i

MASTER OF BUSINESS ADMINISTRATION PROGRAM

2006 - 2008

“THE DEVELOPMENT OF A SUPPLY CHAIN STRATEGY

FOR COMPETITIVE ADVANTAGE”

THE TELESUR CASE

by

ROMANO DOULAT

(SURINAME)

Supervisor

Philippe Leliaert

2008

This paper was submitted in partial fulfillment of the requirements for the Master of Business

Administration (MBA) degree at the Maastricht School of Management (MSM) and the FHR

Institute for Social Studies (FHR), March 2008”

ii

ACKNOWLEDGEMENTS

This research study could not have been made possible without some individuals whom I would

like to thank;

First I would like to express my deepest gratitude to Philippe Leliaert, who guided me during this

research study. Philippe, you shared your wisdom and guided me through this process, which

was for me above expectation. It was an honor to have you as my supervisor.

Second, a special thanks to Hans Lim A Po and Ollye Chin A Sen, and their team for providing

Suriname with this opportunity for sharing and developing knowledge amongst professionals.

Third, my fellow students from MBA III and Dennis Mac Donald from the MBA II program,

who have supported me throughout the program, I have gained much knowledge and have

embraced you as family.

I would also like to express my gratitude to Dirk Currie, CEO of Telesur, Kenneth Muringen and

Frans Eersteling, and the Telesur family, without whom, this would not have been possible.

Thank you for investing in my future career development.

Also a vote of thanks to Pascal Fonville from T Mobile, who has helped me gain insight in the T

Mobile operations.

Last but not least my family, you showed patience and support, words cannot express my deepest

gratitude, thank you.

Romano A, Doulat

Paramaribo, March 2008

iii

iv

ABSTRACT

The telecommunication market in Suriname has been formally liberalized on April 16th 2007. On

that date two new mobile services providers received their license to operate in the market. The

Telecommunicatie Bedrijf Suriname, further to be named Telesur, who had been a monopolist

for 25 years, developed a strategic document in which it laid down how it is to remain

competitive in this new environment. Although strategic, tactical and operational objectives have

been set for the various operating units, no such objectives have been identified for supply chain

management. At present, the supply chain within Telesur is therefore not strategically

exploitable as an instrument for competitive advantage. This research study was chosen to

conduct a case study and develop a supply chain strategy for Telesur. In order to do so the

following problem statement was stated “What is an appropriate supply chain strategy in the

case of Telesur?

A research model was developed and combined with a benchmark study. The model was then

validated within Telesur. The theoretical framework included comprehensive theory on supply –

and logistics management. These were applied to assess which supply chain strategy was

appropriate for the current product groups. Furthermore the maturity levels of supply chain

processes were examined, identifying disconnects related to the case subject’s supply chain

processes.

Validation of theory demonstrates that Telesur should pursue efficiency as a strategy for its

current supply chain. Still, the supply chain process elements PLAN, SOURCE, MAKE and

DELIVER proved to be undeveloped. Furthermore disconnects were identified in the areas of

demand management and forecasting, information integration, supply chain integration of

systems and structures, and performance management. These were all symptoms of immature

supply chain processes. During the research, specific constraints were discovered that have an

impact on these business processes, namely economies of scale and supplier dependence. These

constraints were considered when the supply chain strategy was developed.

v

TABLE OF CONTENTS

ACKNOWLEDGEMENTS..................................................................................................... ii

ABSTRACT ........................................................................................................................... iv

TABLE OF CONTENTS ......................................................................................................... v

LIST OF ABBREVIATIONS ...............................................................................................viii

Definitions .........................................................................................................................viii

Abbreviations ........................................................................................................................viii

List of Tables ........................................................................................................................... ix

List of Figures.......................................................................................................................... ix

List of Graphs........................................................................................................................... x

CHAPTER 1 INTRODUCTION............................................................................................. 1

Section 1.1. Introduction ....................................................................................................... 1

Section 1.2. Preparatory Research........................................................................................ 1

Section 1.3. Problem Description .......................................................................................... 3

Section 1.4. Scope and Limitations ....................................................................................... 3

Section 1.5. Relevance of Topic ............................................................................................. 4

Section 1.6. Research Model.................................................................................................. 4

Section 1.7. Chapter Overview ............................................................................................. 5

Section 1.8. Summary ........................................................................................................... 5

CHAPTER 2 LITERATURE REVIEW ................................................................................. 6

Section 2.1. Introduction ........................................................................................................ 6

Section 2.2. Supply Chain Management Evolution ................................................................ 7

Section 2.3. Purchasing and Supply Management ................................................................. 8

Section 2.4. Internal and External Supply Chains ................................................................. 9

vi

Section 2.5. Supply Chain for Strategic Advantage............................................................ 9 Section 2.5.1. Supply Chain Strategy Assessment .............................................................. 9

Section 2.5.2. Supply and Demand Characteristics........................................................... 11

Section 2.6. Supply Chain Optimization................................................................................ 12 Section 2.6.1. Supply Chain Maturity Model................................................................... 13

Section 2.6.2. The Supply Chain Operations Reference (SCOR) Model .......................... 15

Section 2.7. Decision Making Framework ......................................................................... 19

Section 2.8. Summary......................................................................................................... 21

CHAPTER 3 RESEARCH METHODOLOGY.................................................................... 22

Section 3.1. Introduction.................................................................................................... 22

Section 3.2. Definition of Research Problem..................................................................... 22

Section 3.3. Definition of Research Purpose...................................................................... 22

Section 3.4. Definition of Research Strategy ..................................................................... 23

Section 3.5. Data Collection ............................................................................................... 23

Section 3.6. Application of Instruments ............................................................................ 23

Section 3.7. Interpretation of Results................................................................................ 24

Section 3.8. Summary ......................................................................................................... 24

CHAPTER 4 BUSINESS CONTEXT ................................................................................... 25

Section 4.1. Introduction..................................................................................................... 25

Section 4.2. Company Overview ........................................................................................ 25 Section 4.2.1 Company Profile........................................................................................ 25

Section 4.2.2 New Identity and Strategy.......................................................................... 27

Section 4.3. Competitive Environment.............................................................................. 27

Section 4.4 Summary......................................................................................................... 28

CHAPTER 5 RESEARCH FINDINGS................................................................................. 29

Section 5.1. Introduction..................................................................................................... 29

Section 5.2. Assessment of the Existing Supply Chain Strategy ....................................... 30

Section 5.3. The Supply Chain Maturity Model of Telesur............................................... 32

vii

Section 5.4 The SCOR model Applied within Telesur...................................................... 35 Section 5.4.1. As Is analysis using SWOT........................................................................ 36

Section 5.4.2. As Is Analysis for Material and Information Flow of Telesur..................... 38

5.4.2.1. Supply Chain Definition Matrix .............................................................................. 38

Section 5.5. Potential for Profitable Growth ..................................................................... 45 Section 5.5.1. Determine What to Benchmark ................................................................ 45

Section 5.5.2 Determine Benchmark Partners.................................................................. 45

Section 5.5.3 Supply Chain Maturity Model Benchmark................................................. 46

Section 5.5.4 Take Actions to Improve ........................................................................... 47

Section 5.6 Summary ......................................................................................................... 51

CHAPTER 6 CONCLUSIONS AND RECOMMENDATIONS .......................................... 53

Section 6.1. Conclusions ..................................................................................................... 53

Section 6.2. Recommendations ........................................................................................... 54

BIBLIOGRAPHY .................................................................................................................. 56

APPENDIX 1.0.: SUPPLY CHAIN OPERATIONS REFERENCE MODEL..................... 59

APPENDIX 2.0.: ORGANIZATION CHART ...................................................................... 60

APPENDIX 3.0.: SUPPLY CHAIN OF TELESUR.............................................................. 61

APPENDIX 4.0.: SCOR CARD METRICS .......................................................................... 62

APPENDIX 5.0.: ORGANIZATIONAL CHART OF SUPPLY CHAIN............................. 66

APPENDIX 6.0: SUPPLY CHAIN ORGANIZATION CHART ......................................... 67

APPENDIX 7.0.: FLOW OF PREPAID CALLING CARDS............................................... 68

APPENDIX 8.0.: PROCESS FOR PURCHASING PREPAID CALLING CARDS ........... 69

APPENDIX 9.0.: QUESTIONAIRRE SUPPLY CHAIN MATURITY MODEL................ 70

APPENDIX 10.0.: STAGES OF PURCHASING SOPHISTICATION ............................... 75

APPENDIX 11.0.:DECISION MAKING FRAMEWORK FOR SUPPLY CHAIN STRATEGY .............................................................................................................. 76

viii

LIST OF ABBREVIATIONS

Definitions

Supply chain management: is a total system approach to managing the entire flow of

information, materials, and services from raw-material suppliers through factories and

warehouses to the end customer (Chase et.all, 2006), i.e. from the point of procurements all the

way to the point of sale to the consumer.

Purchasing: the objective of purchasing is to acquire materials and services of the right quality in

the right quantity at the right price at the right time from the right source (Alan Raedels, 2000).

Abbreviations

CCOR Customer Chain Operations Reference Model

DCOR Design Chain Operations Reference Model

DRP Distribution Requirement Planning

ERP Enterprise Resource Planning

LIFO Last In First Out

MRP Material Requirement Planning

MRP2 Manufacturing Requirement Planning

MS Mobile Services

SCOR Supply Chain Operations Reference model

SIM Subscriber Identity Module Cards

Telesur Telecommunicatie Bedrijf Suriname

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List of Tables

Table 2.1 Decision Making Framework

Table 4.0 Distribution of Revenue in %

Table 5.1. Percentage of level 1 processes

Table 5.2. Supply Chain Definition Matrix

Table 5.3 List of Suppliers at Telesur

Table 5.4 SCOR Card results

Table 5.5 Benchmark Performance Metric Comparison Telesur

Table 5.6 Disconnect Summary

Table 5.7 Company Comparison

Table 5.8 Data Summary

Table 5.9 Customer Facing Metrics Telesur Availability

List of Figures

FIGURE 1.0 Research Model

FIGURE 2.0. Topics related to chapter 2

FIGURE 2.1. The Product Positioning Grid

FIGURE 2.2. Demand Uncertainty Matrix

FIGURE 2.3 The Maturity Model

FIGURE 2.4 SCOR Process Elements

FIGURE 2.5 General Benchmark Stair Case

FIGURE 3.0.Topics Related to Chapter 3

FIGURE 4.0. Topics Related to Chapter 4

FIGURE 5.0 Topics Related to Chapter 5

FIGURE 5.1 The Product Positioning Grid

FIGURE 5.2 Maturity of Supply Chain Process

FIGURE 5.3. Supply Chain Maturity Model Comparison between Telesur and T Mobile

FIGURE 6.1. Topics Related to chapter 6

x

List of Graphs

Graph 1.0 Revenue Distribution

Graph 5.0 Revenue Year on Year Growth Telesur

xi

1

CHAPTER 1 INTRODUCTION

Section 1.1. Introduction

This case study presents the analysis of the supply chain within Telesur in Suriname. The need for

research became evident after complaints of internal and external customers. Complaints from

internal customers mostly concern a lack of collaborative planning leading to misalignment

between marketing, planning and operations. These were also supported by real cases of mismatch

between demand and supply.

Section 1.2. Preparatory Research

To discover what the main problem at hand was, some preparatory research was done. This desk

research led to the discovery of a dissertation written by the purchasing manager addressing general

problems with purchasing Daal (2007). His research study contained a questionnaire, with the

following conclusions:

� Purchasing can contribute significantly to the performance of Telesur

� The Purchasing Department is not performing well enough to satisfy Telesur’s needs

� The purchasing function needs to be reorganized as soon as possible

� Telesur should have centralized purchasing

� Delivery of the right materials are important

� The Purchasing Department should provide for an uninterrupted flow of goods required to

operate the business.

According to general principles of purchasing, companies must prepare themselves against

disruptions in the supply chain (Kraljic 1983). In an interview with author, the procurement

manager acknowledged that Telesur did not prepare well enough against supply chain disruptions

and meeting customer expectations. Implementation of an Enterprise Resource Planning (ERP)

module could resolve the problems. However, elements of supply chain strategy were not included

in corporate strategy, resulting in the management of disparate parts of the organization rather than

a total supply chain approach. The existing manner of managing the supply chain resulting in the

following symptoms:

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1. Shortages of equipment at customer premises.

2. Both stock shortages and stock surpluses

3. Lost sales to customers.

Daal (2007) used action research for his case study, for hypothesis testing of what managers that

contributed to the supply chain thought of the role of purchasing. These observations showed that

there are indeed deficiencies within operations and that these usually result in a mismatch between

demand and supply such as shortage of capacity for customer premises equipment. Although these

cases were known to exist among supply chain functions, they were not recorded properly. On the

other hand the research of Daal was only based on the front end of the supply chain, i.e. purchasing,

on which he based his general recommendations. He stated that purchasing must become strategic,

but purchasing was still in a developing phase.

Other documentation included a report of consultant Fernando Kneese (2003). The report’s purpose

was to evaluate the telecommunications company of Suriname and included a segment on the

supply chain process. Kneese (2003) laid down the following deficiencies related to the existing

supply chain. For the purpose of objectivity, his statements were not revised:

1. Lack of trained personnel,

2. Lack of clear technical and functional specifications,

3. Lack of integrated purchase team for the negotiations,

4. Lack of procurement system,

5. Lack of integration with the supply chain,

6. Lack of adequate input from ordering departments or from the budget,

7. Lack of communication between the Procurement department and other departments.

Some additional facts were included in the report:

� The Supply Chain process consists of demand and supply management, procurement, logistics

and warehousing.

