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n insight n Knowledge n best practices n mindset n HUMAN RESOURCE

Supply Chain Management Professional

Dec 2013/Jan.2014 Vol. 1窶年o. 10 & 11

`150

Humanitarian Supply Chain

Preparedness to Partnerships insight Supply Network Compliance Page...6

academic advocacy Supply Chain Improvement: Implementing SCOR Page...14

In This Issue interview Sourabh Maity AVP Logistics, Groupon India Page...42


editorial

Rallying for a Cause I

Girish V S Executive Editor

t has been a very enriching experience this month. While working on the lead theme for the month, we realized one very salient feature – while the NGO’s and Army and Governments take the credit for relief and rescue operations whenever we are struck by a natural calamity, the real unsung heroes are the people who deliver the relief to the affected people - the supply chains. And the world has recognized this by coining the term “Humanitarian Supply Chain”. Unfortunately, Humanitarian Supply Chain is still to catch on in India. In fact the first conference on Humanitarian Logistics in India was in 2013, at IIM Ranchi. Humanitarian Supply Chains involve the collection, transportation, warehousing and distribution of both perishable commodities and non-perishables in challenging environments – and that too with no commercial gain in mind. In essence, the supply chains need to rally for a cause. And no other sector can provide the relief that an efficient humanitarian supply chain can do. Wiping the tears of the affected and giving them a hope of normality is the cause. Let us rally to this cause. And pledge to establish a professional, efficient and well grounded Humanitarian Supply Chain in India too. And for those who are more research oriented, let us push the boundaries of our understanding of Humanitarian Supply Chains by exploring the response to disasters and coming up with an Indian framework. Let us all rally to this cause. Happy Reading!

Executive Editor

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Contents Dec. 2013/Jan. 2014 4 SCMPr

06 Insight >> Is Your Supply Network Compliant? Outsource Only What You Know

10 Guruspeak >>

A free flow conversation with Dr. Anthony Paulraj on developing deeper relationship and sustainability.

14 Academic Advocacy >> A case paper on challenges encountered during implementation SCOR processes.

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40 column >> Anil Sathe on importance of seamless flowing of information in your Supply Chain.


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18 lead story

Executive Publisher Jayaram Nair jayaram.nair@scmp.in

Given the fact that we are facing constant threats from natural disasters, we believe it is time for us to explore Humanitarian Logistics in this edition of SCMPro

EDITORIAL Executive Editor Girish V S girish.vs@scmp.in Consultant Editor Dr. Rakesh Singh rakesh.singh@scmp.in Creative & Production Shivasankaran Pillai shiva.pillai@scmp.in Advertising Soney Mathew soney.mathew@scmp.in

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

42 interview >> An interview with Sourabh Maity, AVP Logistics, Groupon India on SCM challenges for E-comm companies.

44 Human resource >> Darryl Judd on new world emerging SCM and Logistics growth.

50 Last page >> Dr. Rakesh Singh, consulting editor, SCMPro on logistics in 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/-

Academic Partner

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n insight

n Knowledge

n best practices

n mindset

n HUMAN RESOURCE

Supply Network Compliance

A Must

Is Your Supply Network Compliant? Outsource Only What You Know

I

Dr. Lapide is a lecturer at the University of Massachusetts’ Boston Campus and is an MIT Research Affiliate. He welcomes comments on his columns at llapide@ mit.edu.

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n his 1905 book, Reason in Common Sense, philosopher George Santayana famously wrote that those who cannot remember the past are condemned to repeat it.” Presciently, he appeared to have been referring to today’s European and U.S apparel companies, especially the retailers. In March 1911, 146 workers died in an enormous fire at a New York City garment factory that still represents the deadliest workplace disaster in the city’s history. Many of the victims were young women who toiled in “sweatshop” conditions to support their financially struggling families. The tragedy in 1911 sparked an outrage by the public and led to a series of labor and union laws that continue to protect Western garment workers today. Were it not for these laws I would not be who I am today or possibly exist. One of the workers benefiting from the improved working conditions and safety measures was my mother, who was a seamstress and a member of the International Ladies’ Garment Workers’ Union (ILGWU). The regulations put in place after that deadly fire, and the procedures and policies implemented by apparel companies, kept my mother safe and alive. (Not cool, however, as she did literally work at a “sweatshop” that was extremely hot during the summer months. She apparently did not mind the heat, proclaiming that the job was

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important because it helped keep our family properly fed, clothed, and sheltered.) Unfortunately, over 100 years after the NYC garment fire, the same can’t be said for the impoverished women in Bangladesh’s apparel industry, many of whom lost their lives in recent garment factory disasters. The were working in horrible conditions in order to give their families a better life. Within the past year, over one thousand workers died at a garment factory building collapse, and over one hundred died at two garment factory fires. Once again, the world is in an uproar over garment factory working conditions and safety. The customers of these Bangladesh factories were primarily retailers outsourcing the manufacture of their private label products. To avoid tarnishing their brands, the retailers initially disavowed any complicity in causing these disasters. They are currently learning that when it comes to a branded company’s global supply chain, it is only as compliant and safe as its weakest link—anywhere in the world and including multi-tiered suppliers of its suppliers. However, one also has to ask the question: Why has the apparel industry forgotten the lessons learned from the 1911 fire?

Outsource What You Know There is no one answer to this question. Simplistically, perhaps as retailers (in contrast to manufacturers) they don’t know much about plant operations and safety. However,while they appear able to plead ignorance, they still put their image at risk by having their own brand names put on products manufactured at problematic plants. Retailers are known for making decisions solely on price, so I question whether their private label outsourcing decisions would have considered manufacturing competency or plant safety.


insight

Supply chain managers should make sure their brand names are being protected from embarrassing upstream suppliers by implementing robust Supply Network Compliance programs. 8 SCMPr

A best practice is to never outsource what you know nothing about; otherwise, how can you assess a supplier’s competency? I learned this lesson from various outsourcing anecdotes, including those described below: n I heard a story about an apparel company that was going to move their contract manufacturing from China to Mexico. When it came time to implement, the company realized its employees no longer knew manufacturing. It had to ask the Chinese contract manufacturer to help make the move. I don’t know how well that went. However, if I were that apparel company I wouldn’t have bet my brand image on it. How motivated was the Chinese contractor (that was losing the business) to make the move successful? In addition, the plant operations installed in Mexico were most likely less (and certainly not more) competent. Invariably, apparel companies that continue to move production to chase lower wages degrade contract manufacturing competencies, and eventually tarnish their brand names if a disaster occurs. n During the first phase of the MIT Supply Chain 2020 Project, we extensively researched supply chain excellence. We assessed IBM’s hardware supply chain to be excellent and identified a best practice as never outsourcing what it did not understand. The company had a launch “buffer” manufacturing plant where all new products were integrated before being shipped to customers. The purpose of the plant was to get the kinks out of new systems during their launch. IBM only outsourced the operations to a contract manufacturer once it was satisfied that the integration processes were fine-tuned and ready for prime time. When we talked to IBM’s Logistics group, it had just completed the outsourcing of all of its European transportation activities to a 3PL. It stressed, however, that before being outsourced, the operations were consolidated by IBM itself, not the 3PL. In other words, IBM had to understand what they were outsourcing before doing so. n Another excellent supply chain we researched was The Limited Brands Victoria’s Secret division. One of its best practices was the fact that it owned a global sourcing company and maintained partial ownership in some of its Far Eastern suppliers’ plants. This gave the private label retailer the manufacturing knowledge needed to successfully manage

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its outsourced production operations.

Supply Network Compliance is Key So why is it important to only outsource what you know? As U.S. President Ronald Reagan succinctly said: “Trust, but verify.” How can you verify a supplier’s competency if you don’t know anything about what they do? Supply Network Compliance programs are needed to aid in selecting, monitoring, and “verifying” supplier performance. The recent horror stories from Bangladesh point to the sad state of compliance programs in today’s apparel industry. Retailers ought to have manufacturing experts on staff to develop programs that assess a supplier’s manufacturing competency, including plant working conditions and safety. While I’ve focused this column largely on the apparel industry, compliance programs are needed by all brand product companies in order to leverage their image to garner higher operating margins. At the 2006 CSCMP conference, I chaired a track during which a speaker from J&J talked about its external/contract manufacturing standards. I was impressed with how much detail went into developing them and the extent to which J&J was monitoring the operations of its suppliers via on-site audits. J&J was ensuring that the external manufacturing it relied upon met its own acceptable business practices in terms of: product quality standards; labor and employment policies; employee health and safety policies; and environmental protection regulations. I was also astounded by the amount of work that this entailed. J&J was willing to spend whatever it took to maintain its highly-regarded global reputation as a top-notch manufacturer. Supply chain managers should make sure their brand names are being protected from embarrassing upstream suppliers by implementing robust Supply Network Compliance programs such as J&J’s. These programs need to include the multi-tiered suppliers of suppliers. Apparel companies need to avoid future factory disasters like those in Bangladesh and other developing countries. They need to first relearn the lessons from the 1911 garment factory disaster. Apparently their factories “are not my mother’s factory.” Indeed, they are less safe, and those companies need to be making them safer than the ones she worked in long ago. Otherwise, they’ll continue to put their brand names at risk.


guru speak

A Compelling Case for

Sustainability

In this issue of Guru speak, SCMPro caught up with Dr. Antony Paulraj. He speaks to SCMPro about two issues – the need for developing deeper relationships among supply chains and sustainability. The Guru Speak is a free flow conversation with Dr. Antony Paulraj.

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Dr. Antony Paulraj, Globalisation Professor of Supply Chain Management; Department of Entrepreneurship and Relationship Management, University of Southern Denmark.

