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TOC Supply Chain Management Solution for Food Processing Industries

Neetu Andotra, Department of Commerce, University of Jammu, Jammu (Jammu and Kashmir State), India Dr. Pooja, Department of Commerce, Udhampur Campus, University of Jammu, Jammu (Jammu and Kashmir State), India
ABSTRACT. TOC as an ongoing business improvement process based on five sequential step provides a scientific knowledge base for aligning an organizations operations with its business strategy. Its application in food processing businesses lies in high health and safety awareness among consumers, systematic rationalization, vertical integration for reducing production & demand uncertainties and recent impetus to rural industrialisation. The paper aims at comparing firm practices & customers perceptions regarding supply-chain linkage variables. The responses regarding aforesaid variables were obtained through sets of questionnaires administered on 85 SSI manufacturers located within Industrial Estates and 200 wholesalers & retailers from Kathua block of district Kathua using systematic random procedure. It further identified suitable factors resulted after purification through Exploratory Factor Analysis (EFA) also indicating moderate to high degree of linear association among supply chain factors. Finally, the paper designs trade promotion strategies that induce retailers to use price discounts, displays or advertising to spur sales & shift inventory from the manufacturer to the retailer and the consumers. Responses on 36 key drivers of supply chain performance statements recorded on Firm orientation and Customer orientation, collected from channel intermediaries after purifying through factor analysis and applying t test enticed quantity discounts as a major constraint The paper suggests the ordering lot sizes of 1000 or more units in manufacture-distribution retail supply chain for securing transactional and overall channel efficiency. It directs future researches at exploring and solving multiple constraints in dissimilar businesses through the use of a single strategic action. RSUM. La thorie des contraintes (TC) est un processus continu damlioration de lentreprise qui se base sur cinq tapes et qui fournit une base de connaissances scientifiques permettant daligner les activits dune organisation avec sa stratgie dentreprise. Son application chez les entreprises se spcialisant dans la transformation des aliments est due : la grande sensibilisation la sant et la scurit chez les consommateurs; la rationalisation systmatique; lintgration verticale afin de rduire les alas lis la production et la demande; et le rcent lan pour lindustrialisation rurale. Cette tude a pour but de comparer les pratiques des entreprises et limpression des clients par rapport aux variables dappariement de la chane dapprovisionnement. Une procdure alatoire systmatique ft utilise afin de distribuer une srie de questionnaires auprs de 85 petites entreprises manufacturires tablies dans le secteur Industrial Estates (Domaines Industriels) et 200 grossistes et dtaillants du quartier Khatua du district Khatua dans le but de recueillir leurs opinions par rapport ces variables. Une purification des donnes obtenues par lentremise dune analyse factorielle exploratoire (AFE) a aussi permis didentifier dautres facteurs pertinents et de relever une association linaire, variant de modeste leve, entre les facteurs relis la chane dapprovisionnement. En dernier lieu, les auteurs font llaboration de stratgies de promotion du commerce. Celles-ci incitent les dtaillants recourir la publicit et ltalage promotionnel de marchandise, ainsi qu offrir des rabais afin de stimuler les ventes et de favoriser un dplacement des inventaires du fabricant au dtaillant et consommateur. Les donnes recueillies des questionnaires Firm Orientation (Orientation axe sur lentreprise) et Customer Orientation (Orientation axe sur le client) au sujet de 36 noncs portant sur les facteurs cls du rendement de la chane dapprovisionnement, et obtenues via des intermdiaires, furent purifies par le biais dune analyse factorielle et de tests t. Les rsultats semblent indiquer que les rabais sur quantit sont une contrainte majeure. Les auteurs suggrent de passer des commandes de lots dau moins 1000 units de marchandise dans la chane dapprovisionnement fabrication-distribution au dtail afin dassurer lefficience des transactions et des rseaux de distribution. De plus, ils proposent que des recherches futures se penchent sur ltude des multiples contraintes chez des entreprises trs dissemblables et den arriver une solution qui consiste en un seul plan daction stratgique.

