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Transcript of STRIVE 4
MODEL
HUB
&
SPOKE
C P F R
E A M
TRENDS IN
AUTOMOTIVE
INDUSTRY 20
COVER STORY
INTERVIEW
WITH
PRAVEEN
SINHA 24
RFID
IN INDIAN
RETAIL 28
EMERGING
AREAS
COLLABORATIVE
PLANNING,
FORECASTING AND
REPLENISHMENT 1
SPECIAL
IT AND LEAGILE
SUPPLY CHAIN 13
E-COMMERCE AND
LOGISTICS 17
VOLUME 2 ISSUE 2 FEBRUARY 2013 . http://opepiimraipur.blogspot.in/
HUB AND SPOKE
MODEL 10
WORK
EXPERIENCE
IMPLEMENTATION
OF CORE BANKING
IN SBI 31
ROLE OF IT IN
OPERATIONS 35
ENTERPRISE ASSET
MANAGEMENT 6
REGULAR
GURUMANTRA 37
CROSSWORD 39
PHOTOGRAPH COURTESY: TEJIT MITTAL DESIGN: MANOJ H
ON THE COVER
The dispersion of light in the cover page shows the fast paced growth that
every sector is experiencing in their operations & supply chains with the
support of Information Technology. The blue-colored gear in the cover marks
the strong and much required presence of Information Technology in
Operations. In the background we have binary digits "1" & "0" to indicate
digitization in the corporate world
EDITORIAL
In today's dynamic business world,
organizations are changing their way of
functioning by relying more on information
technology - information systems and
operations management are critical to every
organization's success. IT infrastructure and
operations leaders are facing new and
unforeseen challenges everyday and hence
are required to keep themselves updated so
as to convert these challenges into
opportunities. The need to develop and
manage a flexible infrastructure has
emerged as a top priority.
OPEP, the Operations and Supply Chain
Club of IIM Raipur, through its e-magazine
'Strive', serves as a platform for the
Students, Faculty Members and Industry
Practitioners for sharing their knowledge in
the field of Operations and Supply Chain
Management.
This issue of Strive magazine focuses on the
role of Information Technology in
Operations. The magazine begins with an
article by Mr. S Srinivasan, the CIO of TVS
Infotech, who has given his insights about
the role that IT has played in automotive
sector operations right from the time it was
introduced to its contemporary issues. Mr.
Praveen Sinha, Cofounder and Managing
Director, Jabong.com, through an interview,
presents his outlook about the use of IT in
the online retail industry. In the academia
section, Dr. Sumeet Gupta, a faculty
member of Indian Institute of Management
Raipur has listed down the potential benefits
of RFID technology in retail sector and the
issues limiting its implementation.
The students have also written articles about
some of the contemporary issues including–
‘Collaborative Planning, Forecasting and
Replenishment (CPFR)’. This article
explores the various advantages which an
organization can gain from it and the
challenges in implementing it. We have
continued the column 'Gurumantra' from
Strive Issue 3 and Issue 2. Two 1st year PGP
students of IIM Raipur have shared their
work experiences in role of IT in varied
fields.
We are thankful to Prof. B. S. Sahay, Prof.
Vinita Sahay and Prof. Ajit Prasad for their
motivation and immense support & to Prof.
OmkarprasadVaidya and Prof. Sumeet
Gupta for teaching us the relevant subjects
in the field of Operations and Supply Chain.
We also thank all our authors for taking out
time from their schedule and contributing to
the magazine. My editorial would be
incomplete without acknowledging the
support of Manoj, Sujitha, and Thousif in
bringing out this issue and the whole Team
OPEP for their commitment and dedication
towards the club activities.
Akshay Agarwal,
Editor
Strive
DIRECTOR’S MESSAGE
From a humble beginning in 2010, Indian Institute of
Management Raipur has seen its pioneer batch
graduating and joining reputed corporate houses across
the country as well as abroad. Student-run initiatives
play a major role in the process of achieving such feats.
OPEP, the Operations and Supply Chain Club of IIM
Raipur, has played a significant part in setting up this
platform. The biannual e-magazine ‘Strive’ started by
our students has been successful since its launch last
year. Three issues of Strive have already been released.
In the current issue, the focus is on role of information
technology in managing operations and supply chain.
This has brought efficiency and transparency in the
entire value chain with significant impact on the
bottom-line.
I wish OPEP a great success in their endeavor and hope
that you enjoy reading this publication.
Prof. B.S. Sahay
Director, IIM Raipur
Prof . B.S. Sahay
FEBRUARY 2013 1
COLLABORATIVE PLANNING, FORECASTING AND
REPLENISHMENT (CPFR)
Functioning, Advantages and Challenges of Implementing CFPR
[BIR BAHADUR SINGH]
After winning the 2010 FIFA World cup
when Casillas was asked, what was their
winning mantra the answer was a single
word “Collaboration”. The point which I
want to stress here is that be it in business,
football or anything the success of the team
depends how better they collaborate?
In 80’s there was a huge cry for green
sustainable environment as a result Volvo
launched green cars but the market’s
response was opposite as a result Volvo had
a green inventory. To reduce this campaign
was initiated which proved successful. The
increase in sales was wrongly interpreted
and production department and started
producing more green cars. As a result the
company again had a growing inventory and
hence the whole motive behind the
campaign failed. This shows how important
it is for different entities in a corporation to
collaborate.
In a football match it may result to a game
loss but in business houses it costs million
of rupees hence the business houses are
continuously trying to increase the degree of
collaboration as much as possible in order to
minimize the losses. In the pasts we have
seen many great initiatives in the field of
supply chain like JIT (Just-in-time), ECR
(Efficient Customer Response) and VMI
(Vendor Managed Inventory).
Collaborative Planning, Forecasting and
Replenishment (CPFR) is the most recent
concept which came into existence from
1995 that “aims to enhance supply
EMERGING AREAS
The purpose of this article is to explain the functioning of the CPFR (Collaborative
Planning, Forecasting and Replenishment) technique in supply chain management system.
The article also focuses on the various advantages which an organization can gain from it
and what are the challenges of implementing it. Finally the article ends by citing some real
life examples of how companies are using this technique.
“It is a business practice
which combines the
acumen of various
trading partners in the
planning and fulfillment
of customer demand”
FEBRUARY 2013 2
chain integration by supporting and assisting
joint practices. It is a business practice
which combines the acumen of various
trading partners in the planning and
fulfillment of customer demand.” The basic
idea is to create an environment in which the
trading partners share the information which
results in benefit of both the parties. Also we
can see the added advantage in CPFR is that
it answers all the aspects of supply chain
problems unlike the earlier approaches
where one approach only answers one
aspect.
CPFR is nine step processes which can be
represented by a picture and is summarized
below
Phase-I Strategy & Planning
The initial step is to Develop Front End
Agreement - this step mainly concern
with the creation of the unstructured
documents that define the agreement.
The Business modules allow partners to
define and measure specific Key
Performance Indicators. Planning through
the use of Information Technology
ensures that all partners will have access
to the information simultaneously, while
the Portal makes all the data and
information visible across the whole
supply chain. The next step is to Create
the Joint Business Plan, after making the
agreement it is obvious that a lot of
information will start flowing between
FEBRUARY 2013 3
1•STRATEGY & PLANNING
2
•DEMAND & SUPPLY MANAGEMENT
3•EXECUTION
4•ANALYSIS
the partners, but the answers to the all
critical questions like who will get what?
When? Where? How? How much? will be
given by the joint business plan which
was created by the consent of both the
parties. Joint Business Plan also defines
the roles and workgroups.
Phase-II Demand and Supply
Management
The third step is to create the sales forecast; Collaborative forecasting is the engine which drives the success of the whole CPFR if suppliers have better understanding into the retailers’ sales forecast they can plan their operation better. In the subsequent steps again the same procedure is followed for order what was followed for sales. If the suppliers have better understanding into the retailers’ order forecast they can plan their replenishment better. By the same token, retailers can lower the frequency of their OOS conditions and mitigate their consequences by getting continuous information about the replenishment position. The next steps of identifying the exception and the resolution begins with order Forecasting’s statistical forecast, companies can create changes to an
existing forecast or import their own forecast based on the most up-to-date information. Multiple forecasts can be prepared to allow using a dominant algorithm that takes into report the historical accuracy of different forecast contributors. Exceptions are easily identified and when these exceptions are identified, messages are sent to reconcile unusual items. Each provider (partner, supplier, and customer) is a very important part of the real-time collaborative process.
Phase-III Execution
Sixth step of the process of creating
order forecast is mainly dependent on
causal information POS data and
inventory strategies in order to forecast
which supports the shared sales forecast.
Seventh step is of identifying exceptions,
actual results very rarely matches with
the forecast so to determine what is the
reason and why there is a deviation this
step is must. The output of this step is a
list of exception things that are
recognized using the criteria framed in
the front-end agreement. After
determining the exception we need to
“CPFR provides an
ample of opportunity
for the managers to
remove the
inefficiencies of the
supply chain.”
FEBRUARY 2013 4
sort out the issue in the eighth step of
resolving exceptions by querying pooled
data and submitting results to change in
the order forecast.
Phase-IV Analysis
Fourth and final phase mainly concerns
with the order generation and delivery.
To maintain or to increase the customer
base, the very important thing is to timely
delivery which means that the company
should stand on their promise of delivery
it will not only generate trust in the minds
of customer but also sets the benchmark
for the company itself.
There are lots of benefits of this system if
properly implemented some of them are
a) Improved responsiveness to consumer
demand because of reduction of out-of-
stocks and shorter cycle time.
b) Greater forecast accuracy - sharing a
single forecast throughout the supply chain
enables participants to benefit from
synergies. Also increased forecast accuracy
facilitates decrease in safety stock as a result
inventory reduces which further helps in
cost production.
CPFR provides an ample of opportunity for
the managers to remove the inefficiencies of
the supply chain. Europe and other western
countries have already realized its potential
and are exploiting this system to its full.
However, there is certain area which poses
challenge for implementation of this
technique. One of them is the selection of
trading partner with whom the information
sharing because the confidentiality has to be
maintained and the collaboration must be at
the lowest data level. Also, while sharing the
data any weak link in one partner can be
fully exploited by the other which again
calls for a great trust between the parties
before going to the agreement. Below we
will show how some companies
implemented CPFR system.
