Making Supply Chain Management Work
Principle centric supply chain design is critical to ensure greater availability to customers on a sustainable basis. These set of principles should touch each and every element of supply chain management uniformly in order to aid performance of each node in supply chain.
Effective supply chain management (SCM) is key in any business and having the right tools and procedures help to ensure the availability of your products at the right place and the right time. Again with most organisations increasing focus to become customer centric building strong relations and having conversations that enable them to pre-empt demand us becoming key. “Our organisation structure is aligned to the customer presence and adequately resourced to ensure representation in the markets that we serve in. All our core processes in the value chain are well defined, understood and executed with adequate support from IT platforms. We have extensively developed our ERP capabilities and continuously scout for improvement opportunities that assist us in improving our customer serviceability. To ensure availability of our products at the right place at the right time we follow an advanced planning process aligned with Sales & Operations Planning (S&OP) methodology where all relevant stakeholders from the business deliberate upon the demand and fulfilment plan for each customer. Detailed movement plans are prepared, delivery compliance is actively monitored and revisions are made to ensure customer serviceability. Our supply chain network design is quite mature and use rail, road, sea and container modes to ensure availability of product at the right place and right time,” says R S Jalan, MD, GHCL. Likewise, 4TiGO’s key value-adds for enhancing the effectiveness of their customer’s supply chain is providing supply chain visibility, Integrating 4TiGO system with the customer’s supply chain systems to facilitate the same and over a medium-term / long-term improve the efficiency and utilization of the fleet owners and thereby the value that gets delivered to the end customer.
For efficient SCM, the organisational culture needs to promote excellence in various processes, so they can work in cohesion. The key to change is the cultural fabric and the organisation’s values. “4TiGO provides access and visibility to each player of the Supply Chain value-stream through a single technology platform that facilitates the integration of processes of diverse organizations. The primary challenge has always been the pace of adoption of Technology by all the players – and in Road Transportation, it has been the drivers of the Fleet Owners,” avers Anjani Mandal, Fortigo (4TiGO). “We draw strength from our core values of Respect, Trust, Ownership and Integrated Team Work, which also act as our guiding principles in day to day operations. With decades of operational experience, industry know how and consciously learning we have been able to effectively address process excellence opportunities and challenges so far and aim to continue to do so in future as well. We have been engaging with external experts and renowned consultants to adopt latest and best practices in our SCM operations to bring further focus on customer serviceability and build agility in the system,” says Jalan. In any organisational setup, integration of management interfaces and structural dependencies are vital for seamless operations. Hence having robust work systems enabled by efficient processes, competent and motivated workforce well supported by technology infrastructure is paramount.
With rising technology and input costs, it is important to curb other spends and SCM can be leveraged to continuously reduce operating costs as well. 4TiGO platform’s technology helps track the cycle-time of each element of the process of order-to-cash for the Service Providers of the organization’s Supply Chain. “This provides insight on actions to be taken for improving overall efficiency – whether in loading, unloading at customer site or the unnecessary wait-time at Toll Booths or even check-points of ‘clean’ consignments,” says Mandal. Mostly raw material sourcing strategies along with forward planning process clearly identifies procurement plans from multiple sources thus reducing dependence on single source and providing us a platform to take advantage of demand supply imbalance scenarios. “Our focus has all along been on continual improvement through waste elimination, wastage reduction, and value addition carried out by teammates (KAIZEN – small improvements) at shop floor and office locations throughout the year. This helps to improve yield and productivity. On the spot problem solving (JIDOKA – Go and see) is encouraged to bring all concerned at the problem spot to take immediate corrective / preventive actions,” says Sumeet Aggarwal, Managing Director, Midmark (India) Pvt. Ltd. Most organisations also engage with suppliers at a partnership level, where they develop their capabilities, competence and infrastructure that not only enables them to perform better but also ensures long term sustainability. This holds true for the local communities, who have built their livelihood by engaging with the company on the transportation side from SCM perspective. SCM being a controller of large costs in the organization should always remain focused on managing costs proactively to establish competitive advantage for the organization. “Structured approach towards spend management driven by category management expertise, usage of right tools for price discovery, strategic sourcing decisions using data analytics are a must to create sustainable advantage. One often needs to keep working on many projects to deliver such benefits and hence structured review mechanism plays a vital role in ensuring timely completion of such projects,” says Jitendra Mahajan, Chief Supply Chain Officer, Marico Limited.
