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Identifying sources of uncertainty to generate supply chain redesign

strategies

Article  in  International Journal of Physical Distribution & Logistics Management · August 2002

DOI: 10.1108/09600030210437951 · Source: OAI

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 T h e rese a rch reg is te r fo r th is jo u rn a l is a v a ila b le a t T h e cu rren t iss u e a n d fu ll tex t a rch iv e o f th is jo u rn a l is a v a ila b le a t
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Identifying sources of Supply chain

redesign
uncertainty to generate supply strategies

chain redesign strategies

Jack G.A.J. van der Vorst 409
Department of Management Research, Wageningen University, Received June 2001
Wageningen, The Netherlands, and Revised November 2001
Accepted March 2002
Adrie J.M. Beulens
Department of Information Technology, Wageningen University,
Wageningen, The Netherlands
Keywords Supply chain management, Uncertainty, Case studies, Food industry
Abstract Dynamic demands and constraints imposed by a rapidly changing business
environment make it increasingly necessary for companies in the food supply chain to
cooperate with each other. The main questions individual (food) companies face are whether,
why, how and with whom they should start supply chain management activities. Presents a
qualitative research method for analyzing a supply chain network and for identifying effective
chain redesign strategies. Presents a generic list of supply chain redesign strategies based on a
multi-disciplinary literature review. Proposes that in order to identify the most effective strategies
in a specific chain scenario one should focus on the identification and management of the sources
of uncertainties in the supply chain’s decision-making processes. The application of the research
method in three food supply chains resulted in a valuable tool that can be used in supply chain
redesign projects, as it indicates potentially effective redesign strategies when a specific source of
uncertainty is encountered in a supply chain.

Introduction
Companies increasingly see themselves as part of a supply chain that has to
compete against other supply chains, rather than as a single firm competing
against other individual firms (Christopher, 1998). This holds true especially
in food supply chains because of shelf life constraints of food products and
increased consumer attention for safe and environment/animal-friendly
production methods (Boehlje et al., 1995). Recent events have increased
interest in supply chain management (SCM) as a means of improving the
strength of supply chains. Examples are the BSE crisis in the UK, classical
swine fever in The Netherlands and the recent spread of foot-and-mouth
disease in Europe. The tracking and tracing of the whereabouts of the
animals and the activities undertaken in the whole supply chain proved to be
essential in preventing the further spread of diseases and in gaining
consumer trust. These crises made managers aware that incorrect actions at
one stage in the supply chain affected the performance of the complete supply
chain and that there was a need for integrated control and intensified International Journal of Physical
cooperation in the supply chain. Furthermore, the increased interest in SCM Distribution & Logistics
Management,
has been spurred by intensified competition due to open EU-markets and Vol. 32 No. 6, 2002, pp. 409-430.
# MCB UP Limited, 0960-0035
developments in information and communication technology (ICT) that DOI 10.1108/09600030210437951
IJPDLM enable the frequent exchange of huge amounts of information for
32,6 coordination purposes.
Since the 1980s, literature on SCM has stressed the need for collaboration
among successive actors, from primary producer to final consumers, to better
satisfy consumer demand at lower costs. As defined by the Global Supply
Chain Forum, SCM integrates business processes from end user to original
410 suppliers; and it provides products, services and information that add value for
customers and stakeholders (Lambert et al., 1998). A driving force behind SCM
is the recognition that sub-optimization occurs if each organization attempts to
optimize its own results rather than optimize the performance of the chain by
integrating its goals and activities with other organizations (Cooper et al., 1997).
Stevens (1989) refers to the interdependency of activities:
If one activity fails, the chain is disrupted, creating poor performance and destabilizing the
workload in other areas, thereby jeopardizing the effectiveness of the supply chain.

Cooper et al. (1997) extend SCM beyond logistics. Based on a review of the
literature and management practices, the authors conclude that there is a need
for some level of coordination of activities and logistical as well as other
business processes within and between organizations in the supply chain. An
example is designing products for SCM (e.g. Lee and Sasser, 1995). Considering
these definitions of SCM and those of, among others, Ellram (1991), Bechtel and
Jayaram (1997) and Lambert and Cooper (2000), we define SCM as follows:
SCM is the integrated planning, co-ordination and control of all business processes and
activities in the supply chain to deliver superior consumer value at minimum cost to the
end-consumer while satisfying requirements of other stakeholders.

