Operations Management in Warehouse: A case of JW Cogent Logistics - Iloka Benneth Chiemelie

INTRODUCTION

Warehousing is a significant element in the modern day business. This is because, it is the section of distribution process that involves stocking finished goods that will be distributed to the customers, or raw materials that will be used in the production of commodities. It is important because it reduces the possibility of scarcity and ensures efficiency in meeting customers’ demand.

1. Background

The increase on needs to improve supply chain (SC) performance has been the main reason why warehouse has shifted its focus on integrating the production effort within the market (Frazelle, 2002; Baker, 2007). The process of receiving, transferring, handling, storage, packing and expediting goods at the warehouse affects the effectiveness of the company in general and also the quality of logistics services (Rafele, 2004). Based on that view, it can be seen that a proper warehouse management process is critical in gaining competitive advantage by offering better customer services and shorter lead time (De Koster, 1998).

Although the need to maintain proper management of warehouse is there, operations in the warehouse is such that includes rising complexity that are linked to nonlinear relationship between performance factors (Faber et al., 2002) and rise in the associated cost with additional need to reduce the time-to-market the goods. This has influenced supply chain managers to initiate cost-cutting measures (De Koster and Warffemius, 2005) that are integrated with efficiency-oriented management practices (Maltz and DeHoratius, 2004).

There have also been increases in the complexity and cost associated with mass apparel retailing, whereby the product life-cycle, unpredictable demand and seasonality all require effective warehouse management (Bruce and Daly, 2006). In fact most of the palm-oil producers need a strategic warehouse design as there seems to be fluctuation in demand of the commodity. Additionally, Malaysia maintains great presence in the world with huge market shares in the global palm-oil industry.

Proper warehousing of palm-oil will help to reduce the possibility of scarcity as the stocked goods can be sold out when they are in low supply. This is significant in both the industrial and individual consumption.

JW Cogent Logistics Sdn Bhd is a logistics firm in Malaysia that was established under the joint-venture partnership between Cogent Holdings Pte Ltd (Singapore) and Joint Container Logistics Ltd (British Island) (Cogent Holdings, 2011) to provide numerous port related warehousing services in Malaysia. Their services are:

1. Container Handling and Storage
2. Inspections / Survey
3. Container Maintenance
4. Reefer (Dry & Engine) Maintenance & Repair Service
5. Waterfront Services
6. Container / Cargo Transportation
7. Machinery Equipment - Maintenance & Repair Services
8. Container Trading - Parts & Accessories Supply
9. Electronic Data Interchange(EDI) (Cogent Holdings, 2011)

From the above list of services, it can be seen that there is a high need for operations management to be addressed in the warehouse as it is the only way that the company will be able to coordinate its business operations and ensure that the logistics networks of the company are designed to create quality in terms of system delivery for its customers.

1. Importance of study

Operations management is an important aspect of any warehouse design and this is reflected in the understanding that it is the bedrock for the warehouse delivery. Basically, the warehouse process involved three main functions of inbound logistics, operations management and outbound logistics. While there are a number of other functions that are attached to these three main functions, they are in essence the main functions. Operations management is very important because it bridged any gap existing between the inbound deliveries and outbound functions of the business. In order for the warehouse to deliver the expected quality, there is a need for the company to properly manage the arrival of containers in its warehouse and also ensure efficient and effective delivery of these containers to its owners. Additionally, error in terms of wrong delivery or any kind of delayed deliver can also entail financial consequences for the company. On that ground, it can be seen that operations management is very important because it will ensure that such errors or lateness in delivery are eliminated.

Thus, this research is very significant for the number of reasons presented above. The first of such is that it would present the needed light in terms of understanding the concept of operations management as it relates to warehousing. There is a need to understand how pertains management can effectively be implemented in the warehousing system because it is the only way that companies can effectively delivery stored goods to the intended customers. In the logistics and container deport business, operations management is even very important because containers can arrive at any given day and from any given part of the world, and containers can also be delivered the same manner across the world too. Thus, it is important that operations are properly managed in order to ensure effective and on-time delivery. Thus, this research is very significant because it would help to understand how operations are managed in the warehousing of containers by adopting practical example with JW cogent in this study.

1. Research objectives

The objectives of this research are reflected in the above analysis of the research significance and it is based on the understanding that the research is designed to analyse operations management in warehousing with respect to JW Cogent Logistics Sdn Bhd. Thus, the purposes are:

1. To understanding what warehousing is all about;
2. To understand what operations management in warehousing is all about; and
3. To understand how JW Cogent Logistics Sdn Bhd manages the operations in its warehouse.
1. Research question

In order to address the research objectives above, the following questions will be asked as the foundation of the research and also a reflection of what the research intends to achieve:

1. What is warehousing all about?
2. How is operations managed in a warehouse?
3. What are the issue of operations management in warehousing?
4. How can these issues be resolved to ensure better management and quality logistics in warehouse? and
5. How JW Cogent Logistics Sdn Bhd does manage the operations in its warehouse? Are there issues? If so how can these issues be resolved in the company?

