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8/14/2019 Final Ops Draft
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1
University of East London
BetteringServiceSupplyRelations atSandwalkAgenciesSMM108 Marketing and ProductService Delivery
Amarnath GovindarajanStudent ID : U085386720th May 2009.Word Count : 3840
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Bettering Service Supply
Relations at Sandwalk Agencies
Contents1 Introduction........................................................................................................................4
2 Problem Statement.............................................................................................................5
2.1 Objective......................................................................................................................5
3 Methodology......................................................................................................................6
4 Review of Literature..........................................................................................................7
4.1 Prevalent Models in Indian agro-based Industries......................................................7
4.2 Deploying Information and Communication Technology In Agro Sector..................9
4.3 Adopting a two level bi-directional supply chain......................................................10
4.4 Implications of a bi-directional supply chain............................................................11
4.5 Supply Chain approach to service design..................................................................12
4.5.1 Information Management...................................................................................13
4.5.2 Factor Combination Management......................................................................13
4.5.3 Property Rights Management.............................................................................13
5 Findings & Conclusions...................................................................................................13
5.1 Deploying a bi-directional supply chain....................................................................14
5.2 Information management and factor combination management...............................16
5.3 The Sandwalk Service Blueprint...............................................................................16
5.4 Proposed Service Blueprint for Sandwalk Agencies.................................................19
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6 Recommendations............................................................................................................20
7 Bibliography.....................................................................................................................21
8 Appendix A......................................................................................................................22
9 Appendix B......................................................................................................................24
9.1 Supply Base Issues....................................................................................................24
9.2 Vendor development and Partnering.........................................................................24
9.3 Role of information technology (IT).........................................................................25
Role of information technology (IT)
Table of Figures
Figure 1 Depiction of Value Addition Centre (VAC) Model. Adapted from (Gandhi, Kumar,
& Marsh, 2001, p. 342)..............................................................................................................7
Figure 2 Two level bidirectional supply chain, Adapted from (Sampson, 2000)....................14
Figure 2 Two level bidirectional supply chain, Adapted from (Sampson, 2000)
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Bettering Service SupplyRelations at Sandwalk Agencies
1 Introduction
Sandwalk Agencies (Sandwalk) is a start-up firm that aims to source, process and export
agro-based products to both UK and Middle-East Asian markets. It is based in the south
Indian town of Coimbatore and will begin operations in the summer of 2009. It aims to trade
primarily in tropical flowers and fruits. Both of these are perishable commodities and would
therefore require considerable post-production processing. The supply chain management
shall also have to fine tuned to quick turn around times. One of the major pricing criteria for
flowers in the international markets is the freshness of the product. Therefore it would be
ideal if the product is processed in least amount of time after it is picked. In addition to a very
efficient supply chain seasonal variation in production also needs to be taken into account.
Sandwalk have developed a product calendar taking into account both market demand and
production variations. However the company has been facing difficulties in sourcing enough
quantities of desired products. Where available the company is unsure of the quality of the
product Sandwalk does not intend to be a producer in the short-term. The product calendar
and its resource requirements do not allow for an SME sized organization to set-up its own
production. Therefore Sandwalk aims to be a service organization that will source products
for foreign buyers, while on the other hand it will work with local producers to meet the
expectations of foreign buyers.
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2 Problem Statement
Sandwalk lacks a mechanism to communicate with its suppliers early on and is therefore
unable to source required products with appropriate quality assurances at the right time.
Sandwalk being an export oriented business requires products to be grown under different
circumstances than its domestic counterparts.
The usage of pesticides, fertilizers and other chemical agents need to be monitored and in
many cases avoided for the product to be qualified for export. The Department for Business,
Enterprise and Regulatory Reform (BERR) and Her Majesty's Revenue and Customs
(HMRC) lay down the regulations for importing agro-products into the UK; the regulations
include pesticide levels, type and other such parameters. Ideally it would be desirable to
educate the producer about these requirements rather than attempt to remove traces of
chemicals after harvest/picking.(Department for Business, Enterprise & Regulatory Reform,
2009)
2.1 Objective
The objective of the project is to provide Sandwalk Agencies with a framework to improve
its communication and relationship with producers and suppliers. The framework should
enable better communication, service supply relationships and long term vendor development
amongst other things. Sandwalk must be able to slowly incorporate traceability of the
products it sources and processes, improve quality standards by adhering to regulation from
day one of production and also be able to influence production levels and types over a period
of time.
