What is Supply Chain Management

Wish to share an article......on Supply Chain Management in India.......

Supply chain management and organised retail are partners in every way. However, presently India's food chain, according to Lawrence Hutter, consulting strategy and operations partner with Deloitte MCS Ltd., has some catching up to do with global players, including the development of a cold food chain. 

Need for a cold chain
Lawrence Hutter, and 20 year veteran of many of the world's best known global consumer products manufacturers across food, beverage, personal care and household products sectors, talked about India's future food chain.

Hutter says that India's future food chain would be characterised by a focus on encouraging producer collaboration, becoming more market driven, shortening cycle times and reducing waste, and ensuring the integrity of a presently non-existent cold / chill chain. Additionally, it would have to optimise network and logistics costs, provide traceability and food security, and has to be supported by technology. He says the future food chain will ensure optimal costs, quality and freshness, and service or availability to the consumer. 

Indian Challenges:
Hutter outlines the challenges facing the Indian food supply chain as follows:
? Producer fragmentation that is hard to overcome – Hutter says this is easiest to overcome in the dairy segment, and is more difficult in the others, even though it holds significant benefits to farmers
? The vested interests in intermediaries present significant barriers to structural change
? Social issues need greater sensitivity
? 3rd party logistics sector is yet undeveloped

In conclusion, Hutter says, “Take time to establish infrastructure,” indicating that changes in these areas will be driven by retailers, and no one else.

Cold chain irrelevant at the present time?
Presenting a view contrary to that of Hutter, Anshuman Singh, CEO of Future Logistics Solutions Ltd. says that though the cold chain does not exist, every corner shop in India still sells 'fresh' vegetables, which is living proof that the Indian supply chain is very well done. 

He points out that in India, even non-vegetarian products are served fresh, and most consumers till now do not prefer frozen products, or products with extended shelf lives. Singh says eventually, the cold chain that Hutter talks about will definitely come about, but that would not be before the development of frozen chambers within stores that are capable of effectively handling cold stock. 

That he sees happening only when organised retail forms around 40 per cent of the total retail in India. 

Today's challenges, tomorrow's opportunities
Giving a 'state of the business' perspective to supply chain management, PK Sinha, director at Philips India Electronics Limited listed the challenges of working with the current physical infrastructure, comprising rail, road and warehousing, that is made further difficult by manpower issues, lack of technology implementation, complicated tax structures, and complex supplier and service provider relationships. 

3rd Party Logistics Providers
Sinha lamented the true implementation of 'logistics' partners, saying that in the current scenario, though a number of companies have chosen to brand themselves as 'logistics solutions providers', in essence they remain transporters. He says that dealing with road transportation, where 80 per cent of truckers are fleet owners with no more than 2 – 3 vehicles poses a major challenge to the real benefits of supply chain management, rendering most initiatives ineffective. Additionally, congestion and prolonged clearing times at ports, for both exports and imports, are “unbelievable”, says Sinha. 

“Logistics today is a pseudonym for transportation,” says Anshuman Singh, highlighting the fact that there is a long way to go for third party logistics providers. He says Future Bazaar operates out of 102 warehouses, which he hopes will go down to anywhere between 4 to 8 warehouse centres or hubs once the General Sales Tax regime comes into play. 

Real Estate is going crazy
Then comes the problem of real estate and warehousing, which has seen a 100 per cent increase in rentals in a short 36 month time span. These unsustainable and excessively high rentals are seeing attrition in the ranks of partners Philips has been working with for over 30 years, as landlords prefer to give out their properties to others who are more willing to part with their dollars and help them make an easy buck. Sinha says that one way to manage spiralling real estate costs is for the government to create the infrastructure needed by the industry. 

Anshuman Singh too, ratifies Sinha's views. He says that in India, real estate is so expensive that retailers like Future Bazaar do not have the 10,000 – 15,000 square feet store back end stock that is commonplace in foreign stores. In India, says Singh, storage is in terms of pieces of stock keeping units (SKUs), as opposed to cartons in the West. He says Future Bazaar replenishes its aisles piece by piece, from warehouses that are anywhere from 50 to 100 kilometres away. 

RFID
Adding to Hutter's argument for a more 'developed' supply chain, Puneet Kumar Bhatia, Cisco Systems Director for the Internet Business Solutions Group says the point of origin for any supply chain management initiative lies at the customer's end, and then traverses all the way back to the supplier's supplier. 

Throughout this chain, the one critical element, according to Bhatia, is the seamless flow of information that needs to be maintained in order to maintain the supply chain and manage inventory. Adding another dimension to this is the radio frequency identification technology, better known as RFID, which has the power to transform retail as we know it. Bhatia says that a collaborative approach is needed between various stakeholders for this platform to realise the promise it holds, and will be key to eliminating waste within the supply chain. 

Running an electronics business, Sinha says the penetration level of technology is critical to running a retail business, as this directly impacts inventory visibility and management, and gets stock moving. He says warehouse management systems are the need of the hour, and service providers who are strong in cost and service need to be brought in to develop local and regional strengths. 

For the supplier, inventory visibility is key, says Sinha, and tax reforms are needed for the likes of Philips to cut back from 32 warehouses to a more rational number. 

Anshuman Singh agrees, saying “RFID is needed to manage the supply chain, at a piece level, or a very wide level.” He knows all too well the complexities of managing 28 supplychains with no standard product size, comprised of over 3 million stock keeping units (SKUs), of which around a million SKU's are 'live' at any given point of time. “Consolidation of SKU's will happen once the business matures further,” says Singh. 

Sinha says the biggest untapped area today is the strength of leveraging or joint usage of the supply chain. Third party logistics service providers need to effectively manage the supply chain, and free retailers to focus on retail businesses. He says retail has immense opportunities, and is moving to fast that it is almost impossible to make accurate predictions as to where it would be at a point of time in the near or distant future.