In a literature review on SCM, Beamon (1998) found that a number of issues

have not yet been adequately addressed in the literature. This conclusion was
supported by Lambert and Cooper (2000), who see a need for building theory
and developing normative tools and methods for successful SCM practice. The
following questions, among many others, were identified by Lambert and
Cooper (2000) as potential research opportunities:
How should a firm decide which internal process to link with which
supplier(s) and customer(s)?
What decision criteria determine whose internal business processes
prevail across all or part of the supply chain?
How should a firm analyze the network to determine if there is a better
configuration?
What are potential barriers to implementation and how should they be
overcome?
Our research aims to fill in part of these knowledge gaps concerning the
redesign process of SCM. The main questions individual (food) companies face
are whether, why, how and with whom they should start SCM activities.
Companies should be able to analyze what SCM can do for them and find out
what the consequences might be if a supply chain view is taken together with Supply chain
one or more supplier and/or customer. The aim of this paper is to present a redesign
qualitative research method for analyzing supply chains and for identifying strategies
effective chain redesign strategies. In this paper we will:
(1) introduce the concept of ``sources of uncertainty in supply chain decision
making processes’’ as a key driver for chain redesign;
411
(2) present a generic list of SCM redesign strategies based on a multi-
disciplinary literature review;
(3) present a generic list of sources of uncertainty indicating opportunities
for SCM based on three case studies; and
(4) conclude with a tool for supply chain redesign, whereby the
identification of the sources of uncertainty supports the selection of the
relevant SCM redesign strategies.
This paper is organized as follows: first, a literature review is presented
followed by a discussion of the research model. To identify relevant redesign
strategies the concept of supply chain uncertainty is elaborated upon and an
overview is given of supply chain redesign strategies. The main section of the
paper describes the case study methodology and the main case study results,
i.e. a generic list of sources of uncertainty that indicate opportunities for supply
chain management. Next, a tool for chain redesign is presented. The paper
concludes with a brief discussion and summary of this contribution.

Literature review
Around 1990, academics first described SCM from a theoretical standpoint to
clarify how it differed from more traditional approaches to managing the flow
of materials and the associated flow of information (Ellram and Cooper, 1990).
Initially, according to Bechtel and Jayaram (1997), the emphasis was on
facilitating product movement and coordinating supply and demand between a
supplier and buyer. Logistics managers in retail, grocery, and other high
inventory industries began to see that a significant competitive advantage
could be derived through the management of materials through inbound and
outbound channels. Although at the beginning SCM was mainly discussed in
purchasing literature, the emphasis now lies on the process of supplying goods
to consumers to fulfil their needs.
SCM literature provides little information about complete methodologies
that could provide guidelines on how to redesign supply chains and evaluate
these redesigns qualitatively and quantitatively (Beamon, 1998; Lambert and
Cooper, 2000). Most approaches focus on parts of such an integrated
methodology. Process mapping techniques, for example, have received
particular attention (see Hines and Rich (1997) for an overview). Stern et al.
(1996) propose the most generic chain redesign method. They lay out a
marketing channel planning approach that permits the reorientation of
distribution systems so that they are more responsive to customer needs. Best
IJPDLM practice distribution systems are designed by bringing together information on
32,6 the following elements:
Existing system. An accurate description is needed of the current
distribution system, the market coverage it provides, the value-added
activities it performs, and the present and future challenges it faces.
412 Ideal distribution system. Starting from a blank sheet the ideal system is
designed. This calls for thorough research on end-user wishes in order to
segment markets before actually delivering the service outputs.
Constraints. Current and future biases, objectives, constraints, and
threats imposed by internal and external factors are identified.
Although very useful at the strategic level, the main weakness of this redesign
approach is its lack of attention to operational aspects. From a strategic
perspective, end-user wishes are identified and translated into chain
requirements. But how these requirements are translated into relevant settings
for all strategic and operational redesign variables is not clear. ``Do what you
think best’’ is the only guiding principle in this more detailed part of the
approach.
From a more operational perspective, Handfield and Nichols (1999) present
an approach for cycle-time reduction, which comprises six steps. They use as a
starting point two or more organizations that have agreed to set up a supply
chain; but, unlike Stern et al. they focus solely on cycle-time reduction. Beamon
and Ware (1998) developed a process quality model that, according to them, can
be used to assess the performance of a supply chain system and its sub-
systems, assist in identifying quality problem areas, and provide a framework
for continuous improvement. However, they do not give a methodology on how
to establish the improvement other than to ``identify and prioritize
improvement plans’’. In this paper we aim to present a more integrated
approach to supply chain redesign.

