LEAN OPERATIONS GROUP ASSIGNMENT

Student Name. Manish Aggarwal (1049333)

Mudit Vaish (1045061)

Sourabh Doshi (1048760)

Shubham Goel (0957839)

Module title. Lean Operations.

Module code. BST 546

Submission date. June 22, 2011

The Essay Title. A comparison of Construction industry (Housing)

and Food processing industry (Juice) application of

flexible and customer focused business strategies to their

value streams.

Word Count 4862

Lecturer. Owen James.

Lean Operations

Two sectors selected for the group assignment are Construction Industry and Food

Processing Industry, both these industries plays significant role in the development of the

global economy.

Construction industry is huge Industry, it accounts for the 8.6 % Of GDP (office for

national statistics, 2010) and Provides employment to 1.5 Million people in UK it self.

Industry comprises of Builders¸ Designers, Suppliers and producers, contractors and

labours. Construction industry is sum up of Small and Big companies, which differs in

their capacity and capability. Small Companies usually engaged in domestic construction

work like- houses and shops, while big companies construct the commercial complex,

Shopping malls and factories in Global market.

Food processing is the largest manufacturing Sector in UK with annual turnover of 70

billion pounds and provides employment to over half million people of the country.

(Food industry, 2010) Food processing involves preparation of fresh foods products by

transformation of raw ingredients in to the edible food for Human and Animals eating.

Food Products like- juice, Ice cream, cakes, cookies, coffees and chocolates prepared in

Processing plants. Industry comprises of Suppliers, farmers, manufactures, overseas work

force, distribution network and retail shops. Nestle, Unilever, Procter & Gamble are some

Global food processing companies, they hold strong power in supply chain which

enabled them to compete globally. Key to success in the food industry is the integrated

Supply chain management, which helped the company to thrive in rapid and

unpredictable market change.

In the global competitive environment, companies are making constant efforts to

improve their productivity, profitability and willing to take competitive advantage by

offering quality products right first time, in right cost and in right place. For achieving

these benefits, management is highly engaged in improvement of their in-house

operations and integrating their supply chain management by building good relationship

with their suppliers and Customers.

There are various issues involved in the construction and food processing Industry

operations that requires improvement in order to achieve quality output and productivity.

These issues can be resolved by the active participation of the concern bodies in the

decision making, which can significantly increase the productivity by reducing the non-

value adding activities.

Table 1. Illustrates the major constraints present in both construction and Food Industry.

Major constraints in Construction

Industries

Rapid change in customer

requirements and flexibilities.

Global competition

Qualitative and Quantitive gaps

in supply(Naim et al, 1999)

Dissatisfied customer

Unbalanced process flow/

waiting for materials and

Supplies

Design decision

Sustainability

Increased Carbon foot print of

projects

In efficient process

Low material resource efficiency

Safety

Construction schedule/ higher

Lead time

Un reliable supplier

Inventory management

Waste

Major constraints in Food

processing Industries

Short shelf life of the

products.

Storage, transportation and

preservation under controlled

condition

Product quality

Delivery time

New product development

Supply chain

Highly volatile market

High product variety

Intensified competition

Dynamic demand

To overcome these constraints management of both the industries need to implement

some performance improvement tolls & techniques which will enable them to compete in

intensified market and thrive in an environment of rapid change. For implementing

suitable strategy for their business, management first needs to do analysis of their value

chain, available resource and Value adding activities and non value adding activates.

Value adding activities are those for which customers are willing to pay. Non -value

adding activates are those activities which does not add value but requires cost, so

management first need to find Non- value adding actives in their value chain and then by

using available resource they need to take initiatives to reduce/eliminate those Non-value

adding activities. For knowing current status of their organisation they can use Value

stream mapping tool, which will reflect the opportunities to reduce the waste from the

process. Management need to analyze the success and failure of both the strategy, and

then accordingly select the best strategy which is best suitable in their Supply chain

characteristics. (Naim et al. 1999).Supply chain is the key to the success in this global

competitive world, in fact, (O’Marah. 2001) suggested that in the present economy

companies compete on their supply chain model Basis.

Before selecting appropriate strategy among Lean, agile and Leagile, management first

needs to access their capability against the desired capability of the strategy. (Harrison et

al. 1999) for example, Implementation of Agile strategy requires significant capacity to

meet the changing demand and infrastructure to support exchange of information with

supplier through Intranet.

