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Octobeer 2013 Vol. 1—No. 8 `150Supply Chain Management Professional

AcAdemic AdvocAcyTOC for Supply Chain Replenishment

Page...14

HRDarryl Judd on Cross Cultural Recruitment Challenges

Page...42

In ThIs I s s u e

Time for Cost to PerformancePg.18

LSP FocuSSuunil Dabral, Country Head SSI Schaefer

Page...38

Too LiTTLe?evolution

P: +91/22/6111 4700 · E: [email protected] · www.ssi-schaefer.in

Effective warehouse design means short routes for goods and staff. Using containers in conjunction with intelligent conveyor systems speed up and optimise logistics operations. We show you how to become fast, flexible and efficient. Contact us, we will gladly advise you.

Fast beats slow

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editorial

3SCMPr October 2013

We have derived benefits from manufacturing excellence. Our manufacturing processes are world class. Going forward the ability corporate which can achieve and sustain supply chain

excellence will reap benefits. Those who do not will be consigned to local operations. And if we are to derive the benefits of improved supply chain management, it is time India Inc. turned to the specialist. Time it realizes that supply chain management is not to be consigned to a department within the organization, with the mandate to keep costs low. Time to turn from cost to performance.

At the same time, it is necessary for service providers to move from being mere providers of a pre-defined service to value added service pro-viders. This calls for a reworking of attitudes by both the provider and the seeker. A true global supply chain means that both the buyer and provider of the service recognize the other as a partner in their business. For this issue of SCMPro, we examine the 3PL scene in India. Though in its infancy, 3PL is the future of supply chain in India. That said there are challenges that need to be overcome before we can roll out seamless 3PL services. The most important is to find the right people who can take it forward. The industry needs to come together to create the right ecosystem that will help develop the right set of skills in its employees. The National Skill Development Corporation estimates that we will need around 25 million skilled personnel in the transportation and logistics sector over the next 10 years. If we do not start now, we will not be able to reap the benefits of a best in class supply chain.

In Academic Advocacy we cover the concept of Theory of Constraints in Supply Chain replenishment systems - one of the solutions to get im-provement in a multi-echelon supply chain. Again something that 3PL players need to be aware of.

We look forward to your comments and opinions. They for the life blood of SCMPro.

Happy Reading!

Executive Editor

From Manufacturing Excellence To SCM Excellence

Girish V s

Executive Editor

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07InsIght >>Dr. Rakesh Singh, on why Forecasting is Important for true advantage of Indian Companies.

32column >>Mr. Anil Sathe on evolution of Green Supply Chain.

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34Wms–FEAtuRE >>A Business Case on mature and must technology partner for efficient Supply Chain.

10cEo-mIndsEt >>Sanjay Sethi, CEO, Food & Beverages, Export Trading Group says Indian Logistics Service provider’s has immense role to play in Africa.

SCMPr October 2013

14AcAdEmIc AdvocAcy >>A Study on Theory of Constraints in Supply Chain Replenishment Systems.

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SCMPro brings to readers a Current state of 3PL Industry in India - with experts’ views on Challenges and road blocks ahead.

38lsp Focus >>Suunil Dabral, Country Head SSI Schaefer on Indian Warehousing Industry.

Academic Partner

SCMPr

5SCMPr October 2013

18lead story

46RIsk AnAlysIs >>Shouvik Chattopadhyay on GEPE as the efficient tool for Risk Analysis in Supply Chain Management.

42humAn REsouRcE >>Darryl Judd on Cross-Cultural challenges.

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insight

7SCMPr October 2013

In a class of forecasting, the students asked me whether forecasting is dead and mar-kets have to be managed with the help of supply chain capabilities. It got me think-

ing that in an uncertain world, which is far more globalized, one could have imagined that with faster product development, increasingly flex-ible manufacturing systems, an unprecedented number of variety of products competing in markets ranging from apparel, toys, power tools to computers and other hi-tech products, fore-casting would be all the more important. Or is forecasting really dead?

Are all products becoming uncertain? There are products which still depict characteristics of uncertainty. A research by Fisher on “What is the right supply chain for your product”, it was found that products with high implied un-certainty have a high margin compounded by the problems of high forecasting error as well as high stock out rate. Even average forecast markdowns are high. Whereas products with low product uncertainty have lower average forecasting error than lower stock out rate as well as average forecast markdowns.

Business with low implied uncertainty is eas-ier to predict as demand is more certain. They only get affected when the overall landscape in terms of macro economy undergoes rapid

changes including structural changes. But in the case of high implied uncertainty, the volatil-ity in the supply chain emerges primarily from increase in the range of quantity demanded, decrease in lead time, increase in availability of products required, and increase in numbers of channels through which products may be ac-quired and requires service level increase.

When supply chain enthusiasts question forecasting as an effective tool for demand plan-ning and supply chain planning, they forget the difference between demand uncertainty that emerges from macroeconomic environment and low and high implied uncertainty, which are function of the actual demand in terms of range, quantity, lead time and service levels. This confusion makes it difficult for the corporates to resort to appropriate forecasting methods, fore-casting processes and need to restructure the or-ganisation in terms of managing these forecasts. Traditionally, businesses have been using three prominent methods of forecasting:

1. Time Series Model2. Causal Forecasting3. Judgemental ForecastingThe question arises that “How does the

company use these forecasting methods as a fundamental base for demand and supply chain planning when implied uncertainty is

Rakesh Singh

Director, DSIMS, Chairman ISCM.

For TrueForecasting

Dr. Rakesh Singh says Indian firms must understand the nature of demand, their success and building capabilities and methodology around the same can help them be a better organisation and reap true competitive advantage.

Advantage

insight

8 SCMPr October 2013

high”? The macro economic environment is volatile and still there are certain products which are seasonal in demand and certain and can be predicted easily.

Sunil Chopra in his famous book on Supply Chain provides a beautiful framework to un-derstand these uncertainties and create an effec-tive forecasting and demand planning process.

According to him, the business needs to bring about a strategic fit between the supply chain and the larger competitive strategy. There are three basic steps to achieving these strategic fits.

1. Understanding the Customer and Sup-ply Chain Uncertainty: As in the table, it is clearly understood that changes in the cus-tomer needs and required service levels tend to increase the implied uncertainty forecasting the supply chain to identify the extent of un-certainty of demand and any delay, the supply chain must be prepared for. It also helps an or-ganisation understand what kind of capabilities are required to react to the market with a large variety and quantity with the lowest lead time and high service levels.

2. Understanding the Supply Chain capa-bilities: The firm needs to build its capabilities by increasing efficiency and responsiveness by doing the following: nRespond to wide ranges of quantities

demandedn Meet short lead timesn Handle a large variety of products

n Build highly innovative productsn Meet a high service leveln Handle supply uncertainty3. Achieving Strategic Fit: The firms needs

to marry the understanding of the implied un-certainty and demand uncertainty ot the capa-bilities and create a strategic fit as in the diagram:

The beautiful case study which represents this dilemma is the case of Asian Paints Ltd., which by using a supply chain suite called “De-mand Planner” managed its uncertainty in a beautiful way to create a supply chain capabili-ty which would be the best strategic fit between the supply chain and the business strategy, cre-ating a competitive advantage for the supply chain. They were faced with uncertain demand, causal demand, and low implied uncertainty in seasonal products and high volatility in institu-tional buyer’s demand. Instead of looking for a single supply chain forecasting method, they used the approach of uncertainty and strategic fit to solve the problem. The forecasting con-sisted of the following:

This helps them to reduce their inventory by aligning their demand plan to supply schedule to factory planning to manpower planning. Asian Paints today is a leader in terms of man-aging uncertainty in demand and supply and creating a win-win supply chain.

Source: Adapted from “Align-ing Supply Chain Strategies with

Product Uncertainties.” Hau L. Lee, California Management Review

(Spring 2002), 105-19.

Uncertain Demand

Implied Uncertainity

Spectrum

Eertain Demand

EfficientSupply Chain

ResponsivenessSpectrum

ResponsiveSupply Chain

Zone of Strategic F

it

Finding the zone of Strategic Fit

Large UserBusinessCausalPeak to

Average

EfficientSupply Chain

ResponsivenessSpectrum

ResponsiveSupply Chain

Zone of Strategic F

it

Forecasting Method and Zone of Strategic Fit- Asian Paints

Customer Need Causes Implied Demand Uncertainly to...

Range of quantity required Increase because a wider range of the quantity increases required implies greater variance in demand Lead time decreases Increase because there is less time in which to react to orders Variety of products Increase because demand per product becomes required increases more disaggregate

Number of channels through Increase because the total customer demand is which product may be acquired now disaggregated over more channelsincreasesRate of innovation increases Increase because new products tend to have more uncertain demand Required service level increases Increase because the firm now has to handle unusual surges in demand

Supply Source Causes Supply Capability Uncertainly to...

Frequent breakdowns Increase Unpredictable and low yields IncreasePoor quality IncreaseInflexible supply capacity Increase Evolving production process Increase

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


What is your outlook for the impact that Indian Food Sector can make in the world market?

Export Trading Group has presence in more than 30 African countries. It is present in North Ameri-ca, India, China and South East Asia. Owning and managing the supply chain from start to finish, helps move agricultural commodities between regions, strategically matching one area’s market origination capabilities with market consumption patterns in another. The capacity to store commodities close to their point of origin for extended periods of time and

control over transport and logistics maximizes syner-gies and efficiencies at every stage of the value chain continuum. This expertise can be used by the Indian food industry to manage supply chain logistics and exposure to African market and maintain world standard quality of food.

ETG can play a major role in globalizing Indian food sector in following ways:n Be the strongest link between farmers and con-

sumers globally.n Empower farmers to grow quality crops.n Provide a reliable market and fair prices for

commodities.n Support India to process the commodity to in-

ternational standards. n Support India efficiently deliver the commodity

to the end market.

What are the trends that persist in global logistics scene?Trend 1 – Customers are Demanding Specialized Logistics Solutions

The shift to global manufacturing driven by a desire to access lower labour costs exposes organiza-tions to higher transportation costs and regulatory barriers. As organizations grow and sell to customers in more regions, complexity will rise. A global cus-tomer base creates a new set of challenges for organi-zations accustomed to providing standard logistics solutions to a homogeneous regional customer base. Customers are not only demanding accuracy and reliability, but are also requiring customized and complex solutions.