Uncertainty and SCM

In the literature, uncertainties in supply, process and demand are recognized to
have a major impact on the manufacturing function (cf. Wilding, 1998). We
agree with Davis (1993), who believes that the real problem in managing and
controlling complex networks is ``the uncertainty that plagues them’’.
Uncertainty propagates throughout the network and leads to inefficient
processing and non-value adding activities. This uncertainty is expressed in
questions such as: what will my customers order, how many products should
we have in stock, and will the supplier deliver the requested goods on time and
according to the demanded specifications? ``The more uncertainty related to a
process, the more waste there will be in the process’’ (Persson, 1995). The
presence of uncertainty stimulates the decision maker to create safety buffers
in time, capacity or inventory to prevent a bad chain performance. These
buffers will restrict operational performances and suspend competitive
advantage. We agree with Mason-Jones and Towill (1998), who state that Supply chain
``those companies which cope best with uncertainty are most likely to produce redesign
internationally competitive bottom-line performances’’. But what is strategies
``uncertainty’’?
Our definition of supply chain uncertainty is based on the five requirements
for effective system management by de Leeuw (2000). If one or more of these
requirements is not fulfilled, decision makers in the supply chain will 413
experience uncertainty resulting in ineffectiveness (i.e. not realizing planned
objectives):
(1) The managing system should have an objective and corresponding
performance indicators to manage the supply chain in the right
direction.
(2) To estimate future system states one has to have information on the
environment and current supply chain state.
(3) There should be enough information processing capacities to process
information on the environment and supply chain state.
(4) In order to direct the managed system in the right direction one should
be able to estimate the impact of alternative actions. This requires a
model of the system, presenting the relationships between available
redesign variables and performance indicators.
(5) There should be enough potential control actions. Each environment-
supply chain state combination requires one or more different control
actions to manage the system in the direction of the objectives.
We define supply chain uncertainty as follows:
Supply chain uncertainty refers to decision making situations in the supply chain in which
the decision maker does not know definitely what to decide as he is indistinct about the
objectives; lacks information about (or understanding of) the supply chain or its environment;
lacks information processing capacities; is unable to accurately predict the impact of possible
control actions on supply chain behavior; or, lacks effective control actions (non-
controllability).

Partnerships with key suppliers and customers may reduce uncertainty and
complexity in an ever-changing global environment and minimize risk while
maintaining flexibility (Handfield and Nichols, 1999). By breaking down the
walls between supply chain stages (and thus enlarging the system), SCM
provides the opportunity to reduce decision-making uncertainties within the
system, which have been considered by management up to now to be
unchangeable external ``givens’’ (Silver et al., 1998; Van der Vorst, 2000). More
information and control actions will become available to the decision makers in
each stage since additional coordination activities can be employed with
suppliers and customers. Hence, they will be able to manage the system in the
direction of the organizational and/or supply chain objectives. This process is
depicted in Figure 1. After internal integration, uncertainty can be further
reduced through coordination with the environment (SCM). The remaining
IJPDLM
32,6

414

Figure 1.
Decision-making
uncertainty as a design
variable and its
implications

uncertainty results in emergency measures (e.g. an additional delivery to a

customer for only a few products) or deviations from required performance (e.g.
lower delivery reliability).
The SCM literature discusses a lot of different supply chain redesign
strategies that can be used to reduce supply chain uncertainty and, as a result,
improve chain performance. However, it is unclear what strategy should be
used in what particular situation and, furthermore, a complete list of chain
redesign strategies has not been reported up to now.