� Depreciation costs represent over 33 % of Telesur’s revenue, while procurement costs build up

to 53 % of Telesur’s revenue.

� Demand posed by normal business, operations and maintenance activities make the supply

chain process operationally important.

3

� Finally, he asserted that “Marketing demand and newly developed telecommunications

technologies make the supply chain process strategically important”.

Clearly Kneese illustrated in his report how important the supply chain processes are, however no

clear policies were developed to address the issues with the supply chain. He focused more on

disconnects, but the report lacked a clear understanding of strategic actions to be taken. Although

the disconnects should be turned into opportunities, he did not develop that point of discussion. One

of his main conclusions was that the logistics infrastructure was poor.

Section 1.3. Problem Description

The aforementioned disconnects exemplify the fact that Telesur was not able to adequately manage

and configure the supply chain and lacked clear policies on supply chain management. This gave

reason to question whether a formerly monopolistic company operating in a fully competitive

environment would remain competitive under these circumstances. The main problem at hand is a

lack of supply chain visibility, and of an understanding of how the supply chain could contribute to

the company’s strategic advantage. This led to the following problem statement “What supply chain

strategy is appropriate for Telesur?”

The following central questions must assist in answering the problem statement;

1. What are the appropriate instruments for supply chain analysis?

2. What are the main characteristics of the existing supply chain?

3. What are the supply chain disconnects of Telesur relative to the best practices in the

telecommunications industry?

4. What supply chain strategy can be applied based on the results of the supply chain analysis?

Section 1.4. Scope and Limitations

The research will be conducted in the period September 2007 up to February 2008 and has been

validated for one company only. Another case subject will be studied for benchmark purposes only.

The research study is only based on the external supply chain, thus for the goods and services

obtained for the external customers.

4

Section 1.5. Relevance of Topic

This case study presents the analysis of the supply chain within Telesur. The findings of this

research are relevant for purchasing managers, operation managers and organizations that are in

need for strategic actions for their supply chain operations.

Section 1.6. Research Model

The foundation of this research framework lies in three models, namely (1) the product portfolio

grid, (2) the Maturity model and (3) the SCOR model. These models are derived from literature on

supply chain management, logistics and supply management. For benchmarking purposes a best-in-

class comparison will be used to assist in identifying the current position of Telesur within the

industry. A combination of benchmark results and application of the aforementioned models will be

of importance to answer the problem statement. Figure 1.0 depicts the methodology.

FIGURE 1.0 Research Model

5

Section 1.7. Chapter Overview

The paper has been structured as follows;

Chapter one described the motivation and main problem areas that have led to this research.

Chapter two conceptualizes supply chain management and describes the necessary instruments

needed to answer the problem statement.

Chapter three describes which research strategy will be used to answer the main problem.

Chapter four describes the business context.

Chapter five applies the identified models

Chapter six concludes with recommendations.

Section 1.8. Summary

Chapter I described the considerations which have led to this research study on Supply Chain

Management. The methods that will be applied to develop a supply chain strategy were laid down.

The process to answer which supply chain strategy is appropriate for Telesur is structured in six

chapters.

6

CHAPTER 2 LITERATURE REVIEW

Section 2.1. Introduction

This chapter describes and discusses related theory on supply management, supply chain

management and logistics management (figure 1.0, chapter 1). The answer will be given to the

following central question “What are the appropriate instruments for supply chain analysis?

First the chapter describes supply management which relates to purchasing and the supply

characteristics of the supply chain. Second, Chapter 2 also discusses what instruments are available

for assessing the existing supply chain of a company. The chapter continues with tools that are used

to assess the level of maturity of supply chain processes. To conclude the chapter, theory is

described that helps determine what a company’s current performance level is compared to the

industry it operates in. The results on literature in this chapter should lead to instruments which can

be used to analyze the existing supply chain of Telesur. In the following section theory on the

evolution will be discussed. In figure 2.0 the highlighted boxes summarize the topics to be

discussed.

FIGURE 2.0. Topics related to chapter 2

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Section 2.2. Supply Chain Management Evolution

While conducting secondary research the author came across theory on supply chain evolution.

Supply chain management has evolved over the years from purchasing to a more strategically

important supply chain function. In the 1950’s and 1960’s manufacturers wanted unit production

cost reduction as the primary operations strategy (Tan, 2001). A decade later first materials

requirements planning (MRP) and then manufacturing resource planning (MRP-2) were introduced

followed by intense global competition in the 1980’s. Globalization forced manufacturers to

produce goods and services at lower cost, higher quality, and with greater design flexibility.

Therefore, manufacturers realized the importance of strategic buyer and supplier relationships. Tan

postulated that in the 1990’s the evolution continued with best practices in managing corporate

resources to include strategic suppliers and the logistics function in the value chain. Although his

research findings were only based on manufacturing, Tan (2001) concluded that supply chain

management evolved along two paths. The first was based on a logistics perspective and the second

on purchasing. The one that evolved along the logistics path was based on the transportation and

logistics perspective of merchants. This perspective focused more on location and logistics rather

on transformation. The second one was the purchasing and supply perspective, which included

buyer and supplier integration. Integration of information management systems between buyers and

suppliers should lead to an increase in productivity and reduce cycle times. The ultimate goal of

integration between buyers and suppliers was to increase customer satisfaction and increased

market share. After these two paths Tan discovered a third theory that dominated literature which

was one that describes all value adding activities.

Further research found confirmation in the works of Elram (van Goor, 1999), Gelderman (1983),

and Handfield and Nichols Jr. (2002). First Elram described supply chain management more as

managing and controlling distribution channels in order to achieve customer goals through efficient

maximization of resources. Second, Gelderman’s theory was related to purchasing and supply

management. In one of his journals he stated “Purchasing must become supply chain”. Third,

Handfield and Nichols Jr. (2002) and Jacobs (2006), state that the supply chain encompasses all

organizations and activities associated with the flow and transformation of goods from the raw

materials stage through to the end user, as well as the associated information flows. Material and

information flows both up and down the supply chain. Handfield’s focus is more on value creation

by supply chain integration. Although different definitions have been developed over the years, the

8

commonality between these definitions is that of managing material and information flows from

suppliers to buyers, aligning demand and supply, which in general stays the same. Therefore the

following general definition of supply chain will be used: “the supply chain includes all processes

that put the products in the hands of end users”.

Section 2.3. Purchasing and Supply Management

In this section the importance of purchasing is discussed mainly because it is part of the front end of

the supply chain. Disruptions in the supply chain could be reduced or even eliminated if the

strategic role of purchasing is acknowledged. The objective of purchasing is to acquire materials

and services of the right quality in the right quantity at the right price at the right time from the right

source (Raedels, 2000). The definition of “right” has changed since “purchasing must become

supply management” (Kraljic, 1983). The definition of “right” has another dimension to it because

a value assessment of the role of purchasing today leads to three stages of purchasing (Raedels,

2000). First the traditional purchasing function looks at the price alone. The tactical role of

purchasing then looks at leveraging volume from multiple to single sources. The strategic role,

finally, looks at total value.

Today total value is key to establishing the necessary supply strategy. Kraljic states that the

company’s need for supply strategy firstly depends on the strategic importance of purchasing in

terms of the value added by product line, the percentage of raw materials in total cost, and their

impact on profitability. Other than Raedels he elaborates on the four stages of purchasing

sophistication (appendix 11.0). In his model he states that the higher the degree of market

complexity the greater the importance of purchasing. Supply strategy depends secondly on the

complexity of the supply market gauged by supply scarcity, pace of technology, monopoly or

oligopoly conditions, entry barriers logistics cost and materials substitution.

Given these theoretical facts, it is to be stated that the strategic advantage of the supply chain

depends on the phase in which purchasing exists.

9

Section 2.4. Internal and External Supply Chains

Supply chain management distinguishes internal and external supply chains. Elaborating further on

Handfield’s and Nichols Jr.’s (2002) definition of supply chain integration, it is important to

distinguish value creation by internal organizational members and external stakeholders. In their

book Supply Chain Redesign, they made a distinction between internal and external supply chain,

which differs from Elram and Stevens (van Goor, 1999). An internal supply chain is a part of the

supply chain occurring within an individual organization. According to Handfield and Nichols,

internal supply chains are complex, since different types of strategies and organizational structures

require different supply chain configurations. These are dependent on the types of goods and

services which they deliver. Once the internal supply chain is understood, the analysis will extend

to the external part of the supply chain. External supply chains consist of suppliers and end

customers.

This study is limited to the goods and services provided to the external customers.

Section 2.5. Supply Chain for Strategic Advantage

Organizations can develop or improve their competitiveness by bringing “supply chain thinking”

into their company strategy. Making supply chain management strategic means aligning all

operations and information systems with company strategy (Ayers, 1999). In his article Ayers

proved how supply chains can become strategic, based on the dimension of demand characteristics.

Demand characteristics are based on product functionalities which have been determined by the

consumers. He elaborated further on themes of Marshall Fisher and Michael Porter (Ayers, 1999)

and he used their portfolio model to prove how demand characteristics are fundamental for supply

chain strategy (figure 2.0). This resulted in the Product Positioning Grid.

Section 2.5.1. Supply Chain Strategy Assessment

The main objective of the Product Positioning Grid is to help analyze what supply chain strategy is

appropriate for an organization depending on the products it sells. Ayers explained how this

assessment should take place. The Product Positioning Grid is a framework that assists managers in

10

understanding the nature of demand for their products. Based upon the product functionalities a

supply chain that could best “fit” that demand would then be developed (Chase et al., 2006). The

model consists of characteristics such as product life cycle, demand predictability, product variety

and lead times of services.

Ayers explained that products are categorized either as being functional or innovative making it less

difficult for managers to understand the nature of demand. Functional products have longer life

cycles, with low contribution margin, whereas innovative products have shorter life cycles of only

few months. This framework determines product competitiveness by the supply chain that delivers

the product. The foundation of the product grid lies in its functionality, reliability and value-for-

money (Figure 2.1.). The framework is interpreted as follows:

Quadrant A in the grid is categorized as products being best in class performers with excellent

supply chain processes. C is categorized as products being sold in a market where competition is

intense with little difference amongst these products. Supply chain innovation is required to

compete in the market, since these products are no longer the standard for product excellence. B is

categorized by products that are nearly at the end of their product life cycle, with inefficient

operations. Products categorized as D products on the left side are at the end of their life cycle.

Organizations must pursue the position of product group A, making them products with excellent

products and supply chains.

FIGURE 2.1. The Product Positioning Grid

Source: Ayers, 1999

11

A and B are categories equivalent to innovative products and Porter postulates that these product

categories command higher contribution margins, requiring supply chain design based on

availability (Ayers, 1999). Product categories C and D match functional products, requiring

efficient supply chains with low contribution margins. To conclude this segment it is to be stated

that the application of this grid leads to identifying the appropriate supply chain strategy of an

organization.

Section 2.5.2. Supply and Demand Characteristics

In addition to the Product Positioning Grid, Hau Lee (Chase, et. all 2006) describes the supply

dimension for devising a supply chain. Lee’s framework, which is also portfolio based, expands on

Fisher’s demand characteristics as stated by Ayers and underlines the supply dimension with the

same. He describes supply chain strategies that mitigate risk as follows (figure 2.2):

FIGURE 2.2. Demand Uncertainty Matrix

Source: Operations Management For Competitive Advantage

� Efficient supply chain strategies: strategies aimed at creating the highest cost efficiency,

eliminating non-value added activities, and deployment of optimization strategies.

� Risk-hedging supply chain strategy: strategies aimed at pooling and sharing resources in a

supply chain so that the risks in supply disruptions can be shared.

12

� Responsive supply chain strategy: strategies aimed at being responsive and flexible to the

changing and diverse needs of the customers.

� Agile supply chain strategy: strategies aimed at being responsive and flexible to customer

needs, while the risks of supply shortages or disruptions are hedged by pooling inventory

and other capacity resources. According to theory they are agile since they have the ability

to be responsive to the changing diverse and unpredictable demands of customers and

minimize supply chain disruptions, reducing risk both at the front end and the back end of

the supply chain.

However in companies where processes have not evolved into mature stages, hedging and pooling

to a certain extent, could lead to increased supply chain disruptions. For example, pooling on each

others’ stock could also mean that one business unit has not properly planned its material

requirements, which could lead to a bullwhip effect1. The latter could have negative implications for

customer service. So in this research another interpretation applies: Agile supply chain strategies

should lead to shortened response times and production flexibility.

Lee (Chase et al., 2006) states that it is more challenging to operate an organization with a supply

chain strategy that is in the right hand side of the grid. Similarly it is more challenging to operate a

supply chain that is in the lower row (Figure 2.2). He determined that the supply chain will improve

if the uncertainty characteristics of the products are moved from the right column to the left or from

the lower row to the upper by standardizing supply chain processes. In addition to the Product

Position Grid organizations need to include Lee’s Demand and Supply Uncertainty Matrix to assess

their existing supply chain strategy.

Section 2.6. Supply Chain Optimization

In the previous section instruments have been discussed which can be applied to assess an

organization’s supply chain strategy that best fits according to product and demand characteristics.

Knowledge of the most appropriate strategy is not sufficient though, because it only says something

about where the organization is leading its business practices to. Yet an organization must assess if

1 The Bullwhip effect is caused by fluctuations in demand, which as a result is causing stock shortages to become stock

overs.

