Luận văn thạc sĩ Kỹ thuật công nghiệp: A quantitative model for the visibility of supply chain performance in the apparel industry: A case study of practical application

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY

PHUNG DUY UYEN

A QUANTITATIVE MODEL FOR THE VISIBILITY OF SUPPLY CHAIN PERFORMANCE IN THE APPAREL INDUSTRY: A CASE STUDY OF PRACTICAL APPLICATION

Major: Industrial Engineering Major code: 8520117

MASTER’S THESIS

HO CHI MINH CITY, January 2024

5.Member: PhD Nguyen Vang Phuc Nguyen

Approval of the Chair of Master’s Thesis Committee and Dean of Faculty of Mechanical Engineering after the thesis being corrected (If any)

MECHANICAL ENGINEERING

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TECHNOLOGY – VNU HCM

Task sheet of Master’s Thesis

TASKS AND CONTENT:

− Understand the research object, analyze the problem, and orient the thesis topic − Learn about related research and build solution models

− Implement ideas

− Use actual company data to evaluate the effectiveness of the solution and suggest future research directions

II TASK DELIVERY DATE: September 4th 2023

III TASK COMPLETION DATE: December 24th 2023

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DEAN OF FACULTY OF MECHANICAL ENGINEERING

(Full name and signature)

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Acknowledgements

This thesis is a result of my second journey at HCMUT With the "continuous improvement" mindset that I have acquired from university until now, I will not stop learning; instead, I am going to keep discovering in many different ways

Of course, I could not have gone through today's journey without the help from my teachers and friends during the past time First of all, I would like to thank the teachers in the Department of Industrial Engineering for creating a favorable environment and equipping me with the necessary knowledge to complete this thesis

With respect and gratitude, I would like to express special thanks to Associate Professor Dr Do Ngoc Hien Apart from being my teacher, he demonstrated to me his commitment to education in general Since learning occurs when mistakes are made and corrected, he gave his students permission to make errors Without the invaluable support and encouragement from my teacher, I could not have finished this thesis

I would also like to express my deep gratitude to my family and friends who have encouraged and supported me a lot throughout the process of studying, working, and completing my thesis

Due to the complexity of the research topic, as well as limited abilities and knowledge, the thesis cannot avoid certain errors I look forward to receiving comments from teachers and other researchers to improve the thesis research content

Thank you sincerely!

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Tóm tắt Luận Văn

Đại dịch đã làm gia tăng và trầm trọng thêm các vấn đề hiện có trong chuỗi cung ứng Số lượng đơn hàng tại Việt Nam giảm mạnh Với trách nhiệm quản lý chất lượng sản phẩm và dịch vụ từ đầu đến cuối của toàn chuỗi cung ứng, công ty tư vấn quản lý chuỗi cung ứng cần chứng minh khả năng quản lý chuỗi cung ứng với các mối quan hệ đối tác kinh doanh phức tạp Do đó, tầm nhìn trong chuỗi cung ứng đã trở thành vấn đề then chốt trong nghiên cứu SCM vì nó ảnh hưởng đến hiệu suất của toàn bộ chuỗi cung ứng Bên cạnh đó, công ty hiện tại chỉ đo lường hiệu quả hoạt động bằng các KPI riêng biệt nên cần có một thước đo chung để đánh giá tổng thể các nhà cung cấp Qua đó, công ty có thể xác định nhà cung cấp nào hoạt động kém và thực hiện các chính sách phù hợp để hỗ trợ họ Do đó, luận án này đã áp dụng mô hình định lượng SCV sử dụng năng lực xử lý để xác định chỉ số tầm nhìn tổng thể Phép đo này cho phép đánh giá toàn bộ chuỗi cung ứng và các thành phần của nó trên cùng một thang đo, cũng như với các quy trình kinh doanh tương tự của đối thủ cạnh tranh Kết hợp với điểm kiểm tra nhà máy, nghiên cứu đã đề xuất Ma trận hiệu suất Với ma trận này, ban quản lý có thể đánh giá các nhà cung cấp, xác định các điểm yếu trong SC, thực hiện hành động khắc phục và cải tiến liên tục Hơn nữa, công ty tư vấn quản lý chuỗi cung ứng có thể cải thiện hiệu quả hoạt động của mình, duy trì mối quan hệ với các đối tác kinh doanh và thể hiện năng lực của mình không chỉ trong việc quản lý chuỗi cung ứng mà còn củng cố nó Nhờ đó, công ty khẳng định được chỗ đứng của mình trong ngành và thu hút nhiều người mua, nhà cung cấp tham gia hệ sinh thái của họ

