SUPPLY CHAIN MANAGEMENT

by jonas_k

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.

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,