3 Methodology
To achieve the objectives set about in Section Objective it is proposed to first study the
prevalent models that are being implemented in the agro-based SME sector in India.
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The models and supply chain management techniques can then be customized to suit the
requirements of Sandwalk. Such an approach would provide an insight into the workings of
existing agro-based SMEs in India. These insights would prove to be valuable in developing
Sandwalks supplier management framework. This effort is important for Sandwalk primarily
because it is a start-up that is yet to begin operations and is therefore in a position to learn
from others without any organizational baggage. One pitfall in this approach is it fails to
adequately address the requirements of the buyers. There is almost no primary data collection
from the suppliers however it is hoped to incorporate supplier interests in the report from
secondary sources.
Following the identification of an appropriate model for Sandwalk to build upon, the report
will then pick out factors that shall have to be customized for the model to be implemented. It
is expected that supplier management issues will garner much attention.
From a cursory study of the issues involved it has been identified that adopting a two level bi-
directional supply chain, incorporating traceability and vendor/supplier development would
be the key issues. The challenge would be to get the vendors and producers to work for
Sandwalk even while an opportunity exists to do business in the domestic market without any
additional effort or value addition. Besides, Sandwalk is only a SME sized enterprise,
therefore resources are not plenty.
4 Review of Literature
4.1 Prevalent Models in Indian agro-based Industries
There are five broad models for Indian agro-based industries that have been proposed by
Gandhi et al.(2001). They are
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co-operative organization model
government organization
private multinational partnering
multinational-local firm partnership
And finally value addition centre model. (VAC)
Figure 1 Depiction of Value Addition Centre (VAC) Model. Adapted from(Gandhi, Kumar, & Marsh, 2001, p. 342)
The models were studied in detail. Appendix Aprovides a brief description of the models,
and attempts to weigh the pros and cons of each model. In the course of the study the value
addition centre model (VAC) was found to be the most appropriate model for an SME such
as Sandwalk.
As described in Appendix A, the VAC model is conceived as a hub of activities for both post
and pre-harvest activities. The model is presented as one that provides technological know-
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how, market data and access to small and medium scale farmers. The benefits of such a
system are that it removes intermediaries at multiple stages, provides an integrated chain
from farm to the market and facilitates value addition. According to Gandhi et al.(2001)
although the VAC model may appear attractive as a concept it would require additional
organizational effort. It would also require investment in key enablers such as Information
and Communication Technology infrastructure (ICT).
The co-operative and government supported public sector models for agri-industry in India
can not be easily replicated by a SME start-up. The investment requirements and
infrastructure are simply out of reach. The private MNC models including the local firm
partnership models are also ruled out for the same reason. In the case of MNC contract
farming model the massive marketing and processing arm of PepsiCo were able to salvage
any short-term failure in regulating supply from a large supply base. This leaves out only the
ITC-VAC model as a base for Sandwalk to develop upon.
A good example for the VAC model is the ITC e-choupal project. ITC is a large Indian firm
that has a significant presence in agro-based products and agri-exports. This model is based
around village level information centres named e-choupal. The information centres are
owned by the ITC Company and operated by a local farmer. The company also employs a
local commission agent who will facilitate the logistics required. The model operates like a
virtual co-operative where the farmers are supplied with relevant information regarding
prices, demand and weather. The ITC then buys back the farm produce at these information
centres at much better rates than what was offered in traditional mandis (markets). This is
possible due to elimination of intermediaries and multiple handling. (Rao, 2007)
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The ITC E-choupal model has been fairly successful with about 31,000 villages benefitting
from the choupal information service across seven Indian states. Rao (2007) mentions two
main factors that led to the success of ITC. They are:
The ability of the ITC firm to deploy and exploit an extensive Information and
Communication Technology (ICT) infrastructure.
The ability of ITC to conceive and co-ordinate a two level bidirectional supply chain
across this massive ICT infrastructure.
