scmpr n insight mindset n supply chain management professional

SCMPr n insightn Knowledgenbest practicesnmindsetnhUman resoUrce

Dec 2013/Jan.2014 Vol. 1—No. 10 & 11 `150Supply Chain Management Professional

insightSupply Network Compliance

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interviewSourabh MaityAVP Logistics, Groupon India

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In ThIs I s s u e

academic advocacySupply Chain Improvement: Implementing SCOR

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Humanitarian Supply Chain

Preparedness to Partnerships

SL_SCM Pro_Ad3_Print.pdf 1 12/23/2013 12:27:31 PM

editorial

3SCMPr December 2013/January 2014

It 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 “Humani-tarian Supply Chain”. Unfortunately, Humanitarian Supply Chain is still to catch on in India. In fact the first conference on Humani-tarian Logistics in India was in 2013, at IIM Ranchi.

Humanitarian Supply Chains involve the collection, transporta-tion, warehousing and distribution of both perishable commodi-ties 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 profes-sional, 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 In-dian framework. Let us all rally to this cause.

Happy Reading!

Executive Editor

Rallying for a Cause

Girish V s

Executive Editor

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

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

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14AcAdemIc AdvocAcy >>A case paper on challenges encountered during implementation SCOR processes.

10guruspeAk >>A free flow conversation with Dr. Anthony Paulraj on developing deeper relationship and sustainability.

SCMPr December 2013/January 2014

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EDITORIALExecutive EditorGirish V [email protected]

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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

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

Academic Partner

SCMPr


18leAd story

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

50lAst pAge >>Dr. Rakesh Singh, consulting editor, SCMPro on logistics in India.

6 SCMPr December 2013/January 2014

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.

Supply Network Compliance

Is Your Supply Network Compliant?Outsource Only What You Know

A Mustimportant 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 ap-parel 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 hun-dred 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 facto-ries 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 for-gotten the lessons learned from the 1911 fire?

Outsource What You KnowThere is no one answer to this question. Sim-plistically, 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 ques-tion whether their private label outsourcing decisions would have considered manufac-turing competency or plant safety.

In his 1905 book, Reason in Common Sense, philosopher George Santayana famously wrote that those who cannot remember the past are condemned to re-

peat 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 work-place disaster in the city’s history. Many of the victims were young women who toiled in “sweatshop” conditions to support their finan-cially 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 work-ing conditions and safety measures was my mother, who was a seamstress and a member of the International Ladies’ Garment Work-ers’ Union (ILGWU). The regulations put in place after that deadly fire, and the procedures and policies implemented by apparel com-panies, 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

n insight n Knowledge n best practices n mindset n hUMan resoUrce

insight


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 manufac-turing 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 ad-dition, 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 com-petencies, and eventually tarnish their brand names if a disaster occurs.nDuring 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 iden-tified 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 transpor-tation 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.nAnother excellent supply chain we re-

searched was The Limited Brands Victoria’s Secret division. One of its best practices was the fact that it owned a global sourcing com-pany and maintained partial ownership in some of its Far Eastern suppliers’ plants. This gave the private label retailer the manufactur-ing knowledge needed to successfully manage

its outsourced production operations.

Supply Network Compliance is KeySo 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, includ-ing 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 de-tail 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 en-suring 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 protec-tion 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 em-barrassing 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. Appar-ently their factories “are not my mother’s fac-tory.” Indeed, they are less safe, and those com-panies 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.

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

guru speak


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

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.

Supply chains are rapidly evolving, and are proving to be significant contributors to the corporate bottom line. The time is not far off when cor-

porate 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 in-volving them in any decision making proc-ess 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 sup-pliers, 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 proc-ess. 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

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 eval-uating, 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 accept-ed 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 Mo-tor 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.

Sustainability A Compelling Case for

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11SCMPr December 2013/January 2014 11

This can be done in a sustainable perspec-tive. The buyer can collaborate for envi-ronment 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 guide-lines of environmental consciousness. Now if you look at organisations, many research-ers 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 relation-ship. 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

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 as-pects together. Researchers talk about it, but there is no congruence of ideas. So what we need to do is combine them in a more com-plicated model, and test it to see how these two could combine together, as economic and non economic parameters. The econom-ic 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 environ-ment 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 bet-ter 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 send-ing 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 com-plimentors 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 can-not 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 mo-tivation for companies to say, well I want to make my entire supply chain sustainable. It

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.