Management also needs to identify the key competitive factors of their business such as-

Order winning and Order qualifying factors. These factors are important in the strategy

decision because these will guide, what are the key reasons of customer purchasing and

what are qualifying level need to maintain for retaining those customer. For example- if

company’s order winning factor is cost and quality, then company must select Lean

strategy or If company’s order winning factors are timely delivery and innovative

products then, company need to chose Agile strategy.

Strategy analysis-

Lean is business philosophy which focuses on removal of waste, reduction of cost and

time to complete the process and enable the value flow to the customer. There are five

principles of Lean- customer value, value adding activities, process flow, pull system and

perfection by removal of waste. It identified 7 waste- transportation, motion, inventory,

waiting, over-production, over-processing and defects.

“Leanness means developing a value stream to eliminate waste, including

time, and to ensure a level schedule”. (Naylor et al. 1999)

Agile is market sensitive with ability to respond quickly to the customer needs with

controlled cost and quality. It develops the new ways of interacting with customers and

suppliers. It is best suitable in volatile market where demand is unpredictable and change

rapidly.

“Agility means using market knowledge and a virtual corporation to exploit

profitable opportunities in a volatile market place”. (Naylor et al. 1999)

“Agility places less emphases on efficiency while Lean place less emphasis on

customization”. (Naylor et al. 1999) Lean is “process focused” while Agile is “boundary

focused”. Agility supersedes leanness, as the lean is unable to meet the demand of

dynamic market change (Booth. 1996).

There are some common components in the out- come of Lean and Agile Strategies

(Naylor et al 1997). Both strategies put emphasis on reducing Lead time and Quality

improvement, while their emphasis on service and cost efficiency varies. Agile place

comparatively more emphasis on service on the other hand Lean place more emphasis on

cost rather then service.

Table 2 , (Naim et al, 1999) reflects the output of the Lean and Agile strategy

Two individual models can be used to identify which Lean or Agile strategy is best

suitable for Construction industry and Food processing Industry. Fist model suggest

rating of Lean and Agile strategy on the key characteristic parameter and second model

provides the easy differentiation between both the strategies. Manager can simply

identify which strategy should be adopted.

Model 1.

Lean and Agile both places equal emphasis on use of market knowledge, Visual

Corporation, Value stream, integrated supply chain and time Compression in the process.

Lean focuses more on elimination of waste and Level scheduling on the other hand Agile

focuses on rapid reconfiguration and robustness of the process. Lean and Agile strategies

can be used to reduce lead time in process with significant elimination of Waste. Both

these strategies have their specific objectives and outcomes with some similarities and

difference in their concepts.

Table 3. rating of Lean and Agile against standard parameter. (Naim et al, 1999)

Model 2 .

Differentiation of the Lean and agile strategies can identify by current position and

required position of the organisation. Management need to compare the outcomes of both

the strategy and then match those out comes with desired ones. Table 4. Below reflects

the strength of Lean and Agile strategy. For construction industry eight outcomes of Lean

strategy is perfectly matched with the desired one but remaining three are matching with

Agile strategy. Inverse for food processing industry, here three outcomes are matching

with lean and eight with Agile strategy.

Table 4. Shows the strength of Lean And Agile in different parameter

ATTRIBUTES LEAN AGILE

OUTPUTS

MARKET WINNER COST SERVICE LEVEL

PERFOMANCE

CHARACTERISTICS

COST EFFICIENCY DELIVERY/

FLEXIBILITY

PRODUCT VARIETY MORE SUITABLE FOR

LOW VARIETY

MORE SUITABLE FOR

HIGH VARIETY

DEMAND VARIABILITY MORE SUITABLE FOR

LOW VARIABLITY

MORE SUITABLE FOR

HIGH VARIABILITY

INPUTS

RESPONS TO MARKET SMOOTH DEMAND AND

LEVEL SCHEDULING

MAKE TO ORDER AND

RESPOND QUICKLY TO

MARKET

REQUIREMENT

FORCASTING METHOD ALGORITHMIC CONSULATIVE

SUPPLY CHAIN

RELATIONSHIP

LONG TERM

PATNERSHIP WITH

SMALL NO OF

SUPPLIERS

UTILISE THE

EXTENDED

ENTRTPRISE

SOURCING DECISION COST AND QUALITY SPEED, FLEXIBILTY

AND QUALITY

APPROACH TO WASTE REDUCE THE 7 WASTE FOCUS ON SERVICE

LEVEL

CAPACITY SMOOTH CAPACITY HOLD SPARE CAPACITY

TIME COMPRESSION REMOVE NVA AND

SHORTEN AS LONG AS

IT DOES NOT INCREASE

COST

INVEST AGGRESSIVELY

TO REDUCE LEAD TIME

Source - J. Gosling, M. M. Naim, N. Fowler, and A. Feamne. (2007).

