Exploring the supply chain of small and medium-sized South Australian wine producers

Exploring the supplychain of small andmedium-sized SouthAustralian wine producers

16Supply Chain Forum An International Journal Vol. 11 - N°1 - 2010 www.supplychain-forum.com

Ann Monday Newcastle Business School, University of Northumbria,

Email: [email protected]

Trevor Wood-Harper Manchester Business School, The University of Manchester

Email: [email protected]

This research is part of a wider study that seeks to understand the natureof significant stakeholder perceptions as situated in the South Australian(SA) wine industry supply chain (SC) context. The focus is the small andmedium enterprise (SME including micro) wine producers. It explores thecomplex relationships that exist within the supply chain of a number ofcase organisations and their perceived key stakeholders. This paperpresents the findings from four case organisations and explores what theyperceive to be important in their supply chains, who their perceivedsignificant SC stakeholders are, why they are important, and what theimplications are for their SC.

Introduction

Even though the supply chain (SC)and supply chain management(SCM) are not new concepts, manyorganisations and industries areonly just starting to recognise theimportance of managing orexploiting their supply chains. TheAustralian wine industry is noexception. The industry is growingat a phenomenal rate with 2,299wine producers currently listedcompared with 344 wine producersin 1983 (Winebiz.com, 2008). Morethan 100 new producers have beenestablished each year since 1998.The industry is dominated by fivelarge producers in terms of tonnescrushed but the largest number ofwine producers (87%) fall in theSME category. Australia is currentlyranked tenth in the world for grapeproduction and its percentageshare of wine production places itin sixth position. Although itsdomestic sales are growing eachyear its export markets areincreasing much faster, currentlyplacing it fourth in the world interms of wine exports

(Winebiz.com, 2007). In 2001, 663wine producers exported wine to 89 international markets(Winetitles, 2002). By 2007 this hadgrown to 1,165 wine producersexporting wine (Australia and NewZealand Wine Industry Directory,cited in Winebiz.com, 2009).

Although the Australian wineindustry has invested heavily overthe years in all aspects of winecultivation and product quality, andits products continue to grow fromstrength to strength, there isevidence that other aspects of thebusiness have not developed in linewith growth and changing needs.The growth of the industry and ofexports has created a new set ofbusiness relationships withinAustralia and worldwide that hasresulted in a more complex anddynamic supply chain for theindustry. In addition, the number ofwine producers has more thandoubled since 1998 and a very largenumber of these are micro andsmall wineries. The 2008 Australiaand New Zealand Wine IndustryDirectory (cited in Winebiz.com,2009) shows 22 companies

accounting for 90% of sales with theremaining 2,277 smaller companiescompeting for the remaining 10% ofsales.

The wine industry bodies haveidentified potential for supply chaininitiatives, as typically indicated inthe supply chain literature anddetailed below, but there is littleevidence to determine whethermicro, small and medium-sizedwine producers are exploiting theseopportunities.

This article presents the findingsfrom an investigation of four SMESouth Australian wine producers,what they perceive to be importantin their supply chains, who theyperceive as significant stakeholdersin their SC, why they are important,and what the implications are fortheir SC.

Supply chain management(SCM) and the Australian wineproducer

Baatz (1995) suggested thatconceptually the supply chainextends from “dirt to dirt.” Itbegins “when the raw material isextracted from the earth and endswhen the product is reused ordisposed of in a landfill” (p.46) Ifwe consider this in the context of awine producer's supply chain, thechain extends from its agriculturalsuppliers (chemicals, organics,vines, etc.), wine productionsuppliers (grapes growers, grapeprocessing equipment, labels,bottles, closures, vineyard mowers,etc.), and production processesand services (crushing, storage,bottling etc.) to its distributors(wholesalers, retailers, hotels, etc.)through to its final consumer of thewine. It is also influenced by otherparties such as wine industry andregulatory bodies (exporting,funding, policy direction, taxation,etc.). Even for a small-scaleproducer the number of partiesinvolved and the relationships thatexist are quite extensive andcomplex.