13

the supply chain processes of the organization have been sufficiently developed to lead the

company towards gaining competitive advantage. This is a question of whether the organization has

the capabilities to govern its supply chain processes according to the strategic objectives.

Section 2.6.1. Supply Chain Maturity Model

Literature study led to theory on the Maturity Model, which was described and applied by

McCormack and Lockamy (2004). Both state that companies reach greater levels of performance

when they focus strategically on their business processes. This was also the foundation for

McCormack’s research on the Maturity Model. This model assesses the supply chain processes and

produces results on which strategies for organizations to move from poor supply chains processes to

best in class (Figure 2.2). The model conceptualizes how process maturity relates to the Supply

Chain Operations Reference Framework, which will be discussed further in section 2.6.2. The

method used to obtain the aforementioned result is usually through surveys. In this research study it

will be applied to assess the case subject’s stage of maturity.

In another journal, McCormack stated that the model is not directly related to supply chain

processes but encompasses components related to the definition, measurement, management and

control of business processes in general (McCormack et al., 2007). The maturity model is a tool

which is used to investigate the relationship between supply chain process maturity and overall

supply chain performance. The model consists of five stages, describing an organization’s growth

towards effective processes and process maturity. With each level of maturity comes an increasing

level of predictability, capability, control, effectiveness and efficiency.

The first stage depicted in the model is “Ad hoc”. Ad Hoc is characterized as an unstructured supply

chain, without clear targets and process measurement. In the second stage “Defined”, process

performance is more predicable, but often the organization does not achieve defined targets. At both

previously described stages supply chain cost are high and job function traditional. The next stage is

“Linked”, linking processes and functional team members to each other sharing common goals and

making a supply chain more strategic. Supply chain costs begin decreasing slightly, and targets are

often achieved through performance measurement systems.

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FIGURE 2.3 The Maturity Model

Source: McCormick 2006

The fourth stage “Integrated” is an integrated approach towards supply chain management, based on

clear performance measurements, advanced supply chain practices and a collaboration between

suppliers and customers that leads to collaborative planning and forecasting. McCormack concludes

with the fifth phase, which is named “Extended or Evolved”. Extended is client focused and is

based on multi-organizational supply chains, with extended processes and recognized authority

throughout the supply chain. McCormack emphasizes that skipping stages is counter productive, for

as each stage is a building block for the next.

If application of the Maturity Model results in the identification of less developed processes then

the next step is to determine what the underlying causes are and what the implications could be for

the business processes in question. Other steps should be how these disconnects could be removed,

leading to improvement and optimization of the processes from for example “defined” to

“integrated”. To assess what disconnects relate to the supply chain processes and how optimization

should take place the Supply Chain Operations Reference model (section 2.6.2) is applied.

15

Section 2.6.2. The Supply Chain Operations Reference (SCOR) Model

In this section the Supply Chain Operations Reference Model will be discussed giving more

insights into how supply chain processes can be optimized. The Supply Chain Operations Reference

model, further to be named “the SCOR model” was developed by the Supply Chain Council and

became relevant to this study because it provides an integrated, disciplined approach for supply

chain optimization. SCOR utilizes a business process reference model that links process description

and definition with metrics, best practice and technology (Elram et al, 1999; see also appendix 1).

SCOR is part of the Integrated Business Reference Model consisting of Design Chain Operations

Reference Model (DCOR) and Customer Chain Operations Reference Model (CCOR). Worldwide

almost 750 companies, mostly American based organizations, use the SCOR model for supply

chain optimization. The model is built around five distinct process groups: PLAN, SOURCE, MAKE,

DELIVER and RETURN. The Supply Chain Council defined the processes as follows:

1. PLAN; are processes that balance aggregated demand and supply to develop a course of action

which best meets sourcing, production and delivery demand.

2. SOURCE; procurement of goods and services to meet planned actual demand.

3. MAKE; these processes include manufacturing of goods to the desired state to meet actual

demand. Some organizations find it difficult to visualize and measure a services supply chain

(Swartwood, 2006). The author therefore asserts that MAKE includes the workflow combining

the goods and labour that will finally result in a service.

4. DELIVER; these processes are used to provide finished goods and services to meet planned or

actual demand. Functions related to this process are distribution management, transportation

management and order management. Referring to Swartwood, delivery of services is a

combined effort of human capital and goods.

5. RETURN; processes related to receiving returned goods.

The research study will be limited to the first four relevant processes PLAN, SOURCE, MAKE and

DELIVER at level one, given the relevance for the case subject. By definition there are no RETURN

processes when services are concerned. Level one refers to the first level of process description.

Since strategy development is the main focus, the other levels for example level two, three, will not

be described in this research study.

16

FIGURE 2.4 SCOR Process Elements

The SCOR approach contains elements that are based on basic benchmark steps. Handfield and

Nichols Jr (2002) cite Cook who postulates that benchmark analysis contains an effective means of

determining the supply chain performance compared to those of other organizations. Comparing

practices and procedures from other businesses to the best in class helps identify the necessary

improvements to be made. SCOR is based on these general seven steps for benchmark analysis.

Figure 2.4 depicts the staircase which is in this research is named the SCOR benchmark staircase

for supply chain optimization. The same benchmark staircase will be applied, instead of the original

model because of the lower degree of complexity.

FIGURE 2.5 General Benchmark Stair Case

Source: Supply Chain excellence (2003), Supply Chain Integration (2002)

The benchmark staircase will be used combined with some elements of the original SCOR model.

In each stage of benchmark the elements will be described. Application of SCOR should result in

detecting strategy drivers:

Identify As Is situation

The As Is analysis uses SCOR elements to describe the existing situation of the company which

are:

17

� Description of internal and external profile, which is used to describe the scope of

business. Internal profile first looks at the organization chart, then at the identification of

all locations in operation.

� SWOT; using a simple strengths, weaknesses, opportunities and threats analysis a better

understanding exists of the current state of business using the external and internal

profile.

� Identification of suppliers and customers using the 80/20 rule. Suppliers are categorized

by the amount of capital spent, while customers are categorized by the company’s

related earnings.

� Identify As Is material and information flow. The second step of the SCOR framework is

process mapping of existing material flows from suppliers to customers. After mapping

these processes a performance spreadsheet is developed measuring the company’s

performance in each of the four processes, PLAN, SOURCE, MAKE and DELIVER. An

organization’s material flow is accompanied by an information flow, which according to

the SCOR model consists of six SCOR level three transaction types. The third phase of

SCOR model maps the information flows, which are purchase order, work order, sales

order, return authorization, forecasts-plan and replenishment orders. In general the

purchase orders move through:

� S1.1 Schedule product deliveries,

� S1.2 receive product

� S1.3 verify products

� S1.4 transfer product

� S1.5 authorize supplier payment

The SCOR uses the “Staple yourself transaction analysis”, that has the objective to collect data

from the existing supply chains material flow. Each movement is followed physically from the

moment its starts until the moment it ends. This is measured by performance indicators

“technology” and “productivity”. Technology refers to the information tools utilized to complete

the tasks identified in the process step. The next three items on the worksheet are factors in

calculating transaction productivity. Productivity refers to three simple metrics: volume, cycle

time and yield.

� Volume is the number of transactions of the primary output over a specified period of time.

18

� Cycle time is defined in two ways. Event time is the time spent on the tasks from start to

finish assuming no lag time. Elapsed time is the actual time that passes from start to finish

including any lag time; for instance it could take a material handler one hour to complete all

four tasks without waiting time, but four hours in elapsed time.

� Yield is the number of transactions requiring no rework. It is measured as a percentage of the

total. This concept places a value on purchase, work and sales orders that need to be

reopened to change or complete data, such as bad addresses, incorrect unit prices or terms,

wrong quantities.

The “As Is” analysis is summarized in a performance spreadsheet of which the objective is to

collect and analyze key SCOR level two metrics for each location. Supply chain metrics are

exemplified by Bolstorff and Rosenbaum (2003) and summarized in appendix 4.0.

2. Determine what to benchmark

Bolstorff and Rosenbaum explain that measuring an organization’s supply chain does not only

mean measuring KPI’s that are important to internal stakeholders, but also important to

shareholders and end customers. They state that based upon this assumption a SCOR card matrix

must include performance measurement indicators relevant to customer, shareholders and the

internal organization. The indicators under which the organization is benchmarked against best in

class are for example availability and delivery performance. As mentioned before, an explanation of

these metrics are summarized in appendix 4.0 followed by a brief explanation. Application of this

framework should result in the mapping of existing processes and in visibility of disconnects

between processes.

3. Determine benchmark partners

The SCOR card is an instrument which provides such useful comparison. It produces metrics

for the company that is then compared against the industry’s SCOR card, determining the

organization’s current competitive position. Competitiveness is determined by positioning an

organization at three levels namely a level of advantage, a level at parity and a superior level.

Statistically the gaps between the three levels can be measured by calculating the parity gap and

the competitive requirement gap. The parity gap is the gap between the industry’s average and

the company’s actual performance. The parity gap is measured by subtracting the actual

performance of the company from the industry’s average. The competitive requirement gap is

19

the gap between the actual performance of the company and the best in class performances. If

the comparison results in a disadvantage, then these are presented as negative values. The result

of this methodology is the foundation for determining the organizations strategy driver.

The abovementioned benchmarking steps are the only ones to be used in this chapter. The other

four steps are relevant for chapter 5 where the research results will be presented. In this chapter the

information gathered from questionnaires will be discussed. Improvements relative to the

benchmark will also be presented.

To conclude this segment, literature reviews of SCOR have in general been positive; however the

SCOR model contains limitations;

1. Dan Swartwood’s adaptation of SCOR (2006) proved the model to be normative for industrial

companies. The commonality between manufacturing and services supply chain is the degree of

certainty in the chain. Application of the model in a services company may be hampered by the

complexity of multiple supply chains. The input of the supply chain might differ depending on

the desired outcome, for example for education the output is intellectual. This proved to be a

limitation.

2. SCOR does not specifically address sales and marketing (demand management), or research and

development, or product development. If the research discovers problems in demand

management, further research is needed.

Section 2.7. Decision Making Framework

In this section all relevant theory described in the previous sections will be contextualized in a

decision making framework. Before doing such, first two factors will be described that influence

the decision making process leading to the appropriate supply chain strategy.

The first factor that influences strategy development is related to supply management. Kraljic

(1983) used the comprehensive portfolio matrix to reduce supply vulnerabilities. He explained

volume to be the main determinant of a company’s bargaining power, because economies of scale

yield a decisive competitive cost advantage. For companies with fewer economies of scale, high

supplier dependency would apply. Second, the author will refer to McDonald (2006) who adapted

20

the Kraljic purchasing portfolio model to remoteness. McDonald proved how Kraljic’s portfolio

model applies to industrialized countries. He cited Nellore and Söderquist (2000), who rationalized

the purchasing portfolio dimension as being experience based. Poor logistics, economies of scale

and remoteness will be considered during strategy development.

The second factor relates to ownership. Literature research on supply chain management does not

specifically address corporate ownership as a factor yielding risk. In the 20th century a redefinition

of the role of the government was needed to expand industrial activity (Jayashankar, 2007).

Jayashankar explains that the government should perform the role of facilitator and companies need

to endeavor a strategic management approach.

The abovementioned factors are included in the decision making framework which will be used to

lay down the organization’s status quo and develop an appropriate supply chain strategy. The

framework contains the Product Positioning Grid (cf Section 2.5), the Maturity Model (cf Section

2.6.1) and the SCOR model (cf Section 2.6.2). For the Product Positioning Grid the product life

cycle, contribution margin and product functionalities determine the supply chain strategy that best

fits an organization. This is necessary for organizations that have never made their supply chain

visible. When visibility is realized then the Maturity Model is needed to determine the stage of

development for supply chain processes. The results of the maturity model are then used to

determine how this affects operations. Finally, the SCOR model then assists in identifying

disconnects. Disconnects which could affect strategy development and execution.

In the end the framework must lead to pursuing the existing supply chain strategy which has been

determined using the Product Positioning Grid. Other actions of an organization could for example

also lead to a change of strategy. In conclusion an organization must consider the factors related to

the decision making framework in order to develop a supply chain strategy that best fits its overall

business strategy.

21

Table 2.1 Decision Making Framework

Framework Dimension Factors Source

Product portfolio grid Demand Product life cycle, Contribution margin, Product functionalities Ayers, J.

Demand and Supply uncertainty

Demand and supply

Stage of purchasing sophistication, Product functionalities, Economies of scale

Kraljic, P., McCormack,

Supply Chain Maturity Model

Process maturity Process maturity McCormack,

SCOR model Performance Process elements, Performance metrics, Government ownership

Bolstorff, P., Rosenbaum, ., Jayashankar. Decree C-38.

Section 2.8. Summary

The objective of this chapter was to provide an answer to the central question “What are the

appropriate instruments for supply chain analysis? To answer this question literature was reviewed

on the evolution of supply chain management as a science. Supply chain management evolved

along three paths, namely logistics, supply management and value creation. Literature also revealed

two dimensions to the supply chain, the demand and the supply sides, that are fundamental for

strategy development. The demand side looks more at the demand characteristics of products. The

supply side on the other hand looks more at mitigating supply risk. The Product Positioning Grid,

the Supply Chain Maturity model, and the SCOR model are appropriate tools to determine a

foundation on which a supply chain strategy is developed. The Product Positioning Grid determine

which supply chain is appropriate for business, given the services provided to the market,

categorizing products as functional or innovative. Applications of their models induce strategic

actions for organizations. The maturity model assesses the current stage of supply chain processes,

while SCOR identifies disconnects in the existing supply chain. Reviewing these models, it became

clear that they are all limited in certain cases. They are normative and apply for industrialized

countries; adaptation is required for specific cases. Factors related to supply management and

ownership were added to a developed decision making framework.

