2004 and2007 respectively and the target of 600 million connections set
by the planning commission for the end of XIth five-year plan(2007-12)was achieved
in February 2010.
As the growth continues the number of connections is set to cross the one billion mark
by the year 2014. More than 40 per cent of the current monthly addition over
18million customers are in rural areas. This growth will not be only in terms
traditional voice or broadband connections. With multiple research and design
activities being made in machine to machine communication, cloud computing,
tracking , and positioning, controlling devices and processes, smart meters, smart
grids and smart cities the number of connected devices and human being together is
going to exceed all estimates. India in 2013 had about 826 million connections against
six billion connections all over the world which gives further scope for advancement.
With the prevailing growth rate in India, We can assume that India will be having
major share in non-telephony connections. According to GSMA the total number of
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connections in world will be about 15 billion by 2015 and 50 billion by 2020. TRAI
assumed that India will have at least ten per cent or one and half billion connections
by 2015 and five billion connections by the year 2020.
Also being lucrative industry, the Indian telecom Industry is facing intense
competition and price war among approx. a dozen telecom service providers. The
New America Foundation's Open Technology Initiative (OTI) completed a survey on
the costs and types of mobile cell phone packages available to consumers around the
world where in India emerged as the country with lowest tariff and complete cell
phone package and it offers consistently lower prices than others.
Figure 1-4 Global Cell Phone Package Comparisons
Source Chiehyu Li and Bincy Ninan-Moses, An International Comparison of Cell Phone Plans and Prices, New America Foundation (U.S.A. October 14, 2010), p. 7
1.4 CHALLENGES BEING FACED BY THE TELECOM INDUSTRY:As evident from present status telecom industry is going through changing time where
in on one side revenue is under constraint and on another side cost is on upward side
because of requirement of modernisation of network to cater to new technologies.
Following are major identified challenges which are being faced by the telecom
industry:
a. Downward Trend in Subscriber Growth: Subscriber growth is already
down from 24 million a month to six million subscribers per month in last two
years. With rural network expansion still slow where only the growth
opportunities are there and disconnections increasing due to operators getting
rid of dormant accounts from their base figures, a real slowdown in overall
subscriber growth is clearly visible.
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Figure 1-5 Subscriber Growth Trend
Source TRAI Annual Report, 2012-13
b. The Network Reengineering: With spectrum becoming a costly and scarce
resource, every operator had to relook into their network design so that they
can leverage opportunities to deliver better quality at low cost. Also all
equipment which is eight to ten years old had to be replaced for want of
upgraded technology. This shall certainly require intense network planning,
rollout, and innovation that means additional cost to meet challenges of
Industry.
c. Ways to Maximise Return on Capital: Slow Revenue growth shall put
pressure on industry to monitor and control cost but on another side everyone
will like to increase revenue which will result in cost increase. Clearly that
will push industry to go ahead with project with good return of capital and
balance with low return of capital had to wait.
d. Data Explosion and Service Centric Industry: With influx of smart phones,
data growth is clearly visible and expects a data explosion in next five years.
Industry especially operators have to refocus their efforts on engaging
customers through services and experience. We shall see new services being
launched or existing one being made cost effective to gain volumes such as
mobile advertising, mobile TV, mobile Money.
e. Tough Regulatory Environment: With sudden growth in this evolving
industry marred by multiple scams regulator is forced to impose tough
regulatory norms. Some of these such as equipment testing are not practically
implementable in present environment hence spreading confusion in Industry.
With new government in place in 2014, expect that tough regulatory
environment shall prevail in next five years at least.Page |
f. Electronic Waste Generation: Operators who all started their operations in
2004-05 need to renew their network because there is need to upgrade
technology to milk existing network which will result into huge amount of
electronic scrap getting generated. This shall certainly leave an impact on
environment if not disposed properly.
Recent downsizing of most telecom companies signify continued headwinds being
faced by the challenges in the Indian telecom market. Few MNCs like DoCoMo,
Sistema even reduced their stakes in Indian venture. With huge investments required
by operators towards renewal of network to cater to data services the consolidation
process is expected to accelerate so that mounting debts in industry can be controlled.
