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Supply Chain Management Professional

April 2014 Vol. 2窶年o. 2

`150

Salary survey 2014 Page 32

In This Issue Academic Advocacy Forecasting, Demand Management and Capacity Planning Page...8

COLUMN Glass ceiling of Forecast Accuracy Page...31

Knowledge On Time In-Full Page...40


editorial

Let There be Hope W

Girish V S Executive Editor

e are bringing out this edition amidst a season of heightened expectations. The nation is poised for the sixteenth general election. From seventh April to 12th May, the nation will be engrossed in what is being termed as the “dance of democracy”. The Indian economy is at a delicate tipping point. The absence of governance compounded by some seriously doubtful legislation has brought our growth rate to what it was in the early 90’s – we are back to the Hindu rate of growth. We need a firm direction. We need a government that will recognize the persistent inflation cannot be managed with suppressing demand. We need to address the supply side constraints. The Indian industry is on the ventilator. Growth has tanked. High interest rates have crippled our capacity to invest. It is estimated that approximately 20 million young Indians will be entering the job market every year. A recent survey showed no net new jobs were created between 2004-05 and 2009-10, a dramatic slowdown on the previous five years, when 60m jobs were created. Compare this with China which created 130m net jobs in services and industry between 2002 and 2012. The youth are fast losing hope. And that is not good for a nation which has global ambitions. It is my ardent hope and prayer – from Kashmir to Kanniyakumari let there be peace and brotherhood. Let every young Indian – Hindu, Muslim, Christain, Buddhist, Jain and Sikh sit at the table of brotherhood. Let the Indian cities, towns and villages - from Guhar Moti, Kutch in the West to Kumki, in the Changlang district in the East, from Karakoram Pass, near the Siachen Glacier to Indira Point in the Andaman Sea rise up in true entrepreneurial spirit and create jobs for our youth. Let a thousand smiles bloom on the faces of the frustrated Indian youth. Let the boys and girls across this vast nation take pride in the Indian nationhood. Let every mother and father see their dreams fulfilled. Let the dark cloud of slow growth lift and usher in a glorious sunshine of prosperity. I pray. Let there be hope. Happy reading.

Executive Editor

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Contents april 2014 4 SCMPr

07 column >> L.R. Sridhar on Indian Employment trends & prediction 2014-05-01

09 Academic Advocacy >> A review of a research by Charles C. Poirier on Forecasting, Demand Management, and Capacity Planning

32 Salary Survey >> Salary Survey Report complied by Logistics Executive

April 2014


12 lead story

SCMPr Executive Publisher Jayaram Nair jayaram.nair@scmp.in EDITORIAL Executive Editor Girish V S girish.vs@scmp.in Consulting Editor Dr. Rakesh Singh rakesh.singh@scmp.in Creative & Production Shivasankaran Pillai shiva.pillai@scmp.in Advertising Soney Mathew soney.mathew@scmp.in

Organization needs to accurately estimate the demand for its product and SCMPro brings its readers an art and Science of forecasting, Demand and capacity planning.

40 Knowledge >> Nigamanth S, Cobsultant, Miebach Consulting on effective measuring tool ‘OTIF�

44 Human resource >> Darryl Judd on why background checks of selected employee is must.

Rashid Iqbal-Director rashid.iqbal@scmp.in Media Group 211/1, Sona Udyog, Parsi Panchayat Road, Andheri (East), Mumbai -400069 INDIA.

Printed and published by Jayaram Nair on behalf of B2B Media Group. Printed at SAP Print Solutions Pvt. Ltd, 28 Laxmi Ind. Estate, Lower Parel, Mumbai - 400 705, India and published at 211/1, Sona Udyog, Parshi Panchayat Rd., Andheri (E), Mumbai - 400069. No part of this publication may be reproduced or transmitted in any form or by any means including photocopying or scanning without the prior permission of the publishers. Such written permission must also be obtained from the publisher before any part of the publication is stored in a retrieval system of any nature. No liabilities can be accepted for inaccuracies of any description, although the publishers would be pleased to receive amendments for possible inclusion in future editions. Opinions reflected in the publication are those of the writers. The publisher assumes no responsibilities for return of unsolicited material or material lost or damaged in transit. All correspondence should be addressed to B2B Media Group. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Mumbai only. ANNUAL SUBSCRIPTION RATE INDIA: `1,800/-

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ained flat at about 5% and most market analysts expect this trend to continue. cs and Warehousing sectors have maintained steady momentum with many aking the transition from in-house Logistics to specialist Contract Logistics cing trend has intensified already existing skills gaps within many principle

column

Employment Market Trends and Predictions for 2014

d analytical skills are increasingly in demand by the Indian Logistics industry, uggles to overcome critical infrastructure and organisational challenges.

e lack of adequate infrastructure within the Transportation, Logistics and problems of poor corporate organisational design, lack of leadership, disjointed sses required to achieve business objectives and development targets.

ng and Packaging Sector in India currently employs around 7.3 million people. the Road and Rail Transport sectors which are continuously seeking new talent. e established logistics hubs including Mumbai, Kolkata and Chennai as well as r, Indore, Jamshedpur, Anwar, Ahmedabad, Bangalore and Ambala, and Kochi.

mmenced establishing manufacturing facilities in India from 2006 and this was ry and Private Equity players creating a surge in demand for skilled talent. The e demand for talent but this beginning to ease and there are increasing signs nt activity.

I

ndia’s economic growth rate has remained

shortage of industry professionals across a broad range of disciplines, many flat at about 5% and most market analysts ue by attracting staff from premier Institutions as Management Trainees, as expect this trend to continue. The country’s es with transferable skills from Retail, FMCG, Banking and other Industries.

Transportation, Logistics and Warehousing sectors have maintained steady momentum with Human Resources and remuneration levels considerably across the Industry many companies seeking efficiencies by making the transition from in- house Logistics to specialist Contract Logistics and 3PL service es were forced out of business or acquired by conglomerates during the GFC, providers. This outsourcing trend has intensiusiness activity and strengthened hiring intentions across Logistics, Ports, fied already existing skills g aps within many PL, Road Transport, Rail, shipping and Express Logistics organisations. principle companies and the industry generally. Specialised managerial, interpersonal and earch in mid 2013 for human resource with industry specific expertise and analytical skills are increasingly in demand by increased hiring momentum. We expect that the industry will continue to pick the Indian Logistics industry, particularly in its d of 2014. There is a significant trend toward salary rationalisation with more nascent stages as it struggles to overcome critird as a key component. cal infrastructure and organisational challenges. At management and mid-tier levels, the g professionals who have had formal education and training in Supply Chain lack of adequate infrastructure within the encourage growth in the Education, Training & Development space, which in Transportation, Logistics and Warehousing he Supply Chain & Logistics industry to support these private and public sector sector in India has lead to problems of poor corporate organisational design, lack of leadership, disjointed skills alignment, and a lack of core processes required to achieve business objectives and development targets. The Transportation, Logistics, WarehousL.R. Sridhar ing and Packaging Sector in India currently Managing Director - India & Subcontinent employs around 7.3 million people. Over 90% Global Group of this number are employed in the Road and Logistics Executive Rail Transport sectors which are continuously seeking new talent. Talent shortages are most prevalent in the L.R. Sridhar, established logistics hubs including MumManaging Director, bai, Kolkata and Chennai as well as emergIndia & Subcontinent ing hubs of Gurgaon, Vizag, Nagpur, Indore, Global Group Jamshedpur, Anwar, Ahmedabad, Bangalore Logistics Executive and Ambala, and Kochi. 7 14 Employment Market Survey Report

Many MNC manufacturing companies commenced establishing manufacturing facilities in India from 2006 and this was paralleled by major MNC Logistics Industry and Private Equity players creating a surge in demand for skilled talent. The downturn caused by the GFC reduced the demand for talent but this beginning to ease and there are increasing signs of more bullish investment and recruitment activity. The last 7-8 years has been typified by a shortage of industry p rofessionals across a broad range of disciplines, many organisation seeking to resolve this issue by attracting staff from premier Institutions as Management Trainees, as well as head hunting in demand executives with transferable skills from Retail, FMCG, Banking and other Industries. This trend has enhanced the quality of Human Resources and remuneration levels considerably across the Industry verticals. Whilst many small and medium companies were forced out of business or acquired by conglomerates during the GFC, there is now a gradual resurgence of business activity and strengthened hiring intentions across Logistics, Ports, Terminals & CFS, Freight Forwarding, 3PL, Road Transport, Rail, shipping and Express Logistics organisations. Many organisations stepped up their search in mid 2013 for huma n resource with industry specific expertise and knowledge and early 2104 has witnessed increased hiring momentum. We expect that the industry will continue to pick up through to mid year, stabilising by end of 2014. There is a significant trend toward salary rationalisation with more emphasis on variable/ performance reward as a key component. There is a significant move toward hiring professionals who have had formal education and training in Supply Chain & Logistics Management. This trend will encourage growth in the Education, Training & Development space, which in turn will create jobs for professionals of the Supply Chain & Logistics industry to support these private and public sector Education and Training institutions. SCMPr

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n ACADEMIC ADVOCACY

n Survey

n Knowledge

n HUMAN RESOURCE

Forecasting, Demand Management, and Capacity Planning Forecasting allows companies to allocate budgets for a period of time. It also provides an important benchmark for firms which have a long-term perspective of operations. In this Academic Advocacy SCM Pro brings you a review of a research done by Charles C. Poirier on Forecasting, Demand Management, and Capacity Planning.

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Academic Advocacy

S

upply chain management is not complete without the ability to predict future demand. This is necessary because of the unreliable sales forecasts that form the heart of many inventory management and planning systems. Contributing to this nebulous nature of predicting the future is the distortion of past facts that are often rife with mistakes, errors and manual overrides. What typically goes into the upstream side of the chain is quite different from what is needed at the downstream side. In the early levels of the supply chain evolution, this complication

leads to allowances being made for forecast error, additional buffers to inventories to cover contingencies, changed schedules, and efforts to respond to special customer conditions. Manual processes and overrides work but are cost intensive and inefficient. These result in higher administrative costs, excess inventory and/or poor customer service levels, as well as higher costs of goods sold because of the instability in planning and scheduling systems. A typical process of forecasting involves demand management, capacity planning and inventory management. The process begins with sales forecasting. To get a better forecast, other functions must be improved before moving to advanced capability. This will help the firm to increase the accuracy and build a more responsive supply chain system. As the focus transfers to demand management, the firm pays attention to the weaknesses in sales forecasting and begins to establish better methods and procedures for order entry, order planning and management, and supply planning. The SKUs offered are reduced to those on which the firm can make a profit or those needed to have an acceptable market offering. Processing is oriented around how to replenish those items under optimized conditions. In the advanced levels, consumption triggers this replenishment, often through an active, online network that transfers cash register data to planning systems, a key element in a true “pull� system. Higher turns in the most profitable items are experienced because of high forecast accuracy and a low bias in the forecast, which helps the firm avoid having too much or too little inventory to meet actual demand. With a better handle on internal order processing, attention

moves to capacity planning. Here the issue of inventory management is faced, not as a means of foisting inventories upstream in the supply chain to willing suppliers, but as a way to reduce the need for the extraneous inventories in the supply chain system and to utilize capacity to the most effective degree possible. The results are a matching of just-in-time deliveries with actual manufacturing needs, and reduction of the buffer stocks by virtue of knowing what is truly being taken out of the system at the customer end of the chain. Supply capability is reviewed in the advanced levels with respect to the core competencies of the firm and its value chain partners and decisions made on which partner should perform which process steps. In the most advanced levels, flexible systems of response are created. There is much lower variability in the network as all parties are working together through an online extranet to review instantly what is occurring and where changes must be made. Constraints in the system will be under control as the end-to-end partners have linked their ERP systems and have visibility into what is occurring across the full network.