Journal of Small Business and Entrepreneurship 22, no. 3 (2009): pp. 239252

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Introduction In The Goal, Eli Goldratt introduced his Theory of Constraints (TOC), and its effective operationalization in Its Not Luck, through his protagonist, Alex Rogo. Since then many other independent scholars have published a number of business novels (e.g. Goldratt 1994, 1997, 2000), published research in the area of TOC in scientific journals,1 conferences2 and operations management (OM) textbooks (e.g. Finch and Luebee,1995; Chase, Aqulano and Jacobs, 2001), suggesting that the TOC is gaining acceptance and popularity among both academicians and practitioners. A significant number of journal articles3 distinguished TOC with concepts such as linear programming, material requirement planning, just-in-time (JIT) and, lately, with lean manufacturing, supply chain management and six sigma. Eminent scholars such as Dr. Goldratt argued that production management has now become a science and that TOC research provides a scientific knowledge base to the business system and an ongoing improvement process. As a business system, the TOC emphasizes change process implemented at three levels: the mindset of the organization, the measures that drive the organization and the method employed within the organization (Srikanth and Robertson, 1995; Gupta, Baxendale and Raju, 2002). It stipulates that the organization should devote its energy to promote initiatives (e.g. exploring new markets and introducing new products, popularly referred to as throughput-world thinking4) by using the available resources to ensure financial success, instead of expanding energy to reduce cost or save money at employee and market cost (Goldratt, 1994; Dettmer, 1997). TOC states that every business system has at least one specific area, aspect, or process that limits the business performance from a customer, competitive, or profit point of view. This is regarded as a constraint and it can be physical or managerial in nature (Umble and Srikanth, 1997). Goldratt proposed a five-focusing-steps (FFS)5 process for managing constraint and continuously improving an organization. Inherent in this FFS process are the concepts of: V-A-T process structural analysis,6 drum-buffer-rope7 and buffer management,8 which are used to describe/analyze the process, develop the constraints
_________________________ 1. International Journal of Production Research, Production and Operations Management Journal, International Journal of Operations and Production Management, Production and Inventory Management Journal. 2. The TOC World Conference organized by the Avraham Y. Goldratt Institute (AGI), academic conferences organized by the Production and Operations Management Society and Decision Sciences where TOC research has been published and presented on a regular basis. 3. (1) To trace the history of OPT (Goldratt, 1998; Fry et al., 1992) as well as TOC (Gardiner et al., 1994); (2) to review the basic concepts of TOC (Ronen and Starr, 1990; Fawcett and Pearson, 1991; Spencer and Cox, 1995); (3) to categorize TOC concepts and terms (Cox and Spencer, 1998); (4) to review TOC literature (Rahman, 1998; Mabi and Balderstone 1998); and (5) to demonstrate its applications in various areas such as supply chain management, enterprise resource planning, sales and marketing, and human resource management (Goldratt, 2000; Blackstone, 2001). 4. Throughput (T) is defined as the rate at which the system generates money through sales. More specifically, it is the selling price minus totally variable costs. Its relationship to standard financial measures is: Net profit (NP) = T- OE, Return on investment (ROI) = (T- OE)/I, Relationship to standard financial measures, Inventory turns (IT) = T/I, Productivity ratio (PR) = T/OE. 5. FFS: 1. IDENTIFY systems constraint(s), whether physical or policy constraint. Decide how to exploit the systems constraint(s); reduce the effects of the current constraint(s); and make everyone aware of the constraint(s) and its effects on the performance of the system. 2. SUBORDINATE everything else to the above decision, i.e. avoid keeping non-constraint resources busy doing unneeded work. 3. ELEVATE the systems constraint(s), i.e. off-load some demand or expand capability. 4. If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system constraint. 6. V-A-T analysis: a constraint management procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure). A V logical structure starts with one or