1. Limitations

The field of study from which the scope of operations management emerges is the area of supply chain management. Basically, supply chain management deals with the understanding of how supplies (inbound and outbound) are managed in any given company. No matter the kind of business, supply chain management is important because the business owner need to source for raw materials that will be sued for production and also distribute the final goods to consumers. Additionally, the business owner can also be dealing only on finished goods (reseller) but even at that, the business owner needs suppliers to make available the finished goods before they can actually be delivered to the customers. Also, demands for finished goods are based on demand by customers where the business owner source more of goods that are on high demand than those that are not highly demanded by the customers.

Thus, this study is limited in scope. This is because it is based mainly on the operations management and also with reference to warehousing. As such, it bypasses the opportunity for readers to understand fully the concept of supply chain management or even link the findings to other business process that are not operations management. Thus, the narrow scope limits the potential for findings form this research to be applied in vast areas of study.

Although limitations have been established with respect to this research, it is important to understand that it doesn’t make this research void in any way. This is because the limited scope allows for a narrowed study that will yield findings that are more accurate and effective when it comes to real-life applications.

1. Organisation of study

This research is basically organized into 7 main chapters with the first chapter being the introduction. The introduction is the foundation of the whole research process and it defines what is expected as to the main purpose of the research. The introductory stage of the research also sets the research objective and questions that serves as the basic foundation of the overall research process. Effectively, this is the main root of the whole research process and it defines what will be done and how it would be done at each stages of the research process.

The second chapter is the review of literature. Priors to undertaking the primary research, it is important to understand the views of existing literatures with respect to the research topic. Such an understanding will help the researcher to have a view point on what is expected and also to draft the research process based on the guidelines set by these past studies. Effectively, it will ensure that the research process is free of any expected error that can have negative impact on the overall outcome of the research paper.

The third chapter is the methodology and it is used for the purpose of defining the research method with reference to how the research process will be undertaking, research strategy, data collection and analysis, summary of findings and test of reliability as well as validity of the gathered data. Thus this is a very significant part of this research because quality in this area will definitely influence the data gathered and analysed positively and this will be the main focus of this area.

The fourth chapter is the presentation of results. Findings from the whole research process are presented in this chapter to reflect the gained understanding form the primary research. Such presentation includes the test of reliability, factor analysis, regression analysis, correlation analysis, variance and frequency distribution. Additionally, the tests of hypotheses are also presented in this chapter.

The fifth chapter is the discussion of findings. The main purpose of this chapter is to align the findings gained from the primary research together with those that were obtained from the secondary research. This discussion will also be used to further strengthen the research hypothesis. The sixth chapter will be the conclusion and it will provide a general summary of the whole research. The final chapter is the appendix that will provide extra materials used in the research such as the questionnaire.

CHAPTER 2

LITERATURE REVIEW

2.1. Chapter introduction

The focus of this chapter is to conduct a review of relevant literature on the topic of discussion; the review will be based on understanding the dependent and independent variables. As such, the research will conduct a review to understand what warehousing management is all about, issues and benefits from warehousing management, design and features of a medium sized warehouse, palm-oil production, global palm-oil industry and the approaches to warehousing of palm-oil.

2.2. Framework for review

Figure 1: framework for the literature reveiw

As has already been discussed in the introductory part of this research, the review of literature will follow the illustration above in the sense that the review will be divided into three broad sections. The first section will focus on understanding what warehouse is all about and issues and benefits associated with warehousing. The second section will look into understanding the concept of supply chain management and the final section will be to gain an understanding of operations management as a function of SCM with reference to warehouse.

2.3. Warehouse and Warehousing

Warehousing is an important business process, and it involves all the activities undertaken in a warehouse. A warehouse as the name implies is a facility in the supply chain that is designed to consolidate products with the aim of reducing transportation cost, achieving economies of scale in either manufacturing or purchasing (Ramaa et al., 2012), or providing processes that add value and shorten response time. Warehousing has been recognized amongst the major operations in a company that is tailored to ensure sustainable provision of services designed to meet the needs of customers and gain competitive advantage. Different forms of warehouse prevail, and they can be classified into production and distribution warehouse or by the roles they play – which classifies them into raw materials warehouse, work-in-process warehouse, finished good warehouse, distribution warehouse, fulfilment warehouse, local warehouse directed towards consumers’ demands, and value-added service warehouse (Ramaa et al., 2012).

Figure 2: basic warehouse functions

Source as adapted from: (Ramaa et al., 2012).

It has been stated earlier that the differing nature of warehouses means a difference in operation. However, the figure 2: shows that the warehouses share a common pattern in terms of material flow and typical warehouse operations such as: receiving, putaway, internal replenishment, picking of order, accumulation and sorting, packaging, cross docking, and shipping (Ramaa et al., 2012).

Ramaa et al. (2012) also stated that there have been numerous challenges facing warehouses in recent years, and these challenges can be linked to the fact that the supply chain is becoming more integrated and shorter, as well as the influence of globalized operations, which now means that customers’ demand is more sophisticated. The changes in technological development also yield a significant influence in relation to the problems facing warehouses.

Proper management of warehouse include an integration of the 3Ps: people management, process management and problem management. This implies that the warehouse must be employing the right workforce with the necessary attitude to ensure continuous quality management, and the company also need to have a well-designed problem solving approach as well as standards for operation. All these forces will ensure that the company is able to manage its warehouse in such a way that it meets the needs of the customers, while also creating room for sustainability. The factors needed to ensure sustainable warehouse management will be discussed below.

