Supply Chain Management
Content
1. Introduction
Supply chain management is defined as the oversight of materials, information, and finances
as they move in a process from supplier to manufacturer to wholesales to retailer and
eventually to end consumer (SearchManufacturingERP, n.d.). It involves streamlining of
supply-side activities to maximise customer value as well as achieving efficiency across the
chains.
Some of the examples of supply chain activities are procurement and supply
management, materials and inventory management, physical distribution management, and
logistics management. Therefore, supply chain management does not only involves logistics
as some may tend to believe, but also includes the suppliers, manufacturers and retailers.
An efficient and effective management of supply chain allows companies to achieve
significant competitive advantage in the market as they are able to deliver products to every
customers that demand for it at a lower cost structure. In order to achieve the intended
efficiency, some companies go into outsourcing, for instance employing third party logistic
company which helps to reduce cost of idle usage of certain parts of supply chain, while
some companies look into integrating their supply chain processes to gain significant control.
Whatever kinds of strategy companies employ, supply chain management demands the
managers to focus on the broader aspects of their supply chain and devise strategies that are
able to coordinate the upstream suppliers, internal functions and downstream customers.
1
2. Literature review
The increasing complexity of supply chain has led to a need for measuring and monitor the
performance of the activities in order to optimize the supply chain surplus (Bigliardi and
Bottani, 2014). Performance measurement of the entire supply chain is essential when supply
chain acts as a key factor of corporate success (Waters and Waters, 2007). Performance
measures aids in determining the level of progress of the organization and the necessary
action required for improving the system (Kusrini, Subagyo and Aini, 2014), therefore it is
considered a vital tool in the decision making process of supply chain management.
Successful implementation of supply chain performance measurement relies on the
adoption of appropriate metrics that are able to capture the essential components in the supply
chain process. The metrics should enable: i) evaluation and control of performance of the
resources; ii) provide information for management and external stakeholders, and; iii)
continuous performance improvement (Bigliardi and Bottani, 2014). Measuring performance
on supply chain can be a daunting task, however managers should strive to translate financial
goals on effective measures of operational performance, and translate operational measures
on financial goals such as increase in revenue, guiding the supply chain behaviour and
supporting the business global strategy (Santos, Gouveia and Gomes, 2007).
There are hundreds of supply chain performance measures available in existence and
they are separated into categories based on supply chain processes, such as: i) plan; ii) source,
iii) make/assemble, and; iv) delivery/customer (Gunasekaran et al, 2004). According to
Kaplan (1996), an effective set of performance measures should include financial and nonfinancial measures, internal and external measures. Performance metrics related to “cost”
such as cost changes and has long been recognised as an important metric for assessing
supply chain management as one of the ways to maximise supply chain surplus is to
minimise cost. Others opined that customer satisfaction level is the metrics that encapsulates
everything about the performance of supply chain (Estampe et al., 2013). Santos, Gouveia
and Gomes (2007) adopt a more detailed approach of supply chain processes as shown in the
tables below:
2
Table 1: Performance metrics and sub-metrics in a supply chain from a customer perspective
Perspective
Processes
Indicators
Quality - % of non-conformity
Sales/Customer support Forecast accuracy
Market share
On time delivery
Customer perspective
Fill rate
Logistics
Number of products
Number of distribution channels
Damaged shipments
Source: Adapted from Santos, Gouveia and Gomes (2007), pp. 93-115
Table 2: Performance metrics and sub-metrics in a supply chain from a financial perspective
Perspective
Processes
Sourcing
Indicators
Costs of materials
Non-quality costs
Manufacturing
Warehousing costs
Manufacturing unit costs
Warehousing
Carrying cost
Transportation costs
Financial perspective
Logistics
Logistic costs
Cash flow
Income
Accounting
Return on investments (ROI)
Return on sales (ROS)
Source: Adapted from Santos, Gouveia and Gomes (2007), pp. 93-115
Table 3: Performance metrics and sub-metrics in a supply chain from an internal business
process perspective
Perspective
Financial perspective
Processes
Indicators
Supplier on-time delivery
Material inventories
Material quality
Supplier cycle time
% of orders delivered according to plan
Schedule changes
BOM accuracy
Adherence to schedule
% defect products
Number of finished products/SKUs
Manufacturing cycle time
Setups/changeovers
Sourcing
Planning
Manufacturing
3
Plant utilization
Finished goods inventory turn
Delivering/storing
Stock keeping units
Source: Adapted from Santos, Gouveia and Gomes (2007), pp. 93-115
Numerous researchers have also suggested more supply chain performance measures from
different perspectives, such as the environmental perspective (Zhu et al., 2005), but this
comes with the increased complexity to the selection of measures that matches certain supply
chain processes the company is running. In order to assess which performance measurement
model can be applied, the management have to establish a set of criteria that defines good
performance measures and assign level of importance for each criteria (Kusrini, Subagyo and
Aini, 2014).