There are multiple external forces and trends oc-curring in the global market. This includes the spread of urbanization, the spread of wealth, the economic

From AFriCA wiTh Love Catalyzing Agri Supply Chains Africa will soon emerge as the food basket of the world. Export Trading Group has expertise in managing the most vertically integrated agriculture supply chain on the African subcontinent with operations spanning procurement, processing, warehousing, distribution and merchandising across 30 countries. Prof. Shouvik Chattopadhyay, Coordinator – Department of Transport & Logistics Management, Institute of Engineering & Management Kolkata, catches up with Mr. Sanjay Sethi, CEO, Food & Beverages, Export Trading Group.

Sanjay SethiCEO – Food & Beverages, Export Trading Group.

n MindSet n Knowledge n BeSt Practice n human resource n riSK

CEO–MindsEt

11SCMPr October 2013 11

power moving from West to East, young to old, the digitization of the economy, the increased focus on health – all of these things change the way people buy things. The importance of an information platform is also critical. In the future customers will have reach into supply chains, to be able to track the state of their order.

Trend 2 – Companies are increasingly Part of Networked economies

The second important trend refers to the require-ment that organizations build network capabilities to survive in the competitive environment. There has been an explosion of new channels to customers that are not well developed and that are linked with other channels.

Trend 3 – Customers Are relentless on Cost Pres-sure and working Capital reduction

Competitive cost pres-sure continues to drive organizations to seek opti-mized logistics networks. The pressure of the last five years has driven many com-panies to capture the “easy” cost savings, and additional savings require more sophis-ticated approaches.

Customers in India are expecting cost reduc-tions in the supply chain on an annual basis of about 2-3%. India has rising employment costs, so pressure on the sup-ply chain is focused on its redesign and optimi-zation. Now Logistics Service Providers are re-designing their trucks to carry larger capacities, driving freight consolidation and designing routes so that multiple customers can be served by a single truck.

To reduce food loss in transit, food companies are investing in new processes and technologies—from more frequent temperature monitoring and inspections to increased use of mobile technology, global positioning systems, trailer seals, RFID, and biometrics.

Trend 4 – Global Sales Channel Footprints are Growing and Fragmenting

Organizations in multiple sectors are continuing to pursue global growth strategies that focus on expan-sion into new regions. In particular, the focal BRICS countries represent major targets for expansion, but with them come a host of new problems which enter-prises have little experience in dealing with. Examples of major growth strategies and the associated chal-lenges are found in multiple industry sectors. Some of these were driven by government regulations, or access to existing logistics networks.

Trend 5 – Talent Continues to be a ChallengeIn Africa, India, China, & Brazil the shortage

of logistics talent was the most challenging issue, as many universities in these countries do not have logistics training in their curriculum. Managing a

logistics talent pipeline means not only recruiting the right talent, but retain-ing and keeping talented individuals on-board in a competitive market for sup-ply chain professionals who have the requisite experi-ence and leadership. This is occurring not just at lower levels, but mid-level and senior level roles.

Talent is one of the big-gest challenges we face in Nigeria. ETG’s presence in Nigeria in the last two years, we have noticed lack of talent and high recruit-ing cost in senior positions and operational positions. Apart from the infrastruc-ture issues with Nigerian

logistics, the lack of well-prepared professionals in open and low-end senior levels is the biggest chal-lenge in the environment today.

Trend 6 – A Larger Global Footprint Creates more volatility

Volatility is a measure of variation in conditions, whereas risk is the probability of a major disruption to operations. Both are relevant in the discussion of complexity in the global logistics environment, but volatility is perceived as increasing significantly in the logistics environment. Volatility occurs due to increased globalization linked to variation in labour costs, rising fuel costs, regulatory changes, and other parameters that influence where companies source,

In Africa, India, China, & Brazil the shortage of logistics talent was the most challenging issue, as many universities in these countries do not have logistics training in their curriculum.

n MindSet n Knowledge n BeSt Practice n human resource n riSK

CEO–MindsEt


where they produce, and the complexity of processes required to sell to the customer.

Safety and security issue is becoming a critical issue in Nigeria. To date, most companies are still focused on addressing property protection when considering supply chain safety. Very few companies fully realize and understand the impact of supply chain volatility and the consequences, and even fewer consider means of preventing disruptions.

The barrier of regulatory issues render it difficult to meet increasing customer requirements for reliable product delivery, and make it challenging to be able to plan using normal lead times, inventory require-ments, and scheduling.

Do you think Indian Service providers can play any role in African Market in near future?

Yes I think Indian service pro-viders will play an important role in African Market in future.

Indian imports are mostly pri-mary goods and oil, followed by gold, and other minerals. On the other hand, India exports ma-chinery, transport equipment, petroleum products, paper and wood products, textiles, iron and steel, plastic and linoleum prod-ucts, rubber manufactured prod-ucts, agro products, chemicals and pharmaceutical products. Africa has also proved a haven for investment in sectors such as tourism, electronics, computer software and accessories, information tech-nology related products, and financial services. These industries along with food processing will boost the traffic and revenue for Logistics service providers.

The challenge the Indian government faces at the moment is to support the private sector in its overseas ventures while also advocating the tenets of democracy and lessons about nation-building to Africa. Despite the fact that India is helping Africa reach out to the world, it is still rebuked for turning a blind eye to the dictatorial and the authoritarian regimes. India should ideally aim for a long-term strategic partnership with the African Union grounded on strong diplomatic.

Talking about new opportunity in Africa, which trade lines these service Providers can look to serve?

India’s trade with Africa has grown significantly in the past two decades, from a meager $967 million in 1991 to $70 billion in 2012. Trade with South Africa, for exam-

ple, totals over $2 billion, and India has offered duty-free tariff schemes to 33 of the least developed countries in Africa, which covers 94% of India’s total tariff lines.

Companies like Vedanta have invested in the cop-per mines in Zambia, Arcelor Mittal has invested $1.5 billion building an iron ore mining plant in Liberia, and the TATA group has panoptic investment in mul-tiple industries ranging from infrastructure, energy, hospitality, automotive parts to telecommunication.

One particular sector for which India has big plans in Africa is healthcare. The healthcare sector in India is renowned for its high quality and relatively low cost services. Medical Tourism in India is a $2 billion in-dustry and attracts more than a 150,000 tourists every

year. With years of expertise and a lucrative business model, the Indian healthcare firms are investing in Africa. Companies like Apollo Group of Hospitals and New Delhi-based Fortis Healthcare Ltd, for exam-ple, are assisting Nigeria and Mauritius in capacity build-ing through personnel training and investing in infrastructure.

Another sector of particular note in India-Africa relations is that of agriculture. There is a immense scope for India to play a role in Africa. The scope lies both in import and export to and from Africa.

Wrapping upSupply Chain Management has gained significant importance in the 21st century. It is so because companies like Wal–Mart, Dell and Amazon owe their success to their agile and adaptive supply chain. These were small companies virtually un-known not so long ago and suddenly became the most competitive and admired companies. While some Indian companies are moving towards mak-ing their supply chain and logistics efficient, most of them have done very little or nothing. If compa-nies choose to compete in the global environment, they will have to look for ways to reduce expendi-tures of their suppliers and channel partners, lo-gistics or distribution partners. This reduction in cost will lead the revamping of supply chains and significant investment in information technology, because information technology tools and tech-niques plays very important role in improving the status of the SCM.

India’s trade with Africa has grown significantly in the past two decades, from a meager $967 million in 1991 to $70 billion in 2012.

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AcAdemic AdvocAcy

An effective inventory replenishment method implemented in the supply chain is one of the key success factors to achieve low inventory while maintaining high customer delivery performance. The Theory of Constraints (TOC) Supply Chain Replenishment System (TOC-SCRS) is one of the solutions to get this improvement in a multi-echelon supply chain.

By Horng-Huei Wu, Mao-Yuan Liao et alPublished in the “International Journal of Academic Research in Accounting, Finance and Management Sciences Vol. 3 (3), pp. 82–92, © 2013”.

The concept and method applying to the implementation of supply chain, Theory Of Constraints (TOC) was

firstly introduced in the best-selling novel writ-ten by Dr. Goldratt, ‘It’s Not Luck’ in 1994, namely TOC supply chain solution. For such solution is considered as a win-win solution in terms of conflicts on the supply chain invento-ry management mainly. This study will briefly talk about the conflicts and the solution in the following first. As for a company, its’ supply chain basically consists of three major parts:

plant, distribution or regional warehouse, and retailers/sale points, as shown in Figure 1. The plant is responsible for raw materials purchase and production, and products are to be stored in the plant (the central warehouse) once they are finished, and then they are de-livered to a distribution warehouse where the retailer/sale point can proceed with its service, and after that products are sold to customers by the retailer/sale point. Generally, a distribu-tion/regional warehouse is a company-owned branch, but not necessarily for retailer/sale

Replenishment System

A Study of Theory of Constraints Supply Chain

AcAdemic AdvocAcy


again to move to the management mode of plant cargo through rapid information response. Although such change can mitigate the above-mentioned conflict, but the conflict itself will remained unsolved, and even can get worse. For example, the accuracy of a retailer’s forecast of fu-ture sales is found to be lower than that of a distribution warehouse’s forecast, and it is due to the sales of distribution warehouse is the sum of sales of sale points, and hence the ac-curacy is no doubt to be higher than individual forecast conducted by each sale point. Likewise plant sales is the sum of all distribution ware-house sales, therefore the accuracy on overall sales forecast conducted by the plant is of course higher than the forecast of each distribution warehouse sales. In this conflict, its very nature is not to determine which forecast is better than others (please note that forecast itself con-sists of risks and it is not always reli-able), but it is about what inventory should be placed within the sup-ply chain, as well as how each sale point deals with its replenishment, accounted for the reasonable issues. Therefore, the TOC has proposed the following solutions accordingly:

(1) The inventory should be

point. But regardless whether mem-bers of these three parts belong to the same company, the so-called efficient “sales” must be the products sold to the main customers by the retailer/sale points to be considered as the real sales, otherwise they are just the inventory within the supply chain (even if they are noted to be sold to downstream companies, chances the surplus inventory may be returned still exist).

