Monday, April 21, 2008

examples of SCM

Predicting the future with SCM
Supply chain management goes beyond inventory management and streamlining of supply processes. It is being looked upon as a tool for predicting the future by retail and FMCG organisations. Priya Jain reports
Supply chain efficiency in an FMCG or a retail company is essential, as stock-out situations (wherein a company’s stocks are not available with a particular retail outlet) are unacceptable. According to the March 2005 IMRB-Express Computer survey, 26 percent of respondents in this sector have listed ‘increased supply chain efficiency’ as their top business priority. Besides stock-outs, monitoring and tracking the movement of goods is important as it helps record the shelf life of products and reduce pilferage.
"Supply chain costs will constitute at least 20 percent of the overall costs by the time a product is delivered to the end consumer"-Mani MulkiVice-president, ISGodrej Industries
Supply Chain Management (SCM) is now the buzzword for innovative thinking. Traditionally, it was a mechanism for companies to cut costs and boost efficiency levels. Most retailers and FMCG companies that have deployed SCM are now looking beyond management to customise their supply chain strategy. The aim is to go beyond meeting the customers’ present needs and predict their future demands.
Organised retail is but a drop in the ocean of Indian retailing which is dominated by the unorganised sector. To attract consumers, organised retail has to first understand their buying patterns. Mani Mulki, Vice-president, IS, Godrej Industries remarks, “Though brand loyalty is present, it is waning. Often products are purchased on an impulse. In such a scenario prediction can fail. It is important for me to know what a customer is buying and why. The system that we are building for Godrej consumer products is fulfilling that objective.”
Tracing the trend
Before the SCM system can allow decision-makers to predict future demand, it has to be integrated with all levels of a business. V V R Babu, CIO, ITC believes that SCM can help in predicting future demand. To this end, ITC is embarking on the SAP Upgrade project, which will help the company build advanced forecasting and statistical planning tools.
"It is feasible to plan for future demand if an SCM solution is used as a collaborative platform amongst all the key players of a supply chain"
- Chinar DeshpandeCIO Pantaloon Retail
Chinar Deshpande, CIO, Pantaloon Retail feels that it is certainly feasible to plan for the future demand if an SCM solution is used as a collaborative platform amongst all the key players of a supply chain (internal and external). He adds, “It helps our key suppliers plan for future demand when we transparently publish the information on sales of their merchandise in our stores. Moreover, they can see all the stages of goods movement from the time the goods reach our distribution centre till they reach the stores.”
Whether SCM can help predict future demand is yet to be proved. What is certain is that it can gather real-time information and help solve numerous problems. Mulki feels that the key to success of an SCM solution is not so much its ability to predict but the capability to react quickly. “The ability to react on a real-time basis is when you have reached Nirvana,” he adds.
He explains, “What I mean by Nirvana is that if you buy a soap from a retail outlet, does it translate into an order to the supplier on a real-time basis? If this happens on a day-to-day basis, you would know the buying patterns of consumers.”
According to Mulki, an improved SCM solution will help get data from all these areas in as close to real-time as possible. Such a solution should reflect market realities.
Sampark to Sampurna
Godrej had earlier hooked up its distributors through an initiative called Sampark. Now in an effort to connect its retailers, the company is working on an initiative called Sampurna that will consist of Windows CE handhelds connected to Sampark. Sampurna is expected to improve Godrej’s relationship with its retailers and keep a retailer’s inventory to a minimum with only those products well stocked that sell. Once Sampurna is deployed, all SCM segments in Godrej’s pipeline will be integrated.
Presently, the company has 32 CnFAs, five factories, four warehouses in each region, about 1,200 distributors and half a million retail outlets that are directly billed. They have completed 60 to 70 percent of system building and connected 400 ‘A’ class distributors who constitute about 70 percent of the company’s sales by means of Sampark from Botree. Godrej has implemented a customised ERP solution for these distributors who use it for their daily accounting, material receipts, billing and inventory. At the end of each day, the system at the distributor’s end handshakes with the central server via the Internet. In this handshake, the details of the delivery channel are uploaded and the latest price lists downloaded to the distributor’s system.
Responsive systems wanted
"SCM aids in decision-making such as the what and how of production, transport and warehousing—on a daily, weekly or monthly basis "-V V R BabuCIO, ITC
A responsive SCM that provides real-time information is the key to a better decision-making process. Explains Babu, “SCM covers aspects such as capacity planning, supply chain network, layout planning, trade-offs between service levels and inventory and annual budgets. It works at the plant or shop floor level and aids in decision-making such as the what and how of production, transport and warehousing—on a daily, weekly or monthly basis.”
Mulki believes that SCM is the core of managing operations in any FMCG company. “By the nature of its operations, supply chain costs will constitute at least 20 percent of the overall costs by the time a product is delivered to the end consumer,” he adds. With growing competition and the pressure to maintain prices at a certain level for a sustained period, the only way that one can churn out profits is to make sure that the cost of producing and transporting goods to the end consumer is kept at the minimum.
An effective SCM system bridges the gap between the shop floor and decision-makers. To this end, it ensures the smooth sharing and free exchange of data in real-time. An SCM solution makes the entire value chain a transparent entity. Thereby line managers can take quick and well-informed decisions on planning, buying and transporting merchandise from suppliers to customers.
Abel Correa, Assistant General Manager, IT, Piramyd Retail and Merchandising agrees, “FMCG/Retail is a low-margin, high-volume game. The only way to achieve this is to have high sales turnover and minimal inventory, for which one needs a good CSM process and robust technology to support it.”
How SCM has made a difference