3. Background of the Organization
Figure 1: Location of APC’s offices, plantations and factories around the world
Asia Plantation Capital Group (APC) is the owner and operator of a diverse range of
commercial plantation and farming businesses globally. The group has provided sustainable
forestry and agricultural land acquisition and development services to the global forestry and
agricultural sector for more than 10 years. APC have over 8 million trees under management
spread
across
continents
such
as
Sri
Lanka,
Thailand,
Malaysia
and
China.
(Asiaplantationcapital.com, 2015).
Asia Plantation Capital overseas the whole process from the sapling cultivation,
forestry management, harvesting techniques, distillation methods and product processing.
Vertical integration of the processes ensures the highest quality of the product and efficient
supply chain. APC has established several diverse range of businesses, among the other: the
4
use of oud oil from agarwood trees to produce fine perfumes for the international fragrance
industry, manufacturing products for the pharmaceutical sector; construction of sustainable
homes; plantation and agricultural specialist management, and tree nurseries for local
communities to access. (Asiaplantationcapital.com, 2015).
Besides plantation management, Asia Plantation Capital also offers services of
managing plantations owned by private owners using processes and techniques researched
and developed by APC and its Global Scientific Advisory Board. Plantation and biological
assets currently owned and/or under management on behalf of private clients, are in excess of
US$600 million and are forecast to rise to more than US$1 billion over the next decade.
4. Supply Chain of the Organization
The focus of this study is on agarwood, which is also known as gaharu in Malaysia.
Oud oil, a by-product of agarwood, is extracted from the resinous heartwood of tropical
Aquilaria trees. The precious resin is the result of the tree’s natural defence mechanism when
it is infected by fungus (Apcdistilleries.com, 2015). This resin, known as oud, is now one of
the most important ingredients in the global fragrance industry. Demand from the
increasingly affluent society such as China and South Korea is growing and directly affecting
the demand for agarwood. As perfumes are considered luxury goods, the supply chain adopts
make-to-stock environment whereby manufacturers manufacture in anticipation of customer
demand. The demand, however, is more stable compared to fast moving consumer goods due
to it coming from wealthier people.
The supply of agarwood is threatened by illegal logging due to the highly prized oud
oil, which costs at least $50,000 per kg. With only 7% of the agarwood trees naturally
infected with fungus in the wild, illegal loggers resort to mass deforestation to harvest more
wood, resulting in damage in habitat and soil erosion. Asia Plantation Capital has managed to
develop a patented inoculation method whereby the whole Aquilaria trees can be infected to
produce agarwood resin. Utilizing this method, Asia Plantation Capital can achieve 100%
success rate of obtaining the resin as opposed to 7% (Watts, 2015), thereby boosting their
production considerably. In Asia Plantation Capital’s agarwood estates, once the trees start
producing resin, it can be harvested daily for a period of 7 years, in which after that another
tree is planted to replace it. This ensures a sustainable supply of agarwood.
5
Procurement of agarwood is directly sourced at APC’s own agarwood plantation in Sri
Lanka, Malaysia and Thailand, therefore the processing factories are assured of continuous
and exclusive supply from the plantation that can provide all the raw material required.
Besides, as both the plantation and factories are related parties, it is easier for them to
communicate on specific type of quality demanded for the raw material. In order to maintain
consistent quality, supplier performance measures such as supply quality, delivery time and
inbound transportation cost can be put in place. As we can see in Figure 1, the distillers are
located at close proximity to the plantations in each countries, therefore this helps to reduce
inbound transportation cost and lead time.