2.4. Sustainable warehouse management

Sustainable supply chain management has been described as the management of raw materials and services from the suppliers to manufactures and consumers, with the social and environmental impact of such activities being put into consideration (NZBCSD, 2003). The increase in technological development and globalization has opened the opportunity for business and supply chains to expand across borders, further increasing the need for sustainability study in the supply chain management (Jorgensen and Knudsen, 2006).

Figure 3: sustainable supply chain management

Source as adapted from: Kah-Shien et al. (2010).

From the figure 3: above, it is illustrated that the concept of sustainable supply chain management is such that is designed in a way to ensure that activities in the supply unit doesn’t influence the society or environmental negatively, but as well, it must create the right business atmosphere to ensure sustainable growth through increased profitability.

Warehousing is one of the key components to supply chain. However, most warehousing and transportation companies have little respect for the environment in relation to the impact of their actions, and they don’t seem to understand the social consequences of their business activities. The main thing these companies put into consideration is the factors of cost effectiveness and customers satisfaction – which they use to measure their performance. (Linton et al., 2007; Quariguasi Frota Neto et al., 2008). Both Linton et al. and Quariguasi Frota Neto et al. have argued that activities that involve transportation if important in order to ensure that these companies recognize the importance of their transformational business activities on the sustainability of the environment.

The case of sustainability is important in the warehouse because certain production activities undertake in the warehouse involves operations that risk negative impact on the environment and the society. For instance, the warehousing of crude oil could cause significant damage is the oil is spilled in the environment.

2.5. How to model a sustainable warehouse

The management system in a sustainable warehouse design can easily be divided into simple and easy to manage parts for modelling purposes (van Es, 1998). However, it is not sufficient to model a warehouse in isolation; there is a need to establish relationship between the important parts in the management operation (Ahmed and Sundaram, 2007). Sustainability can be developed by adopting an approach that shift the focus from an individual effect to an interconnected system (Ferguson et al., 2003) in order to shape the organization and its operations. In that sense, sustainability in the warehouse needs to tackle the issue of inter-relationship of corporate goals, employees, and administration.

Maani and Cavana (2000) made the observation that the management of a complicated system for feedback can be done by adopting dynamism in the system’s thinking model and methodologies. This implies that while standards of operation should be developed on in relation to warehouse management, there is a need for the organization to understand that differences in problems could result to differences in the solution for such problem. Therefore, the organization needs to adopt the right approach to problems faced in the warehouse management system in order to ensure sustainability.

2.6. Inventory management in warehouse

One of the important issues in warehousing is how to manage inventories. However, in order to discuss this issue, it is important to understand what a medium sized warehouse is all about. In terms of warehousing, the size is similar to corporate representation such as large companies and small-medium companies. Thus, a medium sized warehouse features the elements present in an SME in terms of operation and management. Medium-sized warehouse are those designed by SMEs to store their products.

The terms “warehousing” and “inventory” are closely related together in literatures (Baker, 2007; McGinnis and Kohn, 1998). As such, both terms are usually combined in the discussion of the role of warehousing. It has been argued by McGinnis and Kohn (1998) that warehousing should be seen as more than just receiving, transferring, shipping, and selection of commodities, as has been presented by Bowersox et al. (1968) in the traditional discussion of warehousing. Since that time, the role of warehousing has been advanced, and there are literatures that argue that warehousing can be used as a shield against risk Baker (2007), but there are also possibilities of other forms of risk being increased in the process of shielding against a specific risk. Therefore, warehousing can be viewed as an important factor in relation to risk management. From the view point of management, warehousing can be a form of competitive advantage in relation to its effects on cost-saving and lead-time (Abrahamsson, 1993) and warehousing plays significant role in modern supply chains as well (Baker, 2007).

In relation to the above discussion, it can be stated that warehousing approaches in the medium-sized warehouse should be such that considers the importance of adopting strategic management features that integrates the operation system together in order to create a more competitive atmosphere. The high level of innovation, globalization and market expansion also highlights the need for medium-sized warehouse adopt quality management approaches that creates a competitive atmosphere in the business environment and ensures sustainability of the warehouse operations.

2.7. Supply Chain Management

In an EC funded report for understanding the concept of innovation in SC, Zhao (2002) presented a clear definition and overview of what SC is all about, and his thesis will be adopted in this research. It was noted by Zhao (2002) that most of the organizations in the present business are finding new sources of competitive advantage in order to ensure that they constantly increase their market share as well as increase their business profitability. SC incorporates all the necessary functions in an organizational process, into an integrated form of activities that bring products to the market and create a new wave of customer satisfactions.

Zhao (2002) noted that SC is an integration of all topics in the business management field from manufacturing operations, purchasing, transportation, and physical distribution into a uniform program that is designed to ensure efficiency in the organizational process. Successful SC has been noted to be capable of integrating all these activities into a streamlined organizational process. It encompasses and links all flow patterns in the production chain. Additionally, SC also included all activities that are undertaken in the process of making finished goods available to customers or making raw materials available for production.