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schedule and manage buffer inventories respectively within the organization. From the perspective of an ongoing improvement process, Goldratt and his associates have suggested that an organization must ask three fundamental questions concerning change to accelerate its improvement process: 1. What to change? 2. What to change to? 3. How to make the change happen? What to change? This enables the organizations to identify the weakest link, i.e., the constraint(s) at the strategic, tactical, and operational levels. Roots of disappointment associated with failure to clearly identify what to change include: Effort wasted on local improvements with little or no consequence to global performance; Improving symptomatic situations without addressing deeper root causes; Jumping to solutions inappropriate for the specific system; and Abandonment for a new program of the month. What to change to? This includes strengthening the organizations by developing a viable and practical solution. Answering this question results into jumping to solutions without truly assessing their improvement potential: Focusing on low-hanging fruit and forgetting about the health of the tree as a whole; Failure to take into account implications beyond the immediate target of the improvement; Being successful and not being able to take advantage of or build upon that success (or even backtracking due to such a blockage); or Allowing immediacy to threaten sustainability. How to make the change happen? It explains how organizations should implement the solutions. Otherwise, program and effort results can fall to: Failure to achieve buy-in for co-operation, collaboration and co-ownership; Lack of focus on the task at hand; Distraction of participants local concerns; or Failure to see progress toward significant objectives and a loss of momentum. Based on these, the tools of the thinking processes have been used to enhance the successful implementation of specific TOC application (Gupta, Baxendale and Raju, 2002).
_________________________ a few raw materials, and the product expands into a number of different products as it flows through its routings. The shape of an A logical structure is dominated by converging points for managing the system control point. A T logical structure consists of numerous similar finished products assembled from common assemblies and subassemblies. Once the general parts flow is determined, the system control points. 7. Drum-buffer-rope: the generalized technique used to manage resources to maximize throughput. 8. Buffer management: a process in which all expediting in a shop is driven by what is scheduled to be in the buffers (constraint, shipping and assembly buffers). By expediting this material into the buffers, the system helps avoid idleness at the constraint and missed customer due dates. In addition, the causes of items missing from the buffer are identified, and the frequency of occurrences is used to prioritize improvement activities.

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TOC Tools of Thinking Process


Thinking process Tools and diagnosis Current reality tree: Why is the system sick? Evaporating cloud: What conflict is prevented by the cure?

What to change?

What to change to?

Future reality tree: Will the injection lead to all desired effects without creating new undesirable effects?

How to cause change?

Prerequisite tree: What currently prevents the implementation of the injections? Transition tree: What actions does the initiator have to take to implement the cure effectively?

Literature Review (TOCSupply Chain Interlinkage) Supply chain management is customer oriented and is aimed towards the integration of business planning and balancing supply and demand across the entire supply chain for bringing instantly, costless, seaming less and frictionless products to consumers (Hvolby, Trienekens and Carrie, 2001; Bowersox and Closs, 1996; Cooper, Lambert and Pagh, 1997). Since its evolution, several mathematical models and modeling tools have been used for optimizing finished products flows from plants to the DCs to the final customers and now has penetrated the service sectors (Ganeshan and Harrison, 1995).

Although advanced information and communication technology is integrating the entire chain from initial source to the ultimate consumers, performance is constrained by: the absence of a framework to establish an alliance among supply chain partners, a lack of trust inside and outside a company, a lack of tools to measure the effectiveness of a supply chain alliance, etc. (Lambert and Cooper, 2000; Stern, El-Ansary and Coughlan, 1996; Lancioni, Smith and Oliva, 2000; Porter, 2001). Supply chain management approach to food processing enterprises has acquired significance as it affects customer health and safety and compliance with a number of technology, packaging and environmental laws, with an increased integration between

