Supply chain time and inventory

untitled1.jpgMost of us are quite familiar with the fact that supply chain lead times directly affect the inventory that we need to hold. Each extra day from order to delivery means an extra day of inventory and some amount of safety inventory to compensate for the increased uncertainty.

It is probably a less appreciated fact that the amount of inventory itself adds to the supply chain lead time. This happens when new product launches come into the picture. The more inventory that is there in the supply chain, the longer it will take for the end consumer to experience the new product.

Some companies spend a lot of money in flushing out the old inventory from their warehouses by offering TPRs, one-for-one offers, etc. The net result is simply a transfer of inventory from one player to the other. It will now sit with either the distributor or the retailer or the pantry in the consumer’s house.

Hence careful planning of old inventory needs to be done in order to ensure that the consumer gets to experience the new product within a few weeks of it being launched in the market.

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Road-Railers [ to be developed by the Indian Railways and Kirloskar] can be a good supply chain solution

roadrailer.jpg The road-railer service, has the potential to be a very good supply chain solution from the Indian Railways. It would remove a lot of waste- multiple handling, waiting time and damages- from the supply chain.

For the road-railer to become a true supply chain solution, it is not sufficient to just produce road-railers. The complete end to end solution and service has to be designed and executed. The road-railer is the hardware. The software is the service design and concept. The hardware and software have to be designed well for this supply chain solution to work well.

The software [ service concept and design]

On a macro level, questions that need to be answered are; Who will own the road-railers? Who will provide the road-railers? Who will provide the service-Indian Railways or LSPs/3PLs? Will the road-railers be attached to container trains? Or will they be attached to regular freight trains?

On a micro-level the service concept will have to provide answer to many questions;How will a customer place an order for a road-railer? How much in advance will a customer have to book a road-railer? How will the customer’s order for a road-railer be confirmed? What will be guaranteed lead time to destinations? How will customers be updated on where their road railer is?

To develop the service concept and design the service, The Indian Railways should form a team with 3PLs/ LSPs, potential customers , supply chain consultants and Kirloskar who is developing the road-railer.

The Indian Railways should introduce the road-railer service in a phased manner, starting with any one route, learning from it before expanding it across the Indian Railways network.
Once the service commences the service provider should get feedback from customers on how well the service is performing. This should form part of their KPIs/scorecard.

The hardware [ the road-railer]

Kirloskar’s time frame of developing the road-railer in 12 months seems very aggressive. Any railway rolling stock has to undergo extensive static and running tests before it can be put into use. Kirloskar had the mandate to develop a road-railer for 8 years but did not even produce a prototype. So, realistically the road-railer is at least 36 months away.

To summarize, the road-railer is a very promising development in multi-modal logistics in India. We have to wait and see if the promises are met!

You can see the complete story in
http://www.thehindubusinessline.com/2007/07/28/stories/2007072850050700.htm

Wipro, Coke, Pepsi, Danone line up to buy Bisleri!

bisleri1.jpg I am not at all surprised that companies like Coke, Pepsi, Danone and Wipro are queing up to buy Bisleri from Mr Prakash Chauhan.

In India Bisleri is synonymous with the category. I and million Indians like me, buy a ‘bisleri’ not bottled drinking water!

Coke, Pepsi, Danone and Wipro are buying Bisleri for the brand value. And rightly so!!

I would also place a very high value on Bisleri’s distribution too. Distribution is a key contributor to Bisleri’s success as a brand. As always supply chain is hardly ever acknowledged for the crucial but silent role that it plays in the success of any business.

As a supply chain professional, I admire Bisleri’s distribution strategy. Bisleri’s distribution strategy is not unlike Coke or Pepsi’s – keeping the product within arm’s reach. However, what is different and is the efficiency and execution of the distribution strategy.

For bottled water, reliability and depth of distribution is key to success. Bisleri’s processes achieve these two objectives, very well.

What can companies learn about distribution, from Bisleri?

Robust processes:
The processes have to be robust. This means they must be simple, ‘idiot proof’ and have emergency alternatives.

The trucks have to leave the factory/plant at the designated time, follow the route cover the outlets as per the journey cycle plan, have a standard call process at the store, deliver and collect and then return to the factory/plant at a designated time after covering the route.

At the factory/plant they should have a fixed process- tally the inventory, tally the cash, report problems with the truck and report any competitive activity.

The truck would get loaded at the factory over the night. There would be a fixed loading quantity with a fixed, loading pattern.

Backup processes:
These are processes to take care of any emergency or issue.

