Optimising the smart supply network

With increasing competition and maturing value chains, there has been a significant shift in what is expected of a supply chain function. Gone are the days when supply chain meant only managing logistics and warehousing. Even connecting supply to demand at an optimal cost and service levels is becoming an important factor in making supply chains efficient. Surya Kannoth As the Indian economy grows and the operating system evolves, several macro trends will shape the supply chain design. Greater and more intense competition and global value chains are leading to substantial shifts in what is expected of the supply chain function. It is no longer enough to simply connect supply and demand at optimal cost and service levels. Today’s businesses are demanding more from their supply chains, including competitive advantage. Add to that India’s unique operational challenges, such expectations make the role of a supply chain professional extremely complex. Yet there are examples of organizations across industries that have managed to move beyond the constraints in India to develop supply chains that lead to competitive advantage. Take for example, Drive India Enterprise Solutions (DIESL), the logistics arm of Tata group. DIESL provides the full range of logistics services, including warehousing, distribution, international logistics, kitting and packaging, telecom trading and value-added services like cash management and e-trade. The company offers primary distribution or transportation services, transporting goods from original equipment manufacturers and ports to the warehouse. The second part of its services involves transporting goods from warehouse to market, specifically ensuring these reach dealers, distributors, retailers and individual customers. DIESL’s business, though, is far more complex than simply transporting goods from point A to B. The company’s ability to manage the supply chain, the strength of its systems and processes, the competence of its people and the technology have been critical factors that affect the quality of its services. Thanks to having the best of communications technologies, DIESL has established a countrywide network. Technology partner Tata Consultancy Services has provided customised IT solutions to ensure operational efficiency. International logistics provider Dachser integrates air and sea freight shipments with a globally standardized system that is homogeneously linked to its overland and warehousing activities. “All processes are supported by in-house developed software solutions that always offer our customers and ourselves overview of the current logistics processes,” says Martin Neft, department head - corporate public relations, DACHSER Group. “We have laid the foundation for worldwide transport optimization on all levels: In the air freight division, high departure frequencies with fixed capacities and the use of strictly defined quality criteria in the selection of service providers (including the carriers or air freight forwarders) ensure reliable quality for our worldwide connections,” Neft explains. Transporting over 900,000 vehicles a year, Mahindra Logistics started as a strategic initiative to enhance focus on logistics services to both internal and external customers and to take care of Mahindra’s complex supply chain needs. It has since grown from handling inbound and outbound logistics, inter-plant movement, warehousing, linefeed and value-added services for Mahindra & Mahindra to a full third party logistics provider. Mahindra Logistics runs 25 offices in 70 operating locations, with more than four million square feet of warehousing in order to service inbound, outbound and aftermarket parts logistics. As well as information technology, the company has also invested in over 500,000 square feet of modern warehousing space in western India - a mix of both multi-user and built-to-suit facilities in a single complex. The location of a warehouse or a set of warehouses in India is actually dictated by a variety of factors: taxation, point of supply, demand clusters, type and nature of the commodity, among others. Agri-logistics player Shree Shubham Logistics is engaged in post-harvest value chain for agri-commodities based on an integrated business model. Its activities include warehousing, procurement, primary processing, trading, collateral management, funding facilitation, funding, testing and certification, and pest management in relation to agri-commodities. Explaining the role of warehousing in the agricultural value chain, Aditya Bafna, executive director, Shree Shubham Logistics says, “For the successful implementation of food public distribution, the government needs a strong warehousing system at major consumption centres in the country, rather than the present system where most of the capacity is located near production centres. Looking at the current scenario and government targets, CRISIL Research has estimated that the demand for agricultural warehousing is expected to grow at a CAGR of 5-6 per cent over 2014-15 to 2019-20.” In an intensively competitive environment, superior value chains succeed. Collaboration is a good way to improve the value chain. According to A.T Kearney study for Council of Supply Chain Management Professionals, this can occur on three levels: across functions, across the value chain and beyond the value chain. Collaboration across functions is an essential practice today. Supply chains will need to handle higher variety and faster transitions. The use of intermediaries to develop a lean supply chain model will be crucial. Industry supply distributors, which maintain large logistics networks in their areas of operation with hundreds of thousands of maintenance, repair and overhaul in inventory, help organizations efficiently meet the needs for unplanned purchases. Globalization is changing the way companies view and use their supply chains to compete and gain market share. Global companies are managing multiple supply chains, and they’re counting on those operations to not only deliver goods on time, but to tailor and respond to divergent customer and supplier expectations regarding pricing and packages. To do that, supply chain operators need the capability to personalize offerings for multiple customer segments. Among the challenges facing today’s supply chain are many that link directly to monetization. Market volatility, economic contractions and modest recovery cycles affect the way companies manage distribution, manufacturing, invoicing and materials sourcing. Expansion into new markets introduces complex taxation, invoicing and localization burdens. And dispersed market segments demand different pricing models and services. With so many critical functions in flux, enterprises need to optimize their supply chains simply to remain competitive. Responsiveness is also becoming an important focus point for organizations in India. The ability of the supply chain to respond to a sudden increase in demand or unanticipated supply disruption offers an opportunity to capture new customers from customers. Another important area for supply chains is ‘speed to market’ or freshness. Especially in the case of technology-led products, trumping the competition with better features and benefits can have a big impact on market share. Organisations across a variety of industries are deploying tailored supply chains to manage the challenges from delivering better services at a lower cost to managing complexity. As India’s infrastructure develops to meet the needs of the future, scale will increase and the supply network will consolidate. Being part of the logistics industry while the supply chain is undergoing such a rapid transformation can be perplexing, and maybe even overwhelming. Since manufacturers are creating more diverse sets of product options, packaging designs, and logistics arrangements, today’s logistics providers must deal with a staggering amount of complexity in the form of fragmented channels, expanding product variations, and increasing customer demand for customized solutions. In response to this complexity many are promoting the concept of the 4PL, where logistics providers can offer higher value service that goes beyond physically moving the product, to providing comprehensive supply chain solutions. Yet there is still very little information available to logistics service providers as to how their current technology investments are supposed to fit into this 4PL vision, what tangible steps logistics service providers can take to enable these new services, or even what precisely these higher value services could be. Maintaining supply chain velocity is a key challenge faced by the linked partners of the typical supply chain today. While firms and supply chains are trying to increase product velocity in the supply chain to lower cost by reducing product storage time and damage, the transit times and border delays characteristic of global logistics constrain product velocity. extended transit times and exposures in-transit increases the product risk for intentional or unintentional damage as well as reducing velocity and ultimate flexibility. “The individual customs regulations and security precautions of the destination countries create an additional hurdle. Tightened aviation security standards and measures for the inspection and guarding of goods have been implemented in the age of global terrorism. This includes systematic freight screening, sealing of containers, restricted access to vessels or harbors as well as embargo measures. As part of DACHSER Foreign Trade Compliance, we make sure to comply with all legal requirements. Our experts are always informed on the most up-to-date status. Therefore, we provide you with maximum security, and save you time and money. Above all, we want your goods to arrive at their destination safely and on time,” says Martin Neft of Dachser. As companies look to amplify growth and expand quickly into promising new markets, they will have to take a hard look at what their current supply chains are capable of, and whether those capabilities are enough to support global competition. Many will find that in order to support existing and future business objectives, they’ll have to reconsider their management processes in favour of more flexible practices.