Warner-Lambert & Wal-Mart Warner-Lambert was a American
pharmaceutical company which was later on
acquired by Pfizer faced a problem in the
demand fluctuation of its products. The
demand fluctuation was mainly the result of
Wal-mart’s promotion. The only solution to
the problem was collaboration. The partners
shared the weekly forecast and worked
together to resolve any variation which
occurs. Optimal application of CPFR
aroused when other retailers joined Wal-
mart in sharing their weekly forecast. This
helped Wal-mart to keep effective inventory
levels. Also it helped Warner-Lambert to
gauge market demands more effectively.
Kraft food & J. Sainsbury Plc Kraft is a worldwide famous food
manufacturer and J. Sainsbury Plc is world’s
leading retailers. Both the companies were
facing a major problem of out of stock
inventory which resulted in loss of sales and
high inventory level across Kraft and J.
Sainsbury Plc’s supply chain. Both these
companies adopted CPFR as a pilot project
and the results were breath taking on-shelf
availability increased by 20%.
Super Drug & Johnson and Johnson Superdrug operates more than 700 stores
throughout the United Kingdom. J&J is a
global American Pharmaceutical company.
FEBRUARY 2013 5
Superdrug faced a major challenge of
trimming the inventory as per sales also;
they wanted to improve forecast accuracy so
they started a pilot project with J&J with the
use of CPFR due to similar culture of two
companies. As a result of the
implementation many future issues were
avoided due to proper highlighting of the
issues. Superdrug’s also got the access for
the first time to a range of data which were
unavailable to them earlier. Superdrug also
saw a heavy reduction of 23% in RDC
Cover (Present Stock on hand/Last week’s
sales).
Godrej Consumer Products Limited Godrej implemented CPFR as a part of its IT
initiative which included Customer
Relationship Management and Business-to-
employee portal. Godrej implemented the
project with a name “Sampark”. The
company appointed Accenture to design the
IT roadmap for the project. It addressed
various issues like overstocked distributors
who were looking to reduce service levels,
out of stock scenario due to unexpected
demand. All these issues were solved to a
very greater extent with the implementation
of CPFR and one of the remarkable
outcomes was the better integration between
the distributor & C&F (Clearing &
Forwarding) agents. Company also achieved
a reduction in working capital of the
distributors.
Thus, we can see how CPFR is helpful in
achieving the desired results in the supply
chain of organizations. Though, west has
adopted it but it is not being practiced in
India on a large scale. The advantages are
unmatchable. With the increasing IT power
in India we can say that sooner all supply
chain managers in India will also be
enjoying the wonderful technique.
REFERENCES:-
1. http://www.decisioncraft.com
/dmdirect/cpfr.htm accessed
on 01.01.2013
2. http://web.mit.edu/sheffi/ww
w/documents/genMedia.theVa
lueOfCPFR.pdf accessed on
31.12.2012
3. http://www.ecr.no/data/f/0/7
0/62/2_2401_0/2001_a_guide_
to_cpfr_implementation.pdf
accessed on 02.01.2013
4. http://www.sccori.com/SCM/
COLLABORATIVEPLANNINGFO
RECASTING.pdf accessed on
30.12.2012
5. https://committees.vics.org/co
mmittees/cpfr accessed on
01.01.2013
6. http://en.wikipedia.org/wiki/
Collaborative_planning,_foreca
sting,_and_replenishment
accessed on 01.01.2013
BIR BAHADUR SINGH is a B.Tech in Electrical Engineering from NIT Silchar, after a brief stint at
Schneider Electric Infrastructure Limited he took admission in IIM Raipur as a Post graduate student.
His academic interest includes areas of Operations and Marketing. He can be reached at
FEBRUARY 2013 6
ENTERPRISE ASSET MANAGEMENT
Integrating & Improving with EAM
[ANAND SIVAKUMAR J]
Industries like utilities, manufacturing, and
real estate are capital intensive and physical
assets like equipments, buildings form a
considerable proportion of their total assets.
They operate in highly competitive markets
and they know the harsh realities of
operating in such markets. They deal with
high value assets and equipments and
whenever there is a failure of these assets it
costs them a lot and also disrupts their
business. As downtimes and idle time
become more and more expensive, both in
terms of loss in production and revenue loss,
it becomes imperative for the organizations
to maximize the productive life cycles of
assets via optimized operations
management.
Enterprise Asset Management emerged in
the 1980's in Europe as Terotechnology. BS
3811 defines Terotechnology as, Now, the
companies are focusing on profits rather
than costs. The standard practice of
Terotechnology is concerned with focusing
on the reliability and maintainability of
physical assets of an organization like
machinery, equipment, plant, buildings with
their selection, installation, testing,
commissioning, maintenance and repair with
compilation of information on design,
performance and costs. Based on the data, it
also involved feedback to the original
manufacturer to improve equipment design
and development.
As the companies were very much interested
This article briefly looks into how Enterprise asset management integrates all the principal
interface of an organization namely, physical, financial, human, intangible and information
assets to strategically reduce the operational costs and improving both the value of the
organization and value provided by the organization. It also analyses how the emerging
technology can also be integrated with the existing systems to improve the efficiency.
EMERGING AREAS
"a combination of
management, financial,
engineering, and other
practices applied to physical
assets in pursuit of economic
life-cycle costs ".
FEBRUARY 2013 7
in achieving high reliability of operational
assets it became imperative to replace the
word 'Terotechnology' with the more
acceptable term ‘Enterprise Asset
Management' or EAM. The phrase
'Enterprise Asset Management' implied that
the achievement is a result of involvement
of the entire company.
An organization’s strategic plan will be to
increase the profit which involves low
operational costs and better customer
service. The principal interfaces of an
organization namely, physical assets,
financial assets, human assets, intangible
assets and information assets have to be
managed holistically. These interfaces build
the important relationships between those
who work on these assets and those who
ensure their availability.
Any organization will face the challenges
like provision of high asset availability
without increasing the costs of procurement,
identifying the critical assets and an
optimizing the asset maintenance strategy,
improving asset efficiency, reducing
reactive maintenance costs and finally to
decrease the Total Cost of Ownership
(TCO). A well planned strategy along with
implementing appropriate solutions will
ensure high availability of assets at low
maintenance costs, improved efficiency and
low Total Cost of Ownership (TCO) of
assets.
To build an effective system, asset
management system and quality
management system have to be combined to
focus on the process of continual
improvement by following Plan – Do –
Check – Act methodology of Deming.
The concepts and duties of finance,
engineering, operations and maintenance
must not be seen in isolation. A good asset
management system has to be seen in the
context of getting the most out of assets of
an organization at lower operational costs.
This can be achieved only when Finance,
Engineering, Operations and Maintenance
are working together across the life cycle.
Operational Excellence can be achieved
when there is improved asset reliability and
performance. By whatever name it can be
called Terotechnology, Enterprise Asset
Management or Operational Excellence- it
can be achieved only by a significant change
in thinking and attitude at all levels.
Now a days, accounting, HR and
manufacturing information functions are
standardized and consolidated by most
companies using enterprise resource
planning systems, but very few companies
have integrated their calibration and
equipment management systems. The
integration of systems involves various
dimensions, like integrating the systems
horizontally over time axis, vertically
between lifecycle functions or integrating
the systems across the enterprise. But
achieving this level of integration involves
implementing a very comprehensive
solution.
Real time analysis of data and reporting
across different systems connect individual
asset performance with the entire business
performance by enabling the users to find
“An organization’s strategic
plan will be to increase the
profit which involves low
operational costs and better
customer service.”
FEBRUARY 2013 8
out the 10 assets out of 10000 assets which
require immediate attention. This
information provides an understanding and
some valuable insights to make quality
decisions about where the employees are
spending more time and which resources are
being used at what level. This system also
provides the option of notifications, through
which the concerned operator or shop floor
manager will be informed automatically
about the preventive maintenance activities,
warranty services etc. Based on this, staff
can identify more efficient ways to operate
the equipment, utilize and manage the assets
to get the best business outcomes.
Retrieving data from different computerized
management systems used in different
business modules will take long time which
will not help us much in taking real time
decisions. Using an integrated information
system will make the data from different
business modules like physical assets to
finance easily available and analyzable. A
common language is particularly important
in modern enterprise systems wherein the
user will be empowered to inquire on and
make selected updates to his equipment and
machinery data. The technical solution is
straight forward-simply define a common
set of tracking attributes and establish
validation tables and logic to enforce the
values.
EAM provides us a single database where
even Vendor details, previous transaction
details can also be included. We can design
our own customized approval system
through workflow management where
routing the workflow through the
application is enough to approve the task.
Workflow can be approved, rejected,
escalated to high level, can be paused until a
specific job is done. And remember this
workflow management can be applied to all
modules like finance, human resources, and
operations in a single application without
going for different ERP solutions.
Asset descriptive attributes have to be
standardized and structured in consistent
formats and values. Equipment Cataloging
serves the purpose. Equipment cataloging
enhances the asset management process by
automatically combining attribute data into
useful management information.
In any database, we can easily search for
equipment by attributes such as model
number, manufacturer using modern search
algorithms like SQL. However, unless the
data is structured very well in the database,
searches are going to be slow, unreliable,
particularly as the data volume grows
beyond a few thousand items. Structured
cataloging methodology will solve this
problem.
Now, mobility technology also becomes a
part of EAM. Companies are implementing
mobility solutions as a part of EAM, to
enable their technicians to access and refer
data on-site. This helps the employees to
“An integrated information
system will make the data from
different business modules like
physical assets to finance easily
available and analyzable”
FEBRUARY 2013 9
capture more data which can be easily
entered into the system, which can be
accessed by anyone who is using the system
in the organization.
Dubai municipality’s public transport
system, manages the maintenance and
procurement of components and to monitor
all processes relating to periodic preventive
and corrective maintenance, spare parts and
equipment for its fleet of 2000 light and
heavy vehicles using EAM solution.
EAM maximizes the value of critical
business and assets over their complete
lifecycles with workflows by providing best
practices that yield benefits for all types of
assets, including transportation, delivery,
facilities, production, communications and
IT. Industry-tailored EAM solutions are
available for nuclear power, transportation,
utilities, life sciences, government,
telecommunications and oil & gas. Now,
Organizations like TCS, Mahindra Satyam,
Genpact, IBM are offering these solutions as
Integrated Asset Management (IAM)
solutions.
REFERENCES [1]. Ricky Smith, CMRP, Ivara
Corporation. (n.d.). Connecting
reliability to EAM.