Supply chain redesign strategies

Based on an extended multi-disciplinary multi-industry literature review (in
SCM, logistics management, business process re-engineering, marketing and
operational research journals), we developed a generic list of supply chain
redesign strategies mentioned in literature that focus on chain performance
improvement. The use of one or several of these redesign strategies will alter
the logistical chain scenario, i.e. the design of and logistical way of working in
the supply chain. In detail, a chain scenario can be described by four elements:
(1) Chain configuration: the structure, facilities and means, the parties
involved and the roles to be performed in the supply chain.
(2) Chain control structure: the set of decision functions (located at multiple
decision layers with different decision horizons) that govern the
execution of operational activities aimed at realizing logistical objectives
within the constraints set by the chain configuration and strategic
objectives (e.g. delivery frequency, order acceptance policy, production
planning structure, etc.).
(3) Chain information systems: the systems (with their characteristics) that
support decision making and/or are required to perform operations (e.g.
EDI, ERP, APS, etc.).
 (4) Chain organization and governance structures, which assign tasks Supply chain
(along with the corresponding responsibilities and authorities) to redesign
organizations and persons in the supply chain. strategies
Table I presents an overview of redesign strategies, categorized by element of
the chain scenario; and it refers to the most relevant articles on each strategy
(note that some authors may suggest more redesign strategies). 415
Sources of supply chain uncertainty
Our research model is based on the following proposition:
P. To identify effective chain redesign strategies for a particular
established supply chain, one should focus on the identification and
management of the sources of uncertainties in decision-making
processes that hinder optimal chain performance.
According to this proposition, potentially effective redesign strategies can be
recognized via the analysis and identification of sources of decision-making
uncertainties in the supply chain in the light of chain performance
requirements. Sources of uncertainty are characteristic features of the system
that are responsible for causing uncertainty for a particular decision maker.
These sources of supply chain uncertainty can be categorized as:
(1) Inherent characteristics that cause more or less predictable fluctuations
(which have stochastic occurrence patterns). Uncertainty may take the
form of high variability in demand, process or supply, which in turn
creates problems in planning, scheduling and control that jeopardize
delivery performance (Fisher et al., 1997). Because of the specific product
and process characteristics in food supply chains, such as perishability
of end products, variable harvest and production yields and the huge
impact of weather conditions on consumer demand, these chains are
especially vulnerable to this type of uncertainty.
(2) Characteristic features of the chain that result in potential disturbances
of system performance (non-optimality):
chain configuration (e.g. inflexible capacities);
chain control structure (e.g. wrong decision rules applied);
chain information system (e.g. information delays); and/or
chain organization and governance structure (e.g. misjudgment by a
decision maker).
(3) Exogenous phenomena that disturb the system, such as changes in
markets, products, technology, competitors and governmental
regulations. As Van der Heijden (1996) states:
Forecasts may work very well for a while, but forecasters need to be aware of the
variables that could suddenly break historic patterns and create new trends.
 32,6

416

Table I.

strategies
IJPDLM

Supply chain redesign

Main references

Supply chain configuration

1. Redesign the roles and processes in the supply chain Stern et al. (1996); Thomas and
a) Change or reduce the number of parties involved Griffin (1996); Lee and Tang (1997);
b) Change the location of facilities Van Hoek (1998)
c) Re-allocate the roles actors perform and related processes
d) Eliminate non-value-adding activities
Supply chain control structure
2. Reduce customer order lead times Stalk and Hout (1990); Hoekstra and
a) Change position of chain decoupling point Romme (1992); Jordan and Graves (1995);
b) Implement ICT systems for information exchange and decision support Christopher (1998); Handfield and
c) Reduce waiting times Nichols (1999)
d) Create parallel administrative and logistical processes
e) Increase manufacturing flexibility
f) Improve reliability of supply and production quantity and quality
3. Synchronize all logistical processes to customer demand Womack et al. (1990); Kurt Salmon
a) Increase number of events per time unit (frequency) for all processes Associates (1993); Persson (1995)
b) Decrease the lot sizes applied in the supply chain
4. Coordinate and simplify logistical decisions Lee et al. (1997); Garg and Lee (1999)
a) Coordinate and redesign policies (especially batch sizes)
b) Eliminate or reduce human interventions
c) Differentiate to products, systems and processes
d) Simplify structures, systems, processes and products
Supply chain information system
5. Create information transparency in the supply chain Houlihan (1985); Davenport and
a) Establish an information exchange infrastructure in the supply chain and exchange demand, Short (1990); Lewis and Naim (1995);
supply, inventory or WIP information Bowersox et al. (1998)
b) Increase information timelines by implementing real-time information systems
c) Develop a common database and standardize bar coding
Supply chain organizational structure
6. Jointly define chain objectives and performance indicators Champy (1995); Christopher (1998);
a) Jointly define logistical chain objectives and corresponding chain PIs Quinn (1999)
b) Agree on how to measure logistical performances
c) Align employee’s incentives with chain objectives
The management task is first to redesign the supply chain for optimal Supply chain
performance in line with chain objectives while reducing the potential for redesign
randomness. Then to protect (i.e. redesign) the system against the remaining strategies
random probabilistic events and exogenous events that disturb the system.
Since this paper focuses on supply chain redesign to achieve optimality within
the supply chain, we will leave out the environmental impacts.
A potentially effective chain scenario can be established by selecting one or 417
more of the redesign strategies. Therefore, we are interested in the relationship
between sources of uncertainty and effective supply chain redesign strategies.
When an effective scenario is implemented in a supply chain, this should
reduce uncertainties and, as a result, improve chain performance. These
relationships are depicted in our research model (Figure 2). The underlying
assumption here is that if there were no uncertainties the chain scenario and
chain performance in a given environment would be optimal.
The next section presents the research methodology that was used to test
our proposition. This methodology focuses on the identification of sources of
uncertainty in food supply chains and the relationship between these sources
and potential SCM redesign strategies.