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 mak-ing it lean, I am eliminating waste, reducing its cost, eventually if I am coming up with a sustainable product, where the carbon foot-print is much lower, naturally it will become the in thing. If this belief comes to prevail, then these companies will be at a much bet-ter 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 prod-uct 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 com-panies 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 so-cial 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 ob-jective where there may be cost cutting from one side and it could be looking into the fu-ture 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 ear-lier. Some organisations are facing that. They are trying to audit their entire supply chain

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 oper-ates 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 be-coming 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 organi-sation according to Friedman, is to make profit and the only person that they need to satisfy is the stockholder or equity holder.

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 or-ganisation, 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.

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.

Implementing the SCOR Model Best Practices

Supply Chain Improvement in Developing Countries


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15SCMPr December 2013/ January 2014 15

The 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 im-prove 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, imple-ment 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 trans-ferred and implemented appropriately. Currently, many MIDC are under-going both technological modernization and transition. In order to facilitate the changes, they have started program to improve their industry perform-ance 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 Reengineer-ing (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 prob-lems 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 manu-facturers 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 imple-

Firms in developing countries are adopting best practices to improve their organizational performance. They have been focusing on achieving productivity gains in their operations by implementing best practices. However, these efforts could not lead to expected benefits. The main reasons for failure in adopting the best practice which it face new environmental scenarios different for which it was created. This paper explores the best practices implementation and challenges 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

Fasika Bete Georgise, International Graduate School for Dynamics in Logistics (IGS), University of BremenKlaus-Dieter Thoben Bremer Institut für Produktion und Logistik GmbH - BIBA, Hochschulring 20, D-28359 Bremen, Germany, andMarcus Seifert, School of Industrial and Mechanical Engineering, Hawassa University, Hawassa, Ethiopia


AcAdemic AdvocAcy

16 SCMPr December 2013/ January 2014

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 Sup-ply Chain Council was developed a Supply Chain Operations Refer-ence (SCOR) model that incorpo-rates 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 Prac-tices to Developing Country FirmsResearch 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 indus-trialization and advancement by developing countries. The recent trends of global integration and collaboration are also encouraged experience sharing and bench-

mark against their practice and try to apply some them in their own organizations. However, such ac-tivities 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 partic-ular organization and context. This general lesson applies to less devel-oped countries (LDCs) like Africa as well. Adaptation can potentially be used to reduce new research de-velopment time and costs. There are a lot of efforts are actually being attempted on adoption and imple-mentation 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.

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

Recomended Best Practice Adaptation Steps

Application Factors

Infrastructure

Relationship

Organizational

National

Evaluation

Effectiveness of the transfer

Application

Training

Cultural conflict Re-adaptation

Reconcillation with the existing practice

Adapatation

Conceptual and contextual

Searching and Selection

Transferability

Relevance and compatibility

AcAdemic AdvocAcy

17SCMPr December 2013/ January 2014

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 Implementa-tion Barriers and EnablersImplementing best practices in manufacturing system is not an easy task. For any change in organization to take hold and success, the chal-lenges or barriers need to be identi-fied and understood. The questions were set up on a four-point Likert scale to measure the extent of bar-riers 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 chal-lenge. 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 ex-cising model best practices specifi-city to the developed countries oper-ating environment, quality of skilled and lack of ICT infrastructure.

Challenges from interviewed firms also demonstrated similar re-sults. The major challenges were: lack of expertise & professional experiences, the best practice ideas comes and changes without critical

thinking about the use, manage-ment only involved in routine pro-duction operation, lacks commit-ment 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 inter-vention, 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 ModelBased on these findings, the firms need to follow a systematic approach for adapting the SCOR model best practices. In this regard, it is im-

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 ena-blers 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 prob-lems like quality and productivity

improvement activities. However, their adaptation initiatives are influ-enced by the challenges and current business practices.

The findings show that most of the respondent firms have shown interests and put efforts to imple-ment some of them. But, the re-sults were below the expectations. The implementation of the best practice has faced different chal-lenges 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 con-sider their real situations.

The entire paper can be found at: http://www.engopt.org/nukleo/pdfs/0181_a_framework_for_supply_chain_design.pdf

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.

The Challenges of Best Practices ImplementationType of challenges Mean

The existing model specificity to the developed countries operating envi-ronment

2.97

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

lead story

Periodically the world is witness to large scale destruction of life and property – to either manmade or natural dis-asters. 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.

Preparedness to Partnerships

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.

lead story


Humanitarian Supply CHain........