To be able to further understand the VAC model the above two factors are further explored in
the next sections.
1.1 Deploying Information and Communication Technology In Agro
Sector
Rao (2007) proposes two frameworks to serve as a frame of reference for further
development and study of deploying ICT in agro-based industries. The two useable
perspectives that suit the context of this project is:
Closed vertical food supply chain network within clearly defined businesses
An open chain network with dynamically evolving partners and local communities.
The second perspective would require an effort at the government level involving providing
last mile connectivity, spatial data solutions integrating available natural resources and
socioeconomic data at national/regional level. Such an environment is not present in the
region Sandwalk proposes to operate. In the case of the first perspective it has been found to
be quite an expensive proposition for an SME. Rao (2007) foresees the requirement to deploy
VSAT, training facilities and adequate scaling to cover a considerable area. However there is
hope for an SME.
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In the case of ITC it still had to hire commission agents to facilitate logistics required. Given
the scale of proposed operations the possibility of training conventional suppliers to act as
communication and commission agents can be explored. In other words Sandwalk could use
suppliers or intermediaries instead of ICT. The benefits that were provided to farmers directly
could now be delivered to intermediaries/suppliers who would then pass on the information
to their respective clients. Such a scenario requires an understanding of information flow
from customer to supplier. There is also the case of co-ordinating demand and supply. These
issues are best understood within the bi-directional supply chain framework.
1.1 Adopting a two level bi-directional supply chain
A two level bi-directional supply chain is one in which the initial service provider is the
interface between the service customer and the service supplier. (Sampson, 2000, p. 355) It
is a concept originally developed for services in which a clear customer-supplier duality may
be noticed. Customer-supplier duality is a scenario in which an individual provides the input
for the service organization either in the form of belonging, their minds or in cases like
photography or beauty parlours: even themselves; it would be the same individual that had
just supplied the input that will receive output. (Sampson, 2000)
Even though originally developed for services that clearly exhibit the customer-supplier
duality Sampson (2000) agrees that such a supply chain may also be employed in situations
where the original input provider is not the receiver of the output. That
individual/organization may instead receive other benefits. It has been argued that in the
postal service both the sender of the post and the receiver are customers where the sender is
charged whereas the receiver in most cases is not.
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1.2 Implications of a bi-directional supply chain
Sampson (2000) goes on to list the managerial implications of a service designed around a bi-
directional supply chain. See Appendix B for a detailed study of these managerial
implications and key differences between an ordinary and a bi-directional supply chain for a
service organization. One major theme recurrent in all implications concerning a bi-
directional supply chain is the management of supply relationships.
Insufficient communication between partners has been attributed as the primary reason for
breakdowns or inefficient in service supply relationships. Conflicts, organizational and
cultural differences owe their origins to insufficient communication between the partners.
(Ahlstrom & Nordin, 2006) In the existing practise the businesses or service providers
attempt to withhold all sorts of information in the name of trade secrets, sometimes at the cost
of suppliers unable to understand the requirements or the context of the requirement.
Lamming et al.(2005) make a case for making more information available to stakeholders and
partners despite the trade-risks. They argue that if transparency is achieved on either sides it
would prove immensly beneficial. Besides risks are mitigated if the transparency is mutual
due to increasing level of trust that go along with transparency.
1.3 Supply Chain approach to service design
In an integrated supply chain one stakeholders action produces a cascading effect on others.
In services where a bidirectional supply chain is integral the input process is going to directly
affect the output process; directly affecting the customer-supplier. An inadequate output
maybe the result of an inadequate input each being given in or taken away by the customer-
supplier. To be able to design the entire service based on these dynamics Sampson (2000)
recommends the service blueprinting process. The process is linear and two dimensional; one
dimension denotes the passage of time and the other denotes visits/re-visits to customer
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interaction. Four key action areas may be identified by four horizontal separator lines in a
service blueprint. These are described in Table 1.
Table 1 Lines of Interaction in a Service Blueprint. Adapted from (Flieb &Kleinaltenkamp, 2004, p. 396)
Line type Description
Line of Interaction This separates the customer action area from service provider action area.
