Background of the Study
The fast-moving consumer goods (FMCG) are also called the “consumer packaged goods”. They include groceries and other items consumers buy at regular periods; like household accessories, shampoos, toilet soaps and certain electronic goods. These goods have a high rate of return (Ray et al. 2016).
The supply chain landscape is not static, it continues to evolve and vary in size, configuration, shape and management strategy. The supply chain lifecycle is similar to the product lifecycle, it starts with the stages of emergence, growth, maturity and decline. This lifecycle is applicable in different industries, including the FMCG industry (MacCarthy et al. 2016).
There are many sorts of risk associated with the FMCG supply chain management. The internal and external forces affect the effectiveness of the supply chain. In order to enhance its efficiency and effectiveness, FMCG organizations use the agile to reduce the cost of production and timely respond to the customer needs (Agigi, Niemann & Kotzé 2016).
This research critically analyzes the importance of using the agile supply chain in the FMCG industry, its framework and dimensions. Also, it discusses its impact on the FMCG organizational capabilities and the best measurements that fit the agile strategy.
The supply chain strategy in each organization is derived from its unique characteristics, customer focus, channels of distribution and investment mix. Focusing on the most strategic priorities and capabilities and aligning them with the organizational goals is the key to create a competitive advantage. The FMCG business strategy involves one or a mixture of four key supply chain strategies, represented in the competitive, partnered, responsive (agile) or sustainable strategy. The responsive or agile strategy refers to being able to adaptively and quickly respond to the consumers, retailers and suppliers’ changing needs and requirements while ensuring risk management through the supply chain (A.T. Kearney 2017).
A survey was conducted by A.T. Kearney in 2017 about the Australian Food and Grocery Council (AFGC) members, revealed that the dominant strategy among them is the responsive (agile) strategy. About 3 out of five members used this strategy in 2015 and still using it. An increasing attention of the FMCG organization is devoted to using technology to help in producing innovative products. Miragliotta et al. (2009), as cited in Balocco et al. (2011), discussed the main advantages of using the radio-frequency identification (RFID) on the supply chain performance. RFID is used to automatically identify tags of products and easily tracks them.
Problem and Management Decision
The management problem
FMCG organizations are required to carry out effective and adequate supply chain management to make sure that business performance always improves upon. The assessment of current situation shall be done to find out new initiatives that may be implemented for managing supply chains. The management needs to assess the current scenario and determines the new measures that should be implemented to maintain supply chain agility and faster launch of the new products (Bourlakis & Matopoulos 2010). The research problem could be stated as follows: “Measuring the impact of using the agile supply chain management on the organizational capabilities in the FMCG industry in Australia”.
Research question
The following research questions will be answered upon the completion of the research:
- What are the difficulties that need to be resolved within the supply chain of the FMCG organizations in Australia?
- What is the current status of using an agile strategy in the supply chain management at the FMCG organizations in Australia?
- What are the new measures and tools relevant to the agile strategy that can utilize the management of the FMCG supply chains?
The information required to answer the research questions will include the perception of the supply chain manaagers and the changes that should be made to the organization for managing and improving the supply chains in Australia.
Objectives
- To assess the factors that contribute to the supply chain management in the FMCG organizations.
- To determine the issues associated with supply chain agility in the FMCG organizations.
- To determine the benefits of using the agile supply chain in FMCG organizations.
- To develop a list of tools and measures that can be used to improve supply chain management.
Supply chain management
Supply chain management refers to the active management of the supply chain in order to maximize the value to the customer and create an organizational competitive advantage. The supply chain activities include the sourcing, product development, the production process and logistics management. Organizations should operate the supply chain effectively and efficiently. Managing the linkages between the supply chain activities is likely to increase the value creation and the customer satisfaction. It is important to lower the cost of production along the chain activities by eliminating the unnecessary expenses to achieve system effectiveness. Efficiency could be achieved by solving problems and removing bottlenecks (MacCarthy et al. 2016).
The value-chain concept
The value chain concept depends on the organizational strategic planning and extends beyond the organizational boundaries to include the distribution networks. Different factors are involved in the delivery of the products and services to the customer (Donovan et al. 2015).