In terms of the maximized profit on the supply chain, we must first ensure the main customers are able to purchase goods they desired, and in order to avoid the main customers being unable to buy goods they wish to have, we must place the inven-tory at places where they can reach them easily (such as retailers/sale points), and to prepare as large in-ventory as possible in order to meet the peak of demand that may occur occasionally, as shown in Figure 2. In other words, factories should pro-duce products and deliver them to the retailer/sale point as fast as they could in order to meet the main cus-tomers’ needs, as shown in the up-per part of Figure 2. However in the current market that is intense and competitive, customer requirements are getting harsher and harsher and

the product life cycle is unable to grasp, in order to avoid large in-ventories causing loss and damages (such as products being returned due to decreasing sales, waste, speci-fications or quality failed to meet the requirements, etc). Therefore inven-tories must be stored at the sources of places (namely factories), and should deliver the smallest inventory to the retailer/sale point in order to prevent loss due to demand changes in the market. In other words, the plant shall try its best to delay pro-duction and delivery, and deliver its smallest inventory to the retailer/sale point, as shown in the lower part of Figure 2. Hence the conflict graph shown in Figure 2 shows the two difficulties and conflicts the supply chain management and inventory management within each sale point confronts.

Generally in the face of the con-flict on the supply chain, it is an abil-ity to enhance the response capabil-ity of supply chain via a technology aiming at strengthening the market forecast and speed of information feedback. For example, to push the original plant prediction forward into the management mode of re-tailer/sale point, and then change it into the retailer prediction, and

The Network Graph of Supply Chain

PlantCentral

Warehouse

sale Point

sale Point

regional Warehouse

regional Warehouse

regional Warehouse

Fig. 1

AcAdemic AdvocAcy


placed within the source of supply chain (namely the plant). Therefore do not deliver the products to the downstream companies right away by the time they are finished; and dis-tribution warehouses should not de-liver the products to the downstream companies as soon as products from upstream companies arrived.

(2) Each sale point only needs to store enough inventory needed for such replenishment period. For example, if it takes three days for replenishment and according to the previous sales record, the maximum demand for consecutive three days is 300, and then there should be only 300 in the sale point’s inventory.

(3) Each sale point should make up the replenishment in accord-ance with its sales, by replenishing how much it has sold.

(4) To monitor the sudden abnor-mal condition via the Buffer Man-agement (BM) mechanism in order to prepare for any contingency. Such as the sudden increase in the sales re-sulting in low inventories, then BM can detect it right away and send out a signal for replenishment need.

The above is the main content of the theory of constraints in terms of the supply chain solution. Among which the first point belongs to the new theory of supply chain man-agement, and the second and third

points are referred to a brand new inventory replenishment mecha-nism, namely the TOC supply chain replenishment system (TOC-SCRS), and as for the fourth point, it is the monitoring mechanism of inventory. The focus of this study lies in the discussion of TOC-SCRS. Regarding the TOC-SCRS imple-mentation, please refer to the related documents Holt, 1999; Perez, 1997; Simatupang et al., 2004; Smith, 2001; Yuan et al., 2003).

Under the TOC-SCRS mecha-nism, each sale point has stored the largest inventory that was oc-curred during the replenishment period, and the volume lies in the sales quantity between the two re-plenishment periods, hence we can be certain that the sale point has the lowest inventory. And under the BM mechanism, impacts caused by unexpected situations are to be de-termined, and request of emergency replenishment will be alerted if nec-essary, as a result, out of stock can be avoided. According to common re-actions of various companies (Belve-dere and Grando, 2005; Blackstone, 2001; Hoffman and Cardarelli, 2002; Novotny, 1997; Patnode, 1999; Sharma, 1997; Waite et al., 1998; Watson and Polito, 2003) to-wards the TOC-SCRS, the benefit lies in the reduction of inventory

substantially, enhancement of service quality, reduction in expired prod-ucts (or reduction in the out rate), and more rapid reaction in terms of market changes, etc. However, the exploration of TOC-SCRS is lack in the literature. In this study, the concept and method of TOC-SCRS is first reviewed and modeled. A vir-tual supply chain case is secondly designed to show the behavior of the TOC-SCRS. A three factorial experiment, i.e., fluctuation of de-mand, time of replenishment and frequency of replenishment, is then presented to explore the feasibility and effectiveness of TOC-SCRS. A simulation model is designed to complete the experiment.

ConclusionsThis study established a model in accordance with TOC supply chain mechanism, used the EXCEL soft-ware to run the stimulation and analysis based on three factors in-cluding average daily demand, demand standard deviation, and TRR. The results showed that in the situation when the average daily demand and demand deviation are distributed similarly and the TRR are in different values. As the TRR value gets higher, what inventory level system gets higher as well, and no significant differences are found in the standard deviation. And as the TRR values are fixed, the larger the FR value the higher the average ending inventory level and standard deviation of inventory level along with changes in the average daily demand and standard deviation are larger, the average ending inventory level within the system and standard deviation get higher as well. There-fore we know the TRR and FR de-termine the inventory level within the system.

The Conflict Graph of Supply Chain Management

Successful Supply Chain Management

Reduce the too high risk of supply chain

inventory

Preparation of larger inventory

Preparation of fewer

inventory

To ensurethat cus-tomers can buy the products they want

Fig. 2Source: Goldratt 1994

You can access the complete article at: http://hrmars.com/hrmars_papers/Article_09_A_Study_of_Theory_of_Constraints_Supply.pdf

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19SCMPr October 2013

Geography becomes history. An interest-ing pun on the subjects. With firms lo-cating their manufacturing at far flung locations, their supply chains become

complex and layered. This creates challenges to the firm that is used to simple supply chains. Corre-sponding to the increase in complexity of the supply chains, 3PL or Third-party logistics is gaining impor-tance. An increasing number of corporations across the world are outsourcing their logistics activities to 3PL or logistics service providers. India seems the ex-ception. Even in Automobiles, the only Industry to embrace 3PL in India, outsourcing is prevalent.

Barthco defines Third-Party Logistics provider as one who is responsible to “integrate, coordinate, and manage functions for the smooth handling of sourc-ing, output and production.” Integrate, coordinate,

Apart from Automobiles, Indian Companies has yet to embrace 3PL. India is yet to witness a genuine 3PL play. SCMPro discuss the current state of 3PL market in India - least developed and highly fragmented.

and manage functions provides to its customer’s lo-gistics services for part, or all of their supply chain management functions. Third party logistics provid-ers specialize in integrated operation, warehousing and transportation services that can be scaled and customized to customers’ needs based on market conditions and the demands and delivery service re-quirements for their products and materials.

In this issue of SCMPro, we take a look at this emerging area in supply chain management. We be-lieve that if we have to derive the benefits of a effi-cient supply chain, we need to adopt 3PL services in a big way. When we speak of 3PL, we identify with the definition as given above – and not a narrow view of outsourced transportation.

We start the series with an interview with Samik Chkraborty, Zonal Business Head – East, DIESL on the state of 3PL services in India. He speaks about a series of issues facing the 3PL player – including the threats and opportunities.

The next we look at the scope of innovations in 3PL services in “To be or Not to Be: Innovation in 3PL Relationships“ Logistics was considered to be a low involvement area for a firm. Its sole purpose was to deliver the raw material to the factory or the fin-ished good to the consumer. However, of late, man-agement attention is turning to logistics, primarily driven by efficiency enhancement and cost reduc-tion. SCMPro takes a look at the role of innovation by 3PL players and its impact on 3PL choice.

In Disruptive Technologies in Logistics – Threat or Treat? we look at the future of logistics that will be defined by technology. Some of them would increase the efficiency of the 3PL logistics sector. Some of them would be disruptive. We look at some of the disruptive technologies that will re-define 3PL services in India.

In Talent and diversity – the HR Challenge for 3PL, we examine the talent challenge in 3PL serv-ices. 3PL services are built on three pillars – tech-nology, infrastructure and talent. While technology and infrastructure can be procured by investments, talent crunch is a far more serious challenge. Trained and capable talent is the cornerstone of service levels and quality.

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3PL is set to emerge as a viable and effective alterative to firms who manage their own supply chains. However, there are quite a few challenges the sector faces. SCM Pro speaks to Samik Chakraborty, Zonal Business Head – East, DIESL on the state of 3PL Services in India.

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What is your view of 3PL service in India?Logistics in India has become an area of priority in the past few years. Increased industrial production and growing consumer market has fuelled the need of specialized logistics management which is the key growth driver for 3PL Industry. Though few Indus-tries like Automobile, FMCG, Retail, Hi-tech & telecom have been the major users of 3PL services but gradually other Industries are also outsourcing their logistics.

According to the report of the working group on lo-gistics outsourcing in India is not more than 52% and the average share of 3PL Industry is 1% only. So 3PL Industry is bound to grow and in a trice the growth rate would cross the current average of 15-20% per annum. Factors like Time, Cost, Complexity and Risk play a major role in the feasibility and surge of the 3PL Industry in India. In India some pieces of logistics hardware are not at par with the global standards like,

State of 3PL services

infrastructure, road & rail networks, sea ports and inland waterways, and warehouses But of late some significant infrastructural improvement has been ob-served and also it is expected that there would be some uniform taxation policy and focus from Government to reinforce the supply chain Industry in India.

3PL Industry in India is progressively picking up focus and promises a substantial growth.

Who is an ideal customer for 3PL?An ideal 3PL customer would be someone who needs low cost manufacturing connected to highly efficient supply chain network. However, any customer who wishes to ensure the supply of right product in right quantity, right condition, at the right place, right time, and right cost to his target consumer can be a 3PL user.

Where are the biggest opportunities, and threats, for 3PLs?

service

state of

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in India is so high. The road congestion and time con-sumption to cross interstate borders are the deterrents of improving supply chain efficiency.

Railways are still a preferred mode for bulk trans-portation only like coal and minerals. It could not be put in use for other commodities yet.

The even spread of infrastructure and facilities are not there in water transportation also. 70% of the sea-borne trade is handled by only 2-3 of the major ports out of 12.Which causes higher vessel turnover time, custom inspection and clearance time, vessel berthing time etc.

Apart from Infrastructural bottlenecks, the tax re-gime and recovery process in India is cumbersome and complicated. The much expected GST implementa-tion is still in jeopardy and uncertain as well.

What is your take on the role of technology in the 3PL sector?

Technology plays a key role in 3PL sector which differentiates the organized players from the unor-ganized ones. Barcodes, Scanning and RFIDs have changed the entire material handling process and in-ventory management now. It’s the best way to curb the manual errors.

Advanced warehouse management and transporta-tion management software also contribute to improv-ing the supply chain efficiencies significantly.

Do you think the failure to stay on top of emerging technologies could put a company at a competitive disadvantage?

Partially true in the present scenario as there are a few instances where without much technological sup-port some semi organized Indian players created a big logistics network and are managing a wide range of customers from different Industries. But technology would play the role of a major differentiator in future.

Without technology the cost cannot be kept com-petitive in the long run. Technology and automation will not only reduce cost of manual work but also re-duce error and bring in efficiency and excellence in the system.