On an organizational context, SC is used to make reference to the wide range of functional activities that are undertaken in the firm. Such activities include inbound and outbound logistics, warehousing, and inventory control, sourcing, procurement, and supply management. Other activities in the SC process include production planning and scheduling, order processing and customer service, as well as the information systems necessary for monitoring the activities described above. Basically, supply chain deals with all activities in the organizational process that determines the flow of materials for production, and flow of finished goods to the respective markets for consumption.

2.8 Importance of supply chain management

In the olden days, there has been a common story in the Greek fable about a race between a tortoise and rabbit. The speedy and overconfident rabbit fell asleep on the job and the “slow but steady” tortoise won the race. Such an incidence is not possible in modern day business, and it must be noted that “slow and steady” will not even get a manager out of the company’s gate, not to mention winning the race. Managers in the modern day business must recognize the fact that getting their product to their customers faster than ever will help improve their competitiveness and provide the right solution to issues in supply chain management such as modal analysis, supply chain management, planning of load, planning of route and design of distribution network. Companies in modern day business must face the challenges in the present business environment that comes in the form of value added supply chain management like reengineering globalization and outsourcing.

In any case, the question is as to why it is important for companies to get their products distributed to their respective customers faster. The answer is that after distribution of products is very important for increase sales in the company (Zhao, 2002). There are a number of benefits for every extra minute that a company spends in the market without its competitors around. The benefits come in the form of increased performance and profitability, which all result from higher demands for the company’s products and/or services. Thus, it is important that companies properly manage their supply chain as it has a direct impact on their profitability and productivity performance. Additionally, the high level of globalization and internationalization of firms across the globe has also made the adoption of fast distribution network even more significant as this new business environment has increased the level of competition across the globe.

2.9 Processes involved in supply chain management

Recent studies on SCM has pointed out the importance of collaboration between successive actors from the main producers to the final consumers, in order to increase the satisfaction level customers obtain from the product as well as reduce cost involved in product distribution (see, for example, Lowson 2001, Warburton and Stratton 2002, Stratton and Warburton 2003, Hilletofth and Hilmola 2008). Zhao (2002) defined SCM as a business approach used to integrate the process involved in planning and control of the flow of materials from the suppliers to manufactures. In accordance with Bayraktar et al (2008), the main objective of SCM is to eliminate the barriers existing between each of the links in supply chain, as a means of increase the level of services obtainable in the supply chain network, and to reduce supply cost sustainably. SCM seeks to increase the relation between mutual benefits by defining new structures in the organization and establishing contractual relationship between sellers and buyers, which will wind up to a new adversarial classification. Data et al. (2007) present emphasis on Pareto improvement, with reference to the conditions in which all parties involved are at least on the same ground of benefit, and no one is given higher advantage than the other. Zhao (2002) also presented a description of SCM as a system that is made up of material suppliers, production facilities, distribution networks and services, and customers, with all these facets being linked up with flow of materials and the flow of feedback in relation to the experience gained from using the material. In any case, it is still important to understand that SCM also creates some additional flow. This can be seen in the case of reverse logistics, in which the remanufacturing and product recovery system creates room for flow of feedbacks on materials (see, for example, Bayraktar et al 2008). Sharing inventory or scheduling of production on a similar hand, also create feed forward flow of information. Additionally, individual firms can also be part of the many different chains in supply network at the same time, and it helps to enhance the focus of the organization by drawing functions that each of these people are expected to perform.

Figure 2.2: reference model for a supply chain

Source as adapted from: Datta et al (2007)

The figure above illustrated the processes involved in SCM, which begins with the supplier of the raw material making available the materials needed for production to the producers. The producers the manufactures the goods and delivers it to the warehouse. These goods are then sent off to the retail outlet where they are being made available to the final consumers. From the above flow, there are two flows in the form of information and goods. The flow of goods is what occurs between the periods at which the materials are delivered for production to the period the final goods reaches the final consumers. The flow of information is what occurs after the consumption, and it includes a detailed analysis of consumers’ experience in relation to the product. This information is usually passed from the consumer to the retailers, then to the final producers. In some cases, the flow of information can also be passed directly from the consumer to the final producers through a direct contact network provided for the producers in such cases. The form of contact established depends largely on the form of relationship between the producers and final consumers.

Although the figure above seems to illustrate that the processes involved in SCM are well coordinated, it has to be noted that the traditional approaches adopted in coping with uncertainties (such as does resulting from differences in quality, supplier unreliability and unpredictability in consumer demand) have been usually been handled by building inventories to carter for excess capacities. However, is now considered to be costly and inefficient (Bayraktar et al 2008).  One of the key attributes that high players must possess in the modern business environment is an ability to rapidly respond to the sophisticated demands from consumers (Bayraktar et al 2008). As such, the competitions that exist between individual firms are now being replaced by competition between supply chains. SCM should recognize the level of services required by final consumers, and need to position their inventory in such a way that the amount of stock required at each point is documented, and the inventory should develop the appropriate policies and approaches for handling supply chain under one entity (Hilmola and Szekely 2008). As such, it can easily be deduced that in order to create superior SCM, the company should be able to manage uncertainties.