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 Hu-manitarian Supply Chain is a short opera-tion, 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 strug-gling, 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 natu-ral 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” Humanitar-ian Logistics – Through the Researchers Eye” where we explore the academic un-derpinnings 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 ex-plore 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 hu-manitarian 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 Indica-tors 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 ad-dresses the supply chain impact on disaster. The converse, though not a part of humani-tarian logistics, has its own challenges. We take a look at a policy framework mooted by Asia-Pacific Research and Training Net-work on Trade in a working paper.

Happy Reading!

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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.

Through the Researchers Eye

We start with the academic defi-nition to humanitarian logis-tics by Thomas and Kopczak who define humanitarian lo-

gistics as “the process of planning, implement-ing 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 vulner-able 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 dis-aster 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 emer-gency disaster relief. Another possible expla-nation is that continuous aid operations are more complex to analyze as they require a multi-period approach, which is more com-plex 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 increas-ing interest only in recent years. The strong increase in published research since 2006 can be explained by the fact that in the years 2004-2006, three major natural disasters happened, and the logistic response suffered from ineffi-ciencies, especially in the case of the Asian tsu-nami. 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 humanitar-ian logistics, and a new journal on this topic was launched in 2011.

An interesting aspect in Humanitarian Lo-gistics study is that almost all studies have fo-cused on sudden onset disasters, like a earth-quake, 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 agen-cies to marshal their resources and deploy them

Humanitarian logistics

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better. However, these slow onset disasters have a more severe and long lasting impact on the affected popula-tion, 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 of-ten 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 com-plexity 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

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 re-construction 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 disas-ter 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 humani-tarian logistics into long-term economic development – for example through capacity building or local procure-ment, to ensure that life returns to normal.

The classification according to the research method-ologies 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 dis-asters, 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 in all publications. The word “govern-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 logis-tics. 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 disas-ter relief, with an analysis of a greater number of humanitarian responses to natural disasters, will allow a more ac-curate view of these often missed op-portunities and organizational solu-tions. A greater range of disasters with similar origins need to be studied from different sources. The crossing of ex-periences and best practices will allow the identification of important points for the exchange and development of shared solutions.

Theoretical framework for analyzing Humanitarian Logistics research

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

Theoretical Framework for Analyzing Humanitarian Logistics Research

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

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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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The Breakdown Journey.

transforming logistics

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When disaster strikes, it is estimated that local communities will be self-reliant only for 48 hours, after which humanitarian organizations must be

operational on the ground. When disasters strike, stakeholders mobilize, but not necessarily in a co-ordinated manner, and the degree to which a hu-manitarian operation is successful (or not) depends on how well multifaceted issues and questions have been addressed.

During a disaster, a complete break down of in-frastructure 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 hu-manitarian logistics in terms of efficiency.

Collecting, organizing, synthesizing and creating frameworks with the knowledge derived from both theory and practice, quantitative as well as qualita-tive, in humanitarian logistics is emerging and the importance of this new branch of logistics and supply chain management needs to be emphasized. By work-ing together, learning from one another, and docu-menting 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 zonesWhen 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 organi-zations 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 staffA report on the relief and rescue effort in the Cau-casus conflict mentions “An often under-estimated variable and a formidable logistics challenge is the movement of staff required to deliver relief and res-cue efforts. How do you get large numbers of relief workers to the field and ensure their safety and shel-ter? 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 will-ing 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 rent-ing out their homes. The ripple effect was that lo-cal 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?

nWho is impacted after a disaster?nWhat is the severity/degree of impact?nWhat are the needs of the population impacted?nWho is going to help?nHow are the aid operations performed?nWhat types of plans are needed for the relief operations?nWhat are the preparedness actions required?nWhat types of critical supplies: water, food, medicines, shelter, are

needed and in what amounts?nWhat are the mechanisms and processes for distribution?nHow should the influx of personnel, information and materiel be

handled, processed, and delivered?

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life very difficult for the local population that stayed. These are just some of the logistical challenges con-fronted by humanitarian agencies”

In many disaster zones across the world, NGOs are the first, and often the only ones to offer rescue and re-lief operations. From creating and implementing com-plicated 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 accounta-bility 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 sec-tor and incorporate emerging best practice. Their abil-ity to do this, however, has been hindered by a number of factors.

Lack of knowledgeHumanitarian logistics has become quite complex - involving components such as procurement, trans-portation, 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 relation-ships, infrastructure, standardization and collabora-tive 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.

Funding Funding is an issue with NGOs – they are highly de-pendent 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 investment in technology and com-municationDue to limited financing options, there has been very little investment in implementation of modern man-agement 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.