[2]. Kennedy, S. (n.d.). Innovations in
CMMS and EAM are making life
easier for the plant maintenance
department.
[3]. Philip M. Parker, P. (n.d.). The 2009-
2014 Outlook for Enterprise Asset
Management Systems (EAM) in The
Middle East.
ANAND SIVAKUMAR J is a graduate in Production Engineering from Madras Institute of Technology,
Anna University. He worked in Engineering and Industrial Services of TCS for 3o months. He is
currently pursuing post graduate from IIM Raipur. His areas of interest include Operations. He can be
contacted at [email protected]
FEBRUARY 2013 10
HUB AND SPOKE MODEL
In IT-BPO with INDIA as “HUB”
[SINDHUJA A]
Tertiary sector in India is the fast growing
and most contributing of all the sectors.
More specifically, in this sector, Information
Technology- Business Process Outsourcing
(IT-BPO) has grown remarkably in the past
decade and acted as a catalyst for the growth
of the country. The phenomenon growth in
this industry can be attributed to the
perceived cost advantage of outsourcing to
India. Demographics, geography and
availability of skill led to this IT revolution.
Though initially outsourcing to India was
seen as a way to cut costs, over years the
customers are realising that it is turning to
be a strategic driver. The vendors now are
not just providing services at low cost but
also providing high quality services by
building strong expertise in technology,
operations, business-knowhow and
management capabilities. India has emerged
as the leader in IT offshore outsourcing with
a share of 55 percent in global offshore
market for IT. India can leverage all these to
move from an offshore site to a global
“Hub” for IT.
The outsourcing in IT has evolved over
time. It has changed from onsite in 1980s to
offshore in 1990s to near-shore in 2000s.
Each one of this has a special purpose to
serve. Onsite is best when the desired
customer interaction is high. Offshore
reduces cost to a great extent. Nearshoring
moderately reduces the cost while still being
close to the customers. Each has advantages
and disadvantages. The new model that is
emerging in the field of outsourcing of IT-
BPO is the Hub and Spoke Model. It is a
multi-tier operating model with a
standardized governance structure.
In the Hub and Spoke model, “Hub”
provides a single face to customers with
each “Spoke” as an extension to it.
“Spokes” are distributed across various
EMERGING AREAS
India has a major share of IT-BPO. With the strong base it can now leverage the position to
turn into a “Hub” of global delivery. Hub and Spoke Model is new to IT-BPO but it has been
put in practice in many industries. Indian IT can analyze the cases of Hub and Spoke in other
industries, develop some necessary skills, put all its strengths to work and attain the position
of “Hub”. The Hub and Spoke Model has many advantages over other outsourcing model.
Though it is not completely without disadvantages, implementation of this model would give a
strategic advantage to our country.
FEBRUARY 2013 11
regions and provide services to the
customers. The Hub and Scope Model is not
a new model to experiment with. It has
already been successfully implemented in
various industries like automobiles,
electronics, consumer goods and aerospace.
In aircraft industry, this model helped to cut
down the production timelines. Also it
helped the companies to concentrate on their
core competencies like aircraft design and
assembling while outsourcing the
component manufacturing. Few major
players in Consulting and Technology also
use this model. They split the process
outsourced into various components like
voice, data, etc and routes these processes to
locations that serve them the best. Finally,
the Hub integrates all the services and
provides to the customers.
“Hub” in the Hub and Spoke Model is
responsible for customer management,
quality and performance management,
training and development, man-power
management and regulatory compliance. On
the other hand “Spoke” has to meet the
performance expectations, manage local
projects and support the “Hub” on legal and
tax compliance.
Initially it is good to keep management
activities at “Spoke” minimal with a
“Spoke” working under only one “Hub”.
But as time passes, there would be “Spokes”
addressing multiple “Hubs” by developing a
management layer and finally the evolution
FEBRUARY 2013 12
would lead to a closely knit Hub and Spoke
Model of operation.
Hub and Spoke Model mitigates of risk by
locating in different locations. It takes
advantage of favourable tax and legal
structures of various countries, cost
advantage arising because of emergence of
Tier-II and Tier-III cities and the high
quality talent available at these locations.
Above all it helps to be close to customers
so that their needs are well understood. Also
the cultural affinity helps the vendor offer a
better customer experience. Centralized
training coordinated by “Hub” ensures a
consistent employee quality.
The model however faces some challenges
like ensuring data security, addressing tax
issues, integrating services and managing
the difference in regulatory environment,
culture and time zone.
The companies that are planning to employ
this model for their business need to
concentrate of few aspects before the actual
implementation. They must build a globally
consistent brand, advanced technology, pro-
active location strategy, flexible governance
structures and harmonized and standardized
delivery system. They must ensure
compliance with global information security
standards.
With good base in IT-BPO, increasing
quality regulations, emergence of Tier-II and
Tier-III cities, government initiatives (like
tax benefits for IT-BPO), developing
infrastructure, India has every chance of
being a global “Hub” for IT services. Many
leading MNCs of the world are considering
India as a “Hub” in their global delivery
strategy and developing spokes in other
countries like Philippines, China, Uruguay
and Mexico.
References [1]. Greenbaum, J. (2010, May). Inside
the Hub and Spoke Model.
Managing Automation , 25 (4), p. 14.
[2]. KPMG, NASSCOM. (2012). Hub
and Spoke Model: A new Paradigm
for Indian IT-BPO Industry.
SINDHUJA A is a graduate in Electronics and Communication Engineering from University
College of Engineering, Osmania University. She is interested in corporate banking. She can be
reached at [email protected]
FEBRUARY 2013 13
IT AND LEAGILE SUPPLY CHAIN
Emerging IT Trends in the Application of Leagile Technology
[PULAK JAIN]
Adding value to the shareholder by
generating higher revenue is the main
objective of any firm that can be achieved
by providing service or product that fulfils
the customer requirements. Therefore the
objective of the supply chain of any
organisation would be to ensure that it
satisfies the consumer requirements. Going
through the history of supply chain, craft
shop was the first supply chain that
delivered exactly what the customer wanted,
but it was done at a very high price. Henry
ford introduced assembly line for mass
production of model T at low cost, but no
choice was given to consumers. In the recent
times in order to gain competitive advantage
the companies are focusing on mass
customization and flexible manufacturing. In
the light of this requirement, lean and agile
supply chain management are heavily
studied and adopted across the
organisations.
Lean supply chain management, first created
at Toyota, focussed on reducing cost by
eliminating wastes (muda). Leanness means
“developing a value stream to eliminate all
waste, including time, and to enable a level
schedule.” On the other hand Agility means
using market knowledge and a virtual
corporation to exploit profitable
opportunities in a volatile marketplace. In
short lean is ‘supply what, when needed, but
do this perfectly’, whereas agile aims at ‘be
first, fast and best’.
High level of product quality as well as the
lead time is an important requirement for
both the lean and agile supply chain system
in order to satisfy the consumer demands. In
lean system the lead time has to be small
because the time is considered as waste and
should be removed, while in agile system
shorter lead time is required to fulfill the
volatile customer demand as quickly as
possible to gain competitive advantage. The
following matrix shows that the key order
winner for the agile system is the availability
of the product to the customer whereas in
lean system it is the minimization of the
cost.
Leanness and agility in a supply chain do
not have to exclude each other. Combination
The article deals with the application of the Leagile system in companies and the role IT in
aiding this system. It talks about the emerging IT trends in the application of leagile technology
to gain competitive advantage.
SPECIALS
FEBRUARY 2013 14
of these two concepts within the scope of
one firm or a single supply chain can be
called as ‘‘leagility’. Naylor et al. defined
leagility as “the combination of the lean and
agile paradigm within a total supply chain
strategy by positioning the decoupling point
so as to best suit the need for responding to a
volatile demand downstream yet providing
level scheduling upstream from the
decoupling point.” The decoupling point
separates the part of the supply chain geared
towards directly satisfying customer orders
from the part of the supply chain based on
planning. The decoupling point is also the
point at which strategic stock is held as a
buffer between fluctuating customer orders
and/or product variety and smooth
production output. On the downstream side
of the decoupling point is a highly variable
demand with a large variety of products,
where as upstream from the decoupling
point the demand is smoothed with the
variety reduced. As shown in the diagram
below, the lean paradigm can therefore be
applied to the supply chain upstream of the
decoupling point and thereafter the agile
paradigm can be applied downstream from
the decoupling point as demand is variable
and the product variety per value stream has
increased.
Stalk and Hout in 1990 warned of the
dangers arising from slow information lead-
times in supply chains stating that “the
underlying problem here is that once
information ages, it loses value... old data
causes amplifications, delay and
overhead...the only way out... is to compress
information time''. Overcoming these
problems leads naturally to the concept of
the ``Information Enriched'' supply chain
(Mason-Jones and To will, 1997) wherein
the visibility of demand; by means of timely
information sharing reduces complexity of
control. Harrison and Van Hoek presented
an integrated model for enabling the agile
supply chain in 2005. It consists of four
elements:
1. Market sensitive (or customer
responsive)
2. Virtual (or IT-based sharing of
information)
3. Process integration (of business pro-
cesses)
4. Networked-based (partners with a
common goal).
Market winners and market qualifiers for agile vs
lean system, source: mason-jones et al.
Effective supply chain strategies combine a
range of approaches from operational
flexibility(e.g., postponement, assemble-to-
order (ATO), make-to-order (MTO), and
lead time (LT) reduction), channel
alignment (e.g., contracts, vendor-managed
inventories (VMI), and efficient consumer
response initiatives (ECR)), and joint
decision making through information
FEBRUARY 2013 15
deployment (e.g., point of sale (POS) data,
collaborative planning forecasting and
replenishment (CPFR), and schedule
sharing). The partners are cross-linked and
are all contributing to the value generated
for the final customer.
Examples of IT that enhance supply chain
capability are:
Mobile and wireless technologies for
real-time data collection
Integration technologies (Web
services) for real-time monitoring of
events through Portals
Business process re-engineering and
management tools for business
process automation and redesign of
supply chain system or enterprise
system.
Flow diagram linking Lean, Agile and Leagile
Synchronizing all the essential IT activities
to achieve supply chain agility is crucial. IT
enables a supply chain with a high degree of
visibility, connectivity, responsiveness, and
flexibility. Among different IT
competencies, IT integration and IT
flexibility are deemed to provide the most
obvious contributions to supply chain
agility.