Figure 1-6 Mounting Debts in Telecom Industry
(Source COAI, company reports, PWC)
After reviewing challenges, it is quite clear that telecom industry is going through
tough phase. While the industry hopes to hit the one billion subscription mark by
2014 it continues to be deeply constrained by the negative growth witnessed in
2012.Moreover Additional costs coming from these challenges will also add further
debt to debt ridden industry. Industry is at risk to become a low profit business and
with average revenue per unit (ARPU) under downward trend margins are stretched.
With the surge of third and fourth generation of technology, trend is moving from
voice to data services which are accelerating the growth of mobile telephony to new
heights. The telecommunications sector will continue to contribute significantly to the
growth of the Indian economy over the next few years. The growth in the spread of
telecom infrastructure and provision of services is humungous and this rapid growth
resulted into some processes in supply chains which are modest as sector was prima
facie revenue centric. There is a requirement that proactive steps must be taken to
repair the situation and optimise these processes so that costs can be optimised.
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This study is concentrated on one such major process that means supply chain
management. Supply chain management as a concept as well as Indian telecom
industry has come into limelight over the last 15-20 years. Because of sudden growth
in telecom industry and pressure being on revenues, sales modelling, network growth
and expansion across multiple technologies, supply chain management function
remained as a supporting function and industry could not enjoy the fruits of
optimisation of supply chain management which other industries such as automobile
industries easily did. The telecommunications supply chain begins with sourcing of
components like semiconductor chips and software. These components are
incorporated into equipment purchased by service providers. The service providers
then use the equipment to build networks and provider service to the end users. The
telecommunications industry is enabled by a complex supply chain that includes
a. Service Provider / Network operators
b. Equipment suppliers like Ericsson, Nokia Siemens, Huawei, ZTE etc.
c. Component suppliers (Mostly overseas suppliers of equipment suppliers)
d. Service providers for contract servicing, Logistics, warehousing etc.
e. Infrastructure Providers
f. Recyclers
India is able to drive innovation when it comes to software services in the telecom
space but the results are not encouraging when it comes to developing telecom
equipment. To become an important player in the global telecom space India need to
create a synergetic telecom ecosystem and build globally competitive supply chain.
Despite the growth in the number of subscribers the ecosystem so far failed to
adequately reap the benefits of efficient supply chain management. Since supply chain
management function is not able to pursue efficient functionality from passive to
active, as a result, the domestic telecom equipment manufacturing segment is not able
to meet the demand created by other segments of the telecom ecosystem forcing the
telecom operators to import most of the equipment required for their network. In
2008-09 alone, as per Directorate General of Commercial Intelligence and Statistics
(DGCIS) data, equipment worth Rupees 461.58 billion was imported by the Indian
telecom operators. According to a KPMG report, the telecom equipment market in
India is estimated to be Rupees 450 billion and growing at the rate 20-25 per cent per
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annum. With the right initiatives by all stakeholders the supply chain management can
make rapid strides and can help to establish a value chain which can create a large
value optimisation opportunity with the consequent benefits to the telecom industry
and the country.
1.5 CONCEPT OF SUPPLY CHAIN MANAGEMENTSupply chain management (SCM) is the management of the flow of goods and
services. It includes the movement and storage of raw materials, work-in-process
inventory, finished goods from point of origin to point of consumption, and reverse
logistics from point of consumption to point of repair/replacement and return. It is
network of interconnected or interlinked channels and node businesses for delivering
products and services to end customers in a supply chain. Supply chain management
has been defined as the design, planning, execution, control, and monitoring of supply
chain activities with the objective of creating net value, building a competitive
infrastructure, leveraging worldwide logistics, synchronising supply with demand and
measuring performance globally.
A supply chain is a set of organisations directly linked by one or more upstream and
downstream flows of products, services, finances or information from a source to a
customer. Supply chain management is the management of such a chain. Supply chain
management employs software includes tools or modules which are used to execute
supply chain transactions, manage supplier relationships, and control associated
business processes. Supply chain also includes the collection of goods for recycling
after consumer use including third-party logistics or other gathering agencies as part
of the raw material re-partition process. It is a way of illustrating the new endgame
strategy in line with organisations’ environmental strategy.