Research methodology
According to Yin (1994), the case study is the preferred strategy in exploratory
research, because:
``how’’ questions are posed to identify operational links, which have to be
traced over time;
the investigator has little control over events (unlike in an experiment);
and
the focus is on a contemporary phenomenon within some real-life
context.
In our research, we tried to explain causal links in real-life interventions that
are too complex for the survey method or for experimental strategies. Yin
(1994) adds that the results of case studies can be generalized to support
theoretical propositions, but they do not apply automatically to populations or
universes.
Three cases were selected. First, a supply chain for fresh vegetables and
fruits in The Netherlands comprising multiple growers, auctions, importers, a
focal export firm, and multiple foreign retailers. Second, a supply chain for

Figure 2.
Research model
IJPDLM chilled salads comprising multiple suppliers, an industrial chilled salad
32,6 producer, one retailer distribution center and about 100 retail outlets. And
third, a supply chain for cheese products comprising two cheese factories, a
cheese processor, one retail distribution center and 30 retail outlets.
All three case studies aimed at identifying feasible chain scenarios that would
achieve an integral chain performance improvement. In each case study, project
418 teams were formed consisting of key decision makers in all supply chain stages:
managers responsible for logistics (purchasing, warehousing, distribution) and
information management, and the managing directors. The project teams were
used for expert testing purposes to validate the results obtained.

Case study protocol

According to Yin (1994), the quality of a research project and its case study
design can be tested in four areas. Table II presents the results of such an
evaluation indicating the suitability of our research design. In each case study,
we adhered to three principles of data collection:
(1) Use of multiple sources of data collection (triangulation):
repeated semi-structured interviews with key representatives
concerning current system structure and their opinions about
current and past system states;
direct observations during field visits. We spent a great deal of time
with those familiar with (a particular part of) the supply chain

Criteria Definition Main case study tactics used

Construct validity Establishing correct Using multiple sources of

operational measures for evidence: literature, discussions
the concepts being with key participants in project
studied teams and with other researchers,
observations
Internal validity Establishing causal Constructing cause-effect models
relationships between and discussing these with key
research variables (certain chain participants; comparing
conditions are shown to empirically based relationships
lead to other conditions) with predicted ones (customer
claim analysis etc.)
External validity Establishing the domain Replication logic applied to
to which a study’s multiple case studies
findings can be
generalized
Reliability Demonstrating that the Establishing a case study protocol
operations of a study can that is used in each case study;
Table II. be repeated with the same detailed reporting of all
Evaluation of the results assumptions and relations
research design identified and data used
 system in order to identify all elements of the real system that could Supply chain
have a significant impact upon chain performance; and redesign
mapping of all business processes, including discussions in project strategies
team meetings with key managers and employees to verify the
maps and identify redesign opportunities for performance
improvements.
419
(2) Creation of a case study database (with narratives, notes, computerized
files, etc.) so that all information can be retrieved later. In our research,
all notes, interview reports, and other findings were transformed into
computerized files, which were subsequently verified by the
interviewees.
(3) Maintenance of a chain of evidence, such that an external observer could
follow the derivation of any evidence from initial research questions to
ultimate case study conclusions. This was accomplished by presenting
our ``chain of evidence’’ in the group discussions, where it could be
evaluated and criticized.
In each case study, the following research questions were discussed and
answered in project team meetings:
What are the supply chain objectives and performance indicators?
What chain scenario is currently being implemented (referring to the
four elements)?
What uncertainties are present? Do they restrict chain performance? If
so, how?
What are the sources of these supply chain uncertainties?
What supply chain redesign strategies could be effective for each source
of uncertainty?
To assist in answering these questions, two methods were applied in the case
studies: process mapping techniques and cause-effect modeling. To redesign
chain processes, one has to describe them thoroughly and analyze their
relationships with other processes and chain performance. The inter- and
intra-company value-adding processes have to be mapped to fully
understand the value streams in which an organization currently operates
(Turner, 1993). We have found that, in supply chains with an emphasis on
time management, a combination of two different mapping tools can fulfil
these requirements:
(1) Organization description language for describing in detail the inputs,
transformation (including procedures and responsibilities) and outputs
of each business process in the supply chain (Uijttenbroek et al., 1995).
For example, for the process ``order picking’’: input is the order picking
list with demanded quantities per product specification per customer
order; transformation concerns the picking procedure (including
IJPDLM rationing policies if shortages occur); and outputs refer to a
32,6 confirmation to administration (indicating shortages), corrected
warehouse inventory records and (partially or fully) picked orders (see
Figure 3).
(2) Event process chain (EPC) modeling (Kim, 1995) for describing the
dynamic behavior of the supply chain processes. This approach is
420 specifically focused on time and place (i.e. the organizational unit where
the process takes place) to visualize and reduce throughput times. By
explicit modeling of time, we can identify bottlenecks in both
administrative and physical logistical activities. Graphic depiction of all
relevant processes in the supply chain offers, in our experience, an
excellent tool for discussing relationships between processes and for
defining redesign strategies that reduce throughput times. Figure 4
presents an example of a simple EPC model.
The second method used is the formulation of cause-effect models, starting
with customer complaints in close cooperation with the problem owners, i.e.
the key decision makers in the supply chain. Via these models the main
sources of uncertainties can be identified and typified. Figure 5 depicts a
simplified example of such a cause-effect model for the supply chain of chilled
salads.

