CREATING VALUE ACROSS SUPPLY CHAIN :

Let me start with some live customer experiences

a) An eager shopper enters a store looking for latest fashion. Size or
range not in stock and he moved to other mall.
b) A man enters electronic store, looks for flat screen TV, it is not
available, and he buys it online
c) Think of a factory rushing to turnout an order for a key customer,
critical parts arrives late and assembly line shuts down.
In all the above cases, break down in SCM had direct impact on end
customers. This cost the company not just revenue but customer goodwill,
which impacts future sales also.
The global nature of business, intense competition and high demanding from
customers end let to the development of increasing complex supply chains.
Companies must identify gaps in the business processes flows, which create
customer satisfaction problems, add -on cost or cycle time, impact on
inventory etc.
At each stage of the value chain there is an opportunity for an organization
to compete with the competitors in order to gain competitive advantage by
performing activities more efficiently which creates greater value and
commands premium. Cost advantage can be created either by reducing the
cost of individual value chain activities by re-engineering the value chain or
controlling the cost drivers better than the competitors. Successful cost
leaders are often low cost product developers, low cost marketers and low
cost service providers.
FIT FOR FUTURE AGILE SUPPLY CHAIN
NEED FOR AGILE SUPPLY CHAIN

Turbulent and volatile markets are becoming the norm as life-cycle shorten
and global economic and competitive forces create additional uncertainty.
The risk attached to lengthy and slow-moving logistics pipelines has
become unsustainable, forcing organizations to look again at how their
supply chains are structured and managed.
Supply agility can be defined as the ability to respond to unpredictable
changes in demand or supply. Many organizations are at risk because their
response times to demand changes or supply disruption are too long. Agility
has many dimensions and it relates as much to networks as it does to
individual companies.
COMPONENTS OF AGILE SUPPLY CHAIN VISIBILITY & VELOCITY
a) VISIBILITY
It is the ability to see from one end of the chain to the other. It implies
a clear view of the upstream and downstream inventories, demand and
supply condition and production and purchasing schedules.
Collaborative planning with customers is important to enable
visibility of demand to be gained but also for information to be shared
on market trends and perceptions of risk.
A significant barrier to supply chain visibility is often encountered
within the internal organization structure. The presence of functional
silos inhibits the free flow of information leading to second guessing
and a general lack of communication. This situation is often
exacerbated when the company has internal suppliers or customers
with limited integration between them. The challenge is to break down
these silos to create multi-disciplinary, cross-functional process teams.
b) VELOCITY
It is defined as distance over time. Hence to increase velocity, time
must be reduced. Here we are referring end-to-end pipeline time, i.e,
the total time required to move a product from one end of the supply
chain to the other.
It is not just velocity that matters in the creation of agile supply chains,
it is acceleration. In other words how rapidly can the supply chain react
to changes in demand, upwards or downwards?
There are three basic foundations for improved supply chain velocity
and acceleration

a) Streamlined processes
b) Reduced in-bound lead-times
c) Non-value added time reduction
Streamlined processes are simplified processes that have been
engineered and re-engineered to reduce the number of stages or
activities involved. These are designed around minimal batch sizes be
the order quantities, production batch sizes or shipping quantities. The
emphasis is on flexibility rather than economies of scale.
Reduction in in-bound lead-times. One of the criteria for the choice
of supplier and the source of supply should be their ability to respond
rapidly in terms of delivery and to be able to cope with short-term
changes in volume and mix requirements. Synchronization of
schedules based on shared information enables suppliers to become
more agile without necessarily having to rely on inventory as a buffer
with all its consequential problems.
Reduction of non-value added time. Most time spent in a supply
chain is not value-adding from a customer perspective. More often
than not it is idle time i.e, inventory. That inventory is itself generated
as a result of cumbersome processes every day of process time
requires at least a day of inventory to cover during that lead time.
SUPPLY CHAIN RISK & MITIGATION
Managing supply chains in todays competitive world is increasingly
challenging. The greater the uncertainties in supply and demand,
globalization of the market, shorter and shorter product and
technology life cycles, and the increased use of manufacturing,
distribution and logistics partners resulting in complex international
supply network relationships, have led to higher exposure to risks in
the supply chain.
Supply chain risks can come from many different forms
a) Finance risk
Inventory costs due to obscelence,
markdowns and stockouts.
b) Chaos risk
Complexity and uncertainity in the supply
chain.
c) Decision risk Worng and ineffective decisions.
d) Market risk
Missing the market opportunities.