Forecasting is the Achilles’ heel Throughout this progression, supply chain efficiency is inexorably linked with a better understanding of exactly what is being demanded of the system. All of the process steps mentioned is affected by what is needed, when and where. Since forecasting is an inexact science, forecasts will always be inaccurate. The challenge becomes careful management of this inaccuracy and balancing the incremental cost of producing higher accuracy versus the gains in service, processing costs and inventories that accrue from additional accuracy. SCMPr

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Academic Advocacy Better forecasting starts with asking the right people the right questions. The particular problems occur, not just around determining the direction of demand, but with the magnitude of the demand in a particular time frame. Forecasters can generally react well directionally. They tend to fail in knowing how much is needed for an adequate response, typically predicting higher sales than actual, and they tend to be slow in stemming the tide of extra inventory. Rules-based forecasting is another technique, which takes the judgment of the best experts, codifies their conclusions and uses this data to drive a mathematical model, resulting Finding solutions to these im- in a much more accurate forecast pediments and eliminating what than one produced through data becomes the Achilles’ heel of sup- extrapolation. An effective supply chain efply chain management requires a rigorous effort to improve sales fort moves from the early savings forecast accuracy. That starts made in sourcing and logistics with the realization that most to improving inventory managesales forecasts are based on his- ment, planning, and scheduling. tory, adjusted by sales predic- The accuracy of the sales foretions, and occasionally matched cast, and the proper handling or with current consumption. This mishandling of market data and past information is further ad- information on actual consumpjusted for current market condi- tion, dramatically affects these tions, seasonal alterations, spe- process steps. While most firms cial conditions, market changes, suffer from low levels of forecast unforeseen events and expected accuracy and often fail to take adchanges in buying and supplying vantage of what is known about demand and supply, improvearrangements. ments can be made. By applying the models described, forecast accuracy can be inModelling Supply Chain Transformation creased to 70% or 80%, and Process Functions Advanced Capability beyond for advanced firms. Demand Managen Sales Forecasting n Consumption trigger With better incoming data, n Order Forecasting n Higher turns ment Forecasting, all of the subsequent process steps improve. Then the n SKU Consolidation n High forecast accuracy Planning and Order firm can move to the balancn Replenishment n Low forecast bias Management ing of demand management n Supply capability n Flexible response Capacity planning with capacity capabilities by n Core competence n Lower variability and Inventory Mantaking advantage of shared n Cycle time consistency n Constraint elimination agement market and production information with selected business n Inventory, buffers partners. Over the years, companies have spent considerable time and effort working with their historical data to project incoming orders, often sending approximations of what they believe to be current demand to planning. For those who persevere, mathematical models and algorithms are applied to match the educated guesses with actual data trends to keep the forecasts synchronized with what is actually taking place in the market. Combining history with the present, adjustments are made that should bring a closer congruence between what the firm thinks should occur and what really takes place. The most common mistakes interfering with the development and deployment of a successful forecasting system include: n Lack of an on-going and rigorous process of forecast error measurement. n Advanced firms have automated on-going processes that measure forecast accuracy using meaningful and accepted definitions n Lack of organizational acceptance of the need for accurate forecasts. n Lack of clear organizational ownership of the forecasts that are generated. Without an obvious responsibility,

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everyone can run for cover and use weak forecasting as an excuse for all the poor processing and extra inventories. n Lack of clear rewards and incentives for forecast accuracy. Tying forecasts to sales quotas for example can produce some very bad results as salespeople lowball forecasts to ensure they beat their sales targets. n Failure to understand the underlying patterns and the reasons for variances. n Failure to involve senior executives in the forecasting process.


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lead story

An Eye to See, a Mind to Believe

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lead story

Forecasting is defined as “the use of historic data to determine the direction of future trends”. Companies use it to determine ways to allocate their budgets for an upcoming period of time. This is typically based on demand for the goods and services it offers, compared to the cost of producing them. This is easier said than done.

F

orecasting is defined as “the use of historic data to determine the direction of future trends”. Companies use it to determine ways to allocate their budgets for an upcoming period of time. This is typically based on demand for the goods and services it offers, compared to the cost of producing them. This is easier said than done. Forecasting is both an art and a science. The tools of forecasting are well known to us and used extensively. But more often than not companies do fail to forecast accurately. And then there’s always hindsight – but businesses cannot be run on hindsight. Organizations need to accurately estimate the demand for its products, assess the distribution of the demand over a period of time and then plan for meeting that demand. For this issue of SCMPro we decided to take a look at forecasting. We believe the time has come to elevate the art of forecasting to a more central plane. We begin the exploration with an insightful article by Dr. Rakesh Singh – “Seeing Into the Future”. He explores forecasting as the process of making statements about events whose actual outcomes have not yet been realized. But risk and uncertainty are companions to forecasting and prediction. The article underscores the need to measure and fix it on the one hand and align all functional tactics to the need of the forecasting to avoid the bullwhip effect. We then move on to “Some dos and donts”. Not many can look into the crystal ball and predict the future. But if one wants to manufacture right and sell all, the key is to forecast accurately. The article closes with the role of IT - an important forecasting enabler. But IT alone is not effective unless the right kind of organizational design in terms of new structures, processes and linkages have been set in place. Then there’s a third article on Big Data in forecasting. We have seen the power of analytics with structured data. However, a huge quantum of data that we generate is unstructured. Big Data is the popular term for both structured and unstructured data. The data sets in Big Data are so large and complex that it becomes difficult to process using on-hand database management tools or traditional data processing applications. We conclude with an introduction to collaborative forecasting by looking at some of the challenges in undertaking a truly collaborative forecasting exercise. The concept of Supply Chain Collaboration has been accepted by the industry. But this collaboration is restricted to a few areas of the supply chain. Quite often, different departments of an organization work with different numbers. Sales forecast will differ from the operations forecast which will again be different from what the finance department uses. This breeds inefficiency and waste. So what is an effective tool to manage and ensure that forecasting is accurate and sees results? Read on. SCMPr

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Lead Story

Seeing into the Future Forecasting is the process of making statements about events whose actual outcomes have not yet been realized. But risk and uncertainty are companions to forecasting and prediction.

M

Rakesh Singh Director, Durgadevi Saraf Institute of Management Studies, Chairman ISCM.

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easuring and understanding the performance of a forecast is as important as the forecasting model itself. However, understanding the performance of a forecast has two dimensions. There is understanding bias and, secondly and the most important, understanding the magnitude of error. But these two quantitative forecasts may not give you any meaning if you don’t decompose them and find out what really drives these errors in your forecasting error and raises question about your forecasting performance. The goal of any forecasting system is to minimize error and be as accurate as possible. The manager should use at least one measure of bias and one measure of magnitude on an ongoing basis to assess accuracy. Bias is defined as the systematic difference between the forecast and the actual demand over a period of time. Statistically, it can be measured by calculating Mean error or Cumulative forecast error or mean percent error. A persistent bias indicates that the forecast has been too low or too high and can be corrected by subtracting or adding the amount of bias from the predicted value. The magnitude represents the variance between the actual and the predicted demand. This is statistically measured by Mean absolute deviation, mean squared error, standard deviation and Mean absolute percentage error. The persistence of a huge magnitude indicates that the forecast has been highly inaccurate and cannot be corrected like the Bias inaccuracy. When magnitude is high, it is important to look into the reasons as the

forecasting system used may be a problem. It then needs to be revised.

Knowing Performance A point that needs to be taken into account while understanding the performance of forecast is whether error is due to forecasting model or is due to few functional business practices. One needs to understand the bullwhip effect. A build of high standard deviation around the Mean may leave you unaware of a typical phenomenon that has been happening with corporate. And what is this? You may have stock-outs in some places and surplus in another thus increasing overall supply chain cost, reducing supply chain profitability and putting a tremendous strain on overall business. This happens primarily because the entire supply chain is operating in silos — order moving up the supply chain levels is whipped simultaneously by the retailer, distributor, factory and finally the supplier leading to a changing number at different levels of the supply chain. All these are further compounded by the compulsion of businesses to resort to unplanned promotions which increases forward buying unknown to the demand planner. It may also happen that due to the obsession of the supply team to look for full truck load before they supply final goods, the demand becomes surplus as it arrives late and the competitor has already fulfilled it. So before blaming your forecasting model for any error, be sure you know to measure it and fix it on the one hand and align all functional tactics to the need of the forecasting to avoid bullwhip effect.


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lead story

Not many can look into the crystal ball effectively. But if one wants to manufacture right and sell all, the key is to forecast accurately. Dr Rakesh Singh explains.

T

hanks to global competition, demand is no longer a certainty for any business. Gone are the days of certainty, long product life cycles and loyal consumers. The environment today is dynamic. In such a situation firms increasingly realize that understanding and planning demand, and linking supply with demand is what matters. At the same time, if the supply chain forecast is substantially in error, the ramifications will be felt throughout the entire process. Little wonder that forecasting has assumed a significant importance, and managers are increasingly looking at it to reduce costs. 16 SCMPr

April 2014

While there have been huge leaps in the area of supply chain forecasting as well as IT tools available for the same, most organizations do poorly in terms of incorporating demand uncertainty into their production planning processes. Most often this is blamed on forecasting without realizing the importance of selecting the appropriate technique. Managers need to first identify the firm level variables which cause variability in the supply chain. Once these are tabled, forecasting will be less uncertain. The modern IT-based tools for supply chain and forecasting can help improve and institute a system for tracking errors. Forecasting practices are characterized


lead story by interesting insights about changes in techniques. Research indicates that in the 1980s, despite the growing availability of computer based forecasting systems, companies continued to rely on subjective techniques. Since the mid 1990s, companies began using computer-based forecasting systems, and despite this accuracy have not improved even among those who use these models.