Supply chain management isdescribed in several ways buttypically by the stages involved indirectly or indirectly filling a

customer order, the partiesinvolved (such as suppliers,manufacturers, transporters,warehouses, retailers, andcustomers), and the functions orprocesses required (for example,new product development,marketing, operations, distribution,finance, and customer service) toenable orders to be filled in theright quantities, at the right time, atthe correct location, and tocustomer satisfaction whilstminimising costs (Simchi-Levi et al.,2008; Chopra & Meindl, 2001;Balsmeier & Voisin, 1996), reducing inventories and improvingproduction performance (Challener,1999), and providing added value tocustomers and stakeholders(Jayaram et al., 2000; Handfield &Nichols, 2002). Golicic et al. (2002,p. 851) describe supply chainmanagement as “essentiallymanagement of the relationshipsand activities among the member organizations . . . fromsingle transactions to complexinterdependent relationships.”

In the past, supply chain systemswere regarded as channels ofdistribution with each firmoperating on its own, seeking to make the highest profits (Lancioni et al., 2000; Prahalad &Ramaswamy, 2000). Prahalad andRamaswamy (2000) suggest thatbusinesses have adopted differentroles with other businesses due to “'deregulation, globalisation,technological convergence, and therapid evolution of the Internet”(p.79). Anderson et al. (2007) arguethat many companies focus onimproving their supply chainmanagement in order to balancethe needs of the customer with

those of the company. In otherwords, some organisations aremoving away from the traditionalautonomous operating unittowards alliances and integrationacross the supply chain, whichLambert and Cooper (2000, p. 81)have determined “involvesidentifying the supply chainmembers with whom it is critical tolink, what processes need to belinked, and what type/level ofintegration applies to each processlink.” Neumann et al. (2000) notethat companies that are performingbest are those that are investing insystems that integrate theirinternal and external supply chains.Cross-enterprise supply chainplanning is seen as an opportunityto achieve sustained competitiveadvantage. It provides anopportunity for increasedtransparency in the supply chain,to eliminate distorted information,to reduce the bullwhip effect, andto encourage greater cooperation,planning, and monitoring toremove unwanted stocks, reducelead times and uncertainty, andachieve better capacity utilisation(Skjøtt-Larsen, 2000). In a study ofFrench wine companies Chandesand Estampe (2003) found theFrench wine sector had not yetrealized the importance of supplychain management to the overallperformance of a business.

In Australia, some of the larger winecompanies implemented newsystems to support supply chainactivities. However, not allimplementations were immediatelysuccessful, as could be seen withSouthcorp (Gottliebsen, 2001)though this might be attributed to teething troubles typicallyassociated with ERPimplementation. Southcorp hassince become part of the Foster'sGroup. However, the company isreferred to as Southcorp in thispaper because this was thecompany name during theimplementation of its ERP system.

Industries are also recognising thevalue of their customers and theirknowledge of the marketplace(Prahalad & Ramaswamy, 2000;Chizzo, 1998; Simchi-Levi et al.,2008; Anderson et al., 2007;


The South Australian

small wine producers

are just starting to

recognise the

potential of supply

chain initiatives.

Challener, 1999) and the Australianwine industry is no exception.Different products have differentcustomer requirements and cannotbe satisfied by a single supply chainstrategy (Childerhouse & Towill,2000; Christopher, 2000;Christopher & Towill, 2000, 2001;Power et al., 2001; Fisher, 1997).There is ample evidence ofinvestigation into downstreamactivities in the supply chain withinthe wine industry, particularly inregard to the marketplace,customer preferences, andexporting. These are documentedregularly through a range of wine-related journals and in the local andnational press of Australia.

Challener (1999, p32) points outthat “[t]he inherent complexity of aglobal supply chain requires theefficient and effective coordinationof all of the resources of theenterprise.” She suggests that foran organisation to be ever-moreresponsive to its markets, partners,and customers, new strategies arerequired for supply chainintegration, supply chainoptimization, and inter-enterprisecollaboration, and that cultural aswell as technological barriers existto implementing cross-enterprisesupply chain managementprocesses. It requires tradingpartners to change theirtraditionally adversarial businessrelationships. In Australia, at theupstream end of the supply chain ofa wine producer, there are limitedsources available from which tosource some supplies. Duringproduction, outsourcers are usedfor a range of services that arerequired on a seasonal basis,particularly by the smallerbusinesses. Downstream a numberof services and agents are used totransport and distribute thefinished product to the endconsumer. The wide range of goodsand services used, the quantity andtype required, their availability, andthe size of business all influence thetype of relationship that existsamong the different parties.