Figure 3.
Example of an ODL map

Figure 4.
Example of a time-
related EPC model
 Supply chain
redesign
strategies

421

Figure 5.
Overview of part of a
cause-effect model
concerning stock outs in
retail outlets

A generic list of sources of supply chain uncertainty

The application of the case study protocol in each case study resulted
successively in:
the definition of chain objectives and relevant performance indicators
(including norms);
a detailed description of the current chain scenario;
a typology of decision-making uncertainties currently experienced by
decision makers in the supply chain (see Table III); and
a list of factors that created these supply chain uncertainties.
When the identified sources in all three case studies are gathered and
compared, a generic list of sources of supply chain uncertainty becomes
apparent (see Table IV). We will now discuss each of the sources and present
some examples from the case studies. Next we will focus on effective redesign
strategies.

Quantity aspects Quality aspects Time aspects

Supply Supply quantities Supply qualities Supplier lead time

Demand and distribution Customer demand Customer demand Customer order
for product for product distribution lead
quantities specifications time
Process Production yield Produced product Production
and scrap; quality; product throughput times; Table III.
write-offs quality after storing time Typology of sources of
storage supply chain
Planning and control Information Information Information uncertainty and the
availability accuracy throughput times aspects they concern
 32,6

422

strategies
Table IV.
IJPDLM

Generic sources of
uncertainty linked to
supply chain redesign
Generic sources Supply chain redesign strategies

Inherent characteristics
Product, demand, process and supply 1c) Re-allocate the roles actors perform in the chain and related processes
characteristics 1d) Eliminate non-value-adding activities
2g) Improve the reliability of supply and production quantity and quality
4a) Coordinate and redesign policies
5b) Exchange demand, supply, inventory or work-in-process information
Supply chain configuration
Chain infrastructure 1a) Change or reduce the parties involved
1b) Change the location of facilities
Parallel interaction 1a) Change or reduce the parties involved
3a) Increase the number of events per time unit (frequency) for all processes
5a) Establish an information exchange infrastructure in the chain and exchange demand, supply,
inventory or work-in-process information
6a) Jointly define logistical chain objectives
Chain facilities 1c) Re-allocate the roles actors perform and related processes
Supply chain control structure
Information lead time and decision 2c) Implement ICT systems for information exchange and decision support
process time 2d) Reduce waiting times
Supply, manufacturing and distribution 1a) Change or reduce the parties involved
lead time 1b) Change the location of facilities
1c) Re-allocate the roles actors perform and related processes
1d) Eliminate non-value-adding activities
2a) Change position of chain decoupling point
2d) Reduce waiting times
2e) Create parallel administrative and logistical processes
2f) Increase manufacturing flexibility
4a) Coordinate and redesign policies
Order sales period 3a) Increase the number of events per time unit (frequency) for all processes
3b) Decrease the lot sizes applied
(continued)
Generic sources Supply chain redesign strategies

Administrative and decision procedure 2c) Implement ICT systems for decision support
4a) Coordinate and redesign policies
Decision complexity 1a) Change or reduce the parties involved
1c) Re-allocate the roles actors perform and related processes
1d) Eliminate non-value-adding activities
4c) Differentiate to products, systems and processes
4d) Simplify structures, systems, processes and products
Supply chain information system
Data timelines 2c/5b) Implement real-time ICT systems for information exchange
2d) Reduce waiting times
Data and definition accuracy and 2c) Implement real-time ICT systems for information exchange and decision support
applicability 5c) Develop a common database and standardize bar-coding
6a) Jointly define logistical chain objectives and chain performance indicators
6b) Agree on how to measure logistical performances in the supply chain
Information availability 5a) Establish an information exchange infrastructure in the supply chain and exchange demand,
supply, inventory or work-in-process information
Supply chain organization structure
Authority/responsibility 6c) Align employees’ incentives with chain objectives
Human behavior 4b) Eliminate or reduce human interventions
6c) Align employees’ incentives with chain objectives
strategies