Supply chain management is a cross-functional approach that includes following
functions:
a. Managing the movement of raw materials into an organisation
b. Certain aspects of the internal processing of materials into finished goods,
c. The movement of finished goods out of the organisation and toward the end
consumer.
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As organisations want to focus on core competencies, they reduce their ownership of
raw materials sources and distribution channels. These functions are increasingly
being outsourced to other firms that can perform the activities better or with more
cost effectiveness. This study is an attempt to bring out relationship between supply
chain management and performance of telecom industry and how it can help to
improve the performance of industry.
1.6 FEATURES OF SUPPLY CHAIN MANAGEMENT:Supply chain management as a function has its reach starting from inception of any
project and goes up to final conclusion of project. One can find traces of supply chain
function in any aspect of the business of any organisation starting from strategic
approach towards decisions like make or buy, defining inventory norms or
operational challenges for day to day operations. Following are identified features of
supply chain management function which are critical to success of any organisation’s
supply chain policy:
a. Superior Customer Value: Ultimate objective of supply chain is to fulfil
customers’ requirement in cost efficient manner better than the competition.
While achieving this objective superior value to all stake holders is ensured.
b. Single Entity: Supply chain is always viewed as a single entity and it views
dealing organisation as a single entity. A group consisting of representatives
from various functions such as purchase, distribution, sales can be an entity for
finalising the marketing plan, dispatch plan, production plan or procurement
plan. Team work gives rise to this single entity and it helps in reducing
administrative delays and improving empathy across the supply chain.
c. Inventory Perspective: Earlier Inventories were viewed as buffer to reduce
co-ordination requirements across the network of activities as well as firms but
current supply chain concept view inventory in perspective of speedy flow and
buffer to be used as last option after proper information sharing and co-
ordination. This shall result in leaner system which will be more responsive in
long run and will help in improving flexibility, reducing replenishment cycle,
reducing uncertainties without keeping safety stocks, enhancing market
responsiveness capability, and improving quality.
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d. Strategic Orientation: Supply chain management decision is more a strategic
decision rather than an operational one. For example while hiring contractual
manpower for unloading truck from the market one could consider long-term
contract with supplier or transporter itself to unload the vehicles.
e. Outsourcing vs. In-sourcing: Current date norm in telecom industry is
outsourcing non-core process and remain focused on core competency. It’s a
strategic decision, which all activities need to be undertaken in house and
remaining should be given to outside firms who have better capability,
expertise, and volume to execute the same in more efficient and effective
ways.
f. Supply Chain relationships: Supply chain concept concentrates more of
partnering relationships among all members such as strategic partners,
suppliers, channel participants, and all third party logistics service providers.
This partnership philosophy helps members with high level of motivation to
take appropriate proactive actions for achieving objectives of organisation and
supply chain.
g. Flexible Approach: Efficient supply chain requires flexibility in processes
starting from planning, procurement to manufacturing to warehousing to
delivery. Since change is the only thing which is constant hence business
conditions also keeps on changing and flexibility is must.
1.7 IMPORTANCE OF SUPPLY CHAIN MANAGEMENT: Organisations increasingly find that they must rely on effective supply chains,
networks or business relationships to compete in the global market and networked
economy. In Peter Drucker's (1998) new management paradigms this concept of
business relationships extends beyond traditional enterprise boundaries and seeks to
organise entire business processes throughout a value chain of multiple companies.
In recent decade globalisation, outsourcing, and information technology have enabled
many organisations to successfully operate collaborative supply networks in which
each specialised business partner focuses on only a few key strategic activities. This
inter-organisational supply network can be acknowledged as a new form of
organisation. However with the complicated interactions among the players, the
network structure fits neither "market" nor "hierarchy" categories. From a systems
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perspective a complex network structure can be decomposed into individual
component firms. Traditionally companies in a supply network concentrate on the
inputs and outputs of the processes with little concern for the internal management
working of other individual players. Therefore the choice of an internal management
control structure is known to impact local firm performance. To quote Michael Porter,
the ‘competitive strategic guru’: “the element of strategic purchasing a vital
component in the corporate planning process is aimed at gaining competitive
advantage. Slowly but surely the importance of strategic supply chain management is
coming out of its closet.”