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upply chains are rapidly evolving, and are proving to be significant contributors to the corporate bottom line. The time is not far off when corporate will compete on their supply chains. In this scenario, organisations can manage their supply chain either as a transactional function or a relationship function. Now, when I say transactional, it could be a one way flow, like buying something from them but never involving them in any decision making process and you just tell them what they should do. The other way is you work closely with suppliers, lets say by giving them a higher volume and reducing the number of suppliers, which is the normal process we see emerging today. In this case, firms manage their relationship in a much softer way and involve them in the decision making process. There is a two way flow of information and hence are more involved and feel a sense of ownership in the organisation. Let us look at some specific aspects – say of environment or sustainability aspect – where we need to develop a way to evaluate sustainability in supply chains. When you look at it from the transaction framework, and the buyer wants to, say, evaluate, we

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should be able to test their output and say whether it is appropriate to the specification or goals, or whatever objective the buyer and seller agree to. The buyer may want to audit and the seller’s process. Rather than just evaluating, the buyer could collaborate with the seller, look at their process and see what can be changed. It is an established practice in the developed world, where every supplier is supposed to reduce their price by an accepted percentage every year. The supplier will usually demand that there is an opportunity to reduce the price and the buyer complies. Instead, the buyer should think of a way to reduce cost, propose it to the seller, and back it up by offering to send their engineers to the sellers firm, where these guys will help in look at ways to improve efficiency and reduce costs. If the supplier makes a cost saving, then everyone is happy. Honda Motor Corp. practices this. If the cost saved is much higher than what Honda anticipated, then they split the savings with the supplier. The suppliers are willing to accept this, but they will not do so if the buyer does not help them in reducing costs. That is one way of collaborating and managing. This is one way of managing the supplier.


guru speak This can be done in a sustainable perspective. The buyer can collaborate for environment friendly manufacturing processes at the supplier - one option is to see if the supplier is ISO 14000 certified. If you are certified, then you have all the procedures in place and you will be able to meet the guidelines of environmental consciousness. Now if you look at organisations, many researchers say that organisations can either manage transactionally or in a relationship fashion. If the buyer says that he is going to test the suppliers output, there cannot be a relationship. On the other hand if they say they trust the supplier and wish to collaborate with the supplier, then relationships can grow. This is how researchers look at it. But there were a few scholars who would say that, this it not true. Why cannot these two co-exist? Why can’t I collaborate with the supplier and

We need to pay more towards procedures, policies, or sending people to check etc. In case we have a high level of collaboration, we need to invest in resources and in that relationship specific assets, which again come at a high cost. evaluate him too. But when I evaluate, the intent should not be to see whether they are good, but to see whether the supplier could improve. It becomes a totally different way of looking at it - to not see whether they are trying to do it correctly but to see whether they can improve. Firms like Ford, Nokia do it. The challenge is to bring both of these aspects together. Researchers talk about it, but there is no congruence of ideas. So what we need to do is combine them in a more complicated model, and test it to see how these two could combine together, as economic and non economic parameters. The economic parameter is purely cost driven and non

economic is normally environmental driven in terms of reduction of emissions or social impact on environment. How does environment perform in a society or a community as a whole? There are two different performance measures that we look at. When we say evaluate, collaborate, this is one direction and it keeps increasing. We say we can have high evaluation and low collaboration or low evaluation and high collaboration. When we look at this, and especially so when it comes to economic performance, it is always better to have a mid level for both. So when I say I will evaluate very heavily, it cannot be done without a cost impact. We need to pay more towards procedures, policies, or sending people to check etc. In case we have a high level of collaboration, we need to invest in resources and in that relationship specific assets, which again come at a high cost. And when we do both of them at a moderate level, it will work out economically best. These two, evaluation and collaboration, can act as complimentors to a certain extent, beyond which the effect of complementarity is gone. But when you look at a larger perspective, about the environmental or social performance, the higher these two, the better it actually is. We come to the point where organisations have to really see what their motivation is. Is it to be environmentally friendly, but still want to be economically viable? Naturally they cannot do extreme levels of either, but they must understand that economically they will be much better, but environmentally they will not be as high as they wish to be. If you look at the European firms, the entire environmental regulations are more highly evolved when compared to the US firms. The US regulations are focussed on single firms, if the are environmentally friendly - they look at the process of the firms, the product of the firm, etc. But if you look at the product from the given company, it is not made entirely by that one company. It has its supply chain. Nowadays 60 per cent of anything that is produced is given by suppliers, but even then if you look at process perspective, everything is focussed on a single organisation and there is no motivation for companies to say, well I want to make my entire supply chain sustainable. It SCMPr

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guru speak is never for profit perspective or economic perspective, but it become more of a first mover advantage. If I make myself better, then I will be considered as a sustainable firm, which will increase my goodwill and the image of the firm, which eventually will lead to more profits. This is certainly one way of looking at it. The other way is, if I make my supply chain better, in a way I am making it lean, I am eliminating waste, reducing its cost, eventually if I am coming up with a sustainable product, where the carbon footprint is much lower, naturally it will become the in thing. If this belief comes to prevail, then these companies will be at a much better position than the companies that are not doing it. It is never institutionalised, never a coercive pressure from the government. Of course there are always stakeholders who put pressure, consumers might say I want to buy your product even if it is costly. How much of it will happen I do not know. Naturally we are willing to pay a lesser cost for a product rather than saying that I want to buy it because it is green. But consumers will get to the point where they will not buy a product even if it is cheaper. Then the entire ball game will change and all these companies will have to change. But when that happens, the companies being at the forefront will naturally be at a much better place than the others. That is driving some firms because they want to be there, they want to be the first guys to do it. Nowadays we see social issues coming up, like when Nike gets into trouble when one of its suppliers uses child labour. Those social issues are becoming a big challenge for organisations. They need to make the entire supply chain is social friendly. These things are happening, but environmentally there is not much progress. We still see dumping of electronics waste in China. But it is not changing the way the entire supply chain is working. These are a few examples, where objective where there may be cost cutting from one side and it could be looking into the future and how they would be perceived. There is another stream of research that talks about corporate social responsibility. This is again firm specific. It is coming at the supply chain level, I referred about Nike earlier. Some organisations are facing that. They are trying to audit their entire supply chain 12 SCMPr

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especially if they have a part of their supply chain in the developing nations. They are not just trying to see that they are following the norms set in that region, but are trying to see that they follow the norms set by the home country or the organisation that operates here. Nowadays we do not have code of conduct that is specific for the organisation, but we have a specific code of conduct for the entire supply chain and see to it that the entire supply chain follows all such norms and rules. And that is happening and is becoming a big thing across the globe. This leads to what we call a performance paradox. You are saying that you need to be sustainable, but sustainability does not give you any economic viability. Every organisation according to Friedman, is to make profit and the only person that they need to satisfy is the stockholder or equity holder.

Nowadays we do not have code of conduct that is specific for the organisation, but we have a specific code of conduct for the entire supply chain and see to it that the entire supply chain follows all such norms and rules. But if you look at the European culture, it is very different. They never talk about stocks. They talk about stakeholders. They are not just looking at who has invested in the organisation, but are looking at the entire set of people, the society and everything that can affect them for what they do. That is a totally different change of mentality. In India, it is the same way. You satisfy your shareholders. You are responsible to them and you answer to them. So if that is our objective, then how can a company pursue sustainability when it is going to be against the norms of making money.


n insight

n Knowledge

n best practices

n mindset

n HUMAN RESOURCE

Implementing the SCOR Model Best Practices

Supply Chain Improvement in Developing Countries


Academic Advocacy Firms in developing countries are adopting best practices to improve their organizational performance. Fasika Bete Georgise, They have been focusing on achieving productivity gains International Graduate School for Dynamics in Logistics (IGS), University of Bremen in their operations by implementing best practices. Klaus-Dieter Thoben However, these efforts could not lead to expected Bremer Institut für Produktion und Logistik benefits. The main reasons for failure in adopting the GmbH - BIBA, Hochschulring 20, D-28359 Bremen, best practice which it face new environmental scenarios Germany, and different for which it was created. This paper explores Marcus Seifert, School of Industrial and Mechanical Engineering, the best practices implementation and challenges Hawassa University, Hawassa, Ethiopia encountered during the process of adoption. SCMPro brings you an extract from a paper which appeared in International Journal of u- and e- Service, Science and Technology, Vol. 6, No. 4, August, 2013 By

T

he manufacturing industry in developing countries is facing fierce challenges from both local and international competitors into the marketplace. For these challenges, manufacturers must be able to understand their customers to satisfy better than their competitors and improve their supply chains dynamically. Therefore, companies are pressurized to build their managerial and technical capabilities so that they should retain their markets and integrate in the global business. Due to the recent trend and practices that suggest improving the whole supply chain members as one of the tools for competitiveness, for that the manufacturing industry in developing countries (MIDC) needs to model, measure, benchmark, implement best practices and devise a mechanism for improvement the whole supply chain. The experience of firms in developed countries in modelling and improving the global supply chains can be used as input to benefits the manufacturing industry in the developing countries if the experience transferred and implemented appropriately. Currently, many MIDC are undergoing both technological modernization and transition. In order to facilitate the changes, they have started program to improve their industry performance and competence using different modern management philosophies and techniques such as Total Quality Management (TQM), Just-In-Time (JIT), Flexible Manufacturing System (FMS), Performance Measurement Systems (PMSs), Balanced Scorecard (BSC), Business Process Reengineering (BPR) and Lean Manufacturing. However, it is not sure that innovations best practices can be applied in the different context and environment of less developed countries. The attempt to implement might face a variety of problems that could not occur in developed countries. On the other hand, these modern tools are becoming increasingly expensive to build from scratch and implement in the developing country’s scenario. Consequently, an excellent experience from the developed world that has shown success stories could be transferred for application that satisfies some of the requirements, then extended, tailored for local developing country’s requirements. Recently, academic and practical researches are focused on how manufacturers could use the different management techniques and practices to react to these challenges. Supply Chain Management (SCM) is one of the foremost solutions to leverage manufacturers’ ability to compete and developing a collaborative relationship. A company can propose many initiatives to improve their supply chain at different levels. It is inevitable for the firm to screen and evaluate the different initiatives before impleSCMPr

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Academic Advocacy Recomended Best Practice Adaptation Steps Application Factors Infrastructure Relationship Organizational National

Searching and Selection Transferability Relevance and compatibility

Application Adapatation

Training

Conceptual and contextual

Cultural conflict Re-adaptation

menting the initiatives. Managers’ were focus on SCM practices by classifying them as– the best, the good, the bad, and the worst. The word `best practices´ appears in the advanced SCM because it benefits manufacturing industries in their improvement activities. The Supply Chain Council was developed a Supply Chain Operations Reference (SCOR) model that incorporates the best-practice that helps this paradigm shift. However, the MIDC is facing challenges in adopting the best practice to their business processes.