There is already evidence thatcross-enterprise supply chainplanning is happening betweenbusinesses, though not always

through their information systemsand information technology atpresent. Premkumar (2000)describes three types of inter-organisational systems:communication systems forelectronic messages; co-ordinationsystems that support productionplanning, delivery scheduling, andlogistics co-ordination; andcooperation systems in whichorganisations might share, forexample, product designinformation and customerinformation. Although large winecompanies such as Southcorp sawthe need to invest in these newsystems to support their businessneeds, identifying a newly installedERP “as the base for a world-classchain” (Gottliebsen, 2001, p. 32),Matterson (2001, p. 24) noted“substantial lost wine sales andexcess costs” for Southcorpfollowing the introduction of thenew system.

The Australian Government'sNational Office for the InformationEconomy (2001) report “Advancingwith E-commerce” outlines many ofthe potential benefits of e-commerce for small businesses, forexample, reduced costs, increasedrevenue, and improvedcompetitiveness. The Internet hasmade possible the idea ofintegrating processes, not justtransactions, but this raises issuesof costs, intrafirm and interfirmadaptability, platform neutralityand interoperability, scalability,security, reliability, ease of use,customer support, and perceivedvalue (Sarkis & Sundarraj, 2000). Ina study of Australian SMEs Lawsonet al. (2003) found that majorbarriers to Internet use wereconcern about security and privacyof transactions, cost of consultants,lack of government incentives, lackof IT expertise of staff, lack of cost-effective telecommunicationsinfrastructure, and lack ofknowledge of numbers of usersusing the Internet. Sellitto andMartin (2003a, 2003b) provideevidence that some Australian wineindustry SMEs are using theInternet to their advantage,primarily in downstream marketingactivities, but not across the wholesupply chain. In 2002 only 76% of

wineries had an e-mail address and49% had a web site; in 2007 this hadgrown to 91% and 77%,respectively.

Throughout the wine industrysupply chains, suppliers, grapegrowers, wine producers, sellers,and consumers are involved in therange of typical supply chainbusiness processes. There is littleevidence, however, that micro,small, and medium-sized wineproducers are exploiting or are ableto exploit the opportunities cited inthe vast array of supply chainliterature. Quayle (2003) points outthat there is limited literature onSMEs and supply chainmanagement practices. Much of theresearch has concentrated on largebusinesses and explored simple,linear, and dyadic supply chainrelationships. Quayle also notesthat SMEs generally view thesupply chain as a one-wayrelationship in terms of thepressure that powerful customersplace on them. Macpherson andWilson (2003) suggest that, givenlarge organisations are focusing onstrategic supply chainopportunities, it is notunreasonable to suggest this willhave a significant effect on SMEs.Macpherson and Wilson (2003)note, however, that systems are notcurrently in place to supportadoption of supply chain strategiesby SMEs. In addition, many of thesestudies have been conductedoverseas, have categorised SMEsaccording to number of employees,and are more comparable tomedium to large businesses inAustralia.

The literature tends to agree thatorganisations can, at the very least,achieve some efficiencies throughtheir supply chains, and much ofthe past literature has exploredefficiencies in terms of internalbusiness processes, logistics, andoptimal sourcing. This researchexplores four SME producers andtheir perceptions of what and whois important in their supply chains,why they are important, and whatthe implications are for their SC.


Research design

The approach adopted for thisresearch was an interpretive casestudy. The case study is consideredto be particularly appropriate foranswering explanatory how andwhy questions (Yin, 2003). Wherewhat questions are exploratory, Yinalso considers the case study to beone of several appropriateapproaches.

A number of models already existto explore the supply chain andsupply chain management inorganizations, for example, SCOR(Supply Chain OperationsReference Model) and WLC (WorldClass Logistics model). Becausethis research was exploratory innature, and with a focus on theworldviews of the micro, small, andmedium-sized South Australianwine producers, it was consideredmore appropriate to use whatCheckland (2000) describes as a

purposeful activity model. Hedescribes these as “intellectualdevices-whose role is to helpstructure an exploration of theproblem situation being addressed”(p.S26). The problem situation inthis instance is the supply chain ofthe South Australian wineproducer. The generic activitymodel used is detailed in figure 1.Although Checkland tends to usehand-drawn models, the text in thefollowing models are typed for easeof reading.

This approach appeared to workwell as it provided a basis forexploration whilst allowingparticipants to determine activitiesand related issues that wereimportant to them. It is alsointeresting to note that in eachinstance the case organisationintroduced a context to theirbusiness without the need forprompting.