Major constraints of both industries discussed in the table 1.)Can not be resolved by any

single strategy (Lean or Agile), management need to Implement “Leagile” the

combination of Lean and Agile strategy.

In leagile strategy the strategies of Lean supply and Agile supply be combined at

decoupling point for the proper supply chain management. “Leanness” is used at up

stream while “agility” is used at down stream from the Decoupling point. (Manson-Jones

et al. 2000)

In construction industry key issues of delivery, flexibility, desire of improved service

level and make to order, requires Agile strategy while Lean strategy will provide cost

efficiency, quality product and Waste elimination.

In Food industry key issues are cost efficiency, smooth capacity and waste elimination

from the process and hence require Lean strategy on the other hand to meet the changing

demand of the market and to utilize the short life cycle of the food products Agile

strategy is required. Hence, management should implement “leagile” strategy.

Techniques used to understand current business environment

Study of business circumstances is crucial to understand the working procedure of

business and the environment in which it works. The management is responsible to

perform audit periodically to analyses the current business environment. There are

various methods used by the management for analysis, which can be used by most type of

industrial sector.

The techniques used are –

Value stream mapping –

As per Rother,M and Shook,J 2003 - Value stream mapping is a process of creating a

“big picture map” showing all the processes which are involved in the business to deliver

the product which customer had demanded. It uses different symbols to show all the

processes right from the time the company receives the order, until the product is

delivered to the end customer in the right condition.

Value stream mapping differentiate between the value adding activities and the non-value

adding activities (waste), helps in understanding customer requirement. The identification

of non-value adding activities is the one of the goal of creating the picture; therefore

setting future state vision acting as a blueprint for lean operations. It also helps depict the

current flow of processes and the areas where improvement can be made. With the help

of value stream mapping the company can reduce there waste, thereby streamlining work

processes, cutting lead times, reducing costs and increasing quality.

Value stream mapping for construction industry

Construction industry is a unique sector which has many distinctive features if compared

with other manufacturing sectors; these features include high productive volume,

controllable production flow and use of large inventory as work in progress due to high

lead time. This all features enable the usage of VSM. (Yu, Haitao. et al. 2007).Due to

large number of process, the mapping process is divided into 5 stages

Analysis

From the Fig 1 of value stream mapping we can easily calculate the amount of wastage in

the activity process, the first observation from the map was that the lead time was very

high. The duration of stage 1 was approx 65.5 days whereas the total lead time of the

stage was approx 50 days which account for only 76%. In this example – site managers

book the downstream sub trade immediately followed by the start date of the upstream

task. Generally due to temporary contract relationship between the builder and the

contractor make delay in the schedule being magnified by ripple through effect.

In the construction industry there is a huge delay in the process cycle due to various

reasons like extreme weather conditions. Therefore the next schedule task cannot be

started and causes disturbance in the scheduling process.

As a result, there is a conflict between predetermined scheduled process and the

unpredictable reality which results in the wastage.

Source – Yu, Haitao. et al. 2007,

Value stream mapping for food processing (drinks)

The processes involved in processing of drinks are complex and there are large numbers

of value adding and non-value adding activities. Therefore value stream mapping is best

suitable to study the current business environment. There are certain challenges which

need improvement.

Analysis

From the Fig 2, we can calculate the lead time of the whole process which is 19 days

approx and the value adding activities is 67 minutes. The percentage of value adding

activities is just 5.9%.The most of the wastage is accounted as transportation and this

map is most suitable with perishable foods that require special handling. Many of the

food processes combines continuous flow and batch systems which adds complexity.

Therefore the process needs to be designed carefully to reduce waste.

As a result the process needs to be shortened by reducing transportation waste sustaining

the quality and the cost of the product.

Figure 2 – showing the value stream map for food processing industry.

Supply chain

Supply chain management is the management of a network of interconnected businesses

involved in the ultimate provision of product and service packages required by end

customers (Harland, 1996).

Supply chain is very important for company success and customer satisfaction. It can also

be used as a toll to improve quality and reducing cost.

