A collection of resources and commentary providing an introduction to supply chain management and related systems for students, practitioners, and anyone else interested in learning more about how to design, manufacture, transport, store, deliver, and manage products.
In this
week’s reading about the supply chain networks, the article “Smarter Medicine”
draws my interest towards the similar case that revolutionized the whole supply
chain. “Smarter Medicine” is very interesting case about intelligently addressing
the basic problems in a supply chain, which is network management. I came
across a similar case of eChopal that tells somewhat similar story of innovation
in supply chain networks.
eChopal initiative
was taken by ITC, a corporate giant in India to empower the farmers back in
1998-99. Company is a very big consumer of raw soybean and produce soybean
products that are sold in domestic and international markets. Back in those days company was facing the
challenge of soybean raw materials ineffective supply chain. There were many problems
such as lack of fine inputs, farming practices, inconsistent availability and fragmented
farms that are dependent on mansoon rains. The main challenge before ITC
management was to find ways to secure the competitiveness of the entire value
chain so their business achieves full potential within limited budget.
In the decades
old traditional system, farmers used to bring their grown product to an agricultural
marketplace where potential buyers i.e. middleman rate their product. “These middlemen used unscientific and
sometimes outright unfair means to judge the quality of the product to set the
price.” [2] The middleman intentions were to make most of the profit
as illiterate farmers had no idea about the worth of their commodity. After putting
so much time and effort in growing and transporting the commodity to market,
farmers had no choice but to sell even on loss.
In villages, farmers after a long day of work gather in
evening at a common place to chitchat about the daily affairs of business and
life. ITC took advantage of the cultural norms of the rural people. ITC introduced
eChopal system in which they setup a kiosk in villages. In every kiosk a computer
with internet connection and a printer was setup. ITC linked the domestic
prices of soybean to the international market and this information was made
available on these computers. They carefully selected capable, trustworthy and
influential people from each village and offer them commission based incentive
to operate these kiosks.
Previously ITC was buying the soybean mostly from middlemen
as farmers could not afford to bring their crop directly to ITC. Now ITC
established the collection centers at carefully selected locations to purchase
the soybean directly from the farmers. They even reimbursed the transportation
costs to farmers. In marketplace, farmers were losing 5% of their crop in
weighting errors but ITC make sure the farmer get the fair value for the actual
weight of the crop. Dealing with middleman, farmers might have to wait for days,
even weeks to get their money but ITC make sure that farmers are paid immediately.
It was very important for the farmers’ business that is generally low on cash
and where delays in any activity may adversely affect the crop production.
The setup of eChopal facilitated the new kind of supply chain
network in which the technology was at the curx. Farmers now have the direct
access to international market trends. In addition they had access to weather
forecasts, best practices, crop information and FAQs. They now have the
opportunity to learn from each other as well as from ITC professionals. Collection
at hubs minimized the influence of middleman. Hubs also served the additive
purpose of selling seed, fertilizers and equipment. Soil-testing in labs at
these hubs and free advice from researchers helped the farmers to get better
yields. By selling back the finished products of ITC at low prices, they
established the sense of belonging and care among farmers.
The features such as knowledge, real-time access, transparency
and above all trust made this ITC supply chain network a success.
[1] ITC eChoupal Initiative - Harvard Business Review
Companies
around the world are facing issues with growing logistics complexity. An
appropriate solution for this environment would involve continuous work on the
Sales and Operations plans, which consider demand and efficient supply of
products while considering the revenue and profitability in real time. The
center of Sales and Operations plan is to ensure highest customer satisfaction
and least inventory levels by reducing demand uncertainty, improving
predictability and increasing short term forecast accuracy.
Recently
SAP announced plans to acquire SmartOps, a provider of inventory and
service-level optimization software solutions. This will allow SAP to integrate
the software expertise into their existing platforms such as SAP HANA and SAP
APO, and provide customers with the ability to run their business in real time –
a problem being addressed by increasing number of companies. SmartOps has
developed large-scale, algorithms that take the uncertainty and risk out SCM
processes by using predictive analytics.