The research undertaken isexploratory research and involvesa number of learning cycles. This isreferred to by Gummeson (2000) asthe hermeneutic circle or spiral inwhich at each stage of the researchwe have a different level of pre-understanding that allows us todevelop further understanding.Thus continuous reflection andlearning was important throughoutthe process. The cycles of thisresearch are illustrated in figure 2and described below.

Cycle 1- Finding out aboutSC/SCM - generic model based onbest practice (literature view)The SC and SCM literature wasinitially explored to identify therange of activities, issues,measures, values, expectations,frameworks, and models thatcurrently exist in the literature. Itwas then used to produce a genericactivity model of a SC.


Figure 1Generic activity model of the supply chain of wine producer (modified from Checkland, 2000)

Cycle 2 - Finding out aboutSC/SCM - industry view -annotated modelThe generic activity model wasthen annotated to reflect thepotential activities of the SC of awine producer using findings fromthe industry research. Initial datacollection on the industry wasundertaken using a range ofsecondary sources: industrybodies, web sites, journals,attendance at conferences andevents, and local and nationalnewspapers.

Cycle 3 - Finding out aboutSC/SCM - producer view -annotated modelsThe model (figure 1) was used inthis cycle to provide a frameworkfor semi-structured interviews withwine producers. Given this wasexploratory research and theresearcher did not want toinfluence the businesses beyondproviding a basic supply chainstructure, no values or measureswere included in the model. Inaddition, rather than influence theparticipants by asking specificquestions, participants were askedto explain and comment on theirsupply chains. The model waspiloted with one of the producersand modified before the remaininginterviews took place. Other

sources of data included informalconversations and attendance atmeetings and events.

Cycle 4 - Finding out aboutSC/SCM - key stakeholder views -identified by producersData from key stakeholders wasalso gathered mainly through semi-structured interviews. It wasimpossible to access all of the keystakeholders identified by theproducers but in the instances inwhich this occurred the availableliterature was used as far as waspossible to explore therelationships and potential issues.Other sources of data includedinformal conversations andattendance at meetings and events.

Final reflectionAlthough continual reflection andlearning was important throughoutthe process, this cycle provided animportant final reflection of thefindings in the context of each ofthe previous cycles.

The case organizations

Wine Producer 1

Wine producer 1 crushed less than20 tonnes and classed itself as amicro-sized winery producing a

small range of table wines that itsells through its cellar door, mail-order customers, local restaurants,and hotels. In addition it suppliesits wines to local bed-and-breakfastaccommodations as part of a“holiday package.” It also sponsorslocal events. Its focus is onproducing quality wines in a greenenvironment. The company hastwo full-time staff members who arethe owner/managers. The businessemploys casual staff as needed fornetting, grape picking, earthmoving, and tax accounting. Itidentified as its key stakeholders itscustomers (consumers), winemaking, grape pickers, storagefacility (crushing, maturation,storage), and suppliers.

Wine Producer 2

Wine producer 2 crushed between100 and 249 tonnes and classeditself as a small winery producing arange of premium quality winesthat it sells through mail order,restaurants, and export. Its focus ison producing premium qualitywines. The company has twoowner/managers, one full-timevineyard manager, and two part-time administrators. The businessemploys casual staff as needed fornetting, grape picking, andaccounting. It identified as its keystakeholders its agents, customers(consumers), grape growers, andwine-making facilities (crushing,maturation, storage).

Wine Producer 3

Wine producer 3 crushed between250 and 499 tonnes and classeditself as a small to medium-sizedwinery producing a range ofpremium quality table wines that itsells through its cellar door, mailorder, restaurants, and export. Thecompany has four owner/managersand three sales staff. The businessemploys casual staff as needed forgrape picking. It identified as its keystakeholders its customers(consumers), sales force, andtransportation.

Wine Producer 4

Wine Producer 4 crushed between2500 and 4999 tonnes and classed


Figure 2Research learning cycles

itself as a medium-sized wineryproducing a range of premiumquality table wines that it sellsthrough its cellar door, mail order,restaurants, retail, and export. Thecompany was a family-ownedbusiness employing ten staff. (Note,the company has merged andgrown since the time of theinterview.) It identified as its keystakeholders its agents andaccountants, consumers, crushingfacility, grape growers, andstorage/labelling facility.

A comparison of the keycharacteristics of the four wineproducers is detailed in table 1.

Findings

The findings from the cases arepresented and discussed below.This includes exploration of whatthe case organizations perceive tobe important in their supply chains,who they perceive to be theirsignificant stakeholders, why theyare important, and what theimplications are for their supplychain.