How can a 3PL provide its customers with greater awareness of risks and the means for their mitigation?

Continue to develop a cost-effective and efficient solution that brings value. 3PL service providers man-age the supply chain of customers from different In-dustries. They cater to different business needs in dif-ferent markets. The good practices of one industry can be replicated to another and the customers will get the benefit of staying competitive in market.

Opportunities: n Surge of Organized retailn Increase in Foreign Traden Entrance of MNCs and India’s emergence as a

Manufacturing Hubn Increasing focus on maintaining core competen-

cies and resulting outsourcingn Leveraging the benefit of technology in Supply

ChainThreats:n Threat of new entrants – Low entry risk and in-

numerable local playersn Bargaining Power of Customers – because of high-

ly fragmented nature of the industry and strong presence of small business owners and local play-ers, customers tend to squeeze LSPs on price which results inferior quality of 3PL services

n Competition among the organized players – Al-most all the organized players offer the same qual-ity of infrastructure and services. Lack of differen-tiators cause price erosion.

n Bargaining power of Suppliers –3PL service provid-ers cannot control the basic cost components like fuel price, minimum wages, cross border taxes etc.

How are you fighting commoditization in a tough market, and making sure you understand the needs of your customers?

It’s true that business expansion is a challenge in a recessive economy. The differentiators play a major role for the customers while outsourcing their lo-gistics. We always try to keep the uniqueness in our product offerings by understanding customer needs and customizing the solutions.

Consolidation of multiple services, making a cost effective efficient supply chain model and adding value to customers business is our preference and this also gives us immunity against commoditization in marketplace.

What are the challenges you find in growing your business in India?

Many Indian companies consider logistics as only a cost rather than a strategy for improving supply chain efficiency. They focus on logistics cost competitiveness only.

The Indian infrastructure is also far behind than the global standards. Setting up a warehouse takes at least 300 days in India, where countries like Finland, Ko-rea, USA & Denmark make it within 100 days only.

National Highways consists only 2% of overall In-dian road network but carries 40% of the major traf-fic. It’s not difficult to understand why the transit time

Logistics was considered to be a low involvement area for a firm. Its sole purpose was to deliver the raw material to the factory or the finished good to the consumer. However, of late, management attention is turning to logistics, primarily driven by efficiency enhancement and cost reduction. SCM Pro takes a look at the role of innovation by 3PL players and its impact on 3PL choice.

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Innovation in 3PL Relationships

to be or Not to be:


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Mere replacement of the services performed by a de-partment within the firm by a third party outsourced entity will not bring about increase inefficiency or re-duction in costs. A 3PL player has to create innovative solutions to gain operational advantages. For example, a common issue with automobile suppliers is their un-willingness to co-load. A truck which carries SUV’s cannot be stacked two deep. It can carry only one row. If the trucking firm can co-load, let us say, two wheel-ers, the same truck can optimize its run. However, for this to happen, the manufacturer has to accept that co-loading is beneficial and just because you co-load, your brand does not lose any value. Another benefit of co-loading is that it allows the manufacturer to send LTL, without having to wait for orders to pile up so that they can send a FTL. It ensures speedier delivery, at reason-able costs and higher customer satisfaction. However, the challenge in co-loading is not sending a FTL, by ag-gregating smaller loads. It is in identifying and acquir-ing multiple manufacturers who can share a trade lane, and who can ensure large and consistent loads, so that the 3PL can offer optimized price and delivery terms. Something that India Inc. has to learn.

In a published interview in Supply Chain Brain, Mr. Dillon, director of supply chain technology solutions at APL Logistics says, “Third-party logistics providers are in an ideal position to provide this type of service. We can broker a relationship with multiple shippers, even competitors, because one doesn’t necessarily need to talk to the other–we are the point of contact. Addi-tionally, a 3PL can invest in the solution once and use it

The role of 3PLs in Risk MitigationDespite challenging business conditions, global revenues for the 3PL sector continue to rise as they continue to improve their business presence and create value for their customers. Faced with increasing competition and a difficult economic environment, customers/shippers are increasingly turning to logistics providers as a key driver of both supply chain innovation and risk mitigation.

3PLs have always needed to innovate by introducing incremental process improvements, adding technology or improving execution. In recent times the global markets have started demanding more creative innovations in order for 3PL to drive optimal value through the supply chain. Customers are now looking at engaging with 3PLs at a strategic level rather than having a tactical approach as product life cycles are shrinking in key sectors like Life Sciences, Fashion & Apparel and Telecom/IT. 3PL can actually help customers stay ahead of the curve and reduce risks by adding much value right from inception to the last mile delivery to stay ahead of their competitors.

Innovation in 3PL Relationships

To remain profitable in a tough economic en-vironment, firms choose to increasingly out-source their non-core activities. This trend has been observed across the world – from

the developed world to the developing world. India Inc too has embraced outsourcing. However, this trend is not seen in the supply chains of India Inc. If we are to create efficient supply chains, we need to recognize that time has come for India Inc to outsource their supply chains – embrace the idea that logistics and Supply Chain are specialized functions best left to experts – in this case 3PL players. The future belongs to the specialist – and the specialist cannot remain a mere service provider, who will move goods from point A to point B at the least cost. To retain profitable customers and gain better customers, 3PLs should be able to provide innovative solutions to both the customer and the provider themselves.

Vikas Anand, COO, DHL Supply Chain

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for multiple customers, reducing the cost per customer.”A second area for innovation is the use of multi mo-

dal transport by the 3PL player. Since the 3PL player is focused on moving products and information across geographies, they can plan and use the best mode of transport for each shipment, based on the urgency and cost trade off.

As 3PL players establish their services, one of the key innovations will be in the area of information flows. With investments in IT, 3PL players can offer order management and fulfillment services across multiple lo-cations and map orders to the customer location, assess inventory, rationalize transit, and manager new orders for their customers.

This data creates its own issues. With each entity in a supply chain opting for its own format for capturing data, data integrity is an issue. This leads to the capture of the same data across multiple systems by many op-erators, increasing the chances of errors and omissions. A 3PL player, who can integrate multiple entities, can reduce this wasteful effort, creating harmonious flow of data across the network.

A far more significant innovation that a 3PL player can bring to the table is in managing the risks in the sup-ply chain. As long as supply chains remain fragmented, with no clear owner, the risks in the supply chain become a major issue. A 3PL with his services spread across multi-ple supply chains will be able to draw on their experience to create risk mitigation strategies. The producer of goods does not have the latitude to develop alternate channels for each supply chain disruption. The sheer complexity of having to develop risk mitigation strategies for a large

number of potentially disruptive events adds to the costs they have to foot. The 3PL player, whose business is to en-sure continuity of services, can develop innovative strate-gies to deal with disruptions. In August 2011, a fire in the UK warehouse of Sony; which was the only warehouse storing the products for distribution to UK, destroyed the entire stock. The warehouse stored the entire inventory of PIAS UK, the primary distribution hub for over 150 labels. While insurers may pay for the damage, getting products to customers will be a challenge. An innovative 3PL player would help the firm develop supply chain re-silience, helping the firm get back on track earlier.

3PLs can develop innovative solutions that range from basic to complex. Examples are packaging de-signs, newer deliver systems, better IT infrastructure, provision of new services and creating new infrastruc-ture or innovative facilities. Two researchers from the University of Gavle have classified innovation as Incre-mental, radical or hybrid, based on the nature of the innovation. Their classifications are:

“Incremental innovations are those, which do not bring abrupt and significant change in whole system but are subject to incremental improvement of single basic function; hence bring the incremental improve-ment in the bigger context. Examples of incremental innovation are use of In-process inventory control, Vehicle routing, Warehouse short interval scheduling, warehouse order selection, order entry, warehouse on-line receiving, warehouse workload balance, warehouse merchandise locator, sales forecasting, freight audit pay-ment and freight consolidation software(s).”

“Radical innovation in logistics is one that brings fun-damental and significant change in whole system. Exam-ples of Radical innovations are automated storage and re-trieval system, automated material handling equipment and use of robotics. Intermediate innovation in logistics bestrides other two type of innovation example of this type of innovation are introduction of Optical scanner, EDI (electronic data interchange), DRP (distribution requirement planning), Distribution modeling software, MRP (material requirement planning) software, Direct productivity and profitability software, Handheld de-vices, Bar Codes and Order Processing software.”

As 3PL players emerge on to the Indian supply chain scene, we will see them compete for customers based on their competencies and ability to provide innovative and value added services. As on date, quite a few technolo-gies exist that can radicalize the supply chain scenario in India. The manufacturer may not be able to afford these technologies due to limited use. However, innova-tive 3PL players will be able to use these technologies to drive efficiencies and reduce costs in a significant man-ner. Time we woke up and smelt the coffee!

Role of Technology in 3PL InnovationTechnology continues to play an important role in driving the growth and development of the logistics industry. Emerging technologies such as shipment tracking, warehouse and transport management systems help in modernizing and organizing this industry. The concept of logistics parks is also fast catching up, in keeping with international practices. The Government has shown tremendous interest in developing infrastructure and transportation modes within the country.

At CEVA, we have invested in world-class technology to manage supply chain. Our Matrix™ system integrates transportation, inventory management, order fulfillment, financial settlement and e-commerce applications for visibility and control required by our customers.

It links our customers to our operations and other service providers to support inbound, outbound and reverse logistics.

Murlidhar YadavMD, Indian Sub-Continent (a.i.) CEVA Logistics


The future of logistics will be defined by technology. Some of them would increase the efficiency of the 3PL logistics sector. Some of them would be disruptive. Girish V S takes a look at some of the disruptive technologies that will re-define 3PL services.

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There was a time when “New improved” was not that often talked about. That has changed. Today when we hear of “new im-proved” we have a sense of deja Vu. Tech-

nology changes have become common place. And some of these technologies have a disruptive effect on how we do business. Supply chain managers need to identify these changes, assess the potential impact of

Threat or Treat?Disruptive Technologies in Logistics

these disruptive changes and create a winning strategy that will embrace this change. We take a look at some of the disruptive changes that will shape the supply chains of the future.

3D Printing3D Printing or Additive manufacturing is a process of making a three-dimensional object of any shape

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sic, video, games, software and other similar content that can be distributed digitally. One area where this dove tails into 3D Printing is the delivery of the software that “prints” the required component. The service provider can tap into the manufacturer’s network, extract the relevant drawing and get it dig-itally delivered to the printer.