IT integration is defined as the extent to
which information systems are linked and
information is shared among different
functions and supply chain parties, thereby
effectively creating a virtual supply chain
(Knapp et al., 2006; Lin et al., 2006). IT
integration helps coordinate supply chain
functions and partners through the sharing of
information related to demand forecasts,
production schedules, inventory, and
production quality that dictate supply chain
activities (Li et al., 2009). IT integration also
includes the exchange of knowledge with
partners up and down the supply chain,
allowing them to collaborate and to create
synchronized replenishment plans.
IT flexibility is defined as the ability of IT
infrastructure to adapt to both incremental
and revolutionary changes in the business or
business process with minimal penalty to
current time, effort, cost, or performance
(Conboy, 2009; Nelson et al., 1997). It is
characterized by
(1) Connectivity, which refers to the ability
of the information technology
component to attach to other
components within the organization or
with other organizations
(2) Compatibility, which pertains to the
ability to share information across any
FEBRUARY 2013 16
information technology component
within the organization or with other
organizations
(3) Modularity, which denotes the ability to
add, modify, and remove information
technology components with ease and
without negative effect on performance
(Byrd and Turner, 2000; Fink and
Neumann, 2009)
Moderated by the effect of firm scale, IT
competence acts as the foundation of supply
chain competence, in which IT integration
supports a better supply chain integration
and flexibility, whereas IT flexibility
supports better supply chain advancement.
Moreover, inter-organizational collaboration
is important in achieving a complete IT
integration along the whole supply chain,
which, in turn, supports supply chain
integration and flexibility. IT has facilitated
the formation of global supply chain
markets; changed the relationships among
customers, manufacturer, and suppliers; and
accelerated and visualized the product,
financial, and information flows that need to
be accurately and promptly delivered to
reflect the status in the supply chain.
REFERENCES
1. Mason-Jones et al. (2000), Lean,
agile or leagile? Matching your
supply chain to the marketplace,
International Journal of Production
research
2. Martin Christopher et al. (2000 vol.
5), Supply chain migration from lean
and functional to agile and
customised
3. Mason-Jones et al. (2000),
Engineering the leagile supply chain
4. Childerstone and Towel (2000),
Engineering supply chains to match
customer requirements
5. Moron, Haan (2011), Improving
supply chain performance to satisfy
final customers: ‘‘Leagile’’
experiences of a polish distributor
6. Eric W.T. Ngai et al. (2011),
Information technology, operational,
and management competencies for
supply chain agility: Findings from
case studies
7. A. White et al. (2005), The role of
emergent information technologies
and systems in enabling supply chain
agility
8. Cheri Speier et al. ,The Role of
Information Integration in
Facilitating 21st Century Supply
Chains: A Theory-Based Perspective
PULAK JAIN has done B.Tech in Electronic and Communication Engineering from IGIT, GGSIPU
Delhi. She is an avid reader of philosophy and fiction. She can be reached at
FEBRUARY 2013 17
E-COMMERCE AND LOGISTICS
Wind of change in the field of logistics
[POUSALI CHAKRABARTI]
One of the interesting definitions describes
logistics as “having the right item at the
right time at the
right place in the
right quantity to
the right
customer”
(Susan Mallik,
2010). The all-
inclusive
definition talks
about the holistic
nature of the
traditional business logistics – right from
production, procurement, distribution,
inventory management and of course
delivery across the entire supply chain.
Logistics industry used to rely heavily on
individual skill and dexterity of the
employees. Efficiency used to be thought as
an outcome of practice. However, with
invent of technology, especially with
information technology, revolution is
happening across the business sectors.
Logistics industry also has become equipped
with new ways of doing things. In many
instances, manual labour has become
eliminated or has been reduced significantly.
Skill requirement has enhanced as well, in
terms of grasp and capability around the
new methodology. The new skill set
required includes efficiency in using new
technologies; the faster one gets hold of the
technology and starts using to its full
potential, the stronger it makes it presence
felt in the
industry. IT-
Operations
integration paved
way for a faster
and smoother
logistics industry
by reducing the
frequent errors
and glitches.
With the advent of e-commerce, nature of
business is undergoing changes. Along with
it, the conventional logistics problems are
also changing. Earlier the process used to be
supplier driven, whereas now the drive
comes from the customer. It is more of order
fulfillment rather than stocking. The good
old logistics is getting changed. Typically, in
Indian e-commerce industry, the back-end
operation is often outsourced to some
logistics firm who would take care of the
physical supply-chain process with the e-
commerce sites providing the user-interface
with the front end operations. However,
there are a few players who do manage their
own distribution network partially.
In a conventional supply chain, there are two
distinct players in between the
manufacturers and the customers. In the e-
SPECIALS
FEBRUARY 2013 18
commerce business, the middle two layers
are becoming more and more overlapping.
In the conventional structure, the
warehouses used to be located in the
distribution level of supply chain across
various places including both rural and
urban locations. However, in e-commerce,
the warehouses are often integrated with the
manufacturing stage and are located in
outskirts of a medium to big city. According
to the order placed online, the goods are
moved to the exact locations in smaller
truckloads. The transportation has become
more frequent and less bulky. At the same
time, the transportation need has become
more intensive because of the B2C
(Business-to-Customer) outlook. This shift
in the logistics eventually has impacted the
whole supply chain. Since there is no
physical presence of retailers in e-
commerce, the retailing objective has been
changed entirely. Instead of making a good
physically available to the customer through
the intelligently planned retail layout, the
retailers are attracting customers online
through pages. There too, competition is on
for giving the customer more and more real
life look and feel of a product. Order-to-
delivery time is also increasingly becoming
a competitive feature for the various e-
retailers. As a result, the onus is often on
these retailers so far the stocking or
inventory management is concerned for a
particular product. For instance, let us take
the example of e-retailing of a novel by
Chetan Bhagat just before the launch of the
movie made on it. It is expected that there
would be huge demand for the book. Since
publishing rights would be restricted, there
would be a limit over the number of prints
available of the book. So, the various e-
retailers would eventually be competing for
the share of an almost fixed pie. The more
the stock, the more profit a company would
make. The more profit a company foresees,
the more discount it can offer. The more
discount is on, the more is the chance of a
money transaction by the customer.
More and more e-commerce sites are now
investing in strengthening their logistics.
They are cutting on the outsourcing. One
prominent example would be Flipkart. As a
start-up, it started in 2007 in the Amazon
model. Becoming the most popular choice
for online book-retailers, Flipkart has
ventured into FMCG, apparels and small
and medium sized electronics as well. It has
now 7 warehouses across 25 cities to cater to
the customers.
However, building your own logistics does
not necessarily mean that you have to cut
down on outsourcing. Specially, in a
country like India, where distribution has
always been an issue for some and also the
competitive advantage for some others, it
does make sense to reach as many customers
as you can by all means. Naaptol has been
following the same strategy of a mixed
distribution. They are continuing to follow a
mixed model where they are outsourcing, as
well as banking on the self owned delivery
mechanism for the last mile delivery.
According to Naaptol, in Indian e-commerce
context, the mix-model will rule for at least
a while as to have a fully self owned
logistics will need money and the revenue –
investment only manages to provide a slow
but steady support in the entire process.
FEBRUARY 2013 19
As far as the challenges are concerned, one
major challenge in e-commerce lies in the
geographically and demographically
dispersed traffic these sites cater to. In a
conventional retail based supply-chain
system, it is comparatively easier to
understand your customers, their needs and
also to trace their purchase patterns.
However, in case of an e-commerce site, the
trend analysis could be difficult. Here comes
the demand of better analysis procedure.
Often, the information provided by an online
shopper is so minimal in nature, it is
practically impossible to trace any sort of
correlation between his or her background
and purchase pattern. This problem qualifies
to be a two-way sword as it puts you in a
dilemma whether to ask your customer
about personal information or to make the
process as hassle free as possible for the
customer. Bombarding the customer with
questions makes you lose to your
competitors and otherwise you end up losing
the factor which connects your customer to
you. We must also acknowledge the
dynamic nature of e-commerce in contrast to
the traditional business. Here, the customers
are from varied background. Since, there is
no geographical boundary; the customer
base is also continually changing. Challenge
remains in correct prediction of the demand.
One solution to mitigate the risk of faulty
prediction could be to switch to a dynamic
business model altogether. This model will
ideally have zero or negligible inventory and
also a supporting strong distribution so as to
minimize the order fulfillment gap.
It is true that e-commerce rejects many of
the facets which were crucial for
conventional logistics problems. For
instance you no more need to worry about
your physical shelf space, physical layout
design. But, at the same time, e-commerce
also introduces many newer aspects to the
logistics problems. E-commerce calls for a
more dynamic, more versatile framework of
logistics. In order to achieve that, we need to
have an efficient data-collection and
analysis methodology. This, together with a
dynamic and flexible implementation, will
help us integrate the e-commerce and
logistics.
References: [1]. Susan Mallik (2010). Hossein Bidgoil.
ed. The Handbook of Technology
Management: Supply Chain
Management, Marketing and
Advertising, and Global Management,
vol 2 (1 ed.). Hoboken, New Jersey:
John Wiley @ Sons, Inc.. p. 104
[2]. E-commerce matures, players invest
in logistics, warehouses, Business
Standard
[3]. Anshoo Sharma, AEmerging Trends In
Indian E-Commerce: On Logistics, No
Poach, Payment Gateways & More,
http://www.medianama.com/2012/05/22
3-emerging-trends-in-indian-e-
commerce-on-logistics-no-poach-
payment-gateways-more/
POUSALI CHAKARBATHI is an Electronics and Instrumentation Engineer from Heritage Institute of
Technology. Her interest areas are Operations and Supply Chain. She can be reached at
FEBRUARY 2013 20
TRENDS IN THE AUTOMOTIVE INDUSTRY
The Journey of Automotive Industry with Information
Technology
[S SRINIVASAN]
In the Indian context, while computers made
their mark in operations as much as half a
century ago, there has been a profound shift
in their role in business. Earlier they were
confined largely to processing data in
commercial areas such as payroll and
purchase where their utility was seen in
number crunching operations. On the other
hand, today they are integrated to such an
extent into the operation that the line
separating business and Information
Technology, is fast disappearing.
