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Supply Instruction Questions

SUPPLY CHAIN MANAGEMENT

INNOVATIONS IN LOGISTICS INDUSTRY 

CHAIN REACTION – SUPPLY CHAIN MANAGEMENT

 Introduction

 Global industrial growth in the last 5-7 years has triggered a general uptrend across all sectors.  One of the sectors that has benefited tremendously and seen exponential growth is the Logistics Industry. The Logistics Service Providers in India have grown and continue to grow at an extremely fast pace.

            Logistics service providers face many of the business challenges affecting other industries: stiff competition, pressure to increase shareholder value, and keeping pace with technology advances and the widespread effects of globalization.  These market forces are causing LSP’ to embrace new approaches to business, including providing value-added services as customer specific packaging.  Meanwhile, the trend to improve financial performance by placing responsibility for inventory management in supplier’s hands is putting added strains on traditional supply chains.  And with more goods in transit to contract manufacturers, suppliers, and third parties around the world, LSP’ will benefit from additional visibility into supply chain logistics.

            Some years ago, any mention of a supply chain inevitably implied boundaries that either starts from the dispatch area or ended at the materials inwards gate. So the supply chain “Supplied Raw Material” to manufacturers and made arrangements for it to be taken away from the factory. This process often resulted in high inventories , inefficient schedules /forecasts, low productivity due to frequent changes and numerous conflicts between procurement , manufacturing and marketing departments.

            To succeed in Today’s highly competitive market place, organizations must embrace a customer-centric supply chain model that allows them to sense, plan and respond to real time demand signals across a network of partners, suppliers, retailers and customers.

1. These including reduction of profit margins, high customer expectations and bigger supply chain complexities. Customers are now   requiring manufacturers and suppliers to deliver highly configured, made-to-order products with more specialized features than ever before.   Rapid product proliferation and shrinking product life cycles are also forcing manufacturers to not only innovate across product portfolios, but find new approaches for bringing products to market.

 The Globalization of the supply chain brings rewards, such as cheaper labour costs, but also new risks like longer supply chain lead times and the need to maintain greater local inventoryModern Supply chain are complex and interrelated networks involving the movement of goods, services, funds and information among a wide range of participants.  Keeping this network functioning with high efficiency is a major challenge.

THE LOGISTICAL CHALLENGES OF DOING BUSINESS IN INDIA

            Though India sits atop the global retail opportunity index as the greatest underserved market in the world, its Supply Chains are built on slow transit networks fed by poor roads, ineffective ports and scanty distribution infrastructure.

             Manufacturers looking to cash in on India’s growth need to be aware of the opportunities and obstacles when they expand their Supply Chains

 LOGISTICS INFRASTRUCTURE WILL SLOW PROGRESS

             In India, there is no such thing as next day delivery, no transport company to manage nation wide deliveries, and limited distribution channels.  Logistics Infrastructures is severely lagging the country’s growth and costs are extremely high as a result.  Logistics costs are estimated to be nearly 13 percent of the GDP compared with 8 percent in the U.S.  Entities that have created a retail presence and are currently selling products in India are hit with transportation cost that total 40 percent of all products cost.  For organization retailing to prosper, existing logistical challenges must be overcome and the foundation in India’s supply chain must be built.

 SUPPLY CHAIN CHALLENGES IN INDIA MARKET

             Highlighted are some of the Supply Chain Challenges that companies are expected to encounter as they enter India Market.  They are:

 Limited Physical Infrastructure

• Overburdened Ports
• Non existent Warehouse Standards
• Disorganized Trucking Operations
• Limited Technology Use.

 BUILDING A DEMAND – DRIVEN SUPPLY CHAIN

             Organizations in the current scenario applies new technology to improve their standards in all aspects. But it should be understood that by applying new technology alone will not transform a company into a demand – driven manufacturers.  It requires a combination of people, process, technology and performance measures.  For a successful transformation, the following things need to be taken into account.

•   Successful collaboration (with partners, customers, suppliers and vendors) to ensure adequate and timely demand visibility
• Regular access to timely and accurate data.  Today’s technology enables us to get and analyze high volume of data, including historical sales, RFID and other resources.
• Detailed formulation of sales and operational planning .  S&OP is the process by which executives and planners in Sales, Marketing, Product management, Finance and operations collaborate to align their respective plans based on a globa; view of demand.
• The goal is to understand and project current and future demand variables across every part of the enterprise, and then align customer, product, operational and business plans based on multiple perspectives.

 DESIGN A MULTI-TIERED DISTRIBUTION NETWORK

             The key to a successful distribution strategy will be proximity.  The tail that wags the distribution dog is transportation reliability.  Transportation reliability or more accurately , unreliability will play a key role in determining the number of nodes required for distribution and the inventory to support it.  Even firms with fast-moving goods will be required to set up decentralized, multi-tiered distribution networks that are:

•  Rely more heavily on Inventory
• Reside close to the Market
• Use Technology to provide visibility and Collaboration
• Select a Key Partner.