Key
benefits that will be available to customers with this acquisition:
Coordinate capacity, inventory, demand, lead time, and
product availability variables
Enable planners to set and manage targets such as
safety stocks more frequently at a granular level
Help customers realize savings from improved customer
service levels and lower inventory
Accurately track and streamline inventory positions
throughout an order-to-cash value chain
Increase sales by determining optimal inventory targets
Enhance risk management through prescriptive strategic
analysis capabilities
Free working capital by balancing service levels and
inventory investment
Achieve
rapid ROI
This deal
by SAP is similar to the Ariba acquisition last year, which gave SAP a wide
variety of SCM and e-commerce capabilities. I am sure these deals make sense interms of business strategy, but do they add any
significant SCM capabilities to SAP’s portfolio or are they for defensive
purposes? Do they solve problems faced by companies around the world? A better conclusion can be drawn upon once SAP customers start using the new services.
Transmitted
via the faecal-oral route, poliovirus invades the central nervous system and as
it multiplies, destroys the nerve cells that activate muscles, causing
irreversible paralysis in hours. Of those paralysed, 5-10% die when their
breathing muscles become immobilized. There is no cure for polio, but there are
safe, effective vaccines which, given multiple times, protect a child for life.
If sufficient numbers are immunized against polio, the virus is unable to find susceptible
children to infect, and dies out.
India was removed from the list of polio
endemic countries after completing a year without reporting any case of polio In
January 2012, a major milestone in the history of polio eradication. Understanding
how a country so huge, so diverse and so poor managed to stop polio
transmission offers important lessons both for the complicated international
effort to eradicate the disease for good and for India’s own health care
system. The oral polio vaccine was introduced in India in 1978, a year before
the U.S. was declared polio-free. In 1985, Rotary International launched its
global effort to end polio everywhere. India was a signatory to the 1988 WHO
treaty committing participating nations to be part of that effort. But on the
ground in India, “there was not much happening,” says Dr. Naveen Thacker, a
past president of the Indian Academy of Pediatrics and a member of the expert
advisory group to the Indian government for polio eradication.
It wasn’t until 1994, when the local
government of the New Delhi capital region conducted a hugely successful mass
immunization campaign targeting children, that the idea began to gain momentum
that India might actually be able to tackle this disease. Though other Indian
states like Kerala and Tamil Nadu had conducted similar campaigns before, it
wasn’t until the national government saw tangible progress that officials were
sufficiently convinced they could make a difference.“That’s when
India decided to go after polio in a big way,” says Thacker. Routine
immunization — in which patients sought out the vaccine themselves
— had reduced polio but couldn’t stop it from spreading. Reported
immunization coverage across India was officially as high as 90%, but the
disease was still being transmitted.
In 1995 and ’96, the government started
to organize annual national immunization days, and in 1997, India established
the National Polio Surveillance Project. In 1999, it set up an expert advisory
group that monitored the program and provided continuous evaluation of how the
disease was behaving around the country. Eventually, that group, which Thacker
was a part of, decided the best way to fight the disease was to focus on the
states of Uttar Pradesh and Bihar, two of the poorest areas in the country
where polio transmission was uninterrupted. Crucially, the group also decided
to target migrant workers moving in and out of those states and started
vaccinating along the trail that migrants followed.
It worked. By
2009, 741 cases of polio were reported in India, says Thacker. By 2010, that number
dropped to 42, and by 2011, only one case — as of today, India’s last — was
reported in the entire country. Today, officially 71% of children in India are
immunized against polio, with 98% of children in the highest-risk areas having
been immunized. In the process, the National Polio Surveillance Project became
India’s most extensive public-health surveillance system. There are currently
27,000 reporting units across the country, run through a combination of funding
from the government, WHO, UNICEF, the Bill & Melinda Gates
Foundation and the CDC, among other groups. India has become one of the
world’s largest donors to global polio eradication, putting billions of dollars
into fighting the disease at home and also lending its hard-won expertise to
Pakistan, Afghanistan and Nigeria, where the virus is still being actively
transmitted.
The strategy to make it happen
A number of major interventions and
innovations have been made over the years to strengthen the polio eradication
initiative in India and overcome the challenges and barriers that the programme
faced. These interventions and innovations were reviewed, assessed and
improvised to match the intensive efforts which became increasingly focused to
address issues in the key vulnerable areas and among the most susceptible populations.