Transferability of Best Practices to Developing Country Firms Research activities have undergone by practitioners and academician on the major issues about best practices, its transferability and adaptability to suit to developing countries’ scenarios. Technology transfer has been considered as a tool to bypass of growth for industrialization and advancement by developing countries. The recent trends of global integration and collaboration are also encouraged experience sharing and bench-

Enabler Mean Electronic mail system 2.8 Automated material handling system 2.0 Enterprise Resource Planning systems 1.8 Advanced planning and scheduling software 1.7 Electronic data interchange (EDI) capability 1.7 Bar coding/automatic identification system 1.5 E-procurement system 1.5 Transportation/warehous management 1.3 Forecast/demand-management software 1.2

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Effectiveness of the transfer

Reconcillation with the existing practice

The Level Enablers for Best Practices Success

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Evaluation

mark against their practice and try to apply some them in their own organizations. However, such activities have been a challenge even for developed countries. If the best practices’ implementation is a challenge even to companies in developed countries, what could happen for firms struggling in unstable contexts such as those of developing countries? The experience of developed and developing countries has shown the importance of adapting existing and already tested model to each particular organization and context. This general lesson applies to less developed countries (LDCs) like Africa as well. Adaptation can potentially be used to reduce new research development time and costs. There are a lot of efforts are actually being attempted on adoption and implementation modern management techniques and philosophies in developing countries. They might potentially prove to be failures for different reasons, which may not be experienced in developed countries.


Academic Advocacy portant to consider their existing scenarios, situation and priority. The SCOR best practices generally can be categorized into two categories. Due to the existing challenges and lack of basic requirements as enablers to implement best practices in scenarios of developing countries, the firms must look for the best practices that suit their scenarios. Some of the best practices need a large investment for implement as infrastructure than others. Others initiatives can be the best solutions for their current and priority problems like quality and productivity

The Challenges of Best Practices Implementation Type of challenges

Mean

The existing model specificity to the developed countries operating envi- 2.97 ronment Quality of Skilled and cost effective workforce

2.94

Lack of Information &communication technologies (ICT) infrastruture

2.93

Difficulty to implement the models & handles for practical operations

2.79

Non systematic approach to measuring customer requirements

2.78

Management practices and organizational working culture

2.77

Difficult to establish rerlationships based on shared risks & rewards

2.68

Lack of employee loyalty /motivation / empowerment

2.57

Lack of physical infrastructure

2.45

A lack of willingness to share needed information

2.45

Different practical researches and experiences have shown the models and practiced that demonstrated success in the developed world may fail in developing countries.

Best Practices Implementation Barriers and Enablers Implementing best practices in manufacturing system is not an easy task. For any change in organization to take hold and success, the challenges or barriers need to be identified and understood. The questions were set up on a four-point Likert scale to measure the extent of barriers and challenges described by each of the items. The scale was ranged from 1 to 4 where 1 = never challenge, 2 = few challenge, 3 = challenge, and 4 = strongly challenge. The best practices barriers are analyzed based on the status of best practices implementation by the respondent companies. The three main barriers in firms were the excising model best practices specificity to the developed countries operating environment, quality of skilled and lack of ICT infrastructure. Challenges from interviewed firms also demonstrated similar results. The major challenges were: lack of expertise & professional experiences, the best practice ideas comes and changes without critical

The SCOR best practices generally can be categorized into two categories. The existing challenges and lack of basic requirements as enablers to implement best practices in scenarios of developing countries, the firms must look for the best practices that suit their scenarios. thinking about the use, management only involved in routine production operation, lacks commitment for the innovative ideas and technologies, lack of attention and awareness given for the best practice implementation, less attention for research & development activities, financial constraints for such intervention, low level of acceptance & high resistance for new ideas, lack of practical training & support form academic & research institutions, and lack of continuity & follow-up for introduced best practices.

Proposed Adaptation Model Based on these findings, the firms need to follow a systematic approach for adapting the SCOR model best practices. In this regard, it is imSCMPr

improvement activities. However, their adaptation initiatives are influenced by the challenges and current business practices. The findings show that most of the respondent firms have shown interests and put efforts to implement some of them. But, the results were below the expectations. The implementation of the best practice has faced different challenges and unavailability of the required enablers. Therefore, there is a need for developing countries to analyze their scenarios and then adapt the best practices that consider their real situations. The entire paper can be found at: http:// www.engopt.org/nukleo/pdfs/0181_a_ framework_for_supply_chain_design.pdf December 2013/ January 2014

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lead story

Humanitarian Supply Chain........

Preparedness to Partnerships P

eriodically the world is witness to large scale destruction of life and property – to either manmade or natural disasters. From the Himalayan Tsunami – the flash floods in Uttrakhand in 2013, the earthquake, tsunami and nuclear meltdown in Japan in 2011, the Latur earthquake in 2003, the Tsunami of 2004, the earthquake in Bhuj in 2001 to the famine in India, China, Soviet Union, and the African countries, we have seen large scale disruptions to life and property.

Disasters are on the rise, more complex, and donor support is increasingly unpredictable. In response to this trend humanitarian agencies are looking for more efficient and effective solutions. SCMPro looks at the evolution of supply chain management in disaster relief, Issues, Key performance area, risks and its impacts on disaster management. 18 SCMPr

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lead story

While the onus of alleviating the suffering falls on Governments – sometimes across the globe and NGO’s, the backbone of the entire relief and rescue operations in the supply chain – which we distinguish from the trade supply chain by calling it the “Humanitarian Supply Chain” Unlike the trade supply chains, the Humanitarian Supply Chain is a short operation, in harsh and devastated terrain, often under information blackouts. And it moves from project to project. For this issue of the SCMPro, we decided to take a look at Humanitarian Supply Chain. In a country where trade supply chains are still struggling, humanitarian Supply Chains are not given that importance. A large part of the humanitarian supply chain is managed by the army. However, given the fact that we are facing constant threats from natural disasters, we believe it is time for us to spend some time exploring Humanitarian Supply Chains. We start with an Academic exploration of Humanitarian Logistics in” Humanitarian Logistics – Through the Researchers Eye” where we explore the academic underpinnings to HSCM. Across the globe HSCM has been a recent phenomenon. We bring you how researchers look at HSCM.

We then explore “Fundamental Issues in Humanitarian Logistics” – where we explore the fundamental questions and issues regarding humanitarian logistics and the different modes of network management and supply chain organization. From there we move on to “Supply Chain and Humanitarian Operations” where we take a look at the basic framework for supply chain distribution process in humanitarian logistics, which can support the development of models for rapid response to disasters. In our next article on “Key Performance Indicators in Humanitarian Logistics” we take a a look at the Key Performance Indicators developed by International Federation of Red Cross and Red Crescent Societies. And finally we close with “Disaster Risks and Impacts on Supply Chains” where we look at the impact disasters have an on supply chains. Humanitarian logistics addresses the supply chain impact on disaster. The converse, though not a part of humanitarian logistics, has its own challenges. We take a look at a policy framework mooted by Asia-Pacific Research and Training Network on Trade in a working paper. Happy Reading!

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Humanitarian Logistics

Through the Researchers Eye In recent years, an increasing number of natural and man-made disasters have hit various regions in the world, killing thousands of people and causing billions of dollars of loss. Humanitarian logistics is a critical element of a successful relief and rescue operation that focuses on the efficient management of flows of goods, information and services, to respond to the urgent needs of the affected populations under emergency conditions. Humanitarian Logistics is yet to take root in India. SCMPro takes a walk down the academia’s response to humanitarian logistics.

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e start with the academic definition to humanitarian logistics by Thomas and Kopczak who define humanitarian logistics as “the process of planning, implementing and controlling the efficient, cost-effective flow and storage of goods and materials, as well as related information, from the point of origin to the point of consumption, for the purpose of alleviating the suffering of vulnerable people” The field of humanitarian logistics has been extensively studied overseas, especially since 2006. According to Nathan Kunz and Gerald Reiner, who analyzed over 174 papers on Humanitarian Logistics for their research, “the existing literature focuses mainly on disaster relief, with continuous aid being almost entirely overlooked. The reason for this is that continuous aid allows for better planning and continuous improvement activities and seems to be less challenging to manage than emergency disaster relief. Another possible explanation is that continuous aid operations are more complex to analyze as they require a multi-period approach, which is more complex to model. In our opinion, additional research should address issues from the con-

tinuous aid setting, such as partnerships with local companies, the inclusion of the aid effort in the economic development of an area, etc.” According to available data, the growing trend in the number of publications per year demonstrates that humanitarian logistics is a new field of research that has attracted increasing interest only in recent years. The strong increase in published research since 2006 can be explained by the fact that in the years 20042006, three major natural disasters happened, and the logistic response suffered from inefficiencies, especially in the case of the Asian tsunami. Acknowledging this, several researchers started to investigate that area. This increase can also be partially explained by the fact that during the years 2007- 2011, several journals published special issues focusing on humanitarian logistics, and a new journal on this topic was launched in 2011. An interesting aspect in Humanitarian Logistics study is that almost all studies have focused on sudden onset disasters, like a earthquake, flood or tsunami. There is very little work done on slow onset disasters like drought or famine – events that unfold over a period of time allowing the government and relief agencies to marshal their resources and deploy them SCMPr

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lead story area of reconstruction or rehabilitation. In the immediate aftermath of the disaster, there is a huge outpouring of sympathy and donations – in some cases of things that have no use. However as the immediacy of the rescue efforts wanes, attention shifts, and rarely do we study the reconstruction efforts ad their success. For example, post the Himalayan Tsunami, we do not know about the reconstruction work in Uttrakhand. It should be kept in mind that the quality of logistical activities during this phase strongly impacts on the success of the whole disaster recovery process, especially in terms of sustainability and long-term effectiveness. This is yet another area that begs attention. The need is for the integration of humanitarian logistics into long-term economic development – for example through capacity building or local procurement, to ensure that life returns to normal. The classification according to the research methodologies used in the papers shows that most of the papers use simulation and modeling, and Only a few papers use empirical research. The most studied dimensions so far are relief operations, in particular sudden onset natural disasters, with a major focus on the disaster response phase. The analysis by Nathan Kunz and Gerald Reiner of the situational factors leads to interesting findings. The absolute occurrence of keywords shows that some concepts are used frequently Theoretical Framework for Analyzing Humanitarian Theoretical framework for analyzing Humanitarian Logistics research in all publications. The word “governLogistics Research ment” for example is the most mentioned word, and appears in 73 per cent of the papers, showing the high importance of governments in humanitarian logistics. The word “politic” is the fifth most mentioned word (521 times), which also confirms the importance politics play in humanitarian logistics. This has led to the call by Tomasini and Van Wassenhove (2004) for example for a de-politicization of humanitarian supply chains in order to avoid the manipulation of relief aid by stakeholders such as local governments. An in-depth assessment of disaster relief, with an analysis of a greater number of humanitarian responses to natural disasters, will allow a more accurate view of these often missed opportunities and organizational solutions. A greater range of disasters with similar origins need to be studied from different sources. The crossing of experiences and best practices will allow the identification of important points for the exchange and development of Source: A meta-analysis of humanitarian logistics research by Nathan Kunz and Gerald Reiner shared solutions. better. However, these slow onset disasters have a more severe and long lasting impact on the affected population, primarily due to their larger scale. Therefore, even for responding to slow onset disasters, careful logistical planning and operation is crucial. Another type of disaster that has escaped research scrutiny has been manmade disasters. Manmade disasters are generally thought of as preventable and do not have the “pull factor” of natural disasters. One reason for the general lack of interest among researchers could be the fact that manmade disasters are more complex and often involves legal angles. Many industrial disasters – like the infamous Bhopal Gas Tragedy, Chernobyl and Three Mile Island disasters – have very long term consequences and require continued intervention. The effects of the Bhopal Gas Tragedy are being felt to this day. Relief, in such cases is handled by governments and not NGOs. In some cases, data on these disasters is hard to come by. Based on the high proportion of man-made disasters in relief organizations’ programs, and because of the complexity of such disasters, future research should put a stronger focus on the humanitarian logistic response to man-made disasters and their particular challenges. Yet another instance of absence of research is in the

Source: A meta-analysis of humanitarian logistics research by Nathan Kunz and Gerald Reiner

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lead story

Transforming logistics

The Breakdown Journey.