Seasons rule Some questions arise. Are forecasts reviewed and agreed upon by key departments in the organization? Are the correct statistical methods employed in forecasting demand? What horizons and time period are used for both long- and short-term forecasting? How are statistical and judgmental considerations combined? In a study conducted by the Great Lakes Institute of Management, Chennai, it was found that the most widely used method of forecasting is the sales force composite method. Causal and time series models have given way to rolling plans. With the changing nature of businesses and increasing complexities due to the changing nature of demand, this shift from quantitative to qualitative models is understandable. But what we found surprising was that even where causal and time series models would have been appropriate, IT-based sales force composites were used blindly. Forecasting is not owned as yet by any department, and hence companies need to evolve a consensus approach that will lead to budget driven demand planning. What most companies forget is that not all demand is unpredictable: there are times when demand follows a predictable pattern. While auditing the forecasting processes of a lifestyle major, I found that the company used the time series technique for its vacuum cleaners and spare parts requirement. The error rate was so high that they gave up forecasting in favor of an ERP system where sales force composite forecasts were converted into rolling forecasts. This too saw little success. To understand the problem we used data collated from Mumbai’s Colaba market and found that consumption data showed strong seasonality. No forecast can be accurate unless corrected for seasonal trends and combined with appropriate time series technique. Nor would investment in an up-to-date information system be of much help. Similarly, another company, a tractor major, for which we designed a forecasting model, had almost given up the causal method of forecasting and embraced the sales force composite method, even though the latter’s accuracy was a major worry. Tractor demand is closely related to agriculture. We identified a causal model that was based on drivers of demand for tractors and provided a fair guide in planning sales. The company did not know how to convert causal forecasts into short-term forecasts

for better operational planning and thus gave up scientific forecasting for judgmental methods. On the other hand, agribusiness firms such as Bayer and Syngenta have been pretty successful. Along with their rolling plans, they also forecast the crop scenario for various regions. They intelligently use their sales forces to track changes in the cropping pattern, areas under different crops, procurement prices and rainfall. This data was then used to create an operational sales forecast on both a quarterly and a monthly basis. Not surprisingly Syngenta and Bayer have been able to minimize inventory as compared to some other players.

Keepinginternal biases in check Forecasting methods and models need to be applied intelligently. Indian firms seem to have lost their direction. Their choice appears to stem from supply chain requirements with little understanding of when, where, what and how to forecast. The appropriate choice of a technique depends upon the inherent uncertainty in the business environment and factors that cause this uncertainty. According to a number of surveys, firms today are moving away from sophisticated techniques to one based on market response, i.e. sales force composite method. This method is an outcome of thinking that as the business environment becomes more uncertain, firms can minimize their supply chain cost by adapting to a responsive and postponement strategy rather than being dictated by forecast. In supply chain literature this is called “quick response”. Firms use their widely dispersed sales force to compute a rolling forecast and align their supplies to these forecast. But this approach does not solve all problems. For example, we found a general tendency for small changes in customer demand to be amplified within a production distribution system. Upstream replenishment demand and physical shipments exceed the original order quantity. They are caused due to orders moving up the supply chain levels, unplanned trade and promotion discounts, long lead-time and batch ordering. All these are essential parts of a business organization and these marketing, logistics and forecasting initiatives lead to wide scale fluctuations. Forecasting is often used as an order history from the company’s immediate customers.

Improving business practices Such business driven variability is further distorted as marketing and promotions create havoc with market data or demand trends. It is well known that the supply chain stock during promotions and discounts, leading to a jump in demand. But each promotion is carried SCMPr

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lead story out in isolation vis-Ă -vis the rest of the organization; and strategically to compete with key competitors. Keeping track of these spikes seems next to impossible, be it in any sector. A forecaster sees the upward trend and forecasts high thus leading to inventory costs in the supply chain. Similar problems are posed when a full truck load becomes the norm due to the transport discount, and here again the jump in data can mislead forecasters. We also found that longer lead times meant higher demand amplification, poor forecast and excessive inventory cost. In sum, firms often blame forecasts for the error when the real culprit is their own business practice. Forecasting methods can work when you are apposite to track this business driven variability and then factor them into your forecast.

Sharing knowledge Finally, it should be remembered that forecasting is an integrated exercise in which all levels of the supply chain are involved and willing to share information thus helping in increasing demand visibility within organizations as well increasing the performance of the forecast. IT thus is a critical tool. But most firms show a significant level of dissatisfaction with the quality of IT.

Firms which used forecasting successfully had developed not only cross-functional trust, but also crossorganizational trust with distributors and suppliers. We found that most firms lack extended enterprise functionality and open system architecture which can facilitate integration and collaboration and bring transparency across supply chain management. The current information systems are inward looking and miss linking across the boundaries of the organization. They do not connect easily with other systems. Information systems in these companies are not flexible to adapt to changing needs of the supply chain in terms of changing business models and processes. There is a lack of collaborative architecture in decision support software. These firms still use order-based information instead of flow-base. Lack of advance planning with process functionality hinders optimal supply chain allocations. Real-time communication between information sys18 SCMPr

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tems, transport and warehouse management systems and advance planning systems is absent. Information systems in these companies thus lack a modular, pen and Internet-like architecture or “web-enabled ERP�. Forecasting finally is victim of the same ills which plague any organization. To facilitate the changing dynamics of business in response to uncertainties, these firms need new processes, structures and linkages. Many of these firms who claim to practice SCM in practice do not have one. Software purchased by these firms cannot replace the need to link structures with processes. Most of these firms have a rigid and outdated organizational design leading to lower internal flexibility.

The way forward The structural issues here deal with what is to be done in terms of organizational structure, in terms of cross-functional teams, what will be done in terms of supply bases in terms of the structure of distribution channel, and the manufacturing centre. Key processes that come into play include insuring/outsourcing, strategic processes, new product development, supply planning and execution, demand planning, logistics, and strategic sourcing. Forecasting would be effective only if we know the key linkages between structures and processes. Among the most important ones are common information, co-location, cross-enterprise teams, cross-functional teams, common measures, joint planning and some degree of trust. We found that firms which used forecasting successfully had developed not only cross-functional trust, but also cross-organizational trust with distributors and suppliers. The cross functional discipline requires the various internal groups to put aside their turf issues and focus on building an advantaged distribution system. Many successful companies have succeeded in improving cooperation among internal functions and gaining significant operational benefits. Whereas the firms in which well meaning employees were reluctant to work effectively together with other departments inside the firm, found it easier to point fingers at other departments than cooperate in making the forecasting errorfree. They considered departmental or functional excellence as more important than business excellence. Thus it is clear that forecasting as an exercise is more than using sophisticated techniques. These techniques will work effectively only when we create demand visibility across the supply chain. This calls for aligning marketing, promotions, discounts and other logistics decision with a clear purpose of creating demand visibility across the supply chain. Information technology is an important forecasting enabler, but it is not effective unless the right kind of organizational design in terms of new structures, processes and linkages are put in place.


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Industry Portal for the Supply Chain Professional


lead story

Big Data in

Forecasting 20 SCMPr

April 2014


lead story

A huge quantum of data generated is unstructured. Big Data is the popular term for both structured and unstructured data. Our Executive Editor Girish V S analyses the role of Big Data in forecasting.

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lead story

F

orecasting is always a difficult exercise, especially in the face of a volatile business scenario. No manager would like to lose business even in high growth times, let alone a slowdown. Managers want to keep appropriate levels of inventory and be able to meet the needs of their customer base. Even in the best of times, ability to plan for demand is difficult. According to research by Terra Technology it was found that “rapid innovation, increased seasonal sales and a growing reliance on promotions are causing frustrations for companies trying to conduct accurate forecasting.” Data analysts and managers are hoping that Big Data and supply chain management solutions may be the answer to this problem. Analysis of data from multiple information streams - ERP to social media - can provide managers with real time information to detect demand signals and respond quickly to changes in demand, cut inventory, reduce working capital requirements, and free up cash.

Traditionally, companies have used their supply chain data to drive performance metrics. Big Data, on the other hand, provides them with an opportunity to understand customer behavior and thereby maximize operational performance. In a survey undertaken by Lora Cecere, the editor of the online website Supply Chain Insights LLC, supply chain executives identified data and analytics as two of their top four important supply chain challenges. According to Lara, “Gaining insights and creating actionable analytics from huge quantities of data will require technology and high performance analytics (to take advantage of the parallel and grid processing power, and in-store memory). The challenge for companies will be staying ahead of the technology in a cost-effective manner, and developing organizational processes to effectively utilize the huge amounts of data and consume 22 SCMPr

April 2014

the information into their organizational decisionmaking processes.”

What answers can Big Data Provide? While the usefulness of Big Data is not in doubt, there are quite a number of issues we need to address before we start harnessing its power. First off, managers need to understand the demand drivers they should focus on, and more importantly, how to assess the implications of the demand drivers, and identify the demand shifts that are implied in the data. Another important question is to assess how they can better exploit the data they are already using and potentially collect new data that would allow them to distinguish themselves from competitors.

Big Data analytics for supply chain Over the past couple of years, Big Data has changed the supply chain paradigms in most developed countries. Managers who know how to take advantage of Big Data can better understand demand. Supply chains that use Big Data to support their operations can provide value added services than normal analytics. Demand and supply chain information can come from multiple sources. Some of this data will be structured, some others not. And as data sources keep expanding, the challenges become increasingly complex. Traditionally, companies have used their supply chain data to drive performance metrics. Big Data, on the other hand, provides them with an opportunity to understand customer behavior and thereby maximize operational performance. For example, tracking customer preferences can help shape the product features and service levels in real time. Of particular emphasis is the data contained on social media sites like Facebook, blogs and Twitter. This data can be used by the firm to shape their demand estimation, sales promotions, product lifecycle management, inventory management and create more accurate forecasts. In spite of the advantages that Big Data offers, managers have been slow to adopt it. There are a number of reasons for this right from data quality, integrity and consistency to getting access to the data to the siloed functioning of the corporate. There are a few softer issues too. Prime among them is the lack of trained analysts who understand and can provide adequate support. A second soft factor is that not many people understand how to use business analytics for decision making. Traditionally, firms have used either excel sheets or data warehouses to manage data. Consequently, forecasting has been based on the tools available in


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lead story these systems. But the time has come when firms need to master the art of understanding unstructured data from multiple sources. The science behind the tools is not very different – just that the manager has to ask the right questions and be able to use the tool effectively. Doing so can help create a resilient and responsive supply chain. Technologies like grid computing, data mining, predictive analytics, data visualization and pattern analysis tools can uncover important information unnoticed in the past. Big Data needs to be stored and organized in a way that supports existing supply chain business process objectives. One approach for storing and managing Big Data that is gaining momentum is the Apache Hadoop Distributed File System (HDFS). Hadoop is an open source file system that allows organizations to manage large amounts of data across clusters of computers using a simple programming model. The Apache Hadoop framework is composed of the following modules: n Hadoop Common – contains libraries and utilities needed by other Hadoop modules n Hadoop Distributed File System (HDFS) – a distributed file-system that stores data on commodity machines, providing very high aggregate bandwidth across the cluster. n Hadoop YARN – a resource-management platform responsible for managing compute re-

Hadoop Distributed File System (HDFS) is an open source file system that allows organizations to manage large amounts of data across clusters of computers using a simple programming model. sources in clusters and using them for scheduling of users’ applications. n Hadoop MapReduce – a programming model for large scale data processing. Big Data provides managers untapped data sources that have been neglected in the past. It can now be used to sense, interpret and respond to demand signals and customer requirements and to improve decision making . These advancements in decision support enable demand-sensing and shaping to benefit from Big Data and advanced analytics to improve alignment of demand and supply while increasing profitability.

www.scmp.in ...think supply chain Industry Portal for the Supply Chain Professional 24 SCMPr

April 2014


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lead story

The concept of supply chain collaboration has been restricted to a few areas of the supply chain. Girish V S looks at the emerging paradigm of collaborative forecasting – an endeavor to align the marketing, operations and finance forecasts to squeeze out inefficiencies.