22

CHAPTER 3 RESEARCH METHODOLOGY

Section 3.1. Introduction

In this chapter the methodology is described that was used to systematically answer the problem

statements. Guidance for this research study was obtained from literature by Piet Verschuren and

Hans Doorewaard. The methodology must result in strategic directions for the case object.

FIGURE 3.0.Topics Related to Chapter 3

Section 3.2. Definition of Research Problem

The main problem of the case subject is that the supply chain strategy is unclear. The characteristics

have not been laid down properly and also disconnects have not been identified. The research

subject, Telesur, is therefore unable to use the supply chain strategically as an instrument to gain

competitive advantage.

Section 3.3. Definition of Research Purpose

The purpose of this research is to develop an appropriate supply chain strategy and determine the

current state of the supply chain state. Visibility of the existing supply chain also remains an

objective.

23

Section 3.4. Definition of Research Strategy

A sequential case study is required to answer the central questions, studying first the case subject

and then selecting a best in class subject for comparison. Given the time constraint only one

research subject was included. Literature will be combined with practice using input from cross

functional staff. The staff members are directly related to the case subject’s supply chain process

elements PLAN, SOURCE, MAKE and DELIVER. Using inductive comparison a supply chain strategy

will be developed based on the research results. First, the main observations such as supply chain

disruptions and performance management will be validated using interviews. This will be followed

by testing against a larger sample size, the information gathered from the one on one interviews.

The sample contains 16 employees from 9 departments. The same selected staff members serve as

sources of information from questionnaires and information related to material, work and

information flow.

Section 3.5. Data Collection

Primary information will be collected through interviews and observations. Secondary information

is available using existing documentation as laid down in chapters 1 and 2. The involvement of the

cross functional members is essential, for as the research progresses they will be learning by

implementing. The members will be appointed supply chain agents, communicating the objectives,

the acquired results and contribution and role to this study, to their subordinates. Except for other

information in this research, financial figures were used from the year 2006 as the most recent

available figures.

Section 3.6. Application of Instruments

Understanding the current supply chain characteristics requires a thorough analysis, applying the

theoretical framework described in chapter 2. First the Product Portfolio Grid will be used to

identify which supply chain strategy is required for each of the product groups. Second, the

assessment according to the Maturity Model will depend on the following criteria: state of process -

structures, availability of key performance indicators and of functional descriptions.

24

To find out if the above described criteria apply to the organization’s supply chain, data will be

obtained from a survey amongst cross-functional team members. Gathering information for SCOR

model application is the most difficult since the customer related metrics have not been measured.

To determine the scope of business, information for the SWOT analysis has been obtained from

recent company analysis from 2006 to which different organizational members have contributed.

Material and information flows will be mapped using information obtained from described

processes, interviews, observation and, where available, documentation, together with the cross

functional team members. Where there are no defined measurement systems, a number of

assumptions will be made.

Section 3.7. Interpretation of Results

The most important dimension of this research is the interpretation of results which could lead to

unexpected conclusions, i.e. conclusions that differ from internal organizational members’

perceptions of supply chain functions such as purchasing, marketing, sales and planning. The main

research recommendations could also differ from proposed solutions by organizational members

mentioned in other documentation. On the other hand, there could be similarities in findings.

Findings presented to cross functional team members must result in an evaluation of their existing

role in the supply chain and what strategic actions should be taken, given corporate strategy. The

cause and effect exercise will be beneficial to all team members giving them authority to present

conditions under which actions must be taken.

Section 3.8. Summary

This chapter describes each processes needed to ensure an answer to the research problem. The

process steps include observations of symptoms related to the supply chain. First literature of

logistics and supply chain management will be reviewed. This is followed by interviews of staff

responsible for supply chain process elements PLAN, SOURCE, MAKE and DELIVER. A cross

functional team will assist in to gathering information to answer the problem statement. The

findings will be the foundations for recommendations, which will be shared with organizational

stakeholders.

25

CHAPTER 4 BUSINESS CONTEXT

Section 4.1. Introduction

Chapter four gives a general description of Telesur. First a company overview will be described

presenting the company’s financial status. The necessity of supply chain development becomes

clear in this chapter because of the changed strategic direction that is laid down. The changed

conditions in the mobile telecommunications market which are also described in this chapter,

illustrate how fierce competition is in Suriname and why Telesur needs to gain a competitive

advantage.

FIGURE 4.0. Topics Related to Chapter 4.

Section 4.2. Company Overview

Section 4.2.1 Company Profile

Telesur is the first telecommunications company of Suriname and employs about 1100 people. The

company contributes almost 6 % to the Gross Domestic Product2 and provides connectivity to an

estimated 80,000 residential customers. The government is sole shareholder and Telesur is currently

2 Economic Indicators Report 2005, General Bureau for Statistics (ABS)

26

process of changing the legal status of the company from Sui Generis3 into a Limited Liability

company. Telesur is structured in four divisions namely operations, commercial, financial and

logistics affairs (appendix 2.0). It has seven regionally spread sales branch offices. The company’s

product portfolio consists of three major product groups which include

1) Data communication Services.

2) Fixed Telephony and Mobile Services.

3) Internet and Multimedia Services.

4) ATV which also generates revenue is a television company.

5) Other services include total solutions for some company’s.

Graph 1.0 Revenue Distribution

Revenue Distribution of Telesur

91%

1%

3%

1%

4%

Fixed en Mobile TelephonyServices

Datacommunicationservices

Internet

ATV

Other

Table 4.0 Distribution of Income in %

Service group 2004 In % 2005 In % 2006 In % 2007* In % Fixed en Mobile Telephony Services 74,726,545 91% 92,348,550 93% 99,518,571 94% 113,990,385 93% Data Communication services 1,151,273 1% 1,190,976 1% 1,573,595 1% 1,881,315 2% Internet 2,065,818 3% 2,434.238 2% 2,065,818 2% 5,322,212 4% ATV 410,909 1% 48,727 0% 568,364 1% 791,594 1% Other 3,421,455 4% 3,643,273 4% 2,494,909 2% 243,166 0% Total Revenue 81,776,000. 106,221,256. 106,221,257. 122,228,672.

Source: Annual Report 2006

The figures of 2007 have been forecasted, as the annual report for 2007 has not yet been published.

3 An company structure in which the company has been appointed by law

27

Section 4.2.2 New Identity and Strategy

In 2006 the company changed its strategic direction which gives general guidelines for transforming

the company from a monopolist to a market driven company (from reactive to proactive). In this

strategic plan the scope of business expanded slightly, because markets were not only defined as

local and regional, but also in the Dutch speaking market. In the Dutch speaking market, primarily

the Netherlands, an estimated 300.000 inhabitants from Surinamese descent are domiciled. To

elaborate further on the strategic directions, the company established three themes namely

innovation, cost reduction and quality improvement. The themes evolve along convergence where

services are deployed based on one network solution (Ericsson White Papers, 2006) improving the

organization’s efficiencies and cost effectiveness.

Section 4.3. Competitive Environment

In 1997 the Surinamese government committed itself to the liberalization of the

telecommunications market, because it signed off on telecommunications treaty established by the

World Trade Organization. On the 16th of April 2007 both Digicel and Intelsur received their

licenses to operate in the Surinamese market as telecom operators. Digicel is a private owned Irish

company with 23 branch offices spread across the Caribbean, Mid America, and Pan American

region. Intelsur is a partner of partly state owned UTS, a company that operates in Curaçao as the

incumbent.

Moreover, in this changing market environment pros-umption4 and immediacy5, both reflecting

customer buying power, are becoming the main market drivers.

4 Don Tapscott (1996) explained that customer’s involvement increases in the production process increases; he coined

the word prosumption by contracting production and consumption. 5 Tapscott, (1996) states that, the economy is becoming a real time economy. Businesses must immediately adjust to

changing business conditions and customers needs.

28

Section 4.4 Summary

In the previous chapter background information of Telesur was laid down. The scope of business

was described and the product groups which are deployed in Suriname. Telesur faces competition

on mobile communication services leading to a changed competitive environment, with customers

becoming increasingly demanding.

29

CHAPTER 5 RESEARCH FINDINGS

Section 5.1. Introduction

In order to answer the second central question “What are the current characteristics of the existing

supply chain?” the methodology described in chapter 3 was followed. This chapter first assesses

what supply chain strategy best fits Telesur using the Product Positioning Grid. Second the Supply

Chain Maturity model is used to identify what the current maturity level of supply chain processes

is. Third the SCOR model is applied to identify what disconnects exist within the Telesur

organization. To conclude this section a benchmark study between T Mobile and Telesur is

presented, giving insight in to how disconnects could be removed using best practises from T

Mobile. The current supply chain characteristics are then summarized in this chapter.

The results presented in this section are based on a collaborative effort of a group of organizational

staff members, directly related to the supply chain activities. These cross functional staff are from

Marketing, Purchasing, Planning, Stock management and Sales, joined by the supply chain

representative from T Mobile. T Mobile and Telesur have a long lasting agreement for mobile

roaming services in the Netherlands.

FIGURE 5.0 Topics Related to Chapter 5

30

Section 5.2. Assessment of the Existing Supply Chain Strategy

Using the Product Positioning Grid, as presented by Ayers in chapter 2, the existing supply chain

strategy will be determined. The product positioning grid assists in understanding the nature of

demand and identifying the most suitable supply chain for that demand (Ayers, 1999). According to

Ayers the positioning of the products is dependant on the product life cycle, contribution margin

and product functionalities. Based on these factors it is to be concluded that the product groups are

in the stage of maturity in the product lifecycle. Information on the contribution margin remains

aggregated so the author will assume that contribution margins are low. The products are therefore

classified as being functional. An explanation will be given on what these conclusions are based

upon.

The product groups under consideration for this study are Fixed Telephony including Mobile

Services, Data Services and Internet services. These were selected based on their aggregate revenue

generation – representing over 95% of total Telesur revenues - and growth rates depicted in chapter

4, segment 4.2. The revenue growth rates of these product groups were then obtained from the

annual report 2006 and the results were as follows.

First, one can look at year-on-year revenue growth of each of the product groups, in order to

determine its stage of product life cycle. Graph 5.0 which depicted the results showed no clear

pattern. These facts were not enough to state in which stage of product lifecycle the product groups

are.

Additional market information proved to be helpful;

� If product development were to be considered then it is to be concluded that the level of

product development is low for product group A. As the Fixed Telephony technology is

stable, any product development has been limited to offering additional value added

services, which Telesur launched 4 years ago. By the same token however, for product

group A, which also includes Mobile Services, important functionalities have not been

utilized to the fullest, such as internet on mobile. This brings into question whether mobile

services can still be regarded as being innovative for the Surinamese market. Since one of

the competitors utilized a full fledged internet on mobile service, the level of innovativeness

remains a point of discussion. Both product groups are therefore positioned as being

31

functional. For Data Communications services (group B) there were no major developments

to improve or innovate these type of services. For 4 consecutive years lease lines have been

the revenue generator for product B. This group is also classified as functional.

� Product group C, Internet Services, experienced an explosive growth of revenue in 2006

compared to 2005 and 2004, but grew less in 2007 compared to 2006. Other than ADSL

there were no major developments on product innovation, which led to the conclusion that

product group C is also classified as being functional. In graph 5.0 shown below the year on

year growth rates have been presented.

Graph 5.0 Revenue Year on Year Growth Telesur

Year on Year Revenue Growth Telesur in %

-50%

0%

50%

100%

150%

200%

period

perc

enta

ge

A Fixed en Mobile TelephonyServices

B Datacommunication services

C Internet

A Fixed en MobileTelephony Services

24% 8% 15%

B Datacommunicationservices

3% 32% 20%

C Internet 18% -15% 158%

2005/2004 2006/2005 2007/2006

Source: Annual report Telesur

According to the product positioning grid, group A, B and C would be positioned based on the

criteria product life cycle, product functionalities and contribution margins. It is to be concluded

that because of the low level of product innovation, the risk still exists that these service offerings

have reached maturity.

The information gathered from graph 5.0 can only serve to assess product excellence. To say

something about supply chain excellence would require information about metrics such as

availability or lead-time for all product groups. Since the availability of information is not

sufficient, the results contained in the maturity model in section 5.3 were considered. Next to the Y

axis in figure 5.0, the values 1 to 5 on a Likert scale have been laid down.

32

Product categories A, B and C are positioned as and are equal to functional products, because of

their modest revenue growth rates and product innovation. Using Hau Lee’s supply and demand

risk framework combined with the product-positioning grid, mitigating risk for all product groups

would require efficient strategies. Fixed telephony for example would now require standardization

of processes in order to reduce cost and remove all non-value adding activities. If one of the product

groups would encounter innovation for example, it would require an agile supply chain strategy.

FIGURE 5.1 The Product Positioning Grid

Depending on the outcome, one could assume that an efficient supply chain strategy might be

appropriate for all product groups. To further investigate what the level of supply chain excellence

is with related disconnects of Telesur’s supply chain, application of the supply chain maturity

model is required.

Section 5.3. The Supply Chain Maturity Model of Telesur

The supply chain maturity model was validated performing a survey amongst staff members of key

supply chain functions namely marketing, purchasing, integral planning, sales, stock management,

data communication services. The questionnaires were first translated into Dutch to remove the

33

language barrier that could lead to misinterpretation for respondents. These numbers represent the

supply chain maturity stages for Telesur as assessed by the interviewees.