Humanitarian Logistics is the process of planning, implementing and controlling the efficient, cost effective flow of goods, materials and equipment as well as related information from point of origin to point of consumption for the purpose of meeting the end beneficiaries requirements. SCMPro discusses the fundamental questions and issues regarding humanitarian logistics and quantifies different modes of network management and supply chain organization (including centralized versus decentralized).

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hen disaster strikes, it is estimated that local communities will be selfreliant only for 48 hours, after which humanitarian organizations must be operational on the ground. When disasters strike, stakeholders mobilize, but not necessarily in a coordinated manner, and the degree to which a humanitarian operation is successful (or not) depends on how well multifaceted issues and questions have been addressed. During a disaster, a complete break down of infrastructure and services, incomplete information on the extent of damage and the needs of the local population, powerful emotions of sympathy, anger and frustration at the pace of relief operations, and even chaos may rein. Hence, it is essential to harness all the available tools, including methodological and technological ones, in order to address all phases of the disaster cycle. Recent disasters around the globe had impacted the affected local populations (and beyond) in many ways. The challenges faced by local, regional, national and international relief agencies and governments to prepare for and manage the response activities have emerged as a common factor in all of these extreme events. From these experiences, there is a clear need for major improvements in the performance of humanitarian logistics in terms of efficiency. Collecting, organizing, synthesizing and creating frameworks with the knowledge derived from both theory and practice, quantitative as well as qualitative, in humanitarian logistics is emerging and the importance of this new branch of logistics and supply chain management needs to be emphasized. By working together, learning from one another, and documenting research and findings in the field, will enable practioners to gain valuable insights and information for best practices and fundamental tools, methods, and metrics in order to drive both theory and practice forward. The magnitude and frequency of the disasters are growing, along with the number of people affected by them. This creates urgency for collectively addressing the challenges that humanitarian logistics pose.

Movement of people from disaster zones When disaster strikes, large numbers of people have to be moved out to safe zones – to temporary transit centers and refugee camps. Although this is usually

the role of the government, NGOs and other organizations often participate. Logistics is critical for a successful operation: to locate and mobilize the large vehicles needed, and to ensure sufficient amounts of fuel is not an easy task when fuel is not available in local markets. In addition all the support needs of the transported people depend on logistics: food, water, sanitation and shelter.

Influx of humanitarian staff A report on the relief and rescue effort in the Caucasus conflict mentions “An often under-estimated variable and a formidable logistics challenge is the movement of staff required to deliver relief and rescue efforts. How do you get large numbers of relief workers to the field and ensure their safety and shelter? For example, according to newspaper reports, in the Caucasus, the cost of housing rose tenfold from pre-emergency costs with the influx of non-local aid workers. The housing supply in Baku was limited. With the arrival of thousands of aid workers willing to pay inflated prices, large numbers of the local population started to move out in order to be able to take advantage of the economic gain from renting out their homes. The ripple effect was that local merchants also raised the cost of services; costs of supplies in the markets rose accordingly, making

Some fundamental questions/issues that need addressing in a disaster, which can serve as a guide for more efficient and effective humanitarian supply chains n What is the status of the infrastructure: transportation, healthcare,

telecommunications, housing, emergency services, such as police and fire departments, and even governmental? n Who is impacted after a disaster? n What is the severity/degree of impact? n What are the needs of the population impacted? n Who is going to help? n How are the aid operations performed? n What types of plans are needed for the relief operations? n What are the preparedness actions required? n  What types of critical supplies: water, food, medicines, shelter, are needed and in what amounts? n What are the mechanisms and processes for distribution? n  How should the influx of personnel, information and materiel be handled, processed, and delivered?

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lead story Movement of Materials and Information Donors

Material Flow Information Financial Flow

Suppliers

Humanitarian Organisation (HO)

life very difficult for the local population that stayed. These are just some of the logistical challenges confronted by humanitarian agencies” In many disaster zones across the world, NGOs are the first, and often the only ones to offer rescue and relief operations. From creating and implementing complicated logistics solutions and dealing with ‘the last mile’ NGOs have been willing to invest time and effort to make things work. They have gained considerable expertise and experience in movement and accountability processes and in the effective use of gifts-in-kind (GIK) from corporate sponsors. With modern technology, advances in real time capture and analysis of information, greatly improved approaches to logistics and supply chain management and greater access to know-how, it is critical for these NGOs to learn from the corporate and for-profit sector and incorporate emerging best practice. Their ability to do this, however, has been hindered by a number of factors.

Field Units

Beneficiaries

Most HLP’s have indeed also greatly undervalued the role of logistics, supply chain management and integrated systems support. Funding Funding is an issue with NGOs – they are highly dependent upon voluntary donations generally for paying for direct project costs. These donations are often not enough for a smooth operation. With the result, NGOs live from donation to donation. This does not allow for a healthy strategic process to develop as both planning cycles and funding cycles are generally unpredictable. And it rules out investment in improved systems.

Lack of knowledge

Lack of investment in technology and communication

Humanitarian logistics has become quite complex - involving components such as procurement, transportation, warehousing, inventory management, trace and tracking, bidding and reverse bidding, reporting and accountability. Normally, these components are supported by experts, know-how, IT systems, MIS systems, framework agreements, corporate relationships, infrastructure, standardization and collaborative initiatives. In the humanitarian world, these key support mechanisms are rare. Much of the essential logistics work undertaken by humanitarian agencies is not industry standard.

Due to limited financing options, there has been very little investment in implementation of modern management information systems, information technology or logistics systems for humanitarian logistics players (HLP). Most HLP’s lack modern ‘systems capacity’ in just about any category. Most HLP’s have indeed also greatly undervalued the role of logistics, supply chain management and integrated systems support. This is an area that, if better valued by senior management, could have a significant financial return on investment. Millions of dollars could be saved each year by simply being able to work more ‘smartly’ – more efficiently.

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ONE DAY WORKSHOP ON TOC APPLICATION In today’s competitive business environment, where meeting customer expectation, forecasting the market demand and reducing variability in the process are some of the main concerns of any supply chain professional. TOC workshop from SCMPro, conducted by Goldratt consulting, India will take you through the Theory Of Constraint (TOC) approach to overcome the difficulty in realising the true potential benefits of supply chain.

30th January 2014

Venue: Sofitel, BKC, Mumbai

Eligibility: The delegates should be from the category of GM & above of supply chain, logistics, distribution, planning, production, sales & marketing. Delegate Fees: Rs. 8000* + Service tax per delgate Register before 2nd January 2014 and and pay Rs. 6500/- + tax only. Last date for Registration: 10 January 2014. (Only limited seats available) * Includes Tea / Coffee, Snacks and Lunch

Registration Process: Please sent your requests with details to soney.mathew@scmp.in or call on 022 60020121 / 22 Payment Detail: Payment should be made by cheque/DD drawn in favour of “B2B Media Group” and sent it to B2B Media Group, 211/1, Sona Udyog, Parsi Panchayat Road, Andheri (East), Mumbai 400069

Agenda - Management Attention No. 1 Constraint of any organization - Business Game Exercise - PQ Problem - Introduction to TOC Concepts -

4 Pillars of TOC Five Focusing Steps T, I & OE Concepts of Flow

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Types of Operations Core Conflict of Operations SDBR Solution How to deal with priorities?

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What is the current reality? Moving closer to actual Demand Concept of Pull Distribution Setting Inventory Targets Priority Mechanism

- TOC application for Production

- TOC application for Distribution with reference to After Mkt

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lead story

Humanitarian Supply Chain

Complex Operations

The prime focus of humanitarian logistics is to deliver relief to populations devastated by calamities – both natural and manmade. Efficiency is the key success factor because it ensures the proper flow of goods and services in a complex supply chain. This articles takes a look at the basic framework for supply chain distribution process in humanitarian logistics, which can support the development of models for rapid response to disasters. 28 SCMPr