Supply chain of construction industry

Figure – 3 Supply chain of construction industry

Contract receiver

Supplier

Engineer

Contractor

Sub- contractor

Construction process phase

Value Adding chart

Architect

Design Development phase

Satisfaction S

atisfaction

In construction companies all the parties involved, be they client, main contractor,

designer, surveyor, sub-contractor, or supplier are therefore part of a supply chain. They

have there own role in the company. The supply chain starts with the customer order and

ends with the customer satisfaction, by together integration of architect, engineer etc to

work as per the customer requirement.

Supply chain helps to know the flow of activities and the path in which the work is done

in the industry. The supply chain of construction industry is complex and consists of

number of parties constantly interacting with each other to satisfy the customer.

Supply chain of food processing industry

Figure 4 – Supply chain of food processing industry Source - Folinas,D. et al . (2006).

The supply chain of food processing industry is quite simple, consisting of only few

parties such as manufacturer, packaging, distribution/transportation then retailer and

ultimately customer. In the above supply chain shows the flow of product, data and the

finance. The manufacturer supplies the product list to the customer in terms of data,

which in return lead to the demand for a particular product. Therefore the next function is

the physical flow through various channels passing through packaging and different

distribution channel. Then finally upon the delivery of the product the payment in

received through the channels in the reverse order.

As per the discussion by Wowzio, 2009.Effective supply chain means the efficient flow

of timely and quality information between the manufacturer and the customer, which will

help the manufacturer supply the material to the customer at right time in the desired

condition.

But in the real world there are many situations which go against the planned schedule

creating fluctuations in the supply chain of the product. The fluctuation in the planned

demand can be due to any of the concerned group in the supply chain, by offering too

much or too little. This is due to lack of coordination. The unplanned demand from the

customer can lead to high fluctuation in the supply chain as shown by the diagram below.

Demand oscillation becomes higher while travelling up the supply chain resulting in

overestimation at each level of the chain.

Figure 5 – Bull whip effect Source: Bullwhip effect in supply chain. Feb 2008

Theory of constraints

Thinking process (theory of constraints) of  Eliyahu M. Goldratt'si 1990 is a technique

which is used to identify, analyse and proposing the feasible solutions for the

organisational problem. This technique gives answer to 3 major questions

What to change?

What to change to?

How to cause the change?

Therefore to answer the particular question we are just interested in “what to change”

(current circumstances), and the solution to this is given by current reality tree.

Current reality tree is a technique to analyse the organisations problems and afterwards

by identifying the cause to the problem can help in the removal of problems. Lacreda,D

P. et al.(2010)

Process engineering focuses on the architectural framework of the organisation to

understand analyses and improve the processes involved. This is graphical flow

representation representing the flow activities in the organisation. This process is

generally used in chemical and biological industry. Paim (2002)

Sustainability

Management of the business is responsible in both the business, he/she plays major role

to sustain the Leagile in their business. Often it becomes important for the management

to trade off between the cost lead-time and demand volatility. For construction industry to

meet the deadline of the delivery time, management often took decision which affects

cost of the project. If management is cost conscious then it will effect customer

satisfaction. Same with the food industry to meet the competitor’s price, management

often need to do compromise in the quality.

Hence, to sustain Leagile in this competitive business, management need to take some

strong action in their current business environment, it involves change in human resource,

Production techniques and trading practice of the organization.

Sector-1: The Food Processing Industry

The production and consumption of food like any other human activity has an impact

upon the environment. The food chain involves the agricultural production and its inputs,

processing, distribution and consumption of food. The concept of ‘sustainability’ has

been newly integrated into manufacturing industry, but only recently has this concept

been incorporated into food processing involving the conversion of agricultural products

into final food products (Husti, I. 2006).

The problems associated with the food processing industry can be rectified to an extent

and the entire supply chain process can be made more efficient using the Leagile strategy.

The various factors affecting the sustainability of the food processing chain include: agri-

business development; supply network improvement; the environmental considerations;

economic impact; packaging, distribution and retail; consumer behaviour in context to

purchase and grounding; and the establishment of sustainability in the food production

practice and educating customers (Husti, I. 2006)

Food manufacturing system is an integrated system which is designed for food processing

industry. This system creates industry-centric functionality within a totally flexible,

world-renowned technology platform. Food manufacturing deals with the entire process

of an enterprise i.e. sales operations, customer relations, manufacturing, warehousing etc.

This industry is affluent with features that are important for main operations. The system

also deals with the capabilities related to precise sub-sectors of the food processing

industry (Blocher 2005).

