Supply Chain Edge

The Missing Link - Logistics Skills and Talent

noreply@blogger.com (Ashish Mendiratta) — Tue, 11 Dec 2012 06:20:00 +0000

Logistics is a lifeline of a country’s economy as the two major sectors i.e. industrial and agriculture directly depend on the logistics infrastructure of the country. The logistics spend varies from sector to sector but can be as high as 20-30% of the total cost for the industrial commodities and 50% to 70% for agricultural produce.

The “non-existent” Logistics Talent Pool in India

A lot has been said and written about the talent pool in the logistics sector in India. Numerous reports and whitepapers have been published on the current skill gaps in this domain. National Skills Development Corporation (NSDC) has laid out a special focus on logistics skills development under a Public Private Partnership program. The logistics companies have begun to feel the pinch of the skills gap but yet they have not come forward to take stock of skills short in supply in the medium and long term. The Logistics Sector Skill Council for India, the starting point for preparing the roadmap for addressing the gap, is yet to be put in place.

“Skills for Logistics” – an initiative of UK- is a good example for how skills and productivity needs of logistics sector can be addressed. The council has developed the inventory of skills and competencies, called the Professional Development Stairway, mapped to various levels ranging from the blue collar to the leadership roles. The Stairway also lays down the training needed for career progression at each step. Last year, the council decided to set up national logistics skills academy with government funding.

The vocational training framework in India is largely driven by the ITIs (Industrial Training Institutes) and ITCs (Industrial Training Centres), covering skills ranging from Electrician, Welder, mason, Carpentry, Painting, and Catering etc. However, logistics skills have not found its place in the current setup because of its quasi-technical nature.

NSDC has estimated a need for 17-20 million logistics professionals by year 2022. The job roles ranging from drivers to individuals with specialized skills, such as, handling hazardous materials and cold chain are expected to be in high demand. However, there is no educational framework or adequate infrastructure to support this requirement. NSDC is largely a funding agency to support the skills development programs under Public Private Partnership, without expertise in defining the education framework.

As aforementioned, approximately 17-20 million logistics professionals will be needed in the logistics sector by year 2022. The job roles ranging from drivers to individuals with specialized skills, such as, handling hazardous materials and cold chain are expected to be in high demand. However, there is no educational framework or adequate infrastructure to support this requirement. NSDC is largely a funding agency to support the skills development programs under Public Private Partnership, without expertise in defining the education framework.

The issue that needs to be addressed on the supply side is the lack of attractiveness of logistics as a career of choice. The logistics sector is believed to be labour intensive, lower paying and having more difficult working conditions compared to the other sectors such as sales, hospitality, IT etc. The lack of awareness about logistics as a career at the school and college level, and fewer institutions offering logistics courses in comparison to other professions are the key reasons for not being able to attract the right talent. In the past, not many logistics companies invested on training the employees requiring specialized skills. Most people in this sector have acquired these skills on the job through experience over time. There has not been a concerted effort to develop these employees and help them move up the career ladder.

The scenario has changed at a fast pace in the recent years. While cheap manpower is becoming a thing of the past, companies have started focusing on automation and efficiency that require people trained in logistics skills. It has been one of the prime reasons for the crying need for the skilled manpower in logistics. Also the entrance of multinationals in the logistics sector and emergence of organized retail has acted as catalysts in generating the demand.

Bridging the Logistics Skills Gap in India

This problem of the widening gap between the demand and supply of skilled manpower in logistics requires a multi-pronged approach.

1. Building awareness: The logistics sector is wrongly considered as a non-glamorous occupation. However, people with aptitude and flair for this field have found tremendous opportunities for career advancement. In order to build awareness, the industry, education providers and professional logistics organizations need to conduct seminars in colleges, road shows, workshops and events to popularize logistics as career of choice. Conducting career fairs at a regular frequency focused on the logistics sector and participated by the logistics companies and education providers would go a long way to build awareness.

2. Sector Skills Council: Establishing a Sector Skills Council to develop the inventory of logistics skills mapped to various job roles is the first step towards developing the skills development framework. Defining the competencies and career roadmap would help in laying down standards of education. NSDC has been actively seeking the participation of the logistics sector to form and contribute to the sector skills council.

3. Education and Training Standards: Developing standards would ensure consistency and quality of education and training aligned to the needs of the industry. NSDC can play an important role by bringing together the logistics players, NCVT (National Council for Vocational Training), UGC (University Grants Commission) and private training providers for development of standards of curriculum, content, trainers and accreditation.

4. Creating Training Infrastructure: Setting vocational skills centres for logistics requires substantial investment for placing the equipment e.g. forklifts, reach trucks, cranes, conveyors, simulators, RFID and barcode scanners, and creating a real life working environment for hands on training. Also these centres need to be strategically located not only closer to the logistics hubs but also to those locations where a large mobilisation of people is feasible as well. Funding supported by NSDC and VCs to the private training providers as well as extending the role of ITIs / ITCs to include logistics skills in their curriculum would help achieve this objective.

On the non-vocational side of logistics, UGC may introduce logistics as a specialization at graduate and post-graduate level across various universities. The private education providers, specialized in the logistics sector, can play a role of delivering these courses at the college level as well as driving placement of qualifying students in the industry.

The training and education framework should not be limited only to provide employment to the fresh students, but also to the entire career cycle of people employed in this sector for their career advancement. This shall be done by creating an industry approved flexible framework of multi-tiered qualifications and continuous learning programs.

5. Employment: Matching the availability of skilled resources and demand is as important as creating the training & education framework. Backing it up with the appropriate employment opportunities and career development is important for its success. A nodal agency to build a network of employers, staffing service providers and training providers, using online portal and skills registry would be a big step towards ensuring suitable employment for the trained students.

6. Technology: In order to scale up the training effort at a much faster pace as well as maintain consistency of delivery standard, the use of communication technology such as VSAT, Webex, e-Learning must be explored actively by the private education providers as well as government run institutes.

7. Funding: Last but not the least, availability of funding such initiatives at a large scale is the key enabler. Though NSDC is the key source as far as funding the vocational skills are concerned, however, a holistic approach towards the entire spectrum of job roles needs to applied. The education providers who can service the skill gaps at all levels, including vocational as well as white-collar jobs, are the ones who would be able to scale up this effort much faster and have a successful business proposition. Therefore, the private VC and PE funds with interests and mandate in the education space need to come forward and participate in the development of one of the fastest growing sectors.