DonorsMaterial Flow

Information

Financial Flow

Field Units BeneficiariesHumanitarian

Organisation (HO)Suppliers

Movement of Materials and Information

Most HLP’s have indeed also greatly undervalued the role of logistics, supply chain management and integrated systems support.

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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.

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Complex Operations

Humanitarian supply CHain

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Complex Operations

Natural 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 peo-ple 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, collect-ing and disposing the dead, resource allocation, provi-sion 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 re-sponse 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 sup-ply 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 earth-quake followed by a tsunami in the Indian Ocean caused extensive destruction to 14 countries border-ing the Indian Ocean. Its defining characteristic was the excess of NGOs involved and the overwhelming amount of donations made available. The low qual-ity 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 con-tainers blocking ports and customs areas, warehouses saturated, expensive materials and equipment deterio-rating 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 sup-ply chain management is to establish a flow of vol-untary contributions from international and domes-tic 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 in-formation. Sometimes getting the right information may be difficult because of the breakdown of power and communication infrastructure. The quality of

GovernmentDonor

InternationalAgencies

InternationalNGO

NationalNGOs (in recipient countries of aid)

Community-based organi-zations (local partner)

Aid recipient countries

Model of a Humanitarian Supply Chain

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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 humani-tarian 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 direc-tional flow of goods and services.

One of the barriers to optimal humanitarian sup-ply chain is the administrative and logistical bottle-necks 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 coordi-nating the humanitarian supply chain has strong ties to the political interests and military forces of donors and recipient countries, the requirements of the “in-dustry of donors”, and the lack of coordinated plans. Besides these, the geographical dispersion and poor communication between the disaster zone and the hu-manitarian organizations, as well as between different organizations can hamper the humanitarian logistics.

Information contentBased on experiences and interviews during the earth-quake in Haiti in 2010, researchers identified a few key information areas for effective Humanitarian Logistics - resource allocation policies, needs assess-ment, 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 proposalsAn analysis of the past disasters could help us identify a framework that will help in better performance in the process of humanitarian logistics.

TransportThe 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 (wa-ter), needs to be in place, in order to more efficiently support distribution activities.

Storage and HandlingHaving 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 “sup-ply 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 short-est time, an analysis of potential points for storage, belonging to government entities or private organiza-tions, and the availability of equipment (forklifts, pal-let conveyors, etc.) needs to be able to be mobilized in the shortest time possible.

DistributionAn 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 infrastruc-ture 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.

Preparedness Assessment / Appeals

Resource Mobilization Procurement Transportations

Supply and Distribution

Bought and Storage

Shipping

Supply and Distribution Distribution

Performance Evaluation

Focus of the Study in Humanitarian Supply Chain

Source: Adapted from Thomas (1).

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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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Humanitarian Logistics

Key Performance IndIcator for

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Humanitarian logistics involves trade-offs 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 cap-ture data related to the procurement and distribu-tion of goods has prevented a systematic process of performance measurement from being implement-ed. 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, finan-cial efficiency, and assessment accuracy. Taken to-gether, 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 com-petes 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 start-ing point for the development of a KPI system for disaster relief operations.

Research by IFRC revealed three principles appli-cable 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 score-card. There is a tendency when designing perform-ance 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 ben-eficiaries 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 earth-quake operation, IFRC evolved a set of four indi-cators: 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 re-lated 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

Total Op Target

Percent of Appeal Coverage (in quantity of items)

After 1 Week 63% 61% 77%

Percent of Items Delivered (in quantity of items)

After 1 Week 6% 1% 4%

Donations -to-Delivery Time

Mean (#days) 3 3 3

Mean (#days) 2 3 2

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centage of items that have actually been delivered on-site 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 deliv-ering items.

Donation-to-Delivery Time: This indicator meas-ures 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 de-livery 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 finan-

cial efficiency metric incorporates the transportation cost of delivering the goods to the beneficiaries. This metric is expressed as a ratio of the total transpor-tation costs incurred over the total costs for deliv-ered 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 ex-ample, if it appears on the scorecard that the delivery lead time of a specific type of item was longer than

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

Total Op Target

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%


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%



Donations -to-Delivery Time

Mean #days) 33 35 29

Mean #days) 28 31 24

Financial Efficency

(Donor Cost- Budget Cost) / Budget Cost -5% -11% 30%

Actual CHF Spent - Budget CHF (3,510,849) (5,209,538) 1,810,531

Transportation Cost / Total Product Cost 10% N/A N/A

Assessement Accuracy: Revised Budget /Original Budget

After 2 Weeks 131% 118% 365%

After 1 month 139% 123% 377%

After 2 months 148% 127% 493%

After 3 months 158% 127% 493%

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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 imple-ment these systems and this visibility is established, the use of key performance indicators will then be-come essential to further enhance the efficiency and effectiveness of these supply chains. By clearly defin-ing operational targets and measuring actual per-formance to these targets, organizations will be better able to retain the lessons they learn from each op-eration and provide a higher level of service to their beneficiaries in the future.