The interventions covered all aspects of the programme – surveillance,
supplementary immunization activities, vaccines, communication and research – and
were strongly evidence-based, with detailed data to support why and where they
were being introduced.
Innovations:
Surveillance
Polio case
identification – Initially, polio cases were classified based on the clinical
features of polio or on a laboratory confirmation. In 2001, the case
classification scheme was changed to a virological scheme where cases were
classified as polio based only on a laboratory confirmation. This is a more
accurate and reliable system of case identification.
Reporting network
expansion –
A large network of health facilities – over 33,700 sites, including public and
private health facilities (ISM practitioners and quacks and faith healers
included) have been enrolled as reporting sites for acute flaccid paralysis
(AFP – suspected polio) cases in India. This has resulted in an increase in the
number of AFP cases detected for investigation across the country, thereby
increasing sensitivity of the system including amongst migrant populations.
Increase in
sensitivity of AFP surveillance – In 2004, the case definition of AFP was
broadened
to make the surveillance more sensitive
for AFP case detection. There has been a dramatic increase in the number of AFP
cases reported and investigated since.
Change in laboratory
testing methodology – A new methodology for testing stool specimens was introduced in the
laboratories in 2007, reducing the laboratory testing time by half. The new
system takes about two weeks, thus ensuring a more speedy action after
detection of wild poliovirus. The earlier laboratory methodology for testing stool
sample for detection of wild poliovirus cases took up to five weeks for
confirmation of a case.
Supplementary
surveillance for polio – Wild poliovirus transmits through the faecal-oral route.
Therefore, environmental sewage specimen
testing was started in Mumbai in 2001 to detect wild poliovirus to supplement
the AFP surveillance. This has been subsequently expanded to Delhi
in 2010 and to Patna in Bihar and Kolkata
in West Bengal in 2011.
Genetic sequencing
of wild poliovirus – Genetic mapping and matching of every wild poliovirus
is conducted to determine the origin of
the virus, track the spread of transmission, and also to determine the number
and spread of genetic clusters of the virus. This helped the programme carry out
immunisation and follow-up action effectively, not just in the area the wild
poliovirus was detected, but also the origin of the virus/area of importation
and areas at highest risk of further spread.
Innovations: Polio Immunization
House-to-house
vaccination –
When the programme started, the Pulse
Polio was a booth-only activity where
children were given oral polio drops on the supplementary immunization activity
days. To improve immunization coverage, the booth activity was extended to
house-to-house immunization to actively search for and vaccinate missed
children.
Identification of
missed children – To facilitate identification of missed children, finger marking of
every vaccinated child was launched in 1999. The little finger on the left hand
of the child was marked with indelible ink. In order to ensure completeness of
coverage, the vaccinators marked houses as P (all children in the house
immunized) or X (children missed) based on whether all eligible children in the
household had been vaccinated or not by the polio vaccination team.
Categorization of X
houses visited – Categorization of X houses into sub-categories such as locked houses,
houses with a sick child, houses that resist vaccination etc was introduced to
facilitate appropriate follow up for vaccination. Using this categorization,
houses with sick children can then be visited by doctors, refusal families can
be visited by influencers, and so on.
Back-up ‘B’ team – The back-up team
concept was introduced to ensure immunization of children who had missed being
vaccinated despite revisits of the vaccinators to the household during the days
of the campaign. These missed children are
usually those who are at school, sleeping in the morning,
with their parents at their places of
work, or those whose parents have refused vaccination. After
the vaccination team ‘A’ has completed the
morning visit to each and every household as
per the micro-plan, a ‘B’ team visit was
started to vaccinate the children missed by team ‘A’.
Integration with
NRHM –
The polio programme has been integrated with
the National Rural Health
Mission (NRHM). The NRHM is aimed at
ensuring effective healthcare through a range
of interventions at individual, household,
community, and most critically at the health system levels.
The community worker ASHA – a trusted
member of the community- is involved in mobilization and vaccination for polio.
Transit sites
vaccination strategy –Children on the move often miss polio immunization. In order to
vaccinate them, transit vaccination teams are deployed at train stations, on
running trains, bus stands, highways, markets, prominent road crossings to give
polio vaccine to children in transit.