If we were to broadly analyze the impact of
Information Technology on business in the
automotive industry, we would see the
following phases. In the opening phase, the
role of IT was almost exclusively to save
clerical effort. This was marked by
applications such as payroll and billing in
large organisations, where large mainframe
systems could compress the time for such
documentation and bring high levels of
accuracy in mass scale work. The style of
doing business was however, completely
Mr. Srinivasan S (Chief Information officer – TVS InfoTech) has over 38 years
of experience in materials management, corporate planning, manufacturing
planning, logistics and information technology in leading organisations in
India and Oman. In his tenure at Sundram Fasteners Ltd., he implemented
SAP at a dozen plants of various types and sizes and also handled all aspects
of IT, ranging from hardware and software to connectivity and special
applications.
Srinivasan is a B Tech from IIT Madras and an MBA from IIM Calcutta.
He was nominated by the Automotive Component Manufacturers Association
(ACMA) to discuss the methodology of data exchange with vehicle
manufacturers and was deputed by the Ministry of Commerce to UN-ESCAP
for understanding EDI and data exchange issues.
FROM THE INDUSTRY
FEBRUARY 2013 21
"Information Technology is a
very powerful tool and the
ultimate benefit can be extracted
only when the application
directly impacts business"
unaffected. Next, with the advent of desktop
systems in the eighties, the emphasis shifted
to empowering individual users to create
their own local applications, which would
bring relief to the user. This was based more
on individual creativity and hence users
developed applications more from the
viewpoints of their interest and ability.
Typical applications revolved around
information that had to be submitted
periodically to some authority such as daily
material receipt or cash collection data.
Some relief was available to individual users
but again, these were in pockets and did not
materially alter the business scenario or the
overall working environment in any
significant way.
In the nineties, the emphasis shifted to the
use of IT over a wider horizon, marked by
the introduction of larger applications such
as Enterprise Resource Planning and the use
of advanced software in technical areas such
as planning, design, quality and
manufacturing. These helped to tackle some
of the chronic issues such as, suboptimal
decision through the use of inappropriate
local applications, or, difficulty in churning
out drawings and developments
expeditiously, with changing customer
requirements. In addition, with the shift to
larger servers with wide area connectivity, it
became possible to give access to large
number of users at different locations and all
could share information from the same
database. Real time systems became the
norm and across the organization, the
integrity and consistency of information
were enhanced substantially.
It is significant to note that through all these
transformations, several areas were being
addressed such as cost reduction,
information reliability, rapid developments,
quicker processing and enterprise wide
participation. However a key aspect was still
missing. Information Technology is a very
powerful tool and the ultimate benefit can be
extracted only when the application directly
impacts business. One index is that final end
customers, outside parties, agencies and
institutions with whom the business
enterprise has a relationship should perceive
the benefit of technology and two, business
itself needed to go through a change, in
order to be relevant in the changing world.
From these viewpoints, several changes are
occurring in the business environment that
can be traced to the powers of technology.
Having seen the various phases of IT
applications in the industry, it would be
useful to examine in depth, some of the
developments taking place as of now.
The business process starts logically from
the customer and it would be interesting to
see the developments taking place here.
Customers demand immediate and complete
information. In the automotive industry
unlike the old days, this takes the shape of
enormous choice of models, variants,
colours and products, each of which is
processed appropriately so that the customer
gets delivery on time. This backward
FEBRUARY 2013 22
“Vehicle manufacturers insist
on systematic documentation
of production through well
defined processes and IT plays
a part in the generation of
such documents.”
scheduling of customer deliveries is
facilitated by complex dealer software that
absorbs inputs in the form of customer
preferences and translates these into
shipping schedules from the manufacturers.
In turn these are exploded further into part
requirements from various suppliers so that
they get a schedule for delivery of parts in a
seamless manner.
Engineering and design software play a key
role in product development and in ensuring
rapid turnaround of new products to gain
competitive position in the market place. In
addition to providing a design platform,
such tools are performing a range of
comprehensive functions. These include
a) Search mechanisms for locating similar
products or tools to avoid reinventing the
wheel during a new product
development,
b) Providing a framework for traceability
so that the complete history of design
changes, their impact on the inventory of
products, remedial action taken and final
resolution of inventory are all preserved,
to enable future investigation.
Collaboration between suppliers and vehicle
manufacturers is the name of the game and
increasingly business processes are
becoming collaborative in nature. Areas
include design and development where
customer and supplier cooperate over the
web electronically for product design and
development, submission of product data,
display by manufacturers of supplier
performance parameters and conducting
transactions through portals.
Being the heart of an automotive enterprise,
manufacturing has evolved significantly in
the use of technology. Use of shop floor
automation through either hand held devices
or through SCADA and similar technologies
help to control groups of machines and their
outputs, as also to report production. Also
machine performances, downtimes and
reasons are being captured through such
avenues. Vehicle manufacturers insist on
systematic documentation of production
through well defined processes and IT plays
a part in the generation of such documents.
An area that is well addressed is planning at
the shop floor level as well as the enterprise
level through advanced planning software
and Manufacturing Resources Planning
software. At the shop floor level, the
challenge is to optimize a deliverable such
as customer satisfaction and to arrive at the
best manufacturing plan for the week,
month, quarter or the year. Complexity
arises since the best plan to maximize sales
may not maximize other parameters such as
profits or customer deliveries or satisfaction.
While scheduling looks at these issues, MRP
goes beyond, to generate or regulate orders
for supply of materials and requirements for
all the inputs necessary to make the final
product. Other developments that are
helping to bring sophistication in shop floor
operations include
a) Supplier portals that assist in interaction
with suppliers through electronic mode
for all transactions
FEBRUARY 2013 23
b) Quality control tools such as in- process
gauging, calibration software to monitor
the quality of gauges and statistical
quality control software for real time
quality analysis.
Shop floor material management and control
is a crucial area since day to day shop floor
scheduling has to be based on the position of
material availability. Demands by various
agencies such as auditors, excise authorities
and customers are compelling organisations
to have clear data on material movement
between manufacturing organisations and
their subcontractors and customers, as also
accounting of rejections, scrap,
reconversions and dispatches. With large
volumes of transactions involved, stock
status and monitoring has become a concern
area and this is a focal point for every
commercial and enterprise software.
With customers demanding Just in time
(JIT) based deliveries, there is a major need
to build complete transparency in the final
delivery. This is required to empower field
personnel who interact with customers, to
apprise them of delivery position. This calls
for total integration of data between
manufacturing, transport and warehousing
organisations. A well executed integration
facilitates the tracking of consignments with
clear geographical location, from the
moment they leave the manufacturing unit,
till the time the customer accepts the
material. To enable tracking of products
with high level of accuracy, several aids
such as barcodes and RFID tags are being
employed in the dispatch and warehousing
process.
Finally we come to current developments
where technology and products have started
to merge. With a view to vastly enhance the
reliability of vehicles, developments are
taking place wherein software will reside in
the vehicle and operate, to close a vital need.
The simpler examples are where vehicle
controls can be made to respond to
individual drivers based on say fingerprints
or biometrics and everything from seat to
mirrors can be automatically adjusted based
on the driver. The more advanced involve
applications using software embedded in
components such as engines or brakes so
that the component behavior can be
transmitted directly to say service centers,
which can diagnose faults and prescribe
remedies.
Thus, the impact of information technology
in automotive organisations spreads not only
into the management of its operations but on
to the end product itself. Success of
organisations depends on their ability to
foresee customer preferences, emerging
business processes and other changing
requirements and adopt technology to
suitably close the gaps.
FEBRUARY 2013 24
“One of the major challenges
that we faced was scaling up
really quickly while
maintaining the high service
levels.”
INTERVIEW WITH PRAVEEN SINHA
Co-founder and Managing Director at Jabong Founding Jabong.com in the autumn of 2011, Praveen Sinha
envisions an online E-commerce portal that delivers the trendiest
and the fastest, while inducing a memorable customer experience.
The present sees him as MD and Co-founder of Jabong.com,
however, his past achievements bring to light someone who is considered a maven in
start-ups and a turnaround specialist. Having worked in companies like Microsoft, Maruti
and Mckinsey, he has also played a pivotal role in effectuating energy conservation
initiative across the span of Asia. In addition, known for a keen interest in new business
initiatives, like establishing Aquabrim, he exhibits an immense passion for
entrepreneurship that is highlighted in his frequent sharing of work experiences and
insights at various institutes like IIMs, XLRI, Great Lakes to name a few.
1. What were the reasons behind
taking up an entrepreneurship route
when you had the safety of a corporate
life?
The idea to start business was there since my College days, during my MBA in IIM C I started my first venture - Aquabrim.com which is still active and present in NCR and has plan to go to national level. However finally, I left Mckinsey and got full time into start ups with Jabong.com as opportunity was huge and I was prepared to take the required risks and challenges
2. What are the factors that you would
look into while investing in a start-up?
I think investing in a start-up is about believing in the quality of the team, the size of the opportunity and the scalability of the idea. While the idea can be worked upon or pivoted, the core team cannot be changed; hence
investing in a start-up is a huge bet on the team.
3. Could you please tell us about the
idea that resulted in establishment of
Jabong.com?
After assessing the utility and popularity of
e-commerce in electronics market, I realised
that there was a huge scope in the arena of
fashion and lifestyle. Given the economies
of changing lifestyle patterns, e-commerce is
the future of retail and Jabong.com was
established to capitalize on this huge
opportunity as I had a firm belief that India
was ready for it.
FROM THE INDUSTRY
ENTREPRENEURSHIP
FEBRUARY 2013 25
“We have also built
strong, cross-functional
teams to ideate and
improve processes.”
4. Could you please explain the work
culture at Maruti and McKinsey? Also,
what was your most important
learning from your experience in these
companies?
Maruti as an organization takes pride in
some of the best practices prevalent in the
industry. The operational excellence and 5S
processes are the way of life at Maruti.
Working with large teams under stiff
timelines and disciplined execution are the
key learnings for me.
Mckinsey, on the other hand, gave me an
opportunity to work on a varied set of
assignments across industries. The challenge
was to walk into a company, understand the
problem and turnaround quickly with
workable solutions. Developing the ability
to add value and create a significant impact
was the key takeaway for me.
5. What were the major supply chain
challenges faced by you while working
in Maruti Suzuki Limited?
Maruti’s operations thrive on efficiently run
supply chain. One of the major challenges
was to maintain the service level, given the
involvement of multiple stake holders and
operational complexities.
6. Could you please give us some
examples on how IT is leveraged by
Maruti Suzuki to solve their issues in
Operations and Supply Chain?
The scale of operations cannot be managed
without strong IT backbone. Maruti has a
strong IT system to support all its
operations. In fact, IT has helped in multiple
froms by not only bringing in efficiency in
operations but also reducing overall cost of
operations.
