Posted in Operations & IT Articles, Total Reads: 2271
, Published on 22 January 2014
Increasingly the arena of competition is shifting from company versus company towards supply chain versus supply chain. People would ultimately vote for the best supply chain with their dollar votes or rupee votes for that matter. So it is imperative that some company within the supply chain, often the pivotal company has to take the lead in collaborating with all the players across the supply chain, reduce the uncertainty (which can manifest as a bull whip effect) and keep the animal of cost tethered. But we should also not forget that in the environment of Hyper competition, going back to basics shall be a move for the better rather than worse. After all commonsense is not that common in business perhaps. Let us look at some of the very few initiatives which are being taken by the global biggies of their industry.
ASDA is a retailer in UK, owned and operated by Walmart. Its sources products from global markets through International produce Limited (IPL). By transporting wine in vast 24000 litre ‘wine boxes’ for bottling in the UK, Asda is able to benefit from cheaper bottling and also generate substantial environmental benefits and cost savings, as transporting wine in bulk ‘wine boxes’ uses 50% fewer containers than transporting actual bottles of wine.
Walmart sells Canadian Nestle water in its stores in Japan. How can they ship water from somewhere else in the world and sell it cheaper? Two things: one, the Japanese beverage industry is terribly inefficient and there are a lot of empty containerships that are coming back from the US or North America empty on their way back to Asia. They are able to get really great prices. By doing so, they are able to sell it 50% cheaper than any other bottled water in Japan.
They had pioneered the practices of Backhauling, Cross Docking, and Merchandising Assembly etc way ahead when their competitors thought of them and today they are light years ahead of their competition, just by questioning the unquestioned practices and slaughtering many management holy cows enroute
Maruti Suzuki India Limited:
It uses collapsible racks and bins to carry overseas shipments. Earlier the scraps were sold as scrap as they could not be reused. Now they can get the components on collapsible racks, take the components off, collapse the racks and send them back to Japan.
The model of side opening trucks is unique to Maruti in India. These trucks expedite the process of loading and unloading, because the amount of space that is open makes it easy for the forklifts to lift the auto components or finished items and take it out. So the efficiency of loading and unloading goes up and in the meantime, they can follow FIFO (First in First Out)
Adani offers end to end services to Maruti, exporting 60% of Maruti cars and providing end to end solutions for cold rolled coils. This way, they utilize the empty containers returning from the port by loading them with CR Coils and reduce their overall logistics cost.
It increased the number of gates for the entry of trucks to the factory which had reduced the waiting time for the trucks, that carry raw materials and sub-assemblies.
One of the innovations which you can see in US is pertaining to the last mile distribution. Therefore you can see that all the deliveries are sent to the local CVS Pharmacy (the largest Pharmacy chain in the US) outlet that is open for 24 hours, instead of individual deliveries being made. By thinking cleverly, they aggregated customers and deliveries rather than splitting them.
Another initiative which is roaring with success is the use of lockers. Every city shall have some lockers in major locations. The consignments shall be dispatched to the respective lockers and customer shall be informed of the same. When customer arrives, a digital code shall be messaged to him, using which they can unlock the locker and receive their consignment. Again, this has reduced their last mile logistics cost significantly.
Cook composites and Polymers:
Cook Composites and Polymers company, produces gel coats for high end Yachts. One of the wastes produced in manufacturing process is styrene, a chemical used to clean molds between batches. Generally this is detoxified and dumped. But it identified an alternative usage for this industrial waste, by using it as a coating for Concrete. Productively using the Styrene waste stream gave the company more degrees of freedom to optimise the new joint production process, creating a win-win situation.
Hence it made an old adage of “one man’s trash is another man’s treasure”, come true.
It supplies only those models to the dealers which despite being 20% of the SKU (Stock Keeping Units) account for 80% of the units sold. Doing so, it removes the demand uncertainty and hence reduces the Bull Whip Effect which shall enable in the reduction of the inventory across the supply chain.
In US, the inventory is stored at the dealer’s showroom, but in Europe, the inventory is stored at Consolidation Centres, which can be one for a big country or shared by smaller countries too. This way, it reduces the real estate costs for the dealers and hence reduces the overall cost of the vehicles for the customers.
It pioneered the concept of Milk run to ensure that the Inbound Logistics become more efficient and economical. Milk run includes either a single truck carrying the components from multiple suppliers or a single supplier loading components to multiple customers.
By introducing the first of its kind technology, Asia Paints had forced all the competitors to adopt the colour matching technology in 1980s. As colour is a highly subjective item, suppliers and buyers of various coloured pigments used to have frequent brawls on the specification of the product. But by adopting this unique information system, they had even quantified the specification of the delivered product and thus a lot of convenience was achieved in sourcing and selling the product.
When the leading E-tailer in India, Flipkart has gone for the inventory led model, Wharton MBA founded Snapdeal had maintained its model based on marketplace structure. As a result, it is in the enviable position of making money on every transaction and is also offering a wide assortment of goods and services for the consumer too. By effectively managing the last mile connectivity in its logistics by collaborating with the best in service courier providers locally and Indian Post, it is reaching out to around 800 Indian towns and Villages.
Apollo Health Care
If you are searching for a group which is going modular in a big way, a company by the name of Apollo HealthCare answers to your call. It is already the world’s third largest private hospital chain. Apollo Hospitals Enterprise now has 54 hospitals, 1600 pharmacies and 60 diagnostic clinics all under its umbrella. But to grow further and to serve the underserved, it has decided to tap the hinterland of India and reach to Tier II and Tier III Cities. Essentially it wants to move the outpatients to their own neighborhoods. By entering those areas, it can bring down its hospital set up cost from Rs 50 Lakh a bed, which is 50% lower than that of Tier I cities, where the real estate costs had ballooned. This shall bring down the cost of treatment by 20-30% which it wants to pass it on to the customers. It is meeting the above objectives by launching a new format of hospitals called as ‘Reach Hospitals’, it is trying to connect better through multiple points.
What it has done is, it has drawn a leaf from the growing bank industry, which is yet another hugely underserved sector in Indian market. Just like customers can transact online and at ATMs (automated teller machine), to save costs in branch transactions, it is also attempting to hive off specialty diagnosis and treatments through sub-brands.
What all these organisations are doing is simple. Their every action is ensuring that it adds to their bottom-line, justifying the cardinal principle proposed by Eli Goldrat in his book ‘Goal’. Every action is actually either increasing their throughput, while reducing their inventory and cost. So an action should see in isolation of increasing costs. It should be welcomed with both hands, if it can increase your throughput and reduce your inventory. To quote the aphorism credited to Milton Friedman, ‘the business of the business is to do business’, but in a sustainable way. It can be done only when they take a holistic view of their entire supply chain and come out of their myopic functional and SBU level goals and targets. They should keep their supply chain on top of every function and there is no function who can claim them as an outsider to supply Chain.
This article has been authored by Sarat Chandra Madala from NMIMS
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