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Monday, May 21, 2001

Manage data down the supply chain
By Sumesh Raizada

THE market today is neither monopolistic nor oligopolistic. Earlier, suppliers or manufacturers dictated the market terms and the attitude was ‘take it or leave it’.

However with the liberalisation of economy, market became exposed to MNCs, which were more professionally managed and technically advanced. The domestic industry started facing competition from them.

With the advent of information technology (IT), various Internet and computer-related applications are at the beck and call of manufacturing and service firms. These firms are successfully implementing software-based tools into their operations, in order to improve profitability. Supply Chain Management (SCM) is one such application that is gaining a vast acceptance among the companies, especially in manufacturing or those having a wide retail network. It is, in fact, quite similar to the concept of JIT or ‘Just in Time’, introduced by Japanese several years ago.

The SCM is very important to the manufacturing or transportation industry. This can be gauged from the fact that transportation costs account for nearly 10 to 15 per cent and inventories accounts for roughly 25 per cent of sales turnover. This is mainly due to the compulsion of keeping varied product range, frequent changing of product due to shortened product life and globalisation of market.


Though several manufacturing firms streamlined the processes within the factory premises yet they were unable to control the operations of outside agencies like raw material vendors, distributors, retailers or even customers. The SCM, however, efficiently manages the process right from the origin of raw material till the finished product reaches the end-user.

It facilitates effective coordination of all related factors like man, material, money and information, and efficiently links all those involved in the process. Thus with the proper implementation of SCM-based software tools and packages, companies can plan production and distribution schedules more precisely. This helps in controlling inventories and in turn costs involved in managing those inventories.

With proper implementation, SCM can help in getting deliveries of raw material or finished product, just when they are required. Similarly, in case of export orders or manufacturing plant being situated at far off countries, SCM tool can enable a customer to feed his requirement on the computer. The same gets transmitted simultaneously to the supplier as well their raw material vendors for that product. This not only saves considerable time and efforts but also saves a lot of money. Firms are able to respond quickly to market requirements and adept to changes. As all concerned parties are interconnected, there is flexibility in commercial transactions and considerable reduction in the response time. SCM thus eliminates the lead-time in inter or intra-department communication.

Supply chain can be described as a closely linked network of customers, distributors, manufacturers and their vendors. SCM involves management of information flow, material, product and finances among the members of supply chain. Timely information about customer’s expected orders can help in estimating production schedules and availability of raw material. Also, any change in the requirement or schedule can be immediately corrected and adjustment made, thereby saving unnecessary costs. Supply chain relates to functions like material planning and procurement, production, warehousing and transportation. Transportation can be from vendor to manufacturer’s end, from manufacturer to retailer and from retailer to end-user’s premises. The SCM also ensures that the product is available to customer according to his requirement in terms of quantity and time.

Several IT companies, realising the importance of this management concept, have come out with application specific software on the SCM. These packages simulate the model on material movement at different stages — from raw material, work in progress, packaging, transportation, warehousing and distribution till the finished product reaches the end customer. The time taken at different stages and feedback from various links of the chain is also taken into account. This helps the management to a great extent in deciding the pricing or distribution policy of their product, even before it is launched in the market. The SCM mainly focus on satisfying customer needs by offering better delivery and price, responding to his needs, quickly and flexibly. Demand forecasts can be made more accurately and transparently once the SCM is applied at all levels of the supply chain.

Some of the leading providers of SCM packages worldwide are i2 Technologies, QAD, Manugistics, American Software, Logility, Peoplesoft, SAP and Oracle. The biggest advantage of these packages are that these can manage multi-company transactions simultaneously and are flexible in approach as they can accommodate last minute changes also.

As per the recent estimate, market for the SCM is expected to grow at the rate of nearly 50 per cent annually. Now with the growth of e-commerce in which main emphasis shall be on the quality and reliability of product distribution, SCM is likely to play a major role. In India several manufacturing firms have implemented SCM into their processes. These are Arvind Mills, Ranbaxy, Bombay Dyeing, Hindustan Lever and many more are on the way of doing so, considering their importance in building customer satisfaction and improving profitability. The SCM is finding its application in transportation, cargo and courier industry as well as among leading airlines.

Since SCM is relatively a new and fast-growing concept, career opportunity exists in abundance for professionals with management or materials background and having proficiency in computers. Those who are working in different functional areas of marketing, retailing, purchasing or production also have career opportunity in the SCM industry. People can work with the software or application providers on the development and implementation of client-specific packages. They are also employed within the company as executive or manager for managing the SCM operations within the company and outside. However, they need to have good programming and SCM skills.

The SCM modules are covered in most of the management courses these days. IIM covers a separate course on logistic and supply chain management realising its importance to the industry. The courses usually make a student aware of various functional problems faced by the companies and to develop an effective SCM packages to overcome those problems. Management Development Institute in Gurgaon have established a centre for the SCM, in association with All-India Council for Technical Education.

The purpose is to develop latest resources to achieve efficient coordination of material, information and finances across the supply chain as per the changing global environment for the benefit of industry. Regular courses are conducted to enhance career opportunities in the SCM for the interested candidates. The centre provides facility for conducting advanced research in the field of supply chain optimisation, e-supply chain covering e-procurement, e-warehousing, and e-business which covers e-retailing and B2B. Since the centre also offers consultancy services to various industrial clients in both public and private sector on supply chain strategies, there is a considerable employment opportunity for professionals to work as consultants or instructors in the institute itself. IBM, a leading IT firm, also conducts in-house training on various SCM packages and solutions for its employees as well clients.

Firms like OTIS Elevators, GATI management services, Maruti Udyog Limited, Telco, Britannia Industry, etc also offer job opportunity in this field.

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