7. What have been the major issues in
the Operations and Supply Chain of
Jabong.com and how have you resolved
them?
One of the major challenges that we faced
was scaling up really quickly while
maintaining the high service levels. From
day one, we were clear that whatever we
build has to be scalable. To achieve this, we
adopted modular approach so that processes
could be replicated and scaled easily. We
designed the capacity on base load but
developed flexibility in the system to take
care of peak demand situations. We
leveraged technology wherever possible to
automate or semi-automate the processes.
We also made adequate checks and took
measures through detailed and intelligent
MIS reports which helped us in identifying
our areas of improvement.
WORK EXPERIENCE
OPERATIONS AND SCM
FEBRUARY 2013 26
8. Jabong.com claims to deliver
products in top 10 cities within 48
hours and to other places within 1-3
days, while it is delivering products on
the same day in metros like Delhi.
Could you please explain how
Jabong.com has achieved this
remarkable feat within one year of its
inception?
We have actually revolutionized the industry
by offering same day delivery in Delhi NCR
and next day delivery in metros. It has been
a team effort and has been achieved by
strong co-ordination across functions like;
customer care for order confirmation,
warehouse for order processing and logistics
for delivery. We have also built strong,
cross-functional teams to ideate and improve
processes.
9. Flipkart has started its own courier
service, perhaps to reduce their
dependence on third party courier
services. Does Jabong.com have any
such plans?
JaVAS, which stands for Jabong Value
Added Services has been operational for
almost as long as Jabong.com has been
taking orders from customers. It is currently
present in close to 50 cities. The same day
and next day deliveries mentioned have been
achieved through JaVAS.
10. Could you please let us know how
Information Technology is leveraged
by Jabong.com in its Operations and
Supply Chain?
Information & technology is the backbone
of our warehousing, customer care and
logistics operations. We have implemented
ERP at warehouse and built CRM and
logistics management systems for in-house
operations. In addition, we have introduced
Mswipe facility at the point of delivery and
developed content management system for
production.
11. Wal-Mart has the largest
information technology infrastructure
of any private company in the world.It
helps Wal-Mart to accurately forecast
demand, track and predict inventory
levels and create highly efficient
transportation routes. Is Jabong.com
using any Demand forecasting tools so
that it can reduce inventory levels and
forecast demands effectively?
Being in the e-commerce industry, we have access to consolidated data involving clicks and page views on our website. We have also gone granular in our customer segmentation. We have a dedicated forecasting team which uses state-of-the-art methodologies and tools to predict the demand based on the huge chunk of data as well as industry trends.
12. Jabong.com is now the most
trafficked e-commerce site in India.
What are the steps taken by
Jabong.com to achieve this?
We always believed in big bang approach to
enter the market and went for online
advertising aggressively at the start of last
year, which was complemented by presence
in traditional advertising channels like
television and radio. We have strong focus
on organic growth through Google and
Facebook which helps in driving hits to our
web shop. Aligning all our operations with
these steps, we ensure customer delight
JABONG.COM
FEBRUARY 2013 27
“E-commerce is still
evolving in India and the
current players are
focusing on expanding the
market - getting more and
more end users to transact
online.”
which is a result of high standards in service
and product quality to help spread the
customer base and loyalty.
13. How do you see the future of
online retailing in India, given the
tough competition and thin profit
margins?
E-commerce is still evolving in India and
the current players are focusing on
expanding the market i.e. getting more and
more end users to transact online. This is a
long drawn process as it involves changing
habits. In this quest for new customers,
companies are offering free shipping,
returns, COD, etc which are impacting the
margins. In our view, after a few years, there
will only be a few large players and a set of
few niche players who would successfully
maintain profitability.
14. How does Jabong.com
differentiate from other players in the
e-retail segment?
The DNA of Jabong.com is all about widest
assortment, speed, efficiency and process
excellence. We differentiate ourselves in
being the first to get new styles and options
on our website, first to get the products
shipped to the customers and the first to
refund customer’s money in case of returns.
In the process, we have redefined the market
by introducing options like instant returns
(open delivery), same day delivery in NCR
and next day delivery in metros, instant
refunds, etc. And we have done it on a large
scale.
15. Does Jabong.com have plans to
enter into Brick and Mortar models of
retail?
Jabong.com believes that in the long run, e-
commerce is a scalable and cost efficient
way to reach out to maximum customers.
We do not plan to enter into offline retail.
However, we have and may continue to have
some strategic, located touch points to create
awareness, establish customer connect and
build trust.
16. What is the one advice that you
would give to young managers aspiring
to join the supply chain management
sector?
Supply chain is about continuous
improvement and operational excellence. In
order to bring in significant improvements,
it is important to get into the details of each
process, understand the involvement of
stakeholders and work on incremental
improvements. It is very easy to fail in this
sector; however, to be successful, one needs
to work diligently and have strong checks
and balances. This sector gives huge
opportunity to create next level of service
experience.
GENERAL
FEBRUARY 2013 28
Prof Sumeet Gupta is a professor in the area of Information and Technology Systems. His areas of research includes Management Information Systems (Technology Adoption), Virtual Communities, Supply Chain Management. He Is a member of Association of Information Systems, USA. He has numerous paper and publications in the field to his name.
RFID IN INDIAN RETAIL SECTOR
[PROF. SUMEET GUPTA & AKSHAY AGARWAL]
It was in the year 2005 that Wal-Mart made
it mandatory for its suppliers to use RFID.
In 2008, the Future Group incorporated this
technology in their operations through a tie-
up with Cisco Systems. Given that the
technology isn’t new, and has huge potential
to tackle many issues in modern retail
sector, its penetration has been rather slow.
RFID tags were first used commercially in
1960s by Sensormatic, Knogo and
Checkpoint which developed systems to
counter the theft of merchandise. At that
time, they could only detect the presence or
absence of tags; however the tags could be
made inexpensively and hence were quite
effective in reducing pilferage. These
systems were known as Electronic Article
Surveillance (EAS).Over half a century
later, widespread application of this
technology is still in its nascent stage.
Issues The various hurdles on the way of wide
acceptance of RFID systems can be
categorized as either technical or
managerial. The major technical issues are
1. Collision: RFID tag readers face
problems when they 'collide' with each
other. The signals from one reader may
interfere with those from another, especially
when their physical coverage overlaps.
2. Lack of allotted frequency band: RFID
works on radio waves, which are regulated
by the governments all over the world.
There exists no international agreement on
the frequency band to be allotted for RFID.
Given that this technology can heavily
change the face of supply chains globally,
this is a huge hindrance in the way of its
global adoption.
3. Signal detection and interference: The
RFID tags also have a tendency to interfere
with each other's signals, thus making it
difficult for the tag readers to detect them.
Adding to the difficulty, the signals are
partially blocked by certain types of
packaging materials, metals and liquids.
On the other hand, the following are the
managerial issues:
ACADEMIA
FEBRUARY 2013 29
1. Lack of Technology Standards: Many
organizations prefer to have their own
proprietary RFID systems because of the
fear that their RFID tags could be read by
their competitor, leading to a serious leak of
sensitive information. Thus it has been very
difficult to reach a consensus on a universal
technology standard for RFID.
2. Lack of Acceptance by Supply Chain
Partners: Even a giant like Wal-Mart had
faced some difficulties in implementing
RFID in its supply chain due to resistance
from some of its supply chain partners.
RFID might not make sense to everybody,
especially given the high initial costs of
implementation.
3. Returns on Investment: Implementation
of RFID usually costs a lot and the break-
even period and returns on investment might
not be acceptable for every retail business.
4. Customer Privacy: Some of the
applications of RFID come with a baggage –
customer privacy issues. Hence a lot of
contemplation has to be done on these
aspects.
5. Data Management Problems: RFID
systems generate a lot of data in real time.
Managing this data would require major
changes in the data structures of master files
to maintain consistency across the firm and
its value chain participants.
6. Expensive for Low-Value Merchandise: The cost of RFID tags varies from Rs.5/- to
Rs.100/-, largely depending on the type –
passive (not self-powered, derives power
from the signals of the tag reader), Active
(completely self-powered) and Semi-
passive. Even the cheapest RFID tags would
not justify their item-level application on
low-value merchandise like small toys,
chocolates etc. Currently, the tags are used
on pellet-level, box-level or container-level
in such cases, thus limiting its capabilities.
APPLICATIONS
Now let’s have a look at some well-known
applications of RFID in retail sector:
1. Out-of-stock Warning: Stock out is a
bigger evil than excess inventory in retail.
RFID tag readers can detect the number of
units of each SKU on the shelf in a retail
store in real time. This enables the
implementation of an out-of-stock early
warning system. This system can also be
integrated into a vendor-managed inventory
platform. The same concept would work in
warehouses, thus benefitting the whole retail
supply chain.
2. Shoplifting: Shrinkage, i.e. unaccounted
losses in retail, is perhaps the most daunting
reality for retail businesses, and its major
cause is shoplifting. It should also be noted
that the RFID usage mostly seen around us
relates to security of the merchandise, which
shows that the benefits of RFID in this
aspect already exceed the investments.
3. Supply Chain Visibility: The ability to
detect each unit or pellet of each SKU in
retail setup as well as warehouses and even
during transportation (RFID readers can be
placed in the vehicles and connected to the
GPS) can be translated into very high
visibility across the supply chain. This helps
in combating the dreaded bullwhip effect,
making better forecasts and avoiding
shrinkage and other losses in the supply
chain.
4. Rapid Inventory Counting: Inventory
counting is an essential exercise in any retail
business to avoid or at least detect
shrinkage. It is executed very frequently in
FEBRUARY 2013 30
high-value retail businesses, eg. once every
24 hours in some jewelry retail outlets. But
even in FMCG retail, it is done once every
few months. Needless to say, inventory
counting is heavy on both manpower and
time. RFID can make this process very
quick and easy.
5. Rapid Check-out: Though shopping in
an organized retail setup has become a
means of social interaction and recreation
for many consumers, it also has some trade-
offs, and the worst, undoubtedly, is waiting
in a queue for checking out. The currently
popular UPC (Universal Product Code)
barcode system makes a particular
alignment of the barcode with the barcode
reader necessary for proper detection and
reading. This, and the fact that each item in
the shopping cart must be read individually,
constitute a major part of the waiting time of
the customers. RFID system would allow
almost immediate check-out and virtually
zero waiting time by reading all the items in
the shopping cart instantaneously and in one
go.