Given the skill gap in this sector and business potential, we foresee many players jumping into the logistics education and training space. It will be a good development for the sector; however, the quality of education in the absence of any standard framework may be a big concern. We expect that the logistics players, reputed education providers and government accreditation agencies will come forward and take this initiative beyond the fragmented solution to this problem.

Is India an Infrastructure Deficient or Infrastructural Mess?

noreply@blogger.com (Ashish Mendiratta) — Sun, 10 Oct 2010 10:03:00 +0000

A lot has been said and written about India’s slow pace of infrastructure development despite the 2nd highest GDP growth rate. In the 11th five year plan, India expects to spend USD 500 billion and increase the spending from 5% to 10% of the GDP in building infrastructure the next decade. However, digging little deeper you will find that lack of infrastructure is only a part of problem. A large part of the problem lies with the existing infrastructure that has been created by spending huge sum and has done little to improve efficiency of goods movement.

Highways and expressways have been built to connect length and breadth of the country but inter-state movements are still marred with check posts problems where vehicles have to wait for hours for clearance to cross. Different types of forms and permits only result in delays and corruption. The GST implementation date is nowhere in sight. Poor quality and inadequate maintenance of the roads that are washed out after every rain is another problem. Last mile connectivity has not received any attention worth talking about.

The skewed development in favour of road infrastructure in comparison to the railways and waterways reflects the short-sightedness of our planners. It is a well known fact that road transportation is inefficient compared to railways or waterways. The dedicated freight corridors by Indian railways is still a distance dream and water transport is non existent. Even the existing railway infrastructure is not utilized to full potential. Reducing the tare weight of wagons, block signalling and proper maintenance of tracks can improve the freight carrying capacity by 5% to 10%. India has 8000 kms of coastal line that can be effectively used for movement between the coastal towns. The Indian ports are still congested due to archaic systems and procedures. The newly built ports are yet to realize their potential and contribute to less than 10% of ship traffic.

According to an estimate about USD 45 billion are lost every year due inefficiency of existing infrastructure. So, it is not just inadequate development but poor planning & execution of infrastructure development that is leading to the chaos that we are so used to now. Hopefully, the government will wake up to these facts and appoint a unified command to improve quality and productivity of existing infrastructure in an integrated manner.

Obsession with Demand Forecasting

noreply@blogger.com (Ashish Mendiratta) — Fri, 07 May 2010 11:46:00 +0000

Few days back I was interviewing candidates for Demand Planning position. I asked one of the candidates to share his greatest frustration as a demand planner. What he shared was quite shocking. He had been given a target on forecast accuracy that he missed completely due to uncertainty of tender business, which contributed about 15-20% of the total business. Though company could get the sales and sales team earned handsome incentives but the poor guy lost his annual bonus.

Many companies have a utopian belief that by having a dedicated demand planner and / or a sophisticated tool, any demand could be forecasted with an accuracy should touch 90% or more. Such obsession leads to frustration and demoralizes the entire supply chain staff. The fact of the matter is that one should forecast what is forecast-able and not forecast what is not forecast-able. The demand forecasting is a mean and not an end by itself. In many cases demand forecasting may not be an appropriate mean to an end objective. Trying to improve forecast accuracy beyond a point is self defeating.

It brings out a new paradigm on “non forecast-able” component of demand – how it should be identified and managed. I call this as Demand Management, which is a more strategic topic than the demand forecasting. Let us take a hypothetical example of a product whose sales trends are shown below:

Assuming that the spikes in demand that are not due to any planned event such as pricing or marketing activity, one would attempt to normalize the spikes for generating a forecast for future. The projection will show a nice and smooth line.

However, the demand spikes are a reality and may happen in future. Normally, the supply chain planner would keep as much safety stock to cater to unknown demand spikes. Such an approach is very short sighted and results in high stocks most of the times and stock-out sometimes. It is one of the most common causes of frustration with the demand planning.

Demand management expects a deeper insight into the demand behavior and differential treatment for each kind of behavior. It requires the capability of slicing and dicing of demand data by customer type, geography and seasonality. Continuing with previous example, assume that there are two types of customers for the product i.e. B2C and B2B. Each of the customer type may reflect a different demand behavior, as shown below: This insight into demand behavior opens up many possibilities of demand management. The B2C channel is a clear candidate for demand forecasting using the statistical tools. However, B2B demand behavior shows an unpredictable pattern that may be due to:

1. B2B customers place orders and take deliveries in big lots, to take advantage of bulk price discounts or logistics cost. However, the consumption at their end may not be as fluctuating.
2. The consumption at B2B customers end is unpredictable, however they expect a short response time as and when such demand materialize.

The possible responses to such demand behavior are:
- Collaborative planning with B2B customers, by which the consumption pattern at their end is made visible to the supplying company. This would obviate the need for keeping very high stock all the times and responding to the actual situation.
- Servicing B2B demand through made to order route instead of made to stock.
- Reducing lead time for servicing demand spike by reserving production capacity, stocking of common parts or sub-assemblies, configure to order etc.

By getting an insight and segregating different demand behaviors, it is possible to design supply chain responses that go beyond the benefits of conventional demand planning or forecasting. We have taken one such example but there are numerous possibilities that demand management may throw up.

What should Supply Chain do to prepare for Economic Recovery?

noreply@blogger.com (Ashish Mendiratta) — Thu, 07 May 2009 16:32:00 +0000

Economic and financial gurus have predicted that the recession will bottom out very shortly and recovery will start by end of 2009. Not sure if it has a sound scientific base but commodity prices and stock markets are on upward trend.

Unlike the way we were caught unaware with recession staring at face, we should start making plans for recovery of economy. When recession hit all of us, we were stuck with huge inventories, capacities and resources. During last 6 months we have learnt to live with recessionary trends, used our wisdom to liquidate inventory and unwanted capacities & resources. We have learnt to take a conservative approach to demand and changed our mindset that allows losing sales opportunities here and there rather than blocking cash in resources. We have shed all possible buffers and extra flab. Many suppliers of materials have closed their shops and skilled manpower has been lost.