Based upon the respondents’ answers, it is to be concluded that Telesur’s is in early stages of

supply chain maturity. The company’s average process maturity is between level of Ad Hoc and

Defined. Process element PLAN scores relatively higher compared to the other process elements and

SOURCE (purchasing) relatively lower, which is similar to what the research of Daal (2007)

concluded. Figure 5.2 depicts the results.

From the information obtained from the Telesur’s respondents it is to be concluded that they have

little or no knowledge of performance metrics and there lacks a total supply chain approach.

FIGURE 5.2 Maturity of Supply Chain Process

Source: Questionnaire Supply Chain Maturity process

Some of the questions were not answered, mainly because they were not relevant to the

respondents. A paradigm was also identified concerning regarding process documentation and

process measurement. Processes were documented but departments failed to measure them. Yet,

measurement of processes should be one of the reasons for documenting and defining processes. An

explanation of the distinct process elements will follow.

PROCESS ELEMENT PLAN

The total average score granted by 16 staff members, was valued at the level between “Ad Hoc’and

34

‘Defined’ on a 5-point Likert Scale (appendix 10.0). Where the forecasting models were available

to test the forecasting processes, the minimum average of 1,6 was granted. Respondents

acknowledge that much attention was paid to the planning process of workflow. However, because

ad hoc activities remain, postponement of planned execution of objectives extends the planning

process. For example supply chain disruptions occur when promotional activities are planned on a

day to day basis. Another example is about an ADSL promotional activity which was planned at the

annual fair in 2007. The supply chain was unable to support the subsequent increased demand on

short notice. This resulted in relocation of customer equipment, because they supplied customers

according to the last in first out (LIFO) principle. The previously described example is a symptom

of insufficient cross functional planning. The score of 1,9 was the second lowest score when

respondents were asked if cross functional planning methodologies were structural.

PROCESS ELEMENT SOURCE

Examining centralized purchasing was one of the main objectives of this part of the questionnaire.

Respondents confirmed that they did not involve the purchasing department in the supplier selection

process. The lower values for purchasing activities were given because clear supplier performance

indicators were missing. For the respondents that did in fact make supplier agreements, and in the

process involved purchasing, the values were also poor. Again, process measurement did not exist.

Scheduling processes between suppliers and Telesur were neither defined nor measured.

Agreements between Telesur and their suppliers about for example penalties for delayed supplier

deliveries do not exist at the moment. This was confirmed by the questionnaire responses.

Integration of the systems between Telesur and their suppliers did not exist, as proved by the

questionnaire. The latter led to a lower process maturity stage.

PROCESS ELEMENT MAKE

This is the production part of the supply chain. The MAKE part is a collaborative effort between

departments, to transform equipment, capacity and end customer equipment into end customer

services. These processes are at a relatively higher level of maturity. The lowest value is given to

the question whether material requirement planning models and systems exists. The respondents

gave a relatively high value to the statements whether their processes are aligned with other

departments’ processes. However, alignment must not be interpreted as a collaborative process, but

more as one that is based on requests from departments. This is justified by an average score of 1,8

for the statement whether the processes are based on cross functional collaboration.

35

PROCESS ELEMENT DELIVER

DELIVER is at a relatively lower stage of maturity. One would assume from the value of 2,0 given

for the statement whether departments can deliver more than is requested, that processes are

streamlined. The latter is not a result of streamlined processes, but of excess capacity. A case

example for mobile services will follow in chapter 5. Results show that performance measurement

systems undeveloped. Performance indicators remain to be defined for the supply chain sections

from suppliers to Telesur, and from Telesur to end customers. The results present a score of 1,8,

measuring the process maturity of DELIVERY. In conclusion distribution processes are not clearly

defined and documented, which represent the low average score 1,9.

The outcome gave cause to compare the information gathered from respondents with Telesur’s

process network architecture. The process network architecture is a guideline used by Telesur for

the strategic direction with related processes defined at level one. The comparison provided

information about the low level of process maturity.

Table 5.1. Percentage of described processes at level 1

LEVEL 1 PROCES CUSTOMER GROUPS TO BE

ACTUAL IN %

End Customer Relation 13 2 15 Supplier Relation 6 1 17 Business Partner Relation 5 0 Internal Customer Relation 6 2 33 Total 30 5 17

Source: Network Architecture Telesur

An estimated 17 % of processes have been defined and documented at level two. The remaining

83% are still to be defined. To ensure customer service improvement, Telesur is obliged to

prioritize those remaining process definitions. Based on the company’s snapshot of existing process

maturity, improvement is still an opportunity. Organizational members have explained that

processes are under “construction” and will be defined on short term. However a process

description is no guarantee for supply chain optimization, process owners remain the ones who

manage and control them.

Section 5.4 The SCOR model Applied within Telesur

36

In the previous segments the characteristics of the process maturity of the supply chain have been

laid down. To further detect disconnects, the SCOR model will analyze the company from a

different dimension. The same staircase will be used for this part of the analysis. The analysis will

result in the identification of strategy drivers for supply chain optimization.

Section 5.4.1. As Is analysis using SWOT

To begin with, the first step of the SCOR framework is to define the organizational scope of

business. The author conducted performed a general Strengths-Weaknesses-Opportunities-Threats

(SWOT) analysis based on the external and internal company profile. This SWOT was combined

with recent SWOT analysis results conducted by Telesur:

Strengths PROCESS

ELEMENTS # STRENGHTS

DELIVER S1 Geographically well positioned sales branch offices

S2 Staff with years of experience in the telecommunications sector

S3 Knowledge of the existing technologies to deploy services ALL

S4 Firm financial position

Weaknesses PROCESS

ELEMENTS # WEAKNESSESS

PLAN W1 Poor forecasting processes and unclear demand management policy, no existing

accuracy management systems. Unclear demand management policies.

SOURCE W2

Traditional purchasing function, supply management is at its early stages, which in

supplier dependency, not leveraging supplier relationships enough. The outcome of

purchasing agreements do not reflect the company’s strategic themes, namely cost

reduction and quality management. The bargaining position of Telesur remains

weak, because of the economy of scale, geographical position and the lack of

collaborative bargaining.

37

PROCESS ELEMENTS # WEAKNESSESS

W3 Lack of performance management, related tasks to process elements plan, source, make,

deliver, are still at the first stages of maturity.

W4

Lack of Supply Chain Visibility, an ERP system Exact Globe has been implemented, but is

not being utilized at the fullest. The system is being used for financial accounting purposes,

but actually also includes functionalities for supply chain management.

W5

Insufficient System Integration operational activities related to process element make, must

be integrated in the management information systems. The material handling and

warehousing function still operates as a loose entity, resulting in delayed stock level

information.

ALL

W6 Traditional jobfunctions

Opportunities PROCESS

ELEMENTS # OPPORTUNITIES

PLAN O1 Fuller utilization of existing information and integration of systems

DELIVER O2 Leverage existing geographical positions of sales branches to further strengthen customer

service.

SOURCE O3

Exploit existing supplier relationship, The bargaining position of Telesur remains weak; the

company therefore should strengthen its negotiation position and achieve annual purchase

volume cost reductions.

O1 Convergence of technology, giving the company a strategic advantage by using cost effective

technology to deploy services. ALL

O2 Globalization offers potential markets for economies of scale

Threats PROCESS

ELEMENTS # THREATS

T1 Traditional purchasing function, which focuses only on price rather than total cost

reduction which could lead to unnecessary expenditures. SOURCE

T2 Supplier dependency

T3

Conflicting interest between government and Telesur, government is included in decision

making process. In the near future Telesur has to operate in a full competitive market,

which requires a privatized state owned company. Till now the company still operates as a

by law, appointed organization with governmental tasks. Profit is not the main objective.

ALL

T4 Competition of 2 new mobile operators

38

Section 5.4.2. As Is Analysis for Material and Information Flow of Telesur

5.4.2.1. Supply Chain Definition Matrix

The second step of SCOR is to define the supply chain by its markets, market segments and

distribution channels. In the first section the positioning of services in the Product Positioning Grid

determined the presumed supply chain strategy based on the existing product functionalities, life

cycles and contribution margins. Supply chain definition is contextualized as the supplier base, the

customer base, the product groups, the market and the work and information flow. Table 5.2

exhibits three basic product groups described earlier in chapter four, indicating the market segments

to which they are deployed The 20/80 rule applies for the company’s customer base: 20% consist of

the high revenue generators which are depicted in table 5.2. For reasons of confidentiality the

financial figures are not exhibited.

Table 5.2. Supply Chain Definition Matrix

Data services Fixed telephony & Mobile services

Internet and Multimedia Services

Multinationals Multinationals Multinationalsls Banking sector Banking sector Banking sector Government Government Government Residentials Residentials

Source: Telesur Management Information system

Telesur’s front end of the supply chain is composed of geographically positioned suppliers from for

example the North American continent, Europe, Asia, the South American continent. Based on the

80/20 rule the top 20 suppliers from 2006 and 2007 selected from a list of 97 suppliers, in terms of

annual spend, have been identified and are presented in table 5.4. The total procurement costs make

up an estimated 38% of the total cost of goods sold. The majority of suppliers originate from the

North American and the European continent, illustrating the importance of related import duties

that in general ad up to 50%.

27,6 % of the current procurement costs has been spent on Nortel. The latter illustrates the supplier

dependency and longer lead times, because geographically a large distance exists between

continents South America, North America and Europe. Process elements PLAN, SOURCE, MAKE and

DELIVER are utilized, not only for engineer-to-stock products but also for finished stock.

39

Table 5.3 List of Suppliers at Telesur

#1 Supplier Description Sales in %

Country of

Origin

1 Nortel Switches, exchanges 27,6 USA

2 Comverse prepaid platforms 12,2 Israel

3 LogicaCMG prepaid platforms 8,5 N/A

4 Ericsson switches, exchanges 6,8 Brazil

5 Lucent Technologies Switches 5,6 France

6 Rohn products Towers 3,8 USA

7 Indel Towers 3,8 Curacao

8 Fernandes transportation vehicles 2,9 Suriname

9 Prastel Trading Corp N/A 2,8 USA

10 Gemplus Industrial

Starter kits, gsm

software 2,6 Venezuela

11 ICS

Computer, computer

hardware 2,1 Suriname

12 TKF joint muffs, cables 1,7 Netherland

13 Solunet Dataswitches 1,5 USA

14 Suroto transportation vehicles 1,4 Suriname

15 Unisale joint muffs 1,1 USA

16 Stainless LLC N/A 1,0 USA

17 NTCS Socket , power joint 1,0 Netherlands

18 UCC wireing, cables 0,8 Suriname

19 Locksmith Cellphones 0,8 Suriname

20 Airspan Equipment 0,8 Canada

Source: Purchasing department/ Financial Accounting

Section 5.4.2.2. Work and information Flow

The mapping of suppliers, distribution channels and customers, is followed by the general material

and information flow at level one. Appendix 3.0 depicts the relevant flows.

(a) Identify benchmark partners and determine what to benchmark

In order to establish a snapshot of Telesur’s performance, a benchmark comparison will be made.

To better illustrate the companies performance compared to the industry, the same proposed metrics

40

by Bolstorff and Rosenbaum (2003) have been selected. For the customer facing metrics no data

was obtained, which gave reason to leave the rows in table 5.4 grey coloured. First a selection of 10

of the top 20 telecommunications companies world wide (ITU, 1997) to gain a snapshot of the

industry’s best in class. Forbes and Fortune 500 were also considered to obtain knowledge about

the current status of the benchmark company’s, since the ITU reference is outdated. Industry data

has been obtained from this public owned company’s registered at Hoovers.com. preferably the

author would compare the companies within the region (Caricom), but due to availability of

parameters these company’s were used. The metric definitions are contained into appendix 4.0. The

gap between Telesur and the industry is summarized in table 5.4. The analysis is conducted from -

and limited to - a supply chain point of view.

(b) Analyze data and performance gaps

Supply Chain Cost

These available parameters (table 5.4) show a slight deviation in supply chain cost for about 2 %

from the industry’s average. If Telesur’s objective were to improve its current performance level to

the parity level, a cost reduction of 2% will be required. In terms of value this will add up to USD

1,100,000. If the company wants to achieve a competitive advantage in the industry it should close

an 11% gap equal to USD 6 million. The most logical sequence is to achieve parity, advantage and

then superiority. The difference with the requirement gap is at 20%. Sales and administration cost

are also determined at 6 %, resulting in a requirement gap.

Supply Chain Asset Management efficiency

The figures in table 5.4 show that both cash to cycle time and inventory turnover are at advantage

compared to the industry’s average. Telesur needs less time to convert its inventory into working

capital, which is actually a good sign given the industry’s average of 44,7 times for cash to cycle

and 33,8 times for inventory turnover. Asset turns are at a disadvantage of 0,8 % compared to the

industries average, which leads to a requirement gap.

Shareholder metric Profitability

In general Telesur is less profitable compared to the industry’s level of parity which is based on the

calculated net income of 16% compared to the industry average of 23%. Telesur’s Gross Margin is

in fact 6 % less than the industry’s average. To increase its operating income to the industry’s level

of advantage a 7 % increase in Gross Margin is required.