2.10 Supply chain management and uncertainty

From the traditional form of communication and demand as illustrated in the figure 2.2 above, it can be seen that all activities in supply chain are shown in accordance to the flow of such activities. Normally, consumers in each of these stages hide their internal data from suppliers, and examples of such data include their sales patterns, level of available stock, rules of stock, and delivery design. March and Shapira (1987) stated that even under stable consumer demands, organizational factors such as structures and timeframe, IT system, capacities of machinery, depots and logistics, or other random factors tend to make the expressed demand at each of these stages in supply chain more cyclical with higher variations. Such phenomenon include situations in which orders made to the supplier seem to be larger than sales made to the buyers (i.e., demand distortion) and the distortion propagates upstream in an amplified form (i.e., variance amplification), is called the Forrester effect (Tang, 2006) or the bullwhip effect (Stank et al., 2001). Such effect influences cost seriously. For instance, if the manufacturer is forced to incur excess raw material costs or material shortage as a result of poor product forecasting; extra material cost will be created as a result of excess capacity, poor utilization of resources and overtimes; and most of the excess warehousing expenses will also be increased as a result of high stock level (Flynn et al., 1995; Klassen and Whybark, 1999; Das et al., 2006). Calantone et al. (2003) made the suggestion that these activities can yield excesses in terms of increased cost that can rise up to 12.5% to 25%. Bozarth et al. (2009) also illustrated that the effect is as a result of dynamics in the industry, which can vary from time to time, and the lack of correct feedback control in the organization. Lee et al. (1997) conducted an examination of the bullwhip effect in different cases, and made an identification of four main issues in the form of: demand signal process (if the demand for products increases, the firm will be forced to order more raw materials in anticipation of further increase, and in that case, an artificial high level of demand will result on worsened lead time in the long-run); order batching; difference in price; and shortage gaming. As such, it can be stated that the effect might be a result of reactions to uncertainties in demand or supply and also the complexity and structure adopted in the current decision making process. In any case, it is still important to understand the causes of uncertainty and how they can be eliminated.

There are numerous measures that have been discussed in literatures aimed at improving the performance of supply chain. SCM has largely been linked to reduction in numerous variables that influences productivity negatively, such as delays present in the flow of goods and information and operations that add no value in the supply chain. Information flow is considered very important because Braunscheidel and Suresh (2009) puts it that since millions of dollar are spend to minimize manufacturing time on daily bases, not understanding the ordering time can result in a subsequent low management approach for turnaround time. Stratman and Roth (2002) found from their investigation that work-in-process and level of stock fluctuates with different lengths in order time, making the best approach for handling such fluctuation to be based on increasing lead time, and understanding all main variables that influences performance flow. The idea behind this assumption is that when the forecast horizons are reduced, the error arising from forecast will also decrease. As such, it becomes easy to manage problems arising from control.

Uncertainty is inevitable in SCM and the focus should be on ways to identify the sources of uncertainty and approaches that supply chains can adopt in order to ensure that sustainability is ensure in the business process. The above discussion illustrates that the main sources of uncertainty is from demand variation and over projection. The demand variation is also linked to over projection in the sense that when a demand is varied, the supply will be overly projected and the company will be caught in the mist of defining new approaches for handling such variation. These uncertainties in supply chain pose numerous risks and the preceding section will look to understand the risk posed by these variables.

2.11 Supply Chain integration (SCI) and Supply Chain Risk (SCR)

It has been recognized that businesses are becoming more risky in modern times as a result of the increasing adoption of outsourcing, globalization of supply chain, and reduced product life-cycle (Barry, 2004; Waters, 2007; Christopher et al., 2011). Complexity in supply chain is increased as a result of risk, and supply chain risk also makes businesses to become more sensitive to time. Thus, companies need to strategically position their supply chain system in line with attributes from suppliers and customers in order to increase their sustainability, competition and business growth (Bowersox et al., 1999; Frohlich and Westbrook, 2001; Zhao et al., 2008; Flynn et al., 2010). Supply chain integration (SCI) has been identified as the main factor for increasing value of the SCM (Horvath, 2001).

Although SCI has been singled out as the most important tool for gaining competitive advantage, there are also many questions that need to the addressed in relation to how SCI can be implemented (Bowersox et al., 1999; Frohlich, 2002; Power, 2005; Flynn et al., 2010; Zhao et al., 2011). For example, which factors influence SCI? And also, which factors hinder the implementation of SCI? There are few studies in the past that have looked into these questions, such as that from Frohlich (2002) that conducted an investigation of supply, internal, and demand barrier in the implementation of eSCI. Richey et al. (2009) also put internal planning failure and external monitory failures into consideration as barriers to SCI. However, researches in this area are still not well developed, and there is need for more empirical studies to understand the factors that limits implementation of SCI. SCRs have also become more significant problem in the current economic instability experienced by businesses in the modern age – which is also influenced by variations in demand and supply, and unpredictability of disruptions in the highly competitive business environment of nowadays. It is very difficult for most of the supply chains to respond to these changes, and this makes them very vulnerable to risks (Tang and Tomlin, 2009). As such, the main challenged presently faced by companies is about how to implement SCI under this risky environment, and differences in risk factors that also play significant role in the implementation of different forms of SCI. The most common forms of SCR are supply delivery risk (SDR) – which are those supply risk that are mainly caused by delivery failure, and demand variability risk (DVR) – which are those risks that are mainly caused by changes in demand.