Should the recovery starts by end of 2009, as projected by many experts, are we prepared to embrace it without any major hiccup? The one who is prepared for recovery, is certainly going to gain market share and competitive edge in future. Imagine a situation that there is increased demand from the customers but we can’t meet the demand because we either don’t have enough capacity or material suppliers for the additional demand. We will be caught on the other side of the “bullwhip effect”. What are the options available with Supply Chain? Should we start building extra resources hoping that recovery will happen?

Let us explore the possible ways that we can adopt without much of risk. We categorize these under External Actions and Internal Actions.

External Actions

1. Check macro indicators: Certain indicators like construction activities, prices of metals and other commodities, manufacturing index, import and exports indices can provide a view on overall economy.

2. Maintain a close contact with customers: It is your customers who can give you first signals of recovery in demand. It is very likely that they would have also scaled down their level of operations during recession. Look for these signs:

-If you are in consumer goods business check if there are frequent stock outs at shelf or Distributors’ warehouses.

- Erratic order pattern from the customers, with intermittent & frequent spikes in demand. It may happen because of the reduced capacity of the entire downstream pipeline not able to cater to increased demand.

- Customers placing more frequent orders albeit each order is small.
Increasing number of delivery or service complaints from the customers or consumers.

- Last but not the least, the mood and behavior patter of your key customers. If they look more relaxed it means that they are able to recover their money better but not yet ready to invest back in the business.

3. Monitor unusual increase or decrease of imports and exports of the products in similar category. Due to increase in local demand and inability of domestic suppliers to meet the demand, the imports may increase. Similarly increase in demand in the country may result in lesser availability for exports. It can work both ways.

4. Start talking to suppliers who had either scaled down operations or closed shops. They should re-oil the equipment that was shut, line up requisite manpower (not necessary employ them right away), talk to their bankers for increasing credit limits. If that doesn’t work out, start scouting for new suppliers who can be developed at a short notice.

5. The same holds true for the logistics and other service providers. They will need to revive their capacities to handle higher volume of products.

Internal Actions
1. Evaluate spare manufacturing capacity & upward flexibility. Build “what-if” scenarios and options e.g. whether to revive own capacity or outsource till the time there is sufficient confidence or sustainability in demand.

2. Review stocking policies for the raw materials, finished goods for various levels of demand and estimate cash required. Make plans with finance teams to prepare for the most likely scenario.

3. Watch out for likely inflationary trends in commodities and revise your budgets accordingly.

4. Most importantly, make plans to retain talent because revival will also lead to more job opportunities.

Let us hope that this prognosis of recovery by end of this year really comes true.

Innovative Logistics

noreply@blogger.com (Ashish Mendiratta) — Sat, 02 May 2009 07:06:00 +0000

Innovation doesn't always mean the technology. It is at times means driven by end or value for money.

Seven Habits of Effective Supply Chain Managers

noreply@blogger.com (Ashish Mendiratta) — Tue, 21 Apr 2009 13:00:00 +0000

Skeptical : Supply Chain Managers always look for the risks involved in every strategy, plan or move. Being skeptical doesn’t mean that they are averse to risk taking but simply prepare themselves for any eventuality and have a backup or mitigation plan in place. The ability & habit of generating “what-if” scenarios help them to minimize exposure to operational and financial risks.

“What-if my most critical supplier close down shop?”

“What-if there is a strike at the port?”

“What-if the commodity prices shoot up beyond expectation?”

It may sound crazy to expect a person to always imagine negative events all the time. But it is always better to foresee them than to be surprised by them.
Eye for Details: Supply Chain Managers don’t go by perceptions or the superficial analysis. They are the one who change perceptions by presenting in depth and unbiased analysis. They are aware that the devil lies in details and they don’t let the devil catch them by surprise. However there is a difference between having an eye for details and getting lost in details.

A superficial Supply Chain Manager will try to solve the problem of increasing backlog of customer orders by increasing safety stocks. Whereas the effective supply chain manager will get into root cause of the problem e.g. forecast reliability or production reliability and attack the right cause.
Observant: Supply Chain Managers are astute and inquisitive observers. They are not dependant only on reports and excel analysis to take decisions. They keep an eye on softer aspects, qualitative and informal information to blend it with the quantitative data.

Supply Chain Managers regularly visit the markets and customers they serve. They observe the market reality and ask questions to their customers about demand trends or competition etc. Whereas a superficial manager will always be satisfied with the sales forecast received from Sales or Marketing. Supply Chain Managers are aware of the IR sensitivity in their factories. They use it in making a decision on changing production schedules up or down.
Technology Friendly : Supply Chain Managers are comfortable with technical developments in the area of Supply Chain. They don’t have to be technology wiz kids themselves but they continuously update themselves and evaluate the technology in their area.

I have seen many Supply Chain Managers scoffing at a technical or IT tools as a fad. They always believe that technology means more cost to company. As a result they continue to use obsolete and unproductive methods.

On the other hand the companies with great supply chains are the ones who adopted new technology at an early stage. Dell is one such but not the only example. Unilever, P&G, Toyota adopted technology in supply chain and gained market shares.
Challenge the Obvious: Supply Chain Managers always look for continuous improvements by challenging what might seem to be given. They don’t take anything for granted.

I remember a Purchasing Manager of a big multinational company facing a problem of frequent rejections of material from a supplier. All steps starting from calling the supplier to factory to sending the technical teams to his manufacturing facility didn’t seem to work. The whole focus was on and around the supplier.

One day, he questioned his own factory if they were measuring the quality parameters correctly. He had to face the fury of everyone right from the Factory Manager to the Quality Manager. The company’s quality procedures were taken for granted and assumed to be the perfect. However, he wasn’t perturbed and decided to observe the testing in the laboratory himself. He noticed that operator was drawing number of samples at one go and there was a time lag between drawing the samples and testing. The material that was supposed to be kept at low temperature, crossed the threshold and gave different results in the testing. They changed the procedure to drawing & testing samples one by one and everything was fine.

Supply Chain managers don’t believe that there are any holy cows.
Team Player: This is one habit without which no Supply Chain Manager can hope to survive. I have seen many Supply Chain managers becoming victim of their own politics. All supply chain processes require involvement of cross functional teams and making them agree for the “business cause” is the most challenging task.