Besides that, tt is also useful to use some of the measures employed by palm oil
plantation on agarwood plantation to assess the productivity of the plantation and the
sustainability of the agarwood supply. For instance, agarwood harvested in kg/hectare and
oud oil extraction rate measures the yield of the plantation, the higher the better. Each
agarwood tree can produce resins using artificial inoculation method, however the amount
produced will differ for each tree. Managements also consider the maturity profile of the
agarwood in order to determine the replanting strategy.
Plantation industry is inherently labour intensive because the harvesting jobs cannot
be replaced by machines. Therefore measures that track employee productivity, such as
employee-hours worked versus employee-hours available can be used. As APC employs local
labour and pay above-average wage rates in those countries they are operating, this ensures
the employees are working in a good condition and in return increases the productivity.
Although products of Asia Plantation Capital are of upmarket range, such as perfumes
are earning large profit margin to compensate for its lower sales volume, APC still needs to
ensure the inventory turnover is healthy so that the goods do not stuck in the warehouse for
too long which could lead to obsolescent or damages. Inventory turnover days, which is
calculated by dividing average inventory over total sales multiply with 365 days provides
information on how long the goods stay in warehouse before it is shipped to customer.
Another inventory related measures is ratio of inventory to total assets. Generally lower ratio
implies that less assets are tied to relatively illiquid inventory, which is better.
Asia Plantation Capital operates as a plantation investment scheme where the group
receives deposits from investors and use the cash to venture into plantation business.
6
Therefore to those investors return on invested capital (ROIC) is obviously very important. In
the case of APC, they are being able to generate a consistent return to investors in excess of
15% per annum. Since 2009 to 2013, the company has since repaid investors over US$5.1
million. This measure will be continued to be monitored by investors to decide whether they
want to invest further with APC.
5. Recommendation
Asia Plantation Capital can look into improving their supply chain through:
implementing
tracking
and
mobile
technologies;
integrate
market
expenditures into supply chain planning, and analyse information to meet
customer need.
To improve efficiencies and minimize costs, APC should take
advantage of technology such as RFID in their warehouses. Companies
should embrace technology as it becomes cheaper and provides more
functions. In terms of planning and analysing, it is imperative for
management to consider every aspects in the supply chain that might
lead to wastage and find ways to eliminate it, one of which is marketing
expenditures. This is not limited to the advertisement we see every day,
but also costs, resource limits and anticipated demand impact of proposed
marketing initiatives. This way the supply chain managers will get a better
view on their supply chain cost and benefits. By doing so companies will
know which marketing campaign should be used based on the cost and
potential revenue generated. Lastly, supply chain is not just about
supplier and warehouse, but also the end customers. Therefore it is
important for managers to take time to analyse what the customer
demands and find which products is not in favour by the market. This
information
can
be
incorporated
into
supply
chain
strategy.
(Enterpriseappstoday.com, 2015)
6. Conclusion
The growing turnover of Asia Plantation Capital is a testament to its success in agarwood
industry, but the success does not come easy as the vertical integration model that Asia
7
Plantation Capital employs requires competent supply chain managers who are able to
oversee and coordinates the whole supply chain activities. As the group is getting on steam
for expansion (distiller and agarwood processing factory in United Arab Emirates will be
operating soon), supply chain managers of APC will have to devise strategies that allow them
to continue this mode of expansion and the sustainability of their plantation.
Appendix
1. Excerpts from the interview with Steve Watts, Asia Pacific CEO of Asia Plantation
Capital on BFM 89.9, the business station
“Oud, Gaharu, Agarwood. We refer to them by different names, but they are all the same: the
'liquid gold' that comes from the Aquilaria tree species. While the fragrance industry can be
a lucrative business to do, we explore this with Steve Watts, the Asia Pacific CEO of Asia
Plantation Capital on how they do conduct their business. Other areas discussed in this
interview include regulatory relationship, proprietary knowledge in maximising yield from
the business, and also supply chain management and retailing. ”
Ibrahim
: Tell us about your agarwood plantation.
Steve : … Using our own propriety inoculation method, agarwood trees are artificially
infected with fungus so that it will start producing resins. Compared to the agarwood trees in
the forest, we are able to achieve 100% success rate as opposed to 7% in the wild…
Ibrahim
: Could you share with us your supply chain concept? Where does Malaysia fit
into the picture?