Like the traditional manufacturing set up, the me-dia space too needs to carry inventory, transport the product and make it available at the point of sales. Digital supply chain will help the buyer to go to the

shop, down load the book, and if she wants a printed copy, get it printed right there – thus avoiding the problem of stock outs, transport and waiting time!

Advanced robotics Advances in artificial intelligence, peer-to-peer com-munication, sensors, and actuators are enhancing the dexterity and intelligence of robots. Advances in robotics make it possible for workers to program and interact with robots a relatively easy task. They are getting more compact and adaptable, making it possible to deploy them safely alongside workers.

Robotics is changing the way warehouses func-tion. From the traditional WMS – which keeps track of the SKU location and directs the pick, robotics has advanced to a stage where the entire process is driven by robots, reducing the role of the human pick and store personnel. In a typical warehouse, about 60 to 70 per cent of the labour is engaged in picking the product. Amazon for instance has quite a few innovations when it comes to warehousing – for one, it has adopted the chaotic storage method – where there is no designated place for storage of goods. Goods are scanned into the nearest storage

Robotics is changing the way warehouses function. From the traditional WMS keeps track of the SKU location and directs the pick, robotics has advanced to a stage where the entire process is driven by robots, reducing the role of the human pick and store personnel.

from a digital model. 3D printing is achieved using an additive process, where successive layers of mate-rial are laid down in different shapes. 3D printing is also considered distinct from traditional machin-ing techniques, which mostly rely on the removal of material by methods such as cutting or drilling. It is a disruptive technology that potentially changes many aspects of company’s supply chains It also of-fers both opportunities and threats to the 3PL and Logistics industries.

Unlike the monolithic manufacturing of today, where a central manufacturing unit produces a variety of products, 3D printing allows production to be lo-calized at the point of consumption and just-in-time or demand driven. This will mean minimal transpor-tation costs , avoid movement finished goods or hold-ing inventory (except the raw material that feed the 3D printers). Products can be produced on demand at a local 3D print shop. For example, parts could be made at the local service centre, eliminating the need for costly inventory or cut down the lead time be-tween order and delivery from a warehouse. Another benefit of 3D Printing is that it makes the production of an ever expanding SKU range irrelevant – it enables customized production at the point of consumption a reality.

3D Printing has the capability to profoundly affect how we manufacture, store and transport products. According to the most recent Wohlers report on ad-ditive manufacturing, the 3-D printing industry in-creased 28.6 per cent in 2012, expanding into a thriv-ing $2.204 billion market. In 2013, that market has continued to expand at an accelerated pace, well on its way to meeting Wohlers’ target estimate of $5.2 billion by 2020. GE Aviation, for example, recently announced that in less than two years it will begin 3-D printing fuel nozzles to be used in its jet engines. Along with that, the machines and tools assembling that engine could include as many as 200 jigs and fix-tures that are themselves products of 3-D printing.

3D Printing has the potential of disrupting the tra-ditional supply chain and replacing it with a globally connected, local supply chain. However, there will still be some products that will be outside the ken of 3D Printing – like pharmaceuticals, food and beverages etc. However, for a vast majority of manufactured product – it could be a reality. You could walk to the nearest 3D Print shop and print your own customized version of the iPhone, or your own Honda Accord!

Digital Supply ChainAnother area where technology is changing the way we deliver services is in the media space–books, mu-

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location and a sophisticated WMS directs the pick routine. In its distribution centre in Arizona, ro-bots bring the rack on which the product is stored to a central location where a human picks the cor-rect product (aided by laser guides) and send it to the packing area on another robot. The racks move. The Human stays put. One benefit of the increasing use of robotics is that it could save energy spent in lighting up the warehouse. And to an extent (where temperature controlled storage is not necessary) in reduced cooling for the warehouse.

Autonomous and near-autonomous vehiclesA recent McKinsey report titled Disruptive tech-nologies: Advances that will transform life, busi-ness, and the global economy, says “It is now pos-sible to create cars, trucks, aircraft, and boats that

are completely or partly autonomous. From drone aircraft on the battlefield to Google’s self driving car, the technologies of machine vision, artificial intelligence, sensors, and actuators that make these machines possible is rapidly improving. Over the coming decade, low-cost, commercially avail-able drones and submersibles could be used for a range of applications. Autonomous cars and trucks could enable a revolution in ground transporta-tion—regulations and public acceptance permit-ting. Short of that, there is also substantial value in systems that assist drivers in steering, braking, and collision avoidance. The potential benefits of autonomous cars and trucks include increased safety, reduced CO2 emissions, more leisure or work time for motorists (with hands-off driving), and increased productivity in the trucking indus-try. Autonomous vehicles offer several potential

benefits, including reducing deaths from motor vehicle crashes and reducing CO2 emissions. With computers controlling acceleration, braking, and steering, tightly spaced cars and trucks can safely travel at higher speeds; when one vehicle in line brakes or accelerates, they all do. Since most driv-ing accidents are caused by human error, removing drivers could actually increase traffic safety and re-duce deaths, injuries, and property losses. Convoys of trucks could speed down the highway with no driver needed (or just one driver in the lead truck), with as little as one foot of space between them.76 Roadways could accommodate more vehicles with-out expansion, and acceleration and braking could be optimized to reduce fuel consumption and CO2 emissions. In addition, closely spaced vehicles have much lower aerodynamic drag, which further re-duces fuel consumption.”

Again a disruptive technology, one that removes the driver, or at least reduces the stress on the driver due to transporting goods across long distances.

XBRLYet another disruptive technology that is emerging is the XBRL (eXtensible Business Reporting Lan-guage). Like the current process of shipping goods from one location to another, where each entity in the supply chain passed the goods from one link of the supply chain to another—from truck to railroad and onto a ship or aircraft and back; each piece of cargo had to be separately loaded, packed, arranged and unloaded. Similarly, business information that passes from one link in the chain to the next, must be interpreted, cleansed, reformatted, scanned, keyed in and re-keyed in, verified and cross checked at every node of the supply chain. This information flow that mimics the flow of goods is time-consum-ing, costly and exposes the information to breakage and pilferage in the form of distortions, errors and, sometimes, even fraud.

XBRL offers a standardized way to package busi-ness information at its origin and transported faster, cheaper and with greater security, through all the links in the supply chain. XBRL allows firms to in-tegrate a fragmented supply chain around a single, common standard, to enable seamless, efficient deliv-ery of goods across roads, rails, air and water. XBRL will allow the 3PL player to slash cost of extracting data and converting it into meaningful information. And in the age of technology, information is power. XBRL will encourage new kinds of reporting, allow-ing the 3PL to leverage the power of information embedded in their operations.

XBRL offers a standardized way to package business information at its origin and transported faster, cheaper and with greater security, through all the links in the supply chain.

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3PL services are built on three pillars – technology, infrastructure and talent. While technology and infrastructure can be procured by investments, talent crunch is a far more serious challenge. Trained and capable talent is the cornerstone of service levels ad quality. Girish V S takes a look at the talent challenge in 3PL services.

There was a time when talent in supply chain meant hiring a graduate with reason-able skills and pushing him or her off the deep end – the employee will either learn

to swim or sink. Training was a scarce process and de-velopment unheard of. However, with the emergence of 3PL, and the pressure from service seekers to im-prove efficiency and cut costs, talent in supply chain management has taken on a whole new meaning. If we take a cue from the USA, where these trends first emerge, it is not surprising that fresh MBA graduates

The HR Challenge For 3PL

in supply chain command much higher salaries than their established peers. Today HR in 3PL are looking for a set of people with technical skills and leadership qualities who can bring a fresh perspective to their jobs and to their customer requirements.

According to the National Skill Development Or-ganization of India, the transportation and logistics sector employed around 7.3 million people in 2011 and the number is expected to increase to about 25 million by 2022. Seventeen million more workers over the next 10 years. That’s an enormous challenge,

TalenT and diversiTy

IT T

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An innovative idea that is emerging is the collabora-tion between partners in the supply chain, where the 3PL player can tap into the talent and skills of the part-ners to deliver excellence to their customers. This is not as easy as it sounds. At the very basic level, the entities in the supply chain, the customer, the service provider and the 3PL player combined will need to harmonize their processes and systems to be able to derive value from such collaboration. The 3PL player can then en-sure that all entities benefit from efficiency and mone-tary gains. According to a published report from Gen-pact, “Our collaboration with a 3PL major resulted in accrued benefits being passed on to their end-customer which realized a 10-12% saving in transportation cost, 8-10% saving from carrier sourcing and 5-6% saving from better inventory classification.”

To compete in a global economy, and deliver value to their customers, 3PL players will need to find better educated employees. In India, economic growth is al-ready significantly outpacing talent development, lead-ing to serious skills shortages. In spite of the huge hu-man resources we have – around 20 million Indians are entering the work force every year, we still do not have people who can be employed. 3PL companies in India will need to pick up the slack. That will mean providing in-house training and skills development programs.

An interesting initiative by the consulting firm PWC in its report “Transportation and Logistics 2030, Win-ning the Talent Race” moots setting up a recruitment and development alliance between players. According to the report, companies involved in such programs could work together on recruiting initiatives. They could also help companies to offer more appealing development opportunities, like cross-company job-rotation.

In essence, 3PL play in India may be derailed due to the lack of trained and employable personnel. 3PL players will need to come up with innovative ways to attract, recruit, motivate and retain talent.

particularly considering the struggle to find workers with requisite skills. The challenge for the companies trying to expand domestically or Internationally is to recruit promising employees and providing regular training for their development.

A career in the supply chain sector suffers from an im-age problem. A career in a warehouse or logistics entity is considered as not so attractive and has come to be as-sociated with sub-par working conditions and hardships. The service buyer – the manufacturer sees the industry as someone who fulfills a basic requirement of ensuring distribution of their products to the customer in time, at the least cost. The only criterion is lowest cost. And as the saying goes – you pay peanuts, you get monkeys.

To add to the problems, talent today is not satisfied with salary or assured career path alone. But looks for challenges and an opportunity to use their skills in pro-viding innovative solutions. The industry needs to pro-vide them with the challenges, if it wants to attract talent.

If logistics is considered to be about moving prod-ucts from producer to consumer, 3PL is all about peo-ple. The quality of talent will decide the success of a 3PL player. Traditionally talent management meant identi-fying a requirement, recruiting the right candidate, and retaining the employee. However, with 3PL player, the challenge is to develop the skills required for meeting

the unstated requirements of the customers, well before the customer demands it!

According to a paper by Mr. Jerry Hammon, Vice President, Transportation and Logistics, Genpact, on the facts that affect talent management in 3PL sector.