Supply Chain anchors the balance between demand and supply, cost and service. Taking sides or pleasing one section can be dangerous for supply chain performance. Also not involving a section of relevant people in a process may lead to a biased view of situation and wrong decision making. Whether it is demand planning, supply planning or customer service strategy, you cannot do without cross functional team involvement.
Flexible: Supply Chain Managers cannot afford to hold to a point of view. As the business and external conditions change, they need to adapt themselves to the change. They change their strategy and review their processes to align with the business. They are flexible enough to allow elbow room for any unforeseen deviations that may happen in the chain.

Some of the statements like the ones below are not accepted any more:

“ The demand forecast is frozen and I will not allow any change until next month”

“ This order may be urgent but I will not ship it unless there is a full container load”

One reason most of the commercial or business managers hate supply chain people is for their lack of flexibility. In the garb adherence to processes. the supply chain people may overlook the business needs. The flexibility has to be built into the processes and performance management. The attitude has to change from “why it can’t be done” to “this is how it can be done”. We must appreciate the fact that Supply Chain is a mean to a business goal and not an end by itself.

Supply Chain Is A Risky Affair

noreply@blogger.com (Ashish Mendiratta) — Tue, 14 Apr 2009 10:15:00 +0000

“Fire at Lite-On plant affects more than 50% of LCD monitor production capacity” (source: emsnow, Feb 06 , 2008)

“In 2002, the International Longshore and Warehouse Union was locked out, shutting down ports along the West Coast of the United States for 10 days. The lockout was estimated to cost the US economy up to 2 billion dollars per day. The lockout closed several factories including a joint venture between GM and Toyota.” (source: cnnmoney, Oct 3, 2002)

“Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster” (source: CIO, Jun 15, 2004)

I was doing a little research on Supply Chain disasters and came across many examples that were eye opener. SupplyChainDigest has published a list of top Supply Chain disasters that resulted in businesses going bankrupt or CEOs having resigned or sunk investments.

And a recent example of milk adulterated with melamine that killed or seriously sickened babies in China.

I wonder how many of the supply chain leaders take into account such risks in their decisions and have mitigation plans. When it comes to sourcing cheaper and thereby getting a perceived savings in cost, we turn a blind eye to such risks. However there are few exceptions like HP’s Procurement Risk Management Program that works out possible scenarios and shares both risks and rewards with their suppliers.

Let us analyze the factors that have resulted in greater need for focusing on supply chain risk management:

Global Sourcing : Lot of sourcing has shifted to low cost producing countries. Other than challenges of increased lead times, lack of visibility & communication problems, the risks of supply failure, quality & environment related issues have increased manifold. There have been cases of high toxic contents in the plastics used for children toys and recycled leaking batteries. Such incidences have the potential to spoil the reputation of company for ever.

Demand volatility : With current recessionary trends, estimating demand reasonably well has become virtually impossible. The risk of producing excess stocks that may have to be either discounted or written-off. On the other hand potential of losing sales to competition if a pessimistic view of demand is taken.

Cash Flow : Despite all governments announcing revival packages & pumping liquidity in the market, the credit crunch continues. To achieve sales targets, some companies may extend credit to their customers. As a result cash flow and therefore business sustainability is severely impacted.

Single sourcing : We all grew up in Supply Chain learning the advantages of single sourcing and supplier collaboration. The current situation calls for a review of the single sourcing strategy. I am not advocating to start developing second source for every item, but have a review of the assumptions for single sourcing.

Currency Risk : Indian rupee has depreciated by 25% in last one year. RMB has been artificially kept low against USD despite balance of trade in favor of China. There will be a day when China sourcing will not be as lucrative as it is today.

Geopolitical Risks : The governments are under tremendous pressure from local population to put trade barriers to encourage domestic business. Obama has come out against outsourcing of services to low cost countries. Many countries are putting safeguard duties on imports to protect domestic industries against global competition.

Supplier Sustainability : The entire supply chain is not under control of a single entity. You have suppliers as well as suppliers’ suppliers. They are all part of your value chain. What if any of these suppliers follow illegal practices, pollute environment unlawfully? It can be a big risk not only due to disruption of supplies but also the dent in the reputation of the companies associated with such suppliers.

Well, there are other risks as well e.g. unrest, terrorism and natural disasters, which is beyond anyone’s control.

Every Supply Chain Manager should start analyzing and prioritizing risks to their business, as part of Supply Chain Strategy and make a plan for risk mitigation. The risk management involves three key steps:

Assessment : Identify key vulnerabilities in supply chain and the potential risk alternatives. Quantify the potential economic impact of current supply chain risk profile.

Analysis: Through analysis, make a business case that identifies, quantifies, and prioritizes critical supply chain risks and potential alternatives.

Roadmap: Develop detailed plans needed to implement the changes required to achieve organization’s future state risk profile. Institutionalize risk-mitigation into the supply chain planning and execution and measure process effectiveness and results.

AMR’s supply risk management guru Mark Hillman said, “The greatest risks are the day to day operational risks that can detract from shareholder value and performance. You need to focus on high probability risks that you can control, such as supplier failure or market risks, and take steps to mitigate these.”

Cost Pressure : Are we complaining?

noreply@blogger.com (Ashish Mendiratta) — Sat, 15 Nov 2008 09:41:00 +0000

Indian Retail sector is crumbling under economic crisis & looking ways to cut cost. The other day I visited one of the famous retail outlets in Gurgaon. The kind of waste I saw over there didn’t indicate that there was any cost pressure on the company.

The most obvious was the indiscriminate use of plastic bags. The goods were already packed by manufacturer, which went into smaller plastic bag and many such bags into a bigger plastic bag. On an average they would be giving 2 big plastic bags per buyer (assuming smaller plastic bag is unavoidable). Assuming 5000 buyers per day & 100 gm weight per bag, they would be using 1 T per day of extra plastic and 300 T of extra plastic per year. That is a wastage of Rs. 20-30 million waste per year per store. This is apart from the disastrous impact on environment these plastic bags have. How can the highly experienced & sought after Supply Chain managers of these retail chains ignore such a leakage of money?

