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Supply Chain – A Mature Solution

Published by MBA Skool Team in Operations & IT Articles category , Last Updated: December 19, 2011Read time:

The world has never remained the same and has witnessed a change in each phase of life. The field of business is also undergoing a constant change in response to the increase in level of competition. Earlier, it was the company who defined the rules and customers have to adhere to it but now the scenario has shifted the other way. The classic example for this is Bajaj Scooters in India in 80’s when people had to wait for months after registering with them. Due to the unprecedented growth in the last few decades, companies have switched to a concept called supply chain management. Though, the concept is not so new for all but is comparatively new to a country like India. Most of the nations have crossed the starting stage of this concept and is now into exploring the advance level of it.

Supply Chain

The word supply chain could be defined in many forms. There is no specific definition for supply chain and varies with the nature of business operations of a particular company. It is mostly the input and output generated which forms the definition of supply chain for that particular company. The situation now is so complex that it is not between companies but it is the supply chain of one company competing with the supply chain of another. the main need for supply chain is its ability to cut down costs in each stage of the process and bring value to the customers by delivering what they require. One of the key drivers of supply chain is its velocity. No customer would like to wait for long as time is precious for all. This is where supply chain process brings in the concept of lead time. as a result, customer service is increased and product is delivered on time. The word deliverability is the key solution for all and an effective supply chain has it. Sometimes, we have few activities included in a process which doesn’t add value to it. in such a situation, supply chain is important as it is also responsible for elimination of any unwanted link in a process. It uses JIT( just in time) delivery for getting the goods delivered on time which helps in maintaining adequate inventory levels. JIT is mainly to reduce the working capital across the process and push down the stock out of the inventory. It is a sort of production activity built in order to improve return on investment by reducing work in process inventory and carrying costs. This helps in creating more space within the warehouse and is better applied to fast moving goods (FMCG).  In short, it caters to the need of each company and what they require from the supply chain. Companies like Japan have reached the other side of servicing their customers by implementing technologies like KANBAN. It is another term relating to the supply chain domain and acts as a signal being sent from the warehouse department to the in-house production department to produce and send another set of goods in the required quantity. A new set of shipment is demanded by the signal as the previous material is already consumed. The replenishment cycle performs  the task of tracking this signal and helps in bringing more visibility to the process. Lean management is another part of SCM which takes care of the replenishment of goods which might have got damaged during the process or the ones which have gone waste after the final consumption. KANBAN, JIT and Lean management are three terms which serves the same purpose but has an additional functionality which differentiates them from one another.

Although not at all times you can expect the supply chain to deliver the best as there can be a few lapses which would be enough for any other competitor to take over. When you talk about the supply chain activities in European countries, they are far ahead of the Asians. The reasons for it are many. An Asian country like India does not have much knowledge about where to invest and what kind of technologies and methods to use. Another big reason is that the Indian logistics sector is been ruled by the unorganized players. In India, 90% of the total market structure is comprised of the unorganized players and there is hardly 10% who could be called organized. This is a major setback for a country like India who in spite of developing so fast is not being able to identify these bottlenecks. There is a huge skill gap in this sector. India has to even work on their infrastructure facilities and should encourage people with better knowledge to enter the industry. High costs of operations, low margins, shortage of talents, infrastructural bottlenecks are few of the negative factors which the logistics sector has to look into. There are a few trends in supply chain management which have to be followed in a sequence in order to achieve efficiency. When one is looking from the customers end, he/she has to build initial contact with the customers and end up with the accounting function which takes care of the invoice and payments and service agreements. The manufacturing is the most important part of the supply chain domain where you convert the raw materials into finished products which in turn is a form of value creation for the customers. Customer satisfaction is the core aim for any business be it a small pencil manufacturing company or a big automobile industry. The manufacturing trend believes in lean manufacturing, mass customization and advance planning and scheduling. The lean part is important in every business which takes care of the recycling of goods or service after it gets outdated and advance planning and scheduling is carried out in each segment of the network especially in the inventory warehouse. Mass customization is another need of the hour which ensures that their customers are never taken away by its competitor. Supply chain is not just an activity looking at one particular thing but is a wider concept meant for creating value for the moving product at each and every stage of the process.

This field is growing at a rapid pace and holds a promising career for the upcoming generations. Even there are a few projects been planned for building more logistics parks in most of the metropolitan cities like Delhi, Mumbai, Ahmedabad and jaipur. Countries in abroad carry out more of their transportation activities through the sea mode which is the least in india. India is more dependent on its railways whereas any road transport activity beyond 200 kms in length is not considered economical. Supply chain optimization is what each and every company is looking at. There has been a constant effort made by the Indian companies to go green in their operations in response to their western counterparts. Greener supply chain is a more matured way of carrying out operations. Nokia has already taken actions in this regard by setting up of green boxes throughout its dealer house and encouraging customers to deposit their old cell phones for replenishment. One can relate lean management to the concept of green supply chain which helps in recycling and reduction of wastage. Companies adhering to greener supply chain can definitely bring in more sustainability in their operations and can stay ahead in the competition. Aquafina is another big company which has adopted green supply chain. The company is going to launch its new Eco- friendly bottle which is said to be the lightest among all other brands in the market. They have made a constant effort in planning this out in response to the recent plastics ban movement carried out all over.  They have been successful in making a much lighter bottle which is made up of 50% less plastic comparing to the earlier one.  Supply chain has brought so many new concepts and is still evolving to serve the end customer in the best possible manner.

At times SCM needs other departments like operations and marketing to support them. Although Operations is a much bigger process and SCM just being a part of it, are linked to each other in many forms. The role of the marketing guy is of great value to the supply chain guy as marketing department is the one which does the job of demand forecasting. Planning is the most primary aspect which you do before starting up a business. Therefore demand planning is a crucial element in a particular operation. A set of demand been analyzed out of a statistical forecasting and other customer intelligence will help the SCM guy in coordinating things properly and deliver exactly what is required. He should have a wider perception on ideas and should be ready for any kind of customization needed at any point of time as the customer’s demand never remains the same.  The current market is entirely customer driven which demands your SCM to be one which is more proactive in terms of what is called “Deliverability”.

This article has been authored by Sanju Mathew from School of Business logistics, Chennai.

Views expressed in the article are personal. The articles are for educational & academic purpose only, and have been uploaded by the MBA Skool Team.

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