The need to deliver innovation in a constantly changing business environment, especially with the emergence of Big Data, will impact all 3PL organizations. While some will be able to fill the skill gap demanded by the changing landscape, others will be left without access or pathways to critical talent.

The cost of hiring, retaining and training people will rise sharply. Logistics players will find it harder to control expenditures (keeping an eye on margins all the while) while holding on to the talent they sorely need to drive innovation and excellence in execution.

Talent Management Innovations (from the Transportation and Logistics 2030, Winning the

Talent Race report by PWC

Cross-age Career Collaboration: Career paths have traditionally been developed individually, rather than across teams. New trends in career design are now taking a broader view. For example, some companies now systematically pair up junior and senior project managers. That helps younger employees advance faster and gives more experienced employees the opportunity to develop mentoring competencies. We call this ‘Cross-age Career Collaboration’ (3C). 3C could enhance the employer brand and serve as an important point of differentiation for transportation and logistics companies.

Edutainment: Edutainment combines education with entertainment to make learning more fun. For example, the MIT Sloan School of Management developed a game around beer distribution to help teach students about the importance of visibility in the supply chain.

Virtual Academy: As workforces become more global and mobile, their working and educational needs are changing. A Virtual Academy would offer a broad range of educational services available online, accessible from all over the world.


Evolution of ConceptImpact of various industrial activities and other developments on natural resources has now reach threatening proportions. Global warming is not being discussed to-day as possibility but a reality.

Organizations have also found themselves under pressure to green their supply chain. This pressure comes from customers, regula-tors and competitive and strategic obligations.

Increasing cost of energy and raw mate-rials has forced businesses to find new ways to reduce their energy use in order to re-duce cost and remain competitive in the in the market.

One of the greatest impacts that Supply Chain can make in this area is to it drive towards Green Supply Chain. Adding the “Green” component to supply chain man-agement involves addressing the influence and relationships of supply chain manage-ment to the natural environment.

Definition One of the ways to define Green Supply Chain would be:

The process of using environment friend-ly inputs and transforming them into out-

puts that can be reclaimed and recycled at the end of their life cycle, thus creating sus-tainable supply chain.

This can make a huge business sense as well and there are many examples where companies have taken lead to ensure their products consume less material, packaging is recycled, technology is used to make trans-actions paperless and so on...

Few challenges today Lack of information about the Green supply chain best practices:

Many surveys have shown that it was not investment costs, but a lack of information on regulations and green supply chain best practices that left organizations with a lim-ited view of what to do and implement.

Lack of tools to Optimize Supply Chain with environmental Management:

There is no dearth of tools for supporting green supply chain initiatives. The challenge lies in selecting the right tools.

Global sourcing:Global Sourcing is considered to be

challenge for Green Initiative as it does not

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

The external pressure and Strategic obligations, has forced the organizations to green their Supply Chain.

Green, the Colour of Future Supply Chain

n MindSet n Knowledge n BeSt PrActice n human resource n riSK

Column


support reduction in fuel consumption and practices optimum recycling of materials.

How do we start?To be successful in implementation of Green Supply Chain initiatives, companies must develop appropriate organizational struc-tures for environmental innovations, which reduce the environmental impact of carry-ing out particular kinds of activity in terms of consuming fewer resources, producing less waste, and creating less environmental harm.

Green supply chain analysis provides an opportunity to review processes, materials and operational concepts. It targets wasted material, wasted energy or effort and under-utilized resources. Companies should review all their business processes to identify areas where adopting a greener outlook can actu-ally improve their business

Once the company decides on ‘Greening’ supply chain, impact on both upstream and downstream supply chain activity should be studied. Purchasing clauses, targets, prac-tices, and technologies have to be studied in terms of costs of altering supply chain from its traditional focus of cost, quality, and serv-ice to include environmental performance. Once this is done we can go ahead in steps based on the business benefits these changes bring in and in turn justify additional costs.

Another approach could be to focus on pollution and waste which represent incom-plete, ineffective, or inefficient use of resourc-es. Companies should review each process along the supply chain to identify the sources then see if a more environmentally sound ap-proach will drive waste from the supply chain processes. This will ensure continuous im-provement in all supply chain operations.

How do we measure?Before we discuss measurement we need to understand what kind of change /improve-ments are expected from this initiative.

A number of environmentally conscious practices can be evident throughout the supply chain ranging from green design (marketing and engineering), green pro-curement practices (e.g. certifying suppliers, purchasing environmentally sound materi-als/products), total quality environmental management (pollution prevention), envi-

ronmentally friendly packaging and trans-portation, to the various product end-of-life practices defined by the “Re’s” of reduction, reuse, remanufacturing, recycling.

Some of the simple measures to start could be:n Management systems pertaining to social

and environmental performance.n Magnitude and nature of penalties for

non-compliance incurred during the yearn Number, volume, and nature of releases

to land, air, and water.n Environmental liabilities under applica-

ble laws and regulations.n Total energy use including electricity/

fuel etc.n Total water usage.n Total materials used in packaging.

Off course more detailed matrix will be specific to the company and nature of their business

ConclusionFor green supply chain implementation to be successful and sustainable; transparency col-laboration and integration of systems between partners in the supply chain is a MUST.

Secondly, senior management support is also important not only because the senior management play an important function in influencing the business attitude towards green initiative, but they can also dedicate resources in terms of time, personnel and fi-nances towards such initiatives.

Lastly Green supply chain has to closely align to customer needs which will give the supply chain clarity on the green product de-sign that is required of them.

In short, four things to be done to move to Green Supply Chain (and better tomorrow):1. Define and deploy an environmental

management system (EMS).2. Measure existing environmental impacts

and establish goals to improve performance.3 Publicly disclose their metrics and results.4. Ensure this becomes a norm across sup-

ply chain and is followed by all suppliers and service providersMy best wishes to all of you to start this

journey today itself.

Green supply chain analysis provides an opportunity to review processes, materials and operational concepts. It targets wasted material, wasted energy or effort and under-utilized resources. Feedback /suggestions /comments are most welcome

on mail ID [email protected]

n MindSet n Knowledge n BeSt PrActice n human resource n riSK


Building a Business Case for W M S

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feature


Warehouse management system (WMS) is a key part of the supply chain and represents a mature technology. WMS solutions are complex and the potential business benefits and associated return on investment reflects this. SCMPro takes a look at the business case for WMS.

The business environment is get-ting tougher. Businesses need to cut down physical inventory, receive raw materials, handle in-

terplant transfers, pick orders and ship out goods. They need information on inventory and their storage in real time and also need to share it to wide ecosystem of partners, suppliers, customers and financiers. At the same time, the wide geographic dispersion of the customer base and the global sourc-ing strategy forces them to have multiple storage points across the supply chain. Apart from the geographical spread, firms face a few more challenges–for one, cus-tomer preferences are changing quite rap-idly and there is an explosion in the SKUs that need to be manufactured, transported

and stored. Alternate channels have mush-roomed, with customers opting to buy from on-line and mobile stores. A warehouse is no longer a simple storage facility – it has morphed into a business partner, where quite a few services can be offered – from re-packing to kitting.

However, for India, warehouse automa-tion is still in its infancy. In earlier editions of SCMPro, we had looked at some of the emerging practices in warehousing – espe-cially in Amazon, where chaotic storage and robotics, coupled with a feature rich ware-house management system has ensured that Amazon continues to hold on to its unique advantage of being able to ship customer orders within 24 hours from a wide spread warehouse infrastructure.

Building a Business Case for WMS

feature


Under normal circumstances, a business case for Warehouse man-agement system would not be an is-sue. However, given the poor state of automation in India, we take a look at some of the best practices and considerations for building a business case for a warehouse man-agement system.

The building up of a business case for WMS, or for that matter any other system should not be the preserve of just the concerned division alone – in this case the warehouse team. A cross func-tional team including members from sales and marketing, prod-uct development, finance, HR and IT needs to sit together to develop the case. While the Sales and marketing would represent the customer side of the story, the product team would represent the supplier and plant perspective. The finance team would look at

the risk return trade off and pro-vide an economic justification for the project.

Components of the Business caseA WMS can create a wide range of advantages and benefits to the firm. The team should consider all such advantages when developing the business case for WMS. These benefits may be tangible like re-duction in labor, or intangible like an improvement in customer sat-isfaction. n Improving scheduling con-

sistency and on-time deliv-ery can help position the company as a supplier of choice.

n Improved customer service levels will increase sales and margins and reduce returns.

n Ability to give improved order status information in-

creases responsiveness and customer confidence.

n Improved management of the overall billing cycle to customers will have a posi-tive impact on cash flow, resulting in lower company interest costs. Timely and accurate customer invoicing brings cash in quicker.

According to a “Warehouse Management & Control Systems” white paper, savings categories that can be used when building a WMS business case are shown in the Ben-efit Category Mapping diagram. The items in Area I are easily quan-tified. They are often at the top of management’s wish list and gener-ally should be included in the busi-ness case. The items in Area II may be quantifiable, depending on the firms operation. They may be in-cluded in the business case depend-ing upon the situation. The items in Area III are difficult to quantify, so should generally be included in the business case in narrative for-mat, if at all.

Some of the common advantag-es that need to be considered are:

LaborLabor benefits generally comprise more than 50 percent of the over-all WMS project benefit. Labor is generally classified in three areas; Direct, Indirect and Administra-tive. A WMS can reduce receiving,

Traceable inven-tory with any device

WMS Investment SummaryInvestment Category % of Total Examples

Software & Hardware 30 - 60 License, databse, server, printers, PCs, RF access points, Scanners

System Integration 30 - 35 Consultants, operational charges

Software Vendor Assistance 10 - 15 Professional services, project management, conference room pilot, modifications

Host System Modifications 5 - 10 Interface programming

Internal Corporate Costs 5 - 10 Special training, back fill, retention

Contigency & Other Costs 5 - 10 “Just in case” money

Annual Maintenance 15 - 20 Normally priced as percent of contract value

feature


put away, pick, and replenishment efforts at a warehouse. Amazon does not have a designated rack for its goods. It stores goods ran-domly, and a powerful set of au-tomation tools ensure accuracy of picking. In a typical warehouse, the picker spends 65% of his time in moving from bin to bin, rack to rack and only 35% of time ac-tually in picking up the order. A WMS can drastically reduce the time spernt in moving around, by directing the picker to the right bin. The developments in robotics has eliminated movement of the picker – the robot brings the bin to the stationary picker, and laser pointers aid them in picking the right product.