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 sys-tem and determine if the organization is meeting its goals for the opera-tion, the logistics department would analyze these scorecards at differ-ent points in time after the operation’s original appeal date.

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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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Risks and ImpactsHuman supply CHain management

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According to Council of Australian Govern-ments, 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 com-munities, 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 com-panies 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 natu-ral disasters. Examples include the “just-in-time” prac-tice 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 sud-denly 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 Ja-pan triggering a devastating tsunami, which led to the meltdown of nuclear reactors in Fukushima. The dis-aster 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 com-bination of the earthquake and tsunami damage and the meltdown of the Fukushima nuclear reactors af-fected 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

Disaster Impact Spill-over from the Great East Japan Earthquake

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

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Japan, creating large scale unemployment due to clo-sure 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 Ayut-thaya 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 manufac-turing production index fell by 2.4 per cent. In US, the price of hard disk drives tripled during the floods. Sup-ply 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 manag-ing the impact of disaster risk on supply chains. The framework addresses three stake holders – the private business enterprise, the governments and the private-public partnership entures.

According to the policy framework, Enterprises in-volved in global supply chains must adopt risk reduction strategies to increase resilience. Two key strategies are:

Find a balance between efficiency and risk - While

Losses for earthquake damages in 2011 Items Amount US$ millions Repairs to property, plant and equipment 535.8 (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 615.3Note: Calculated based on IUSD = 80.5 Japanese YenSource: Renesas Annual Report 2011

sourcing from only one supplier can reduce produc-tion costs, it can also make producers vulnerable to disasters. Although having multiple suppliers in dif-ferent 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 pru-dent 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 the supply chain and increasing sup-ply chain visibility, 4) diversifying risks by using different distribution channels and suppliers, 5) enhancing relationships with other supply chain partners.

The second key strategy is to Invest in long-term continuityFor Governments, the policy frame-work advocates a dual role. Gov-ernments have a responsibility to develop and disseminate informa-tion about risk and risk reduction measures to raise awareness within global supply chains and assist in-dividual entities to prepare for po-tential natural hazards. Post-disaster recovery is another important issue for governments as the speed of the recovery process is the key to miti-gating negative consequences on global supply chains.

Comparison of National and Global Supply Chain

Nation A

National Supply Chain Global Supply Chain

Nation B

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

Nation C

Nation A

Nation B Nation C

Worldwide customers

Domestic customers

Customers

Focal Firm

Focal Firm

ISCM Brings you a Unique Conference on the emerging scenario in Supply Chain Management

ISCM is at the forefront of Supply Chain education in India. We bring you an opportunity to listen and interact with some of the experts in supply chain management from the Asia Pacifi c region in a one day conference on emerging

trends in SCM and what we in India can do to tap the opportunity.

Some of the probable speakers are:

Sean Rafter – Head Logistics, Asia, Save the Children

Brian Beveridge – Sr. Director, Global Supply Chain, ATMI, USA

Peter L. O’Brien – Russell Reynolds Associate, Australia

Mark Goh K. H. – Associate Professor, NUS Business School (Department of Decision Sciences)

Wayne Hunt – President / CEO TOLL Global Logistics Divn., Singapore

Dr. Ioannis N. Lagoudis – Assistant Professor, Malaysia Institute For Supply Chain Innovation, Malaysia

Paul Gallagher – Asia Pacifi c Supply Director, DIAGEO, Singapore

Gaurang Pandya – Vice President, Industry Strategy, JDA Software Group, Inc, Dallas, Texas

Sunil Chopra – IBM Professor of Operations Management and Information Systems, Kellogg School of Management

Dr. Mahender Singh – CEO & Rector, Malaysia Institute for Supply Chain Innovation, Malaysia

Institute of Supply Chain & Management 1st Floor, Durgadevi Saraf Institute of Management Studies, S V Road, Malad West, Mumbai 400064.

email:[email protected] website: www.iscmindia.net

If you would like to participate, please mail in your intent to: [email protected]

Presenter Media Partner

EXCLUSIVE SEMINAR

ISCM Brings you a Unique Conference on the emerging scenario in Supply Chain Management

ISCM is at the forefront of Supply Chain education in India. We bring you an opportunity to listen and interact with some of the experts in supply chain management from the Asia Pacifi c region in a one day conference on emerging

trends in SCM and what we in India can do to tap the opportunity.