Keywords: Supply chain visibility, end to end supply chain, apparel industry, focal company

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Abstract

The pandemic has accelerated and magnified existing problems in the supply chain The number of orders at Vietnam decreased sharply With the responsibilities of managing the whole supply chain's end-to-end service and product quality, the focal company needs to prove its ability to manage the supply chain with complicated business partner relationships Visibility has therefore become a key issue in SCM research because it affects the performance of the whole supply chain Besides, the company only measures the performance by separate KPIs, so there is a need for a common metric to generally evaluate suppliers The company is then able to define which suppliers are underperforming and implement appropriate policies to support them Therefore, this thesis applied the SCV quantification model using process capability to identify an overall visibility index This measurement allows the entire SC and its components to be evaluated on the same scale, as well as with competitors’ similar business processes Combining with the audit score, the study proposed a Performance Matrix Consequently, management may assess the suppliers, identify the weak areas in the SC, take corrective action and improve continuously Thus, the focal company improves their performance, maintain relationships with business partners and shows their capability in not only managing the supply chain but strengthen it As a result, the company affirms their stand within the industry and attracts more buyers, suppliers to join their ecosystem

Keywords: Supply chain visibility, end to end supply chain, apparel industry, focal company

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The commitment of the thesis’ author

I hereby declare that this thesis is my personal research in the past and has not been copied from others, carried out under the scientific guidance of Associate Professor Dr Do Ngoc Hien and PhD Nguyen Duc Duy All data used and analyzed in the thesis and research results were researched and analyzed by myself objectively, honestly, with clear origins and have not been published in any form I take full responsibility for any inaccuracies in the information used in this research

AUTHOR

(Full name and signature)

1.2 Aims of the thesis 3

1.3 Limitation of the study 4

1.4 Outline of the report 4

Chapter 2 Literature Review 6

2.1 Definition of Supply Chain Visibility 6

2.2 Quantification of Supply Chain Visibility 8

2.3 Measuring Business Performance and Supply Chain Visibility 9

Chapter 3 Methodology: Quantification Model of Supply Chain Visibility Using Process Capability 11

3.1 Process Capability-Based Quantitative Model of SCV 11

3.2 Quantification Model for the Overall Supply Chain Visibility 17

3.3 Business of process links 19

Chapter 4 Assessment of Overall Supply Chain Visibility in a Focal company 21

4.1 Introduction to the research object 21

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List of Figures

Figure 1.1 Vietnam’s textile and garment export turnover (Synthetic BSC 2021) 1

Figure 1.2 Export growth of textile and garment industry and GDP growth of Vietnam (Vietstock Finance 2021) 2

Figure 3.1.Supply chain network structure for visibility assessment 19

Figure 4.1 End-to-end SCM 22

Figure 4.2 Supply chain solutions 23

Figure 4.3 The Maritime Incoterms 24

Figure 4.4 Free on board Incoterm 24

Figure 4.5 Performance Matrix Example 30

Figure 5.1 Visibility index 32

Figure 5.2 v_DIF histogram 32

Figure 5.3 v_FIR histogram 33

Figure 5.4 v_ALT histogram 34

Figure 5.5 v_OTD histogram with 3 days buffer 34

Figure 5.6 Overall visibility 35

Figure 5.7 Performance Matrix 36

Figure 5.8 HUYEJO information dashboard 37

Figure 5.9 Fabric in bale form 38

Figure 5.10 Bale form relaxing machine 38

Figure 5.11 Fishbone diagram for Defect 1 39

Figure 5.12 Relaxation fabrics are stored in the racks with clear document record 39

Figure 5.13 Pareto chart for ALT of HUYEJO 41

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List of Tables

Table 2.1 Definitions of SCV 6

Table 3.1 Sigma level to visibility index 17

Table 4.1 Characteristic definitions 25

Table 4.2 Technical facility assessment requirements 28

Table 4.3 Grading scale 28

Table 4.4 Overall handling methods 30

Table 5.1 Calculation of v_ALT of BRAHAN factory 31

Table 5.2 Overall visibility index of TDTINV factory 31

Table 5.3 Average lead time of HUYEJO 40

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List of Abbreviations

Abbreviation Meaning

FIR First inspection result

Chapter 1 Introduction 1.1 Introduction to Subject

The ongoing pandemic poses substantial challenges for supply chains on a global scale Lockdowns, shelter-in-place orders, and travel restrictions have all been a major disturbance, impacting every aspect of the economy Demand for certain categories has decreased, while others have seen an increase As a result, companies are contemplating significant strategic adjustments to the structure and operation of their supply networks in order to maintain the flow of their business

