Supply Chain Management in Food Chains: Improving Performance by Reducing Uncertainty J. G. A. J. VAN DER VORST, A. J. M. BEULENS, W. DE WIT and P. VAN BEEK Wageningen Agricultural University, Hollandseweg 1, 6706 KN Wageningen, The Netherlands This paper investigates the impact of Supply Chain Management on logistical performance indicators in food supply chains. From a review of quantitative and more qualitative managerial literature, we believe that Supply Chain Management should be concerned with the reduction or even elimination of uncertainties to improve the performance of the chain. The following clusters of sources of uncertainty are identi®ed: order forecast horizon, input data, administrative and decision processes and inherent uncertainties. For each source of uncertainty, several improvement principles are identi®ed. A case study was conducted in a food chain in which a simulation model helped quantify the eects of alterna- tive con®gurations and operational management concepts. By comparing this simulation study with a pilot study, the model is validated against real data, and organisational consequences are identi®ed. The results of the case study suggest that reduction of uncertainties can improve service levels signi®- cantly, although current supply chain con®gurations restrict possible bene®ts. The availability of real- time information systems is found to be a requirement for obtaining ecient and eective Supply Chain Management concepts. # 1998 IFORS. Published by Elsevier Science Ltd. All rights reserved Key words: Supply chain management, uncertainty, chain simulation model, pilot study, continuous replenishment. 1. INTRODUCTION Recent literature on Supply Chain Management has been stressing the need for collaboration among successive actors, from primary producer to end-consumers, to better satisfy consumer demand at lower costs (see, for example, Scott and Westbrook, 1991; Ellram, 1991; Towill, 1996). Jones and Riley (1985) de®ne Supply Chain Management (SCM) as an integrative approach to dealing with the planning and control of the materials ¯ow from suppliers to end- users. According to Fearne (1996), SCM seeks to break down the barriers which exist between each of the links in the supply chain, in order to achieve higher levels of service and to substan- tially reduce costs. ``It seeks to achieve a relationship of mutual bene®t by de®ning the organis- ational structures and contractual relationships between buyer and seller, which up until now have been classi®ed as adversarial'' (Fearne, 1996). Iyer and Bergen (1997) emphasise Pareto improvement, referring to the situation in which all parties are at least as well o, and one party is better o than before. Stevens (1989) describes a supply chain as a system whose con- stituent parts include material suppliers, production facilities, distribution services, and custo- mers linked together via the feed forward ¯ow of materials and the feedback ¯ow of information (Fig. 1). SCM does, however, create some additional ¯ows. Reverse logistics, i.e., remanufacturing and product recovery, creates feedback ¯ow of materials (see, for example, Thiery et al., 1995 and Verrijdt, 1997). Sharing inventory or production scheduling information, on the other hand, creates feed forward ¯ow of information. Furthermore, note that an individ- ual business can be a part of many dierent supply chains at the same time, i.e., it functions as a focal organisation within a network. Int. Trans. Opl Res. Vol. 5, No. 6, pp. 487±499, 1998 # 1998 IFORS. Published by Elsevier Science Ltd All rights reserved. Printed in Great Britain 0969-6016/98 $19.00 + 0.00 PII: S0969-6016(98)00049-5 Paper presented to the Seventh International Special Conference of IFORS: `Information Systems in Logistics and Transportation', Gothenburg, Sweden, 16±18 June 1997. Corresponding author. Tel.: +31 317 483644; Fax: +31 317 485454; E-mail: Jack.vanderVorst@alg.bk.wau.nl 487