MANAGING THE COLD CHAIN : A CASE STUDY AT A SOUTH AFRICAN ICE CREAM COMPANY

This paper documents the results of a supply chain management (SCM) case study conducted at Centurion Ice Cream and Sweets CC, a producer of ice cream in the greater Gauteng area. The current SCM environment was first analyzed before the distribution function was identified as a prime candidate for further analysis. A Monte Carlo simulation was subsequently performed to investigate the effect of different distribution scenarios. The paper concludes with an investigation into information technology (IT) as the enabler for improved supply chain performance.


INTRODUCTION AND BACKGROUND
As early as the Industrial Revolution, managers realized that working closely with other businesses was essential for continued success.Since those early days, effective supply chain management (SCM) has developed into an integral part of any business strategy [1].The successful implementation of strategies aimed at improving supply chain performance is, however, greatly dependent on the industry as well as on the unique business environment in which a business finds itself.
Centurion Sweets CC, trading as Centurion Ice Cream and Sweets Factory Shop, has established itself as a high quality ice-cream supplier in the Centurion area.The product mix consists of approximately 930 different types of sweets and ice cream products.Nine different product types, available in 13 flavours, are produced inhouse.Meeting the ice cream needs of almost 400 schools in Gauteng, the business generates an annual turnover in excess of R4 million.Klein Kariba, the University of Pretoria, and the South African Police Service are just some of the regular clients.
The production facility is located on 500 square meter premises.Twenty-eight workers are currently employed, and four ice cream machines, four refrigerated one-ton delivery vehicles, and 100 square meters of cold storage are utilized during the day-to-day operation of the factory.The organizational structure of this family business is relatively simple, consisting of owners Charles and Erica Meeser, the production manager, the sales representative, and an employee who is in charge of sales.Two cashiers, three drivers, two assistants, a cleaning lady, nine production workers, and another general assistant are also employed.
The production process consists of a number of simple steps.Firstly, ice cream in liquid form is mixed and 'packaged' into cones.After a 12-hour freezing period, the dipping process can begin.After dipping, the cones are frozen again for a couple of hours before the products are individually packaged in cardboard boxes, ready for distribution.
Since this paper documents the results of a case study conducted at Centurion Ice Cream, the current SCM environment was first analyzed (as discussed in the next section) before the distribution function was identified as a prime candidate for further analysis.A Monte Carlo simulation was then used to investigate the effect of different distribution scenarios.The paper concludes with an investigation into information technology (IT) as enabler for improved supply chain performance.

ANALYSIS OF THE EXISTING SUPPLY CHAIN
This section discusses the use of the Supply Chain Operations Reference (SCOR) model to analyze the current state of affairs at Centurion Ice Cream.Owing to the important influence of company strategy on supply chain management activities, the company strategy is briefly stated before the actual analysis is done.

The business strategy
Centurion Ice Cream CC attempt to differentiate themselves from their competitors by striving for unsurpassable quality and impeccable customer service.A more By applying the formula in Equation ( 1), the intersection of areas of importance with stakeholder involvement can be used to categorize the stakeholders, where P and S respectively denote the primary and secondary vectors of concern, and C i is the vector associated with stakeholder i.From Table 5, it is clear that Tibbett & Britten and Clover are the most important suppliers with whom to negotiate and build relationships.This makes sense on a conceptual level since they are intimately involved with the distribution of frozen goods.Collaboration on a strategic level, where the entire distribution function is outsourced to one of these companies, can also possibly be considered.
From Table 4, it should be clear that Centurion Ice Cream is largely concerned with operational issues.Similar operational issues are, however, currently being addressed by a large percentage of the other partners in the supply chain.Collaboration between Centurion Ice Cream and the smaller suppliers, agents, and customer segment individually according to the size and type of order placed.For example, schools can be billed for bulk purchases, while other larger institutions can be serviced and billed on a make-to-order basis.Transportation-based pricing involves billing customers individually according to the distance from the central facility.However, the costs associated with the transactional requirements of such a pricing structure should be considered carefully before a decision is made.Finally, customers can be serviced on a fixed-term contract basis.For a predetermined Rand value, all the ice cream needs of a specific institution can be met by Centurion Ice Cream.Although customer lock-in can be advantageous, this pricing option should be adopted only with great care.However, a number of the existing clientele would appreciate the reduced administrative burden.

Production management
Production takes place on both a make-to-order and a make-to-stock basis, depending on the time of year, inventory levels, and type of order.A significant amount of time and effort is spent on smoothing demand by building inventory during the quieter winter months, and making use of overtime and additional machine capacity during peak summer months.Emphasis is also placed on producing the maximum number of units of one flavour before a costly set-up time needs to be incurred.Unfortunately, the demand consists of mostly small quantities of a large number of different flavoured products.This situation may lead to reduced customer satisfaction through incomplete orders being delivered.
Alternative strategies include employing sophisticated production scheduling software, servicing all customers on a make-to-order basis, performing an ABC analysis for customer prioritization purposes, allocating specific machines to different customer segments or flavours, and dedicating specific shifts to specific flavours.Cutting back on product variety as well as focusing on automation and outsourcing are also (possibly less feasible) alternatives.

