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from austere to agile supply chains
low prices. Its counterparts in India have yet
to reach that stage. To get there, an amalga-
mation of huge investments, government
policies, third-party intermediation, and
fast-changing consumer preferences will
characterize this back-end revolution.
The key opportunities for investment ina supply chain lie in the
areas of sourcing,
distribution centers (warehouse, cold stor-
age), transportation networks, inventory
(both store level and warehouse), supply
chain information systems such as ware-
house management systems, planning,
forecasting and inventory management.
Instead of keeping everything under one
roof, different players have chosen vari-
ous combinations of activities that theyperform while
outsourcing other tasks to
upstream or downstream entities, includ-
ing third-party logistics companies, or
3PLs.
An Indian retail chain like Subhiksha
has outsourced most of its back-end work,
but some, like Reliance, are investing heav-
ily in the supply chain network to seek
backward integration of their businesses.
Yet others, like Pantaloons, are excessively
pushing their in-house brands in their
stores. To a certain degree, such enterprises
have successfully included manufacturing
in their supply chain.
ChallengesAccording to the late British Prime Minis-
ter Winston Churchill, A pessimist sees
a difficulty in every opportunity and an
optimist sees an opportunity in every diffi-
culty. The rigid supply chains of today willhave to be
optimistic to avail themselves
of the futures opportunities if they are to
overcome the many challenges in trans-
forming austere supply chains in India into
strong and agile delivery channels. Here are
the major challenges:
Lack of skilled human resources.
While the destiny of manufacturing is
in efficient supply chains, in India such
advanced supply chains will take more time
to develop because of the countrys general
lack of supply chain professionals. Even
among them, the levels of process expertise
and best practice skills are low. The only
consolation is that these factors may be a
comma but not a full stop. However,
with the growth of organized markets alongwith the increasing
number of professional
courses offered and research undertaken
about supply chain management in the
country, numbers of supply chain profes-
sionals gradually are focusing on scientific
methods to deal with the critical issues
faced by supply chains in India.
Infrastructure woes. The infrastruc-
ture in India is not as well-developed as in
other countries. It should be an acceptedfact that many parts of
India still are not
connected by roads, leaving goods and
products to be delivered through traditional
transportation such as tractors or bullock
carts. Hence, any supply chain strategy for
rural and semi-urban sectors would need
to take all these indigenous Indian factors
into account.
Use of 3PLs. The gap between expecta-
tions and the actual level of services 3PLs
can provide, combined with the prices
charged by the 3PLs, are primary reasons
why more companies are not looking to
outsource their logistics. Frankly, in India,
the current service levels of 3PLs leave a lot
to be desired. Hence, as of now, only mature
companies in this field have a true chance
at success.
Supply base. Due to the fragmented
nature of supply chains in India, the players
have to deal with a wide number of otherentities. This results
in lower margins per
level for the same amount of goods and
transactions. Furthermore, additional levels
in the supply chain also result in increased
overall waste for the supply chain. This also
increases the number of points at which
waste will happen.
Large number of intermediaries.
This fragmented supply base results in a
large number of intermediaries, which arti-
ficially increases product costs, resulting in
decreased margins at the retail points of
sale. In simpler words, enjoying a lions
share of the profits becomes more difficult
as there are more shares to divide up from a
defined profit level.
Counterfactual forecasts. Indiancompanies continually face big
problems
when it comes to forecasting inventory
requirements. Due to the fact that many
organizations have not properly imple-
mented the necessary IT systems, historical
data often is not available at the appropri-
ate time. In certain cases where such data
is available, organizations do not possess
enough technical competency to analyze
this data and derive meaningful insights.The results are easily
visualized in an
increasing number of stock-outs, increased
markdowns, low inventory turns and high
pilferage rates.
Green manufacturing in its infancy.
With ambitious protocols announced
in the drive to save the environment for
the future, there also is the need to make
supply chains greener while increasing
their agility. In India, green manufacturing
itself is in its infancy. This leads to a debate
about how to create a flexible and adaptable
supply chain that can react quickly and with
minimum effort as the regulatory land-
scape changes. Go back to supply chain
leviathan Wal-Mart. The worlds largest
retailer announced that it would cut some
20 million metric tons of greenhouse gas
emissions from its supply chain by the end
of 2015. This is the equivalent of removing
more than 3.8 million cars from the road fora year. Supply
chains in India have miles to
go before they can dream of such savings.
Targeting agilityAlthough the country and its enterprises
face a difficult transformation from auster-
ity to agility in supply chain management,
a number of methodologies are available to
help. Manufacturers worldwide have used
these effective methods to increase prof-
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itability, add agility and strength to their
supply chains, and , in some places, literally
save their enterprises skins.
Interpretive structural modeling.ISM provides a fundamental
understand-
ing of complex situations and puts together
a course of action for solving problems. Its
basic idea is to use experts practical experi-
ence and knowledge to break a complicated
system into several subsystems (supply
chain enablers) and construct a multilevel
structural model. ISM also enables individ-
uals or groups to construct a directed graph
of the complex relationships between the
various supply chain enablers involved in a
complex situation.
Structural self-interaction matrix.
SSIM methodology suggests the use ofexpert opinions based on
various manage-
ment techniques such as brainstorming
and nominal group technique in develop-
ing the contextual relationship among
a systems variables. In this research,
experts from industry and academia can
be consulted to identify the nature of the
contextual relationship between variables
that affect agility. In order to analyze the
relationship among the agility variables,
a contextual relationship of lead to type
shall be chosen. Four symbols are used
to denote the direction of relationship
between the variables (i and j):
V = Variable i will help achieve variable j.
A = Variable j will be achieved
by variable i.
X = Variable i and j will help achieve
each other.
O = Variables i and j are unrelated.
Based on the contextual relationships,
the SSIM is developed so that the variables
Improving supply chain efficiency in India not only could save
the country billions of dollars, it literally could save
lives, according to various reports.
A recent study from the Confederation of Indian Industry (CII)
and Amarthi Consulting concluded that India
loses $65 billion a year from inefficient supply chain systems,
reported the website Moneylife.com. Supply chain
costs the retail sector between 12 percent and 13 percent of
gross domestic product, which compares with a 7
percent to 8 percent rate in developed countries, and 95 percent
of the retail sector is fragmented and unorganized.
But a lack of adequate warehousing, cold storage and food
distribution channels costs the country 12 million tons
of fruit and 21 million tons of vegetables every year, according
to the U.N. Environment Programme. The Inter
Press Service News Agency reported that the Food Corporation of
India admitted to losing 79 million tons, or 9
percent, of the grain it procured from 2009 to 2013.
Such losses are tragic in a country that has 200 million
food-insecure people, according to the International
Food Policy Research Institutes 2011 Global Hunger Index. India
Real Time, a blog of The Wall Street Journal,
did a six-part series on starvation in India last year. The
report included numerous tragic cases of starvation and
malnutrition.The articles stated that according to government
estimates, 35.6 percent of Indian women and 34.2 percent of
Indian men have body mass indexes less than the normal 18.5.
SUPPLYCHAINSSAVEMONEYANDLIVES