Collaborative Forecasting 26 SCMPr

April 2014


lead story

F

orecasting is the foundation of business planning. In most firms, forecasting as an exercise begins with a sales forecast which indicates the customer demand for the product or service. The production team uses the sales forecast to prepare a production schedule. The finance team uses these forecasts to come up with its own forecast of the investment and working capital requirement. Most firms undertake a number of forecasts across various functions. Most often these forecasts are intertwined. This creates multiple hurdles. One of the biggest problems with multiple forecasts is the lack of transparency across the departments. Each department creates its own assumptions, data sources and models for their forecasts. The other departments, and at times, managers within the same department are not privy to these assumptions, or whether the data used is relevant and current. This leads to inaccurate and obsolete forecasts. Such forecasts are of no value to the firm. Managers start looking for alternative forecasts they can base their key decisions on - sometimes building their own models, spreadsheets or proprietary data systems. It could also mean relying on judgment. This may give them some comfort, but there is little assurance that data and assumptions are correct.

Imagine if the firm could use a common data source, a common set of tools and a set of assumptions that are known to all. Imagine if the managers could integrate the multiple forecasts into an enterprise wide forecast that could be used by all. Imagine if data can be automatically analyzed in real time. If only managers with specific insights about aspects of the business and planning can input information in real time. If only the impact of these changes will then automatically flow through the system in real time, updating all relevant forecasts. If only managers can see the impact on all departments as these changes take place. If only managers could test and understand the implications of what-if scenarios and alternative decisions. This is where collaborative forecasting comes in. A commonly accepted definition of collaborative forecast is “the process of setting up a continual line of communication between distributors and those customers with the ability to predict the future needs of the products they buy from the distributors. When the customer’s work schedule is developed, their system SCMPr

April 2014

27

27


lead story automatically alerts the distributors system indicating the time when they will require specific quantity of products. Any changes in the work schedule will be automatically communicated and adjusted for. Collaborative forecasting involves the sharing of real-time demand forecast data amongst the members of the supply chain.” Collaborative forecasting stands on four key pillars: 1. Develop statistical models and algorithms that can mine the available data for relevant insights 2. Develop a robust system that can collect customer information from across entire source - social media to newspapers. 3. Enabling systems that will use the management inputs to develop a coherent forecast. 4. Integrate multiple forecasts from marketing and sales into enterprise wide forecasts

Collaborative forecast is a great concept that has revolutionized business practices by integrating the organization more effectively to realize mutual benefits. Challenges

There a number of challenges Analysis Vs. Insight: The first challenge is to resolve the analysis versus insight debate. Traditional forecasting techniques are polarized between analytical frameworks or based on insights. The analytical approach depends on statistical models and complex algorithms to detect relationships and come up with a forecast. The insight based approach, on the other hand depends on the judgment, experience, perceived customer behavior and understanding of the markets by the manager. We need to combine both these approaches. The starting point could be an analytical forecast modified using the managers’ experience and judgment. Multiple iterations could throw up a more accurate forecast. Real time Vs. Periodic: Traditional forecasts relied on point in time data. Collaborative forecast requires real time data. As data is input, the effects on the forecast are calibrated and reworked. This 28 SCMPr

April 2014

requires an organizational framework that will collect data in real time, clean it, verify it and update it. Collaborative forecasting therefore requires a central forecasting application that pulls in data from disparate systems spread throughout the organization. Transparency Vs. Opacity: In the traditional methods, users access data they are privy to, make assumptions that are not documented or passed on and develop algorithms that are for their own use. This breeds opacity. However, people trust processes that are transparent and inclusive. Instead of tracking down and reconciling information from marketing, sales, operations, finance and HR, managers need to incrementally use the information they have to take decisions. Collaborative forecasting allows each stakeholder to add new information, propose changes, test scenarios and share insights in a single, enterprise-wide system. The assumptions are tracked, time stamped and documented. This helps the organization to revisit the forecast. The biggest gain will be in terms of the organizations ability to track the forecast and do a deviation analysis. Customer Vs. Marketing: It seems strange – but there exists a bias in most marketing departments – they tend to take a product-centric view rather than a customer-centric view. The marketing looks at the portfolio in product terms and the sales from the customer perspective – selling more than one product to the same customer. It is but natural that the sales forecast and marketing forecast will be divergent. An effort has to be made to reconcile them. Precision Vs Available: Marketing and sales develop forecasts based on approximate estimates of demand distributed along the year. They may be able to forecast aggregate sales over a period, but rarely be able to develop a precise off take. Production cannot work with approximations – they need to plan for production – if not on a day wise format at least for a batch or week. This creates issues when production forecasts are reconciled with sales forecast. Collaborative forecast avoids this by making the same set of data available to both the departments. Collaborative forecast is a great concept that has revolutionized business practices by integrating the organization more effectively to realize mutual benefits. The organization benefits from reduced costs, better forecasting, collaborative relationships to get better service levels and synchronized operations. These models require commitment, true collaboration and top management buy-in.


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column

Forecast Demand Accuracy Setting a target accuracy level for demand forecasts and before investing in vast resources is the trend. But then, although a few organizations have achieved success, the mechanisms employed for forecasting may not have a direct bearing on the result, says Vimal S Nair.

U

Vimal S Nair Author can be rreached at vimal.nair@miebach.com

30 SCMPr

April 2014

nderstanding the underlying forecastability of demand trend is the first step towards achieving optimal results for any firm. A stable recurring pattern is predictable and any forecasting technique applied to such a data stream can be expected to be fairly accurate. However, rarely does the demand pattern of firms showcase such consistency. Classic examples would be automotive spare-parts companies dealing in tens of thousands of materials where spurious demand may be a regular phenomenon, and apparel industries where promotions are driven by sale offers multiple times during a year. The forecast accuracy of any firm is limited by the inherent nature of its demand pattern. Some common practices undertaken by firms which in hindsight do not favour them are n Misconception about forecastability: Do not treat all SKUs the same. Not all products are forecast-friendly. Forecasting attempts can be made for a consistent regularly demanded product, whereas predicting the trend for a sporadic material exhibiting

spurious demand is not bound to give meaningful results. n Order

vs Sale dilemma: Which explains demand better: Order or Sale? This is a loop which most firms always enter into. Forecasting demand basis order history could be as detrimental as forecasting demand based on sale. Effects of back-order on sale, service level patterns on customer orders are to be considered. Understanding the relation between order and sale should precede the forecasting process. n

Dynamic model selection: For every forecasting period, firms evaluate all forecasting techniques and choose the ones that have the best correlation with past data. In the event of multiple techniques chosen during short period of time, the trend does not show a consistent pattern and pure chance determines which technique fits the most recent demand. The obvious conclusion is that the future demand pattern would be as random and indeterminable as the recent past and hence, even the most recently chosen technique need not be in concurrence with the future.


Increasing Average interval between demand

column

Bulk (Not Forecastable)

Intermittent (Forecastable only if intermittency is a known phenomenon) Regular & Steady (Forecastable)

Erratic (Forecastable in presence of trend/cyclicity)

Increasing Variance (Coefficient of variance)

n

The SKU life cycle issue: Fixing a particular forecast mechanism for a product family over time without considering the SKU life cycle is a major threat to inventory control. Behavioural pattern of a single material varies significantly between its growth phase, maturity phase and decline phase. Critical evaluation is mandatory not just to define a forecast process but also to determine forecastability at various life stages of process. n

Forecasting process diligently supports “Garbage in – Garbage out”. Closer the data represents unbiased demand, better are the chances of improved forecast.

Efforts for minimal benefit: Understanding the inflection point between effort and benefits reaped is an important realization to be acquired by all firms. In a dynamically varying demand scenario, a simple model like the weighted average or exponential smoothening can yield results which might not be bettered by a complex mechanism involving higher time and resource requirement. The silent signal to stop trying to improve forecast accuracy is to be followed diligently. n

Underestimating manual input: Be it change in top management, price elasticity or political scenario – anything can have an impact on demand. Expecting a theoretical phenomenon to predict these aberrations is a gross error. Management should know when to intervene in the process of demand prediction. Is it implicitly indicated that no model other than naïve ones are to be deployed while forecasting? Is the word Forecast accuracy improvement obsolete?

Absolutely Not!! The objective of a firm with respect to forecast should not just be “Accuracy improvement but also Process improvement. Accuracy is just a charter of process improvement. n

Process and regulate demand: Forecasting process diligently supports “Garbage in – Garbage out”. Closer the data represents unbiased demand, better are the chances of improved forecast. n

Develop spike order policy: Extreme demand spikes resulting from promotion or other interferences should not be taken for as forecasting inputs. A definite outlier correction process should be in place for efficient forecasting process. n

Development for forecastability: Regularly ordered consistent demand material can be forecasted. Coefficient of variation indicator/ trend estimator is to be developed to group parts which are to be forecasted. n

Occam’s razor: Forecast with complex assumptions need not give better results. More often than not, hypotheses with fewer complications provide better accuracy. Effort vs Accuracy improvement is a parameter that needs to be scrutinized. These preliminary steps along with a robust master data management process are critical for every forecasting process. SCMPr

April 2014

31


n analysis

aken ffices

n Practice

n knowledge

n Survey

n human resource

In an exclusive to SCMPro, Logistics Executive shares its compilation of Salary Survey Report 2014 that covers the entire spectrum of salary bands and geographical territories in India.

d inobal ,000

Methodlogy The research and information contained within this report has been compiled by the Logistics Executive Group from research undertaken and intelligence gathered in the course of its everyday business activities. The Logistics Executive Group was founded in 1999 and has offices in India, Australia, Singapore, Hong Kong, China, Dubai and United Kingdom. Specialising in Logistics & Supply Chain Executive Recruitment, Business Consulting and Training, the company has an active database in excess of 125,000 logistics and supply chain professionals. Information contained within this report is compiled from data contained with our extensive database, business acquired intelligence and regular research surveys, which includes the Global Employment Market Report (now in its 8th year). The Global Employment Market Report is an online survey of approximately 10-15 minute duration and was emailed to more than 75,000 people within the Supply Chain & Logistics Industry in late 2013. About 5,178 respondents completed the survey. NB: The results are purely indicative in terms of overall trends within the industry. Further to this, the Logistics Executive Group undertook a series of interviews with HRD‘s and HR Personnel validating this data and this information has been incorporated into the final document produced. Sources for this particular research includes: n Human Resource Director Interviews n Business briefing provided by CEO’s of leading 3PL companies n Logistics Executive’s Employment Market Report data from late 2013 n Logistics Executive’s business intelligence database n Candidate and Client interviews (conducted by Logistics Executive Group)

and

32 SCMPr

April 2014 March 2013


salary survey

Look Within L

ogistics Executive Group has regularly undertaken research and gathered intelligence to bring out a Salary Guide report for the logistics industry. And the findings do bring surprises. While the cost of logistics continues to spiral in India, there seems to be little technique to bring it down. However, there are numerous changes in this sector. The retail sector has grown and this has brought in changes in the logistics as well. What is heartening is the vast number of employees that the logistics sector will need in the future in this sector. Moreover, while costs are worrying, most logistics managers are also worried about the new types of industries that are coming up, such as e-commerce and e-retailing. This is ensuring that the supply chain and logistics industry will undergo a transformation and there could be a need for radical change. It will also require the managers to cater to B2C and C2C markets – something that could be new to them. This means that the supply chain industry will have to step up to create new talent pools and also look for new types of talent in the industry. Talent shortage is not something that can merely be filled with new candidates. The government of India must create courses that will enable emergence of new courses and encourage students to take up supply chain as a career course. According to PWC, in their recently released 2030 Transport and Logistics report, the logistics industry will need to find more than 17 million more workers over the next 10 years. As an industry, the supply chain is not attractive to a lot of people. It’s associated with ports and docks, warehouses, etc. But there’s much more to that.