The prospective in applying lean and agile strategy in food processing industry should

not involve the execution of one strategy at the expense of the other. Careful concern and

application of Leagile strategy is required in the total food processing supply chain. The

decoupling point plays an important role in defining the leagile supply chain. In food

processing it is frequently linked with the strategic stock that buffers the supply chain

from changes in customer demand, in terms of both volume and variety. Association with

the decoupling point is the issue of deferment and late configuration. Thus, cultivating

what is required abundantly by supply chain in which the product is decided from the

outset, that is, from consumers. In this supply chain all businesses are at times lean and

all respond to supply chain (Naim et al, 1999).

To add on to the leagile aspect of the ‘sustainability factor’, development of people

involved in the food processing supply chain is equally important. It includes teaching,

guiding and motivating the staff involved the technicalities of the lean and agile thinking.

The supplier – customer flow should be leagile for the best output. Here, fundamental

change in the behavior of staff is equally important. Continuous improvement in also one

of the prime principle behind leagile approach (especially in the food processing supply

chain) boosts the sustainability prospects. Recycling of the products and waste reduction

should be stressed upon for future sustainability.

Sector-2: The Construction Industry

In context to the leagile project delivery involving construction and real estate

development, the challenges faced are enormous (as in removing/ reducing the problems)

in this industry.

To focus on some prime problems of this sector, issues with time (timeliness), no or little

control on the costs, substandard performance and safety problems. By using leagile

principles, we can definitely improve the grounds for the current or future construction

needs. (Barlow and Gann 1999).

In spite of these ‘generic’ problems, faced by construction industries in the

world, there have been many attempts to open lessons from leagile production.

By and large, process modeling has been a forerunner in the elimination of non-value

added actions and managing supply chain programs which are designed to lead to time

compression and reduced total costs (Evans et al. 1997). The work in Japan has been

expansively acknowledged (Gann 1996).

The prospective for applying leagile construction should not involve the implementation

of one approach at the expense of the other. There is a need for a careful consideration

and application of both paradigms within the entire supply chain. The decoupling point

plays an important role in defining the leagile supply chain. In construction it is normally

associated with the strategic stock buffering the supply chain from changes in demand of

the consumer (in terms of both volume and variety). In association with the decoupling

point is the subject of delay and late pattern. The first one is ‘buy to order’ supply chain

in which the merchandise is configured from the outset (ie. from raw materials). In this

supply chain all businesses are agile and all respond to changing customer requirements.

In this supply chain, long lead-times is prominent. The other acute is the ‘ship to stock’

structure in which a standard product is provided from a well defined range. Although

lead-times are very short, the danger of obsolescence is to be considered. The motto here

is to arrange the product late so as to allow a substantial element of flexibility and hence

customer’s choice with the best use of standardized components (Naim et al, 1999).

Here are two examples of the ‘leagile’ application in industry:

Benetton delayed the dyeing of their jumpers until the very end of the supply chain

process. So, with standardized jumpers which were customized lately, customer’s choice

is achieved without longer lead-times and without the risk of obsolescence (Gattorna and

Walters 1996).

Initially, Hewlett-Packard manufactured printers for a global collective demand and

Customized it for local markets preceding to their shipment for the regional distribution

centres. Unfortunately, the demand forecasts were never accurate and had high

obsolescence risks. The solution for this was to postponing the decoupling point as late

aspossible and customising the printers in the regional distribution centres when the

‘pulled’ the orders (Davies 1993).

A final glance on the sustainability picture in respect to the construction industry supply

chain must surely include the parameters like development of the people involved with

the work starting from the supplier heading towards the customer. The entire staff should

be well versed with the concepts and the principles of the lean & agile (ie. leagile)

strategies. Regular trainings, workshops and motivational clichés should be regularly

delivered to the people involved directly and indirectly in the supply chain. These moves

definitely help in giving the best output paving the way towards the so-called

sustainability. Again, as in the food processing supply chain, the construction industry’s

supply chain should definitely by-pass the improvement cycles at regular intervals.

Recycling of products and reduction of waste directly or indirectly should be carefully

dealt with cause it forms an important aspect in the ‘sustainability’ arena. To sum up,

plots and moves like lowering the carbon foot print (especially in the construction sector)

and on-site project management is again like a shining star shining in the sky of

sustainability.

Barriers to the chosen lean and agile Strategy:

The implementation of leagile strategy in both construction and food processing industry

is not free from barriers. These barriers are the root of some other barriers and which are

influenced by some other barriers. These barriers pose certain challenges both for

management and policymaker in these industries. It is very important for management to

identify the barriers so that the chosen strategy can be implemented successfully.

Construction industry:

In construction industry many barriers in the implementation of the strategy can be

observed due to this house builders faced constrains both in internal and external market.