The lean concept
A lean concept is a team-based approach to continuous improvements that focus on waste elimination to create a value-added. This concept has been lately applied in the supply chain and logistics management issues (A.T. Kearney 2017).
Key supply chain activities of the FMCG organizations
The FMCG supply chain activities include primary activities and supporting activities. The primary activities are the inbound logistics, operations, outbound logistics, sales and marketing and services. The support activities include the procurement activities, technology development, human resource management and firm infrastructure (Ray et al. 2016).
Literature Review
The agility concept in the FMCG industry
Agility refers to the organization’s ability to respond to the changes in demand rapidly in terms of quantity and variety. Agility is about the organization-wide capability, including the information systems, organizational structure and logistics processes. The agile organization is flexible because it mainly depends on the flexible manufacturing systems (FMS). It is often used by the lean manufacturing to achieve the zero inventory and the just-in-time production. The lean strategy focuses on the elimination of all the waste and non-value adding activities, but the agile strategy requires rapid reconfiguration in response to the customer needs and waste elimination as much as possible (Gligor, Esmark & Holcomb 2015).
Christopher (2000), argues that organizations would have to choose between the pure agile or a lean strategy to adopt within its supply chain. Sometimes they will have to combine between the two strategies in a hybrid strategy. The supply chain may require to be lean for some activities and agile for the rest.
The agile supply chain dimensions are customer enriching, enhancing competitiveness through cooperation, mastering change and uncertainty through the organization. According to van Hoek, Harrison & Christopher (2001), the agile supply chain framework involves the following:
- Customer sensitivity or the customer-centered rather than product centered logistics.
- The virtual integration that represents the immediate conversion of consumer demand into new products and services by using knowledge-based methods rather than the multi-function methods.
- Process integration that represents the self-management to maximize the autonomy rather than the standardization of work.
- Network integration that depends on the fluid clusters of networks rather than the long-term relationships.
- Measurement is based on capabilities rather than the lean measurements of quality and productivity.
According to KPMG 2014, as cited in Agigi, Niemann & Kotzé (2016), the FMCG industry is the largest industry worldwide. It is rapid and agile and produces diverse products. The grocery production faces diverse risks represented in the loss of key suppliers, the limited amount of safety stock and variation in the fuel costs.
Some FMCG organizations operate their own distribution channels and sell their products in their wholesale or retail stores. These organizations have the chance to timely detect the consumer needs. Their ability to respond to them rapidly is higher compared to other manufacturers. They can fully realize that the customer experience focuses on the intangible business aspects that require shifting the sales of goods into services (Sachdeva & Goel 2015).
Measures of evaluation
Globalization has resulted in networked collaboration between the partners from different world countries. The organizations that could not integrate, were unable to achieve the required performance level and failed. According to Ritala & Ellonen (2010), as cited in Ray et al. (2016), creating a source of competitive advantage depends on the performance of the network of organizations rather than the old concept of depending on the organizational inherent intangible resources.
According to Anu (2014), as cited in Ray et al. (2016), the modelling processes could be used to solve supply chain problems through information sharing with the different involved stakeholders. The End-to-end resource planning (EERP) improved the information flow through the supply chain. The complexity of the supply chain management requires special measures that can detect and evaluate the different factors that interact within the system. According to Ekinci & Baykasoglu (2016), entropy represents an indicator of variability, hidden activities and connections within the system. It could be used to measure the rate of information dissemination within the supply chain.
Research design and justification
The research design is important in assessing the appropriate approach to be used in solving the research problem and answering the research questions (Rajasekar, Philominathan & Chinnathambi 2013).
This research follows the ontology philosophical paradigm that assumes an external reality exists. It is a way of understanding the world phenomenon. It depends on objective approaches to discover the social concepts related to the phenomenon of the investigation. The used approach is the positivist that uses objective data collection and hypotheses testing. It requires the researcher to be objective and not to follow his personal feelings in order to achieve unbiased theory development (Xian & Meng-Lewis 2018).