In the 21st century changes in the business environment have contributed to the
development of supply chain networks. As an outcome of globalisation and the
proliferation of multinational companies, joint ventures, strategic alliances, and
business partnerships, significant success factors were identified complementing the
earlier "just-in-time", lean manufacturing, and agile manufacturing practices. Also
technological changes particularly the fall in communication costs (a significant
component of transaction costs) have led to changes in co-ordination among the
members of the supply chain network . To generate the highest value to stake holders,
firms need to offer product/services which are of best quality at the same time cost
efficient coupled with an improvement of productivity and profitability by optimum
utilisation of resources reducing idle time. To achieve these objectives a successful
supply chain organisation is must. A good supply chain has cost saving potential by
maximising the value of product. Success of any company in supply chain fields
depends on meeting principle of five Rs’ that means supply chain success depends
upon planning and facilitating:
a. movement of Right thing
b. at the Right time
c. at the Right place
d. at the Right cost
e. In the Right quantity
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1.8 CRITICAL SUCCESS FACTORS OF SUPPLY CHAIN:
In order to achieve desired performance from supply chain we need to review factors
which affect success of any supply chain. Following are key factors which every
organisation need to possess so that supply chain of any organisation can be
successful:
a. Infrastructure flexibility: In order to meet the ever changing dynamic
environment of industry scenario infrastructure of supply chain management
has to be flexible so that it can accommodate the ever happening changes in
environment without impacting deliverables of supply chain such as spikes in
requirement due to sudden spurt in requirement.
b. Customer / Stake holders’ co-operation: While designing the supply chain
management it is must to involve all stake holders including customer so that
inputs can be considered at planning stage only and effective supply chain can
be set up. Without co-operation from all stake holders chances of success of
supply chain are limited.
c. Optimised network structure: Network structure needs to be optimised
considering the balance between cost of supply chain structure and
deliverables of supply chain. Balance needs to be achieved in order to meet the
5R objectives of supply chain that means movement of right thing at the right
time at the right place at the right cost in the right quantity.
d. Identification / Codification system: In order to ensure identification and
traceability of all components in supply chain codification methodology needs
to be finalised for components and processes. Codification is must for any
supply chain so that complete organisation speaks on one single platform.
e. Geographical constraints: Topographical constraints if any needs to be
reviewed and de-risked in advance so that geographical area dependency can
be pre-determined to design effective supply chain.
f. Process capability: Capability of supply chain processes needs to be
monitored, reviewed, and improved on continual basis to deliver optimum
results from a supply chain.
g. Logistics economics: Transport and logistics need to be economically
designed and route mappings need to be secured proactively so that waste
during transportation or any of the logistics’ process can be eliminated. Page |
h. Co-ordination: Co-ordination among the constituents or stake holders of
supply chain is mandatory. In absence of good co-ordination and effective
communication chances of success of supply chain are limited as most of time
stake holders may keep on resolving differences reactively and proactive
approach to problem solving in any process shall be missing.
1.9 SUPPLY CHAIN MANAGEMENT RELATIONSHIPSSupply chain management assimilates processes or major business functions which
occur through or across organisation. Supply chain activities such as purchasing,
logistics, inventory management etc. drives synchronisation of processes and
activities with and across multiple functions like marketing, sales, finance, planning,
product design, manufacturing, information technology, and operations etc.
Sales personnel have to understand the supply chain to commit the lead time of
product to customer and if both functions are not interlinked than most of time
commitment to customer will not be met. Similarly marketing personnel need to
understand supply chain cost, lead time of product to device product marketing
strategy. Speed to market or reducing the cycle time to develop new products can be
improved significantly through involving supply chain management in R&D
functions. For manufacturing, supply chain strategy is different for make to stock or
make to order. Production planning for make to stock products can’t be done till the
time supply chain is not integrated with manufacturing team for raw materials.
Information technology facilitates high degree of inter functions integration and co-
ordination with in the firm hence an effective supply chain system. For Finance,
supply chain activities affect profit and loss statements, balance sheets, and the cost of
capital. Significant opportunities exist in supply chain cost reduction, generation of
better returns on invested capitals.