In 2020, Vietnam's textile and garment industry encountered numerous obstacles as a result of the severe impact of the COVID-19 epidemic The implementation of social distancing in Vietnam led to a sharp decline in orders By the conclusion of 2020, the entirety of the Vietnamese textile and garment industry managed to attain an export turnover of 35.29 billion USD, which represented a 10.91% decrease in comparison to 2019 (Figure 1.1) [1]

Figure 1.1 Vietnam’s textile and garment export turnover (Synthetic BSC 2021)

According to statistical data, the textile and garment industry witnessed a growth rate of 16.5% in export in 2018 However, due to the outbreak of COVID-19 by the end of 2019, this growth rate declined to 8% In 2020, the prolonged pandemic situation led to a significant drop in the growth rate of the industry (as shown in Figure 1.2) The export turnover of textiles and garments reached 26.73 billion USD in the first 11 months of 2020, experiencing a decline of 10.5% compared to 2019 As a result, Vietnam's GDP reduced from 7.02% in 2019 to 2.91% in 2020

Figure 1.2 Export growth of textile and garment industry and GDP growth of Vietnam (Vietstock Finance 2021)

In 2022, national lockdowns are still prevalent, which can hamper the manufacturing sector by impeding the flow of both finished goods and raw materials At the same time, the pandemic did not necessarily cause new challenges for supply chains, but it did expose unanticipated vulnerabilities such as staff shortages and losses due to closures Hence, it has intensified and accelerated current issues in the supply chain

After the Covid pandemic, the number of orders at Vietnam decreased sharply In order to earn more orders, a supply chain management company must prove itself through continuous improvement in its service With its responsibilities of managing the whole supply chain's end-to-end service and product quality, its ability to manage

its supply chain with its complicated business partner relationships will determine high or low profitability Thus, the focal company needs to make sure that the goods made by the suppliers reach customer seamlessly and satisfy their needs Visibility has therefore become a key issue in SCM research because it affects the performance of the whole supply chain (SC)

Besides, the company only measures the performance by separate KPIs, such as on time delivery (OTD), overage shipment, shortage shipment, fail inspection rate, etc Although each individual KPI is used as an index to measure the capabilities of a unit process, the impact of changes in the process may be depicted as a trade-off with other indices Thus, there is a need for a common metric to generally evaluate suppliers From there, the company is able to define which suppliers are underperforming and implement appropriate policies to support them

Therefore, this thesis applied the SCV quantification model using process capability proposed by Lee and Rim [2], which defined that the entire business performance from the formula to calculate a Rolled Throughput Yield (RTY) by Graves [3] After that, the study proposed a performance matrix to allocate the suppliers in groups and identify different handling policies

1.2 Aims of the thesis

To manage the relationship with different suppliers and evaluate their performance to upgrade the company’s business, this study used a mathematical approach proposed by Lee and Rim (2016) [2] to evaluate the visibility level of a focal company in the Apparel industry with six-sigma approach and identify the common performance metric using the concept of RTY formula This measurement can evaluate every process in the entire SC and its components on the same scale Sigma level 3 is considered as moderate for most products or processes According to the sigma level, the visibility index values are divided into 3 ranges: ≤ 0.333 (≤ 2σ), 0.333 - 0.5 (2σ - 3σ), ≥ 0.5 (≥ 3σ) As a result, efforts must be directed on improving the process whose visibility index is less than 0.5 Certainly, with continuous

improvement mindset, the visibility index with value more than 0.5 (equivalent to 3σ) and below 1 (equivalent to 6σ) still needs "incremental" improvement over time

The thesis after that proposed a performance matrix combines between the visibility index and technical facility audit score The management may assess the suppliers, identify the weak areas in the SC, take corrective actions and improve continuously Hence, the focal company improves their performance, maintain relationships with business partners and shows their capability in not only managing the supply chain but strengthen it As a result, the company affirms their stand within the industry and attracts more buyers, suppliers to join their ecosystem

1.3 Limitation of the study

Shipments which produced Viet Nam, within 2022 in the supply chain of one the company’s customers

Evaluated only upstream Tier 1 suppliers

Factors that were considered: Lead time, Delivery in Full, First Inspection Pass Rate, On time delivery

1.4 Outline of the report

This thesis consists of 6 chapters:

Chapter 1: Introduction stated the subject, its aims and delimitation of scope

Chapter 2: Literature Review introduces the definition of SCV, the quantification of SCV, business performance measurements

Chapter 3: Methodology: Quantification Model of Supply Chain Visibility Using Process Capability describes the methodology which going to applied in this thesis Chapter 4: Assessment of Overall Supply Chain Visibility in a Focal company introduces the research object, defines the factors and performance matrix

Chapter 5: Result explains the results from applying the methodology

Chapter 6: Conclusions and suggestions shows the conclusions and suggestions

Chapter 7: Appendices includes supplementary document that facilitates the study’s argument and conclusions

Chapter 2 Literature Review 2.1 Definition of Supply Chain Visibility

In recent years, both researchers and practitioners have been placing increased emphasis on the concept of supply chain visibility, or SCV SCV pertains to the degree to which various actors involved in the supply chain can obtain timely and precise information that they deem essential or favorable for their respective operations [4]

Poor visibility, not only affects business performance, but also hampers the ability to establish a resilient supply chain Consequently, in order to achieve sustainable and competitive business performance, managing supply chain disruptions across a network of global suppliers, operations, and markets has become crucial, and the concept of SCV has gained prominence In fact, manufacturers have been increasingly vocal about their concerns regarding the importance of visibility in the supply chain [5]

There are many definitions for supply chain visibility in the industry, yet the concept of supply chain visibility itself remains ambiguous "Visibility" is a term that does not have a universally recognized or agreed upon definition, and different studies use different definitions and measures, making it difficult to compare and generalize the findings This ambiguity hinders the development of a standardized approach to evaluating and improving visibility Some outstanding definitions that are frequently being used in research are shown in Table 2.1, which mostly concentrated in information sharing perspective

Table 2.1 Definitions of SCV

“Visibility means that important information is readily available to those who need it, inside and outside the organisation, for monitoring, controlling, and changing SC

Schoenthaler (2003)

strategy and operations, from service acquisitions to delivery.”

“[Visibility is] the extent to which actors within a SC have access to or share information which they consider as key or useful to their operations and which they consider will be mutual benefit.”

Barratt & Oke (2007)

“[Visibility is] the ability to be alerted to exceptions in SC execution, and [to] enable action based on this

“[Visibility is] capturing and analyzing SC data that informs

decision-making, mitigates risk, and improves processes.” Tohamy (2003)

While SCV's extensions offer diverse capabilities, many of them do not provide complete coverage of process visibility, inventory visibility, demand visibility, and exception visibility [6]

This thesis employs Rim and Lee's (2016) concept of visibility, which is classified as "process visibility" and focuses on operational capacity rather than information visibility, which is oriented on information processing like others The suggested SCV is: “Visible level which manifests the status and behaviors of various factors in the supply chain; The ability for sensing and sharing variability in the supply chain process; The process maturity achieved by improvement initiatives for the key factors of the supply chain; Predictable level for the viable degree of supply chain plan and outcome of process’s activity.”

Lee & Rim (2016) proposed that “SCV is the degree to which the adherence to the supply chain plan can be predicted SCV indicates the viability to execute the supply chain plan according to process capability A lower process capability may lead to a higher probability where the business goals cannot be met due to a lack of operational capability to execute the supply chain plan Even though the processes have the same

lead time, it can predict that a process with a lower variance is executed with a higher level as planned.” [2]

Improving process visibility can play a crucial role in enhancing process capability and longevity in supply chain management This can be accomplished by gaining valuable insights into the status and behaviors of various aspects in the supply chain process Through this approach, an organization can effectively detect and share variations in the supply chain process, leading to the identification of areas that need improvement With this valuable knowledge, informed decisions can be made to drive further improvements in the supply chain process With process visibility, supply chain managers can better understand the performance of their processes and identify any bottlenecks or inefficiencies This enables them to take proactive measures to improve process capability by reconfiguring and transforming processes and key factors By addressing these issues, the supply chain becomes more robust and capable of executing the supply chain plan as intended Furthermore, process visibility enhances the predictability of the supply chain plan and the outcome of process activities It allows for a higher level of control and enables process owners to align their activities with the overall business strategy This predictability helps in meeting business goals and ensures that the supply chain operates efficiently and effectively

2.2 Quantification of Supply Chain Visibility

As mentioned previously, there have been various studies conducted in order to define the concept of supply chain visibility (SCV) and establish a quantitative model for it Some of these studies have employed grading systems based on surveys or case studies, while others have utilized mathematical techniques to manage the abundance and quality of information shared among supply chain members [7, 8, 9, 10, 11]