Upstream

Suppliers/growers - agriculturaland wine productionOn the supply side of their supplychains, when sourcing materials forgrowing and manufacture, all caseorganisations recognised thebenefits of economies of scale butnot all agreed that economies couldbe realised by individualbusinesses given the relativelysmall quantities of materials theysourced. This reflected the viewpresented in the literature of amore powerful player controllingthe relationship, though the caseorganisations did not necessarilyview this as a coercive relationship.Rather they represented it as a factof business that one accepted andworked with. In some instances thevery small producers were able tobuy from a larger producer. Two ofthe businesses suggested thepossibility of bulk purchasingthrough a regional group. However,they also commented thatextensive organisation would berequired to manage the process.Given that small (including micro)

producers have limited resources,it would rely on the good will andskill of one or more members whohave little or no spare time for thistype of activity. One producer alsocommented that it is extremelydifficult to get a large number ofproducers to agree on an approach.They had established an informalarrangement with a few other smallproducers to achieve some smallsavings. These producers alsosupported each other when one ofthem found they needed urgentsupplies. There is also a verylimited number of local (domestic)suppliers to the wine industry andthus choice is limited. One of thelarger of the four producersdescribed buying supplies, whenonly two suppliers exist, as“playing one supplier off againstthe other” but the producer saidthis was only possible when largerquantities are required.

All the producers were also grapegrowers. Although two producersused only their own grapes, twoproducers also sourced grapesfrom other growers. The cycle of


Table 1Key characteristics of wine producers

over- and undersupply of grapes inpast years has resulted in a volatilemarket for some growers. Thisperhaps explains the increase inthe number of new producerlicences as grape growers look foralternative markets. However, thebusinesses that sourced additionalgrapes commented that theypreferred to establish arelationship with a grower orgrowers to ensure the type andquality of the grape theypurchased.

The two smaller case organisationsdo not view information andcommunication technologies (ICTs)as important in terms of orderingor managing supplies coming intotheir organisations. They use theInternet only to keep up to datewith available products. The thirdcase organisation initially uses e-mail to invite suppliers to tenderand then orders are placed via e-mail. They also use the Internet tokeep up to date with availableproducts and to look for newproducts. The larger of the caseorganisations uses ICTs moreextensively to support many of itsbusiness processes.

Production

Grape pickersGrape picking can be viewed as anupstream activity in that the grapesare sourced as an input to theproduction process and, in someinstances, sourced from othergrowers. However, in everyinstance the producers discussedgrape picking as an integral part oftheir production process and thishas influenced the location of thisdiscussion. Grape picking isseasonal and grape pickers arerequired for only a few days eachyear by the case organisations.They also need to know they havereliable pickers who may need tobe available with limited notice,given the vagaries of the climate.There are agencies that supplygrape pickers but the cost wasconsidered to be prohibitive for thesmallest wine producer. This caseorganisation has cultivated areliable group of casual pickersover a period of time. The caseorganisation not only has to trainits grape pickers in picking, but

they must also comply withoccupational health and safetyrequirements and thus train theirpickers in safe working practices.To encourage their pickers toreturn each year they provide agood working environment and allfood and refreshments.

The other case organisations usedagencies on the basis that it wasthe agency's responsibility toensure they provided trained staff,though one organisation didcomment it was still soundbusiness practice to monitor theactivities of the casual workforce.One organisation commented thatthey had established a relationshipwith an agency and their “pick” waslarge enough to ensure a supply ofstaff was available even when anunexpected change in climatenecessitated an earlier or laterpick.

Crushing, maturation, and storageMost micro and small and to someextent medium-sized wineproducers do not have the space orthe facilities to crush and thenstore their wine during production.Many tend to outsource thisactivity. All but one of the caseorganisations regularly relied onoutsourcing companies to someextent for this aspect of thebusiness.

Crushing can be a difficult processto manage given it is not alwayseasy to forecast the exact time agrape will be ready to pick. Anunexpected change in weatherconditions can quite easily lead toan early or a later pick and crush.Crushing may only take a few hourseach year but timing is importantand the business has to rely on thegoodwill of the outsourcingcompany in terms of a flexibleschedule.