Some of the probable speakers are:

Sean Rafter – Head Logistics, Asia, Save the Children

Brian Beveridge – Sr. Director, Global Supply Chain, ATMI, USA

Peter L. O’Brien – Russell Reynolds Associate, Australia

Mark Goh K. H. – Associate Professor, NUS Business School (Department of Decision Sciences)

Wayne Hunt – President / CEO TOLL Global Logistics Divn., Singapore

Dr. Ioannis N. Lagoudis – Assistant Professor, Malaysia Institute For Supply Chain Innovation, Malaysia

Paul Gallagher – Asia Pacifi c Supply Director, DIAGEO, Singapore

Gaurang Pandya – Vice President, Industry Strategy, JDA Software Group, Inc, Dallas, Texas

Sunil Chopra – IBM Professor of Operations Management and Information Systems, Kellogg School of Management

Dr. Mahender Singh – CEO & Rector, Malaysia Institute for Supply Chain Innovation, Malaysia

Institute of Supply Chain & Management 1st Floor, Durgadevi Saraf Institute of Management Studies, S V Road, Malad West, Mumbai 400064.

email:[email protected] website: www.iscmindia.net

If you would like to participate, please mail in your intent to: [email protected]

Presenter Media Partner

EXCLUSIVE SEMINAR


Quite often we say today that we are going thro’ an age of infor-mation explosion. Scenario is no different when it comes to

Supply Chain. We are constantly bombarded with information whether it is regarding ex-change rate or commodity prices or market statistics or some industry specific informa-tion. Nobody can deny that information is vital to enhance decision making process, managing risks, improving market share, cus-tomer satisfaction and so on.

People, processes, and machines - all pro-duce and consume information, and there is typically a natural flow from one or more pro-ducers to one or more consumers. Informa-tion 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 in-sights to the information’s consumers.

Existing information supply chains need to

evolve to address emerging business require-ments. For example, analytics of all kinds are becoming increasingly important throughout the enterprise. Whether to better understand customer behavior, ascertain business risk, in-troduce new product, or traceability, we are looking for more ways to use more informa-tion to improve outcomes.

Well designed or well executed informa-tion system will add value in area such as:n Higher visibilityn Real time availability of informationn Greater accuracyn Better customer servicen Higher productivityn Reduced paper workn Faster processingn Increase on-Time Deliveriesn Improved Capacity Utilization

Let us look challenges we see today in in-formation flow across chain and how we can handle them.

Input (inbound) supply chain Challenge here it to integrate suppliers /serv-ice providers with the buying organisation. It begins with making them understand re-quirements in terms of drawings /specifica-tions/packaging/test specifications/SLAs etc.

Anil S. SAtheSenior General Manager, Supply Chain (ProductsBusiness), Blue Star.

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

InformatIon supply chaIn Drive Efficiency to New Heights

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Even bigger issue is to handle changes par-ticularly for long gestation projects.

Invariably we will find use of technol-ogy and making complete communication paperless has worked wonders in this area. Certainly lot more needs to be done on glo-bal platform where information simultane-ously has to trigger changes and need actions at multiple locations. Even language barriers have to be crossed to put across your require-ments correctly.

One more area that needs vast improve-ment in Indian circumstances is tracking of shipments across the country. Particularly in applications, where storage conditions in transit can damage the product. Present solu-tions in this area are inadequate and we need to find answers in time to come.

Internal supply chainThis 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 traceabil-ity, financial transactions etc.

How many time we struggle due to incor-rect items codes, duplication, mismatch in system stock v/s physical stock etc? Why do we end up with delayed shipments since sys-tem does not have necessary support to cus-tomise the transactions?

Timely actions by all elements across is the biggest challenge and actions triggered can lead to huge chaos if various actions by dif-ferent functions are not in sync with commit-ments 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 to-day in many of the manufacturing facilities for this purpose.

Outbound supply chainPOS data is most critical and represents the material that has gone out of supply chain and gives indication of replenishment re-quirements. It also is most authentic infor-mation on the changes in customer prefer-ences. 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 off-course 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 im-provements you need to make and also ensur-ing 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 re-lation 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 manage-ment 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 inte-gration levels.