2 LITERATURE REVIEWIt is well acknowledged fact that no study can be truly conceived and thoroughly
consummate without analysing –what had already been done in relation to topic.
Literature review is the review of previously recognised understanding concerning to
the area that allows us to observe what all had already been addressed and what all
still need to be addressed. Once we have knowledge of already done work and of the
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work to be done than we can give logical and purposeful structure to study to achieve
its objective. Literature review aids to magnify the study subject so that we can see its
prominence and relate it to work done on subject. It helps us in defining the problem
statement and study objective clearly. Review of literature supports to define
importance of the problem being envisaged for study and how same or similar
problem is addressed in any other studies. Review shall help us to understand the
related previous problem and how the previous one is going to help in achieving the
objectives of present study. Literature review helps us in acquiring understanding
through the consideration of principally practical studies and it is must to explore
already available understanding before exploring the area in which we are working
on.As it would be detailed in section 2.1 that there is very less studies which are
available for reference literature review hence most of literature review is being done
through supply chain guidelines from Telecom Regulatory Authority of India (TRAI)
papers, global studies on supply chain management, domestic studies on supply chain
management, white papers from various consultants and reference books.
Features of supply chain management are in existence from over last few eras whether
its purchasing or any of logistics activity however the term supply chain management
entered the public domain when Keith Oliver, a consultant at Booz Allen Hamilton
(now Booz & Company) used it in an interview for the Financial Times in 1982. It
gained admiration and acceptance in the mid-1990s, when a number of articles and
books were published on the subject. Supply chain research Group at the University
of Tennessee defines supply chain Management as the systematic strategic co-
ordination of multiple business functions and strategies within a particular company
across all business functions in and across an organisation, with the objectives of
improving the long-term performance of the individual companies and the supply
chain as a whole. Christopher (1992) defines a supply chain as the network of
organisations that are involved, through the upstream and downstream linkages in
different processes and activities that produces value in the form of products and
services in the hands of ultimate customers. A customer-focused definition is given by
Hines "Supply chain strategies require a total systems view of the links in the chain
that work together efficiently to create customer satisfaction at the end point of
delivery to the consumer. As a consequence costs must be lowered throughout the
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chain by driving out unnecessary expenses, movements, and handling. The main focus
is turned to efficiency and added value, or the end-user's perception of value.”
Supply chain management has its reach in entire process of any organisation.
According to the Council of supply chain management professionals (CSCMP),
supply chain management encompasses the planning and management of all activities
involved in sourcing, procurement, conversion, and logistics management. It also
includes co-ordination and collaboration with channel partners, which may be
suppliers, intermediaries, third-party service providers, or customers. Supply chain
management integrates supply and demand management within and across
companies. More recently the loosely coupled self-organising network of businesses
that cooperate to provide product and service offerings has been called the extended
enterprise.MIT (Massachusetts Institute of Technology) official definition “Integrated
supply chain management (ISCM) is a process oriented approach of procuring,
producing, and delivering products and services to customers. ISCM has a broad
scope that includes sub suppliers, suppliers, internal operations, trade customers, retail
customers, and end users. It covers the management of materials, information and
fund flows.” Ganeshan and Harrison mentioned supply chain as “A supply chain is a
network of facilities and distribution options that performs the functions of
procurement of materials, transformation of these materials into intermediate and
finished products and distribution of these products to customers.”
In current scenario supply chain is facilitating creation and development of strategic
partnerships and relationships between suppliers and customers. Ohio State
University’s Global SCM Forum says “Supply Chain Management is the management
of relationships in the network of organisations, from end customers through original
suppliers, using key cross-functional business processes to create value for customers
and other stakeholders.”Cisco mentioned that “Supply chain management aims to
increase sales, reduce costs, and make full use of assets by streamlining the
interaction and communication of participants along the supply chain. SCM solutions
are networking technology to link suppliers, distributors, and business partners to
better satisfy end customer while feeding real time data about customer demand into
the partners’ production and distribution processes”. Supply chain management is
often referred to an efficient management of the end to end process, which starts with
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design of product or service and end the time when it has been sold, consumed and
finally, discarded by the consumer. Ganesh kumar, C in his study on “Supply Chain
Performance and Organisational Performance of Manufacturing Industries in Union
Territory of Puducherry” study has revealed that supply chain performance strongly
influence organisational performance. Study concluded that Supply chain
performance of manufacturing enterprises is influenced largely by supply chain
competence and supply chain practices. Supply chain competence can be enhanced by
providing effective training to employees, utilizing 3PL and 4PL concepts to
concentrate entirely on core activities and outsourcing the non-core activities. The
manufacturing enterprises can improve their supply chain practices by monitoring
quality of their products and trying to innovate their product line to adopt changes
taking place in the environment.