Line of Visibility This differentiates activities that are visible and those that are invisible to thecustomer. Front office activities are featured above this line.
Line of InternalInteraction
Support process, back room processes are placed below the line of internalinteraction.
Line of Implementation
This line separates the support zone and management zone of the serviceprocess. Management processes are closed associated with specific service
processes. For example: allocation of additional resources.
However it is also possible to design a service blueprint around the first three lines
mentioned. Integral to the process of evolving a service blueprint is the identification of
failure points/areas where the service blueprint inefficiencies may lead to service failures. To
this end Flieb & Kleinaltenkamp(2004) propose three measures to reduces chances of service
failure and increasing efficieny. They are studied below.
1.3.1 Information Management
This involves increasing the over-all process awareness across the blueprint including
suppliers and customers by providing sufficient service process evidence, i.e. an insight into
the service process from time to time. This would provide the stakeholders with an
appreciation of the service process. It would make the customer/supplier aware of the
expected participation from their side for an improved service process.
1.3.2 Factor Combination Management
This involves studying the relevant external and internal factors in a service process; and
jointly exploiting them for maximum efficiency. For example standard levels can be set for
important critical activities and depending on the standard level the service process may
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incorporate changes to the process. For example: a customer input that requires more
processing at one level may be accorded a processing agent with high efficiency/capacity.
This would require a standardisation/proper classification of form of inputs, internal and
external factors.
1.3.3 Property Rights Management
This entails proper contract management, with the supplier/customer being made aware of
exact extent of property rights over process inputs and outputs. A dispute on property rights
might prove disastrous.
2 Findings & Conclusions
The studies undertaken in Section Prevalent Models in Indian agro-based Industriesindicated
that the Value Addition Centre model (VAC) was the most appropriate amongst the available
models. Further analysis of the model in Sections Deploying Information and
Communication Technology In Agro Sector revealed that deploying information and
communication infrastructure (a key enabled for VAC model) over a sizeable area was quite
out of reach for a small/medium enterprise. Where the company had used ICT to the
maximum extent it could be reasonably substituted with the intermediaries already trading in
the market. While efforts can be made to reach the suppliers directly with a decent level of
success it is doubtful if such an approach would be scalable in the long run. Despite a clear
cost imposition the intermediaries would still require much less resources than deploying an
ICT network as it was done with the VAC model. Therefore finding means to increase
efficiency of communication with the suppliers and being able to influence the suppliers
through intermediaries in the long term are the two main issues that require to be addressed.
It has been proposed to adopt a bi-directional supply chain approach to counter these issues.
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grown with the help of VAC to the VAC which then processes the product and exports the
product. The customer-supplier both receives and supplies. There is definitely a case for
customer-supplier duality.
A case can be made against this duality citing that the information supplied by VAC does not
constitute anything more than feedback on the product. A closer study reveals the VAC
provides much more than mere information services in many cases information on expected
product prices during harvest season, logistics to move produce, pesticides, fertilizers and
even experts are supplied to improve farm productivity. This constitutes much more than
feedback.
Further it was found (Section Supply Chain approach to service design, Supply Chain
approach to service design) that a service process can be much more efficiently run with the
entire process evolved around the bi-directional supply chain. Literature recommends using
the service blueprint tool to produce a service design. This exercise was carried out. In
addition to the service blueprint it was also learnt that the supply chain efficiency can be
improved using information management and factor combination management. Appendix B
describes some of managerial/practical implication of bi-directional supply chains.
2.2 Information management and factor combination management
In section Information Management(Information Management) it was learned how providing
a clear idea of the service process and the requirements in advance to the customer-supplier
would enhance the efficiency of the supply chain. The need for transparency without
compromising on trade secrets was also discussed earlier in section (Implications of a bi-
directional supply chain). Clearly information management is a crucial area. Communications
with the consumer-suppliers can make or break the service process. Considering the proposal
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of using intermediaries instead of direct information and communication technology presence
(ICT) it would be required to evolve a well defined supplier development program.