Steve
: Malaysia is very important in the future in terms of production and
acquisition of plantations. Right now we are acquiring plantations and planting saplings. We
have to wait for 7 years until we can harvest it, but during the period we will still continue on
the acquisition as well as assisting Thailand with the processing of agarwood which is
expected to be available to harvest in the next 18 months. We are expanding rapidly in
Thailand through joint venture with existing planters.
8
References
Apcdistilleries.com, (2015). [online] Available at: http://www.apcdistilleries.com/ [Accessed
15 Nov. 2015].
Asiaplantationcapital.com, (2015). Asia Plantation Capital | Leading the way in sustainable
plantation management. [online] Available at: https://www.asiaplantationcapital.com/
[Accessed 15 Nov. 2015].
Bigliardi, B. and Bottani, E. (2014). Supply chain performance measurement: a literature
review and pilot study among Italian manufacturing companies. International Journal
of Engineering, Science and Technology, 6(3), p.1.
Enterpriseappstoday.com, (2015). 13 Ways to Improve Your Supply Chain Management Enterprise Apps Today. [online] Available at:
http://www.enterpriseappstoday.com/supply-chain-management/ways-to-improvesupply-chain-management.html [Accessed 15 Nov. 2015].
Estampe D., Lamouri S., Paris J.-L. and Brahim-Djelloul S, 2013. A framework for analysing supply
chain performance evaluation models. International Journal of Production Economics, Vol. 142
No. 2, pp.247-258.
Gunasekaran H., Patel C. and McGaughey R.E., 2004. A framework for supply chain
performance measurement. International Journal of Production Economics, Vol. 87 No.
3, pp.333-347.
Santos, S., Gouveia, J. B., Gomes, P. (2007). Measuring performance in supply chain - a
framework. International Journal of Advanced Technology & Engineering Research, pp
93- 115.
Waters, C.D., and Waters, D.,2007. Global Logistics: New Directions in Supply Chain
Management. Kogan Page Ltd, London (UK).
9
Watts, S. (2015). How Does the Perfume Industry Perform in a Lean Economy.
Zhu, Q., Sarkis, J., & Geng, Y. (2005). Green supply chain management in China: Pressures,
practices and performance. International Journal of Operations and Production
Management, 25, 449-468
10
Supply chain management is defined as the oversight of materials, information, and finances
as they move in a process from supplier to manufacturer to wholesales to retailer and
eventually to end consumer (SearchManufacturingERP, n.d.). It involves streamlining of
supply-side activities to maximise customer value as well as achieving efficiency across the
chains.
Some of the examples of supply chain activities are procurement and supply
management, materials and inventory management, physical distribution management, and
logistics management. Therefore, supply chain management does not only involves logistics
as some may tend to believe, but also includes the suppliers, manufacturers and retailers.
An efficient and effective management of supply chain allows companies to achieve
significant competitive advantage in the market as they are able to deliver products to every
customers that demand for it at a lower cost structure. In order to achieve the intended
efficiency, some companies go into outsourcing, for instance employing third party logistic
company which helps to reduce cost of idle usage of certain parts of supply chain, while
some companies look into integrating their supply chain processes to gain significant control.
Whatever kinds of strategy companies employ, supply chain management demands the
managers to focus on the broader aspects of their supply chain and devise strategies that are
able to coordinate the upstream suppliers, internal functions and downstream customers.
1
2. Literature review
The increasing complexity of supply chain has led to a need for measuring and monitor the
performance of the activities in order to optimize the supply chain surplus (Bigliardi and
Bottani, 2014). Performance measurement of the entire supply chain is essential when supply
chain acts as a key factor of corporate success (Waters and Waters, 2007). Performance
measures aids in determining the level of progress of the organization and the necessary
action required for improving the system (Kusrini, Subagyo and Aini, 2014), therefore it is
considered a vital tool in the decision making process of supply chain management.
Successful implementation of supply chain performance measurement relies on the
adoption of appropriate metrics that are able to capture the essential components in the supply
chain process. The metrics should enable: i) evaluation and control of performance of the
resources; ii) provide information for management and external stakeholders, and; iii)
continuous performance improvement (Bigliardi and Bottani, 2014). Measuring performance
on supply chain can be a daunting task, however managers should strive to translate financial
goals on effective measures of operational performance, and translate operational measures
on financial goals such as increase in revenue, guiding the supply chain behaviour and
supporting the business global strategy (Santos, Gouveia and Gomes, 2007).