Table IV.
redesign
Supply chain

423
IJPDLM Inherent characteristics
32,6 In the three case studies, chain performance was hampered by the following
inherent characteristics causing fluctuations in time, quality and quantity:
Demand. In all cases, consumer demand fluctuated, due in part to
seasonal patterns and changes in consumer preferences. For example,
chilled salads are sold most frequently when it is barbecuing weather.
424 Inherent changes in consumer preference resulted in requests for
different products (larger assortments), which impacted the need for
shelf space in retail outlets.
Product. The perishability of products led to a need for air-conditioned
transportation and restricted storage time to prevent quality decay. On
the other hand, cheese requires long storage times (weeks or up to a
year) to mature before it can be processed further or delivered.
Furthermore, packaging characteristics (such as materials used and the
number of products packed together) influence product handling time.
Process. The producer of chilled salads and the cheese processor had to
deal with fluctuations in process outcomes and production times, which
were mainly due to variable process yield and scrap-rates.
Supply. Food products are characterized by natural variations in quality,
seasonal patterns and yield. The supply of goods in the case studies was
sometimes hampered by bad weather conditions or traffic congestion,
resulting in uncertainty concerning the timing, quantity and quality of
supply.

Supply chain configuration

Identified sources of uncertainty related to the configuration refer to the chain
infrastructure (long distances between suppliers and customers), parallel
interaction and the available facilities. Sometimes, capacity shortages resulted
in longer throughput times (e.g. picking products or filling retail shelves).
Parallel interaction concerns the interaction of supply chains with each other
(Wilding, 1998). For example, in the cheese supply chain a truck filled with
products had to wait for cross-docking at a distribution center until another
supplier’s products arrived.

Supply chain control structure

Here two main elements can be distinguished that are can cause uncertainty.
The first is the order forecast horizon; the second is decision policies and
complexity.

Order forecast horizon

When an order is generated one usually counts stock and forecast demand to
calculate the required amount of products. The length of the order forecast
horizon (the number of days one looks ahead to forecast total demand) depends
on two factors, namely:
 (1) Order leadtime. The time that elapses from the moment an order is Supply chain
placed to the moment ordered goods are received. This time period redesign
comprises five elements: strategies
information lead time (i.e. the time needed for the order to be received
and processed by the supplier);
administration or decision process time (i.e. the time needed to 425
generate a production plan, picking lists and distribution schedules);
product manufacturing time (if applicable);
distribution lead time (i.e. the time needed to pick, load and transport
the products); and
waiting times between these processes.
(2) Order sales period. The time that elapses from the moment the ordered
goods are received to the moment the goods of the next order are
delivered. The ordered quantity should be large enough to suffice for all
sales during the order sales period, because it is only at the time of the
next delivery that product availability is increased again.
The total order forecast horizon equals the order lead time plus the order sales
period (see Figure 6). The longer this horizon, the further one has to look ahead
and the greater the inaccuracy of the forecast (because of inherent demand
characteristics and imperfect weather forecast reliability), resulting in
extensive inventory, non-value-added activities and/or stock out costs. For
example, in the supply chain for chilled salads we found that the retail outlet’s
order forecast horizon was six days (order lead time was three days and
delivery frequency of the distribution center was two times/week).

Decision policies and complexity

Decision policies applied in a supply chain may result in bad performances. In
the supply chain for fresh fruits and vegetables, the purchasing department of
the exporting firm aggregated customer orders over time to be able to buy large
batches, thus reducing responsiveness. In the supply chain for cheese and

Figure 6.
Time windows in the
order cycle
IJPDLM desserts, the retailer’s delivery policy required delivery to the cross-dock
32,6 distribution center before 10 o’clock in the morning, even though the next
activity at that distribution center (DC) did not start until hours later (see
Appendix, example 1). Ignoring or aggregating information in administrative
or decision policies may create uncertainty. Furthermore, customers demand
many different products in one delivery, but each product may have a different
426 lead time. Hence, decision complexity is a major source of supply chain
uncertainty.