Congregation site
vaccination – Large gatherings at fairs and festivals provide regular opportunities
for the poliovirus to spread and also for the programme to vaccinate the vulnerable
population. Polio
immunization is carried out at all fairs and
festivals in and around polio-endemic states – both at the
venue of these gatherings, and also all
along the routes which people take to reach these venues.
Newborn tracking – With data showing that
most polio cases occur in children less than two
years of age, a system was introduced in
2006 to identify, track and immunize every newborn child in the highest risk
areas of Uttar Pradesh and Bihar. By ensuring newborns are quickly added to
microplans and introduced into the routine immunization system, each child in
these vulnerable areas receives up to eight doses of OPV through polio rounds
as well as the routine doses before the age of one year.
The complete report: http://www.unicef.org/india/Polio_Booklet-final_(22-02-2012)V3.pdf
As today's supply chains have become more global and interconnected, they’ve also become prone to
failures and disruptions. Owing to the prevalent socioeconomic factors i.e. currency exchange rates, fluctuating oil prices, economic downturn etc. the current global market place has become more volatile than before. With the increase in speed and efficiency, the supply chains have also become more complex, costly and vulnerable. Even a minor mistake or miscalculations can lead to major consequences as their impacts can spread throughout complex supply chain networks within a short time frame. Due to this, the executives managing supply chain are under severe pressure as they are finding it very difficult to tackle theses challenges using conventional supply chain strategies and designs. It’s no longer enough to build supply chains that are efficient, demand-driven or transparent. Now, they must also be smart.
IBM in their recent study has predicted that the supply chain of the future will be:
Instrumented: Information that was previously created and maintained by people will increasingly be handled by new technical innovations i.e. RFID tags,actuators, GPS, ERP and more. Inventory will count itself. Containers will detect their contents. Pallets will report in if they end up in the wrong place.
Interconnected: The entire supply chain network will connect not just customers, suppliers and IT systems, but also parts, products and other smart objects used to monitor the supply chain. Extensive connectivity will enable worldwide networks of supply chains to plan and make decisions together.
Intelligent: The Advanced analytics and modeling will help decision makers evaluate alternative against an incredibly complex and dynamic set of risks and constraints. And smarter systems will even make some decisions automatically increasing responsiveness and limiting the need for human intervention.
Smarter supply chains will be inherently flexible and will be composed of an interconnected network of suppliers, contract manufacturers and service providers that could be tapped on demand as conditions change. It will have objects not people reporting and sharing information. Critical data will come from everywhere trucks, docks, store shelves and even products moving through the supply chain. In fact this sort of real time visibility will extend to the world in which the supply chain operates. Smarter supply chains will track soil conditions and rainfall to optimize irrigation, monitor traffic status to alter delivery routes or shipping methods, and follow financial markets and economic indicators to predict shifts in labor, energy and consumer buying.
To leverage resources optimally, the supply chain of the future will employ intelligent modeling capabilities and simulations that will allow supply chain managers to see the cost, service level, time and quality impacts of the alternatives being considered. Increasingly, visibility issues will not be about having too little information, but rather having too much. Supply chain executives would in turn have to make sense of it all. Apart from handling tactical concerns the executives would have to perform as strategic
thinkers and collaborators to optimize complex networks of global capabilities.The future supply chain management would transform from decision support to decision delegation and, ultimately aquire a predictive capability. Going by the trend, the question that one needs to answer is, can the supply chain of future be smarter than you? If yes, how long would it take; if no, what would be the consequences?
Most companies in UK or US have established a stronger online presence and have reduced the number of retail stores to cut costs. These companies are now looking at other potential markets to establish their real estate presence. These target markets must have the required infrastructure, buying power and a large customer base with the traditional retail store shopping preference, such as India.
Starbucks, H&M, Hamleys, Lacoste and Gron Stockholm are among the premium foreign chains set to be active in the Indian retail real estate space in 2013. American coffee chain Starbucks has already opened stores in Mumbai and Delhi through a joint venture with the Tatas. While the Swedish fashion chain H&M is in the process of applying or India entry. Other like the UK-based toy major Hamleys, French apparel brand Lacoste and European kidswear chain Gron Stockholm are present in India through local partnerships.