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enterprises within production networks (Harrison, 1994) or, more broadly, within a process of systematic rationalization (Altmann and Dei, 1998) or controlled autonomy (Appay, 1998). Empirical studies have authenticated that through the application of supply chain management, food processing industries have sought to radically reduce cost and inventory through the development of closer supply relationships, real-time information transfers and move towards a pull rather than push distribution system (Goor, 2001). Price discounts have been widely used to influence a buyers decision. Choi, Lei and Wang (2004) review the types of discounts and its use for profit sharing to co-ordinate channels (Choi et al., 2004), reducing operational cost or for price discrimination, and improving supply chain inefficiencies caused by double marginalization (Tsai, 2006); cost savings due to economies of scale, due to marketing factors or to stimulate demand, to increase order size and decrease order frequency, reduce inventory or build demand before a price increase, and truckload discounts to reduce transportation costs. Munson and Rosenblatt (1998) found that buyers saw all-unit quantity discounts, 37% saw incremental quantity discounts, 29% saw fixed fees and 76% observed volume discounts during purchase. The present paper examines and compares firms practices and customers perception regarding supply-chain linkage variables and focuses on aligning and devising trade promotion strategies for seeking supply chain coordination. Research Methodology Kathua District covers an area of 2,651 sq. km. It is surrounded by Pakistan in the southwest, the Gurdaspur district of Punjab in the south, the Chamba district of H.P in the east and Doda, Udhampur and Jammu districts in the north. The area is divided into 4 revenue tehsils, 8 CD blocks and 587 villages. The ranges of climatefrom sub-tropical in the plane and Kandi belt to severe cold in the hillssupports the growth of multiple crops like rice (34,303 ha), wheat (53,097 ha), maize (16,233 ha), other millets (3,156 ha), pulses (3,639 ha), fruits (7 ha), vegetables (228 ha), other food crops (191 ha), fodder (9,582 ha), oilseeds (7,067 ha) and other non-food crops (3 ha) on 1,27,542 ha of gross sown area, thereby providing the raw material to the food industry. The bulk of the industrial activities are food processing businesses like flour mills, rice shellers, oil mills, and dairy and confectionery items (e.g. papad, barian, biscuits, noodles, bread). There are 28 food processing businesses (200203) providing direct employment to 197 workers and indirect employment to more than 50,000 people. Keeping in view the agrarian nature of the district economy, the proximity to the markets, the vast employment potential and government support to rural industrialization, there is a need and justification to develop and support food processing businesses. TOC application on the efficiency of supply chain management in food processing businesses was tested by designing three sets of questionnairesone each for manufacturers, wholesalers, retailers. These questionnaires covered five aspectsfacilities, inventory, transportation and channel responsiveness, information and demand predictabilitycustomer satisfactionand 32 statements covering four Ps for consumers. Deliberate interlinking and counterchecking statements were kept in the questionnaire to elicit true responses. The aforesaid sets of questionnaires were administered on 85 SSI manufacturers located within Industrial Estates, 200 wholesalers and retailers from the Kathua block of district Kathua. A systematic random sampling technique was used to select a sample of 2.5% of 8066 households (District Industries Centre, All India IIIrd Census,

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Table 1. Comparison of firms practices and customers perception regarding supply-chain linkage variables Standard Mean Importance Deviation Standard Mean Importance Deviation

No.

1. 2. 3. 3.50 5.00 0.53 3.32 0.56 3.99 0.59 1.10

2.50 4.62 4.75

1.93 0.74 0.46

3.06 2.99 2.71

1.10 1.28 1.35

-0.782 3.800* 3.191* 0.552 3.240*

4.

5.

Facilities Product quality is market-oriented/ Firms products are of good quality Products enjoy high reputation in the market/Firms products enjoy positive words of mouth Products are preferred over competitors/ Firms products are of good quality and priced at par with national brands. Rigorous testing and certification would enhance customer loyalty/ Firms products are standardized Prompt after sale service would build brand loyalty/ Prompt after sale service provided by the firms.

6. 4.87 3.50 0.35 1.31

4.62

0.74

3.94 3.96 3.3

0.60 0.51 1.13

2.376* -1.080 4.822*

7.