Most companies need to attract talent by branding themselves and thus gain the trust of job seekers. There’s also the apprehension that the logistics sector is a poorly paid one and there’s no scope for growth and learning. HR should work towards changing this by offering a multicultural work environment and overseas training assignments and projects. Also the compensation and benefits should be benchmarked and made as attractive when compared to other industries. Surprisingly, the supply chain sector is also attracting women. Those associated with this sector will see that more women have also joined the workforce and have taken up eminent positions. If companies modify their benefits and compensation structures along with the working conditions offered then more women are likely to take this up. They should provide flexibility in work hours, work-life balance programs (working from home and with flexible work hours), on-site child-care services, career-counsel and mentoring for women employees. It would also help if companies moved in quickly and thought up innovative ways to hire new talent, men and women, from other industries that will help them bring in ideas, skills and experience. Referral programs should be made more rewarding and so too the employee retention schemes. The rate of attrition depends on several factors. While most of the time, people cite money as the reason, there needs to be a good working culture in the company and a strong reason to stay. A lot of people now also want career advancement, while of course money is a motivator. Training employees and commitment to them from the employer’s side will definitely help any organization. SCMPr

April 2014

33

33


salary survey    

Position

Industry / Supply Chain Management Industry Chain Delhi Management Mumbai / Supply Chennai Bangalore

VP/ Director Supply Chain Position

VP/Director Logistics

MD / GM Logistics

75  -­‐  95  

Mumbai

Chennai

Delhi

75 - 95

75 - 85

75 - 95

45  -­‐  50  

75  -­‐  85  

70  -­‐  95  

40  -­‐  50  

40  -­‐  55  

Bangalore 75 - 80

-­‐  80   3040   - 50

40 - 75 30  -­‐  50   25 - 35

General Manager Logistics

22 - 60

30 - 45

30 - 65

Operation / Warehousing Regional Logistics Manager

18 - 24

7 - 18

17 - 22

General Manager Supply Supply Chain VP / Director

Chain 45 - 80

Logistics Director

Operation / Warehousing

Warehouse Manager Regional/ DC Logistics

Manager

6 - 12

35  -­‐  50  

518   - 8-­‐  24  

5 - 12

Warehouse/Operations Executive

2-6

2-5

2-6

Lean / Quality / Six Sigma Manager

8 - 16

8 - 15

9 - 17

Warehouse / DC Manager

Warehouse/Operations Executive Logistics Specialist 5-8 Procurement / Purchasing Lean / Quality / Six Sigma

Manager

6  -­‐  12  

4 -2   6-­‐  6  

5-8

10  -­‐  16  

40 - 75

30 - 45

40 - 75

Senior Procurement Manager

5  -­‐  8  

30  -­‐  45  

14 - 18

7  -­‐  15   5 - 8 5  -­‐  8   2  -­‐  5  

2-5 6 - 11 3-6

8  -­‐  15  

Procurement VP / Director

Logistics Specialist

25 - 40

4  -­‐  6  

75  -­‐  80  

75  -­‐  80  

65  -­‐  75  

40  -­‐  50  

40  -­‐  45  

40  -­‐  45  

75 - 80

50 - 75

24 -25   45 -­‐  35  

22  -­‐  45  

24  -­‐  45  

25 - 50

25 - 35

25  -­‐  45  

25  -­‐  35  

8 - 18

8 - 18

8  -­‐  15  

8  -­‐  15  

5  -­‐  8  

4  -­‐  8  

5  -­‐  8  

2 - 62  -­‐  5  

2  -­‐  6  

2  -­‐  4  

6  -­‐  15  

8  -­‐  12  

3  -­‐  6  

3  -­‐  6  

30  -­‐  50   17  4-­‐-  210 2  

25  -­‐  40  

5 -14   8 -­‐  18  

2-6

2-4

6 - 15

8 - 12

5  -­‐  12   2  3-­‐  -66  

6  -­‐  11  

25 - 50

25 - 40

10 - 14

9 - 14

8 - 13

8 - 13

5  -­‐  8  

5  -­‐  6  

12 - 20

10 - 15

12 - 18

Procurement / Purchasing Senior Quality Manager

8 - 20

8 - 12

8 - 20

9 - 18

Sourcing Manager

7 - 15

665   - 14-­‐  70  

8 - 15

35  -­‐  50  7 - 11

65  5-­‐-  710 5  

5 -30   9 -­‐  50  

30  -­‐  50  

30  -­‐  40  

15  -­‐  20  2 - 5

15  1-­‐  -340  

12  -­‐  20   2-4

12  -­‐  20  

12  -­‐  20  

8  -­‐  12  

8  -­‐  20  

9  -­‐  18  

8  -­‐  13  

8  -­‐  12  

Procurement VP / Director

Purchasing Manager

5-9

Senior Procurement Manager 2 - 5

Purchasing Officer

5-9

18  -­‐  30   2-4

5-9 2-5

8  -­‐  20  

Inventory, Planning & Demand Senior Quality Manager Demand/ Supply Planning Head

25 - 35

18 - 25

22 - 30

Supply Chain Manager

12 - 20

12 - 16

12 - 20

Sourcing Manager

Purchasing Manager Planning / Forecast Manager Planner Purchasing

Officer

Commodity Manager

7 - 12

5 -5   9-­‐  9  

5-9

5 -2   8-­‐  5  

Demand/ Supply Inventory Controller

Supply Chain Consultant

Inventory Manager National Distribution Head

Zonal Distribution Manager Inventory Controller Transport Controller

2  5-­‐  -57  

3-7

3-5

12  -­‐  16  

12  -­‐  18  

7 - 14

10 - 19

5  -­‐  12  13 - 18

7  9-­‐  -114 5  

13 - 20

5  -­‐  8  12 - 15

5     10-­‐  -912

20 - 35

18 - 25

6  -­‐  9  

8  -­‐  12  

23 - 45 10 - 14

25 - 50

-­‐  7   22 -5   35

12 - 16

9 - 3   12-­‐  7  

5-7

5-7

20 - 30

20 - 30

5  -­‐  8  

5 - 72  -­‐  5  

2  -­‐  4  

2  -­‐  4  

2 -20   5 -­‐  25  

18  -­‐  25  

18  -­‐  25  

10  -­‐  15  

10  -­‐  15  

10  -­‐  12  

3-5

-­‐  9   14 -5   16 8  -­‐  12  

5  -­‐  9  

5  -­‐  9  

5-7

25  2-­‐  -350  

12 - 20

7  -­‐  15  

8  -­‐  10  

7 - 95  -­‐  9  

8 - 10

18  -­‐  25  2 - 6 15 - 25

7  -­‐  12  

9 - 10

15 - 35

Consulting &Project Management

Sales & Marketing

5-7 8 - 12

12 - 30

Transport

Commodity Manager

2  -­‐  4  

12 - 35

Planning / Forecast Manager 12 - 19

General Manager Transport

5-9 5-7

Project Implementation Manager

Planner Project Manager

7 - 11

6-9

3-5

12  -­‐  20  

10 - 15

5 - 12

5-7

Consulting &ProjectManager Management Supply Chain

18 - 25

5  5-­‐  -97  

10 - 17

5-7

16 - 25

8  -­‐  15  

8 - 12

125   - 5-­‐  35  

20 - 25

5-8

5  -­‐  9  

6-9

Planning Head 3-7

5-9

6  -­‐  12  

8 - 12

Inventory, Planning & Demand

Inventory Manager

7  -­‐  15  

10 - 15

Hyderabad

Hyderabad

10  -­‐  17  

25 - 50

Pune

Pune

40   5   22-­‐  -745

SCMPr

8 - 15

8 - 15

6  -­‐  11  

5  -­‐  11  

7  -­‐  11  

5  -­‐  7   10 - 13

5  -­‐  7  

5  -­‐  7  

8  -­‐  12  

9  -­‐  10  

8  -­‐  10  

10 - 14

5  -­‐  6  14 - 26

15 - 20

5     15-­‐  -725

15 - 20

5  -­‐  6   15 - 25

5  -­‐  7  

5  -­‐  6  

2  -­‐  5   9 - 12

11-­‐  -714 3    

11 - 14 2  -­‐  6  

2  -­‐  5  

2  -­‐  5  

5-7

4-6

2-5

2-5

30 - 75

-­‐  35   3015   - 50

30 - 75 12  -­‐  30   30 - 45

15   5   25-­‐  -340

25 -15   40 -­‐  25  

12  -­‐  20  

12  -­‐  20  

12 - 15 Manager

1012   - 14 -­‐  19  

12 - 16 10  -­‐  14   12 - 15

10  9-­‐-  1119  

9 - 13   11 -­‐  18  

9  -­‐  14  

10  -­‐  14  

12  -­‐  15  

10  -­‐  12  

10  -­‐  15  

 

 

 

25  -­‐  30  

15  -­‐  25  

15  -­‐  20  

Salary data is shown as a range from low – high and 25   is displayed as an 22   Annual in-­‐Lakhs -­‐  35   -­‐  35  Base Salary23    35   Per Annum. 14  -­‐  26   National Distribution Head Additional benefits such as annual bonus, company vehicles or travel allowances may apply. (Cr) = Crores.

Supply Chain Sales Director

Consultant

Area Sales Implementation Manager Project Regional Brand Director

15 - 35

15 - 30

15 - 35

Regional Brand Manager

15 - 25

14 - 22

15 - 25

7 - 12

6 - 10  

Project Manager

Transport Territory Sales Manager

15  -­‐  20  

  General Manager Transport

40  -­‐  55  

Zonal Distribution Manager

12  -­‐  16  

7 - 12

15 - 22

14  -­‐  16  

10 - 20

 

5-9

30  -­‐  40   9  -­‐  12  

5  -­‐  7   5  -­‐  7   Transport Controller Supply Chain & Logistics 2013 India Salary Survey Report   Sales & Marketing

13 - 22

13 - 22

13 - 17

10 - 15

13  -­‐  20   6   - 9

40  -­‐  55  

5-8

15  -­‐  25  

15  -­‐  25  

10  -­‐  14  

9  -­‐  12  

9  -­‐  12  

9  -­‐  12  

5  -­‐  7  

4  -­‐  6  

3  -­‐  5  

3  -­‐  5  

2

Sales Director

65    -­‐  75  

40  -­‐  50  

65  -­‐  75  

30  -­‐  45  

25  -­‐  40  

25  -­‐  40  

Area Sales Manager

30  -­‐  45  

25  -­‐  35  

30  -­‐  45  

25  -­‐  35  

15  -­‐  20  

15  -­‐  20  

Regional Brand Director

20  -­‐  35  

15  -­‐  30  

20  -­‐  35  

15  -­‐  22  

13  -­‐  22  

13  -­‐  22  

Regional Brand Manager

15  -­‐  20  

14  -­‐  17  

15  -­‐  20  

10  -­‐  20  

13  -­‐  17  

10  -­‐  15  

Territory Sales Manager

7  -­‐  12  

6  -­‐  10  

7  -­‐  12  

7  –  10  

7  –  10  

7  -­‐  10  

 

Salary data is shown as a range from low – high and is displayed as an Annual Base Salary in Lakhs Per Annum. Additional benefits such as annual bonus, company vehicles or travel allowances may apply. (Cr) = Crores.