Inventory-related aspects
All inventory is currently stored at the Centurion Ice Cream facility in Pretoria, and raw material orders are placed when needed.Order sizes are kept to a minimum in order to optimize inventory levels throughout the demand side of the supply chain.If it is deemed feasible to make additional facilities operational, significantly more attention will need to be paid to inventory allocation throughout the supply chain.
Alternatives to be considered include reducing the frequency of deliveries by increasing inventory levels at both the production facility of Centurion Ice Cream and the various customer facilities, and working on a re-order point planning basis.

Vehicle routing, scheduling, and delivery territories
The distribution function of Centurion Ice Cream is highly dependent on the defined delivery territories, and so these two relatively distinct issues are grouped together in this paper.Depending on their physical location, customers are clustered within seven delivery areas (DAs).Each delivery area is serviced one or more days in a week.Each of the vehicles is assigned to just one delivery area per day.
Strategies for improvement include improved clustering of customers into delivery territories, using multiple delivery routes per day to service more than one delivery territory, and optimizing the utilization of the trucks.Furthermore, the use of a software-based vehicle routing solution to determine which customers need to be serviced by which vehicles on which days also holds significant opportunities for improvement.

Carrier set, fleet size mix, and outsourcing
All products are currently delivered by means of four refrigerated delivery vehicles with equal capacities.Owing to the perishable nature of the product, it is imperative that products are transported in refrigerated vehicles.Different capacities and vehicle types could be the topic of a future analysis.
Outsourcing the distribution function to a third party logistics service provider is another interesting option.The impact on delivery flexibility and the consequences associated with outsourcing a strategic competency should, however, not be ignored.

Load consolidation
For all but two of the delivery territories, products are transported directly from the production facility to the customer.The use of additional agents or 'distribution hubs' may be considered.

A quantitative assessment of supply chain alternatives
Although a qualitative analysis of the various supply chain alternatives is valuable in improving understanding of the supply chain, a more quantitative analysis is required to investigate the alternatives that show potential.However, for a quantitative assessment to be meaningful, it is important that the scope and assumptions of the models used portray the actual situation as realistically as possible.Throughout the rest of this section, Monte Carlo simulation is used to evaluate the impact of the various strategies on total distribution cost, customer satisfaction, and working capital.
Owing to the strategic nature of network design and facility location decisions, a total of 816 potential and existing customers were identified.As previously stated, the service area of Centurion Ice Cream currently consists of seven user-defined distribution areas.However, a large degree of uncertainty exists with respect to the number of customer orders received from each of these areas in any given week.To address this issue, the number of customers from each area was sampled from triangular distributions (Table 6) for each of the simulation runs.The actual customers were then randomly selected from the list of potential and current customers in each area.
All models make use of a simplification of Gillett and Miller's sweep algorithm [6] for route construction.Although there are solution techniques that are more suited to obtaining near-optimal routes, this is not the purpose of this paper, and the computational simplicity as well as ease of implementation resulted in this Opportunities for improvement are also evident in terms of improving the functionality of the various 'ERP modules'.An excellent example is that of improved forecasting being possible with the aid of software-based solutions.This will be discussed in more detail later in this section.A number of opportunities also exist in terms of advanced planning and optimization.This ranges from more sophisticated techniques used to determine distribution routes and delivery schedules, to the use of supply chain event management (SCEM) principles to improve data and information integration across the supply chain.

Forecasting
Forecasting is currently performed manually by the owner.Years of experience result in relatively good 'guesstimates' of demand requirements being available.The use of more formal forecasting techniques could add significant value in this area.Sometimes uncertainty exists with respect to demand patterns, and the sales figure for the corresponding month of the previous year is considered to be the most reliable information available.
Ice cream demand data is highly seasonal, and Centurion Ice Cream has experienced steady growth over the past few years.A formal forecasting technique such as Winter's method [11], which takes both the trend as well as the seasonality of the data into account, should be considered.The final forecast can further be adjusted for environmental factors like weather conditions and drastic changes in market demand, which have a major impact on the accuracy of the forecast results.
It would be recommended that such a custom-designed forecasting system be automated, and that the subsequent application be integrated with the DOS-based inventory and Point of Sale (POS) systems.Furthermore, the accuracy of the forecast can be improved by aggregating the data according to product group or region.A feedback loop should also be incorporated into the demand forecasting process to ensure that actual sales and forecast sales are reconciled, and that any changes that might be required can be made to the system.