Each of the case organisationsmanaged this aspect of theirbusiness differently. Oneorganisation crushed at anoutsourcing organisation. It alsoused this site to store its owncontainers and to make its ownwine. It has also on occasion usedthe expertise of the residentwinemaker at the outsourcing

company. The case organisation,however, has a range of skills usefulto the outsourcing company andprovides its services in partpayment for the services theoutsourcing company provides.The case organisation views itsrelationship with this company ascritical to the success of itsbusiness. The second caseorganisation again uses anothercompany's facilities to crush, make,and store its wines, which it saw asa necessity but did not identify thisas one of its key stakeholders.However, it did comment it hadspent considerable time and effortin cultivating a good workingrelationship with the facility, whichit stated was essential to ensure ithad access to the facilities as andwhen they needed. The third caseorganisation had invested inequipment and was now self-sufficient in terms of crushing,storage, and maturation though ithad found one year that aparticularly good yield hadnecessitated the use of externalstorage. The final and largest caseorganisation crushed a proportionof its own grapes but governmentrestrictions limited the amount ofwater it could use in the area it islocated and more than half of itsyield had to be transported andcrushed elsewhere. It has its ownfacilities to make its wines andbottle and store at an outsourcingcompany.

The focus of all case organisationsis on producing a high-qualityproduct for their marketplace. Theowners consider investments inproduction technology their corebusiness, far more important thaninvestments in ICTs, particularlygiven the high cost of capitalinvestment in terms of wineproduction.

Downstream

Agents/Sales ForceOn the downstream side of thesupply chain only two of the caseorganisations used an agent and athird employed sales staff. Bothorganisations that used agentsidentified them as critical to thesuccess of their business. Theydescribed the agent as the businessthat was responsible for


representing their products to theend consumer. One stressed theimportance of having an agent withthe same value system as its ownso that the ethos of the businessand the qualities of the wine wouldbe faithfully represented. The otherstressed the importance of theoverseas agent visiting the wineryin Australia so that the agent knewwhere the winery is located andcould accurately describe theregion the wine is coming from aswell as the features of the wine.Another organisation discussed thedifficulties of finding and keeping areliable sales force and commentedit was developing its electronicsales as much as possible toeventually shorten its supply chainwith the intention of reducing coststo the mutual benefit of itself andits customers.

CustomersAll four wine producers identifiedcustomers (consumers) as keystakeholders in their businessthough each producer prioritisedthe customer differently. One wineproducer commented that “ifpeople don't drink wine thenthere's no reason to exist.” Thesmallest winery believes that it isimportant to give the customer “awhole wine experience as well asgood value, good quality wines at agood price; good value for money.”If people are interested they willtake them into the barrel room,explain the different processes, andexplain about the wine and how it ismade. It believes it is important toestablish a relationship with thecustomer, providing a qualityexperience as well as a qualityproduct. The other wine producersnoted the need for sales staff andagents who valued the productthey were responsible for selling.

TransportationOne organisation identifiedtransportation as particularlyimportant to it given its globalmarketplace, though it did notidentify any particular difficulties interms of transportation.

It is at the downstream end of thesupply chain where ICTs are morefully exploited by the caseorganisations. However, the

smallest case organisation stated ithas a web site on which it “hadplenty of hits but no sales.” TheirEFTPOS and electronic credit cardfacilities have proved to be veryeffective for the business, providingbetter cash flow, daily tallies oftakings, and less risk of fraud.

The second case organisationviews good stock management ascritical to the organisation andkeeps track of its stock andshipments in a database. Some ofthe storage and distributioncompanies provide access to anintranet to allow the caseorganisation to track its stocklevels and shipments but this is notavailable from all companies.However, it views its businessrelationship with its wholesaler asmore critical than the systems itmight put in place to manage sales.

The third case organisation wouldprefer all orders other than cellardoor to come in via e-mail. None ofits software currently is linked toother businesses; however, itstated it would welcome a more-structured link for processingorders with customers (retail andend consumer) and see benefits interms of reducing costs - fewer carsfor sales staff, lower phone costsand associated costs - which wouldenable them to lower prices andgrab a bigger market share. Theyhave good in-house expertise in ITthat has been learnt on the job. Thecompany does not view IT as theproblem-“it's getting the initial wineinto the market [the retailer] . . .the hardest part is selling . . . notreally a financial investment . . . it'smore a time investment in terms oflearning your systems andprocedures and how we go about itand seeing what works and whatdoesn't work . . . when you get tothe sales side of it that's somethingyou have no idea . . . until younegotiate a sale. . . . I think we're abit behind in this country inactually selling wines over thecomputer.”

The largest of the caseorganisations had more developedand more integrated systems tosupport its downstream activities.