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lead story

N

atural disasters, or manmade calamities, when they occur in populated areas, cause destruction of local infrastructure and population. This creates deprivation and suffering to large numbers of people. In some cases it may call for large scale rescue operations to bring people out of these areas. Any disaster triggers a relief and rescue mission to provide rapid assistance to victims in different ways, such as rescuing those who are stranded, providing medical assistance to the wounded, collecting and disposing the dead, resource allocation, provision of food aid, shelter and medical care, and restoring access to remote locations. Delays in relief and rescue can cost lives. Therefore, efficiency in logistics is a key success factor, because it ensures the smooth flow of goods and services in a complex supply chain. To quote “Logistics plays a key role in disaster response operations; it serves as a link between disaster preparedness and response, between procurement and distribution, and between headquarters and the field, and is crucial to the effectiveness and responsiveness to major humanitarian programs such as health, food, shelter, water and sanitation.” A typical Humanitarian Supply Chain, like for any other operation includes the following activities: preparation, planning, procurement, transportation, storage, tracking and customs clearance. However, unlike the business supply chains, humanitarian supply chains are driven by the necessity to save lives, not just to ensure the efficient distribution of goods for trade. In the humanitarian logistics, the end user (the population receiving the aid) rarely participate in the transaction, having little control over supplies. According to experts “when applied to humanitarian

action, the supply chain needs to be flexible and able to respond quickly to unpredictable events effectively (which can be the difference between life and death) and efficiently (to treat a greater number of victims) under heavy budget constraints.” According to available reports, “The 2004 earthquake followed by a tsunami in the Indian Ocean caused extensive destruction to 14 countries bordering the Indian Ocean. Its defining characteristic was the excess of NGOs involved and the overwhelming amount of donations made available. The low quality of operations and excess donated as unnecessary goods caused a supply chain overload that suffered with operational problems inherent in quantity and quality of local and international staff; inadequate methods, programs and tools, and little involvement in process management or coordination. Accordingly, the consequences were obstructed airports, excess containers blocking ports and customs areas, warehouses saturated, expensive materials and equipment deteriorating in the sun and rain, inadequate supplies and insufficient staff to provide records of materials, poor logistics reports and, in addition to losses, theft and sale of donations.” The single biggest challenge of humanitarian supply chain management is to establish a flow of voluntary contributions from international and domestic sources, some of which may not be useful, may not come in time, or even be what is needed, with minimal waste of resources. Another major issue is the poor quality and overwhelming quantity of information. Sometimes getting the right information may be difficult because of the breakdown of power and communication infrastructure. The quality of

Model of a Humanitarian Supply Chain Government Donor

Aid recipient countries

International Agencies

Communitybased organizations (local partner)

International NGO

National NGOs (in recipient countries of aid)

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lead story Focus of the Study in Humanitarian Supply Chain Preparedness

Assessment / Appeals

Resource Mobilization

Procurement

Supply and Distribution

Transportations

Supply and Distribution

Bought and Storage

Distribution Shipping

Source: Adapted from Thomas (1).

information is extremely important for the frequent decisions that need to be made. The management of a humanitarian supply chain involves the integration and coordination of a large dispersed group of experts with a view to ensuring the basic mission of humanitarian aid: “the delivery of products and/or services to the needy, whose immediate or long-term survival can depend on the efficient execution of operational activities of logistics and supply chain, including the crucial ‘last fifty meters’” Oloruntoba and Gray have created a simple model of humanitarian supply chain which allows a one directional flow of goods and services. One of the barriers to optimal humanitarian supply chain is the administrative and logistical bottlenecks due to poor infrastructure for receiving aid and the number of agencies and governments involved sometimes from not so friendly countries. According to Oloruntoba and Gray, a major difficulty in coordinating the humanitarian supply chain has strong ties to the political interests and military forces of donors and recipient countries, the requirements of the “industry of donors”, and the lack of coordinated plans. Besides these, the geographical dispersion and poor communication between the disaster zone and the humanitarian organizations, as well as between different organizations can hamper the humanitarian logistics.

Information content Based on experiences and interviews during the earthquake in Haiti in 2010, researchers identified a few key information areas for effective Humanitarian Logistics - resource allocation policies, needs assessment, uncertainty of demand and supply, location for storage and shipment of goods, type of vehicle fleet and technology, and uncertainty about routes and vehicles. An analysis of major natural disasters will identify the key processes and/or actions that need to be taken in the context of the distribution of supplies for secondary purposes.

Best practices proposals An analysis of the past disasters could help us identify a framework that will help in better performance in the process of humanitarian logistics. 30 SCMPr

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Transport The first step is to map the risk areas and identify the availability of transport type (road, waterway, air) that can be mobilized quickly in the event of a natural disaster. A prior survey of transport service providers, government entities, private fleets that can be roistered including, identifying the types of vehicles and their capabilities will help when forces need to be mustered. Most often, humanitarian operations use road and air transport. However, a plan B using other modes (water), needs to be in place, in order to more efficiently support distribution activities.

Storage and Handling Having a comprehensive list of nodes where the goods can be received in order to manage the distribution by warehouses and subsequent storage in groups or “supply kits” to facilitate distribution can reduce the lead time in delivery. At these nodes, the goods are stored, handled, screened to identify unwanted or rejected material, shipped and the rejected material channeled to storage. In nodes where international donations are received, it will help if the staff has knowledge of customs clearance. This will speed up the movement of goods. To mobilize the relief efforts at the shortest time, an analysis of potential points for storage, belonging to government entities or private organizations, and the availability of equipment (forklifts, pallet conveyors, etc.) needs to be able to be mobilized in the shortest time possible.

Distribution An efficient distribution program requires information data about the goods available and the people affected. The number of distribution points should be minimize the distance to the beneficiaries, but they should be placed in centers already established. Humanitarian logistics are complex processes, where the learnings from previous disasters are not of great value as the nature of the terrain, the type of disaster, the requirements of the population and the infrastructure in place. This leads to delays and ill-coordinated efforts. When it comes to humanitarian logistics, the key is being prepared, based on the unique features of the geography.

Performance Evaluation


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lead story

Key Performance Indicator for

Humanitarian Logistics

When disasters strike, response by relief organizations to deliver aid must be fast and agile. The disasters may occur anywhere in world - from the well developed country to remote Uttarakhand. Donors, beneficiaries and media will closely monitor how efficiently the response is. SCMPro look at the KPI developed by International Federation of Red Cross and Red Crescent Societies.

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lead story

H

umanitarian logistics involves tradeoffs of speed, cost, and accuracy with regard to the type and quantity of goods that are delivered. To balance these trade-offs, it is necessary to measure supply chain performance. However, the challenges to capture data related to the procurement and distribution of goods has prevented a systematic process of performance measurement from being implemented. The International Federation of Red Cross and Red Crescent Societies (IFRC), has developed four indicators which measure logistic performance in terms of the trade-offs of speed, cost and accuracy: appeal coverage, donation-to-delivery time, financial efficiency, and assessment accuracy. Taken together, these indicators create a “scorecard” that will help the logistics department gauge performance both during and after a relief operation. The business or commercial supply chain competes with humanitarian logistics in terms of speed – both require movement of goods quickly and at the least cost. When we compare humanitarian logistics with military logistics, the convergence is stark. Both operate in harsh conditions, short ramp up periods and difficult working conditions. This was the starting point for the development of a KPI system for disaster relief operations. Research by IFRC revealed three principles applicable to the humanitarian sector. Align metrics to the organization’s core strategy If a metric is not critical to fulfilling an organization’s core strategy, it should not be included on the scorecard. There is a tendency when designing performance measurement systems that “more is better,” but

if too many metrics are selected, the scorecard can become too cluttered, preventing individuals from truly gauging performance. Understand the dynamics of how performance is driven. The faster that goods are delivered to beneficiaries after a disaster, the less likely these goods are accurately meeting the needs of the beneficiaries, and the more likely the operation will be costly. The organization responding must decide in advance how it wants to align itself along the dimensions of speed, accuracy, and cost. Review the metrics periodically as performance improves–the goal of implementing metrics is to improve performance over time, and as goals are achieved, targets must be re-evaluated and revised as necessary to ensure continuous improvement in the organization’s supply chain. Using the data from the 2005 South Asia earthquake operation, IFRC evolved a set of four indicators: appeal coverage, donation-to-delivery time, financial efficiency, and assessment accuracy. These indicators do not represent pure index calculations, but rather they serve to help the logisticians get a sense of how well they are achieving their goals related to each “appeal,” the term which refers to the list of items recorded on an operation’s total budget. Appeal Coverage: This indicator comprises of two specific metrics: 1) percent of appeal coverage and 2) percent of items delivered. The first metric is the quantity of items that have been pledged by donors out of the total number of items requested for the operation. Its purpose is to indicate how well and how quickly the organization is finding pledges for the requested items. The second metric is the per-

South Asia Earthquake Appeal Date: October 9, 2005

Status Update: Week 1 Date: October 16, 2005

Operation Tool (weighted)

Priority 1 Housing

Priority 2 Kits & Sets

63%

61%

77%

After 1 Week

6%

1%

4%

Mean (#days)

3

3

3

Mean (#days)

2

3

2

Total Op Target

Percent of Appeal Coverage (in quantity of items) After 1 Week Percent of Items Delivered (in quantity of items) Donations -to-Delivery Time

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lead story South Asia Earthquake Appeal Date: October 9, 2005

Status Update: Final Date: March 18, 2006

Operation Tool (WEIGHTED)

Priority 1 Housing

Priority 2 Kits & Sets

Percent of Appeal Coverage (in quantity of items) After 1 Week

63%

61%

77%

After 2 WeekS

47%

45%

18%

After 1 month

74%

73%

51%

After 2 months

91%

92%

71%

After 3 months

93%

99%

100%

Percent of Items Delivered (in quantity of items) After 1 Week

6%

1%

4%

After 2 WeekS

9%

5%

2%

After 1 month

33%

27%

8%

After 2 months

48%

46%

19%

After 3 months

67%

72%

47%

Mean #days)

33

35

29

Mean #days)

28

31

24

Donations -to-Delivery Time

Financial Efficency (Donor Cost- Budget Cost) / Budget Cost

-5%

-11%

30%

(3,510,849)

(5,209,538)

1,810,531

10%

N/A

N/A

After 2 Weeks

131%

118%

365%

After 1 month

139%

123%

377%

After 2 months

148%

127%

493%

After 3 months

158%

127%

493%

Actual CHF Spent - Budget CHF Transportation Cost / Total Product Cost

Assessement Accuracy: Revised Budget /Original Budget

centage of items that have actually been delivered onsite out of the total number of items requested for the operation. Together, these two metrics indicate how well the organization is meeting its appeal for an operation in terms of both finding donors and delivering items. Donation-to-Delivery Time: This indicator measures how long it takes for an item to be delivered to the destination country after a donor has pledged to donate it. Both the mean and median number of days are reported on the scorecard. These two metrics help gauge both the average and the consistency of the delivery lead times. Financial Efficiency: Three metrics comprise the indicator of financial efficiency. The first two metrics use two methods (one relative and one absolute) to compare the budgeted prices to the actual prices paid for items delivered in the operation. The third finan34 SCMPr

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cial efficiency metric incorporates the transportation cost of delivering the goods to the beneficiaries. This metric is expressed as a ratio of the total transportation costs incurred over the total costs for delivered items at a point in time. The value of this ratio should decrease over time, as less expensive transport methods are used after the initial delivery phase and as more items are delivered on-site. Assessment Accuracy: How quickly donations are pledged and goods are delivered to beneficiaries relies on how accurately the field personnel assessed the needs of the population affected after a disaster. Assessment accuracy therefore indicates how much the operation’s final budget changed over time from the original budget. This metric contextualizes the values of the other metrics on the scorecard. For example, if it appears on the scorecard that the delivery lead time of a specific type of item was longer than

Total Op Target


lead story

A key feature to highlight from the scorecard is the systematic use of designating “priority items” in each operation. If an organization determines at the beginning of an operation what the most important items are to deliver to beneficiaries, this will facilitate communication between donors who need to know what to donate. average in an operation, the assessment accuracy metric will indicate if the long lead time of that item was caused by an initially low estimation of the quantity needed. IFRC used the metrics to form a scorecard. To implement this system and determine if the organization is meeting its goals for the operation, the logistics department would analyze these scorecards at different points in time after the operation’s original appeal date.