On the other hand , we have an example of Wal-Mart’s sustainability measures specifically focusing on packaging not just in their stores but even at the suppliers’ end. It has set a goal to reduce packaging in the supply chain by 5 percent by 2013. Reaching that goal would prevent 660,000 tons of carbon dioxide from entering the atmosphere, a feat equal to taking roughly 200,000 trucks off the road every year. It would also save the company more than $3.4 billion. General Mills is a leading example of the changes: straightening its Hamburger Helper noodles meant the product could lie flatter in the box. This, in turn, allowed General Mills to reduce the size of those boxes. The move saved nearly 900,000 pounds of paper fiber every year, reduced the company's greenhouse gas emissions by 11 percent, took 500 trucks off the road and increased the number of Hamburger Helper boxes on Wal-Mart shelves by 20 percent.

Wal-Mart has unveiled a packaging scorecard in 2008. It will help to evaluate the sustainability of its suppliers' packaging. The company's buyers will then use the scorecard to make more informed purchasing decisions.

I am yet to see any effort by any of the retail chain in India, to reduce, recycle or reuse plastic bags. This economic crisis is an opportunity for the retailers to take initiative, not only within their own chain but also involving suppliers & customers. As a retailer, involving consumers into sustainability efforts will only strengthen their ties with brand. Consumers can be encouraged to reuse or drop in the collection bins placed near the store. Many consumers park their cars in the parking lot & carry the trolley to the car. At that point they can discard the plastic bags & deposit in the bin placed nearby. One can visit http://www.plasticbagrecycling.org/00.0/ to have access to resources that would help to take an initiative in this direction. I liked this toolkit http://www.plasticbagrecycling.org/00.0/images/toolkit.pdf with very clear direction for plastic bag recycling.

Let us not blame the economic crisis but think out of the box to eliminate “waste chain” in the supply chain.

Global Recession : Are We Becoming Wiser?

noreply@blogger.com (Ashish Mendiratta) — Thu, 30 Oct 2008 14:40:00 +0000

Recession, business cycle, bubble are not new for this world. Right from 1930's onwards, there is an ample record of economy movements & major recessions, their causes & impacts. Have we learnt any lesson from each of the down turn or just become good at analysing it post facto? With so much of experience, knowledge, sophisticate modeling capability or merely improved common sense, why can't we see it coming? Why do realize it when we are only deep into it?

These questions are difficult to answer and many experts may claim that they saw it coming but as a collective human race, we have been again fooled by our psyche. Just a few months back the whole world was dancing to the tune of growth. Oil & commodity prices crossed the limits of any imagination but the greed of producers continued to grow without any limit. They kept on increasing prices to make a hay while sun shines. Same was the story for the real estate sector fueled by strong consumer demand that soon turned into a bubble with entry of investors colluding with builders. The sensex, having crossed 10000 mark did not look back, with every increase sharper & faster than before till it touched 20000 mark. Experts even forecasted sensex crossing mark of 30000 in near future.The stock market sharp rise was nothing but another bubble being built by FIIs pouring dollars into a stock market. Rupee sharply rose against dollar & analysts forecasting further strengthening of rupee.

While the experts were building castles in the air, the US economy was getting into troubled waters right from beginning of 2008. Japan was already on the edge of recession. There was increasing unemployment in US resulting in lower consumer demand. In the middle 0f 2008, alarms were raised on sub-prime concerns with many banks declaring losses. Experts failed to read the signal & assess the impact. This was another bubble waiting to burst. The experts strongly believed in it's not over until the fat lady sings.The sharp increase in food prices was attributed to food shortage due to increased consumption in India & China..... another cover story to ignore the reality.

The story of India is very peculiar. The economy was growing at 8-9% and expected to touch double digit oblivious to what was happening to commodity prices until inflation started hitting both the industry as well as common man. When crude oil prices crossed USD 100, government had no option but to increase fuel prices. Prices of common items, food and vegetables went up 30-40%. The government that was gung-ho about growth had to resort to practices of reducing liquidity in market & restricting exports but failed to make any dent on inflationary trend. That was a swing to completely opposite extreme. FIIs pulled money out of stock market to meet US financial crisis and Indian investors pulled money from real estate to face stock market crash. As a result real estate bubble also burst. Now government has reacted to recession by swinging to another extreme of loosening credit in the market. The impact of the additional money in the market is yet to be seen.

Coming back to the key issue i.e. why we didn't see it coming and took proactive steps. We became victim of our own success. Who is responsible for this? Banks, who over sold the mortgages in US? Or commodity producers who kept on increasing prices assuming demand is not sensitive to any level of price? Or investors flush with funds, who kept playing with stock & commodity prices in the market? Clearly, it is all of them. They all belong to a new sect of unregulated free economy that doesn't mind killing itself for the short term gains. They not only kill themselves but harm the entire mankind the way it hurts the most. They are a greater threat compared to any other foreseen dangers to mankind.

Are we learning a lesson & preparing to tame this sect so that we do not face similar situation in future? Hope the world will gain wisdom, amend policies, put in place some basic regulations in the free market. economy.

Role of Supply Chain In Riding Over Financial Crisis

noreply@blogger.com (Ashish Mendiratta) — Fri, 17 Oct 2008 06:05:00 +0000

The US economic crisis has taken all the economies, big or small, by storm. Or should we say a "Typhoon" with no signs of receding in near future? Financial liquidity has tightened & credit dried up, especially for the small businesses. In these troubled times, it is very important to be able to keep head above water. It is critical that not only you but your business partners, be it customers or suppliers, are able to survive the crisis.

Supply Chain Managers can play a very critical role to help the businesses ride over the "Economic Tsunami". Here are few suggestions, based on my own opinion and that of some of the experts:

1. Go lean on Inventory. Availability of Cash is the biggest need of the hour to sustain the business. Building inventory for strategic or speculative reasons, under these circumstances can be a disaster. Even if it means keeping your capacity or manpower idle that would erode margins, is a better option than keeping inventory for an uncertain demand that would block cash needed for meeting operating requirements of the business.

2. Don't push Inventory to Customers. It is like shooting in your own foot. There is a general tendency to push inventory to customers to achieve sales target numbers. It only converts your inventory into higher credit in market or outstanding from customers. The financial risk goes up if your customers are facing liquidity crunch and some of them go bankrupt or don't pay at all. By pushing inventory to your customers, you are not only increasing your own risk but may kill the customer with high debt.

