Value creation and the impact of policy interventions: Indian LPG supply chain case study

• Date: 12 February 2018
• Published date: 12 February 2018
• Pages: 64-89
• DOI: https://doi.org/10.1108/IJLM-10-2016-0242
• Author: Neeraj Mittal,Renu Agarwal,Willem Selen
• Subject Matter: Management science & operations,Logistics

Value creation and the impact of

policy interventions: Indian LPG

supply chain case study

Neeraj Mittal

World Bank, Washington, District of Columbia, USA

Renu Agarwal

Management Discipline Group, University of Technology Business School,

University of Technology Sydney, Sydney, Australia, and

Willem Selen

School of Business, Faculty of Arts, Business and Law,

University of the Sunshine Coast,

Maroochydore, Australia

Abstract

Purpose –The purpose of this paper is to demonstrate the development of key supply chain capabilities in

the Indian public sector-run liquefied petroleum gas (LPG) supply chain. This case study has relevance to

emerging markets grappling with problems caused by monopolies and subsidies. Furthermore, this case

study not only aims to improve operations of the LPG supply chain, but also re-designs its supply network to

meet customers’expectations. It illustrates value creation through growth in non-domestic sales, a reduction

in consumption of subsidized LPG as a consequence of better understanding of customer needs and customer

diversity, process re-engineering and deployment of ICT systems, and change management and capability

building across various LPG stakeholders.

Design/methodology/approa ch –An interpretive research methodology is applied, using an

illustrative single case study of the Indian public sector-run LP G supply chain. The res earch

methodology is iterative and exploratory in nature, consisting of a back and forth process between

extant literature and t he field, as well as in-de pth discussions/inte rviews with senior man agement,

distributors, and consum ers.

Findings –Key supply chain capabilities of an integrated and seamless ICT system, detection and blocking

of duplicate/ghost connections, the capping of entitlements, and coordination and collaboration across

various stakeholders result in value creation for all stakeholders. When such collaboration

across stakeholders’spans both vertically and horizontally through the supply chain, change management

and capability building drive value creation through policy interventions and initiatives.

Practical implications –This study provides an illustrative example of meeting customers’expectations,

increasing consumer convenience, and improving service levels, amidst the complex subsidy challenges in

LPG distribution in India. The economic and environmental benefits, as well as increased customer

satisfaction, from policy interventions regarding value creation in supply chains, have implications for similar

public sector-run schemes.

Social implications –As a result of the various policy changes, the LPG subsidy was restricted to

legitimate customers, reducing the fiscal burden on the Indian Government. Furthermore, seamless

ICT-introduced efficiencies for government, distributers, and customers were attained.

Originality/value –This research articulates the capture, creation, and appropriation of value through

the deployment of new supply chain initiatives in a large, complex environment, in particular the public

sector-run LPG supply chain.

Keywords Value creation, Supply chain management, Coordination, Integration and alignment,

Public sector supply chain, Service value network

Paper type Case study

The International Journal of

Logistics Management

Vol. 29 No. 1, 2018

pp. 64-89

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-10-2016-0242

Received 22 October 2016

Revised 26 October 2016

28 February 2017

Accepted 31 March 2017

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

The authors are gratefulfor the efforts by Ministry ofPetroleum and Natural Gas (MoPNG) Delhi India,

Petroleum Planning and Analysis Cell (PPAC), and oil marketing companies (OMCs) management in

providing the required datafor this paper.

64

IJLM

29,1

Introduction

Public sector innovation is mainly problem driven (Windrum and Koch, 2008), generally

constrained by a lack of resources, possesses limited innovative capacity, and as such is

unable to deliver public value (Hartley, 2005, 2006). Likewise, a lack of effective supply chain

implementation in the public sector is the primary cause for its inability to deliver value

(Humphries and Wilding, 2004). As Eggers and Singh (2009, pp. 6-7) point out, “it is in the

last three phases [of innovation, i.e. idea selection, idea implementation, and idea diffusion]

that innovation often gets derailed in the public sector”. Nevertheless, Langergaard and

Scheuer (2012) see possible increased public value delivered through improved governance

and service performance, including improved efficiency through incremental innovations.

This would involve solving “complex”and “intractable”societal challenges through

unpacking ideas and possessing the capacity to design and implement change. This, in turn,

requires leadership and management to transform ways of addressing the many human,

regulatory, financial, institutional, and technical issues to achieve practical outcomes.

While implementing innovative ideas and practices in the public sector is challenging, many

opportunities do exist. First, in order to derive value, public sector supply chain members need

to strategically collaborate and manage each of their segments through partner coordination,

partner integration, and partner alignment (Gattorna, 2010; Walters and Rainbird, 2006, 2007;

Simatupang and Sridharan, 2002). However, it is common for supply chain member firms to pay

attention only to the management and planning of physical and financial aspects, rather than

concentrating on collaborative efforts in managing knowledge- and information-related

intangible aspects of their supply chains (Ayers, 2002; Westgren, 1998; Agarwal and Selen, 2009,

2011a, 2014). Furthermore, Yu et al. (2010) point out that when managers have incomplete

information on hand, and lack motivation to share knowledge, a fundamental lack of

coordination prevails end-to-end across the supply chain. To address this, firms need to ensure

that routine processes, and associated activities, as well as knowledge and information spanning

inter- and intra-organizations, are integrated and aligned (Lee et al., 2010) in order to achieve

efficient coordination across stakeholders (Lee et al., 2010; Subramani and Agarwal, 2013).

This, in turn, is needed to make supply chains agile, adaptable, and aligned (Lee, 2004).

Increasingly, integrative planning and management among various echelons of the network

provide significant opportunities for stakeholders. In particular, ICT systems p rovide the ability

to integrate inter- and intra-organizational systems and processes enabling a seamless flow of

information, reach, and richness across partnering organizations (Agarwal et al., 2012;

Liu et al., 2015). Additionally, increased customer focus fosters supply chain relational

capabilities, leading to beneficial performance outcomes (Lado et al., 2011; Chen and

Paulraj, 2004). A strong relationship between partnering organizations and increased

communication, and information and knowledge sharing, mitigates uncertainty, risks

and promotes adaptation to change (Kraatz, 1998).

The foundation of a good supply chain comprises two core elements, namely to

produce and deliver products and services to meet customer requirements, and working

with stakeholders both upstream and downstream to ensure delivery of products and

services with quality, i.e. at the right time, to the right place, and in the right quantity

(Chopra and Meindl, 2009; Simchi-Levi et al., 2008). Underpinning this, the ability to

identify and foster new supply chain capabilities is paramount for efficient supply chain

growth in emerging markets, and more so in public sector service delivery (Eggers and

Singh, 2009; Green et al., 2014). There is an emerging trend where governments are

realizing the potential of ICT system deployment. In particular, the implementation of

portals, coordination, and collaboration across various stakeholders of the supply chain,

and alignment in implementation of policy initiatives across suppliers and distributors for

value creation (Ambe, 2009; Lucon et al., 2004; Asamoah et al., 2012; Cahyaningrum

and Simatupang, 2013; Simatupang and Sridharan, 2002; Hendricks and Singhal, 2003).

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Indian LPG

supply chain

case study