There are hundreds of supply chain performance measures available in existence and
they are separated into categories based on supply chain processes, such as: i) plan; ii) source,
iii) make/assemble, and; iv) delivery/customer (Gunasekaran et al, 2004). According to
Kaplan (1996), an effective set of performance measures should include financial and nonfinancial measures, internal and external measures. Performance metrics related to “cost”
such as cost changes and has long been recognised as an important metric for assessing
supply chain management as one of the ways to maximise supply chain surplus is to
minimise cost. Others opined that customer satisfaction level is the metrics that encapsulates
everything about the performance of supply chain (Estampe et al., 2013). Santos, Gouveia
and Gomes (2007) adopt a more detailed approach of supply chain processes as shown in the
tables below:
2
Table 1: Performance metrics and sub-metrics in a supply chain from a customer perspective
Perspective
Processes
Indicators
Quality - % of non-conformity
Sales/Customer support Forecast accuracy
Market share
On time delivery
Customer perspective
Fill rate
Logistics
Number of products
Number of distribution channels
Damaged shipments
Source: Adapted from Santos, Gouveia and Gomes (2007), pp. 93-115
Table 2: Performance metrics and sub-metrics in a supply chain from a financial perspective
Perspective
Processes
Sourcing
Indicators
Costs of materials
Non-quality costs
Manufacturing
Warehousing costs
Manufacturing unit costs
Warehousing
Carrying cost
Transportation costs
Financial perspective
Logistics
Logistic costs
Cash flow
Income
Accounting
Return on investments (ROI)
Return on sales (ROS)
Source: Adapted from Santos, Gouveia and Gomes (2007), pp. 93-115
Table 3: Performance metrics and sub-metrics in a supply chain from an internal business
process perspective
Perspective
Financial perspective
Processes
Indicators
Supplier on-time delivery
Material inventories
Material quality
Supplier cycle time
% of orders delivered according to plan
Schedule changes
BOM accuracy
Adherence to schedule
% defect products
Number of finished products/SKUs
Manufacturing cycle time
Setups/changeovers
Sourcing
Planning
Manufacturing
3
Plant utilization
Finished goods inventory turn
Delivering/storing
Stock keeping units
Source: Adapted from Santos, Gouveia and Gomes (2007), pp. 93-115
Numerous researchers have also suggested more supply chain performance measures from
different perspectives, such as the environmental perspective (Zhu et al., 2005), but this
comes with the increased complexity to the selection of measures that matches certain supply
chain processes the company is running. In order to assess which performance measurement
model can be applied, the management have to establish a set of criteria that defines good
performance measures and assign level of importance for each criteria (Kusrini, Subagyo and
Aini, 2014).
3. Background of the Organization
Figure 1: Location of APC’s offices, plantations and factories around the world
Asia Plantation Capital Group (APC) is the owner and operator of a diverse range of
commercial plantation and farming businesses globally. The group has provided sustainable
forestry and agricultural land acquisition and development services to the global forestry and
agricultural sector for more than 10 years. APC have over 8 million trees under management
spread
across
continents
such
as
Sri
Lanka,
Thailand,
Malaysia
and
China.
(Asiaplantationcapital.com, 2015).
Asia Plantation Capital overseas the whole process from the sapling cultivation,
forestry management, harvesting techniques, distillation methods and product processing.
Vertical integration of the processes ensures the highest quality of the product and efficient
supply chain. APC has established several diverse range of businesses, among the other: the
4
use of oud oil from agarwood trees to produce fine perfumes for the international fragrance
industry, manufacturing products for the pharmaceutical sector; construction of sustainable
homes; plantation and agricultural specialist management, and tree nurseries for local
communities to access. (Asiaplantationcapital.com, 2015).
Besides plantation management, Asia Plantation Capital also offers services of
managing plantations owned by private owners using processes and techniques researched
and developed by APC and its Global Scientific Advisory Board. Plantation and biological
assets currently owned and/or under management on behalf of private clients, are in excess of
US$600 million and are forecast to rise to more than US$1 billion over the next decade.
4. Supply Chain of the Organization
The focus of this study is on agarwood, which is also known as gaharu in Malaysia.