Apart from the premium brands, mega retail store chains such as IKEA and Walmart have also entered the Indian market. IKEA is awaiting a clearance from the Cabinet Committee on Economic Affairs for investing 10,500 crore in India for opening stores. IKEA plans to setup retail stores on the outskirts of big cities. Walmart has joined the Indian Bharti group, both for Easy Day and Bharti-Walmart’s cash and carry or wholesale stores.
Most international brands plan to be centered across cities Delhi, Mumbai and Bangalore, while some Indian brands are exploring opportunities to expand in Tier-II and Tier-III cities. This uptrend in leasing activity from retailers is primarily due to the government policy to allow up to 51 per cent foreign direct investment in multi brand and 100 per cent in single brand retail. Most of the premium brands will scout for retail space at malls.
This cycle of international brands reducing their stores in their home countries to expand their online presence and opening retail space in the developing markets, and at the same time domestic brands expanding their reach to rural cities, is happening in all the major markets. Does this mean that sometime in the future all the major brands will have a stronger presence online for all the major markets?
After reading the article about Apple’s offshoring in China,
I searched for some articles about offshore. As far as we know, China is the
country which is well known for cheap labor. Numerous companies set their
manufactures in China. But today’s China is far more expensive than before. I
often heard new in China that many manufactures in China can’t find workers
because they have to pay more to workers, otherwise they can’t even hire any
workers. Then the companies have to stop operation. This is a very bad
situation. So I began to think about the advantages of offshore. The first one
is the cheap labor in the offshoring country. Second one is maybe the places are
to the raw materials. It’s also possible that the company would like to expand
their market to the offshore country. But I believe that the logistics is big
concern in offshoring. Except for this, companies also have to consider other problems,
such as inventory, currency exchange rate, and environmental regulations. As far
as I see, even in the time the labor price was still low in Asia, the benefits
of offshore are still limited. On good example is TOYOTA. TOYATA makes Corollas
in Silicon Valley, one of the most expensive places on earth to produce goods.[1]
The reason for it is that TOYOTA believes in the principle that sending goods
to customers within one day is better than shipping goods through long and
complex logistical and political boundaries in a month. TOYOTA applies other
method to attain low cost, applying lean manufacture to keep its cost least. In
summary, when considering whether manufactures should go offshore or not, they
should clearly think about that if lower labor cost is decisive to the final
total cost or not. They should also consider how quickly they can respond to
customers’ demands. They must also take into account for risk in offshore
supply chain.
----Collaboration in future supply chain
When I read the collaborative physical logistics in the
article, the future of supply chain, I began to doubt the possibility to realize
it. Then I found a research studied by McKinsey and ECR Europe, discussing the collaboration
in future supplies chain. The participants in the research represent industryleader in 13 countries. The willingness of collaboration is not very agreeable.
And only 60% of the collaboration initiatives yield some benefits. Researchers
conclude that the reasons for failure of collaboration are insufficient
resources, lack of support from management, and resistance to share information.
But the research participants show great interest in the collaboration in
supply chain. I believe that the idea of sharing warehouse storage and
transportation vehicles sounds tempting to them. I think the collaboration in
supply chain can reduce the cost and also do benefits to environment. It will take
fully use of supply chain resources.
To attain successful collaborations, companies must first
decide who to collaborate with, what to collaborate on and how to collaborate. For
example, to collaborate with those who are more willing to collaborate is better
than to those only have larger capacity and good performance. Those who
collaborate should focus on long term rather than stick to currently interests,
otherwise they can hardly overcome initial hurdles to keep collaboration in
future. [2]
My question is supply chain in future will be in a more
uncertain, complex and risky world. How do companies establish long-term collaboration
and trust in such environment.
I came across this article talking about Barnes & Noble’s plan to make its Nook e-book business as a separate company. A deal with Microsoft and Pearson is valued at more than $1.7billion, way larger than B&N’s stock value, which is $800million. What seemed more interesting than the article itself is the video that is attached to it. The video shows B&N’s main distribution center. The VP talks about how millions of boxes are packed and shipped from the building.