41

Table 5.4 SCOR Card results

Level 1 Performance

Metrics Actual

Parity Median of statistical example

Advantage midpoint of parity and superior

Superior Parity Gap = Parity -

Actual

Requirement GAP =

Superior - Actual

Supply Chain Delivery Reliability

Delivery Performance NA NA NA NA NA NA

Line Item Fill Rate NA NA NA NA NA NA

Perfect Order Fullfillment NA NA NA NA NA NA

Supply Chain Responsiveness

Order Fullfilment Lead Time NA NA NA NA NA NA

Supply Chain Flexibility

Supply Chain Response Time NA NA NA NA NA NA

Ext

erna

l

Production flexibility NA NA NA NA NA NA

Supply Chain Cost Cost of Goods Sold 58% 56% 47% 38% -2% -20%

Total Supply Chain Management cost

0%

0% 0%

SGA Cost 6% 16% 10% 3% 10% -3% Supply chain Asset management Efficiency

Cash to Cycle Time

23,8 44,7

33,0

21,4 20,9 -2,4

Inventory turnover 17,0 34,2 20,4 6,7 17,2 -10,3

Inte

rnal

Asset Turns 0,9 1,6 6,9 12,2 0,7 11,3

Profitability Gross Margin 38% 44% 53% 62% -6% -24%

Operating Income 32% 29% 39% 49% -3% 17%

Net Income 16% 23% 35% 46% 7% -30%

Shar

ehol

der

Effectiveness Return on Assets 29% 14% 22% 29% -15% 0% Source: www.hoovers.com / Telesur annual report 2007/ Forbes.com

Legend NA= Not Available.

Shareholder metric effectiveness

The last indicator, return on assets proves Telesur to exploit its assets more effectively when

compared to the industry’s level of parity. The return on assets is calculated at 29%. As the product

positioning grid illustrates a company’s competitive advantage is dependent on the supply chains

that deliver the products or services, which demonstrates that improvement in some areas is needed.

To conclude this gap analysis, the table clearly demonstrates some advantages and disadvantages

resulting in the following summary table 5.5, in which the current status of Telesur is presented.

42

Table 5.5 displays the company’s current status, which is a starting point. The table also displays

which metrics need improvement in order to be at parity or at advantage with the industry and

where it needs to remain competitive. In order to achieve parity (P), advantage (A) or become

superior (S), the next step is to assess existing disconnects in the supply chain and were

improvement is needed. After a series of interviews, the following aggregated disconnects were

identified.

Table 5.5 Benchmark Performance Metric Comparison Telesur

SCOR Card Metric Definition Level 1 Performance Metrics Actual To Be

Supply Chain Cost Cost of Goods Sold BP P Total supply Chain Management cost SGA Cost A S Supply chain Asset management Efficiency Cash to Cycle Time A S

Inventory turnover A S

Internal

Asset Turns BP P Profitability Gross Margin BP P Operating Income P A Net Income BP P Effectiveness Return on Assets S S

Internal Shareholder

Legend: , A = advantage, BP=below parity, P= parity,, S = superior

Supply chain disconnect analysis

To further analyze what disconnects exist possibly causing these disadvantages, the above described

metrics were investigated through a series of interviews, which resulted in the following

disconnects. These were also supported by observations.

PLAN

(1.0) Poor forecasting methods, systems and demand management systems.

Forecasting methods are generally based on historical figures. Some of the product groups

such as fixed telephony and mobile services are compared monthly, because of competitive

pressures. Evaluation of financial targets usually is an annual event but structural accuracy

control does not exist. On the other hand structural evaluation of forecasted material

requirement and actual usage does not exist. For some product groups monthly reports are

produced for fixed and mobile services. For fixed services for example the reports contain

annotations about shortages of equipment for customer connections. However, a detailed and

43

consistent description about the amount and type of material, the time and source of

disruption, which causes scarcity, does not exist. This disconnects cause poor asset

management and affect inventory.

(2.0) No supply chain management function. As appendix 5.0 shows all functions are being managed

by their own divisions and are widespread across the organization, but not as interlinked

processes. For example the commercial secretariat and inventory management department

manage prepaid calling card inventory. Disconnect 2 increases supply chain disruption risk for

increased stock and inventory planning and also inefficiency, because of excess tasks.

(3.0) Inadequate performance measurement systems. Telesur’s operational objectives in general are

known but they lack proper execution. Proper performance indicators are not incorporated in

the job tasks. Proper execution of operational objectives remains the bottleneck. Disconnect 3

affects the total supply chain, because adequate performance measurement systems do not

exist.

(4.0) Insufficient coordination of inventory management. Supply of material gets disrupted, as other

departments relocate stock to special projects. An example is the shortage of joint muffs: The

main problem here is that there is no forecasting for execution of special projects, which leads

to hedging and pooling of material needed to support customer connections. The impact is

made visible in the net earnings of the company, caused by relatively high cost of goods sold

and the customer facing metric supply chain flexibility.

SOURCE

(5.0) Supply management and its strategic role remain unclear. Cost reduction objectives based on

purchasing policies have not been singled out. An estimated 14 departments carry out

sourcing, without collaboration with others to reap economies of scale in relevant sourcing

families. Furthermore the supply disruption which leads to inefficiency risk remains as

departments have the discretion to take their own purchasing decisions. These cause

unforeseen purchasing cost and inefficiency.

(6.0) Insufficient utilization of the ERP system Exact Globe. Although information system

integration initiatives have begun within the company, modules containing supply chain

functionalities have not been implemented.

(7.0) Unclear performance management systems; performance management systems are not

integrated in daily activities. For example, for suppliers no key performance indicators have

been defined. However, there are some service level agreements which have been agreed upon

for end customer connections. This disconnect affects all process elements.

44

MAKE

(8.0) The strategic role of inventory management. Proper warehouse systems exist, however they are

not fully integrated. The function of inventory is restricted to storage of stock. Management

information systems regarding stock are not fully utilized to manage stock.

(9.0) Integration of warehousing systems. Differences occur between physical stock and stock

information from the management information systems. This affects the number of days in

which cash is tied up as capital, because on time data available for promotional activities does

not exist.

DELIVER

(10.0) Supplier performance metrics. Supplier delivery Key Performance Indicators (KPI) on level

two are not available, not for the sales branch offices nor for the external resellers. Customer

facing metrics are ill defined, also given the fact that processes related to end customers,

mentioned in 5.3 have to be defined at level 2. Clearly defined distribution strategies do not

exist.

As section 5.3 pointed out the maturity level of supply processes is low, causing the above

described symptoms. Section 5.3 also indicates that an estimated 17% of processes have not been

clearly defined at level 2. In table 5.6 the disconnect summary is presented. Theory has been used to

assess the problem at hand. For guidelines to potential solutions a benchmark comparison will be

conducted. T Mobile was approached as benchmark partner to determine the possible solutions

related to the identified disconnects.

Table 5.6 Disconnect Summary

# Areas of improvement Proces element 1.0 Supply management SOURCE 2.0 Performance management ALL PROCESS ELEMENTS 3,0 Forecasting and demand management PLAN 4,0 Inventory management MAKE 5,0 Information Integration & centralization of Supply chain functions ALL PROCESS ELEMENTS

Source: Questionnaire results

45

Section 5.5. Potential for Profitable Growth

In the previous section some of the research results have been presented. One of the main findings

includes 5 disconnect areas. The objective of this section is to illustrate what solutions T Mobile

provides to improve the summarized disconnects within Telesur. It is to be stated by the author that

best practises are also a source of solutions besides theory. The same benchmark staircase of

chapter 2 (figure 2.4) will be considered. To avoid repetition of information presented in the

previous section, only the relevant benchmark steps will be compared.

First a description will follow as to which product group will be benchmarked and why the

benchmark partner was chosen. The same SCOR card comparison will follow and what the

benchmarks itself produced as solution to remove disconnects.

Section 5.5.1. Determine What to Benchmark

Using the general benchmark staircase the author will describe why the product group Mobile

Service was chosen for the benchmark;

1. Competitive position; recently the telecommunications market was liberalized allowing two

new telecom operators to compete on the mobile market.

2. Revenue generating share; mobile services contribution is an estimated 38% of the total

companies revenues.

3. Pro-sumption; liberalization resulted in increased buyer power. Telesur must therefore improve

time to market in order to meet customer demand.

Section 5.5.2 Determine Benchmark Partners

T Mobile is the benchmark partner and was chosen because of the companies leading role in the

telecommunications industry in Europe, the availability of company data and the fact that the

company is partly private owned. The company is currently the number 3 leading operator in the

Netherlands based on market share. To put the benchmark comparison into perspective a brief

company comparison is presented. The figures are summarized in table 5.7 Company Comparison.

46

For strategic reasons and availability of figures, separate financial figures for mobile services will

not be included in the comparison.

Table 5.7 Company Comparison

Parameters Telesur T Mobile Ownership Government owned 100% Public owned Revenue $96.300.000,00 $23.220.000.000,00 Subscribers 350.000 4,300.000 Employees 1007 1415 Operations worldwide Caribbean, Europe USA, Europe Number of countries with operations 2 10

Source: Annual reports Telesur / T Mobile 2007

The total amount of subscribers of T Mobile in the Netherlands amounts up to 4,3 million, of which

an estimated 2 million are active subscribers (annual report T Mobile, 2006). In Suriname there are

an estimated 350.000 subscribers. The revenue per employee clearly shows a higher productivity

factor. Information about T Mobile’s supply chain is included in appendix 6.0.

Section 5.5.3 Supply Chain Maturity Model Benchmark

To compare both supply chain processes between Telesur and T mobile, the Supply Chain Maturity

Model was applied. This result is needed to determine the level of supply chain process maturity

within T Mobile and to assess whether a higher level of maturity leads to improved business

operations. The results which were provided by the supply chain department of T Mobile are as

follows.

The result proved that T Mobile’s processes were much more developed than Telesur’s. The lower

levels of maturity for T Mobile are positioned between integrated and linked, while the levels of

Telesur’s supply chain maturity processes are valued between Ad Hoc and Defined. Comparing

Telesur’s supply chain process with T Mobile’s, some contradictions were discovered. The process

elements SOURCE and MAKE at T Mobile were highly developed, against the poorly developed

SOURCE and MAKE processes of Telesur. The highest values within Telesur were given to process

elements PLAN, MAKE and DELIVER, while the same process elements at T Mobile’s showed

relatively lower level of process maturity.

47

FIGURE 5.3. Supply Chain Maturity Model Comparison between Telesur and T Mobile

Source : Questionnaire results Telesur T Mobile 2007

The results show that requirements for company performance are based on, but not limited to a firm

supply management functions and MAKE, the production part of the company.

Section 5.5.4 Take Actions to Improve

The purpose of this section is to identify solutions within T Mobile’s business processes for

disconnects shown in table 5.7. Disconnects 1.0, 2.0, 3.0, 4.0 and 5.0 are described by giving

examples of real cases which reflect the situation on hand. Since some disconnects are similar to

each other they were described as one.

DISCONNECT 1.0 &2.0

1) Supply management Telesur is dependent on suppliers because of the remoteness of operations.

Purchasing prepaid calling cards is an example. Instead of exploiting supplier relationships

through the development of long term contracts, calling cards are purchased with an average

frequency of 4 times a year. The current purchasing manner increases supply risk.

2) Performance measurement systems are insufficient for example no supplier metrics have been

determined and the number of availability for prepaid calling cards, handsets and sim cards have

not been set. The questionnaire in appendix 10.0 contains survey results that prove that

measurement systems are not sufficient.

48

BENCHMARK COMPARISON T MOBILE against DISCONNECT 1.0& 2.0 Performance measurement systems are for example customer and internal facing such as

availability, forecast accuracy, variation. Operational objectives of the supply chain department are

measured by the key performance indicators

o velocity, which are average sales of the previous 3 weeks

o availability, the percentage of lost sales,

o yield and depreciation versus stock on hand, which is 1 % of purchased stock.

DISCONNECT 3.0& 4.0

3) Forecasting and Demand management is the bridge between front office and back office.

However the existing level of forecasting within Telesur is low. Demand management is not

part of daily activities. Disconnect 3.0 has been identified when the author approached the

responsible staff member for prepaid calling cards and also for handsets and sim cards.

4) Inventory management functions are traditional and decentralized. This means fragmentation of

inventory management for handsets, sim cards and prepaid calling cards. The inventory

management function is reactive, which means that forecasting and proactive signaling of

supply chain disruption is not part of daily activities.

The responsible staff members for selling, purchasing and inventory management of prepaid calling

cards presented a relevant case. They are employed by the commercial secretariat which supports

the commercial division of Telesur. The staff members are responsible for:

� Distribution to resellers,

� Inventory management of prepaid calling cards

� Purchasing of prepaid calling cards in collaboration with the purchasing department.

The following example describes the abovementioned disconnect in dept;

Appendix 7.0. includes two samples from the commercial department responsible for inventory

management of USD 5 and USD 10. They state that the current forecasting method is based on a 3

month safety stock level. The 3 month safety stock is based on the throughput time of the entire

workflow, which adds up to 3 months (appendix 7.0.). On average 8% of annual amount is sold for

5 USD and 10 USD prepaid calling cards every month.

49

A comparison between the actual order quantities and the 3 month forecasting method proves that

there is no clear pattern which is illustrated in appendix 7.0, and increases the risk of stock

shortages or as excess stock. In percentages, the average stock level should be at 8 %, while the

order quantity should be at three months average equal to 24% (3 months multiplied by 8%). The

results shown in appendix 7.0 prove that the order frequency and purchased amount do not comply

with the methods used, resulting in a deviation about the mean (appendix 7.0) for USD 5 calling

cards and USD 10 calling cards.

