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R. Arunachalam

Supply chain management has emerged as a new source of competitive advantage. Successful implementation of various supply chain practices has made it possible for firms to compete in delivery, reduced cost, less obsolescence, better use of non-operating assets and responsiveness to customer needs.

There are four major decision areas — location, production, inventory and transportation/distribution. The trend of outsourcing various activities started with outsourcing of transportation/distribution. In the Indian context, transportation generally accounts for 50 per cent of supply chain costs.

Buoyed by the initial success, companies are outsourcing most of the activities of supply chain. Companies are lowering their investment in fixed assets by leasing and renting plants and warehouses while outsourcing manufacturing and transportation processes.

The environment of soaring oil prices, inflation going up, essential commodities slowly moving out of reach of lower classes, construction industry facing challenges with cement and steel prices skyrocketing, and interest rates pushing industries and the common man to reduce borrowing, is expected continue for some more time.

The numbers recently released by the CSO on industrial production for 2007-08 were the lowest in six years, and show a significant slowdown with respect to growth over the previous year. In March 2008, industry recorded a growth of 3 per cent, against 14.8 per cent the previous year. Every player in the supply chain has a serious role to play in putting the economy in a faster orbit.

A customised SCM is one area where greater operational efficiency can be gained, thereby reducing an organisation’s costs and enhancing customer service. The aim should be to identify the effects of inventory, information technology, human behaviour and logistics on supply chains and thereby evolve a better-customised process. A customised SCM should have the following objectives:

To map the existing processes of purchasing, transportation and inventory — be it reduction or overstocking.

To find the extent of customisation of ERP on supply chain and integration of data in the area of information technology. To identify the influences of various human behaviours on the supply chain processes, such as demand planning, replenishment, etc.

To explore the current pressing issues in logistics with respect to the customer service explosion, Time compression, globalisation of industry and organisational integration.

Sharp focus needs to be trained on the entire supply chain cycle. This includes right forecasting, appropriate order cycle and quantity, selection of service-oriented shipping and transport partners, swiftness in clearing, accurate stock replenishments, satellite depots efficiency and interconnectivity, online reporting, turnaround time (TAT) monitoring and reverse logistics capabilities for immediate replacements to customers.

Supply chain outsourcing has become a strategic tool, not simply the latest buzzword or passing fad.Outsourcing the entire supply chain function or in part gives the client’s management the freedom to focus on emerging business opportunities.

Radio frequency identification (RFID)-based data capturing, software in warehousing, forecasting or predictive analytics latest tools, GPS tracking for vehicles, Web portals for order placements, completely integrated ERP, Automated distribution centres (ADCs) for effective put-away and related warehousing activities with RF-enabled options for users are some important SCM tools.

All these require considerable investments, with returns only over a longer period.

These are some key aspects to keep in mind: Higher initial investment; service costs to compete with small-scale manual operators; transition/migration issues and availability of trained resources; acceptance of latest technologies by the market; maintenance issues; higher costs of upgradation/maintenance; strategies to facilitate success; management involvement; training and education.

Companies that do go in for effective supply chain management will feel its benefits soon enough.

More Stories on : Supply Chain Management

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