Risk & Change Management
Changing input costs or natural disasters that affect procurement are risks that are inherent in business. Hence it is important that the SCM used has the capacity to accommodate market and environmental changes. In fact, risk management is a key ingredient in strategic planning. Aggarwal explains, “we have a robust organisational Risk Management Plan in place which identifies the natural and manmade hazards, financial risks, operational risks, strategic risks and reputational risks that can affect each function. There are short term and long term plans in place to mitigate these risks based on severity of impact and probability of occurrence.” BCP (Business Continuity Plan) is a necessary step in any supply chain design be it procurement, manufacturing or distribution. “Annual BCP planning ensures risks are identified proactively and worked upon with right strategic and tactical initiatives which help the organization to manage the VUCA environment better. Objectively defining value at risk for each of the identified risks helps you prioritise these actions effectively, else the importance of such actions are felt by stakeholders only when faced with these risks,” avers Mahajan.
Partnering for Service
In the current Indian context the third party logistics (3PL) concept is still evolving and most companies prefer to capitalize on their core capabilities and then reaching out only if required if they are efficient and economical. “We employ 3PL service providers for specific movements through sea, containers movement via rail etc. The choice between own distribution network and 3PL depends on performance factors an organisation is looking at; for us it is about customer serviceability and cost efficiency. The advantage of using 3PL lies in effectively harnessing their core competency in terms of speedy execution, experience, assets, relationships and logistics capabilities,” says Jalan. The appropriateness of the choice is defined by the organization’s balance definition between control of each leg of the Supply Chain, cost levels of own operation vs third-party suppliers and the efficiency levels possible in a dedicated operation despite variances in demand and demand pockets of each SKU of the company. Each choice is appropriate in certain combinations of the variables and not so apt in other combinations. VVS Mani, Director – Operations, Unibic Foods India Pvt. Ltd, explains, “we started with our own fleet of autos for distribution in 2005. With this, we directly distributed our products in Bangalore. Over the years, as business grew, we have a built strong network of distributors and retailers apart from institutional sales. This is run with a dedicated team of sales force focused on each of the channels to leverage on our growth plans. In terms of managing our Bangalore depot, we used to do it ourselves fully. But, recently, we are trying an outsourcing model and monitoring the effectiveness of it for the improvement of business apart from cost control.”
GST is a tax reform that has altered how businesses work. “The reform gives us an opportunity right away to rationalise the number of warehouses and depots thereby allowing us to decrease our costs. We are now able to improve our distribution network further by concentrating on serviceability and developing multi modal hubs for bulk movements. The opportunities are there, just that we have to relentlessly pursue them. We have noticed that the cost of certain inbound materials has reduced with GST and taxes being applied only on value addition,” says Jalan. In the long term, organisations are also anticipating further benefits in logistics from the GST implementation; one being vehicle transit time will reduce thus reducing the on-road wheel time and increased asset utilisation. This will help reduce freight and supply chain costs accordingly as well. “Road Transportation does not have GST applicable on it directly. However, there are two sets of benefits, the collapse of the inter-state movement resulting in delivery period in long-distance transportation coming down and potential reduction in costs once new trucks are procured by Fleet Owners who then start billing with GST extra and taking the set-off of GST on all assets, services and eventually fuel as well,” says Mandal.
The introduction of the E-way bill has the potential to further reduce the time for delivery of long-distance transportation if the organized players that pre-declare their consignment on the GST portal and use only “RFID-tagged & identifiable” trucks that get a free-pass at every check-point to the extent of 95%-98% of the time. Technology is changing rapidly creating exciting opportunities which never existed earlier. Excellence would be defined by what extent the organizations leverage these opportunities and customize to its business context to differentiate against their competition.
This story appeared in Manufacturing Today’s Jan 2018 issue here: January 2018_Supply Chain Management