After information management the next important issue would be factor combination
management. It would entail evolving standardised procedures or tools that would help
analyse both external and internal factors. The analysis could then used as a basis for further
decisions. In the case of Sandwalk for example a standardised farm file for every farm/land
holding that records soil properties and water salinity can be used to decide on fertilizer,
irrigation schedules and passed on to supplier.
2.3 The Sandwalk Service Blueprint
A prototype service blueprint (Section Proposed Service Blueprint for Sandwalk Agencies)
has been drawn up based on the framework studied earlier in section Supply Chain approach
to service design. The blueprint lays emphasis on inspection and crop monitoring. These two
make the supply chain a bi-directional one. Three main failure points have been identified.
Two out of the three are related to information/communication management. Any gap left
unplugged here could lead in variations in input that will go on to affect processing and
shipping schedules. This gap or error could occur at two instances before the seeds are sown
or during the inspection/query activities. A failure to accurately communicate the pricing,
quantity required and product types at the requirement and contract stage can either cause the
service provider to default on contracts with its buyers from abroad and may cause quality
issues as well.
The role of inspection and crop monitoring begins once the requirements are passed on to the
growers. Contracts at this stage are informal as theyre not easily legally enforceable in
Indian conditions. As previously mentioned information management and factor combination
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management have their largest role here. The crops will need to be periodically inspected and
the growers provided as much information and assistance as could reasonably be provided.
Regular inspection also provide for growers to interact with the service provides. Processing
and shipment being in-house activities are behind the lines of visibility. Less attention has
been provided to those areas and failure points since theyre out of scope of this report. Only
a general gist of the elements that would constitute physical evidence during each stage of
customer activity have been provided. In practise it would be necessary to adopt such
elements that are easily accepted and passed down by the intermediaries to the grower. It is
also important that these physical evidences reach the growers ultimately.
This report has made an attempt to answer the basic queries raised by Sandwalk Agencies. It
more or less makes a case for treating suppliers on par with customers in fact it goes a step
beyond and explores the intricacies of customer-supplier duality. Perhaps it is the
acknowledgement of customer-supplier duality that would need to come first to the
organization in order to be able to get the suppliers working for them and more importantly
for the organization.
Factors like transparency and information management that make bi-directional supply chains
a success have also been discussed. The service blueprint provides for an over-all framework
that was required to base the operations of Sandwalk agencies. A set of recommendations that
will help Sandwalk Agencies evolve and build on the present prototype have also been
provided in the last section.
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Leaflet2.4 Proposed Service Blueprint for Sandwalk Agencies
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3 Recommendations
It needs to be mentioned that during the initial operational phases Sandwalk would be using
market intermediaries to be able to reach suppliers. So in a sense the intermediaries are also a
set of suppliers.
It would be necessary to devote time and resources for vendor/supplier development. The
whole service process of the organization hinges upon the possibility of being able to secure a
set of decent suppliers that are co-operative and participatory in the service process. Specific
mechanisms and direct contact facilities in addition to direct marketing efforts will have to be
pursued to get the suppliers involved and producing.
Sandwalk Agencies must ensure that the product calendar development takes care of issues
such as domestic demand and local crop preferences. It would be quite an undertaking to
convince the growers to abandon traditional crops and shift to new types. Changes will need
to be incremental and preferably decisions on change should be arrived with the participation
of customer-suppliers.
The possibility of outsourcing post-harvest processing to the suppliers/intermediaries can also
be explored at later stages. This would leave Sandwalk Agency a solely knowledge based
company that provides know how for growers and then trades the products to the market.
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4 Bibliography
Ahlstrom, P., & Nordin, F. (2006). Problems in establishing service supply relationships:
Evidence from a high-tech manufacturing company. Journal of Purchasing & Supply
Management, 12, 75-89.
Department for Business, Enterprise & Regulatory Reform. (2009). Importing into the UK -
Introduction. Retrieved May 18, 2009, from Department of Business Enterprise and
Regulatory Reforms: http://www.berr.gov.uk/whatwedo/europeandtrade/importing-into-
uk/page9728.html
Flieb, S., & Kleinaltenkamp, M. (2004). Blueprinting the service company. Managing
Service processes efficiently.Journal of Business Research , 392-404.