The same methodology resulted in the visibility and confirmation of the described disconnect. The

difference between the annual sales and purchased quantities for USD 5 calling cards is determined

at 11% and for USD 10 cards at 26 % (table 5.8). Given the 3 month minimum stock level, 1740204

should be equivalent to the 24 % - i.e. a safety stock of three months for both USD 5 and USD 10

prepaid calling cards. This means that a stock shortage exists of 13 % for prepaid USD 5 calling

cards (11 % excess stock deducted from 24 %). For USD 10 prepaid calling cards this represents

excess stock of 2 % (26 % excess stock deducted from 24 % average stock level).

The figures in table 5.8 have been adjusted because of strategic reasons. To give a better illustration

of excess stock in table 5.8, only the purchased and sold prepaid calling cards are illustrated, the

surpluses or deficit of preceding years have been left out.

Table 5.8 Data Summary

Month Sales Received Annual Difference In %

USD 5 6960817 7750000 789183 11%

USD 10 1080837 1363091 282254 26% Source: Inventory management 2007

Another example includes the availability and forecast accuracy percentage of prepaid calling and

handsets (table 5.9.). The availability is measured by dividing the available stock by the velocity of

for example a handset or prepaid calling cards (availability = available stock / velocity). In the table

the velocity of the handset is determined at 12 handsets a week, which is 612 (12 handsets

multiplied by 51 weeks). The available stock is determined at 1142 handsets for a period of eleven

months. The availability percentage is 187%. The same methodology applies for prepaid calling

cards. The figures have been adjusted reasons of confidentiality.

50

Table 5.9 Customer Facing Metrics Telesur Availability

Product Handsets Sold Purchased Handset model A 187% 612 1142 Prepaid calling cards USD 5 125% 4960817 6183256 Prepaid calling cards USD 10 118% 1580837 1863091

Source: Inventory management

BENCHMARK COMPARISON T MOBILE against DISCONNECT 3.0 and 4.0

At T Mobile accuracy evaluation and control is a method used to compare forecast of two different

periods. Using SAP APO, a software planning tool, the company minimizes supply chain

disruptions and excess inventory. In the next section a brief description will be given for the

presumed cost savings in case Telesur would apply the same key performance indicators of T

Mobile.

DISCONNECT 5.0 Integration of information management systems and centralization of supply chain functions

remains a deficiency, which leads to increased inefficiency. Several departments are responsible for

the supply chain of mobile services. The latter will be exemplified by describing the responsible

function for handsets, calling cards and sim cards;

Handsets

� PLAN; planning of handset is a collaborative effort between the product manager of mobile

services and sales manager mobile services.

� SOURCE; sourcing is also an effort between the product manager mobile services and the

purchasing department.

� MAKE and DELIVER; the inventory department is responsible for the distribution and material

handling of handsets.

Sim cards

� PLAN; the mobile services sales department is responsible for planning inventory and

availability of the sim cards.

� SOURCE; purchasing sim cards is done by the mobile service department in collaboration with

the purchasing department.

� MAKE and DELIVER; the inventory management department is responsible for preparing sim

cards for distribution.

51

Prepaid mobile calling cards

� PLAN; the secretariat of the commercial division is responsible for inventory planning and the

availability of calling cards.

� SOURCE; the secretariat of the commercial division is responsible for purchasing calling cards in

collaboration with the purchasing department.

� MAKE and DELIVER; inventory management is responsible for preparing prepaid calling cards

for distribution.

The abovementioned case description exemplifies the supply chain as being managed as a loose

entity. The process elements for mobile services are being managed by a secretariat from the

commercial division, mobile services from the commercial division, product manager from the

general affairs, purchasing from the operations division and inventory management from operations

division. Although actual disruptions have been limited, the risk of supply chain disruptions still

exists.

BENCHMARK COMPARISON T MOBILE against DISCONNECT 5.0

Compared to T Mobile the supply chain activities are centralized within one supply chain function,

which is part of the channel management department. The supply chain department manages

forecasting, inventory planning of handsets, sims and vouchers. Specialists are assigned to specific

tasks (appendix 6.0.).

Section 5.6 Summary

In chapter five two of the central questions were answered namely “What are the main

characteristics of the existing supply chain?” and “What supply chain disconnects exist within the

existing supply chain”. First the Product Positioning Grid assisted in determining the supply chain

strategy based on the characteristics of the existing product groups. This analysis was followed by

application of the Supply Chain Maturity Model. Application of this model resulted in the

identification of un (der) developed supply chain processes. To determine how these un (der)

developed supply chain processes related to supply chain performance the SCOR model was

applied to compare Telesur’s performance against that of the telecommunications industry. The

results revealed that Telesur performed worse than the industry and that improvement is needed.

52

Further analysis resulted in five major areas of disconnects that affected Telesur’s performance. To

exemplify these disconnects a separate section paid attention to a benchmark between Telesur and T

Mobile. This section provided some insight into available solutions to existing disconnects.

53

CHAPTER 6 CONCLUSIONS AND RECOMMENDATIONS

Section 6.1. Conclusions

The topics related to chapter 6 are summarized in figure 6.0.

FIGURE 6.0. Topics Related to chapter 6

The supply chain of Telesur has never been made visible or analyzed before as interlinked

processes. Neither has a supply chain strategy ever been developed for Telesur in order to maintain

or develop a competitive advantage. In order to develop such supply chain strategy, four central

questions have been asked.

The first one is “What are the appropriate instruments for supply chain analysis? The answer to

this question led to a literature study and resulted in a framework containing three models. The first

one is the product-positioning grid, which assists in understanding the nature of demand and

compares a company’s product against other products in the industry. The model is used to

determine the appropriate supply chain strategy. The second model, which is the supply chain

maturity model, assesses the maturity stage of the supply chain processes. The model is an

instrument used to investigate the relationship between supply chain process maturity and overall

supply chain performance. The third model is the SCOR model which determines supply chain

disconnects that lead to gaps between the benchmarked company and the industry it operates in.

54

The gap is then translated into improvements of the supply chains and what the strategy drivers are,

that connect the strategy with operational objectives.

To answer the second central question “What are the main characteristics of the existing supply

chain?” the models were validated within Telesur;

� Application of the product-positioning grid revealed that all three described product groups

were classified as functional. The results showed that the product groups required an efficient

supply chain strategy. Efficient strategies are characterized by cost reductions and elimination

of non value adding activities. It is to be concluded that one of the themes of the Telesur’s

strategy namely cost reduction, does comply with the conclusions obtained from this research.

� The maturity model was validated to better understand the maturity of supply chain processes

PLAN, SOURCE, MAKE and DELIVER. The result proved that the supply chain processes were

under developed, and that Telesur is not (yet) a process driven organization. The current levels

of maturity are positioned at the level ‘Defined’ (level 1). Especially process element SOURCE

was less developed compared to process elements PLAN, MAKE and DELIVER. The low levels of

maturity cause symptoms leading to inefficiency and unnecessary expenditures.

� The third model SCOR, was applied to further research what the main disconnects were. It

helped answer the following question “What are the supply chain disconnects of Telesur

relative to the best practices in the telecommunications industry? The SCOR card proved that

Telesur needed improvement in specific areas. Disconnects were made visible and five major

areas were revealed: (i) Sourcing, (ii) demand management and forecasting, (iii) information

systems integration, (iv) centralization of supply chain functions, and (v) performance

management. These problematic areas were summarized after a series of interviews. To find

solutions to the existing disconnect Mobile Services of Telesur were benchmarked against T

Mobile. The benchmark resulted in centralization of supply chain functions, integration of

management information systems and performance management, eliminating all forecasting and

demand management errors.

Section 6.2. Recommendations

To answer the problem statement “What supply chain strategy can be applied based on the results

of the supply chain analysis?” a supply chain strategy will be proposed. The aforementioned facts

will be considered along with the constraints presented by Kraljic and Jayashankar which are:

55

1) Government ownership; by law Telesur is not obliged to generate profit, which is not an

appropriate objective in a liberalized market environment with a high level of competition.

2) Economies of scale; the economies of scale lead to supplier dependency which weakens the

negotiation position of Telesur.

Considering the abovementioned, the supply chain strategy should remain one that is efficient. To

ensure successful achievement of strategic objectives which include implementation of the efficient

supply chain strategy, strategic actions are required. First the process elements SOURCE, MAKE

and DELIVER need to be developed towards the process maturity level of process element PLAN.

The process element PLAN is relatively mature compared to the process elements SOURCE,

MAKE and DELIVER. Before process development takes place the process elements need to be

clearly defined and made visible as interlinked processes given the current level of process

maturity. Last, removal of identified disconnects will impact development of supply chain

processes SOURCE, MAKE and DELIVER. On the long run Telesur should try to grow towards

the highest level of supply chain maturity.

Further development of supply chain process elements is dependant on the level of implementation

difficulty and the impact on Telesur’s performance. To decide on a supply chain process element

that impacts Telesur’s performance the most and one which has a high degree of difficulty, further

research is necessary. This future study will not only have to reveal what impact these supply chain

process element have on Telesur’s performance, but also what risks exists when certain supply

chain process elements are not properly developed. Further research must also include an in dept

analysis on the competitive position of Telesur within the Region.

56

BIBLIOGRAPHY

Books

Bolstorff, P., Rosenbaum, R.(2003), Supply Chain Excellence, Broadway, New York, American

Management Association.

Chase, R., Jacobs, F., Aquilano, N., (2006), Operations Management For Competitive Advantage,

11th ed, Mc Graw – Hill, Irwin, New York.

Daal, A., (2007) Developing The Purchasing Function, Paramaribo, Lim A Po Institute of Social

Studies.

Doornewaard, H., Verschuuren, P., (2005), Het ontwerpen van een onderzoek, derde druk,

Uitgeverij Lemma BV Utrecht.

Handfield, R., Nichols Jr, E (2002), Supply Chain Redesign, Transforming Supply Chains into

Integrated Value Systems, Pearson Education, USA

Horngren C., Sundem, G., Elliot, J., Philbrick, D., (2006) Introduction to Financial Accounting, 9 th

ed., Pearson Education, USA.

McDonald, D., (2006), Application of Kraljic Portfolio Matrix in an Undeveloped Logistics

Structure, Lim A Po Institute for Social Studies, Paramaribo.

Raedels, A., (2000), The Supply Management Process, Managing Key Supply Processes, Institute

for Supply Management, Tempe.

Simchi-Levy , D., Kaminsky, P., Simchi Levy, E., (2008), Designing and Managing The Supply

Chain, 3rd ed., Mc Graw – Hill, Irwin, New York.

57

Van Goor, A., Ploos van Amstel, W., Ploos van Amstel, J.(1999), Fysieke Distributie: Denken in

Waarde Toevoeging, , 4 th edition, Educatieve Partners, Nederland.

Journals

Ayers, J., (1999), Supply Chain Strategies, Information Systems Management.

Elram, L., Tate, W., Billington, C., (2004), Understanding and Managing the Service Supply Chain,

Fawcett, S., (2000), The Supply Management Environment, Institute for Supply Management Tempe.

Hau, L., Padmanabhan, V., Whang, S., (1997),. "The Bullwhip Effect in Supply Chains", MIT Sloan Management Review.

Karljic, P., (1983), Purchasing Must Become Supply Management, Harvard Business Review.

Lockamy III, A., Mc Cormack, K., (2004), The Development of a Supply Chain Maturity Model Using the Concepts of Business Process Reengineering, Supply Chain Management Journal.

Swartwood, D., (2006), Identifying Strategic Initiatives, Inside Supply Management, Volume 17.

Tan, K., (2001), European Journal of Purchasing and Supply management

Valadares de Olivieira, M., Bronze Ladeira, M., Mc Cormack, K., (2007), Supply Chain Maturity in Brazil,

Reports Jayashankar, R., (2007), Enterprise Restructuring and Privatization. Reader MBA 2006-2008.

Websites http://miranda.hemscott.com/ir/cw/ar_(2006)..

http://www.ericsson.com/solutions/operators/news/2006.

http://www.itu.int/ITU-D/ict/statistics/at_glance/topptor_1999.

58

www. T-Mobile.com

www.canto.org

www.hoovers.com

www.itu.org

www.mintct.sr

59

APPENDIX 1.0.: SUPPLY CHAIN OPERATIONS REFERENCE MODEL

SSuupppplliieerr’’ss

SSuupppplliieerr ((iinntteerrnnaall oorr

eexxtteerrnnaall))

PPLLAANN

Deliver Source

Make

Deliver Source

Source

Make

Deliver Source

Make

Deliver

SSuupppplliieerr CCuussttoommeerr CCuussttoommeerr’’ss

CCuussttoommeerr ((iinntteerrnnaall oorr

eexxtteerrnnaall))

60

APPENDIX 2.0.: ORGANIZATION CHART

FIGURE: Organizational Chart

61

APPENDIX 3.0.: SUPPLY CHAIN OF TELESUR

FIGURE: Supply Chain of Telesur Related to Process Elements

62

APPENDIX 4.0.: SCOR CARD METRICS

Table: Customer Facing Metrics SCOR Card

Metric Definition Calculation Method

Delivery performance Compared te percentage of orders delivered on time and in full to customer request.

Customer order received in time and full / total number of Customer Orders

Fill Rates Fill rates measures the percentage of ship from stock orders shipped within 24 orders of order receipt.

Customer lines delivered on time and in full.

Perfect Order Fullfillment

Measures the percentage of orders delivered on time and in full to customers request date and flawless match of purchase order invoice and receipt.