Caridi et al have developed a quantitative model for measuring visibility in supply chains that comprise more than two layers This entails comparing the amount and quality of useful information to the entire volume of information exchanged within the nodes of the supply chain Four categories of information flows must be accounted

for: transactions, status information, master data, and operation plans They've attempted to quantify the data via a semiquantitative assessment of factors such as amount, freshness, and accuracy, relying on an analytic hierarchical process procedure centered on the experience of supply chain managers [7, 10, 11]

Zhang et al, on the other hand, define inventory visibility as the capacity of a supply chain actor to obtain or transmit timely information about inventory involved in the supply chain to/from important supply chain partners, to enable better decision making They propose two kinds of capabilities: accessing information that is already available and transmitting information that is already present in the supply chain In an effort to quantify the information, they employed a model that incorporates the relationships between information items and supply chain partners [8] In both instances, the data on SCV was employed to construct a more objective quantification

2.3 Measuring Business Performance and Supply Chain Visibility

Wei et al discovered that supply chain reconfigurability, which is a critical dynamic capability for supply chains, is facilitated by SCV and also significantly impacts supply chain performance [12] Meanwhile, Caridi et al identified data readiness, usability, and shareability as indicators of visibility derived from actual supply chain activities They proposed a value evaluation method using cause and effect mapping and business key performance index (KPI) to improve business performance [13, 11] Li et al studied the bullwhip effect in an uncertain supply chain system and developed a supply chain state transition model to explore the impact of erratic lead times on replenishment [14] Gaukler et al examined how order progress information can improve inventory replenishment decisions, calculating the cost savings associated with stochastic lead time and demand fluctuation [15] Chew et al assessed the effect of SCV on inventory management by examining the influence of order movement through multiple intermediate locations in relation to inventory decisions and costs [16] Goel provided an example of how SCV can improve delivery performance by adjusting transportation plans based on real-time information on the transportation system [17] These studies evaluated the cost and delivery performance with respect

to variations in lead time based on visibility grade by managing the delivery route Many researchers have looked into how delivery lead time affects business success in relation to operational excellence and process competence Kane introduced capacity indices to streamline process information, process potential, and performance information [18] Tanai and Guiffrida explored process capacity indices, the Six Sigma program, and lead time compression and variability reduction in relation to delivery performance [19] Garg et al focused on decreasing unpredictability and synchronizing business processes to achieve timely deliveries throughout the supply chain They also proposed a heuristic technique with process capability indices to address supplier selection challenges [20] Wang and Du created a capability index that connects customer specification with actual process performance, addressing supplier selection issues [21] Finally, Dasgupta proposed using Six Sigma metrics like 𝑍-value to evaluate and monitor supply chain performance, emphasizing rolling throughput yield (RTY) and delivery performance [22]

In essence, the majority of research has utilized fluctuations in delivery lead times as a means of gauging business effectiveness based on the expenses associated with on-time deliveries Some studies have used either the delivery time distribution by itself or the process capability in combination with a specified delivery window to calculate these expenses Higher visibility has been shown by the former to improve delivery time distribution, which in turn improves business performance On the other hand, the latter has demonstrated that a process capability may characterize the distribution of delivery times and that company performance can be assessed using both costs and the process capability index

Chapter 3 Methodology: Quantification Model of Supply Chain Visibility Using Process Capability

This thesis examined the significance and function of SCV in addition to providing a review of numerous studies on the topic from a variety of angles and definitions in the preceding section The majority of the current research falls into one of two categories The first group presented a quantitative model based on information volume and suggested SCV for information management and sharing from an IT standpoint From a theoretical standpoint that is resource-based, the second group suggests SCV The latter acknowledged that information exchange results in SCV and that SCV enhances SCM performance

It builds on the framework proposed by Lee and Rim (2016) [2], which described the concept of SCV from a more practical perspective It suggests a more comprehensive idea from the standpoint of process capacities, as well as a more impartial and grounded quantitative model that is built around this idea

The purpose of implementing a quantitative model like the Z score in Six Sigma methodology for evaluating and enhancing supply chain visibility is to provide a standardized and objective measure of the performance and capability of the supply chain processes By using the Z score, which is a statistical measure of process capability, companies can assess the level of visibility in their supply chain and identify areas for improvement