It seems that all types of business are moving to the web, and this brings to my question: How will the functions of the physical stores change in the future? If the bulk of sales and revenue come from online stores, retail stores will function more as a brand advertisement and product display center. If this is the case, then companies like B&N are likely to continue shut down physical stores and leave those that are at the prime location for brand-messaging purposes. Then, what factors regarding supply chain should companies consider when they close a certain number of physical stores?
It is obvious that manufacturing jobs have been coming back
to the US from around world from early 2010. However, what remains debatable is
whether it is a short-term effect or the beginning of a long-term
de-globalization for the manufacturing world.
Big names including Whirlpool, GE and Apple have been on the
long list of companies who shifted at least parts of their manufactory lines
back to the US. More and more companies thing about taking job back home from
developing countries mainly due to the economic consideration. The cost
benefits for manufacturing companies have shrink to a surprising extent that
Apple would consider hiring workers to assemble Macs in California!
Major incentives for this insourcing wave include the
increasing workers’ wages in China and Southeast Asia, soaring price of gas,
intellectual property concerns and environmental awareness. Among these
factors, economic consideration still plays a dominant role when companies
develop their global strategies.
Therefore, the insourcing trend seems inevitable as the
costs of oil and labor continue to rise around the developing world. However,
some would still argue that manufacturing may required relatively more skilled
workers in the future, when robots can easily substitute for low-skill jobs,
and it’s still much more cost effectively to hire skilled labors in the
developing world, as education has been made available to many more people in
those countries. As a result, it is still to early to draw a conclusion now.
Building off of the McKinsey article on reducing energy use across supply chains, Wal-Mart in particular comes to mind, so I decided to research what they were doing in this respect. This report that Wal-Mart published discusses some of the challenges that have come from having a supply chain which is so massive, but has a goal of 20% reduction in greenhouse gas emissions.
They have been successful at reducing emissions for a couple of reasons; first, they direct source a lot of their products from suppliers rather than middlemen, so they have greater power over how materials are shipped and packaged. Second, they are such a massive company that they have considerable power over their producers, as none of their suppliers want to lose Wal-Mart as a client. Third, because of their direct ties with their suppliers, they have been able to use a standardized energy reporting and analysis tool across the board for collection and analysis of emissions. Finally, they have focused on facility energy management, which is a significant part of their emissions due to store and warehouse sizes, and this has produced considerable results. All of these aspects have contributed to their success in reducing the energy footprint of their supply chain. It would be interesting to see where they currently in stand in terms of the largest opportunity areas for additional improvement in the energy arena, since it seems that they have considerable accomplishments to date.
In the near future, individuals or small-and-mid-sized enterprises (SME) will take center stage on production. They will design and plan products, then have a high volume manufacturing through outsourced supply chain, while up until now, only big firms have managed a whole supply chain. This movement has already begun.
Pebble
One of the examples of this new trend is the Pebble watch. It is a smartwatch developed by Pebble Technology and delivered in January 2013[2]. Now Pebble Technology begins to churn out 15,000 watches per week. This watch has been developed by just five engineers for five years and funded by the crowd funding, Kickstarter since April 2012. As the result, this project got eighty five thousands orders and huge fundraise-money, over ten million dollars while its initial fundraising target was one hundred thousand dollars[1]. The reason why Pebble Technology could gather many funds is that this product has fascinating specifications. First of all, it can communicate with Android or iOS device, using Bluetooth. Second, it provides developers with open SDK which enables user to add other applications like measuring physical exercise or running distance. Finally, it runs 8 days without charging[3]. Although Pebble Technology designed this watch, they have outsourced the processes of supply chain, like planning, manufacturing, packaging, managing inventory, and logistics, to PCH International which offers transportation, sustainable production and supply chain management services to various kinds of clients, from Fortune 500 to innovative start-ups[4].
Pabble watch
Source: Pebble: E-Paper Watch for iPhone and Android by Pebble Technology[1]
The advantage of new supply chain
This movement shows supply chain is now open to not only manufacturing companies but also individuals and SME. This new-type supply chain helps people to release an idea buried in individuals’ mind. Even individuals who do not have enough money can have an opportunity to come out with innovative products and mass-produce them, utilizing cloud funding and outsourced supply chain. Even though a product is developed by individual idea, of course, it can make good business sense since this supply chain aims at mass-production.
Question
- What kinds of measures do big companies take against this new type supply chain?