8.

Inventory Customer orders are processed timely/ Products are available as and when we approach the retailers/ wholesalers Sufficient inventory is maintained at various sales outlets- stores/ New and improved products are available at various sales outlets Shortage of quality raw material at economical price effect production process/ Firms products are easily available and readily identified. 3.37 4.75 1.92 1.28

9.

3.99 2.42

0.48 1.42

-0.469 3.208*

10.

Transport and channel responsiveness Products are not acceptable to retailers and wholesalers/ Products are promptly transported to the retail stores Sale support exists at retail level/ Personal selling efforts are effective.

11. 12. 13. 14.

Information Customers are well informed about new and improved products/Firms products are heavily promoted The price is always printed on products/ The price is always printed on firms products Quality-price parity exists in firms products/ Quality and price-wise products are competitive Seasonal and quantity discounts are frequently advertised/Sale discounts are frequently advertised.

4.75 4.87 3.87 4.50

0.46 0.35 0.83 0.92

2.55 3.96 3.69 1.59

1.39 0.88 0.93 1.04

4.583* 3.055* 1.426 5.292*

15. 16.

Demand predictability/Customer satisfaction Product demand is certain/Products are worth buying Unrestricted competition exists in marketplace/Products have yet to establish their image and identity.

4.12 4.16

1.36 0.99

4.02 3.51

0.57 1.02

0.261 0.893

ANDOTRA AND POOJA

*values significant at 0.05% level of significance

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200203) (i.e., 203 urban wholesalers and retailers from the block) where, first, store was selected at random from the list obtained from the District Statistical & Evaluation Office and, thereafter, every 40th respondent was contacted. Of the 203 questionnaires administered to respondents, 200 were selected for further analysis on the basis of quality of information obtained. The responses were collected on a five-point Likert scale (5< to >1) ranging from strongly agree to strongly disagree and were analyzed within the TOC tools of thinking process (Gupta, Baxendale and Raju, 2002). The responses were reduced and purified using factor analysis on SPSS (version 13.0) and thereafter tested using t-test, averages, and percentages to achieve the following objectives and sequential activities: 1. To identify possible reasons for vertical conflict between different stages in the supply chain following the effect-cause-effect diagramming principles to resolve the constraint. As many as 36 statements falling within the domain of supply-chain were purified using multivariate statistics on SPSS (version 13.0). 2. To analyze supply chain structure and its interrelationships for identifying a constraint. Sixteen interlinked statements emerged after purification of the scale items were subjected to t-test (Table 1) for identifying significant mean difference between firm practices and consumer perception, which resulted in locating constraints in supply chain management. 3. To formulate optimal promotion strategies aligning manufacturers objectives with retailers for attaining supply chain coordination. Based on the constraint analysis, trade promotional strategy is designed to achieve overall supply chain coordination (Table 2).

Table 2. Optimum lot size order by retailer based on quantity discount from firm to retailer in food processing industries Nature of industry Unit size Monthly Fixed demand cost Holding Order cost quantity 0500 5001000 1000more 0500 5001000 1000more 0500 5001000 1000more 0500 5001000 1000more 0500 5001000 1000more Unit price Lot size 7.50 7.45 7.42 17.00 16.90 16.80 60.00 59.80 58.00 125 123 120 6.00 5.50 5.00 1125 4013 4021 1188 1192 1195 346 347 352 619 625 632 3742 3908 4099 Lot size cost 918372.5 949466.74 903142 1028112.5 1024069.7 1018200 217495 217354.99 212060 1479937.5 1479841.8 1444200 478827.5 464364.37 428450

