Since time immemorial price has been taken to be the most faithful indicator of product quality. Is this applicable any more! Fortunately the Answer is No! This is bound to make the decision making even more cumbersome. A cheaper product can be better than the costlier one or vice-versa. The major aspect in this being the efficiency of the organization’s supply chain. The most important parameter in the purchase decision has been the techno-commercial evaluation. This usually has always been a critical and analytical choice but with the emerging scenario it is going to be lot more tough and rigorous with many new dimensions being added to the decision making. This makes it all the more essential to establish very close networking with suppliers and customers. The natural corollary is the integration of the supply chain becoming the single most important factor.
Integration of the supply chain with the electronic business is name of the game for creating effective value. This results into competition among the supply chains rather than among the products or among the companies.
The supply chain, as shown here under Figure-1, only shows the raw material (or components) flowing without indicating the directions, processes, subprocesses, time duration, men and machines involved. Supply chain management can effectively take the shape of networking by the ultimate selling organization, meaning that the said organization can effect economies of scale for its vendors by pooling the effort. The Figure-2 on the other hand shows the flows.
Illustration:
We are taking here the lighting industry to bring home one of the most important components of supply chain integration.
The copper wire is required here at least in five other manufacturing units/operations, as shown, and here the marketing organization can take the lead by clubbing all requirements and negotiating a contract. This would certainly save at least 20% and moreover the bargaining power of the organization will be much more. This would also ensure, besides economical prices, timely deliveries, quality of raw material, etc. to be strictly as per the specifications of the organization. Added benefit being the ruling out of all the play between different parties while instilling confidence, about the payments etc. to the respective vendors.
Likewise, the economy of scales can be enjoyed for most of the materials required here. This would briefly sum up the supply side of the value chain i.e, the upper part of the value chain. This all is much easier said than done. If done by conventional methods it is quite a time consuming and arduous exercise and may not even be worth the effort. Looking at the connectivity in the present scenario, with the advent of the Intranet, Internet and the Extranet technologies the whole thing can be handled and controlled with much ease and economy with just the prospective click of the mouse. Such ease in handling the suppliers also makes it easy to contact the other prospective suppliers for the best PACKAGE DEALS. The prospects, moreover, are not limited to the Indian market alone but also the search can be carried out for prospects all over the Global Village. The revolution in this direction is certainly a Bye-Product of the networking technologies.
Now we take a look at the other side of the value chain i.e., the selling side. Rather than looking at the chain from LHS to RHS we look at it the other way round i.e., from the User towards the supplier (much akin to the supply side chain). Here we are taking the consumer to be the user department or organization and more specifically the formally oriented buying organization.
The basic processes involved in the supply chain here are:
• Tendering
• Bidding
• Specification and layout formalization
• Paying and
• Pre-and post-tendering as also post-award negotiations
The above listed processes are besides the as yet purely physical operations namely, material deliveries and the installation or the turnkey execution.
All the other five processess can be taken care of by
• E-tendering
• E-bidding
• E-specifications
• E-layouts
• E-cash
• E-nego
Identical to the Aps on the Taps the e-tendering and the e-bidding softwares can be offered on rentals or service charge basis to users.
Consider the following
Floating a tender is a multistage and a multiprocess exercise and is therefore very time consuming
• Deciding upon the job/work
• Preparation of specs and the layouts
• Estimate preparation
• Preparation of the draft document
• Proofreading
• Laying down the ground rules implying the terms and conditions
• Making the final document ready
• Publishing the NIT and even the pre-qualification terms in some cases, while also allowing almost one month time for the bid submissions.
• Calling for the tender fees and EMD
• Tons and tons of copies of the tenders sold to the prospective bidders in paper editions.
• Prospective bidders making inquiries in the form of clarifications
• Receipt of the bids and public opening thereof.
The whole process gets completed in around two months at the bare minimum generating quintals of paper and involving thousands of man-hours.
Another two months go in the negotiations and final placement of order if the whole process does not get bogged down in any litigation or proprietary issues. This turns out to be one of the most important reasons for the time and cost overrun of a project.
Hence is the inevitability of E-Everything!
The new millennium compatible supply chain can give the company its competitive advantage. Every link in it can add up to a competitive advantage. Time was when companies looked at their supply chains – the upstream part of the value-chain from the company’s perspective – as a means of focusing on their own core competencies, of leveraging those of vendors, of lowering their costs, and of becoming more responsive to customers. Those goals won’t be swept away by the supply chain in the new Millennium. But they will be superseded by a single super-objective : Competing on the basis or how well you manage your supply chain. It was companies who used to compete with each other earlier. Today, the competion is much broader-between supply chains. The one with the best supply chain will walk away with the customer, however competent individual pockets in the supply chain be.
Of course, one major factor that has forced corporates to re-examine supply chain management is the cost tied up in it. The cost of an activity has to be lower than the value it adds. Otherwise, it is of no use. And the poorly constructed and managed supply chain that many companies in India used to operate which led to supply chain management becoming a major cost management effort. But that’s not all the supply chain can serve up for one tomorrow. Against this backdrop, how can Indian companies leverage their supply chains for competitive advantage?
The art of supply chain war
Effective supply chain improvement, like effective military command, is the art of moving from incisive analysis to decisive action. Unfortunately, the typical general manager whose supply chain is being overwhelmed by increasingly demanding customers and innovative competitors is at a loss as to how to respond. Confusion produces procrastination, which typically takes the form of round after round of studies, followed by minute examination of every detail of supply chain. On today’s operational battlefield, companies simply cannot afford to spend months dissecting their supply chain problems, months more weighing their improvement options, and additional months developing a business case and marshalling resources.
The supply chain assessment and improvement process can help companies in operational distress to chase and turn the tide of battle.
The seven commandments of supply chain management
The seven commandments are :
1. Segment customers based on service needs. Companies traditionally have grouped customers by industry, product (or service), or trade channels and then provided the same level of service to everyone within a segment. Effective supply chain management, instead, groups customer by distinct service needs regardless of industry and then tailors services to those particular segments.
2. Customize the logistics network. Companies need to design their logistics network based on the service requirements and profitability of the customer segments identified. The conventional approach of creating a “monolithic” logistics network runs counter to successful supply chain management.
3. Listen to signals of market demand and plan accordingly. Sales and operations planning must span the entire chain to detect early warning signals of changing demand in ordering patterns, customer promotions and so forth. This demand-intensive approach leads to more consistent forecasts and optimal resource allocation.
4. Differentiate product (or service) closer to the customer. Companies today no longer can afford to stockpile inventory to compensate for, possible forecasting errors. Instead, they need to postpone product (or service) differentiation in the manufacturing process closer to actual consumer demand.
5. Strategically manage the sources of supply. By working closely with their key suppliers to reduce the overall costs of owning materials and services, supply chain leaders enhance margins both for themselves and their suppliers.
6. Develop a supply chain wide technology strategy. Information technology must support multiple levels of decision making across the supply chain. The IT system also should afford a clear view of the flow of products, services, and information.
7. Adopt channel-spanning performance measures. Excellent supply chain measurement systems do more than just monitor internal functions. They adopt measures that apply to every link in the supply chain, incorporating both service and financial metrics.