Supply Chain & Logistics 2014 India Salary Survey Report   34 SCMPr April 2014

2


Position

salary survey

Logistics Service Providers (LSP/3PL’s) Mumbai

Chennai

Delhi

Bangalore

Pune

Hyderabad

80  -­‐  2.0  (Cr)  

75  -­‐  1.5(Cr)  

80  -­‐  2.0  (Cr)  

75  -­‐  1.5  (Cr)  

60  -­‐  1.0  (Cr)  

60  -­‐  1.0  (Cr)  

COO/Director

75  -­‐  90  

60  -­‐  75  

75  -­‐  90  

65  -­‐  75  

50  -­‐  65  

50  -­‐  65  

General Manager

40  -­‐  55  

30  -­‐  45  

40  -­‐  55  

30  -­‐  45  

30  -­‐  40  

30  -­‐  40  

Regional Manager

25  -­‐  30  

20  -­‐  25  

25  -­‐  30  

20  -­‐  25  

12  -­‐  20  

12  -­‐  20  

Branch Manager

15  -­‐  20  

8  -­‐  10  

15  -­‐  20  

8  -­‐  10  

8  -­‐  10  

8  -­‐  10  

CEO / MD / Country Manager

 

 

 

 

 

 

VP / GM / Sales Director

45  -­‐  65  

35  -­‐  40  

45  -­‐  60  

35  -­‐  45  

35  -­‐  40  

25  -­‐  30  

National Sales Manager Regional Sales Manager / Territory Manager BD Manager (3PL)

35  -­‐  50  

25  -­‐  35  

35  -­‐  50  

25  -­‐  35  

25  -­‐  35  

25  -­‐  28  

22  -­‐  32  

15  -­‐  18  

22  -­‐  32  

12  -­‐  18  

14  -­‐  18  

10  -­‐  15  

12  -­‐  18  

8    -­‐  14  

10  -­‐  18  

8  -­‐  14  

8  -­‐  12  

8  -­‐  10  

BD Manager (Freight)

8  -­‐  15  

7  -­‐  13  

8  -­‐  15  

7  -­‐  13  

6    -­‐  12  

6  -­‐  11  

Key Account Manager

10  -­‐  18  

8  -­‐  12  

10  -­‐  18  

10    -­‐  13  

8  -­‐  10  

5  -­‐  8  

4  -­‐  7  

3  -­‐  6  

4  -­‐  7  

4  -­‐  5  

3  -­‐  5  

3  -­‐  5  

Sales & BD

Sales Executive Operations 3PL Contract Manager Warehouse/Operations/DC Site Manager Warehouse/Operations Executive

 

 

 

 

 

 

30  -­‐  45  

25  -­‐  35  

35  -­‐  40  

22  -­‐  35  

20  -­‐  30  

18  -­‐  30  

8  -­‐  15  

7  -­‐  9  

8  -­‐  12  

8  -­‐  12  

6  -­‐  9  

5  -­‐  8  

5  -­‐  10  

4  -­‐  8  

4  -­‐  8  

5    -­‐  9  

5  -­‐  7  

4  -­‐  7  

Import/Export Manager

6  -­‐  10  

6  -­‐  8  

6  -­‐  10  

5  -­‐  8  

4  -­‐  6  

4  -­‐  6  

Air Freight / Sea Freight Manager

14  -­‐  18  

10  -­‐  15  

12  -­‐  18  

8  -­‐  12  

8  -­‐  10  

8  -­‐  10  

3  -­‐  4  

3  -­‐  4  

3  -­‐  5  

3  -­‐  5  

3  -­‐  4  

2  -­‐  4  

Shipping Clerk

 

 

 

 

 

 

Project Implementation Manager

15  -­‐  19  

10  -­‐  14  

12  -­‐  15  

10  -­‐  14  

10  -­‐  12  

8  -­‐  12  

Project Manager – WMS/TMS

18  -­‐  22  

14  -­‐  20  

16  -­‐  20  

14  -­‐  18  

10  -­‐  12  

12  -­‐  14  

Project Manager

 

 

 

 

 

 

General Manager Transport

45  -­‐  60  

25  -­‐  40  

40  -­‐  50  

25  -­‐  40  

25  -­‐  35  

20  -­‐  30  

National Transport Manager

35  -­‐  45  

30  -­‐  40  

35  -­‐  40  

25  -­‐  35  

25  -­‐  35  

25  -­‐  35  

Line-haul Manager

22  -­‐  28  

20  -­‐  22  

20  -­‐  24  

16  -­‐  20  

15  -­‐  22  

12  -­‐  17  

National Compliance Manager

15  -­‐  25  

12  -­‐  18  

15  -­‐  25  

10  -­‐  14  

7  -­‐  10  

7  -­‐  12  

Site Manager

10  -­‐  15  

8  -­‐  1  3  

10  -­‐  14  

8  -­‐  12  

7  -­‐  10  

7  -­‐  10  

Fleet Manager

12  -­‐  15  

8  -­‐  12  

12  -­‐  15  

8  -­‐  10  

7  -­‐  9  

6  -­‐  9  

6  -­‐  9  

5  -­‐  9  

6  -­‐  9  

4  -­‐  6  

4  -­‐  5  

3  -­‐  5  

Transport

Workshop Manager

Salary data is shown as a range from low – high and is displayed as an Annual Base Salary in Lakhs Per Annum. Additional benefits such as annual bonus, company vehicles or travel allowances may apply. (Cr) = Crores.   Disclaimer:   Logistics  Executive  is  committed  to  the  highest  standard  and  quality  of  information  and  every  attempt  has  been  made  to  present  up-­‐to-­‐date,  accurate   information.  The  information  contained  herein  is  general  in  nature  and  is  not  intended  as,  and  should  not  be  construed  as  professional  advice  provided  by   Logistics  Executive  to  the  reader.  While  every  effort  has  been  made  to  offer  current  and  accurate  information,  errors  can  occur.  Much  of  this  information  is   obtained  from  records  that  for  reasons  of  privacy  are  confidential.  This  information  is  provided  as  is,  with  no  guaranty  of  completeness,  accuracy,  or   timeliness,  and  without  warranty  of  any  kind,  expressed  or  implied,  including  any  warranty  of  performance,  merchantability,  or  fitness  for  a  particular   purpose.  In  addition,  changes  may  be  made  in  this  information  from  time  to  time  without  notice  to  the  user.  The  reader  also  i s  cautioned  that  this  material  may   not  be  applicable  to,  or  suitable  for,  the  reader’s  specific  circumstances  or  needs,  and  may  require  consideration  of  additional  factors  if  any  action  is  to  be   contemplated.  The  reader  should  contact  a  professional  prior  to  taking  any  action  based  upon  this  information.  Logistics  Executive  assumes  no  obligation  to   inform  the  reader  of  any  changes  in  law,  business  environment,  or  other  factors  that  could  affect  the  information  contained  herein.  

Supply Chain & Logistics 2014 India Salary Survey Report  

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salary survey

Changing Fortunes - Salary Trends in 2014 I

n the past 10 years, the rise in consumer purchasing power, growing consumerism and brand proliferation has driven growth beyond India’s traditional industrial growth sectors. As good example of this is retail modernization in India and according to the Investment Commission of India, the retail sector is expected to grow almost three times its current levels to $660 billion by 2015 (just two years away). The growing Indian market has already attracted a number of foreign retailers and domestic Corporates to invest in this booming sector and with new FDI regulations coming into effect, it is only a matter of time before multi-brand retail changes the retail supply chain sector forever. The rise of the middle class consumer brings with it significant advances in lifting India towards a ‘first-world’ economy and will see rapid change in the social economics of its people. But it’s not without its challenges for the supply chain and logistics sector. Costs of logistics are still higher in India than in more developed economies. In fact, the logistics industry in India, which is expected to touch US$200 billion by 2020 has a estimated cost of logistics in India valued at 13 – 14% of GDP, whereas in developed nations the cost is in the range of 7-8% of their GDP. It’s alarm bell that rings loudly in corporate head offices around the world, when they compare this cost metric with best practice. And the challenge of reducing the cost of logistics isn’t getting easier. As the Indian economy continues to recover from it’s recent recession, the logistics industry will still need to expand in order to continue to service the steady recovering manufacturing and re36 SCMPr

April 2014

tail markets. Although be it that growth and expansion with come largely in the form it has evolved over the past 5 yearsbut it will bring with it none of the cost control measures, supply rationalisation and supply chain innovation that MNC’s drove heavily (and with urgency) in more mature markets during the 2008 Global Finance Crisis (GFC). The bi-product of which is shorted supply chains, reduced costs and more adaptable. Having said that, change is happening. Particularly in multi-modal transport, specifically in the trucking and rail sectors where growth will exceed that of domestic airfreight as cost becomes a significant factor. Likewise, the trend of moving international airfreight to ocean is expected to remain a key factor in 2014/2015. It not just costs that are resting on the minds of supply chain executives. We are seeing new emerging disruptive industries coming to the fore in India, such as e-commerce and e-retailing. All of which is driving the way we think about the traditional supply chain models and the wider distribution model that is now required to serve a B2C and even C2C markets.

Growing Pains - Talent Crunch still the number one challenge Its been talked about for some time, but the rapidly evolving transportation and logistics industry faces a big challenge in terms of finding its next skilled workforce. The Transportation, Logistics, Warehousing and Packaging Sector in India currently employ’s around 7.3 million people. Over 90% of this talent pool is employed in the Road and Rail Transport sectors and with the expected growth,

this sector is continuously seeking new additional talent, whilst struggling to retain it existing employees. Talent shortages are most prevalent in the established logistics hubs including Mumbai, Kolkata and Chennai as well as emerging hubs of Gurgaon, Vizag, Nagpur, Indore, Jamshedpur, Anwar, Ahmedabad, Bangalore and Ambala, and Kochi. It’s an alarming trend that requires an Indian Industry and Government solution. According to PWC, in their recently released 2030 Transport and Logistics report, the logistics industry will need to find more than 17 million more workers over the next 10 years. Moreover, it’s an industry that is just ‘not sexy’. When measured against other emerging sectors like Entertainment, Social Media, IT, the Logistics industry is just not seen as attractive to tomorrow’s workforce. Working in logistics industry is usually associated with working in warehouses, onships or roads, none of whichare considered a favourable working environment. Not helping this attractiveness is that Logistics is largely seen as a ‘blokes’ world. It’s a warning bell to Indian executives given the success that is seen in developed economies when effort is focused on building diverse workforces for all. Supporting these talent challenges, Logistics Executive Group’s 2014 Employment Market Reportfound that more than 61.55% of respondents agreed that it has become harder for them to source quality staff. This is significant up from 2012 and 2013. The lack of trained manpower is certainly being felt by the warehousing sector and this is not likely to let up in


salary survey 2014. In fact, by 2015, India will need approximately 35,000 to 40,000 warehouse managers– a real challenge given the lack of investment being made at the grass root in developing enough trained manpower. With increasing supply chain complexity, improved warehouse management processes and operations with more demanding customers, lack of attraction for new recruits arising from poor working conditions, relatively less attractive incentives and benefits, and the emergence of attractive alternate career options are having a significant contribution to the skill shortage in the Indian warehousing sector. The operational needs for the industry as far as skilled labour is concerned, will undergo a tremendous change as a result of the changing economy. It will also raise training needs because of technological changes as well as evolving customer expectations. What companies need to do is start branding and gain popularity with job seekers. HR should work towards changing this by offering a multicultural work environment and overseas training assignments and projects. Also the compensation and benefits should be benchmarked and made as attractive when compared to other industries.