3. Plan, Replan & Replan. In a scenario of uncertain demand, do not pre-commit resources & materials in advance. Build visibility into your demand chain and align your supply / production more frequently than you have been doing in past. Catch the demand signal early & do not hesitate to change the production schedules, even if it means more changeovers or setups on production lines.

4. Stop producing slow moving or not so fast moving items against the forecast. Rely more on the actual demand signals than on the forecast. Or best agree with your customers to produce/ assemble these items against their orders. It may lead to increase in response time but unlock the capital blocked in such items.

5. Service efficiently. It doesn't mean service at lowest cost or cutting corners. Redesign your network that can service smaller lots and at a higher frequency to your customers. If your network cannot support frequent & smaller deliveries, use a reliable 3PL. Consolidate number of service providers & shipments. Evaluate alternate modes of transport e.g. Railways, multimodal shipments that are economical as well as reliable.

6. Form alliances. Taking a cue from the alliance reached between Jet Airways and Kingfisher Airlines, it is not a bad idea to share assets wherever synergy is feasible. Join hands with others, including like mind competitors, to find collaborative ways of saving costs in manufacturing, servicing and logistics. Remember, recession is a bigger threat compared to your competitor.

7. Follow lean processes. Tough time is also an opportunity to re-engineer your processes. Evaluate your processes, cut out wasteful activities and minimize wastage in the supply chain. Order processing time, inventory idle time, supply lead times are some of the few candidates that would need a very close look. Inventory inaccuracy or leakage in warehouse, transit damages, storage conditions would require stricter controls.

8. Pay your suppliers on time. Don't push your liquidity crunch to your suppliers by delaying their payments. The suppliers sustainability is as critical as your own business continuity. Incentivize your suppliers to reduce lot sizes & implement JIT, Vendor Managed Inventory / Replenishment. Consolidate suppliers & shipments for economy of scale. Renegotiate the contracts & shift to "value" suppliers, wherever possible.

9. Motivate people & upgrade their skills. The economic scenario can dampen the spirits of SCM people due to pressures from suppliers, customers & internal stakeholders. It is important to help them overcome difficult situations, upgrade their functional & leadership skills. Motivate them to take difficult decisions that benefit overall business.

10. Network with Supply Chain professionals from similar or different industries, learn how they are coping with difficult situations, share your learning and help each other in solving the problems.

What are the key priorities & right approach for Supply Chain Skills development?

noreply@blogger.com (Ashish Mendiratta) — Sun, 10 Aug 2008 14:46:00 +0000

In my pursuit to get a wider view on Supply Chain skills development , I launched a survey through Linkedin . It is my pleasure to share the results of he survey. As promised, I am not going to disclose the names or the individual responses. However, I would welcome feedback & comments & continue to refine my study.

First question was, “What are the key priorities for Supply Chain skills development?” The participants were expected to rate each of the given priority as High, Medium or Low. Based on collective response the priorities have been rated in descending order.
A : Need for preparing the SC Organization to meet future business challenges.
B : Ability to assess the gaps in skills for meeting existing business requirements.
C : Need of reviewing or redefining roles & responsibility within SC organization.
D : Fill gap in Soft Skills in SC organization.
E : Fill gap in Technical or Functional skills in SC Organization.
F: Need for developing structured approach to arrive at the skill gaps.
G: Focus on continuous skills development for strategic organization development.

Clearly, building Supply Chain organization to meet future challenges is the topmost priority followed by skills needed for existing business needs. Development of soft skills scores a slight edge over the functional skills (will detail these skills as specified by the respondents).

The second question went on to ask each respondent to specify soft skills. The list was quite long, so I am including the most commonly expressed ones.

Soft Skills for Supply Chain Organization :
1. Effective Communication : Looking at the number of responses for this skill, it sounds like a “mantra” for Supply Chain. There were various forms of this skill mentioned e.g.:
· Communication with peers
· Communication with internal & external customers
· Intra-departmental communication
· Written communication
The importance of communication in Supply Chain effectiveness is well known to everyone, yet it continues to be biggest gap in all SC organization.
2. Collaboration & Coordination, not only within the organization, but across the extended enterprise ( suppliers & customers)
3. Inter-personal skills, Transparency, cooperation with stakeholders , Trust
4. Business acumen & Market understanding : I would take a liberty to expand this a bit more. Most of the SC professionals tend to be specialists and not the business managers.
5. Proactive approach & Sense of Urgency
6. Ability to analyze problems & think out of box

Functional Skills for Supply Chain Organization:

1. Sales & Operations planning, Forecasting, Inventory Management
2. Understanding of entire value chain (including constraints in each part of chain) starting from customers to suppliers
3. Supply Chain network optimization
4. Negotiation
5. Knowledge of integrated IT / ERP tools and ability to quickly adapt to enabling technologies.
6. Risk Management & Disaster Recovery
7. Project management
8. Customer Service

The final question on the skills gap was to check at what level these gaps exist & to what extent. The respondents were asked to pick up one of the level (Senior, Middle & Staff) for the soft & functional skills. The results are:

Soft Skills: 62% felt the need at Middle Management level, 30% at Senior Management Level & 8% at staff level. It is well understood that the largest need for soft skills development is at middle management level because this group plays an important role in managing ground level operations and it is also needed for them to move to senior management roles. Interestingly, many felt the need at senior management levels as well. It means many Senior Managers also lack some of the soft skills.

Functional Skills: 40% felt the need at the Senior management level, 33% at Staff level & 27% at Middle Management level.
It shows that need for development & understanding of Functional Skills is there at all the levels .

TRAINING & DEVLOPMENT
The second section analyzed the priorities for training in Supply Chain organization.

A : Need for continuous training programs for retaining talent in the Supply Chain.
B : Need for training & development support available outside organization (consultants, institutes etc.).
C : Need for training & development support available from within organization..
D : Satisfaction with the quality & relevance of the existing training programs to the job
E : Extent to which the existing training programs use Games, Simulations tools to reflect near reality scenarios.

Type of Training : 80% of the respondents felt that combination Class Room Training and eLearning is the best possible way to make training effective.

Need for external consultants : 55% of respondents are open to engaging external agency or consultants for Supply Chain training.

RECRUITMENT AND RETENTION
The last section analyzed the priorities in the recruiting & retaining talent in the Supply Chain organization.