There are also some potential applications of
RFID that are not so obvious, like:
1. Identifying Consumer Behavior
Patterns: This is already being done with
the help of membership cards by recording
and analyzing the buying patterns of the
respective customers (card-holders). To go
further, RFID tags can be embedded in the
smart shopping cards, and then the presence
or absence of the respective customer in the
store can be detected. In fact, it is possible to
track even the movement of the customer
within the store. This data can throw up
new, fruitful insights in consumer behavior.
It is also technologically possible to identify
how customers observe and react to different
items on offer in the retail store. For
example, for a particular SKU’s trial pack,
the number of times it is picked up and
placed back on the shelf can be determined.
2. More Efficient After-Sales Services:
The ability to uniquely identify a particular
product can be used to create a history of its
service which is easily accessible. This
would be something similar to sharing of a
person’s medical history across different
hospitals for better diagnosis.
Though we have a long way to go before the
huge potential of RFID is identified and
utilized by the retail industry, the hopes have
gone up owing to the recent developments in
“FDI in Retail” and the efforts of
organizations like EPCglobal Inc.
Acknowledgement: The author
acknowledges the help and support from Mr.
Akshay Agarwal, a student at IIM Raipur.
References
1.Sumeet Gupta, Sanjib Pal; An Analysis of
Issues and Possible Remedies in the
Adoption of RFID in Retail Chains of India,
in Cases on Supply Chain and Distribution
Management, IGI Global, Eds.
MitiGarg&Sumeet Gupta, Pgs. 387-400.
2.http://articles.economictimes.indiatimes.co
m/2008-03-25/news/28387628_1_retail-
biggies-future-group-future-in-hypermarket-
format
3.read.pudn.com/downloads165/doc/comm/
755010/RFID.doc
FEBRUARY 2013 31
IMPLEMENTATION OF CORE BANKING IN STATE BANK OF
INDIA
[SHWETA MALLICK]
A graduate in life sciences from Patna University and has an experience of working with both SIDBI -a
financial institution and SBI for more than five years. She is presently pursuing her PGPM from IIM
Raipur. Her areas of interest are corporate banking and business strategy. The author can be reached at
With the advent of private-sector banking,
banking sector witnessed implementation of
modern centralized core banking systems
and electronic delivery channels that
allowed introduction of new products and
provide greater convenience to customers.
Due to which, the private-sector banks
attracted the major chunk of middle and
upper-class customers at the expense of
existing old public-sector banks. Foreign
banks such as Standard Chartered Bank and
Citigroup used their advanced automation
capabilities to gain market share in the
corporate and high-net-worth markets. To
remain competitive with its private-sector
counterparts SBI began the implementation
of a centralized core banking system in
2002. The State Bank of India selected Tata
Consultancy Services to customize the
software and to implement the new core
system, and also to provide ongoing
operational support for its centralized
information technology.
The implementation of the Tata Consultancy
Services (TCS) BaNCS-24 Core Banking
software at the State Bank of India (SBI)
and its affiliate banks represents the largest
centralized core system implementation ever
undertaken. It included the conversion of
approximately 140 million accounts held at
14,600 domestic branches of SBI and later
also at its affiliate banks. Unlike private-
sector banks, SBI has a dual role of earning
profit and expanding banking services to the
population throughout India. This tradition
of "banking inclusion" later posed a major
challenge to core banking implementation.
SBI had undertaken a massive
computerization effort in the 1990s to
automate all of its branches when it
implemented a highly customized version of
Kindle Banking Systems' Bank-master core
banking system. However due to the
extensive use of local processing and the
lack of reliable telecommunications in some
areas, it deployed a distributed system with
operations located at each branch. In 1992, it
had just one fully-computerized branch - at
Nariman Point. During next ten years, it
computerized about 4,000 branches. By
2004, it managed to complete its
computerization drive by connecting all of
its 9,000 branches (then). The
computerization task has often been
WORK EXPERIENCE
FEBRUARY 2013 32
“In 2005, the bank suffered a
loss of transactions for about
three days, when the nation
fell prey to the Tsunami as no
separate hubs were established
and there wasn’t any disaster
recovery plan in place.”
compared to something like repairing a car
engine while it is running. SBI now boasts
of 14,000 plus computerized branches, apart
from a heavy balance sheet to the tune of Rs
13.35 trillion. It now has about 8.96 million
Internet banking customers out of the 154
million savings bank account holders. More
than 22,000 SBI ATMs across the country
today serve customers. In 2011-12, SBI
again topped the charts in terms of growth in
operating profits at 24% as against 14-16%
recorded by ICICI Bank and HDFC Bank
Ltd.
In 2002, it approved the KPMG-
recommended strategy for a new IT
environment that included the
implementation of a new centralized core
banking system. This then encompassed the
biggest 3,300 branches of the bank that were
located at major places.
The main objectives were:
Delivering of new product capabilities
To unify the processes across the bank to
realize operational efficiencies and
improve its customer service
Provide for a single customer view of all
accounts
Ability to merge the affiliate banks into
the State Bank of India
Support for all SBI existing products and
provide for developing new ones
Reduced turnaround time and controlling
the customer attrition
The bank faced several extraordinary
challenges in implementing a centralized
core processing system. These challenges
included finding a new core system that
could process approximately 75 million
accounts daily — a number greater than any
bank in the world was processing on a
centralized basis. Also, the bank lacked
experience in implementing centralized
systems, and its huge employee base took
great pride in executing complex
transactions on local in-branch systems. This
practice led to a doubt whether the
employees would effectively use the new
system or not. Another challenge was
meeting SBI's unique product requirements
that would require the bank to make
extensive modifications to a new core
banking system. The products range from
gold deposits (by weight), to savings
accounts with overdraft privileges, and
activities like posting of extraordinary
number of passbook savings accounts
amongst others. The services it provides
vary between extremes from boutique
banking to mass banking in rural areas.
The migration of existing software Bank
Master and Credit Information System for
Loan & Advances (CISLA) to single
software of BANCS – 24 was a challenge.
The branches were migrated from local
server to servers situated at CBD, Belapur. It
was difficult to manage as now the branch
had to deal with the suspense/dummy
accounts managed at central as well as local
level. There was a lot of duplication of data.
FEBRUARY 2013 33
ATMs which were initially connected with
the local server at branch were now to be
connected with the central server and entries
pertaining to disputes now to be handled by
the central team. The basic transactions of
clearing and funds transfer to other branches
which initially would have been done
through suspense accounts and taken
days/months to reconcile were now online
and any wrong entry would have created
havoc for the customers. Account opening
process which was best at the local level as
branch was sure about the credentials of the
customer, now needed a thorough
verification as customer could transact from
any part of the country. Overall, the bank
was now more vulnerable to mistakes
caused by non-reconciliation of entries, any
erroneous data entered and the risk of fraud
was higher than in the earlier system and
could send a panic wave across the
organisation and a bad repute among the
customers. Apart from this, branches which
migrated from manual transactions to
computerized environment faced lot more
challenges in installation of hardware /
software, training of employees and
managing network – WAN/Leased Lines
were major challenges. As the branches
were spread across country ranging from
planes to hilly terrain, geographical
constraints came across as one of the factors
that the bank kept in mind while setting up
its branches and ATM network. Constraints
ranging from installation of V-SAT to
arranging the leased line in interior parts of
the country for smooth banking experience
to the locals were severe. In 2005, the bank
suffered a loss of transactions for about
three days, when the nation fell prey to the
Tsunami as no separate hubs were
established and there wasn’t any disaster
recovery plan in place. The organisation was
midway in the transition between
Bankmaster and BaNCS -24 and thus
suffered huge loss in business and repute.
Also, as the employees were not fully
acquainted with the technology, frauds took
place in the branches wherein the funds
from internal accounts of Bank were
misappropriated due to lack of track and
supervision of suspense accounts (inter
branch funds transfer, charges accounts,
interest payable/receivable accounts etc.).
The banks were not only supposed to train
staff on IT security, but also to educate their
customers on compromise of passwords and
ATM pins. Phishing, spam attacks and
cloning of cards were now the challenges
faced by the banks.
The contract for the initial project was
completed in May 2002 and the target was
to complete converting 3,300 branches by
mid-2007. TCS then began a gap analysis
effort to determine the required software
changes to the BaNCS-24. The changes
included installing required interfaces with
more than 50 other systems as well as
making enhancements to support the bank's
product requirements. They placed a priority
on the needed changes that would allow
branches with high-net-worth individuals
and then corporate accounts to be converted
as soon as possible. The primary data centre
was established at Navi Mumbai and a
backup centre was established at Chennai.
The bank then also decided to extend this
core banking implementation to include all
of its (then) eight affiliate banks. TCS
created a separate processing environment
FEBRUARY 2013 34
within the Mumbai data centre used to
provide support SBI. The conversion effort
for each of the affiliate banks spanned 18 to
24 months. The branch conversions
overlapped among the banks, allowing all
the affiliate banks to be converted in 30
months.
No matter what application/technology an
organisation adopts, it is the people who will
be required to enable the effective
implementation and smooth transition of
products and services toward new systems.
Employees need to gain education and
expertise in these systems to enable the
banks to leverage on the investments and
convert them to returns. It has been observed
that large technology initiatives usually face
a lot of resistance to change and low
acceptance by the employees and therefore
become the main reason for the failure of
such implementation. Bank needed to focus
their efforts on the training and education of
employees to enable the successful
implementation of their information
technology and convert the heavy cost
incurred into returns. In SBI, where many of
the employees were about 50 + years,
adoption of technology and its
implementation been a major challenge.
Apart from the employees, the bank is still
facing an uphill task in convincing its
customers to increase the usage of net
banking/mobile banking services offered by
the Bank.
Several critical factors contributed to the
success of the SBI core banking
implementation:
• Senior management commitment
• Staffing and empowerment of project
team
• Ownership by business heads
The bank has further launched various
platforms to reduce human intervention and
provide for increased automation to serve
anywhere, anytime like mobile banking
(though, IMPS (Inter Bank Mobile Payment
Services) facility is yet to be fully
functional), internet banking, offering
several value-added services through their
electronic channels such as tax collections,
trading, bill payments, and viewing demat
accounts, electronic funds transfer etc.