Effective supply chain management involves a change from managing individual
function to assimilate activities into key supply chain processes. Supply chain
business process integration involves collaborative work between buyers and
suppliers, joint product development, common systems, and shared information.
Managing an integrated supply chain needs a seamless information flow. In order to
optimise product flows implementation of a process approach is must. Supply chain
management is the management of relationships in the network of organisations, from
end customers through original suppliers using key cross-functional business
processes to create value for customers and other stakeholders. Successful supply
chain management needs applying cross-functional practices within the company and
assimilating them with key associates of the supply chain. The key supply chain
processes stated by Lambert (2004) are
a. Customer relationship management process
b. Customer service management
c. Demand management style
d. Order fulfilment cycle
e. Manufacturing flow management process
f. Supplier relationship management
g. Product development and commercialisation
h. Returns management
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i. Procurement process
j. Physical distribution
k. Outsourcing/partnerships
l. Performance measurement
m. Warehousing management
A supply chain management is considered to be successful only if it leverages the
linkages among its member appropriately. Most of studies including the one by
Supply Chain Management Institution, Ohio University in “Building High
performance Business Relations” had brought the worth of partnerships for the
success of supply chain but the challenge is in Indian telecom scenario to find
effective approaches for evolving the right type of relationship. Partnerships are
costly propositions in terms of the time and effort required due to this an
organisation can’t make every supplier a strategic partner because of limitations of
resources. Hence it become utmost important that these scarce resources are used
only for associations which maximise benefits to organisations. In order to
identify the association where these kinds of partnership need to be used,
partnership approach is to be used which delivers an organised and repeatable
method to form and preserve custom-made business association that will be an
strength for organisations looking for competitive edge.
The partnership approach can be used to create relationships with utmost
important customers or suppliers where there is past experience of working
together and both sides understand the association as having the prospective for
strategic partnership. But in real world most of time these conditions are not met
hence Collaboration Framework can be used to frame collaborative business
relationships where the settings for using the partnership approach are not met
successfully. A new association with high prospective or a significant association
to each side that is not a balanced association are examples where the
collaboration framework can be used. The collaboration framework can be used in
the creation of product and service agreements with key associates be it customers
or suppliers. During the collaboration discussions decision makers from both
organisations explain their prospects and jointly come to an understanding on
objectives for the association.Page |
Guidelines from Telecom Regulatory Authority of India and Government of India
are clear on encouraging telecom equipment manufacturing. As per consultation
paper the time has come when we have to collectively discuss debate and finalise
measures that can become recommendations for the Government. Clear issue
identified in the study was how telecom manufacturing value chain needs to be
altered to benefit country’s telecom industry and economy of country. Value chain
depicts the sequence of activities which are must to bring a product from its
conception to its final disposal through stages of value chain. In case all the
activities of chain are controlled and executed with in boundary of country then it
can be termed as national value chain and in case any of the process happen
outside the country it is termed as global value chain. Though end customer may
receive the product from some Indian company but at the end of the day product
may be global and its intellectual property right may reside outside the boundaries
of country.
Figure 2-7 Telecom Manufacturing Value Chain
Source: TRAI, Consultation Paper on Encouraging Telecom Equipment Manufacturing in India
The Department of Telecom (DOT) data shows that production of telecom equipment
in India at the end of March 2009 stood at Rupees 51,800 Crore. As compared to this
Chinese telecom equipment maker M/S Huawei Technologies Co Ltd alone reported
revenue of Rupees 82,350 Crore in 2008. This reflects the amount of work which
needs to be done in developing the value chain for telecom sector as supply chain
management is an inherent part of this value chain. Development of infrastructure for
supply chain management is one of the key constituents of this value chain. Non-
availability of home-grown constituents is a foremost limitation in front of the
manufacturing industry of telecom sector. So in order to bring down the cost of
equipment being used in telecom sector massive indigenisation need to take place
starting from components’ level to final assembly then even to disposal of
components which have completed their life. All this massive drive shall require
supply chain constituents to achieve the target being set.