There would be processes to take care of vehicle breakdown [ having a spare vehicles]. There would be processes to take care of leave [ have people on the bench, multi-skilling like all helpers/ merchandisers trained as drivers, drivers and helpers/merchandisers familiar with 2-3 routes].

Balanced scorecard:
All parameters of the distribution network would be measured – what gets measured gets done!
Measures on the scorecard would include, what time the vehicle left, how many outlets they covered, what time they returned, stocks reconciled and cash reconciled.

And the incentives and compensation of the drivers, helpers, warehouse team would be linked to this scorecard.

It is fascinating to see this process at work. I worked in Mumbai for a few months. My workplace was close to the Bisleri plant at Chakala on the Western Express Highway. To use a cliché, “ I could set my watch by the Bisleri truck”. I would pass the Bisleri truck at nearly the same place on my way to work, I would see the Bisleri truck at nearly the same time everyday, in the retail outlet opposite my workplace and in the evening you could see all the trucks back at the plant.

Wipro and Danone will learn and gain the most from the distribution model. They could learn and re-apply from the model after modifying it to suit their products and strategy. [ The Bisleri model ‘in toto’ works well for limited number of skus and brands].

The distribution model reflects Mr Prakash Chauhan’s style; simple, commonsense and no fancy jargons for him. I liked the way he changed Bisleri’s colour to sea green to make the brand standout from the commoditized ‘ blue water bottles’.

As an Indian, I would want Mr Prakash Chauhan to sell Bisleri to an Indian company. Coke and Pepsi will just kill the brand to promote Aquafina or Kinley.

For the full story click on the link below;

http://economictimes.indiatimes.com/articleshow/2234344.cms

Indian Railways improves rake utilization by 300% – What can Indian Logistics Managers and 3PLs/LSP learn from this?

prcl.jpgThe initiative by the Indian Railways and Pipavav Rail Corporation Ltd [PRCL] to design special containers for Maruti cars to increase container and rake utilization, is a smart move!

The Indian Railways and PRCL customized the containers, so that each wagon now carried 300% of the cars it carried previously in standard containers!!

This idea can be re-applied, by logistics and transport managers to road transportation.

Weighed-out versus Cubed-out

The space in a truck can be either weighed-out or cubed-out.

On loading a product if the truck reaches it permissible maximum weight before all the space is utilized, it means the product has weighed-out. Steel billets, paper rolls, laundry powders would be examples of products that weigh-out.

If a product reaches it’s maximum cubic space available before the maximum permissible weight of the truck, it is called cubed-out. Hay, diapers, wafers would be examples of products that cube-out

What can logistics or transport managers do to maximize truck utilization?

  • Send mixed products: The key is to balance products which cube-out with those that weigh-out. This is usually possible for a company which produces multiple products, like FMCGs. It is possible from Distribution Centres [ DCs] where multiple products are stored and mixed loads [ of weigh-out and cube-out products] can be formed.
  • Customize the dimension of the trucks: For a single product company or for despatches from a plant which produces a single product, the solution lies in customizing the dimensions of the truck [ similar to what the Indian Railways and PRCL did for Maruti cars]. To customize the trucks, logistics managers or transport managers will have to enter into a long term contract with transporters. The transporters will incur expenditure to customize their trucks and they need to be given time to recover their investments.

How do logistics managers and transport managers implement this?

1. Gather data on all the products: The skus of the company will have to weighed and measured.

2. Gather data on the truck dimensions: In India there are no standard truck dimensions. However, it is possible to narrow down to about 5-6 truck sizes.

3. Get a truck-building software: A software, usually called truck building software, many of which are readily available of-the-shelf will have to be bought. Or a smart programmer can develop one in-house. If the company runs a ERP package, this will have to be ‘bolted-on’ to the ERP package.

4. Include truck-sizing as part of the dispatch or deployment process: For acceptability by the team members, include the truck-sizing as part of the dispatch or deployment process.

What can 3PLs/LSPs learn from this?

For 3PLs/LSPs to move up the value chain and become supply-chain solution providers, this is one easy solution that they can provide to their customers.

What savings can be expected from the exercise?

In my experience, savings of 8%-10% are possible.

We combined diapers, which cubed-out with shampoos which weighed-out and got savings of 8%-10%.

We changed the dimension of the boxed/container trucks from our DC and got savings of 10%.

The PRCL initiative, listed above gave a 300% improvement in utilization!!

The Indian Railways is really progressing! This is one time when the Indian Railways has taken the lead.The road transporters/ 3PLs/LSPs can learn something from the Indian Railways.

For the complete story see the url below;

http://www.thehindubusinessline.com/2007/07/20/stories/2007072051971000.htm