The various electronic delivery platforms
have helped the bank to reduce the crowding
of lobbies, transactional cost of branches
and also the stationery cost of vouchers &
instruments incurred. The technological
advancement has helped in reduction of
customer complaints. The new core system
has resulted in benefits throughout the bank
for both the customers and the employees of
SBI. The new core banking system has
allowed the bank to redesign processes,
establish regional processing centers, and an
increase in employee productivity.
Implementation of the TCS BaNCS system
has provided the bank with the ability to
consolidate the affiliate banks into SBI.
FEBRUARY 2013 35
ROLE OF IT IN OPERATIONS
Learning from the IT industry
[VIRINCHI ACHARALU M]
As time passes, it can be observed that a
luxury becomes necessity. Telephones for
example which once were luxury is a
necessity now. Imagine a company which
operates millions of transactions and handles
terabytes of data every day. You can simply
state that there is no choice. Information
Technology has a huge role to play in day-
to-day operations of such a company so
much so that, you have to change your way
of operation in accordance with its
limitations.
Based on my experience in an IT company I
would like to share some insights in to how
IT plays an important role in day to day
Operations of a company like its Business
Process, investment on IT infrastructure,
negative aspects and new trend that is
emerging.
1. IT & Business Process During my tenure in an IT company, I was
managing data warehouse system of world’s
leading manufacturer of sports goods. It has
operations all over the world and all
transactions were handled by tailoring
systems to the local way of doing business.
However, senior management needs reports
that integrate data from all over the world in
a predetermined format. This was
implemented using SAP Business
Intelligence. This application used to handle
7-8 terabytes of data.
Russian data was not integrated in to this
application till then. If it is done data size
increases up to to 10-11 terabytes. The
current application does not have capacity to
handle such a huge data. A huge investment
is needed to increase its hardware capacity.
However, an innovative solution was
proposed. The requirement would be
fulfilled with a small change in report
design. However, this needed a change in
Business process. A new way of classifying
its retail stores had to be done. This solution
reduced data by 85% saving huge amount of
money. The company adopted it.
The learning is that there can be a situation
where Business process of a company was
changed to accommodate the limitations of
IT, thus illustrating how important its role is
in Operations.
2. Investment in IT The same company reduced spending in IT
during 2008 recession. A huge IT system
was initially not maintained and later
managed by only 5 engineers because of
lack of budget. The result is that 50% of data
was not useful. But when the economy
recovered the company had to spend huge
amounts of money to make use of it
effectively. Today the same system is
maintained by 30 engineers. It is used for
many activities like replenishment of stores,
WORK EXPERIENCE
FEBRUARY 2013 36
decision on offering discounts, planning for
opening new stores, comparing various
stores etc. The conclusion is even though
company ignored some of its IT
infrastructure in short term, they came back
rescuing it as soon as they can emphasizing
its importance.
IT is also used for very short term purposes.
For example this same sports manufacturing
company had a huge investment opportunity
during 2012 London Olympics. They
expected a sudden surge in the sales but for
a very short term. To tackle such a situation
they developed IT solution for a very short
term. The investment proved to be useful.
Sales as expected were so high that existing
infrastructure would have never supported it.
The learning is that IT plays a vital role
while trying to exploit an opportunity.
3. Negative effects of IT on
operations While working for Energy Utilities
Company in US our team was called for an
emergency meeting early in the morning.
Issue was, Employees had their salary
credited one day in advance. Reason was
that the newly implemented HR solution
was not tested properly. Imagine the impact
of it for a multibillion dollar company with
more than 10000 employees. The conclusion
is if not properly handled in all steps IT
implementation will seriously hamper your
operations.
A government sector company in India once
implemented major changes in its system
architecture for efficient billing mechanism.
They received many complaints about
inflated bills. The main reason was company
did not pay proper attention to data
migration from legacy system to new
system. There was a script that ran for hours
to migrate data which stopped abruptly
because of insufficient hardware
infrastructure and loaded inconsistent data.
So much effort was invested in to load the
data while the solution was simply to
implement effective code in the script. By
the time it was identified junk data was
already live in production system.
The learning is that you can’t ignore any
step of IT development and it is very crucial
to identify the underlying reason for a
problem.
4. Emerging trends of IT in
operations IT product developers have been releasing
standard Industry specific packages so that
you can just do little customisation and start
using it. Today companies are a step ahead
wherein they are forming strategic alliances
with IT product producers, where even
before the product is released it is tested for
adaptability for their organisation. Recently
I have seen a major manufacturing
company, IT product Development
Company and IT consulting company all
were working together for the release of the
new version of the packaged software.
The learning is that IT is expanding its role
in operations across industries.
I would like to conclude that IT has multi
dimensional affect on operation of any
major player in any Industry across the
world
FEBRUARY 2013 37
CLOUD SUPPLY CHAIN
THE GURU ANSWERS
Q) Sir, the term Cloud Supply Chain has
generated a significant interest among
supply chain enthusiasts in the recent
times. What does it refer to?
A) To understand the underlying concepts of
Cloud Supply Chain, let’s begin with an
introduction of cloud computing. Cloud
computing refers to the use of computing
resources as a service, that is delivered over
a network, usually the internet. Supply chain
has emerged as one of the biggest
applications of this model, and a supply
chain using this model is called a Cloud
Supply Chain.
Q) Interesting, but can you explain in
simpler terms?
A) Imagine that you are operating a
computer or a mobile handset with an
internet connection. You can run a program
or store a file on the internet without using
the computing power or disk space of your
device. For example, any online service that
convers a document from one format to
another is called as SaaS (Software as a
Service). Google Drive allows you to store
your files on Google’s servers. It can be
categorized as STaaS (STorage as a
Service). Both of these are different types of
cloud computing services.
Q) Why is there so much furor around
cloud computing?
A) Cloud computing offers many
advantages over the traditional IT models.
Some prominent ones are:
1. Very low initial investment since
developing the IT infrastructure and
manpower is not required to a large
extent. Also, the need of buying
expensive software is eliminated.
2. Very flexible model, and hence easy
to for expansion and reap the
benefits of economies of scale.
3. Very convenient payment options,
like one-time-payment and pay-as-
you-go.
4. Easy access to the data as well as
monitoring of projects on the cloud.
5. Low manpower investments – less
training and less number of people
required.
Q) And where does Supply Chain come
in?
A) A usual problem in any supply chain is
that the different partners – suppliers,
manufacturers, distributors and retailers, use
different software platforms to collect and
analyze various kinds of information and
data. This makes the integration of the
supply chain data a difficult task. On the
other hand, when all the supply chain
GURUMANTRA
FEBRUARY 2013 38
partners are on the cloud, the relevant data
from each other is accessible to them. The
improved supply chain visibility makes it
more efficient and well-armed against
bullwhip effect and other such problems.
Q) Please elaborate on the benefits of
cloud to a supply chain.
A) The data-accessibility and high degree of
visibility in a supply chain allows it to
1. Make better forecasts
2. Identify gaps and react quickly to
plug them
3. Better and quickly identify the shifts
in customer demand
4. Minimize bullwhip effect
5. Work with lesser inventory and
higher service rate
Besides, as discussed before, the cloud
model benefits each partner by rationalizing
the IT resources and providing a lot of
flexibility.
Q) Can you name some companies who
are operating on cloud supply chain?
A) The list would be huge, but some
prominent organizations who have recently
moved their supply chains to cloud are
Pfizer, Renault and P&G. Nonetheless, there
are ample media reports suggesting
significant improvements in their supply
chains and hence competitive advantages
that cloud has brought to them.
Q) Who are the major players
providing cloud services for supply
chains?
A) Some well-known players are Oracle,
SAP and JDA. Also, since each supply chain
is different from another, many companies
prefer to use cloud services for some
specific part of the supply chain. This has
worked in favor of some companies who
specialize in and are reputed for such
services. Some examples are Salesforce
(Customer Relationship Management),
AMAC Logistics (Transportation
Management), Lighthouse Systems
(Manufacturing Execution Systems) and
eBizNET (Warehouse Management).
Q) Is there any pitfall of cloud supply
chain?
A) There are some concerns regarding the
security of the data stored on cloud. Since
the leakage of the supply chain data, say
through hacking, can be highly detrimental
to a company, many organizations are still
“on the fence” when it comes to
implementing cloud in supply chain. They
don’t trust a third party service provider
with the sensitive data.
Another risk is that any technical fault in the
system would do more damage to the entire
supply chain than in case of the traditional
IT models. High degree of maintenance is
required to avoid such problems.
References
1. http://finance.yahoo.com/news/renau
lt-moves-export-supply-chain-
110000711.html
2. http://www8.hp.com/uk/en/hp-
news/press-release.html?id=1330013
3. http://www.verio.com/resource-
center/articles/cloud-computing-
benefits/
4. http://mobiledevices.about.com/od/a
dditionalresources/a/Cloud-
Computing-Is-It-Really-All-That-
Beneficial.htm
5. http://en.wikipedia.org/wiki/Cloud_c
omputing
FEBRUARY 2013 39
CROSS WORD
Across 3. The registering and tracking of parts, processes, and materials used in production, by lot or
serial number.
4. This allows you to expand your wireless local area network into an asset tracking system
6. Type of analytics software that tells a manager what's going on in his supply chain now
7. First Indian company to create a hub and spoke distribution model in the express package
industry in India
11. A wireless locator device for high-value cargo that provides real-time tracking data for
increased security and is the first device of its kind to meet FAA specifications.
REGULARS
FEBRUARY 2013 40
12. Systems link management functions with engineering, manufacturing, and support
operations.
13. A computer software system used in a number of industries for order entry and processing.
16. Type of warehousing which refers to the use of the voice direction and speech recognition
software in warehouses and distribution centres.
17. Software system which aims to control the movement and storage of materials within a
warehouse and process the associated transactions.
Down 1. The system that allows suppliers to access large amounts of online, real-time, item-level data
to help those suppliers improve operations
2. DHL's temperature monitoring technology device piloted to customers from the food and
pharmaceutical companies to ensure every shipment is kept at a specific temperature without the
need of opening the packages.
5. Management software systems that enable shippers to automate planning and execution,
connect electronically with carriers, and reduce freight costs though optimal mode selection and
optimal carrier assignment
8. A type of two-dimensional bar code initially introduced in automobile industry. It has become
very popular due to its ease of use and storage capacity
9. Type of Analytic software that tells the supply chain managers of the future risk,Example-
Alternatives to be followed when price of oil changes from $50 to $100
FEBRUARY 2013 41
SOLUTION TO CROSSWORD
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