InventoryWMS improves inventory accu-racy and provides real time infor-mation. Therefore, inventory levels can be reduced without affecting customer service levels. Addition-ally, WMS provides better inven-tory visibility. Improved inventory management results in fewer raw material and in-process inventories needed for a given level of output. Studies in USA have shown that inventory reductions can range from five to 20 percent or more.

Carrying CostInventory carrying costs range from 25 to 35 percent of the over-all inventory value. A WMS will reduce carrying costs by improv-ing aspects of each carrying cost component:n Inventory Cost: Inventory

investment can be reduced due to effective planning and accurate inventory records.

n Inventory service costs: If the overall inventory value is lowered, insurance and taxes should lower proportionally.

n Storage space costs: Less inventory and more efficient

use of space will result in a reduction in space require-ments.

n Inventory risk costs: Over-all obsolescence, damage and pilferage can be minimized.

Inventory Write-Off When inventory cannot be located during a physical inventory or dur-ing a cycle counting, firms tend to write it off. The “lost” inventory is removed from the system. With improved inventory accuracy and real time accountability, inventory tends to get lost less frequently in a system- controlled environment.

Physical Inventory Count The accuracy of WMS eliminates the need for a physical inventory. This enables an organization to spot short-term and/or seasonal fluctuations, to discern long-term trends early, and to avoid end-of year inventory surprises. Improve-ments in inventory control can re-sult in a 50 to 100 percent saving if the number of times a physical inventory is taken can be reduced or eliminated.

SalesIf the firm can ship out products faster, more accurately, it can in-crease customer loyalty. This in turn will have a positive impact on sales. Increasing the thruput re-duces the time the product sits on the shelf. Reduced shelf time can lead to better utilization of space.

SpaceWith better control over storage, WMS can optimize space usage, enabling the firm to store much more SKs in the same space. This can result in a savings of up to 15% in some cases.

Cycle Time With improved visibility, order cycle times can be improved by 10 to 50 percent. Improved cycle times gen-erally result from a combination of several other factors including con-firmed inventory availability, timely replenishment activities, improved labor planning, etc. With shorter or-der processing cycle times, you may be able to extend your order place-ment deadline, potentially providing you with a competitive advantage.

Visiblity

EDI

Customerservice

EmployeeSatisfactory

MisplacaedOrders

Start UpTime

Intangible

More

Benefit Category Charting

Man

agem

ent

Resp

onsi

vene

ss

CharacteristicTangible

AreA IAreA III AreA II

System Availability

Space

Inventory

CarryingCost

InventoryWrite-off

Labout

Demurrage

LaboutErrors

Workload Control

UserGroup

Perormance Measures

Value Add

Equipment

Value Add

Upgrade Pathe

Expedite

Paper workShippinggAccuracy

Management Information

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What are the trends that persist in Indian warehous-ing scene? How is it different from the global trends?

The growth drivers such foreign trade, influx of FDI & FIIs in multiple industrial sectors, organized retail and growth in the services sectors have fuelled the need for modern warehousing in the country. In-dia’s logistics spend is 13% of its GDP against the world average of 11% and still the Indian warehous-ing landscape is far behind the west but the good

sign is that it is changing for better for example even though where the land cost is low the vertical stor-age is considered for the warehouse efficiency. Mod-ern warehouses are doing away from block storage practice and the focus is shifting towards the man-agement of warehouse throughput, space, operating costs and resources optimization. As compared to the global practices, I would say that the countries where population is being controlled have seen the eco-nomic prosperity which has pushed the living stand-ards up leading to higher manpower costs. There is another reason for higher manpower costs which is the ‘EHS’ (Environment, Health & Safety) and vari-ous countries in Europe have daily allowance limit of weight handling. This has resulted in labour cost going up and fuelled the need of warehouse automa-tion. Globally warehouses have far higher degree of automation as compared to the warehouses in India.

What fundamentals go as base when planning a solution?

We spend time with our customers and under-stand their operations in details. We then identify the bottlenecks in their logistics processes and ware-housing limitations and develop a solution which is scalable for future growth with minimum additional investments. The solutions are equipped with the technologies which do not become obsolete and cus-tomers have a complete peace of mind when it comes to return on investment. This sounds so simple, but this is a real trick how when it comes to doing. But fundamentally everything starts with considering and evaluating the basics because I believe that every complex problem is built of simple problems which were not handled in a right manner.

Are there any challenges in terms of Regulatory Poli-cies, Tax and Fiscal provisions, and most importantly -Infrastructure?

Creating World Class Warehouses Warehouse is the most neglected area in a supply chain. SSI Schaefer is a world leader in warehouse automation. Suunil Dabral, Country Head SSI Schaefer talks to SCMPro on warehouse automation.

Suunil Dabral,Country Head SSI Schaefer

lsp focus


Yes these challenges are definitely there and will persist in the near future also. The macro-economic landscape is little bit worrying at present for the en-tire country not just for the supply chains alone. But this has highlighted the weaknesses of our approach and policy system. The Indian currency depreciation has stalled the imports of goods and services and the almost every big infra-structure project has some ele-ment of imports in the form of goods (Equipments) and services (Consultancy). The warehousing land-scape is also not changing so fast because due to the complex taxation system, companies are bound to have state level warehouses. If GST comes then it will be easier to manage a bigger warehouse rather than multiple small warehouses.

What is your approach to sustainability in warehousing?We believe that ware-

housing activity is not cheap from any dimen-sion hence there is a need to optimize the warehouse operating costs. A sustain-able warehouse means that a warehouse could re-main economically viable in future even with the ris-ing costs. To achieve this, there is very limited that one can do in terms of cost cutting but what will be critical is the efficiency in terms of operating cost and volume handled by that warehouse. This bal-ance between the volume growth and the operating cost can be achieved with the use of various technolo-gies. At SSI Schaefer, we can help the customers to strike this balance in a most optimized way.

How do you help your customers manage SCM risk? SCM risk is also substantial at a warehouse level

apart from other. It is not advisable to ignore the risk of disruption in the SCM in an area which is con-trollable. We do consult our customer for the right solution and explain them why a particular solution/technology is right for their operation? During the conceptual stage, we do the warehouse process flow mapping and then visualize the material flow logics. These are further analyzed for any bottlenecks which are then addressed. In our experience, most of the bottlenecks are around inward & outward. You can

have the best warehouse with the best throughput but if the allied processes like inward and outward are not in line with the warehouse capability then you will have an underperforming warehouse leading to cus-tomer dissatisfaction.

As CEO, what are your concerns - that which keeps you awake at nights?

My biggest and the only concerns are around the safety at the project sites. In our kind of business this becomes a big issue when there is a Greenfield site and multiple activities are going on. We have a planned schedule which we cannot afford to deviate from so we have to maintain our speed with the safety. Any near miss, accident, injuries are a matter of serious concern for SSI Schaefer. We have very stringent safe-ty norms and we practice them very diligently.

What areas would you like to see more technol-ogy penetration?

In the supply chain, the most technology defi-cient area is the neglected warehouse. In this area there is a need for better technologies for mate-rial handling and mate-rial flow logic within the warehouse. In most of the warehouses in India, bar coding, RFID, radio technology and WMS/RFID is already becom-ing common. Wherever the processes are more people intensive, there is

a higher probability of errors, risk and conflict of in-terest. There is a complete ambiguity around the la-bour costs levels in India; some argue in favor of lower cost and some against. However, only the labour cost alone is not a single enabler of technology but various parameters are there to justify the technologies.

What is your outlook for 2013-14?My outlook for 2014 is moderate yet positive. The

macro-economic landscape is little uncertain but I am hopeful that the situation is already red-flagged and the government is looking into it. However, any decision taken even now will not bear any desired re-sults until 1st quarter of next year but some short term improvements could be there. This is the time when we are strengthening our position with our customers

SSI Schaefer’s corporate philosophy is to develop solutions for those intra-logistics needs which do not exist today but will exist tomorrow. A lot of R&D investment is spent on this philosophy throughout the year. We have developed AS/RS cranes (Exyz) which have energy regeneration capabilities.

“

lsp focus


through effective customer service for building ever stronger relationships. Taking corrective actions and revisiting SSI Schaefer’s go-to-market strategies will be on the agenda. SSI Schaefer’s Customers’ Patron-ization Index (CPI) is above the internal benchmark so our India go-to-market strategy will also focus on this.

Do you find the business models in the warehouse space changing?

Yes it is very much changing for good now. A ware-house today is a lead indicator of ‘Customer Service’. You can assume one company’s market stability and customer service with the warehouse performance. Today’s modern warehouses have become a point of critical value add. Today you can see modern ware-houses where heavy investments are being made on various aspects like the building, flooring, cladding, Insulation, MHE equipments, Intra-logistics, tech-nologies like Radio, Bar code, RFID, GPS, WMS, WCS, ERP, EHS etc. So all this is justified only when warehouse is able to absorb this cost and still viable to operate to enhance value addition. The modern ware-houses are not just a place to store but they are a place of value add.

How can do you ensure that as customer needs change, your offerings change and adapt to meet their needs? Can you cite an example?

In our industry this is very common. Our de-coupling point is based upon our order fulfillment

method of MTO (Make to Order) because our solu-tions are customized to the needs of the customers only. The needs and requirements vary from industry to industry and product to product. We have built a solution for one of our customer which comprises of adjustable pallet racking, multi-tier shelving, heavy duty cantilever and special free standing mezzanine in one single warehouse. In FMCG/Beverages sector we have given drive-in systems, robotic pallet shuttle system, gravity flow racks etc. I would say that no two projects are identical under normal circumstances.

What are the emerging technologies in the pipeline? Are there any new technology based products you are contemplating?

SSI Schaefer’s corporate philosophy is to develop solutions for those intra-logistics needs which do not exist today but will exist tomorrow. A lot of R&D investment is spent on this philosophy throughout the year. We have developed AS/RS cranes (Exyz) which have energy regeneration capabilities i.e. these cranes generate energy for their own horizontal ac-celeration, multi-deep shuttle based AS/RS, Schaefer tray system, Schaefer Quad System and some more new technologies will be on display in the CeMAT Germany this year. All of our products are patented for the technologies and most of them are the award winning products. We have the most silent conveying systems (noise level below 70dB), Schaefer carousal system, Schaefer Lift & Run….there is a very long list of products.

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May 2013 Vol. 1—No.4

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Anil Sathe:

Challenges in

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42 SCMPr September 2013

or are They?