3.1 Process Capability-Based Quantitative Model of SCV

Quantification of SCV is important for multiple motives Quantifying a SCV with different models has been attempted by numerous researchers However, the majority of research has concentrated on information management from the standpoints of interorganizational system integration, information sensing, information sharing across partners, and information visualization through the use of various graphical tools or dashboards By evaluating the volume and caliber of information sent between supply chain participants, numerous studies have tried to quantify visibility

This method evaluates visibility by taking into account the information maturity level as opposed to the supply chain process's operational capacity From the perspective of process capability, however, information maturity along the supply chain is not as significant as the operational capability of actual processes to produce and deliver Six Sigma's process-oriented approach to supply chain management contributes to monitoring the performance of the underlying process by offering a quantitative tool to evaluate process capabilities Six Sigma use process capacity indices, such as the Z score, to analyze a process's ability to meet customer needs while maintaining a high degree of quality Six Sigma allows for the quantification of process visibility, which is an important part of supply chain management, by evaluating the mean and standard deviation of a process This method allows businesses to find areas for improvement, optimize operations, and improve overall supply chain efficiency The Six Sigma Z score allows companies to compare their supply chain performance to world-class standards and detect any gaps or inefficiencies It provides a consistent scale for measuring and evaluating the performance of various supply chain operations such as manufacturing, ordering, procurement, and delivering Companies can acquire insights into the effectiveness and efficiency of their processes by evaluating supply chain visibility using the Z score This allows them to detect bottlenecks, minimize variability, and improve supply chain performance overall It also aids in finding opportunities for proactive adjustments and restructuring to increase process capability and attain operational excellence

Overall, incorporating a quantitative model such as the Z score within Six Sigma principles to evaluate and improve supply chain visibility can offer companies a structured approach to gauging, assessing, and enhancing their supply chain processes This can lead to more informed decision-making, heightened efficiency, and improved customer satisfaction overall

Therefore, this research applies the methodology from Lee & Rim (2016) [2] for quantifying mutually sharable and easily measurable the operational ability of a process The process visibility metric was established by the quantification approach,

meeting the necessary requirements as follows: “ Single value with a unique meaning in the supply chain; Common usable value that can assess the SCM’s core value and be used for benchmarking; Quantifiable value to reveal the operational status and behaviors of the process; Statistical value that can represent the process capability; Value that reflects the variability from both upstream and downstream; Predictive value of the outcome for the supply chain plan”

Requirement (1) stipulates that the value should be easily understood and identifiable by all participants in the supply chain, without any discrepancies in terms of its concept, meaning, and quantification methodology If a given element's level of comprehension differs from that of other elements, it is deemed unfit for supply chain management (SCM) Under Requirement (2), the quantified value must be broadly applicable and independent of the measured time and the individuals responsible for making mutual comparisons and trend controls Requirements (3) and (4) focus on the operational status, capability, and performance of the process, demonstrating how the quantifiable value can be measured and statistically analyzed Additionally, Requirement (5) emphasizes the importance of taking into account upstream and downstream variances, including data and process variations from Chapter 3.1 Finally, Requirement (6) explains how the value can be utilized to predict and depict the results of supply chain operations during implementation

In order to effectively execute a Supply Chain Strategy and Plan, it is necessary to undertake a variety of innovative initiatives and activities The outcomes of these activities indicate the different elements of operational performance, such as lead time, yield, quality, utilization, lateness, and shortages specific to each supply chain process These performance indicators are either managed as Key Performance Indicators (KPIs) or Key Factor (KFIs) in the field and are primarily utilized as the data source for time series analysis, competitive benchmarking, and supply chain planning However, the use of Average Performance Factor as a measure often fails to fully reflect the unpredictability, uncertainty, and process capability of the business

process These results imply that the Supply Chain Plan's predictability is not very high As a result, requirements (5) and (6) are crucial prerequisites for our study

While a single key performance indicator (KPI) may be utilized to assess the effectiveness of a particular process, it's important to consider the potential trade-offs with other metrics when implementing process modifications For instance, if the final quality inspection is expanded to improve the overall quality of finished goods by increasing the sample size and frequency of inspections, this may result in significant quality improvements However, the costs and lead times associated with the process could also increase substantially as a result Similarly, if batch sizes are reduced in order to expedite the process, this could have negative impacts on productivity

Analyzing an entire business process using specific indicators can be a challenging task According to Lee & Rim's definition [2], the overall performance 𝑃( ) of a business can be determined by multiplying individual performance indices 𝑃( ) =Π𝑖𝑓𝑖( ) This formula takes into account the performance factor (represented by 𝑓) and the number of performance factors (represented by 𝑖) The concept of calculating the overall business performance stems from Graves' formula for determining a RTY [3]