When the operation has been completed, the information can be compiled in a Final Scorecard, which presents a cumulative snapshot of the logistic performance throughout the entire operation. A key feature to highlight from the scorecard is the systematic use of designating “priority items” in each operation. If an organization determines at the beginning of an operation what the most important items are to deliver to beneficiaries, this will facilitate communication between donors who need to know what to donate, field personnel who need to know what they are receiving, and the logistics department which links these two parties together. The prioritized items are prominently displayed on the scorecard so that the organization can easily see how quickly and efficiently these goods are being delivered to the field. As more organizations begin to adopt and implement these systems and this visibility is established, the use of key performance indicators will then become essential to further enhance the efficiency and effectiveness of these supply chains. By clearly defining operational targets and measuring actual performance to these targets, organizations will be better able to retain the lessons they learn from each operation and provide a higher level of service to their beneficiaries in the future.

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lead story

Human Supply Chain Management

Risks and Impacts

Humanitarian logistics is one aspect of a supply chain – a supply chain response to a compelling cause. However, apart from the response of the supply chain to a disaster, disasters too have an impact on supply chains. Humanitarian logistics addresses the supply chain impact on disaster. The converse, though not a part of humanitarian logistics, has its own challenges. For one it creates resilience in supply chains. SCMPro looks at the policy framework mooted by Asia-Pacific Research and Training Network on Trade working paper on the impact of disaster risk on supply chains.

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lead story

A

ccording to Council of Australian Governments, Disaster resilience is ‘the capacity to prevent, mitigate, prepare for, respond to, and recover from the impacts of disasters’. Building supply chain resilience enhances our ability to minimize the effects of future disaster events on communities, economy and environment. It also means we efficiently and effectively cope with the impacts of disasters when they do occur. Resilience is a dynamic quality and is usually developed and strengthened over time, it builds upon rather than replaces existing strengths and arrangements. Global supply chains expand the risks of natural disasters and in turn natural disasters affect supply chain operations. As supply chains go global and multi modal, these developments globalize disaster risks and bring extra vulnerability to businesses, particularly to their production networks. Natural disasters are one of the causes of disruption to supply chains. They usually result in widespread damage to a large number of companies and production locations at the same time. This has a severe impact on an industry and significant time is often required for recovery from natural disasters. According to a ARTNeT Working Paper, “some widely adopted supply chain management strategies also increase the risks of problems in situations of natural disasters. Examples include the “just-in-time” practice and lean supply chain management, which require more frequent deliveries of supplies, minimizing the non-value-added time and inventory. These efficiency maximization models in business increase the level of interdependence between firms and correspondingly raise the chances of a supply chain disruption. Also, the compression of non-value-added time in inventory

transfer and storage may remove the essential risk buffer between the production nodes and deepen the negative impact when natural hazards occur in the global supply chain. For example, when a disaster hits a supplier or a distribution link and disrupts the supply chain, the focal firm that adopts “just-in-time” practices will suddenly encounter production suspension due to supply shortages and the negative effect will transmit quickly to the downstream supply chain.” There are a few lessons from the great Japanese earthquake. In March 2011, an earthquake struck Japan triggering a devastating tsunami, which led to the meltdown of nuclear reactors in Fukushima. The disaster caused a record 210 billion United States Dollars (USD) in economic damage, representing 3.8 per cent of Japan’s Gross Domestic Product (GDP). The combination of the earthquake and tsunami damage and the meltdown of the Fukushima nuclear reactors affected broad areas and caused severe damage in various sectors, especially in the manufacturing and chemical industries. As a result of this disaster, individual firms suffered huge direct losses, and the disaster could have a longterm impact on the ability of firms to produce and deliver their products or services. On top of this, the disaster affected the employment opportunities in

Some widely adopted supply chain management strategies also increase the risks of problems in situations of natural disasters.

Disaster Impact Spill-over from the Great East Japan Earthquake

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lead story Japan, creating large scale unemployment due to closure of firms in the affected area. This subsequently led to labor migration from these area to other locations, creating fresh pressures on the supply chains. Another defining crisis was the floods in Thailand in 2011. A large number of firms had chosen Thailand as a low cost manufacturing center. And most of them were confined to the low lying areas in and around Ayutthaya and Pathum Thani. The floods caused significant impact on other countries through their global supply chains. In India, car manufacturer Honda was affected by the floods as some of its crucial parts were supplied from Thailand. Thailand’s supply chain disruption and production losses affected Japan, where the manufacturing production index fell by 2.4 per cent. In US, the price of hard disk drives tripled during the floods. Supply disruptions due to natural disasters are no more an abstract discussion. Given the scale of possible damage due to natural disasters, Asia-Pacific Research and Training Network on Trade has published a policy guideline for managing the impact of disaster risk on supply chains. The framework addresses three stake holders – the private business enterprise, the governments and the privatepublic partnership entures. According to the policy framework, Enterprises involved in global supply chains must adopt risk reduction strategies to increase resilience. Two key strategies are: Find a balance between efficiency and risk - While

Comparison of National and National Supply Chain Customers Nation A Focal Firm

Losses for earthquake damages in 2011

Items

Amount US$ millions 535.8

Repairs to property, plant and equipment (expenses for restoring to the original condition) Loss on disposal of stock 90.7 Loss on disposal of fixed assest 77.1 Fixed expenses durisng suspension of operations 73.3 (loss for inability to operate Loss on cancellation of lease contracts and others 37.3 Total loss on the disaster 814.2 Insurance payments received (198.9) Net loss on the disaster 615.3

Note: Calculated based on IUSD = 80.5 Japanese Yen Source: Renesas Annual Report 2011

sourcing from only one supplier can reduce production costs, it can also make producers vulnerable to disasters. Although having multiple suppliers in different locations may raise transaction costs, it reduces the risk of disruption by securing supply substitutes. To achieve a proper balance between efficiency and risk, firms should take risk into account and conduct a prudent cost-benefit analysis and implement measures to enhance disaster resilience. Such measures may include: 1) raising production flexibility to cater to the volatile nature of the market, 2) selecting suppliers on the basis of risk criteria rather than on pure cost minimization (Christopher, 2011), 3) shortening Global Supply Chain the supply chain and increasing supply chain visibility, 4) diversifying Global Supply Chain risks by using different distribution Worldwide customers channels and suppliers, 5) enhancing relationships with other supply chain partners. Nation A Focal Firm

Nation B

Nation C

Nation B

: A Production node : A distribution link (including services facilitating this process)

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Nation C

The second key strategy is to Invest in long-term continuity For Governments, the policy framework advocates a dual role. Governments have a responsibility to develop and disseminate information about risk and risk reduction measures to raise awareness within global supply chains and assist individual entities to prepare for potential natural hazards. Post-disaster recovery is another important issue for governments as the speed of the recovery process is the key to mitigating negative consequences on global supply chains.


EXCLUSIVE SEMINAR ISCM Brings you a a Unique Unique Conference Conference on on the the emerging emerging ISCM Brings you scenario scenario in in Supply Supply Chain Chain Management Management ISCM is is at at the the forefront forefront of of Supply Supply Chain Chain education education in in India. India. We We bring bring you you an an opportunity opportunity to to listen listen and and interact interact with with ISCM some of the experts in supply chain management from the Asia Pacifi c region in a one day conference on emerging some of the experts in supply chain management from the Asia Pacific region in a one day conference on emerging trends trends in in SCM SCM and and what what we we in in India India can can do do to to tap tap the the opportunity. opportunity.

Some Some of of the the probable probable speakers speakers are: are: Sean Sean Rafter Rafter – – Head Head Logistics, Logistics, Asia, Asia, Save Save the the Children Children Brian Brian Beveridge Beveridge – – Sr. Sr. Director, Director, Global Global Supply Supply Chain, Chain, ATMI, ATMI, USA USA Peter Peter L. L. O’Brien O’Brien – – Russell Russell Reynolds Reynolds Associate, Associate, Australia Australia Mark Mark Goh Goh K. K. H. H. – – Associate Associate Professor, Professor, NUS NUS Business Business School School (Department (Department of of Decision Decision Sciences) Sciences) Wayne Wayne Hunt Hunt – – President President // CEO CEO TOLL TOLL Global Global Logistics Logistics Divn., Divn., Singapore Singapore Dr. Dr. Ioannis Ioannis N. N. Lagoudis Lagoudis – – Assistant Assistant Professor, Professor, Malaysia Malaysia Institute Institute For For Supply Supply Chain Chain Innovation, Innovation, Malaysia Malaysia Paul Gallagher Gallagher – – Asia Asia Pacifi Pacificc Supply Supply Director, Director, DIAGEO, DIAGEO, Singapore Singapore Paul Gaurang Gaurang Pandya Pandya – – Vice Vice President, President, Industry Industry Strategy, Strategy, JDA JDA Software Software Group, Group, Inc, Inc, Dallas, Dallas, Texas Texas Sunil Sunil Chopra Chopra – – IBM IBM Professor Professor of of Operations Operations Management Management and and Information Information Systems, Systems, Kellogg Kellogg School School of of Management Management Dr. Dr. Mahender Mahender Singh Singh – – CEO CEO & & Rector, Rector, Malaysia Malaysia Institute Institute for for Supply Supply Chain Chain Innovation, Innovation, Malaysia Malaysia

If If you you would would like like to to participate, participate, please mail mail in in your your intent intent to: to: info@iscmindia.net info@iscmindia.net please Presenter Presenter

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Information supply chain

Drive Efficiency to New Heights

The seamless and consistent flow of information is a key component of any healthy business operation and surely for effective Supply Chain Management.