In order to pursue the truth in this research, the researcher will depend on the descriptive research design to describe the phenomenon of applying the agile supply chain management in the FMCG in Australia on the organizational capabilities.
Subjects for study and selection process
The positivist research involves an evaluation of the facts and truth that requires a distance between the researcher and the phenomenon of investigation (Xian & Meng-Lewis 2018). Positivism involves using the quantitative research that begins with the sample selection. The type of data will be the primary data collection from the respondents. The sampling method that will be used in this research is a convenience sampling or the availability sampling. It is a type of non-probability sampling method that depends on data collection from the population members who are conveniently available and meet certain practical criteria. Also, the members of the targeted population should be homogeneous to assure that no differences will occur in the research results (Etikan, Musa & Alkassim 2016).
The targeted sample of this research is the FMCG companies that use the agile supply chain management. The research will consider the member organizations of the Australian Food and Grocery Council (AFGC). The members represent the leading national companies in Australia operating in food, drink and grocery manufacturing industry. They are 180 companies, where about 3 out of five companies depend on the agile strategy, which means that the sample size will be 108 companies (A.T. Kearney 2017). The questionnaires will be distributed to the managers and staff members.
Conceptualization and measurement
This research depends on the quantitative data analysis that comes after the primary data collection. It requires a precise definition of the used measurements for the research variables (Flick 2013).
This research considers the independent variable represented in the organizational capabilities and the dependent variable represented in the agile supply chain management. The organizational capability measures consider the capability of the organization to create a competitive advantage, cost reduction, customer satisfaction and measuring the entropy. The measurements of the agile supply chain management include customer sensitivity, virtual integration, process integration and network integration.
The researcher will depend on the construct validity that deals with the questions or the operationalized variables. Also, it will consider the content validity that covers the concepts within the dimensions. Moreover, it will consider the empirical validity that assures the internal validity of the variables and that they are empirically correlated. Statistical methods will be used to ensure data reliability, including the Cronbach’s Alpha test and t-test (Centellas 2016).
Data collection method
The data collection methods should match the research design. This implies that the method to be used in this research is quantitative questionnaires. The researcher will create the questionnaire that will use closed questions. This method requires accurate selection of the questions, managing the sequence of the questions, offering limited options for an answer, the sequence of the questionnaire should follow the logical thinking, no spelling mistakes exist and it assures that the questions are easy to understand (Hirzalla & van Zoonen 2017). The questionnaire will be manually distributed and gathered from the respondents within a 3-month timeframe.
Data analysis
After finishing the data collection phase, the quantitative data analysis will take place. The quantitative data analysis measures the quantities or amounts that result in a set of numbers. The results will be presented in graphic and tabular formats. It will represent frequency distribution and statistics summary, relationships among the research variables, sub-group analysis, statistical models and results generalization from sample to population (World Health Organization 2014). The independent variable is represented in organizational capabilities and the dependent variable is represented in agile supply chain management.
Social research should consider the ethical issues and the national and international laws of each subject area. The researcher should follow the academic citation. The ethical principles of dealing with human participants should be followed. The human rights should be respected, including data privacy and confidentiality of the personal information. The arrangements of the post-study, including the respondents’ interventions should be clearly documented. It is important that an ethical committee reviews the research before the final approval. The research study and the statistical analysis should be accurately approached and clearly justified. The research should be done according to the appropriate risk management and conducted by qualified researchers. High care should be devoted when implementing the research, including the appropriate setting. The country laws and regulation in relevance to ethical research might regulate the data collection process, storage of the personal data and protection of people who refuse to participate in the research. In compliance with the governance concerns, the adverse issues that occur during the research should be reported to the review ethical committee that approves the final research (Harriss & Atkinson 2011).
This research is limited to testing the impact of the independent variable represented in organizational capabilities on the dependent variable represented in agile supply chain management. It is not meant to investigate any other variables.
The research results will be analyzed by using the quantitative method and the judgments will ensure objectivity to be able to generalize the results to the population.