Flour mills

1 qtl

10,000

100

.20

Rice sheller

1 qtl

5,000

100

.50

Oil mills

50 kg

300

100

.10

Dairy and dairy 1kg products

1000

100

.05

Confectionary items

units

7000

100

.02

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Table 3. Supply chain factors purified using factor analysis Constructs Firm Orientation 1. Facilities First Factor Product quality is market-oriented Prompt after sale services would build brand loyalty. % variance explained Second Factor Products enjoy high reputation in the market. Products are preferred over competitors. % variance explained Total 2. Inventory First Factor Customer orders are processed in a timely fashion. Sufficient inventory is maintained at various sales outlets. Shortage of quality raw material at economical prices affects production process. % variance explained Total 3. Transportation and channel responsiveness First Factor Products are acceptable to retailers and wholesalers. Sale support exists at retail level. % variance explained Total 4. Information First factor Quality price parity exists in firms products. The price is always printed on firms products. % variance explained Second factor Customers are well informed about new and improved products. Seasonal and quantity discounts are frequently advertised. % variance explained Total 5. Demand predictability/Customer satisfaction First factor Product demand is uncertain. Unrestricted competition exists in marketplace. % variance explained Total 4.50 4.75 .91 .65 32.86 84.77 4.62 4.75 .93 .76 37.44 83.46 Mean Factor loadings Variance explained % Cumulative variance %

2.50 5.00

.86 .88 46.02

4.62 4.87 3.50

.78 .85 .74 62.69 62.69

3.37 4.75

.88 .62 59.19 59.19

3.87 4.87

.95 .96 51.91

4.12 4.12

.89 .82 60.52 60.52

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Table 3, continued Constructs Customer Orientation 1. Facilities First factor Firm products are standardized. Firm products are of good quality and priced at par with the national brands. Prompt after sale services are provided by firms. % variance explained Second factor Firms products are of good quality. Firms products enjoy positive words of mouth. % variance explained Total 2. Inventory First factor Products are available as and when we approach the retailer/factory. New and improved products are available at various sales outlets. % variance explained Second factor Firms products are easily available and readily identified. % variance explained Total 3. Transportation and channel responsiveness First factor Uniform price is charged to all customers. Products are promptly transported to the retail stores. % variance explained Second factor Personal selling efforts are effective. % variance explained Total 4. Information First factor Firms products are promoted. Sale discounts are frequently advertised. % variance explained Second factor The price is always printed on firms products. Quality and price-wise products are competitive. % variance explained Total 5. Demand predictability/Customer satisfaction First factor Firms products are worth-buying. Firms products have yet to establish their image and identity. % variance explained Total No. of iterations = 3 3.99 .99 33.54 72.37 Mean Factor loadings Variance explained % Cumulative variance %

3.99 2.71 3.06

.61 .68 .77 29.05

2.99 3.32

.76 .70 28.65 57.70

3.94 3.96

.80 .76 40.74

3.13

.96 34.16 74.91

2.08 2.42

.76 .76 38.83

3.96 3.69

.68 .79 32.97

2.55 1.59

.64 .84 27.81 60.78

4.02 3.51

.69 .69 48.93 48.93

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Data Analysis and Interpretation Purification of the Scale Items for Identifying Relevant Factors The results of exploratory factor analysis (EFA) using principal component extraction and Varimax with Kaiser Normalization rotation method yielded 16 factors from 32 items with Eigen value 1. The communality for 20 items ranged between 0.47 and 1.00, indicative of a moderate to high degree of linear association among the variables. The factor loadings ranged from 0.61 to 0.98 and the cumulative variance extracted ranged from 48.93% to 84.77% (Table 3). The values of Kaiser-Meyer-Olkin (KMO) Measure of Sampling Adequacy and variance explained (as evident in Table 4) for five variablesfacilities, inventory, transport and channel responsiveness, information, and demand predictability/customer satisfaction indicate construct validity of the construct (Hair et al., 1995).
Table 4. Alpha reliability coefficient and variance explained values S.no Construct KMO values FO 1 2 3 4 5 Facilities Inventory Transportation and channel responsiveness Information Demand predictability customer satisfaction 0.50 0.64 0.53 0.52 0.52 CO 0.65 0.50 0.50 0.51 0.60 Variance explained FO 33.46 62.69 59.19 84.77 60.52 CO 57.70 74.91 72.38 60.78 48.93