Level of ERP integration
As was discussed earlier in this section, the IT environment of Centurion Ice Cream consists of a large number of stand-alone applications that perform different functions in the business.This results in a relatively high level of data duplication and reduced data accuracy.Although the ideal scenario would be to progress through the various stages of EA maturity to where a fully functional ERP system is the next step, a short-term solution should be found for the time being.
One such option is the use of middleware, which is discussed in [12].Processorientated middleware was selected owing to the reduced cost and complexity as well as the focus on managing business data in the form of business processes.Effort should be made to select a commercial-off-the-shelf (COTS) package that adheres to at least 80% of the business requirements; otherwise expensive customized linkages between the various systems will be required.

E-business opportunities
Although some orders are received via email, the business does not have a website, and the ordering process is completed telephonically with the support of a 'Telesales' system.Centurion Ice Cream could obtain a significant competitive edge by marketing itself more effectively on the internet.In the future, a website where customers can place orders and view the product mix and services offered by Centurion Ice Cream should be developed.This would be a first step towards more effectively exploiting e-business opportunities.
The benefits of e-business with respect to improved supply chain management are too numerous to mention.For Centurion Ice Cream the creation of a portal for suppliers to interact with the company, as well as for collaboration between other supply chain partners (for example, agents), would probably be the most beneficial.Although a large investment in time and money will be required initially, the effective use of e-business can be instrumental in aiding the business to meet one of its key strategic objectives, namely the expansion of market share in the greater Gauteng area.

Data accuracy
Data accuracy was one of the key problems identified by management as critical to address in the near future.An analysis of critical data resulted in a number of internal and external data sources being identified as critical for supply chain success.
The accurate collection and transfer of production data to information which can be used to improve order fulfillment and subsequently customer satisfaction has a major impact on the management of the rest of the supply chain.A manual system is currently in place to record all maintenance and production data on the production floor.Although this data is eventually reconciled with the POS system, the use of an MS Access database could significantly improve the quality and flexibility of the production reports.Work has been done in the past to obtain the specifications for a data warehouse from which queries can be drawn to analyze the production rates per machine per worker per product.
From a supply chain perspective, higher quality supplier and customer data could be helpful in categorizing customers and suppliers according to profitability.Collaboration between partners may also be improved, since the various relationships between Centurion Ice Cream and the other supply chain partners can be monitored more accurately.APICS [12] lists a number of issues that can be addressed to improve the quality of data in the business.These include defining a suitable data accuracy threshold, capturing the data at the source, and converting to passive data capturing mechanisms.Data is currently captured in batches at the end of a production shift or at the completion of a distribution route by factory personnel.Owing to the relatively stable conditions of the ice-cream industry, this is sufficient, and the high costs associated with other real-time capturing mechanisms are not justified.Batch tracking and improved product quality may, however, result from using barcodes on the finished goods, and this option should be investigated in more detail.

Inventory management
Inventory management at Centurion Ice Cream tends to be a reactive process.The POS system is integrated with the company's DOS-based operating system, and the system inventory levels are reconciled with actual inventory levels on a regular basis.However, production planning is done according to available capacity more than actual demand, with the aim of reducing high shortage costs as much as possible.Thus the average inventory levels tend to be relatively high.Unfortunately, the inventory policy has not been 100% fool-proof over the past few years, since products with smaller demands tend to be out of stock.This process could be improved by following a re-order point planning process.This will, however, require more accurate inventory data, and the use of barcodes on production pallets and boxes of final products (as discussed in the previous section) should be considered.Centurion Ice Cream is not currently over-concerned with the appropriate allocation of inventory throughout the supply chain.However, this could also hold significant opportunities for improvement [13].In Section 3, the use of MOQs was identified as having the potential to reduce logistics costs significantly.An alternative to reducing the cost cuts of agents might then simply be to enforce larger MOQs.

Warehouse processes
In the ice-cream industry the management of storage locations is significant in determining the competitive advantage of a supply chain.Raw material can be categorized into frozen, refrigerated, and non-refrigerated goods.Work-in-progress, as well as final products, are all frozen goods.Owing to the high cost of storage space of frozen goods, it is important to ensure that the use of storage space is optimized.Fortunately, recent expansions have resulted in capacity not being considered a problem.
The various storage locations and associated inventory of the facility are currently being monitored by the factory manager by means of a manual system.The limitations of this system result in inventory levels only being monitored on a relatively aggregated basis.No batch tracking can thus be performed.However, the use of a computerized warehouse management system will not be recommended, since the lack of product complexity does not justify the large initial investment.

Future view and recommendations
In summary, a list of future technologies or IT-based initiatives was compiled and a priority rating between 1 (low impact) and 10 (high impact) was allocated to each initiative to provide an indication of the expected impact of the initiative on overall profitability (Table 11).From the table it is clear that management attention should be given first to designing and maintaining a website, and second to progressing

Figure 4 :
Figure 4: A logistics framework for identifying stakeholders