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2.1 GAPS IN THE EXISTING LITERATUREAs detailed above there are multiple studies on supply chain management as a generic
concept or in industries other than the telecom. There are very few studies which had
attempted to understand the supply chain management of telecom industry of India
which is one of the critical industries for country’s development and efficiency.
Considering the present changed scenario where subscriber’s growth is in negative
and industry is in debt there is a strong need to be very specific about ways / action
items which will minimise cost and maximise profit. Thus a need is felt to initiate
study in this direction on supply chain management of telecom industry so as to
evaluate bottlenecks and propose ways to enhance effectiveness of supply chain
management function of telecom industry. This study is a preliminary effort at the
supply chain management at telecom sector level.
3 DESCRIPTION OF PRESENT STUDYIndian telecom industry has got much importance in the Indian economy in present
scenario. While the estimates of impact of growth of telecom on a country’s economy
may vary from study to study but one cannot deny the fact that telecom is a critical
infrastructure sector having significant impact on other sectors and the economic
growth. On the basis of technical aspects telecom sector in India is bifurcated into two
segments mainly on wire line and wireless technology. As evident from records of
multiple government bodies, wire line subscribers are only three per cent of total
subscribers hence throughout this study concentration is given to wireless subscribers
and related organisations since they represent 97per cent of industry . To become a
force in the global telecom space, India needs to create an efficient supply chain
system and build globally competitive supply chain across the telecom sector. As the
supply chain gets altered and become more efficient, an all-round impact on the
telecom sector and the Indian economy would be evident. However there are multiple
challenges faced by the telecom sector today pushing for higher costs. Motivation to
this study comes from the challenges being faced by the telecom Industry which are
detailed in section 1.4.
To overcome these challenges impacting costs, cost management is a key which
industry has to adopt. Owing to these challenges very nature of telecom sector is
having the threat of risk imbibed in it. Need is felt that it is high time that cost needs
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to be optimised to manage the risk getting generated through these challenges. New
cost pressures shall mean a change in mind-set and the ability to think outside the box.
Organisations need to minimise the cost wastage getting generated in the process by
initiating critical thinking on components of process. This study brings out one such
component of telecom industry which can help to improve the performance of
industry which is supply chain management and its various sub functions. Supply
chain management’s main role is to integrate processes or major business functions
which run through or across organisation. For management of risk in telecom sector,
supply chain has to play a major role in synchronising processes to boost
organisational performances. Supply chain performance impacts the organisation’s
performance as it relates to its ability to deliver goods and services in the precise
quantities and at the precise times required by customers. Bowersox et al. incorporate
performance metrics such as customer satisfaction, delivery speed, delivery
dependability, and delivery flexibility. Marketing performance reflects the
organisation’s ability to increase sales and expand market share as compared to its
competition. Financial performance reflects an organisation’s profitability and return
on investment as compared to its competition. Therefore, it is necessary that supply
chain of telecom sector is analysed and studied to improve organisational
performance. Also both telecom industry and supply chain management function has
grown at fast pace in India in last 15-20 years, a need is felt to measure relationship
between these. Also not much study had been done on supply chain management of
telecom industry so it becomes important to study this relationship. Therefore, the
overall purpose of the study is to review “Supply Chain Operations and
Organisational Performance” in telecom industry.
4 OBJECTIVES AND HYPOTHESES OF STUDYThis study aims to verify various factors of supply chain impacting performance on
organisation level in telecom sector. It further aims to verify and validate key
functions of supply chain of telecom operator. The objectives of this specified
research are:
a. To examine the current supply chain dynamics of Indian telecom industry and
to identify key factors of telecom industry’s supply chain competitiveness
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b. To assess the existent parameters on which the supply chain performance is
measured
c. To identify bottlenecks of supply chain performance and to find out the way
they impact organisational performance
d. To suggest ways to enhance effectiveness of these supply chain operations
To operationalise above objectives following hypotheses are set for testing:
H1: There is significant impact between supply chain operations and operational
performance of organisation.