High volume of research exist on how SCI influences numerous performance measures in the organization such as operational performance (e.g., Armistead and Mapes, 1993; Frohlich, 2002; Cousins and Menguc, 2006; Swink et al., 2007; Braunscheidel and Suresh, 2009; Flynn et al., 2010; Danese and Romano, 2011), customer service (e.g., Vickery et al., 2003; Swink et al., 2007), logistical performance (e.g., Stank et al., 2001; Gimenez and Ventura, 2005; Germain and Iyer, 2006), and product innovation (e.g., Ragatz et al., 2002; Petersen et al., 2005). Not to forget is the fact that, findings on the relationship between SCI and performance are not consistent. As an example, while most of the past studies on SCI have discovered significant positive relationship between SCI features and performance measures (e.g., Armistead and Mapes, 1993; Vickery et al., 2003), others see no significant relationship (e.g., Droge et al., 2004; Flynn et al., 2010), and even a significantly negative relationship (e.g., Koufteros et al., 2005; Swink et al., 2007). The main reasons for the inconsistencies experienced can be linked to differences in the form of SCI conceptualization and operationalization, differences in terms of performance measurement, and differences in terms of the context of research conducted in order to make the integration process a success (van der Vaart and van Donk, 2008). For the dimensions of SCI, numerous studies have viewed SCI as one construct (e.g., O'Leary-Kelly and Flores, 2002; Vickery et al., 2003; Rosenzweig et al., 2003; Cousins and Menguc, 2006), while other studies have designed their focus on both internal and external integration (e.g., Stank et al., 2001; Frohlich, 2002; Gimenez and Ventura, 2005). Just a handful of studies have focused on three different dimensions in the form of – internal, supplier and customer integration (e.g., Koufteros et al., 2005; Swink et al., 2007). As for this study, the three dimensions of customer, suppliers, and internal integration will be adopted. It is also important to note that past studies have focused on understanding limited performance measures (e.g., Armistead and Mapes, 1993; Gimenez and Ventura, 2005), but there is a need for more studies in the field in order to understand the full context of the review and present a more reliable platform for successful SCI implementation.

2.12 Supply chain risk management (SCRM)

Supply chain risks are receiving high attention in modern SCM researches (e.g., Zsidisin, 2003; Peck, 2005; Ellis et al., 2010; Tummala and Schoenherr, 2011). This is in line with suggestions made earlier that there is a great need for firms to manager SCRs in order to enhance agility of their supply chain as a result of the fact that the current economic turbulences present uncertainties in the business environment (Braunscheidel and Suresh, 2009). The importance of SCR management (SCRM) can be seen from numerous trends like increasing outsourcing activities, globalization, increasing on-time delivery demand, increase in technological advancement, and shortened product life-cycle (Zsidisin et al., 2000; Trkman and McCormack, 2009; Olson and Wu, 2011). There have been a significant increase in the volume of SCRM literatures since 2000 (Trkman and McCormack 2009) and special SCRM  issues have been included in numerous literatures in different journals such as Production and Operations Management (2005), Journal of Operations Management (2009), and Supply Chain Management: An International Journal (2011).

Irrespective of the increasing level of interest from practitioners and academia, there still seems to be little studied on the subject of SCRM and this makes researchers consider the subject as still being in its infancy (Juttner, 2005). Most previous studies are conceptual or descriptive (e.g., Zsidisin, 2003; Ellegaard, 2008; Christopher et al., 2011). The main focus has been the definition and classification of SCRM (e.g., Zsidisin 2003; Spekman and Davis, 2004; Tang and Tomlin, 2008), with some of the literatures also discussing on SCRM strategies and procedures (Spekman and Davis, 2004; Kleindorfer and Saad, 2005; Juttner, 2005; Craighead et al., 2007). Current conceptual and descriptive literatures on SCRM offer firm theoretical background for further investigation on the context of SCRs. One of the first attempts to make SCR operational and valid was made by Ellis et al. (2010), through their empirical investigation designed to understand the relationship between environmental factors, risk of disruption in supply and performance of firms. 

Risk is a very board subject and it is defined in different ways which can basically depend on the field of study in which it is applied (Wagner and Bode, 2008). Since the focus of this study is on understanding risk in SCRM, the definition adopted will be that from March and Shapira’s (1987, p. 1404), which defines risk as” variations in the distribution of possible outcome, the likelihood of such outcome occurring and their subjective values of such outcome. As Lefley (1997)  made it clear that risk is produced as a result of uncertainties and it can increase the probability of future occurrence as it is normally related to negative influences like inability of the firm to meet consumer demands and even increased threats to consumers’ safety (Zsidisin, 2003).