Just as raw materials are processed into finished goods, information management systems as being made up of multiple and , overlapping supply chains. Feedback /suggestions /comments are most welcome

on mail ID [email protected]

n inSight n Knowledge n BeSt PrActice n mindset n human resource


How do you see supply chain manage-ment evolving for an e-commerce firm?

In the early days,Supply Chain Man-agement (SCM) was referred to as pur-chasing, 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 of product Cycle time, increased rate of New Product Introduction (NPI).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 Cus-tomer 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 cre-

ate 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

Model(Own Inventory & Own Logistics), Drop Shipment Model (Merchant Inventory & Own logistics)& Merchant Shipment Model (Mer-chant 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 ca-pability within the SCM.Managing Reverse Logistics properly makes a huge difference in retaining Cus-tomer Loyalty & protecting the reputation of the e-commerce 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 Service-able 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 Distri-bution Centre (DC).

n Once product received we initiate refund to cus-tomer according to our prescribed return policy.

How do you manage demand driven supply chains?Demand driven SCM aligns the planning, procure-

ment & replenishment process to actual customer de-mand or sales. The entire activity can be segregated in 2 stages.

Stage 1 comprises of Planning where Buying Team/

SCM - A Support function for E-commerceProf. Shouvik Chattopadhyay meets Sourabh Maity, AVP Logistics, Groupon India to find out what goes to make a successful E-Comm company.

n insight n Knowledge n Best Practice n mindset n human resource

souraBh MaityAVP Logistics, Groupon India

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 Mer-chants to deliver the product on agreed time frame, automated replenishment /PO system & implemen-tation of JIT.

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

SCM works as a support function for any e-com-merce 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 and-Delivery.

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-Hold-ing 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.

What issues keep you awake at night?In SCM operations we can’t afford to keep any-

thing pending in any sub-function bythe end of the day. Hence, there are 2 determinants:-nThere 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

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 contri-bution to profit.

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

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 lim-

ited to Metro & Tier-1 cities delivery.n LSPs don’t have their own branches in the interior

locations and hence work through franchisee mod-el. This scenario leads to poor tracking of consign-ments & ownership.

n Lack of direct connection of LSPs Distribution Centre, consignment/material handling gets in-creased resulting higher probability of in transit damage.

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. How-ever those LSPs are working as facilitator rather than directly involved in distribution operation. Moreover there are certain limitations with De-partment of Post e.g. 1. COD order distribution is not proper2. Tracking tool is not so advanced3. Can be a delay in the update of AWB tracking4. Probability of In-transit lost as theft is very high5. 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.

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 insight n Knowledge n Best Practice n mindset n human resource

44

n insight n Knowledge n best practice n mindset n hUMAn ResoURCe

Darryl Judd COO, Logistics [email protected]

talent


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

Logistics Executive Group Glo-bal 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 observa-tions 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 mar-ket growth surround us. “Picking up ran-dom 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 sto-ry on rapid economic growth driving labour shortages across their public and private sec-tors, 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 au-tomotive manufacturing industry signals its planned departure for Australia”

He references that this strengthening of merging economies and lessons for sup-ply chain and logistics players is empha-sised in December’s Harvard Business Re-view (research by India’s J. Ramachandran, K.S.Manikandan and Anirvan Pant)where the success of emerging market conglomer-ates is made obvious. “This excellent 5 year researchpiece uncovers the success of emerg-ing market players in overcoming the issues that led to the demise of the majority of ‘ma-ture market’ conglomerate businesses in the 80’s and identifies how diversified business groups comprising numerous unrelated en-terprises are flourishing in the contemporary dynamic setting” says Winter.

This business model he discusses typically coordinates work that unites and inspires af-filiate business unit employees, helps them

New Emerging Market

n insight n Knowledge n best practice n mindset n hUMAn ResoURCe

talent


spot and seize opportunities, share resources and talent and collabo-rate on strategic activities (such as supply chain and logistics func-tions). 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

easily copied sources of leverage are being irreversibly eroded with advantage increasingly being iden-tified “downstream” in the mar-ketplace. 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 mar-ket 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 signi-

fied by the rise in the significance of G20 counties in relation to the G8 withcorporations from emerg-ing 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 pro-viding executive search / corporate advisory, training, development, career transition and outplacement to Supply Chain and Logistics in-dustry 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-

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 of-fer, 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 organisa-tions–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 compa-nies and the significant shift from 2007 - 2012 with growth being 22 per cent for developing versus 6 per cent for developedmarket com-panies”. 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 sup-ply chain and logistics players throughout emerging markets, but the growth journey can be hazard-ous with multiplechallenges and threatsexist.