This research is limited in space, it will take place in Australia. It is limited in the number of investigated companies represented in the member organizations of the Australian Food and Grocery Council (AFGC). The sample size is 108 and it will consider the opinions of the supply chain managers.
References
A.T. Kearney 2017, ‘Supply chain strategy and capability assessment: Creating a stronger voice for Australia’s FMCG supply chain practitioners’, A.T. Kearney, India.
Agigi, A, Niemann, W & Kotzé, T 2016, ‘Supply chain design approaches for supply chain resilience: A qualitative study of South African fast moving consumer goods grocery manufacturers’, Journal of Transport and Supply Chain Management, vol 10, no. 1, pp. 1-15.
Balocco, R, Miragliotta, G, Perego, A & Tumino, A 2011, ‘RFId adoption in the FMCG supply chain: an interpretative framework’, Supply Chain Management: An International Journal, vol 16, no. 5, pp. 299-315.
Bourlakis, M & Matopoulos, A 2010, ‘Trends in food supply chain management.’, in Delivering performance in food supply chain, Woodhead Publishing Ltd., UK.
Centellas, M 2016, Research methods handbook, University of Mississippi, Mississippi.
Christopher, M 2000, ‘The agile supply chain: Competing in volatile markets’, Industrial Marketing Management, vol 29, pp. 37-44.
Donovan, J, Franzel, S, Cunha, M, Gyau, A & Mithöfer, D 2015, ‘Guides for value chain development: A comparative competitive’, Journal of Agribusiness in Developing and Emerging Economies, vol 5, no. 1, pp. 2-23.
Ekinci, E & Baykasoglu, A 2016, ‘Modelling complexity in retail supply chains’, Kybernetes, vol 45, no. 2, pp. 297-322.
Etikan, I, Musa, S & Alkassim, R 2016, ‘Comparison of convenience sampling and purposive sampling’, American Journal of Theoretical and Applied Statistics, vol 5, no. 1, pp. 1-4.
Flick, U 2013, Mapping the Field, SAGE, USA.
Gligor, D, Esmark, C & Holcomb, M 2015, ‘Performance outcomes of supply chain agility: When should you be agile?’, Journal of Operations Management, vol 33, no. 34, pp. 71-82.
Harriss, D & Atkinson, G 2011, ‘Update – Ethical Standards in Sport and Exercise Science Research’, Editorial, vol 32, pp. 819–821.
Hirzalla, F & van Zoonen, L 2017, ‘Research methods for critical audience studies’, in The International Encyclopedia of Media Effects, Wiley-Blackwell, UK.
MacCarthy, B, Blome, C, Olhager, J, Srai, J & Zhao, X 2016, ‘Supply chain evolution – theory, concepts and science’, International Journal of Operations & Production Management, vol 36, no. 12, pp. 1696-1718.
Ogunlela, G & Lekhanya, L 2016, ‘The use of integrated supply chain management model for promoting competitiveness in the fast moving consumer goods (FMCG) manufacturing industry in Nigeria’, Problems and Perspectives in Management, vol 14, no. 1, pp. 160-167.
Rajasekar, S, Philominathan, P & Chinnathambi, V 2013, ‘Research methodology’, Cornell University, New York.
Ray, S, Basak, A, Fatima, K & Seddiqe, I 2016, ‘Study on supply chain management of industries in FMCG sector in Bangladesh’, Global Journal of Researches in Engineering, vol 16, no. 2, pp. 29-34.
Sachdeva, I & Goel, S 2015, ‘Retail store environment and customer experience: a paradigm’, Journal of Fashion Marketing and Management, vol 19, no. 3, pp. 290-298.
van Hoek, R, Harrison, A & Christopher, M 2001, ‘Measuring agile capabilities in the supply chain’, International Journal of Operations & Production Management, vol 21, no. 1/2, pp. 126-148.
World Health Organization 2014, ‘Data, analysis and presentation’, World Health Organization, Geneva.
Xian, H & Meng-Lewis, Y 2018, Business Research Methods for Chinese students: A practical guide to your research project, SAGE Publications Ltd, London
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