Identify New Labour Pool- Attract More Women to Logistics Sector The idea that women can be key contributors is still a hard concept to promote in most sectors. Unfortunately this is particularly true in the Supply Chain and Logistics industry, which is still largely male dominated. It’s a tough task to attract women to transport and logistics sector but companies that succeed will get access to new talent pool. This will increase gender and cultural diversity in work place and in turn will enhance innovation and creativity. Logistics companies often struggle to increase their soft skills such as interpersonal skills and people management. Such skills are inherently attributed and predominant to women. Transportation and logistics companies should encour-

age appointment of women to top jobs in the C-suite. There is a lack of reliable data in the market place but recent surveys would suggest that globally the numbers of women participating in supply chain and logistics are as low as 20% - 30%. According to the industry group “Women in Supply Chain, UK” Women account for just 22% of the logistics workforce in England, compared with 46% in other sectors, and women hold fewer than 10% of the managerial roles in Logistics. In India this number is likely to be lower. However there is evidence that things are changing. The number of women taking up tertiary study in supply chain and logistics is higher than ever, with universities globally running a wide range of initiatives to increase diversity. At the same time, there has been an increased awareness that supply chain and logistics qualifications are no longer a male domain. The result being that there is a growing pool of talented women coming through at university level. Most importantly companies need to modify their benefits and compensation structures along with the working conditions offered. They should provide flexibility in work hours, work-life balance programs (working from home and with flexible work hours), on-site child-care services, career-counsel and mentoring for women employees. Employers should make the employees feel the importance and values their daily job activities add to overall organization success.

Aim for Strategic Recruitment According to Madhuri Mathur, General Manager, Logistics Executive India,“most of the players in logistics industry still rely on job posting and resume search to find right employees. They overlook the need to hire a good recruitment partner. A good recruitment agency develops their talent pool with networking and also account for talent outside current geography in the global market”. Organisations that recognise and em-

brace the link between people, company performance and who actively invest in the next generation of talent management programs will lead the market in the long term. Companies need top move quickly to adopt innovative hiring techniques and hire candidate from other industries, bringing in new ideas, skills and experience. Employee referral programs should be made more rewarding and so too the employee retention schemes. The blurring of the line between employees within the organization and those outside of it is also driving talent management changes, particularly around sourcing, strategic workforce planning and employee engagement. Given these changes, executives in leading companies are increasingly focused on talent management issues and workplace alignment, recognizing that talent, wherever it comes from is their only sustainable competitive advantage. In an effort to turn challenge into opportunity, leading-edge organizations have increased their efforts to tap into wider talent markets and build a network of intellectual human capital engagement platforms that extend not only to employees but also customers, partners and the public at large in an effort to create an extended connection to the potential talent.

Retaining best people for future growth People leave jobs for many reasons, and our 2014 survey shows major factor contributing to people leaving organization is Career Advancement (although it should also be said that when asked why they joined their new employer?, most respondents answered ‘Money’). Most organizations do have employee retention strategies with mix success with training and development plays keying role in these strategies. However, only about 20% of people are satisfied by the training offered/arranged by the employer. Generally people look at their supervisors to identify their strengths and weaknesses, mentor them, and support them SCMPr

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salary survey to improve on their weaknesses. While it is true that individual assessment should be carried out at least 2-3 times during the year by the supervisor, people have to understand they cannot simply wait for their supervisors to come forward and start talking about their career advancement or improving their skill sets. It is the responsibility of every individual to do self-assessment, self-realisation and awareness that “ I own my career and no one else “. Every individual must think “ How can I increase the value of my service to my company today “. It’s point made by Ms Sheila Naravane, Executive Vice President, Logistics Executive India to potential candidates by asking individuals to think and assess “Do I make a valuable and powerful difference to my company business?”. Making sure we add real value, consistently, to our roles needs constant reassessment. It needs to become a habit. It is easy to get lost in the trench warfare of what we do every day, lose focus and get stuck in marginal-value activity. Sure it happens to all. From experience, Logistics Executive Group makes a point of assisting candidates in this exercise, boost their confidence level and make them understand that “it’s you, who is ultimately responsible to super charge your career”. The key is to assist them to think for themselves - what is best career option at this point of time?, should they just focus and put more energy on existing job profile?or it is the time to look for better options to advance their career?

Why best talent should join your company These days companies are using various sources to reach out to potential candidates e.g. social/professional-networking websites like linked in, job boards, internal references and of course recruitment agencies. Sure, the online jobs boards can reach a lot of people but they can’t accurately screen people resulting in a mass of unsuitable applicants and often causing the few suitable applicants to go unnoticed as their resume wasn’t key word friendly 38 SCMPr

April 2014

enough resulting in no response from the employer (or an auto reject response from the jobs board) which is already pushing more and more people to move away from applying to jobs through jobs boards.Then what about social media…. Well social media sites seem to have a limited lifespan, the artificial relationships that are quickly made will end just as quickly when the new flavor of month website comes into the limelight and people jump ship. On top of this people are becoming much more guarded about the information they provide about themselves online. These talent attraction tools may have worked in the past have been successful, but here’s the news – its over! Organisations need to deploy a range of talent attraction strategies. Job portals are just one method. Successful organisations will use all of the talent attraction tools available to them – portals, career fairs, graduate programs, in-house HR and of course, third party providers. The key to success with using any third party provider is to talk the same language. Working with a recruitment provider who doesn’t understand what you do and more importantly the skills that are therefore needed to make your organisation successful is a bit like playing darts – sometimes you hit bull eye, but mostly you miss. Having a partner that understands exactly what you want beyond the job description, is able to assess the cultural fitand whom has a deep understanding about your industry and it’s challenges takes you one step closer to ensuring you attract and find the right person. Specialist’s recruitment and search firms may cost a little more, but in the long run its money well spent as it saves time, ensures alignment of experience and will enable you to tap directly into an existing network that best fits your industry. Equally important is ensuring the ‘right-fit’ between the organization and the employee. The Logistics Executive Group 2014 Employment Market Report identified that a large part of the

reason employees leave their jobs is as a result of a mix-match between expectations and that of the organisation culture or leadership. More and more, organisations are not leaving this to chance. Use of psychological and behavioral testing like the ones used by Logistics Executive Group, My Profileand Profile XT Assessmentsare helping to identify questionable behaviors, which might prevent the candidate from fulfilling their responsibilities. In fact since 2012 to Logistics Executive Group has experience more than 300% growth in use of it its psychometric and behavioural test systems. Employers are choosing to use psychometric testing during their recruitment process in order to help them get a better overall evaluation of a candidate and hopefully secure the best fit for the role. There’s some debate over the value of psychometric testing, but those who use it believe that it can give a more objective overview of a candidate’s character, strengths, weaknesses and working style. Typically, a psychometric test will never be used in isolation, but as one component of a wider, integrated evaluation strategy.For employers, psychometric testing is helping to gauge the future performance of a candidate and improve the employee retention by making more successful hiring decisions.

Training is critical There is no doubt that as the Supply Chain and Logistics sector grows, the success in this critical industry will only be achieved through an ongoing process of self-improvement and continuous learning. It is the investment in tailored training programs that will ensure that organisations are able to have the right talent to meet the changing rigors defined by best industry standards. Ensuring staff remain loyal, proactive and engaged is an important factor which cannot be overlooked, if we are to achieve a return on investment made into skill based training programs and develop ‘home-grown’ talent.


salary survey Employee engagement is the vital link to successful organisations for providing an emotional connection between employees and their organisation. This emotional connection leads to improved performance (both individually and company), increased productivity, better staff retention, improved customer service and greater staff loyalty. According to L.R Sridhar, Managing Director for specialist logistics training firm, Mile Academy and the head of Logistics Executive India, training has become an imperative for supply chain and logistics organisations looking for a competitive edge. “Our clients who have traditionally used Logistics Executive to source talent, are now asking us to take our off the shelf supply chain training programs and personalized these for their local environments in order to be more globally ready and to retain staff” said Mr Sridhar. As a result of this upward swing in demand, Mr Sridhar added that the Logistics Executive Group is partnered with internationally leading universities offering programs from ground floor basics like inventory management to MBA certified programs specialising in Supply Chain. However with the costs associated to setting up organisation wide training programs, many companies are asking ‘is this a necessity?’. This answer is clear –well conceived and committed training programs ensure staff will be better prepared to avoid problems, to minimize the damage caused by those problems, and to maximize their contributions and output. Without appropriate training, staff will be more likely contribute to security risks through accidental behaviour but not necessarily malicious behaviour. These mistakes will less likely occur when a well-intentioned employee has been properly trained.

A long way to go With the 2014 survey finding that skills and talent in the Logistics and Supply Chain sector still in strong demand across most of India, costs will rise and turnover is unlikely to decrease any time

soon. Adding to thisis the emergence of Logistics and Supply Chain as a key driver in enabling organizational success and it increasing complexity means further executive talent will be required. With Logistics Executive Group’s 2014 Salary Survey, along with other recent salary studies finding that on average Executives will see estimated salary increases of between 15 and 20 per cent, the challenge to manage cost increases and invest in grooming talent has never been greater. Latest projections by Logistics Executive Group’s 2014 Salary Surveyshowed that middle and senior-level professionals are likely to get a pay increase in the range of 10 to 15 per cent. Similar increases could also been with respect to bonuses. Sectors such as pharmaceutical, chemicals and consumer goods sectors - that are largely dependent on domestic economy, are expected to see the greatest salary increases, closely followed by the Construction, Mining and Services sectors. With inflation pressures and a rebounding economy, companies need to be careful while carrying out appraisals since there is need to retain performers and provide them with solid salary adjustments whilst being careful not to set unrealistic expectations that will overtime hamper growth prospects. In many ways these challenges rest not only with the CEO and Business Managers but also with Human Resources. The human resource function has to move fromits traditional hire and fire role to that of a strategic partner. It needs to sit front and centre at the executive table, along side supply chain, finance, operations and other business centers that are not centers of profit for the organization. The job of HR, as is the job of all such departments, is to ensure that the business gets the most out of its employees. Another way to put this is that the human resource management needs to provide a high return on the business’s investment in its people. This makes it a highly complex function - because it deals with not just management issues but human ones as well.