Q

Anil S. Sathe Senior General Manager, Supply Chain (Products Business), Blue Star.

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uite often we say today that we are going thro’ an age of information explosion. Scenario is no different when it comes to Supply Chain. We are constantly bombarded with information whether it is regarding exchange rate or commodity prices or market statistics or some industry specific information. Nobody can deny that information is vital to enhance decision making process, managing risks, improving market share, customer satisfaction and so on. People, processes, and machines - all produce and consume information, and there is typically a natural flow from one or more producers to one or more consumers. Information doesn’t just flow directly from producer to consumer, though it is often processed (and garbled) along the way by intermediaries that consume the information, process it in some way, and then provide that information to subsequent consumers. This flow is akin to a supply chain for physical goods. Raw information enters the supply chain and is then cleansed, transformed, combined, and put through one or more analytical and operational processes designed to deliver insights to the information’s consumers. Existing information supply chains need to

December 2013/January 2014

evolve to address emerging business requirements. For example, analytics of all kinds are becoming increasingly important throughout the enterprise. Whether to better understand customer behavior, ascertain business risk, introduce new product, or traceability, we are looking for more ways to use more information to improve outcomes. Well designed or well executed information system will add value in area such as: n Higher visibility n Real time availability of information n Greater accuracy n Better customer service n Higher productivity n Reduced paper work n Faster processing n Increase on-Time Deliveries n Improved Capacity Utilization Let us look challenges we see today in information flow across chain and how we can handle them.

Input (inbound) supply chain Challenge here it to integrate suppliers /service providers with the buying organisation. It begins with making them understand requirements in terms of drawings /specifications/packaging/test specifications/SLAs etc.


column Even bigger issue is to handle changes particularly for long gestation projects. Invariably we will find use of technology and making complete communication paperless has worked wonders in this area. Certainly lot more needs to be done on global platform where information simultaneously has to trigger changes and need actions at multiple locations. Even language barriers have to be crossed to put across your requirements correctly. One more area that needs vast improvement in Indian circumstances is tracking of shipments across the country. Particularly in applications, where storage conditions in transit can damage the product. Present solutions in this area are inadequate and we need to find answers in time to come.

Internal supply chain

Just as raw materials are processed into finished goods, information management systems as being made up of multiple and , overlapping supply chains.

This quite often may be more difficult to handle since internal supply chain deals with multiple interfaces and information flow in real time is a huge challenge. While there could be many strategic issues on which information flow will happen, in the context of this article we will restrict the same to various transactional issues like: stock replenishments, quality records for traceability, financial transactions etc. How many time we struggle due to incorrect items codes, duplication, mismatch in system stock v/s physical stock etc? Why do we end up with delayed shipments since system does not have necessary support to customise the transactions? Timely actions by all elements across is the biggest challenge and actions triggered can lead to huge chaos if various actions by different functions are not in sync with commitments to customer. In fact success of effective system (more specifically for internal supply chain) is to keep on revisiting the objectives often and to ensure we gain in speed and accuracy without losing controls. We also need to create Visual factory where the non-verbal communication can play major part by way of displays and triggers for actions Electronic KANBAN cards is being tried today in many of the manufacturing facilities for this purpose.

Outbound supply chain POS data is most critical and represents the material that has gone out of supply chain and gives indication of replenishment requirements. It also is most authentic information on the changes in customer preferences. To make effective use of the same this must be put to the beginning of supply chain and for planning of inputs. This has given enormous benefits to speed up changes, and reduced obsolescence. Right from the point PO is placed to the point customer starts using the goods/services, there are many touch points and they need to be mapped carefully to deliver the some value to the customer. This is valid even for last mile delivery - the way delivery schedule is decided and paperwork handled are all important part of information within supply chain and offcourse help in reducing bullwhip effect. Another important part of information (and also material movement) today is reverse logistics. It’s important to capture and put back into the system all issues that led to reverse flow of product. It is critical for all subsequent improvements you need to make and also ensuring commitments under legal obligations.

Summary However, given the evolving complexity of global supply networks - not to mention the sheer size of them - the need for parties to communicate and share data. There is a strong emphasis on effective configurations with integration both in relation to internal and external chains. This inevitably requires changes to the ways in which both internal and external customer and supplier relationships are created and managed. Information and communications technology (ICT) has to play pivotal role in this is vital for the process. The centrality of information management in effective supply chain design is a central theme in contemporary thinking. Recent years have seen the development and proliferation of a range ICT tools. The key is to view ICT as a tool which has the capability of enhancing supply chain integration levels. Feedback /suggestions /comments are most welcome on mail ID feedback_scmexcellence@yahoo.com

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SCM - A Support function for E-commerce Prof. Shouvik Chattopadhyay meets Sourabh Maity, AVP Logistics, Groupon India to find out what goes to make a successful E-Comm company. How do you see supply chain management evolving for an e-commerce firm?

In the early days,Supply Chain Management (SCM) was referred to as purchasing, logistics and transportation. However, the evolution of SCM has moved the focus on today’s e-Commerce environment which has intensified the strategic emphasis on speed, reduction Sourabh Maity of product Cycle time, increased rate of AVP Logistics, Groupon New Product Introduction (NPI). India The SCM for e-commerce also implies:n Merchant Integration. n Multiple Inventory Model Integration. n More technological based Replenishment strategy. n Order Processing with much speed & accuracy. The objectives are to eliminate redundancies & reduce Lead-Time of every activity so as to provide better customer service at a lower cost. The goal is to create “Customer Value” leading to increased Customer Satisfaction, profitability, shareholder value & sustained competitive advantage in the long run. What challenges will e-commerce players need to be informed about?

Some of the major challenges I can think of right now are:n Customer Acquisition i.e. getting more customers online. n Convincing one time customer for repetitive buying. n An average Indian consumer has trust issues with ecommerce purchases. n Providing consistency in the quality of products and services. n Delivering wrong/damaged products which create a negative ripple i.e.there are a higher logistics cost due to reverse logistics which leads to decrease in net sales and a bad shopping experience for the customer. n Choosing the right model amongst- Inventory 42 SCMPr

December 2013/January 2014

Model(Own Inventory & Own Logistics), Drop Shipment Model (Merchant Inventory & Own logistics)& Merchant Shipment Model (Merchant Inventory & Merchant’s Logistics). Each model has its own pros & cons but selecting what suits best for your business without trial and error is a challenge. What is the role of reverse logistics and how would you organize it?

Companies can no longer afford to treat Reverse Logistics as an afterthought. It needs to be a core capability within the SCM.Managing Reverse Logistics properly makes a huge difference in retaining Customer Loyalty & protecting the reputation of the ecommerce portal. The processes of Reverse Logistics (RL) are as follows:n Collating of Reverse request. n Segregation of Reverse request under the head“Serviceable Reverse PIN Code” & “Non Serviceable Pin code”. n Return Requests which come under -“Serviceable Reverse PIN Code” are to send to Reverse Logistics Partner for pick up from the customer. n We ask customers to send the product directly to our specified locations whose Return Requests fall under “Non Serviceable Pin code”. n Reverse Logistics Partner pick up the consignment from the specified locations & deliver to the Distribution Centre (DC). n Once product received we initiate refund to customer according to our prescribed return policy. How do you manage demand driven supply chains?

Demand driven SCM aligns the planning, procurement & replenishment process to actual customer demand or sales. The entire activity can be segregated in 2 stages. Stage 1 comprises of Planning where Buying Team/


CEO–Mindset Planning team plays a vital role by introducing new products, analysing products which other e-commerce portals are selling etc. Stage 2 comprises of SCM activities i.e. sending the order lists to the merchants, liaison with Merchants to deliver the product on agreed time frame, automated replenishment /PO system & implementation of JIT.

an even better management of the associated SCM processes. The contemporary view is that SCM is a tool for demand generation. Both views will play a crucial role but in the future SCM will emphasise on designing & operating the supply chain to enhance the revenue of the company in such a way as to maximize the contribution to profit.

What is the role of SCM in maximizing revenues in e-com?

How easy is it to scale delivery capability in India? What would be the challenges?

SCM works as a support function for any e-commerce company. Hence, the SCM helps maximising revenues by increasing customer satisfaction in the following manner:n Processing order in the least possible manner & ensuring shorter lead time from Order Place andDelivery. n Ensuring right product gets delivered to the end customer. n Optimum utilization of Inventory through Just InTime (JIT)model, Merchant maintained Inventory which helps to decrease Stock-Holding cost. n Optimum using of DC space which leads to the decrease in DC operating cost. n Minimization of Logistics cost achieving the SLA of Delivery Lead-Time.

It’s not easy to scale delivery capability in India as it’s geographically widespread. The challenges we face are:-n Last Mile delivery problem where a consignment is going to a single destination. n You can’t aggregate the consignments. n Major Logistics Service Providers (LSPs) are limited to Metro & Tier-1 cities delivery. n LSPs don’t have their own branches in the interior locations and hence work through franchisee model. This scenario leads to poor tracking of consignments & ownership. n Lack of direct connection of LSPs Distribution Centre, consignment/material handling gets increased resulting higher probability of in transit damage.

What issues keep you awake at night?

In SCM operations we can’t afford to keep anything pending in any sub-function bythe end of the day. Hence, there are 2 determinants:n  There should be no pendency in any sub function by end of the day. n A process is laid down for every activity as per the business requirement with proper responsibility matrix & ensuring the process adherence. What will define the supply chain of the future?

There will be a tremendous shift in the material movement & consumption of the same by the end users in the near future. All of which will require

LSPs don’t have their own branches in the interior locations and hence work through franchisee model. This scenario leads to poor tracking of consignments & ownership.

Amazon wants to tie up with the department of posts for delivery. Have you explored this?

There are other LSPs as well who had already connected with Department of post for greater penetration & larger reach to increase sales. However those LSPs are working as facilitator rather than directly involved in distribution operation. Moreover there are certain limitations with Department of Post e.g. 1. COD order distribution is not proper 2. Tracking tool is not so advanced 3. Can be a delay in the update of AWB tracking 4. Probability of In-transit lost as theft is very high 5. Claim recovery of In-transit Damage and so on What do you think should be done to re-position supply chain management as a profit centre?

SCM can be re-positioned as a profit centre through the following ways:n Giving equal importance to SCM –Cost Reduction Model & SCM-Revenue generation strategy. n Collaboration & Coordination among the SCM sub function & channel partners. n Information sharing among channel members. n Sharing advanced technology. SCMPr

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Darryl Judd

COO, Logistics Executive darrylj@logisticsexecutve.com

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talent

New Emerging Market

New world order hard to ignore as emerging supply Chain and Logistics market growth continues.