A composite measure that captures the key performance indicators for every step of the business process is required for this purpose It is applied to several metrics in the supply chain that assess how well corporate performance is matched with process capacity Measurements include things like mean, median, mode, variance, standard deviation, range, covariance, and so forth

In statistical process control, it is used with 𝐶𝑝 in Eq 1 for the short-term process capability and with 𝐶𝑝𝑘 in Eq 2 to consider the biased process mean indices for the lower specification limit (LSL) and upper specification limit (USL) Also, 𝑍𝑏𝑒𝑛𝑐ℎ in Eq 3 is used to evaluate the process capability at Sigma level with a 𝑍 score in Six

Sigma methodology The short-term process capability 𝑍𝑠𝑡, which is referred to as the Sigma level (= 𝑍𝑏𝑒𝑛𝑐ℎ + 1.5), shifted by 1.5𝜎:

The Six Sigma methodology is among the most well-known examples of best practices The main benefit of Six Sigma measurements is that they make it possible to compare any process's performance to that of world-class performance by computing its performance on an equal scale Therefore, the best metric for this study's objectives is process capacity indices based on statistical process control Due to the numerous processes involved in supply chains such as manufacturing, ordering, procurement, and delivering, we have found that Six Sigma methodology can be applied to any business process with success Hence, among several process capability indices, the Z score in Six Sigma has proved to be the most efficient method for this research Therefore, utilizing the Z score as a measure of process capability, a mathematical model has been developed to quantify process visibility 𝑍𝛼 value is defined in Eq 5, where 𝑓(𝑥) denotes the Probability Density Function of the standard normal distribution

Using the process capability (𝑍𝑏𝑒𝑛𝑐ℎ) in the Six Sigma approach, we defined the visibility index of a process 𝑖 (𝑉𝑖) as follows:

Eq 5

In this study, a visibility index is utilized to determine an organization's business process capability This index, which is defined in Eq 4, measures the operational efficiency of a given process based on its mean and variance, as per traditional quality control theory The reasoning behind this is quite straightforward: a process with a greater capability is likely to be more stable, with less variability, therefore resulting in better outcomes A lower process capacity results in a process that is more uncontrollably variable since some essential cause variables are not identified and addressed, which makes it impossible to accurately predict when the business process will come to an end

To account for various performance factors throughout the supply chain, we've established visibility indices that are restricted to a range of values between zero and one, illustrated in Eq 4 These indices can be adjusted through mathematical operations like multiplication or division, given specific criteria A supply chain's particular echelon's process capability tends to decline in proportion to its weakest link and is a multiplexed result of several performance metrics Consequently, compared to other visibility models, this model may be used to quantify the SCV more experimentally and objectively

With the formula shown in Eq 4, we transfer the value of sigma levels into visibility as Table 3.1

For the majority of processes and products, Sigma level 3 is regarded as a moderate level of performance This indicates a fairly high process yield of 93.32% Therefore,

the visibility index over 0.5 is considered as moderate level, below 0.5 is considered as poor and unacceptable

Table 3.1 Sigma level to visibility index

Zst Yield (%) Visibility index Criteria of Performances

3.2 Quantification Model for the Overall Supply Chain Visibility

In section 3.2, this study used a quantification technique that measures a process's mean and standard deviation for each of the various performance metrics, then uses a 𝑍 score in Six Sigma to determine the process capability The individual index's computation method makes it possible to quantify visibility by unit processes at every supply chain level It is also possible to extend this to compute the total visibility across the supply chain As a result, these outcomes can be contrasted with those of the other supply chain phases Furthermore, focusing on the critical variable with the lowest value can be a way to improve the performance of the bottleneck operation at a specific stage and enhance overall visibility of the supply chain

However, since this study only focused on managed business process links configured as in Figure 3.1, author considered the simply one stage “production” in this case Therefore, this thesis only applied the overall visibility calculation approach in [2] and skip the steps where they applied for multiple stages in the SC

Step 1 Define the major performance indices 𝑓 and their parameters: 𝑓—factors

Step 2 Calculate visibility instances by factor for item 𝑖: 𝑣𝑖𝑓

Step 3 Calculate the visibility by process: 𝑣𝑓 = ∑ 𝑘𝑖 𝑖 𝑣𝑖𝑓, where 𝑘𝑖 is weight of sales revenue for item 𝑖, 0 < 𝑘𝑖 < 1.0, ∑ 𝑘𝑖 𝑖 = 1