 SET BASIC TRANSPORTATION GOALS

             Currently the transportation network consists of few highways , small trucks and constrained speeds. It is projected that highways will improve, as recently funded projects are completed.  The Government has pledged to build 10,000 Kms of new roads and improve ports by 2010.  But the bulk of the infrastructure will likely come from private or foreign investment. As infrastructure improves , new market entrants will need transporation strategies, which are likely to be:

 v   Focus on high asset utilization

      Leveraging low cost labour to maximize the utilization of asset will be a critical element to optimizing transportation strategies. By employing strategies such as “slip-seating” one driver can be changed-over with another driver when his maximum driving time is reached, since there is minimal financial impact in having him rest for the remaining of the day. Firms can utilize team-driving to improve not only equipment utilization, but also transit time and reduce variability.

 v     Establishing a Core, Senior Logistics Team on the Ground

       Delivery success in the near term will not be based on technology, but rather on relationship and communications.  Any organization can successfully penetrate into India, by employing a core, experienced operation team in each region.

 v     Set rigid provider qualification

       India’s carrier based will continue to consolidate and become more sophisticated as the shippers they serve demand higher service. Companies need to put in place a set of rigid qualifications to net expectation for intermediaries and independent carriers.  Firms need to rigorously qualify and measure carrier performance and communicate that data back to carrier.

 v     Establish Infrastructure others can use

       Firms should consider infrastructure investments as potential future profit centers.  Manufacturers will have an opportunity to not only build infrastructure for themselves, but to create distribution and transportation services that others can use.

 v     Invest early in Technology

       India’s telecom industry is extremely advanced when compared to other industries.  And while only 30,000 vehicles in the country have tracking capability that is expected to grow 100 percent over in next 5 years. 

 KNITTING TOGETHER THE SUPPLY CHAIN – Effective telecom networks can help, optimize and strengthen manufacturing supply chains

             The passage of goods from each stage in the manufacturing process to the next is almost always triggered and followed by the handling over of information from one party to another.  This information, in the form of order, pick lists, manifests and numerous other documents and instructions is usually transmitted over the telecom network.

             The smooth movement of goods through the production process depends on how efficiently information is exchanged between manufacturers, suppliers, customers and logistics partners.  However to move information smoothly, you need an underlying robust communication network. Otherwise, ineffectiveness and interruptions in the flow of information will be quickly manifested upstream and downstream in the form of delays and added costs.

 KEEPING A WATCH  -  Communication Inefficiencies

             Since the competitive nature of the manufacturing industries allows no room for error, it is necessary that the communication network be fully integrated, highly automated and extremely reliable. Network monitoring tool now have evolved to the point where information flows and handover can be mapped with total precision.  Documents files and instruction can be tracked and timed as they make their way across the complex network of services, scanners, readers, printers and countless other devices involved in the today’s supply chain operations.

 USING TECHNOLOGY TO IMPROVE SUPPLY CHAINS

   Investments need to be made in a wide variety of technologies and solutions by both shippers and service providers to enable smooth management of Supply Chains.  With the industry facing a global slowdown, financial crisis, high flue costs, and ‘go green’ environmental efforts , efficient management of supply chains has become critical to the growth, profitability – and even survival – of business. As a part of the strategy to streamline business operations, companies are increasingly investing in IT infrastructure and applications across their supply chain operations.

             Some of the Key issues faced by the shipper community include obtaining total supply chain visibility, reducing the time to market, responding to changes in demand through mass communication, and creating a supply chain of chains with enough flexibility to enable an agile enterprise rapidly respond to change. To address these needs, the logistics service provider community needs to provide the seamless access to global networks, deliver ‘real-time’ accurate information, integrate into shipper systems, manage more than transportation, and achieve a balance between managing client expectations, maximizing asset utilization and human resources.

 TECHNOLOGY AS ENABLER IN SCM

             In India, the supply chain market has numerous small and big players, coupled with complex processes, a multitude of incompatible systems, and a plethora of manual operations. This makes the SCM a challenging activity.  Most supply chain participants do not have compatible IT systems, platforms and application infrastructure in place to share informations and data that is crucial to execute collaboration objectives. Some technologies that can help today’s supply chain managers in overcoming these hurdles are:

ü      Forecasting & Planning Management

Collaborative planning and forecasting allows business to create, modify and track their financial and promotional plans for each channel – and communicate changes across the entire supply chain

 ü      Electronic Data Interchange

Electronic Data Interchange (EDI) is the inter-organizational exchange of business documents in structures, machine processable form. EDI can be used to electronically transmit documents such as purchase order, invoices, shipping bills, receiving advices and other standard business correspondence between trading partners.

 ü      Web Based Solutions

Integrated, new generations web-based systems can be designed to provide end-to-end automation of all functions, providing the necessary business visibility and increased accessibility.

 ü      Mobility Solutions

Integrating mobile technology with business applications will be a key trend in the future.  Mobility management is about eliminating the barrier between field resources and the corporate information they need to perform their work.

 ü      E-Commerce Platforms

Airports and ports need to have a common platform where all its stakeholders can exchange information and interact seamlessly. Such an e-commerce platform will reduce paper work.

 ü      Radio Frequency Identification (RFID)

Technology providers are working hard to keep pace with end user expectations by focusing on easier management and distribution of RFID data.

 SEARCHING FOR A ROI

             Enterprises typically struggle to justify the ROI for investing in supply chain visibility.  However, smart investments in visibility can be leveraged to improve supply chain productivity through increased data accuracy and elimination of ‘bad data’ issues plaguing existing EDI and ERP systems.  Some of the significant benefits of visibility that contribute to rapid ROI include:

 v     Lower total cost of supply chain through reduced inventories and perfect-order-delivery.

v     A better understanding of the supply chain to enable re-design of the network

v     Elimination of non value-add  activities and costs

v     Reduction in lead times, and shorter time to market

v     Better management through improved information technology (IT)

v     Access to intelligence that mitigates supply chain risks, like automated detection of security exceptions and environmental exceptions helps mitigate losses and save costs.

 SECURING SUPPLY CHAIN

             Maintaining a safe and secure supply chain, is just as vital in an economic downturn, as it is during an upturn. Business managers have recently become sensitized to the vulnerability of their SC’s and are now leveraging a variety of technologies to enhance and the security of their SC’s.

              

                 

Article by

S. Shiny

Karpagam University

s.shiny04@gmail.com

 

About the Author

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