A : Level of pre-assessment of candidates & filtering of resumes by placement
B : Ability to attract good talent in Supply chain.
C : Satisfaction with the recruitment services provided by placement consultants.
D : Attrition rate in the Supply Chain compared to other functions in your organization
Major reasons of dissatisfaction from recruitment consultants:
-Lack of Supply Chain domain knowledge
-Focus on quantity than quality
-No pre-work / whetting done on matching the job & person’s profile
-Lack of communication
-No accountability

I thank all who took time to participate in the survey & gave valuable inputs. I feel that this study will help Supply Chain Leadership to make right decisions about supply chain skills development.

Where should Demand Planning Report: Sales Organization or SCM Organization?

noreply@blogger.com (Ashish Mendiratta) — Sat, 26 Jul 2008 06:48:00 +0000

We had an informal meeting of small group of supply chain professionals representing various companies. One of the issues that came up incidently for discussion was, "where should Demand Planning report : SCM or Sales organization?" Everyone had very strong views about it & also a solid justification for the option selected. Then I posted the same question in Linkedin networking site and received about 25 responses on the subject during one week. The analysis of the responses is:

· 50% believed that Demand Planning should strongly report to SCM
· 23% believed that Demand Planning is one of the core responsibility of Sales & Marketing
· 18% were neutral & felt that it didn’t matter as long as accountability and processes are well defined
· 9% felt that direct reporting can be to either SCM or Sales but dotted line to the other function

Irrespective of the option chosen, all emphasized the need for collaboration to make demand planning successful.

After reading the responses I realized that it was a provocative question touching a sensitive issue. One of the respondents accused me of compartmentalizing the Demand Planning process between the functional silos. The responses included people’s personal experiences and also strong emotions about what they believed. The fact that question was posted in SCM section & responded by SCM people, it was not a surprise to receive highest number of responses in favor of “Strongly SCM”. Here is summary of the justifications given by each respondent, for each of the option:

Strongly in Favor of SCM
- Demand Planning should happen in function that is responsible for working capital management, customer service, product availability which is a SCM responsibility.

- Demand Planning is part of integrated planning process that happens in SCM function.

- Only SCM can challenge and take a balance & objective view of the demand forecast, without any influence of internal factors e.g. targets.

- Sales perspective of demand planning is to get sufficient stocks, since they are not responsible for working capital.

- Knowledge of statistical models is a core competency in SCM

- Keeping Demand Planning within SCM helps to avoid blame game

- Demand Planning needs to take into account inputs of Production, Finance, Procurement through consensus / collaborative process that is best done in SCM.

- Planning Process discipline in SCM better than Sales.Along with these justifications, there was a strong recommendation for the ability of Demand Planner to have good understanding of ground realities of market & competition.

Strongly in favor of Sales
- Demand Planning is truly a cross functional effort within an organization, but it should start with Sales driving the need for better, more accurate forecasts and demand plans.

- The role of demand planning is essentially SALES function based on different forecasting models, however its SOLE objective is to provide inputs to SUPPLY CHAIN and other stake holders (such as manufacturing, finance and HR) for both PRE Production (raw material and other manufacturing planning & execution) and POST production (distribution & logistics planning and execution).

- Sales is responsible for generating, improving and building-in the revenues / turnover of the organization.

- Sales is closest to the external customer & has first hand feel of the market demand.

- APICS state clearly that demand planning is a sales and marketing role.

- Demand planning reports directly to Sales for the simple reason that Sales manages the forecast. Organizationally, it is more efficient since the demand planner can directly communicate with Sales especially on sudden change in the market behavior. Demand Planning can focus on realizing the best mix as it directly gets input from the Sales Team.

Neutral
- As long as process happens the way it should and with clear accountabilities, doesn’t matter where it belongs.

- Demand Planning is not an exact science, so needs COLLABORATION

- Depends on the quality of people, size, type & maturity of organization.

- Let S&OP forum drive the Demand Planning process (integrated with other planning processes).

- Focus on Extended Enterprise to integrate customers & suppliers in planning processes.

- Identify critical touch point i.e. is it more critical (or complex) to drive sales to consensus or integrate consensus demand plan to operations. In former case, it should report to Sales & in the latter to SCM.

Dotted line to either Sales or SCM
- Since the Supply Chain processes are cross-functional, Demand management has to be strongly integrated with the Sales organization.

- Demand Planning Role should be a solid line reporting to Supply function from where it gets all the support and alignment for timely supplies and clarity on potential supply issues and risks. However the role should also be a dotted line reporting to Sales for the ownership of forecast and timely intimation of change in market dynamics causing a change in forecast.

These are views expressed by respondents coming from different geographies, companies & professions but all are connected to SCM profession.

I, personally, would go with the option “Neutral” (not the most popular option) and very much convinced with the justification given. While the type, size & maturity of organization is one of the factor for deciding, Demand Planning will work (irrespective of function it reports) only if :

· The rigor & discipline of S&OP is in place.
· The accountability of Demand Planning accuracy is clearly defined.
· Supply Chain configuration & design takes into account the Demand Planning capabilities or limitations
· Demand Planning is not considered as an end by itself but as a mean to achieve optimal balance between customer service, cost & working capital.
· Mixes well the science ( statistical forecasting etc.) & market intelligence through collaboration or consensus
· The information flows fast through the value chain & enables quick response to any change triggered by market or customers.

At the end, I felt it was a very involved & intense discussion as it is one of the grey areas in Supply Chain.

Building Supply Chain Competency

noreply@blogger.com (Ashish Mendiratta) — Tue, 08 Jul 2008 06:54:00 +0000

Every time I come across with a CEO / COO of any company, I see a tacit discontent with their Supply Chain performance written on their face. When I ask them about efforts being put on skills development of Supply Chain people by their companies, they draw a blank surface. "Yes, we send them for trainings", is the common answer.

Sending people for trainings is not same as developing skills. This holds true more for Supply Chain because of its vast overlap with many functions & far reaching impact. Skills development starts with assessment of Business & Supply Chain needs for today & future. This is then followed up defining various skills for different levels of positions, roles & responsibilities, linking it to the Key Result Areas for each. Next step is to get into detailed assessment of gaps in skills & performance for each individual in the Supply Chain. Only then the development plan can be worked out & training is just one of the way for development. There are many questions related to the kind of trainings e.g. whether customized or generic.