H2: Supply chain management has more impact on cost rather than revenue of
company.
4.1 LIMITATIONS OF STUDYThe limitation of the present study is that it may suffer from lack of representation
because of following factors:
a. Presence of indirect factors such as outsourcing impacting supply chain
b. Reliability of data provided by companies
c. Finally the study shall be restricted to a particular sample size else the study
scope shall have been extremely wide. However we shall be trying our level
best to ensure that sample chosen shall represent industry in its true sense.
5 METHODOLOGY TO BE ADOPTEDNot much information is available from secondary sources to prove the impact of
supply chain management on organisational performance in telecom sector’s set up in
India. There is a general impression held by the industry that supply chain
management activity is a support activity required to meet the revenue targets. There
is another view equally prevalent among the people in industry that technical
knowhow for the product is not must for supply chain professional. The proposed
study will build upon the information collected from the primary sources and it will
use secondary information wherever available. The primary data will be collected
from the structured questionnaires.
Initially a list of major players in telecom sector will be made and flow of information
and material flow among these players will be analysed. Further on the study proposes
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to identify the wastage getting generated in the process due to supply chain
operations. Some ware houses are in a bad shape and are generating more wastage.
Some other warehouses are just a ‘going concern’; with little or no prospect at present
to thrive in the future. Yet some other ware houses are thriving and handling the
goods carefully and contributing to profits. Since the economic conditions of industry
is undergoing a challenging situation where in operators are constrained to increase
the mobile tariffs but ever changing scenario such as increasing equipment price,
higher spectrum prices, wages, inflation etc. are pushing cost on upwards side hence
this impact of wastage getting generated shall be analysed.
At the third stage primary data received through questionnaire shall be analysed. Two
sets of questionnaire shall be circulated, the one from the supply chain professionals
and the other from the professionals other than the supply chain management. For
practical reasons, the total number of responses (from the two groups together) may
not exceed 150. The observation /data thus collected will be subjected to suitable
statistical analysis to draw conclusions and relevant statistical techniques shall be
used wherever applicable.
5.1 TENTATIVE CHAPTER PLANIt is envisaged that the study will be divided into six chapters.
Chapter-I: Introduction (Including Introduction to Telecom Industry, Supply Chain
Management, Statement of the Problem, Methodology of Data Collection and
Analysis etc.)
Chapter-II: Literature Review
Chapter-III:A Profile of Telecom Industry’s Dynamics, Its Challenges and Supply
Chain Dynamics of Industry
Chapter-IV: Supply Chain Operations and Their Impact on Competitiveness:
Empirical Analysis and Discussion
Chapter-V: Implications and Recommendations for Supply Chain Management.
Chapter-VI: Summary of Findings, Directions for Further Research and Conclusion
6 EXPECTED OUTCOME OF THE RESEARCHIn terms of contribution, the expected results of this study are related to advancement
of theoretical understanding of the supply chain management of telecom
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industrywhich represents a major process that is relevant to performance of
organisation in any business. By studying supply chain as well as knowledge
management of telecom industry the project will provide holistic understanding of the
topic. Since supply chain is having a cross-functional approach hence this study will
have the potential to discover whole new theoretical openings in the area of the
research. This study shall contribute to academic research in multiple ways. The one
theoretical contribution shall relate to innovativeness. The study is likely to bring out
a clear vision for changes in supply chain functions to suit the ever changing telecom
industry scenario.
I am quite hopeful that this study would provide the necessary platform for discussing
the important issue of supply chain operations and would enable us to make
significant improvement in the orderly growth of telecommunication sector taking
account of the interests of service providers, equipment suppliers, 3rd party logistics
providers, and other stake holder etc.
6.1 SOCIAL IMPACT This research project enhances the prospects of the telecom sector as a whole as it
improves the capabilities and competitive advantage of the organisations associated
with in this sector. The study also targets to review the right mix of manpower suited
to handle supply chain management function in organisation to improve their
possibilities for growth. The study will result in business environment with stronger
awareness of the challenges in telecom sector and concrete ways to overcome them.
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