Eliminating supply chain risks is every company’s concern. BY TEAM MT
As the row about the price of onions
in India rages, the most widely used ingredient has suddenly become elusive and exclusive. In the last three weeks, the price of onions has risen from Rs 30 to Rs 80 per kg. And this is just not acceptable to the common man. Although there have been several efforts to anchor prices, the steep rise is attributed to scarce supply due to unseasonal rainfall this year. So it’s not surprising to note that onions, an essential commodity along with potatoes, are seeing lesser demand (obviously due to rising prices) as supply continues to elude.
Effective supply chain management has rarely been near perfect in our country. The sheer lack of industry collaboration in supply chain management is one of the biggest losses that have contributed to such supply chain risks.
Such situations and others are compelling supply chain companies and their customers to increasingly look at supply chain collaboration. This is an approach to gain competitive advantage through reducing costs and improving service levels. Indeed as we look to the future, improved levels of collaboration, in the supply chain, addresses many of the issues associated with sustainability and delivering triple bottom line objectives.
The advancement of this sector has certainly put enormous weight on supply chain companies to enhance and develop integrated solutions in its true sense. Vikram Mansukhani, head, business development and corporate services, Drive India Enterprise Solutions Limited (DIESL), says, “To keep up, it is essential that a 3PL service provider invests in and focuses on developing equivalent capabilities in inbound collection, forward and reverse logistics. At the same time it is pertinent that the 3PL provider ensures that the transportation modes, manpower and technology are used efficiently so as to avoid uneconomical cost increases along the entire supply chain. The repeated focus has to be on just in time, zero pilferages and breakages.”
The major partners of the supply chain are the suppliers, the organisation and the consumers and any other partners involved in the business transactions (like banks, middlemen, etc.). Considering the involvement of so many, it is pertinent that logistics providers apply the right technology and forecasting. Amit Sood, sales and marketing head, Asahi India Glass, says, “Although component makers catering to the Indian automobiles market are positive about the future, they need to look at foreign markets as they are high opportunity areas. This is the case with products that are mature, in high demand and skill-intensive components. Indian companies are looking at supply chain collaboration – produce in India and sell in international markets.”
Improving delivery and quality systems and extending supply chains is also on the agenda. “Global customers are not forgiving. Delivery needs to be made on time,” says a supply chain head from a leading auto component company in Chennai.
Hence, it’s not surprising to find that large Indian original equipment manufacturers (OEMs) like Tata Motors, Mahindra, TVS and Bajaj have already set up production units internationally. Most Indian suppliers who have been associated deeply with OEMs are banking on these relationships to globalise, either through exports or by setting up greenfield production units in target markets. One of the reasons they can afford to do this is that they have done it for their OEMs in India – set up production units near their factories so as to reduce supply chain time.
Collaboration and transportation is expected to see a stronger focus in the coming years. Several supply chain companies and OEMs are also developing collaboration tools that will allow them to plan accurately, which will also include sharing documents and thus set standards procedures. Such steps will help them curb costs and increase compliance, thus increasing supply chain efficiency. For instance, across the various stages of supply chain it is important that supply chain managers also have in place customs-approved electronic documentation, labelling, and electronic submission that will help them move the goods quickly out of customs.
According to a recent report, another step to reduce transport-related cost for the supplier is increasing visibility throughout the process. The report adds that these include additional spend related to transport mode decisions, such as a last minute, forced change from sea to air transportation to ensure timescales are met; fees that must be paid if items are detained at port; penalties for non-compliance with customs regulations; and customer contract costs for delayed projects.
DIESL has invested heavily into cutting-edge technology platforms that offer a multitude of standalone and integrated real time information to customers. For warehouse operations, it has WMS from INFOR, which can track and facilitate all activities inside the warehouse, right from the time the inbound truck docks till the delivery route vehicle reaches the end consumer. The platform allows for minimal decision-making by the operator based on a high level of forward operations planning at the set up stage. For distribution it has the Oracle Transport management platform, which allows transactional data capture for all transportation requirements through multiple types of vehicles, vendors and geographies including freight forwarding. “The OTM platform allows for booking vendor costs and doing customer billing simultaneously and also allows us to provide controlled access on shipment visibility to customers. Besides these we have home grown order booking portals, complaint measurement and resolution tools; and a very robust document management system. From a financial control and accounting standpoint we have deployed SAP,” says Mansukhani.
A supply chain is by nature supposed to be extremely dynamic, business oriented and forward looking so that vagaries of the market at large do not impact production or distribution to end customers. The new buzzword is sustainability of the supply chain. However, it is critical to ensure that supply chain managers are completely involved in the product planning process soon after the innovation is available, rather than after the product is ready to be launched. “It is critical that our customers truly entrust the supply chain planning and day to day execution to us and measure us on pre-agreed KPIs rather than micro managing day to day operations, which in essence defeats the very purpose of outsourcing. Needless to say, this will call upon a high degree of trust and delivery capabilities for customers to take a bit more hands off approach,” says Mansukhani.