There is no common definition of SCRs dimensions, and varying classifications abide in literatures. For instance, Tang (2006) classified SCRs into two dimensions as: risk of disruption and risk of operations. Disruption risk is used to refer to those risks caused by occurrences like bankruptcy, natural disaster, and terrorist attacks. Operational disruption on the other hand is used to refer to coordination of supply and demand, and uncertainties such as uncertainty of demand and supply. Disruptive risks are not common, but in cases where they occur, they are very severe and hard to manage; while operational risk on the other hand can easily be reduced through SCM. Other forms of SCRs can be said to include supply risk, process risk, demand risk and risk of technologies (e.g., Bogataj and Bogataj, 2007; Tang and Tomlin, 2008). However, Trkman and McCormack (2009) presented a summary that risks emanating from constant changes as a result of unstable environment, such as those changes that from demand and supply priorities are usually ignored at large. Supply risk has been defined as the chances of an incident that is related to what has been supplied from an individual fails to meet expectations of the market in terms of quality, and as such results in the possibility of the purchasing firm not being able to meet customers’ demands or even pose a threat to the health of customers (Zsidisin, 2003, p. 222). Of all the types of supply risk, SDR might be the most significant because most of the companies expect their supplier to offer efficient and effective delivery that occur in real-time. When suppliers fail to meet on-time delivery, they cause numerous issues to the purchasing firm. For an example, if manufacturer is experiencing tremendous increase in the demand of his products, and his supplier is not able to make resources readily available for production, the manufacturing will be experiences difficulty of meeting the increasing demands from customers. Demand risk on the other hand is associated with turbulence in the business environment, and instability as well as dynamics of consumer demands (Chen and Paulraj, 2004). Unstable demand is usually the biggest challenge for today’s companies, which leads to high inventory costs, low levels of customer service, and unreliable deliveries.

CHAPTER 3

RESEARCH METHODOLOGY

3.1.      Chapter introduction

Earlier in the introduction of this paper, it was made known that this chapter will focus on understanding as well as analysing the approaches to be adopted for the primary research. On that ground, areas to be covered in this chapter is the research purpose, philosophy, design, data collection and analysis.

3.2.      Research purpose

In the introductory stage of this research, the purpose of the paper was made known to be to gain an understanding on the operations management approaches designed in the warehousing of JW Cogent Logistics Sdn Bhd Malaysia. Thus, the purpose of this primary research is also to achieve the same aim and the primary research will look to design new approaches that the company can use in the process of redesigning its operations management in order to ensure effective and efficient warehouse management system.

3.3.      Research philosophy

Just like in any other academic setting, there is a need to develop philosophy that will guide what is obtainable within such setting in order to ensure an effective quality delivery. Thus, this research is also designed in line with a given philosophy and the philosophy of this paper is to ensure effectively delivery in terms of quality. Quality is an important aspect of the research process because focus and emphasis is led on ensuring that the data are sourced from the highest level of quality possible as this is the only way that the finding can be considered effective in terms of real life application.

3.4 Research Design

The research design is based on two settings of interview and primary sources from JW Cogent Logistics Sdn Bhd and then questionnaire designed used to gather extra information from respondents with regards to the findings made from the first approach.

An in-depth interview was conducted with the company via phone call and the purpose of the interview was to understand how logistics management is undertaken in its system. Basically, the company was called on 15^th of October 2010, and after much identification, the responder (who asked that his named be made secret) openly addressed a number of questions in relation to how logistic functions and operations management are undertaken in the company in order to ensure effective delivery.

The questionnaire for this research was designed by following guidelines from other related researches previous conducted (the questionnaire is available in appendix 1). A pilot test was conducted by distributing the designed questionnaire to online users via FreeSurveyOnline.com. The pilot test was conducted in order to test whether the choice of online survey will be right for this research in terms of data quantity and quality. Survey was chosen as the preferred data gathering method because it can easily be read and generalized, and it incorporates studies that are based on present situations (Churchill and Iacobucci, 2005). Surveys also provide researchers with the opportunity to access high variables(Ma, 2007). Additionally, surveys are convenient, fast and a cost effective data gathering method (Zikmund, 1999). It also reduced the biases associated with other form of data gathering such as interview. In order to determine the right sample size for this research, Roscoe’s Rule of Thumb (Roscoe, 1975; cited in Sekaran (2003)) was utilized as the guiding criterion. The rule states that the sample size must be bigger than the sample components by a high margin.

3.5 Measurement

A self-addressed questionnaire was adopted in the research, and responders were to answer the questionnaire by choosing between either totally agreeing or totally disagreeing with each question from a 7-point rating likert scale method. The adoption of likert scale method is because it is the most commonly used rating scale method in business research, and it offer responders the opportunity of being more precise with their responds.

Table 1: adopted likert scale rating method

The table (1) above illustrates the rating scale adopted for the research. An introductory note was drafted for the responders to understand how the scale will be used for answering the question. The inclusion of an introductory demonstration was to ensure that responders did not answer out of ignorance; rather, they based their response from full consciousness of their contribution to the overall quality of the research.

3.6 Data Collection

The rule of thumb is the rule used to measure the appropriateness of a given data analysis with regards to the fact that for a data to be considered appropriate for any given research, the amount of variable loaded into the questionnaire will be at least twice the volume of the responders. Therefore, a sample of 20 questions targeted to 150 responders is considered appropriate for the research, because 150 is greater than 20 by 7 times. Once the sample size has been determined, and the survey developed, the survey was hosted atwww.FreeOnlineSurvey.com for data gathering. The reason for choosing online survey is because it offers participants from all over the world the opportunity of contributing to the studying by sharing their workplace experience as related to perception of organizational politics and its effects on job performance. Once the survey has been hosted for contribution, responders were made aware of the survey through Google advertisement and advertisement on FreeOnlineSurvey.com for its registered members to participate.