Construction sector need to learn from other industries. In UK house building,

innovation and changes are very slow in comparison to other industries due to these

barriers. Several institutional factors constrained the level of customization felt by house

builder.

The consumers in UK are conservative in their taste in selecting housing style. The UK

consumer still likes to prefer traditional style house with two storage, pitched roof, semi

detached house, and in a limited range of style which built the base of British Housing

Industry. This conservatism in the UK market limits innovation. Changes are possible

only to a limited extent means house can be built by a degree of improvement of building

elements without the radical transformation of product itself. The standardize housing

system introduced in 1960s and timer framing concept of housing introduced in 1980s

develop a impact on consumer that they do not want to adopt new style in housing.

Because of this preference difference Housing market conservatism is very strong in

Britain when compared to elsewhere in Western Europe

The planning system militates against design forms that are different from those that have

already been approved. Due to this final user of the house cannot change or experiment

with design and its component.

The UK construction industry heavy relies on subcontractors. The sub-contracting has

many criticisms also. Sub-contracting involves the risk of bad practice. Subcontractor

generally over commits themselves. They generally have limited skills so that it’s not

easy for them to change techniques. They usually in hurry to complete the task as early as

possible and they do not train construction worker properly and threaten quality.

“The market has undersupply of new housing because of this speculative house builders

face limited competition. , as there are few alternative sources of new supply— the social

housing sector is targeted at specific population groups and self-build sector is hardly a

viable alternative because of problems in obtaining suitable land.”

The house builder comprehend that they face an environment of constant ‘feast and

famine’ (cf. Ball 1999). So that houses are built to suit the financial period requirement.

They not focus as much on customer needs.

The expectation of house builder related to material innovations are very high, this may

account for slow diffusion. They wait and watch for this change to happen so that they

can learn from experience of others. This waiting is the main retarding factor in the

innovation process.

The UK construction industry is focusing towards the technological advancement but

advancement in technique in is generally characterized by limited information. For

Example, A material producer knows about pricing strategy with respect to the new

product but do not want that its competitors and customers know about that. “Imperfect

information may limit the variety and subsequent competitive selection of new

technologies.”

Such issues in Construction Business act as Barriers to the chosen Leagile Strategy.

Further research is needed in construction sector so that the related Barriers can be

eliminated.

Food processing industry:

“The food industry is becoming an interconnected system with a large variety of complex

relationships, reflected in the market place by the formation of (virtual) Food Supply

Chain Networks (FSCN) via alliances, horizontal and vertical co-operation, forward and

backward integration in the supply chain.” The increase in complexity on FSCN

developed various barriers to the Leagile Strategy.

Most of the product in food processing industry carries certain inherent characteristics

and complexity. Perish ability and seasonal fluctuation of demand and supply are the

main inherent characteristics on food products. Food can only be held for a certain time

period before they become non-consumable and obsolete. Such food requires special and

specific investment on storage and transportation equipments which increase the overall

cost. Such inherent and other related properties effect the leagile operations. Sometime

the FSCN is heavily affected by seasons and whether and instability of nature which also

creates problem in leagile operations.

The FSCN network is getting more complex day by day as mentioned earlier. This

complexity involves number of tasks which has to be preformed and completed in a short

span of time. Due to this numerous cost/service tradeoffs arise in operation which directly

or indirectly affects leagile strategy.

The food industry involves large range of products. Handling of large number of food

product varieties (measured by stock keeping unit) requires higher management cost of

inventory control and higher inventory cost for each item. This increase in cost acts as

barrier for leagile strategy because leagile strategy highly focuses on cost reduction. (Rao

and Young 1994)

Now a day consumers are highly focusing on food safety due to the recent outbreaks of

animal diseases. Due to this the quality requirements in the food processing industry are

of utmost importance. The retailers and consumers are ready to pay more for better

quality of food. The increase in demand on quality places barriers on the flexibility of

FSCN. “In the poultry supply chain quality requirements limit flexibility”.

The demand of products in food processing industry is very unpredictable. This argues

that food industries should start over- production and should be stored to fulfil the

demand in peek time. Unfortunately, this is not possible due to the perish ability on fresh

food product. The unpredictable demand affects the FSCN which ultimately affects

leagility strategy.

In Conclusion, the concept on leagility and decoupling point is very useful in the analysis

and identification process of innovation in Supply Chain design but due to the specific

characteristics of Food Supply Chain and other factors, its applicability is restricted to a

certain extent.

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