Discussion

The supply chain of an SME wineproducer has a large number ofparties with complex relationshipsand much of the cultivation,picking, production, anddistribution processes areoutsourced to external parties. Thecase organisations explored had, tosome extent, differing views of whotheir key stakeholders were;however, there were a number ofinteresting issues identified by thecase organisations.

Measures of performance

Measures of performance wereidentified as most important.Checkland and Scholes (1999)define five measures ofperformance (effectiveness - arethe goals the right ones; efficiency -are the minimum resources used toreach the goals; efficacy - do themeans employed enable us torealize the goals; elegance - is this abeautiful transformation; andethicality - is this a morally correcttransformation).

The smaller producers did notbelieve they were working with thecritical mass necessary to achieveeconomies from their supply side.They had explored potentialstrategies for achieving economiesof scale through their regionalassociations but noted this wouldrequire extensive organisation,goodwill, and skill for it to besuccessful, and considered thecosts in terms of time and moneywould outweigh any benefits theymight gain. There was, however,potential for achieving efficienciestowards the end of themanufacturing process and at thedownstream end of their supplychains. This is discussed belowunder postponement strategies.

A greater importance was placedon establishing the right goals(effectiveness) and operating in amorally acceptable (ethical) andtasteful (elegant) way. All fourcases questioned their goals duringthe interview process. Theycommented that, as was typical ofmany small businesses, they spentmore time working in the business



rather than on the business.However, each business had a clearidea of what its product should be,who its potential customers were,and which markets it would target.Likewise, they were all aware thatthere were potential opportunitiesto improve the efficacy of theirwine production as well as theirbusiness processes.

The right goals were defined by thequality of their product, thesatisfaction of customers, buildinga good reputation, contributing tolong-term viability, and establishinggood working relationship withgrowers, other producers, theproduction facility owners, anddistributors.

For the customer there wasemphasis placed on providing ahigh-quality product and a goodwine experience. For thedistributor, shared values wereemphasized and a knowledge of thewine and its region. When growingand wine making were outsourcedthe emphasis was placed ondeveloping a close relationshipwith each so that they became avalued part of the productionprocess and final product.

Postponement strategies

A great deal of movement takesplace for these producers inmoving raw materials to crushingfacilities, then on to productionfacilities, storage facilities,distribution facilities, and cellardoors. For some this was moreextensive than for others. Therewere limited opportunities toachieve efficiencies in some ofthese processes as governmentregulation limited the type ofactivities that could be undertakenby the businesses at its own siteand, if regulation did allow,required a large capital outlay.However, opportunities wereidentified for achieving efficienciesand efficacy through carefulmanagement of its stock in terms ofhow much it held in bulk, howmuch it bottled, when it blended,and when it labelled and packaged.This is typically described in theliterature as logisticspostponement (Pagh & Cooper,

1998) or assembly postponement(van Hoek, 1997), though ifblending is postponed this could beseen as part of postponedmanufacturing as described byPagh and Cooper (1998) and vanHoek (1997).

Collaboration andorganizational forms

Quality of product, satisfaction ofcustomers, reputation, and long-term viability are well documentedin the literature. Formal alliances,relationships, and networks arealso documented in the literatureand tend to focus on upstream anddownstream relationships.

For the wine producers,downstream and productionrelationships, and to some extentupstream relationships, wereconsidered to be important. Someof the relationships weretemporary and developed toachieve a particular need. Forexample, if a wine producer wishesto export wines it must belong to aregion that has been designated asa wine region and, to achieve this,the region must apply to beregistered as a “geographicalindicator.” The application processrequires a large amount of data tobe collected, summarised, andpresented for consideration, and inthe instance discussed during theinterview, it was successfullyachieved by the establishment of aregional group of producers,managed by representatives of thegroup. Although none of the wineproducers identified communitiesof this kind as a key stakeholder,three of the case organisationsidentified communities in the formof cooperatives and regional bodiesas important to their businesses.Some relationships were informaland involved the exchange of skillsand expertise particularly withother smaller producers, who werealso their competitors. Others wereof a more formal nature, such as therelationships with distributors andgrape growers. In all instancesethical action and shared valueswere placed high on the agenda ofthe relationships.

The role of ICTs

ICTs were considered to be moreuseful by all organisations at thedownstream end of their supplychain. The two smaller businessesidentified cash control and stockmanagement supported by ICTS.The two larger organisationsviewed ICTs as an opportunity toprovide a greater level of controlover a number of businessprocesses.