L

ogistics Executive Group Global CEO and Milestone Supply Chain and Logistics Consultants Pvt Limited Chairman Kimble Winter recently delivered a key note address at the International Conference on Supply Chain and Logistics Management (ICSLM)conference in Delhi hosted by Birla Institute of Management Technology (BIMTECH) and University of Hull. In his address Winter shared observations on some of the key issues / challenges and opportunities across the contemporary supply chain and logistics landscape in the context of what he described as s pivotal and dynamic time for Emerging Markets and the players involved. Winter says the evidence of energy market growth surround us. “Picking up random publications between flights and ferries on recent business meeting in 5 countries across Asia / India in 7 days, the pace of growth in emerging markets is highlighted and reinforced everywhere” he says. “The Macau morning paper headline story on rapid economic growth driving labour shortages across their public and private sectors, threatening manufacturing, transport and distribution capabilities and public ad-

ministration” he noted. He continues ”The ‘Wall Street Journal runs a story on the Yuan overtaking the Yen and the Euro in world trade finance for the first time. ‘The Australian’ headlines with the Australian Government’s decision to run with an uncapped debt policy to kick start much needed economic growth as the automotive manufacturing industry signals its planned departure for Australia” He references that this strengthening of merging economies and lessons for supply chain and logistics players is emphasised in December’s Harvard Business Review (research by India’s J. Ramachandran, K.S.Manikandan and Anirvan Pant)where the success of emerging market conglomerates is made obvious. “This excellent 5 year researchpiece uncovers the success of emerging market players in overcoming the issues that led to the demise of the majority of ‘mature market’ conglomerate businesses in the 80’s and identifies how diversified business groups comprising numerous unrelated enterprises are flourishing in the contemporary dynamic setting” says Winter. This business model he discusses typically coordinates work that unites and inspires affiliate business unit employees, helps them SCMPr

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talent spot and seize opportunities, share resources and talent and collaborate on strategic activities (such as supply chain and logistics functions). The research shows that business groups using this model are not only profitable but are also outperforming other companies in their markets. He goes on to reference another HBR Feature”When Marketing IS Strategy” (Niraj Dawar) outlines that for decades businesses have sought competitive advantage by “upstream” activities related to making new products, building bigger factories, finding cheaper raw materials and so on. But those

fied by the rise in the significance of G20 counties in relation to the G8 withcorporations from emerging economies occupying over 90 slots in the Fortune 500 in 2013, up from 14 in 2001. During his address Winter stated that “as a whole of life cycle talent management business providing executive search / corporate advisory, training, development, career transition and outplacement to Supply Chain and Logistics industry organisations, we’ve seen a massive shift in momentum from mature to emerging markets over the last 10 years. Established in Australia 1999, by 2003 our off-

The Rolland Berger research shows the growth of thetop 10 global companies in ‘developed’ markets in comparison the top 10 emerging Asian companies and the significant shift from 2007-2012 with growth being 22% for developing versus 6% for developedmarket companies”. easily copied sources of leverage are being irreversibly eroded with advantage increasingly being identified “downstream” in the marketplace. He supports the article which proposes that the question is increasingly not “what else can we make” but “what can we do for our customers”, this is having a profound impact on businesses and according to Winter, global supply chains, with emerging market players being at the forefront of responding to and leading change. He argues that further evidence of the power shift from the mature to emerging markets is also signi46 SCMPr

December 2013/January 2014

shore businesses accounted 20 per cent of his company’s activity, he says whist the Australian business has continued to grow steadily on the back of increased demand for the specialist executive search and corporate advisory services that offer, Logistics Executive Group has mirrored the last decade’s emerging market growth patterns with 80% of business now conducted from their offices in Asia/India/Middle East key logistics hubs. “We are truly are at a pivotal time and the shift is there for all to see, so what of the drivers/trends powering supply chain and logis-

tics environments and participants today and tomorrow?: Winter asked He noted that “One of the most interesting developments is the growth of Market Expansion Services or MES players. A recent report by global research house Rolland Berger reinforces the rise in influence of the MES organisations–companies whose specialized knowledge spans the entire value chain and whose expertise has been established in recent years in many emerging markets. The Rolland Berger research shows the growth of thetop 10 global companies in ‘developed’ markets in comparison the top 10 emerging Asian companies and the significant shift from 2007 - 2012 with growth being 22 per cent for developing versus 6 per cent for developedmarket companies”. He continued “According to the research, share of emerging markets GDP (USD) is up from 4.6 Trillion or 12 per cent in 1980 to 17.7 Trillion or 33 per cent in 2012 worldwide”. He argues that opportunities are being created by and for supply chain and logistics players throughout emerging markets, but the growth journey can be hazardous with multiplechallenges and threatsexist. He says that the role of infrastructure is central to any economic growth story, especially in regard to sustainable supply chain and logistics activities, citing the manner in which the Asian tigers and China handled this growth phase being a lesson for other regions. The address included reference to the growth of international trade, the role playedby logistics service providers(LSP’s) and supply chain integrators (SCI’s) as well as trade enablers such as Economic Free Zones (EFZs’)being pivotal. “We are honoured to have recently been contracted by Dubai


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talent Government’s JAFZA (Jebel Ali Free Zone - the world’s largest Logistics and Supply Chain free zone) to represent JAFZA in Australia and New Zealand.It’s been staggering to see how dedicated leadership in a world class logistics environmentcan operate so effectively when the central government and all National and Local Governmentbodies are committed to total alignment with and facilitation for the zone’s customers. JAFZAencompasses 6900 businesses, in 20 square klms located between Jebel Ali Port and Dubai’s new Dubai World Central (DWC) Airport, several times larger than Dubai’s current international airport” said Winter. The free zone is seen as a jewel in the crown of Dubai’s incredible growth as one of the world’s leading logistics hubs. Accounting for 32 per cent of Dubai’s GDP JAFZA is on track for significant further expansion as a result of the recent announcement that Dubai will host World Expo 2020, with infrastructure investment tipped

to be $35B+ attracting 25 Million addition visitors and generating an additional 277,00 jobs. According to Winter “As with the UAE, India is well positioned geographically in the high growth MENASA (Middle East, North Africa, South Asia) regionas a fulcrum of future growth for global trade howevercurrent hurdles in logistics infrastructure (World Bank India Logistics Performance index low at 3.14), ease of doing business (rating down at around250 in a list of 290 or so) identifies challenges but also underlines the immense scope for growth in the Indian supply chain and logistics domain”. He told the large gathering of private and public sector senior C level executives, academics and educators that although India faces the issues associated with its’ diverse regional infrastructure,in favour of the growth story is India’s frugal mindset, low cost modelling and rapidly improving managerial skillscapability and capacity through massive improvement in education

and technology innovation. In his closing comments to the attendees from APAC, North, South and SE Asia, MENASA, CIS and the UKthat the key to all economic and business success in emerging or mature marketsis the influence of strong, well-educated/ trained/experienced leadership and 360 degrees talent management, from an attraction, acquisition, engagement, development and retention perspective. He noted that Logistics Executive Group are only weeks away from publishing their seventh annual (2013/14) Global Supply Chian and Logistics Employment Market Research Survey Report completed by over 5000 industry respondents in over 40 countries and that this year’s Survey Report includes a wide range of new research including leadership, training and development with some startling results on how we as an industry are dealing with and meeting the demands of talent management.

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India Logistics A Way to go......

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

50 SCMPr

World Bank report states that the Indian Logistics cost is one of the highest in the world. Comparing the cost of logistics between the countries, the report mentions that for France, the logistic cost is 5.5 cents/km, Japan is 3.7 cents/km, Canada is 2.0 cents/km and India is 7.0 cents/km. Such a high cost of logistics makes Indian firms uncompetitive in the global market. When one looks at the reason for such a high cost in India, one can broadly classify them into two basic groups: first, area of policy regulations indicating main inputs to the supply chain (customs, infrastructure and services) and second, Supply chain performance outcomes, comprising of indicators of time, cost and reliability, such as timeliness, international shipments and tracking and tracing. World Bank’s Logistics Performance Index is primarily based on the above two criteria and ranks India as 46 out of 103 countries that were analysed. The high cost of logistics can now primarily be assigned to the infrastructural issues relating to congestion in ports and inland roads having rapidly increased, directly augmenting the logistic costs and also resulting in high inventory cost as delivery time increases. If you look at the road infrastructure, which is the main source of transportation, India has not invested sufficiently on consolidating on development of the golden quadrilateral, which links major cities in the country during the NDA rule. Worldwide experience says that effective use of rail logistics can be more cost effective, reliable and timely. Rail infrastructure in India though is ignored and is underdeveloped. The development of ports also suffers from a similar story. The rise of the public-pri-

December 2013/January 2014

vate partnership in infrastructure has not helped much and thus the transportation and network costs of doing business in India leads to disadvantage for the Indian firms. They in future will fail to take advantage of the global opportunities that the world will throw. This alongwith huge administrative costs including insurance and government taxes and the inefficiency of the clearing process by border control agencies including customs, makes logistics a costly affair in this country. Despite numerous laments, we have not made much progress as far as Logistic performance indicators are concerned. India needs to look at Morocco’s logistics performance since 2007, where it has jumped from 113 rank to 50 in 2012. Similarly, on the face of improving areas of policy regulations on one hand and service delivery on the other hand. India needs to work on the six components which the World Bank LPI report indicates if it wants to become a global player in the world market. These six components include: 1 The efficiency of the clearance process (speed, simplicity, and predictability of formalities) by border control agencies, including customs. 2 The quality of trade and transport related infrastructure (ports, rail, roads, information technology). 3 The ease of arranging competitively priced shipments. 4 The competence and quality of logistics services (transport operators, customs brokers). 5 The ability to track and trace consignments. 6 The frequency with which shipments reach the consignee within the scheduled or expected delivery time.


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Please Contact: girish.vs@iscmindia.net with your area of interest About ISCM: The Institute of Supply Chain & Management (ISCM) is the leading forum for supply chain professionals to share best practices, strategic insights and business challenges and explore the innovations in Supply Chain Management in India. ISCM is one of the leading institutes in the area of Supply Chain Management in India. It offers full time and part-time post graduate programs and specialized management development programs in the area of supply chain and business forecasting. The programs offered by ISCM are highly respected and recognized in corporate sector for employment.

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