Oud oil, a by-product of agarwood, is extracted from the resinous heartwood of tropical
Aquilaria trees. The precious resin is the result of the tree’s natural defence mechanism when
it is infected by fungus (Apcdistilleries.com, 2015). This resin, known as oud, is now one of
the most important ingredients in the global fragrance industry. Demand from the
increasingly affluent society such as China and South Korea is growing and directly affecting
the demand for agarwood. As perfumes are considered luxury goods, the supply chain adopts
make-to-stock environment whereby manufacturers manufacture in anticipation of customer
demand. The demand, however, is more stable compared to fast moving consumer goods due
to it coming from wealthier people.
The supply of agarwood is threatened by illegal logging due to the highly prized oud
oil, which costs at least $50,000 per kg. With only 7% of the agarwood trees naturally
infected with fungus in the wild, illegal loggers resort to mass deforestation to harvest more
wood, resulting in damage in habitat and soil erosion. Asia Plantation Capital has managed to
develop a patented inoculation method whereby the whole Aquilaria trees can be infected to
produce agarwood resin. Utilizing this method, Asia Plantation Capital can achieve 100%
success rate of obtaining the resin as opposed to 7% (Watts, 2015), thereby boosting their
production considerably. In Asia Plantation Capital’s agarwood estates, once the trees start
producing resin, it can be harvested daily for a period of 7 years, in which after that another
tree is planted to replace it. This ensures a sustainable supply of agarwood.
5
Procurement of agarwood is directly sourced at APC’s own agarwood plantation in Sri
Lanka, Malaysia and Thailand, therefore the processing factories are assured of continuous
and exclusive supply from the plantation that can provide all the raw material required.
Besides, as both the plantation and factories are related parties, it is easier for them to
communicate on specific type of quality demanded for the raw material. In order to maintain
consistent quality, supplier performance measures such as supply quality, delivery time and
inbound transportation cost can be put in place. As we can see in Figure 1, the distillers are
located at close proximity to the plantations in each countries, therefore this helps to reduce
inbound transportation cost and lead time.
Besides that, tt is also useful to use some of the measures employed by palm oil
plantation on agarwood plantation to assess the productivity of the plantation and the
sustainability of the agarwood supply. For instance, agarwood harvested in kg/hectare and
oud oil extraction rate measures the yield of the plantation, the higher the better. Each
agarwood tree can produce resins using artificial inoculation method, however the amount
produced will differ for each tree. Managements also consider the maturity profile of the
agarwood in order to determine the replanting strategy.
Plantation industry is inherently labour intensive because the harvesting jobs cannot
be replaced by machines. Therefore measures that track employee productivity, such as
employee-hours worked versus employee-hours available can be used. As APC employs local
labour and pay above-average wage rates in those countries they are operating, this ensures
the employees are working in a good condition and in return increases the productivity.
Although products of Asia Plantation Capital are of upmarket range, such as perfumes
are earning large profit margin to compensate for its lower sales volume, APC still needs to
ensure the inventory turnover is healthy so that the goods do not stuck in the warehouse for
too long which could lead to obsolescent or damages. Inventory turnover days, which is
calculated by dividing average inventory over total sales multiply with 365 days provides
information on how long the goods stay in warehouse before it is shipped to customer.
Another inventory related measures is ratio of inventory to total assets. Generally lower ratio
implies that less assets are tied to relatively illiquid inventory, which is better.
Asia Plantation Capital operates as a plantation investment scheme where the group
receives deposits from investors and use the cash to venture into plantation business.
6
Therefore to those investors return on invested capital (ROIC) is obviously very important. In
the case of APC, they are being able to generate a consistent return to investors in excess of
15% per annum. Since 2009 to 2013, the company has since repaid investors over US$5.1
million. This measure will be continued to be monitored by investors to decide whether they
want to invest further with APC.
5. Recommendation
Asia Plantation Capital can look into improving their supply chain through:
implementing
tracking
and
mobile
technologies;
integrate
market
expenditures into supply chain planning, and analyse information to meet
customer need.