The risk spiral exists everywhere and the only way to break the spiral is
to find ways to increase the confidence in the supply chain.
Information Accuracy, Visibility & Accessibility
Throughout the supply chain, key operational metrics and status
reports such as inventory, demand, forecasts, production and shipment
plans, work in progress, yields, capacities, backlogs etc., should be
accessible easily by key members of the supply chain. Thus, it is
important that the key indicators are tightly managed and that any
updates are made as timely as possible. The accuracy of the data
should be a source of confidence to the parties using the data.
Synchronising the Supply Chain
Once information can flow across the supply chain, then we are only a
short step away from a dramatic reduction in total system inventory
whilst simultaneously improving responsiveness to demand. The
ability to match supply more closely with demand we call agility and
the key to agility is speed. If flows through the pipeline can be
acclereated then it stands to reason that vloatile unpredictable
demand can be met more precisely. Even better, there is less inventory
in the pipeline because it is shorter in effect we have substituted
information for inventory.
However, agility is not a single company concept. Rather it implies
synchronisation from one end of the pipeline to the other. In other
words all the players in the supply chain are marching in step, to the
same drum beat as it were.

What a customer wants is availability of the product, what he wants with

wide range of options, with value for money and a unique shopping
experience. Organizations have to focus on customer relationship
management (CRM), increased customer responsiveness, loyalty bonus
schemes, allied promotional activities etc. to give delight to customer in his
shopping experience.
Indian Logistics industry is registering CAGR of 8% to 10%, now this growth
pattern has attracted many new entrants and global players who have setup

operations here. This has resulted in high level of competition amongst the
industry players. Customers becoming more and more demanding, looking
for improved services at lesser cost, industry norms seems to be survival of
the fittest.
Changing nature of services required is imposing increased demands on
logistics service providers. The firms are now seeing IT as an enabler to
manage complexity of operations. Currently due to manual operations there
exists lot of inefficiencies in the operation causing delays, penalties, and lack
of shipment visibility resulting higher costs of logistics in India.
This higher logistics cost pegged at around 13% of Indias GDP. Moreover the
technology adoption in Indian logistics is extremely poor. On an average the
industry spends only 0.3 to 0.5 % of revenue on technology where as the
global standard for the same 3% to 4%.
CHALLENGES IN LOGISTICS
a) Avg. cost of logistics is 7% to 8% of the Gross Domestic Product (GDP)
in developed economies.
b) In India the Avg. cost of logistics is 13% to 14% of the GDP
The main factors are
a)
b)
c)
d)
e)
f)
g)
h)
i)

Lack of world class highway infrastructure

Delays at check posts en route.
Inadequate WH infrastructure
Defective tax regime
Extremely fragmented nature of market
Lack of certainty in transit times.
Lesser capacity utilization
Untrained manpower
Uncertainty of return loads (back loads).

OPPORTUNITIES
a)
b)
c)
d)

Reverse logistics will improve efficiencies

GST will address multiple taxes.
Technology like Transport Management system.
Dedicated Freight Corridors

e) Connectivity between various Logistics modes Logistics parks, 3 PL

and multimodal transports.
Low penetration of IT and lack of proper communications, infrastructure also
results in delays and lack of visibility and real time tracking ability.
Unavailability and absence of a seamless flow of information among the
constituents create a lot of uncertainty, unnecessary paper work and delays.
There is a lack of skill and knowledgeable manpower also.
Establishing effective electronic connections with trading partners and
customers can present formidable technical challenges.

In this highly competitive and high cost low margin business,

logistics managers have to not only focus on differentiating the
services rendered by their companies but also market the
differentiating factors of their services appropriately.
They also make their cost structures transparent and investment in
quality, assets, technologies such as RFID, GPS, which will lead to
improved delivery of service.