Significant Mean Differences Across Firms Practices and Customers Perception Regarding Supply-chain Linkage Variables A paired t-test was used to identify the key constraint from 16 interrelated items classified under five supply-chain dimensions (Table 1). Based on the mean value of importance of various supply-chain items and tstatistics for difference of mean as practised by food processing firms and perceived by customers, five statements with significant mean difference were sorted out. These statements were further arranged in descending order. One statement, sale discounts are frequently advertised, was identified as a key constraint. Vertical Distributive Flows and Conflicts The obstacles to coordination in the supply chain are due to misaligned incentivesinformation processing, operational, pricing and behavioural obstacles that result in optimizing local stage objectives instead of total supply chain profits (Chopra and Meindl, 2003). In the food processing business, as the manufacturer works on lowering his order or setup cost, the discounts he offers to wholesalers and retailers must change. In practice, the wholesaler keeps the discounts to himself and does not share with the retailer who places orders in small quantities. However, a meagre incentive is occasionally offered to a retailer to retain his institutional loyalty, which the latter seldom passes on to consumers. The consumers, being scattered, neither ask for it nor shift their preferences to other brands due to a limited access to sale outlets (Fig. 1).

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Figure 1. Factors accentuating vertical conflicts over quantity discounts

Quantity Discounts for Supply-chain Coordination In the manufacturer-distribution retail supply chain, the manufacturer must influence the retailers action indirectly through the distributor (Mishra, 2004) to achieve optimal profits and share the gains through the use of incentives for taking channel-optimizing decisions. Quantity discounts have been proposed in operation management and marketing literature as a tool for achieving incentive compatible coordination within the chain by ensuring transaction efficiency and channel efficiency (Choi, Lei and Wang, 2004). To arrive at the optimal quantity discountscompatible to lot sizes to maximize profits or to minimize the sum of material, order, and holding costseach retailer contains specific break points (qo, q1, qr) where qo = 0. If an order is placed that is at least as large as qi, but smaller than qi + 1, then each unit is obtained at a cost of Ci. In general, the unit cost decreases as the quantity ordered increases: i.e., Co C1 Cr. To arrive on the lot size that minimizes the overall cost using i ? i ? r, the following has been used and the calculated values are shown in Table 2.

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The three possible cases for Qi: 1. qi Q < qi + 1 2. Qi < qi 3. Qi > qi + 1 Thus, to optimize quantity discounts based on standard unit sizes of demand by the retailers, are with lot sizes of 1000 more units. With such lot sizes retailers can take advantage of price discounts, which add to the average inventory and flow time in a supply chain. Policy Implications and Recommendations A manufacturer can pursue a twin trade promotional strategy to influence the retailers: induce retailers to use price discounts, displays, or advertising to spur sales and shift inventory from the manufacturer to the retailer and the consumers. The survey demonstrated the outstanding importance of pursuing a promotional strategy that would enhance store levels as well as customer satisfaction. However, it invites more efforts from small businesses to redesign strategies from time to time, keeping into view the competition, rising input cost and changing customer preferences. Such an empirical research would be useful not only to policy makers, but also to entrepreneurs, retailers, customers and researchers. Future research needs to be directed at exploring and solving multiple constraints in dissimilar businesses through the use of a single strartegical action. Contact Information
For further information on this article, contact Neetu Andotra, Department of Commerce, University of Jammu, Jammu (Jammu and Kashmir State), India Phone: 01912450969/Mobile: 09419617503 E-mail: neetu.bipan@rediffmail.com or Dr. Pooja, Department of Commerce, Udhampur Campus, University of Jammu, Jammu (Jammu and Kashmir State), India Phone: 09858221378 E-mail: pooja_sch@yahoo.com /poojasundan@rediffmail.com / pookiran@gmail.com

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