Supply chain information system

A lot of uncertainty found in all case studies was related to a lack of correct,
accurate and up-to-date information. Data timeliness and data applicability are
prerequisites when exchanging information. If information is not up-to-date
and well managed in order to provide current information on stock levels and
stock availability, the total time frame of consideration, i.e. the order forecast
horizon, becomes even larger (see Figure 6). Uncertainty due to a lack of
accuracy in recording inventory levels was experienced in all three case studies
(see also Inger et al., 1995). For example, if the computer indicated that there
should be 100 items in stock, planning was based on this number even if there
were actually no more than 60 available. In all three cases the inventory levels
were not known at all times, nor were product qualities. Order specifications
were understood incorrectly over the telephone or order forms were unreadable
(see Appendix, example 2). Furthermore, there was a lack of information on
demand, work-in-process and to-be-supplied goods. And if data was presented
concerning consumer demand, it was often difficult to translate it into the right
format. Another source of uncertainty was found in data definitions; e.g.
product quality was defined differently by the participants in the fresh produce
supply chain.

Supply chain organization structure

The final sources of uncertainty were identified in the company culture and
division of responsibilities and authority. Specific human behavior in decision-
making processes resulted in different outcomes because of cognitive or
political influences. For example, in the supply chain for fruits and vegetables,
the exporting firm suspected that customers sometimes deliberately ordered
too many products, and when these could not be sold they were returned
claiming quality faults. Of course, this problem is also due to the lack of a
product batch registration system, which would make it possible to refute such
claims.

Tool for supply chain redesign

Now that we have drawn up a generic list of sources of uncertainty, we can link
them to the list of supply chain redesign strategies identified earlier. In each case
study, workshops were conducted to discuss and link each source of uncertainty
to effective redesign strategies that can eliminate or reduce the corresponding
uncertainty and improve operational performance (using a detailed and Supply chain
specified version of Table I; Van der Vorst, 2000). Table IV is the generic result redesign
of this exercise. It represents a valuable tool that can be used in supply chain strategies
redesign projects as it indicates potentially effective redesign strategies when a
specific source of uncertainty is encountered in a supply chain.

Discussion 427
Although the results we obtained proved to be useful to the participating
organizations, our research is nevertheless subject to a number of limitations.
In this section we will focus on the degree of generalization of our approach.
By describing and discussing the relevant processes and variables in the
food supply chains using process models, we assume to have captured the
critical variables in each supply chain within the demarcation area of our
research. We recognize that the specific detailed findings in each case study
might differ significantly if other types of supply chains were investigated
(since these are highly dependent on the characteristics of the supply chain
scenario and the objectives of participating companies). However, we believe
that the sources of uncertainty and the supply chain redesign strategies
identified are of a generic nature. This is particularly true for the list of
redesign strategies, since it is based on literature from many sectors and
disciplines (see Table II). Of course, it is possible that additional sources of
uncertainty may yet be found that could be linked to our list of redesign
strategies, thereby further completing our methodology.
Preliminary studies show that our approach to chain redesign is also
applicable to larger chain networks, which incorporate more interacting supply
chains. Focusing on the chain network will give more insight into the
functioning of supply chains, since performance improvements made in one
supply chain might result in a performance decline in another.

Conclusions
This paper presented a qualitative research approach to supply chain redesign.
Case studies showed that the presence of uncertainties in supply chain
decision-making situations results in the establishment of several non-value-
adding activities that reduce profitability. By using process-mapping
techniques, an accurate and detailed description of the current chain can be
obtained. This facilitates discussions with key employees in the supply chain
and helps to identify uncertainties and, more importantly, sources of supply
chain uncertainty. In all three cases, the identification of uncertainties and
especially their sources led to the recognition of effective chain redesign
strategies. The list of supply chain redesign strategies assisted in this process
by providing a complete overview of possible redesign strategies. We therefore
endorse our initial proposition: to identify effective supply chain redesign
strategies one should focus on the identification and management of the
sources of uncertainties in supply chain decision-making processes.
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430
Appendix
Example 1. Waiting times in the supply chain
A producers is obliged to deliver the retailer distribution center before 10:00 hrs each Thursday.
When the supplier arrives, shipment papers are immediately sent to the accounts department to
confirm the retail orders. When the supplier is late, administration calls him demanding an
explanation. However, the process flow analyses showed that the goods are not required until the
end of the day when they are cross-docked. They are not distributed to the retail outlets until the
next day. A confrontation of both parties with this issue revealed that the time restriction was
based on last year’s distribution schedule. The changes were mistakenly not passed through to
the accounts department and the supplier.

Example 2. Data accuracy and information throughput times in the cheese supply chain
Orders are generated at retail outlets and punched into the outlet information system. They are
processed automatically at the retailer distribution center and then sent to the supplier by fax.
Consecutively, the order is entered into the supplier’s information system manually. Then
picking lists are generated and during order picking the number of picked items is entered into
the information system again, after which a check is made on delivery reliability. Thus, each
order is processed (typed over) three times; this makes the system prone to data errors requiring
many hours.

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