Authors Darryl Judd, Global Chief Operating Officer, Logistics Executive Group darrylj@logisticsexecutve.com With more than 20 years of executive experience in Aviation, Supply Chain and Logistics Transport Industry, Darryl has held executive positions within the airline & aircraft leasing/charter industry and major logistics organizations. He is regularly called upon to manage key human resources consulting projects and supporting business to drive changes, particularly around M&A activity and international executive management. © 2014 LRS Group Pty. Ltd. All rights reserved Madhuri Mathur, General Manager – North, Logistics Executive Group India Sheila Naravane, Executive Vice President, Logistics Executive Group India

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n HUMAN RESOURCE

OTIF? How’s that? 40 SCMPr

April 2014


Knowledge

Effectively measuring the performance of a company based on the kind of business it does needs an effective tool. But don’t just misuse or misconstrue it, warns Nigamanth S

W

hen you have a tool that can measure how well a company can get it right the first time, you will want to jump for it. For some time now, there has been in existence such a tool and one that is a buzzword in corporate circles. It’s called ‘OnTime In-Full’ (OTIF). There’s a charm in getting something right the first time, especially for companies. Not only does it improve service level, but also lowers cost in terms of service. OTIF has been touted by consultants and supply chain practitioners as the one-stop-shop for most problems. Although OTIF is in fact an essential tool to track and trace the performance of an organization, it is more important to understand its intricacies than its ability to merely measure. This article covers the points that are essential for a better understanding of OTIF.

OTIF is not the end goal To begin with, every businesshold should ask themselves this pertinent question: “Does OTIF make sense for our business?” leading to the more important question: “What is the customer expectation?” Consider this scenario where two companies serve the same market. Company A promises a six-day lead time to serve and misses the target in 10 per cent of the orders (90 per cent OTIF)

while Company B promises a 12 day lead time but never misses the target (100 per cent OTIF). Whose performance is better? The answer to the question lies in understanding the customer. There are three things that a customer might expect from the supply chain of a company: Reliability: consistent deliveries at right time in right quantities Responsiveness: time taken to service the delivery request Agility: capability to accommodate changes in plan without affecting service levels An OTIF measure will only show how reliable a company has been to its customers and is not a complete measure of its supply chain. Hence, the company has to analyse customer requirements and set importance for each of the above parameters and start measuring them.

How right is the number? After a company takes the decision to measure OTIF, it has to then define the same in terms of the business it deals in. Take a scenario in which a company currently measures OTIF at 85 per cent. It is very important for the company to determine whether it will measure OTIF based on the number of orders served or on the volume served. More importantly, how should the company measure? In another case, the top management of a company that exports agricultural produce constantly

Nigamanth S Consultant, Miebach Consulting

receives customer complaints regarding delivery issues despite high OTIF levels of 90 per cent. A closer look at their OTIF suggests that they measure OTIF at the warehouse gate but since they deal with exports, it should ideally be measured on reaching the customer warehouse. Thus it is essential to define OTIF according to the business requirements.

Setting right targets “100% is ideal but not always the best”—this fits perfectly to OTIF measurement. Any business that gears up for an OTIF improvement must understand the cost associated with serving. A business has to decide the OTIF level it needs to target based on the trade-off between the benefit that it will achieve upon SCMPr

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knowledge Collateral damage

Since management usually sets a target OTIF and evaluates the performance of people involved based on the achieved OTIF, “meet OTIF at any cost” is often the focus of many managers in the supply chain. improving OTIF and the cost incurred to improve it. Thus, 100% OTIF need not always be the target.

Setting a target OTIF does not end a company’s woes. In fact, it could start a whole new set of problems. Since management usually sets a target OTIF and evaluates the performance of people involved based on the achieved OTIF, “meet OTIF at any cost” is often the focus of many managers in the supply chain. Companies that lay too much of stress on the OTIF number face the problem of managers trying hard to achieve it. Although it is good that a manager has focus on OTIF, an overwhelming stress on OTIF will just make them find ways to circumvent the system to achieve the target. An increase in upstream inventory and excessive capacity addition are some of the common outcomes. So should OTIF be measured? If yes, then what should be the target? Does it really solve current problems? These are some of the

questions the management should ask itself to assure that an effective system is in place. For a business to ensure its goal of achieving the target OTIF levels, the following need to be done: n Form a team with all stakeholders in the supply chain. n Prepare the team to analyse the customer requirements in terms of supply chain performance. n If OTIF turns out to be an expectation from the customer, let the team finalize the definition of OTIF as per feedback. n Set a realistic target OTIF based on the benefit of better delivery against the cost incurred in providing it. n Track the OTIF using an automated tracking and measuring system. n And importantly, create an atmosphere where managers are encouraged to identify bottlenecks and improve the supply chain.

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April 2014

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Hiring the

Unknown Darryl Judd COO, Logistics Executive darrylj@logisticsexecutve.com

44 SCMPr

April 2014

A thorough background check of a prospective candidate will throw up loopholes or information that the candidate may have deliberately hidden. It’s better to investigate than rue, says Darryl Judd


talent

S

o the final interviews are complete, the candidate’s experience is second to none, employment history and skills on the mark—you’ve have found the perfect candidate! Not an easy thing in today’s talent short market. But are they really all they represented themselves to be? You don’t need a dictionary to know what resume fraud means and with a number of studies showing that nearly 50% of candidates embellish, or even lie outright, on their job applications and resume, getting fooled can be quite costly. Resume fraud is rampant. Experts estimate that 20% to over 50% of job applicants lie or embellish their credentials. In fact, Steven D. Levitt, an economics professor at the University of Chicago, cites research suggesting that more than 50 percent of job applicants lie on their resumes. Cover letters are notorious for embellishment and exaggeration. Mistakenly hiring someone who cannot perform their duties or who is dishonest could manifest negatively in their work habits. This can result in havoc internally and harm morale in your organization. Not to forget that replacing a wrongly hired employee can be expensive and disruptive.

Common lies Fabrications on resumes range from little white lies, such as embellishing job responsibilities, to making up fictitious employers and references. Some of the more familiar ones are: n Falsifying academic degrees and other credentials n Padding out dates to mask employment gaps n Overstating job titles or salaries n Inventing achievements that never took place

n Claiming

sole responsibility for team efforts It’s a fact that in today’s competitive job market you must assume that a percentage of your applicants are lying about their credentials and job experience. In order to avoid getting caught off-guard by candidate mistruths reviewing the employment application materials such as resumes, cover letters, and job applications right from the start could help you flag possible inconsistencies. Use these suspicions by making sure you question the candidate about these in a pre-screening phone call and/or during the first interview itself.

gistics Executive Group, My Profile that helps to identify questionable behaviors, which might prevent the candidate from fulfilling their responsibilities.

Background checks Think resume and background checking are a poor use of your time? Think again. Effective background checks are one of the most critical steps when hiring an employee. Taking time to verify that all the presented credentials, skills, and experience are actually possessed by your next employee is seen by many as just a mere formality in the process which has little bearing on the

If you are unsure about the validity of academic degrees or other credentials, ask the candidate to provide you with official proof sent to you directly, sealed, from the institution itself. Verify early Use the hiring process to your advantage and draw on resources and tools to help identify potential gaps. For example, when it comes to specific skills and knowledge the applicant claims to possess, administer tests or specific quizzes to determine if the candidate genuinely knows their stuff. Draw out experts inside your organization to assist in the interviewing process. If you are unsure about the validity of academic degrees or other credentials, ask the candidate to provide you with official proof (e.g. transcripts or graduation confirmation) sent to you directly, sealed, from the institution itself. Use psychological and behavioral testing like the one used by Lo-

candidates’ appointment. After all, they have passed the interview stage and a decision to hire them has largely been made. But background checks are more than that. They are one of the key instruments in protecting your organization from potential failure, cost and employee disruption. The background checks must include work references, especially former manager or supervisors, educational credentials, employment references and actual jobs held, and criminal history.

Some tips for background checking It’s difficult to save time in reviewing applicants, but these suggestions may save you the grief of hiring a fraudulent employee. The SCMPr

April 2014

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talent more time you spend on the front end of the hiring process, the more you will save later addressing potentially unqualified employees. These ideas will help. n With resume fraud on the rise, take time to review resumes, cover letters, and employment applications with a careful eye. Look closely at dates and reasons for leaving. Is the candidate offering references of earlier employers – if not, why not? You can no longer take what is written on the resume at face value. Faked academic credentials are on the rise, too. n Ask specific questions about statements and points that the candidate has listed on their resume during the phone screen

All of these are red flags. n Background checking has become critical. Check every fact including degrees, dates of degrees, degree majors, employment history, exact dates of employment, direct supervisors’ names, job titles, job functions, salary history, and why the candidate left each job. If anything seems suspicious, ask the candidate for details and verify the stories the candidate tells you. Ask the candidate for verification. n Go Online! - Check the candidate’s online history and profiles using Internet search engines such as Google and Social media sites like LinkedIn. Look to see if the candidates’ history online differs,

If at a later stage you find that a current employer has committed any form of fraudulent behavior during the hiring process, then investigate, and if you find that the employee was untruthful, then terminate the person’s employment. and follow these up during subsequent interviews. Ask questions such as: How did the candidate achieve the stated results? How did the candidate measure to determine that he or she had accomplished the stated improvements? Official title? Unofficial contribution? Careful questioning should reveal differences between stated facts and reality. When asking these questions look for suspicious behavior, wide-ranging or broad answers, vague responses to specific questions and long-winded statements lacking details or facts. 46 SCMPr

April 2014

in any way, from the “facts” they provided in all application materials and on their resume. If you find differences, dig deeper, or ask for an explanation. n Call Referees personally – One of the best ways to verify the candidate’s history is to talk to those that they previously worked for and ensure that this includes referees in addition to those that the candidate provides. Chances are the references that he/she provides will generally be positive and will speak well about the candidate. It is unusual to find a ref-

erence that says, “No, I wouldn’t employ them again”. Call every recent employer and ask detailed questions about the candidate’s responsibilities. Cast a wide net to people you know who may know the candidate in her industry and among your network. n Undertake the same background checking process irrespective of who sourced the candidate including those provided by a third party such as a temporary staff provider firm or a recruiter. Even if you have an agreement with the recruiter about what they will check, understand that no one will ever care as much as you do about bringing qualified, superior staff people into your firm. n Establish a no tolerance policy. If your background checking reveals that a candidate has lied or exaggerated their credentials in any way, eliminate the candidacy from your selection process. Likewise, if at a later stage you find that a current employer has committed any form of fraudulent behavior during the hiring process, then investigate, and if you find that the employee was untruthful, then terminate the person’s employment. Establishing this kind of consistent behavior may help deter fraudulent behavior from other candidates. n State in your Offer Letter that lying on the resume constitutes a possible firing offence. It reminds the candidate of the consequence they might face if they choose not to disclose a material falsehood before they accept your employment offer. Do appropriate candidate background checking to spare your company the negative effects of resume and job application fraud. Time spent in prevention, with thorough candidate background checking, will save you time, energy, and heartbreak.



Fullmag april 14