Gandhi, V., Kumar, G., & Marsh, R. (2001). Agroindustry for small and rural farmer
developement: Issues and Lessons from India.International Food and Agribuisness Review ,
331-344.
Lamming, R., Caldwell, N., Phillips, W., & Harrison, D. (2005). Sharing Sensitive
Information in Supply Relationships: The flaws in one-way open-book negotiation and the
need for transparency.European Management Journal, 23, 554-563.
R.J.Vokurka. (1998). Supplier Partnerships: a case study. Product and Inventory
Management Journal, 39 (1), 30-35.
Rao, N. (2007). A framework for implementing information and communication technologies
in agricultural development in India. Technological Forecasting & Social Change , 491-518.
Sampson, S. E. (2000). Customer-supplier duality and bidirectional supply chains in service
organizations.International Journal of Service Industry Management, 11 (4), 348-364.
Zeithaml, V., & Bitner, M. (2000). Services Marketing. New York: Irwin McGraw-Hill.
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5 Appendix A
There are four broad models for Indian agro-based industries that have been proposed by
Gandhi et al.(2001). They are
co-operative organization model
government organization
private multinational partnering
multinational-local firm partnership
And finally value addition centre model. (VAC)
The first two models are both top heavy, require massive investment with operations
spanning over more than one district. The co-operative organization runs according to Co-
operative Society laws and is collectively owned by the farmers. The farmers co-operate at
various levels and are centrally managed by a district committee. The government
organization model is ideal for a public sector organization with the government establishing
and operating cold-storage centres, information centres and finally marketing the product.
The private multinational partnering model was evolved by PepsiCo in the Indian state of
Punjab. It entailed mass contract farming with the company choosing to take the informal
route to enforce contracts. It would also suffer losses of about Rs.40 million a year for three
years before the venture was profitable. It involved provision of seedlings, computerized
planting patterns and schedules. Overall such a model requires enormous amount of resources
with the company micro-managing everything including planting of the crops.
Similarly the multi-national-local firm model also required massive investments and direct
government backing. The project involved corporate farming over a large area owned by the
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company. The project has hit a road block due to laws proscribing private corporations from
owning farm land and may never be implemented.
Finally the value addition centre model: It is conceived as a hub of activities for both post and
pre-harvest activities. The model is presented as one that provides technological know-how,
market data and access to small and medium scale farmers. It would compete directly with
the traders network to purchase back the product thanks to its offering of an integrated
package of services to the farmers. The benefits of such a system are that it removes
intermediaries at multiple stages, provides an integrated chain from farm to the market and
facilitates value addition. According to Gandhi et al.(2001) this VAC model is attractive as a
concept but may require additional organizational effort.
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1 Appendix B
Listed below are some of the practical implications of adopting a bi-directional supply chain
as put forward by (Sampson, 2000)
1.1 Supply Base Issues
Manufacturers have to make three important decisions related to supply bases: make or buy,
number of suppliers and finally supplier selection. Sampson (2000) argues these are a little
different for service organizations that run a bidirectional supply chain.
In a service organization running a bidirectional supply chain the input taken in is well and
truly outsourced to the consumer-supplier. In cases where the value added product is
directly provided to the consumer-supplier it is desirable to have as many suppliers as
possible for it means a directly proportional increase in business. Supplier selection is
fundamentally different because it is the supplier (consumer-supplier) that chooses the
service organization.
1.2 Vendor development and Partnering
Partnering is a mutually beneficial process; it would help improve the quality of the input
provided by the consumer-supplier. The direct incentive to the consumer-supplier for
partnering is that better inputs produce better outputs from the service organization.
(R.J.Vokurka, 1998 cited in (Sampson, 2000)) The major challenge for a service organization
to partner with a customer-supplier is to manage partnering with a large quantity of customer-
suppliers. Where a long term relationship can be cultivated vendor development is much
more appropriate.
1.3 Role of information technology (IT)
Because bidirectional supply chains are rather short, just-in-time and require quicker response
from consumer-suppliers an appropriate medium of communication with the suppliers would
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need to be established. Once again the number of consumer-suppliers that need to be
communicated with is crucial this usually dictates what sort of medium needs to be
established.