FMCG/Retail
SCM implementation
Benefits

Godrej Industries
The ERP system is QAD MFG/PRO. The supply chain solution ‘Sampark’ is from Botree Software.
Reduced time for closing accounts
Better visibility into the inventory pipeline
Almost 400 distributors connected through Sampark
Pantaloon Retail (India)
SAP SCM solution
Integration of warehouse management,procurement and inventory functions
ITC
SAP Upgrade project
Business Process Optimisation
Minimises overall cost of the supply chain and maximises net revenues
Creates multiple scenario data
Tackles both strategic and tactical problems
Piramyd Retail & Management
JDA’s ERP Package
Provides the technology support to manage and monitor supply chain efficiency
Systems in place
Piramyd is currently implementing JDA’s ERP suite for retail including modules that will provide the technology support to manage and monitor supply chain efficiency.
ITC already has SCM systems in place at different levels broadly classified as MRP led production planning, raw material planning, distribution planning for stock management and delivery order planning for shipments to customers or distributors.
The other instance is that of Godrej Industries which has deployed an ERP system, MFG/PRO from QAD up to the clearing and forwarding agent (CnFA) level. The company has successfully reduced the time taken for closing accounts by 15 days and gained better visibility into its inventory pipeline.
Pantaloon has recently replaced an in-house solution with SAP SCM. The solution takes care of procurement, warehouse and inventory management in an integrated environment while working seamlessly with core merchandise management.
Added advantage
With the consumer buying patterns shifting from need to impulse-based shopping, companies are realising that any stock-out translates into lost business. Solutions like SCM are going to play an important role in gaining customer loyalty by offering superior service.
Correa says, “With collaborative planning, a manufacturer can plan his production for the stock keeping units (SKU) which are proving to be popular.” In short, the manufacturer can utilise its production capacities optimally to bring down the cost of a popular product and hence its selling price.
Other than this, SCM solutions help optimise business process and create a balance between cost and service levels. Says Babu, “SCM has a lot of potential, it can minimise the overall cost of a supply chain, maximise net revenues from it, create data regarding multiple scenarios, compare them on key variables and help tackle both strategic and tactical problems.”
However, creating an efficient supply chain is an enormous task. Since people are habituated to working in a particular manner, getting them to adapt to a new technology becomes an issue.
“The major challenges are all non-technical, they are people-oriented. It has got to do with the culture and mindset of the stakeholders, because when you are linking the supply chain with a new technology you are actually changing the culture of the work that people are used to. A perfect SCM solution has to translate into attractive benefits for all stakeholders,” concludes Mulki.
priya@expresscomputeronline.com

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