Finally, calculate overall visibility: 𝑣𝑜𝑣𝑒𝑟𝑎𝑙𝑙 = √∏ 𝑣𝑛 𝑓, where 𝑛 is the number of process for overall supply chain

In order to calculate the process capability index for major performance factors 𝑓 such as process yield, manufacturing lead time, utilization, quality, delivery lead time, and shortage performance, Step 1 outlines the key parameters (average, standard deviation, and target USL or LSL) for process visibility

Step 2 calculates the visibility by factor of item 𝑖, and it is possible to compare the outcomes to those of other products

Step 3 weights and sums the item visibility while accounting for the item's sales revenue to determine the process unit visibility The unit visibility value can be contrasted with comparable business processes of competitors

Step 4 finally computes the total visibility for the processes under consideration As a result, this outcome is utilized to get the production stage's total process visibility and to compare its values to those of competitors

3.3 Business of process links

Figure 3.1.Supply chain network structure for visibility assessment

Managing all business process links across the entire supply chain can be quite daunting Some links have more importance than others, making it crucial to allocate resources effectively among various process links Lambert et al have identified four types of process links between members of the supply chain: managed business process links, monitored business process links, not-managed business process links, and not-member business process links [23]

Managed process links are business process connections that are deemed crucial by the focal company and are proactively integrated and monitored These connections are generally formed with top-tier customers and suppliers, and the focal company takes accountability for organizing and supervising these processes to guarantee seamless integration and a successful management outcome Thick solid lines in the supply chain diagram represent managed process links

Regarding monitored process links, it is important for the focal company to ensure proper integration and management among all member companies Though the focal

company may not rely heavily on these links, they must still be monitored or audited to ensure efficient integration and management

On the other hand, not-managed business process links refer to links within the supply chain that the focal company is not actively involved in and does not allocate resources to monitor While these links are less critical, they are still significant as they allow the focal company to focus its resources on more important process links The company must trust the other members to manage these links efficiently and can benefit from streamlined operations and efficient resource allocation However, it's important to keep in mind that the performance of these non-managed links can still impact the overall performance of the supply chain

Lastly, not-member business process links are those between members of the focal company's supply chain and those outside of it These links, such as relationships with non-member suppliers or customers, may impact resource allocation, product availability, and information confidentiality within the supply chain While not considered part of the focal company's supply chain, these links can still affect its performance and must be taken into account

This thesis focused on managed process links which are the linkages with Tier 1 suppliers

Chapter 4 Assessment of Overall Supply Chain Visibility in a Focal company

4.1 Introduction to the research object

Focal company L is a Hong Kong-based end-to-end supply chain management company (Figure 5.1) It services some of the largest retailers in North America and Europe with product design, sourcing, and manufacturing Company L has 250 offices in 40 markets worldwide and this study is conducted in one of their offices in Vietnam The research company plays a role as focal company (Figure 3.1) so this study focused in evaluating Tier 1 suppliers in front of the focal company Tier 1 suppliers represent for vendors who work directly with the company L One vendor may own many manufacturing factories or subcontractors worldwide Thus, considering the number of manufacturers within a vendor would make the calculation becomes more complex, this study will consider manufacturers as Tier 1 suppliers during the application of the model

Figure 4.1 End-to-end SCM

The company has expanded its offerings beyond traditional sourcing services and is now focused on creating collaborative digital platforms that connect all its supply chain partners, including customers and suppliers Their ultimate goal is to help brands and retailers develop consumer-loved products, and they are achieving this by providing an array of digital solutions that are delivering speed, innovation, and profitability By implementing these supply chain solutions, the company is enabling its customers to enhance margins, increase efficiency and achieve innovation, creating the supply chains of the future This research studied a department store K in the US, who is being provided with supply chain solutions service by the focal company The stages are including in Figure 4.2

Figure 4.2 Supply chain solutions

Additionally, it must be noted that Company L is working with customer K on an international FOB Maritime Incoterm (or International Commercial Terms) Incoterms are a universally recognized set of 11 terms that outline the roles and responsibilities of sellers and buyers in a sales transaction They clarify which party is responsible for managing and paying for shipping, insurance, documentation, customs clearance, and other logistical activities Four of these terms, called "maritime" terms, are designed for use when the goods are loaded onto a ship at a sea or inland port, indicating delivery from the seller to the buyer (Figure 4.3) These terms are typically used for bulk and conventional maritime transport, while containerized transport is governed by the multimodal Incoterms