To improve efficiencies and minimize costs, APC should take
advantage of technology such as RFID in their warehouses. Companies
should embrace technology as it becomes cheaper and provides more
functions. In terms of planning and analysing, it is imperative for
management to consider every aspects in the supply chain that might
lead to wastage and find ways to eliminate it, one of which is marketing
expenditures. This is not limited to the advertisement we see every day,
but also costs, resource limits and anticipated demand impact of proposed
marketing initiatives. This way the supply chain managers will get a better
view on their supply chain cost and benefits. By doing so companies will
know which marketing campaign should be used based on the cost and
potential revenue generated. Lastly, supply chain is not just about
supplier and warehouse, but also the end customers. Therefore it is
important for managers to take time to analyse what the customer
demands and find which products is not in favour by the market. This
information
can
be
incorporated
into
supply
chain
strategy.
(Enterpriseappstoday.com, 2015)
6. Conclusion
The growing turnover of Asia Plantation Capital is a testament to its success in agarwood
industry, but the success does not come easy as the vertical integration model that Asia
7
Plantation Capital employs requires competent supply chain managers who are able to
oversee and coordinates the whole supply chain activities. As the group is getting on steam
for expansion (distiller and agarwood processing factory in United Arab Emirates will be
operating soon), supply chain managers of APC will have to devise strategies that allow them
to continue this mode of expansion and the sustainability of their plantation.
Appendix
1. Excerpts from the interview with Steve Watts, Asia Pacific CEO of Asia Plantation
Capital on BFM 89.9, the business station
“Oud, Gaharu, Agarwood. We refer to them by different names, but they are all the same: the
'liquid gold' that comes from the Aquilaria tree species. While the fragrance industry can be
a lucrative business to do, we explore this with Steve Watts, the Asia Pacific CEO of Asia
Plantation Capital on how they do conduct their business. Other areas discussed in this
interview include regulatory relationship, proprietary knowledge in maximising yield from
the business, and also supply chain management and retailing. ”
Ibrahim
: Tell us about your agarwood plantation.
Steve : … Using our own propriety inoculation method, agarwood trees are artificially
infected with fungus so that it will start producing resins. Compared to the agarwood trees in
the forest, we are able to achieve 100% success rate as opposed to 7% in the wild…
Ibrahim
: Could you share with us your supply chain concept? Where does Malaysia fit
into the picture?
Steve
: Malaysia is very important in the future in terms of production and
acquisition of plantations. Right now we are acquiring plantations and planting saplings. We
have to wait for 7 years until we can harvest it, but during the period we will still continue on
the acquisition as well as assisting Thailand with the processing of agarwood which is
expected to be available to harvest in the next 18 months. We are expanding rapidly in
Thailand through joint venture with existing planters.
8
References
Apcdistilleries.com, (2015). [online] Available at: http://www.apcdistilleries.com/ [Accessed
15 Nov. 2015].
Asiaplantationcapital.com, (2015). Asia Plantation Capital | Leading the way in sustainable
plantation management. [online] Available at: https://www.asiaplantationcapital.com/
[Accessed 15 Nov. 2015].
Bigliardi, B. and Bottani, E. (2014). Supply chain performance measurement: a literature
review and pilot study among Italian manufacturing companies. International Journal
of Engineering, Science and Technology, 6(3), p.1.
Enterpriseappstoday.com, (2015). 13 Ways to Improve Your Supply Chain Management Enterprise Apps Today. [online] Available at:
http://www.enterpriseappstoday.com/supply-chain-management/ways-to-improvesupply-chain-management.html [Accessed 15 Nov. 2015].
Estampe D., Lamouri S., Paris J.-L. and Brahim-Djelloul S, 2013. A framework for analysing supply
chain performance evaluation models. International Journal of Production Economics, Vol. 142
No. 2, pp.247-258.
Gunasekaran H., Patel C. and McGaughey R.E., 2004. A framework for supply chain
performance measurement. International Journal of Production Economics, Vol. 87 No.
3, pp.333-347.
Santos, S., Gouveia, J. B., Gomes, P. (2007). Measuring performance in supply chain - a
framework. International Journal of Advanced Technology & Engineering Research, pp
93- 115.
Waters, C.D., and Waters, D.,2007. Global Logistics: New Directions in Supply Chain
Management. Kogan Page Ltd, London (UK).
9
Watts, S. (2015). How Does the Perfume Industry Perform in a Lean Economy.
Zhu, Q., Sarkis, J., & Geng, Y. (2005). Green supply chain management in China: Pressures,
practices and performance. International Journal of Operations and Production
Management, 25, 449-468
10