3.7 Responders’ Profile and Sampling

Although the focus is on JW Cogent Logistics Sdn Bhd, the actual topic is to understand the operations management in warehousing. Thus, the research is also centered on understanding issues of operations management in warehouse and how these issues can be resolved in order to ensure effective management delivery in the system. Thus, the respondents for the questionnaire come from all over the world and this is because it was actually hosted online. However, they have to e employed and have an understanding of what logistics functions are in order to address the questions asked

3.8 Data Analysis and Coding

The data was electronically coded with IBM SPSS data analyzer. Since the study was conducted only, coding was easier because it can directed be pasted from the database to the SPSS system. The idea of copying and pasting the data from the database directly into the SPSS system ensured a higher level of efficiency and reduced the level of human error (e.g. typing) that might have impacted on the overall quality of the research.

3.9 Ethics of Data Gathering and Analysis

Since the whole data gathering process was via online survey, little worry was raised in link to the ethics involved in data gathering. This is because, the online platform set standard guidelines for responders to follow and offered necessary help for solving all difficulties the responder might experience. There was no case of data gathering biasness as the responder was under full control of his or her self, and had the right and opportunity to respond exactly as he or she fells without any interruption from the interviewer.

On the analysis part, it became clear that ethics was essential for maintaining the quality of the research and either proving or disproving the stated hypotheses. Thus, as stated earlier on, the gathered data were directly copied from the database and imputed into the SPSS system for analysis. Thus, there was no change in the data gathered as related to the data analyses. Ethical principals were always put into full consideration during the whole data analysis section.

3.10 Limitations of Chosen Methodology

The components of online survey is a common topic of discussion in numerous literatures (for example, Fricker and Schonlau, 2002; Furrer and Sudharshan, 2001; Ilieva et al., 2002; Malhotra, 2004; McDaniel and Gates, 2005; Tingling et al., 2003; Wilson and Laskey, 2003) and some of the weak-points of online survey can be considered as limitations to the overall quality of this research. These limitations are discussed below.

3.10.1 Skewed attributes of internet population – not until recently, the internet was considered as being true representatives of the overall population. However, studies that question the real representativeness of online survey to the general population has emerged, suggesting that the internet is not a real representative of the overall population (for example, Fricker and Schonlau, 2002; Grossnickle and Raskin, 2001; Miller, 2001; Ray and Tabor, 2003; Wilson and Laskey, 2003). This is a limitation especially for this research because the 150 responders in real sense cannot be considered to be a true representative of the global population and other factors such as differences in culture, lifestyle and management system can also influence the perception of organizational politics and its impact on job performance. Job performance on the other hand can be measured in different ways and be said to mean different things to difference people. Nevertheless, Fricker and Schonlau (2002) stated that this difference in terms of representativeness of the internet population to the overall population is closing in and can be considered as being insignificant in the near future.

3.10.2 Sample selection and implementation - research have frowned heavily on the choice of online survey as a data gathering option, because of the fact that samples cannot really be determined by the interviewers. For this research, the man limitation is representativeness of samples. This is because, unintended responders can pretend to be have meet set criterion and contribute, while in reality they don’t meet the set criterion. Qualified responders on the other hand can input wrong information due to social or psychological pressure. For instance, responders who have been victimized but suffered little negativities can input that he or she suffered high level of associated negativity due to the psychological pressure that the responder might still be facing. However, Kulp and Hunter (2001, p. 35) associated this limitation as with low significance level, by saying that it can also be possible with offline surveys.

3.10.3 Responders lack of online expertise – although the internet adoption is increasing growing, it has been noted that the majority of the internet population is made up of users who have not used the internet for several months (Greenspan, 2003). Thus, the responders’ skills might be lacking on understanding the current survey methodology and required skills. Therefore, this can become a limitation as incompetence responders can enter results based on lack of understand and might find it difficult to delete mistake based inputs.

3.10.4 Technological variations - both differences in the responders’ computer device and their internet connection can influence the quality of the research. This is because, the model of software used are different and the higher the model the quality of information presented to its users. Thus, questions that are properly arranged might appear disorganized in lower computer versions (Ray and Tabor, 2003) and this can affect the overall quality of research and responders might not clearly understand the question being asked. Other technological factors such as electricity and dialup speed can also determine whether the responder will be able to finish the question or forced to drop out of the survey as a result of inconveniences caused by these technological factors.

3.10.5 Interpersonal issues – as compared with offline interview, there is no direct contact between the responder and the interview and it can influence the in-depth of the research conducted to a great extent. This is because, lack of contact between the responders and interview limits the possibility of in-depth probing that is commonly used in offline survey to gather more information (Scholl et al., 2002). Brown et al. (2001) supports this argument by stating that telephone interview offer greater opportunities for responders to pause and reflect on the questions being asked before presenting sound answers. Thus, responder might be forced to drop out of the survey if they face any difficult and don’t seem to find the perfect solution to the difficulty faced.

Although numerous limitations have been highlighted as to how the quality of the research might be affect, it must be noted that different measures have been put into place to ensure that the expected negative effects does not occur. Such measures include a 24/7 support system, where responders can contact the interviewer via email or phone contact to verify any issue or difficult faced during the survey. An introductory page is also provided advising the responders on how to about with the study and urging them not to participate if they don’t meet any of the set criterions as it could impact the overall quality of data gathered.

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