What makes the whole process complex is the lack of understanding of various supply chain skills, as they are not well defined. For example, is Demand Planning a skill for Sales or Supply Chain? Similarly, what role should be played by Supply Chain in product design or process design, is not clear to many. As a result, deliverable & skill gaps in Supply Chain are seen in a narrow context. In many cases, the effect experienced in the Supply Chain is caused by an event on which Supply Chain had no skills to influence. Companies keep beating around the outcome without understanding the cause & effect relationship.

Sending people to short term training courses or workshops is not an answer to address the skills gap. It can at best help to show your good intentions towards people development. The real training is a continuous process and has focused deliverable. It requires clear linkage with the real life situation & the job a person is handling. It focuses more on the addressing the cause, irrespective of the fact which part of organization it lies in.

In a nutshell, addressing the skills development in Supply Chain is a quite involved process and any simplistic approach could be counter productive. The ROI of hiring an expert over a long run could be very attractive.

Take a brief Survey on Supply Chain Skill Assessment.

Supply Chain Top 25

noreply@blogger.com (Ashish Mendiratta) — Fri, 30 May 2008 11:55:00 +0000

AMR Research has come out with Top 25 companies with best Supply Chain. The company to top the list is Apple, followed by Nokia, Dell and P&G. Surprisingly, Wal-Mart is ranked at No. 6. Motorola that ranked No. 12 in 2007 doesn't appear in the list for 2008.

Going deeper into the criteria for rating, AMR has chosen 2 parameters i.e. Inventory Turns and Days Sales Outstanding (DSO). The criteria itself is very lopsided towards financial measurement. By this criteria Dell should have come on top, so have they changed their business model? What about customer service or satisfaction parameters? Inventory turns and DSO can vary for different industry or business model. The concept of differentiating Supply Chain based on efficiency or responsiveness has been completely overlooked. The approach followed by AMR is over simplified.

The prelude to the ranking reads like this "The AMR Research Supply Chain Top 25 identifies companies that demonstrate leadership in applying demand-driven principles to their global supply chains. Our goal is to show how supply chain excellence contributes to economic value creation, and, in so doing, to raise awareness of the importance and influence of the profession." However the measurement used for ranking is not completely aligned. Such surveys only distort the real picture.

Logistics Landascape In India After March 2010

noreply@blogger.com (Ashish Mendiratta) — Thu, 27 Mar 2008 05:30:00 +0000

In the last Union Budget, the CST rates were brought down to 2%. This gives a confidence to government's commitment to phase out CST by March 2010.

This decision will obviate the existing need of maintaining CFA or Depots in every state to avoid double taxation. This is going to change the entire logistics landscape in the country. This will provide a huge opportunity to reduce logistics cost (10% - 15%) by consolidation of warehouse infrastructure. Currently, all consumer goods companies operate 20 to 40 warehouses in the country, that can come down to 5 t0 10 progressively. This would also mean that small players will be out of the scene and big 3PLs will take over the majority of logistics business.

Is the logistics industry preparing itself for the change, well in advance? The logistics players must start planning & building the infrastructure "now". The Planning requires mapping the demand pattern of major consumer goods companies, creation of logistics hubs, looking at the high volume / high speed trucks, container handling facilities, railways connections etc. The role of 3PLs in the supply chain will increase to customer service, route optimization instead of just shipping goods.

With reduction in number of warehouses, servicing small customers /orders will become difficult. So, 3PLs will have to create cross-docking facilities to operate efficiently, like a relay-racer end to end. The order servicing time to distributors or customers will increase, so this will need a mindset change. However the service reliability will improve with professional 3PLs and stock-outs will reduce due to consolidation of inventory.

This will also open doors for greater multi-modal transportation opportunities using road, rail & even ships for long distances. Railways will be an important mode for the consumer goods companies and not just for bulk items. Also, containerized movements will get a fillip and container requirement will go up substantially.

However, it is not known if the things like differnt forms for different states , octroi, road permits, toll gates will also be done away with. If these bottleneck remain then the entire benefit will not be realized. The industry or CII should represent to government to already take steps in abolishing non value adding procedures.

We propose to form a work group of people who are interested in it.

DISCUSS THIS TOPIC

Next Evolution in Supply Chain

noreply@blogger.com (Ashish Mendiratta) — Tue, 11 Mar 2008 09:25:00 +0000

Whenever we think of Supply Chain what comes to mind is Efficiency, Costs, Responsiveness, Customer Service. While these topics will continue to keep Supply Chain managers busy, what is it that will figure prominently in the tomorrow's Supply Chain vision and strategy statements.

According to few experts, the next evolution will be "Green Supply Chain". With crude having crossed USD 100 mark and pressure to reduce carbon emission, it is the thing that will catch the management attention in every company that is involved with transportation of goods. In a country like India, the scope to reduce emission by Logistics industry is huge. According to one estimate Indian outsourced logistics industry is slated to grow at CAGR of over 16% between 2007-10. There are about 3 million trucks on Indian roads, consuming almost 20 million liters of diesel every day and emitting about 500,000 of CO emission. We all know about the condition of roads as well as of trucks plying on these roads. The laws made to regulate the life of trucks & load carrying capacity for each kind of trucks have met with little success. Overloaded trucks on the highways is a common scene & helping only to fill pockets of few. However if the road conditions improve & laws are enforced properly, the CO emission should come down by 30-40%.

We have not seen any CNG trucks despite success of CNG based public transportation in Delhi. Compared to diesel trucks the carbon emission from CNG trucks is 75% lower. Government should make plans to make CNG available widely & incentivize CNG based trucks.

Another area where logistics companies can bring down emission is through energy bills of their warehouses. A recent study conducted for a logistics service provider that operates 3 million sq feet of warehouse space, shells out Rs. 1.25 per sq ft per month. Energy audit of one of their warehouse showed that energy bill can be reduced by 25% by doing simple things like improving power factor, energy efficient lighting and improving efficiency of DG sets.

Very soon many of the Supply Chain Managers will be grappling with these numbers along with their regular costs & efficiencies. Let us be all prepared for the Green Supply Chain.

Discuss this Topic.