Implications and furtherdevelopments

This research has explored theworldviews of four SME wineproducers in terms of their supplychains. It has been noted that themeasures of success for theseproducers relate to demonstratingquality in their product andethicality and shared values in theirrelationships with their supplychain members. This does notsuggest the SME wine producersignore efficiency and efficacy. Thebusinesses interviewed were fullyaware of a range of potentialopportunities but they were alsoaware of the costs involved and haddetermined the benefits did notoutweigh the costs. All the caseorganisations were establishedbusinesses that had been inoperation for several years and haddetermined an approach thathelped them to survive in a volatileindustry and marketplace. The factthat they are establishedbusinesses and are profferingsimilar views may suggest thattheir approach is replicable byother producers in the industry.Given more than 100 new wineproducers have been established inAustralia each year since 1998 andmost of these are micro, small, andmedium sized it would benecessary to evaluate some ofthese newer businesses todetermine whether they have asimilar view of their supply chains.In addition, given this is a smallsample, further research is alsoneeded to determine whether thisis true of other established micro,small, and medium-sized wineproducers.


Although much of the previousresearch has concentrated on largebusinesses there is limitedliterature on SMEs and supplychain management practices. Thereis even less discussion of thesupply chain of micro, small, andmedium-sized wine producerswithin the wine industry. For thewine SME the literature tends to belocated in the marketing literatureand is focused on the downstreamend of the supply chain. SMEsexplored in the supply chainliterature tend to present the powerrelationship between the largeproducer and the smaller supplier.In this study the producers are thesmall players who are often tradingwith the larger, more powerfulbusinesses. This research hasnoted the relationship between thelarge suppliers and the smallproducers but it has also identifieda set of many and complexrelationships that exist for theproducer with other parties to itssupply chain. The caseorganizations have recognizedopportunities to develop a numberof these relationships particularlyrelating to their production anddownstream supply chains andsome aspects of the upstreamchain, though not necessarily afully integrated supply chain. Theresearch also needs to examine theviews of the key stakeholders asdetermined by the producers andto explore whether their viewsconflict or coincide.

In noting the varied and sometimestemporary relationships within thesupply chain of a wine producer,the research has also raisedinteresting questions relating to thetype and shape of the organisationand where the boundaries lie. Thefindings from the cases explored sofar also suggest a number ofdifferent organisational forms.Future work will examine whatforms these might take and howthey can be defined, developed,and implemented into the complexsituation of a wine producer.

Given the large number of micro,small, and medium-sized winerybusiness both in Australia and inother countries, it may also beappropriate to replicate this studyin other countries.

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About the authors

Ann Monday lectures in supply chainperformance at the Newcastle BusinessSchool. She has managed a number ofundergraduate and postgraduate programsand has taught in the UK, Australia, HongKong, and Singapore. She has a bachelor ofbusiness from the Nottingham TrentUniversity, UK; a master's in informationmanagement from Hull University, UK; and acertificate in education from LeedsUniversity, UK. Her master's thesis exploredquality-monitoring systems in productionprocesses at a large packaging/manufacturingorganisation. Her current research, as part ofher doctoral research, is in the area of supplychain management within the Australian wineindustry. She has presented a number ofpapers at conferences in Australia, Finland,New Zealand, Canada, the United States,Ireland, and the UK relating to both hersupply chain interests and pedagogy. She isalso on the editorial board and reviews for anumber of journals.

Trevor Wood-Harper is professor ofinformation systems at the ManchesterBusiness School (MBS) UK. He has co-authored 25 books, monographs, and specialjournal issues. Recently Wood-Harper haspublished over 200 research articles in a widerange of topics including the multiviewmethodology, electronic governance,electronic commerce, action research,business process re-engineering, ethics,information systems foundations, anddoctoral education. These papers have beenpublished in top international journalsincluding Communications of the ACM,Information Technology and People, TheComputer Journal, Information SystemsJournal, European Journal of InformationSystems, Journal of End-User Computing, andthe Journal of Information Technology.Currently he is researching informationsystems for organization change, systemstheory, action research in practice, and storytelling as a research method. Also, to date, hehas successfully supervised or co-supervisedmore than 30 PhD theses. While at SalfordUniversity he led the IS research group whichachieved a 6* rating in the researchassessment exercise (RAE). At MBS he alsoachieved a top rating in the 2008 RAE.


Documents

Exploring the supply chain of small and medium-sized South Australian wine producers