He says that the role of infra-structure is central to any econom-ic growth story, especially in regard to sustainable supply chain and logistics activities, citing the man-ner 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 re-cently been contracted by Dubai

The Rolland Berger research shows the growth of thetop 10 global companies in ‘developed’ markets in comparison the top 10 emerging Asian companies and thesignificant shift from 2007-2012 with growth being 22% for developing versus 6% for developedmarket companies”.

SCMP is a monthly magazine for Supply Chain Professionals for Enterprise Users as well as Service Providers. The magazine contains specialist artcles, news and information designed to update the readers on the developments in supply chain industry. Specialised articles are contributed by the Industry Leaders and Academicians. Besides, there are other updates published to keep the readers keep pace with the Industry. Published in the 1st week of the month, the magazine is distributed to the readers through courier. Currentxly the print copy of the issue is available only for readers based in India. cover Price 150/-

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Supply Chain Management Professional

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Government’s JAFZA (Jebel Ali Free Zone - the world’s largest Lo-gistics 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 environment-can 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 cus-tomers. JAFZAencompasses 6900 businesses, in 20 square klms lo-cated 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 incred-ible 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 ful-crum of future growth for global trade howevercurrent hurdles in lo-gistics 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 sup-ply 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 skills-capability 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, en-gagement, development and reten-tion perspective.

He noted that Logistics Execu-tive Group are only weeks away from publishing their seventh an-nual (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 re-search including leadership, train-ing and development with some startling results on how we as an industry are dealing with and meeting the demands of talent management.

ClubSCMPro aims to nurture an active community of Supply Chain decision makers, professionals, experts and academicians. The idea is to build a forum where the SCM stakeholders can not only share great ideas on best practices, but can also discuss issues and pain areas affecting supply chain process.

As qualified members, you can avail the following benefits:> Subscriptions to SCMPro, monthly Enterprise magazine> Regular invites to Supply Chain Workshops, Seminars, Conferences, etc> Industry Reports> White Papers> Case Studies> Exclusive invite to the elite annual Black Suit Event

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A World Bank report states that the Indian Logistics cost is one of the highest in the world. Compar-ing the cost of logistics between

the countries, the report mentions that for France, the logistic cost is 5.5 cents/km, Ja-pan 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 uncompeti-tive in the global market.

When one looks at the reason for such a high cost in India, one can broadly clas-sify them into two basic groups: first, area of policy regulations indicating main inputs to the supply chain (customs, infrastruc-ture and services) and second, Supply chain performance outcomes, comprising of in-dicators 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 conges-tion 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 con-solidating on development of the golden quadrilateral, which links major cities in the country during the NDA rule. World-wide experience says that effective use of rail logistics can be more cost effective, reli-able 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-

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 ad-vantage 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 cus-toms, makes logistics a costly affair in this country. Despite numerous laments, we have not made much progress as far as Lo-gistic performance indicators are concerned.

India needs to look at Morocco’s logis-tics performance since 2007, where it has jumped from 113 rank to 50 in 2012. Simi-larly, 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 compo-nents which the World Bank LPI report in-dicates 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, infor-mation 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.

India Logistics

Rakesh singhDirector, Durgadevi Saraf

Institute of Management

Studies, Chairman ISCM.

Way to go......

ISCM is Looking for Faculty

C/o. Durgadevi Saraf Institute of Management Studies, R. S. Campus, S. V. Road, Malad (W), Mumbai – 400 064Email:[email protected] Website:www.iscmindia.net

Please Contact: [email protected] 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 off ers full time and part-time post graduate programs and specialized management development programs in the area of supply chain and business forecasting. The programs off ered by ISCM are highly respected and recognized in corporate sector for employment.

If you feel you have acquired deep insights to help the Supply Chain professionals

bootstrap their knowledge, the Institute of Supply Chain & Management invites you

to join us as Associate Faculty in the areas of:

• Supply Chain Management

• Agri Business

• Demand Planning & Forecasting

• Warehousing

• Transportation

• Supply Chain Audit

• Shipping & Logistics

• Supply Chain Network Design

• Retail Logistics

• Sustainability

• Humanitarian Logistics

If you would like to be associated with us in any of the above

areas, we would like to hear from you.

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