Cross Cultural Calamities...

n Mindset n Knowledge n Best Practice n human resource n risK

“We didn’t all come over on the same ship, but we’re all in the same boat.”– Bernard Baruch, American financier and statesman

A few months ago I was attending an Interna-tional Supply Chain Conference in Asia. One of the session’s

topics was ‘Sharing Supply Chain career success stories with fresh graduates in the industry’. The aim of the session was to provide young people with some insight into the real world of logistics and the many career opportunities on offer.

A very successful logistician of Anglo-Saxon background, stood up to talk to the students. He be-gan by sharing what he called his ‘secret of success’. He encouraged his eager graduate audience, who mainly shared the hosting coun-try’s Asian culture, to choose an in-dustry they were really passionate about if they wanted to succeed.

“Passion, hard work and a little bit of luck will bring the results”, was his sincere message.

Some of the audience who shared the same cultural frame-work as the speaker, that is an Anglo-Saxon understanding of the world, perfectly understood what the speaker meant and were nodding in agreement. However, the greater part of the audience, presumably of Asian cultural back-ground, were frowning, fidgeting and staring with expressions that escalated to the point of mild anxi-ety as they tried to decipher what this stately and articulate doyen of the logistics world was trying to impart to them. Seemingly una-ware of this reaction, our speaker continued by calling on all to “fol-low their hearts”.

This caused even more disturb-ing glances as by Asian reference,

ries have been pushed back in very intimate ways. In recruitment terms, hiring managers and HR professionals now work alongside international and cross-cultural colleagues. As global boundaries are pushed, multinationals and even local companies find it es-sential to keep their competitive edge by hiring the best talent they can find. Today this often means hiring new employees from glo-bal talent banks. Thanks to new technologies such as Skype, we can spend more time talking to col-leagues across the other side of the world than the team member sit-ting at the desk beside us.

As a result recruitment, already

an industry challenged with an im-posing ‘matchmaking’ role, finds itself becoming increasingly the platform for ‘blind dating’ as the culturally inexperienced fumble their way through surprises, mu-tual misunderstandings and inevi-table business risks. Defined as ‘the personal capabilities, underlying characteristics and behaviours that drive superior performance at work across national boundaries’, there is no doubt that for today’s global organization, ‘cross-cultural com-petence’ is critical.

the word passion tends to denote high romance. Hardly an emo-tion that should be expressed in a professional context? Could this fellow be behaving inappropriate-ly? Driven to breaking point one of the students very seriously at-tempted to decipher this seeming-ly complex and possibly encoded message by asking the question that put a smile of understanding as light bulbs went off on some of the faces in the audience but only added to the confusion of others “what do you actually mean by being passionate ...about a job?” he asked.

Unfortunately for the poor speaker, this question prompted

a long explanation of what he meant by passion. This imbued part of the audience with a sense of dread as they silently willed both parties to put the missing jigsaw pieces together whilst the other part of the audience con-tinued to writhe in their embar-rassment at the inappropriateness of matters of the boudoir being referred to at a supply chain and logistics conference!

Though it is comical, this little story is very common in today’s globalized economy. The bounda-

Cross Cultural Calamities...


In recruitment terms, hiring managers and HR professionals now work alongside international and cross-cultural colleagues.


talent

talent


Trying to conduct an interview in your own country where culture is not as problematic presents dif-ficulties enough, so it is easy to see that interviewing candidates from another culture is even more chal-lenging as the number of things that need to be correctly coded and evaluated increases exponentially.

“In my years of engaging with foreign talent from Western coun-tries, I find that interviewees tend to be more straight forward. As a Recruiter, being able to get more direct answers from candidates makes the screening process a lot less complicated, though this doesn’t mean that less direct an-

swers are not of less value, it is just that they need further probing” - says Carmel Perales, Regional Executive Search Manager at Lo-gistics Executive. Different cultural backgrounds not only have differ-ent values and therefore motives, but may also have direct or indirect conversational styles, different nar-rative styles and indicate their at-titude in different ways.

There are many variables at play. Failing to correctly interpret cross-cultural values and behaviours for example, during a job interview revolves around how candidates deal with context. Low and high context cultures are terms pre-sented by the anthropologist Ed-ward T. Hall in his book Beyond Culture. A candidate from a low

context culture - where more is ex-plained through words or verbali-zation instead of the context such as Germany, Scandinavia or the US, will provide a lot more detail when asked an interview question than someone from a high context culture like China, Japan or Thai-land, who might give a shorter or indirect answer. This can often be interpreted by the interviewer as either talking too much or being wishy-washy, when in reality it is more a question of communica-tion style.

If that’s the case and words like ‘success’, ‘better opportunity’ and ‘enthusiasm’ mean different things

in cultures, how are recruiters/interviewers supposed to conduct proper intercultural interviews and make the right hiring deci-sions? If only there was a system that helped the interviewer inter-pret cross-cultural dialogues; so that when the British candidates say “quite good”, they might mean “a little bit disappointing” or when the Chinese say “yes”, they might mean “I hear you, but I disagree”. Are there inter-view answers that are considered good regardless cultural context? Should interview questions be de-signed according to the cultural background of candidates?

The bad news is there is no universal “global competency” that can be limited to the same

behavioural indicators for every culture. While the competency may be global, such as leadership, the behavioural indicators will dif-fer from culture to culture if that leader is to be effective in deliver-ing what the organisation needs internationally.

Unfortunately, the fact that it has become an everyday activity for hiring managers of various levels to make recruitment decisions in an inter-cultural context doesn’t nec-essarily mean that they have devel-oped a cross-cultural competence. Although there is little data avail-able on the effectiveness of recruit-ment practices across cultures, it is highly possible that an interviewer with less cross-cultural exposure will tend to make decisions based on his or her cultural experience and reject candidates who do not fit into his/her personal, cultural framework.

According to Ms Perales of Logistics Executive “There are ex-amples in our work on a daily ba-sis, as we recruit for clients across the Asia Pacific Region where the most talented candidates are lost due to cultural and communica-tion road blocks.” This is a con-cern, as the lack of cross-cultural awareness, understanding and sensitivity on the side of the hir-ing organization’s decision makers and very often on the candidates’ side, can directly affect communi-cation and assessment. These steps can easily lead to missing out on talented candidates or the wrong hiring decisions that don’t actually comply with company leadership and culture.

It doesn’t have to be all that complicated however to overcome these barriers, as long as there is a sincere and open willingness to make the connection. As a starting point here are some easy steps that both employees and corporate en-tities can follow:

“There are examples in our work on a daily basis, as we recruit for clients across the Asia Pacific Region where the most talented candidates are lost due to cultural and communication road blocks.”

talent


1. Acknowledge and accept cultural diversity.

2 Develop an awareness of dif-ferent cultures – this doesn’t have to be too complex, you just have to know enough about each other to check in and make sure your message is being understood if you anticipate there may be con-fusion.

3 Be tolerant – mistakes will happen but keep in mind that both parties will most likely have a strong desire to work it out. Set up a framework of support and acceptance – in fact it is an absolute necessity that you feel you have sup-port in trying to overcome cross-cultural differences, so insist on this if you do not feel it is forthcoming.

4. Keep it simple. Do not use over complicated language or references that are cultur-ally specific (such as our poor Supply Chain presenter’s ref-erence to “passion” in our earlier example). It is prob-ably better not to attempt to humour until you know the level of understanding and reference points of your au-dience.

5. Don’t be afraid to ask for help!

It may be a good idea to ask for the assistance of international hir-ing and human resources consult-ing firms who have vast experience in navigating intercultural and lan-guage challenges, such as Logistics Executive. English is not the first language of many international business people. Their language

may be peppered with culture-specific or non-standard English phrases, which can hamper the communication process. Again, having an experienced recruiter on hand may be the best solution.

It is critical for today’s business leaders to have a strong compe-tency in cross-cultural awareness. Often this is the competitive edge that makes or breaks most compa-nies. Though this can be a compli-cated endeavour, it may also be one of the most basic. It is important to remember that people, all over the world share a common desire, perhaps even a ‘passion’ (if we may borrow a turn of phrase from our Logistics’ Professional’s example above), to listen and to be heard. All it takes in the business world is a lot of determination, tolerance and a little help.

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Procurement

Domestic

West Bengal

Political

Government Type

Stability

Tax Policy

Trade & Tariff Controls

Economical Geological Environmental

International

Australia

In this column we will have a look at a tool that can be used for Risk Analysis along with the Risk Matrix for Risk Management. We will understand GEPE Analysis and its importance through di-

agrams, pictures and news clippings. Hope this will allow for a better understanding of the requirement of this GEPE Analysis rather than through an article.

We divide the items procured according to different countries and for big countries like India, China and USA according to different states or zones as per diversity. Then we apply GEPE Analysis. Figure 1 shows the factors of GEPE that will allow for Risk Analysis:

Supply DiSruptionS:

Fig. 1: Supply Chains are Politically Sensitive

n Government stability is essential to ensure supply guarantee.

nTax policies, trade & tariff control will affect procurement, material storage and movement.

GEPE as a Tool forRisk Analysis



Procurement

Domestic

West Bengal

Political

Government Type

Stability

Tax Policy

Trade & Tariff Controls

Economical Geological Environmental

International

Australia

Procurement

Domestic

West Bengal

Political Economical

Current Economic Growth

Projected Economic Growth

Impact of Globalization

Expected Changes in Economic Environment

Geological Environmental

International

Australia

n Will affect future availability of material.

n Will affect cost of material, more so in case of exchange fluctuations.

n Will affect cost of material storage & movement.

Fig. 2: Supply Chains are Economically Sensitive

Risk AnAlysis



Procurement

Domestic

West Bengal

Political Economical Geological

Stability of Region

Availability of Safe Routes

Availability of Disaster

Response Plans

Environmental

International

Australia

n Any questions?

Fig. 3: Supply Chains are Geologically Sensitive


Risk AnAlysis

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.

Procurement

Domestic

West Bengal

Political Economical Geological Environmental

Seasonal Effects on

Region

Seasonal Effects on

Route

SWOT Analysis

International

Australia


n Seasonal Variations leading to drought, flood-ing, avalanches, and snow can have dramatic effects on material movement as well as storage.

nRegular movement of cyclones in the area or through routes can have a dramatic effect on risk as well as cost.

Fig. 4: Supply Chains are Environmentally Sensitive

Risk AnAlysis

Should GEPE Analysis be made mandatory for all risk assessments? Your views are welcome at [email protected].

scmpr n mindset n supply chain management …...ing supply chain strategies with product...

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