Customer orders delivered on time and in full with 100% match of price, quantity, packing slip, purchase order / Total number of Customer Orders

Order fullfillment leadtime

Measures the number of days from order receipt in customer service to delivery receipt at the customer dock.

Actual Delivery date for each line item and or each customer order.

Supply Chain Respons Time

Measures the number of days it takes the supply chain to respond to process elements to an unplanned increase or decrease in demand.

Source Leadtime for Constraint Item + Manufacturing Cycle Time for Make to Order + Order Fulfillment leadtime for Stock Items.

Cus

tom

er F

acin

g M

etri

cs

Production Flexibility The number of days to achieve an unplanned increase or decrease in demand.

Query of Supplier contracts

Source: Supply Chain Excellence (2003) / Hundgren et all(2006)

Table: Internal Facing Metrics SCOR Cards

Metric Definition Calculation Method

COGS (Cost of Goods Sold)

Measures the direct cost of material and labor to produce a product or service.

Cost centres for material+ Cost centres for Direct Manufacturing Labor + Cost centres for Indirect Manufacturing Labor.

Sales , General and \administration Cost

Measures the indirect cost of sales, administration or engineering.

Map the Cost Centres that support the supply chain .

Cash to cycle time Measures the number of days that cash is tied up.

(Inventory / /(COGS / /365)] + [Receivables / Revenue / 365)] - [Payables / Material Cost / 365)].

Inventory Turnover Measures the number of days that cash is tied up as inventory. COGS / 365

Inte

rnal

Fac

ing

Met

rics

Asset Turns This measure the percentage of assets converted into revenue.

Revenue / Total Net Assets

Source: Supply Chain Excellence (2003) / Financial Accounting (2006)

63

Table: Shareholder Facing Metrics SCOR Cards

Metric Definition Calculation Method

Grosss Margin The excess of sales revenue over the cost of inventory that was sold.

(Revenue - Cost of Goods) / Revenue

Operating Income Gross profit after deducting all expenses (Revenue - Cost of Goods-SG&A Costs) / Revenue

Shar

ehol

der F

acin

g M

etri

cs

Net Income The remainder after deducting all expenses from from revenues

(Revenue - Cost of Goods-SG&A Costs-Tax) / Revenue

Source: Supply Chain Excellence (2003) / Financial Accounting (2006)

64

Table: Financial Figures of top ten Telecom Operators

Operator

Cost of Goods Sold

Inventory Receivables

1 Deutsche Telecom 45.887,00 2.688,10

2 KPN 8.630,80 149,20 2.822,80

3 Vodafone 58.246,00 567,00

4 Telesur 64,50 3,80 47,00

5 Verizon 34.994,00 4.106,00

6 Telefónica de Argentina S.A 670,40 100,00

7 Nippon Telegraph and Telephone CorporationTokyo 37.256,00 2.620,00 19.768,00

8 France Telecom 41.458,70 1.114,30 11.094,50

9 Telecom Italia 23.754,80 384,20 11.671,50

10 Sprint 16.567,00 1.176,00 5.518,00

11 Mexico 6.228,40 161,4 3.396,00

Operator Account

Payables Revenue Total Assets

1 Deutsche Telecom 80.996,40 177.992,30

2 KPN 2.920,50 15.918,90 28.473,60

3 Vodafone 49.919,00 266.711,00

4 Telesur 103,20 112,00

5 Verizon 88.144,00 188.804,00

6 Telefónica de Argentina S.A 1.223,00 100,00

7 Nippon Telegraph and Telephone CorporationTokyo 18.214,00 91.191,00 155.642,00

8 France Telecom 16.069,40 68.262,10 123.656,70

9 Telecom Italia 11.918,30 42.092,50 150.939,30

10 Sprint 8.655,00 41.028,00 97.161,00

11 Mexico 3.426,10 16.240,60 25.040,10

65

Operator SG&A Taxes

1 Deutsche Telecom 13.560,80 924,20

2 KPN 999,50 373,40

3 Vodafone 8.574,00 7.978,00

4 Telesur 6,19 16

5 Verizon 25.232,00 2674

6 Telefónica de Argentina S.A 45,4 36,6

7 Nippon Telegraph and Telephone Corporation Tokyo

26.780,00 3.968,00

8 France Telecom 7.235,20 2.762,10

9 Telecom Italia 1.274,10 2.502,00

10 Sprint 12.385,00 488,00

11 Mexico 3.206,00 1.532,40

66

APPENDIX 5.0.: ORGANIZATIONAL CHART OF SUPPLY CHAIN

FIGURE: Organizational Charts of Supply Chain Functions from Telesur

Supply Chain Functions include

� Marketing

� Commercial secretariat

� Mobile Services

� Purchasing

� Inventory management

67

APPENDIX 6.0: SUPPLY CHAIN ORGANIZATION CHART

FIGURE: Supply Chain Organization from T Mobile

68

APPENDIX 7.0.: FLOW OF PREPAID CALLING CARDS

FIGURE: Sold and Received USD 5 Prepaid Calling Cards in 2007

Maand Sold in % Received in % Deviation about the Mean* Januari 8% 20% -4% Februari 7% Maart 8% 28% 4% April 9% 32% 8% Mei 9% Juni 8% 7% -17% Juli 8% Augustus 11% September 8% Oktober 11% 14% -10% November 4% December 9%

Source: Inventory Management

FIGURE: Sold and Received USD 10 Prepaid Calling Cards in 2007

Maand Sold in % Received in % Deviation about the Mean Januari 8% 51% 27% Februari 7% Maart 8% 28% 4% April 8% Mei 9% Juni 7% Juli 10% Augustus 10% September 8% Oktober 9% 21% -3% November 8% December 8%

Source: Inventory Management

� The mean is 24 % (3 months average of 8%)

69

APPENDIX 8.0.: PROCESS FOR PURCHASING PREPAID CALLING

CARDS

Table: Process steps for Purchasing Prepaid Calling Cards Nr. Description Nr. Description

1 Initiate Order 6 Clearance and Storage

1a Signalling minimum stock level 6a Clearance of calling cards

1b Identification of the need for prepaid cards 6b Receipt of calling cards.

2 Request Authorisation 6c Send invoice and receipt of inspection

2a Request of authorisation 6d Registeristration and administration of invoice

2b Handling of request for authorisation 6e Make inventory of receipt cards

2c Ratification of request 6f Administrate receipt of calling cards

2d Receipt ratified request 6g Administrate batch nubers and storage of cards

2e Receipt ratified request 6h Receipt and confirmation of calling cards

2f Receipt ratified copie request 6i Update inventory

3 AFSTEMMEN INZ. LAYOUT / COLORPROOF 3a Signal to order cards 3b Signal to order cards 4 Production of pincodes

4a Signal to generate pincodes 4b Aanmaken versleutelde pincodes voor prepaid cellular cards. 4c Production of prepaid calling cards 5 Order en Pyament

5a Drawing up an order form 5b Signing of the order form 5c Sending of signed order form 5e Confirmation of received receipt 5f Received confirmation 5g Information about lead times 5h Received information about order fullfillment 5i Received confirmation 5j Sending pincodes to supplier 5k Drawing up a payment form 5l Fiatteren betalingsopdracht.

5m Invoice Payment 5n Payment receipt

5o Make customer connection 5p serienummers and pincodes 5q Receipt of pincodes and batchnumbers 5r Send confirmation 5s Print calling cards 5o Shipment of cards

Source: Telesur

70

APPENDIX 9.0.: QUESTIONAIRRE SUPPLY CHAIN MATURITY MODEL

Table: Sample Questionnaire Supply Chain Maturity Model

Number of respondents 16

Number of departments 9

Score on a Likert Scale

happens sometimes (Ad Hoc) 1 does happen often (Defined) 2 takes place systematically(Linked) 3 always takes place and is structured (Integrated) 4

��������������������

Average SCORE

Telesur

1 Operational objectives have been defined 2,4

2 Operational objectives have been derived from strategic objectives 2,8

3 The department always executes operational objectives properly 2,4

4 Performance indicators have been defined for your department 2,0

5 Cross functional teams help plan departmental activities such as marketing, purchasing, planning and sales. 1,9

6 All process steps are being documented 2,1

7 Process owners are assigned to specific processes. 2,0

8 Forecasting systems and methods exist within your department. 1,6

9 Forecasting is demand based (internal and external) 2,1

Average Score 2,1

71

SOURCE Average SCORE

Telesur

1 Delivery scheduling is a collaborative effort between your department and suppliers 1,8

2 You are always aware of the status goods and services that are being purchased 2,0

3 Structural deliberation between your department and Telesur always takes place 1,7

4 Integration between your delivery systems and that of suppliers is a continuous process 1,0

5 Performance indicators have been defined for your suppliers 1,0

6 Delivery schedules are made in collaboration with suppliers 1,2

7 Delivery times of suppliers are being measured 1,0

8 De actual deliveries are compared with planned ones 1,0

9 Agreements between your department and suppliers are always evaluated 1,3

Average Score 1,3

MAKE Average SCORE

Telesur

1 Your department is included in cross functional teams when planning capacity or material 2,2

2 Planning procedures and processes related to material and capacity planning is being done by cross functional teams 1,8

3 The outcome of planning procedures and schedules related to capacity and material planning is aligned with actual demand 2,3

4 Delivery times are extremely important for the departments planning processes 2,9

5 Material requirement methods are used by your department for planning purposes 1,4

6 The work processes of your department are aligned with workflow of other departments to which you provide services 1,9

7 Your department measures the level of systematic planning 1,7

8 Internal and external customers needs for material or capacity are met with the existing processes. 2,0

9 Delivery schedules and material requirement planning for external customers are integrated with your department's activities 1,9

Average Score 2,0

72

DELIVER Average

SCORE

Telesur

1 Objectives, indicators are always determined for your department 2,1

2 Distribution processes are measured and documented 1,9

3 Distribution processes are aligned with other process elements (plan, source, make) 1,9

4 Performance indicators are determined for your distribution processes 1,8

5 Actual deliveries are being compared against planned ones 2,2

6 Customer service is measured 1,6

7 Prompt delivery is not a problem 2,3

8 Orders are derived from end customers 2,6

9 More can be delivers than required 2,0

Average Score 2.0

Table: Average Score valued 16 staff members of 9 departments

PROCES SCORE Minimum Score Level Supply Chain Maturity Stage

Plan 2,1 3,0 Linked Source 1,3 2,0 Defined

Make 2,0 2,0 Defined Deliver 1,8 2,0 Defined

Table: Average Score Comparison Telesur T Mobile

PROCES SCORE Telesur

SCORE T Mobile

Plan 2,1 4,3

Source 1,3 4,9

Make 2,0 4,8

Deliver 1,8 3,6

73

Table: Sample Questionnaire Regarding Supply Chain Disruptions

Number of respondents 16

Number of departments 9

GENERAL Agree Disagree

The departmental objectives are known 75% 25%

The achieved targets are measure red periodically 75% 25%

Your department has agreed upon SLA's with other departments in order to improve customer service 58% 33%

Performance indicators related to customer service are laid down and are being measured 50% 42%

The performance results are being used to evaluate your department and employees 25% 67%

Customer sales processes have been documented and are being measured and monitored 58% 25%

Process owners are assigned to specific processes. 42% 42%

Process owners are monitoring the processes to which they are designed 33% 33%

SALES / REVENUE FORECAST Agree Disagree

Forecasting methods are clear 17% 67%

Forecasting methods can be applied easily to be used to forecast sales 42% 42%

Your department knows what to forecast 42% 42%

Your department knows how to forecast 42% 42%

Your department compares the deviation between actual and estimates 58% 25%

Your department measures the difference between actual and estimates periodically 67% 17%

PURCHASING Agree Disagree

Your department orders materials goods for customer connections 50% 33%

Ordering equipment or capacity is a collaborative effort between your department and purchasing

67% 17%

Your department includes purchasing in the selection process of suppliers 67% 33%

Purchasing of equipment/materials is a collaborative effort between your department and purchasing

67% 17%

Your department determines the timeframe in to which equipment/materials have to be delivered

33% 50%

Your department documents delivery agreements with suppliers 17% 42%

The flow of goods can be monitored manually 8% 67%

Your department monitors the flow of goods manually 50% 25%

74

INVENTORY MANAGEMENT Agree Disagree

Your department determines the safety stock levels 50% 33%

Your department monitors the stock levels 58% 17%

SLA's exist between your department and inventory management or purchasing 67% 17%

Your department sells 80% of customer orders 25% 17%

Your department can easily react to unplanned demand 25% 50%

Shortage of stock does exist periodically 33% 42%

As a result of shortage of materials/equipment, lost sales occur 0% 33%

Your business unit determines when stock for sales purposes must be delivered 17% 58%

Stock is always being delivered on time and in full 0% 75%

75

APPENDIX 10.0.: STAGES OF PURCHASING SOPHISTICATION

FIGURE: Stages of Purchasing Sophistication

Source Kraljic,P.,(1983)

76

APPENDIX 11.0.: DECISION MAKING FRAMEWORK FOR SUPPLY

CHAIN STRATEGY

Framework Dimension Factors Source Results Product portfolio grid Demand Product life cycle Ayers, J. Mature Contribution margin Ayers, J. Low Product functionalities Ayers, J. Functional Demand and Supply uncertainty

Demand and supply Supply management Lee, H. Low

Economies of scale Kraljic, P. Low Supply Chain Maturity Model Process maturity Process maturity McCormack, Low

Job functions McCormack, Les developed

Measurement systems McCormack, Poor SCOR model Performance Performance metrics Bolstorff, P. Poor

Government ownership Jayashankar,, Decree C 38 High