Importance of Global Supply Chain management for India
With multi brand retailing to open up as promised by prime minister Man Mohan Singh , Retail multinationals like Wal-Mart, Metro and Carrefour are waiting in the wings to enter India India . Global Supply Chain Management is bound to get utmost attention in our country which is long over due and it would be pertinent to discuss this topic more in detail.
The World is flat
In an era of globalization, global supply chain Management is contributing most significantly towards GDP of every country through enhanced efficiency and productivity of the nations. The world is said to be a global village or rather flat. The national boundaries and barriers have been destroyed through internet and PC driven globalization in today’s knowledge based economy. This was pointed out in a lucid manner by three times winner of the Pulitzer Prize Thomas. L. Friedman in his famous book ‘The World is flat’. In fact global supply chain management coupled with Information technology and telecommunications opened floodgates of progress for developing countries so as to come at par with developed countries.
How Wal-Mart managed it
Company like Wal-Mart applied the rules of Global supply chain Management successfully and rose to become number one company in the world after beating big Conglomerates like K-Mart and Sears in their own game. Wal-Mart chose their suppliers globally from countries like China and Far East and cut down its procurement and manufacturing costs and could sell every item cheaper than their nearest competitor. Wal-Mart carried out computerization with heavy use of ERP (Enterprise Resource planning) software throughout their value chain and shared the customer’s information liberally with their suppliers, distributors and dealers through IT networks resulting into complete transparency throughout their value chain. The information concerning the buying behaviour of customer, purchase orders, prices and inventory flowed both way along the value chain resulting into reduction of inventory carrying costs both for finished goods and raw material. Wal-Mart could thus supply what customer exactly wanted at the right place, at the right time and at the right price.
With customer centric approach, Wal-Mart set up huge distribution centres in every city where merchandise in cartons were received from various suppliers chosen globally shipped by sea, Air or Rail Road and trucks and then unloaded on the network of conveyer belts installed at the distribution centres. The merchandise was redistributed despatching and transporting it once again to the various Malls located throughout the city. The history of content of the cartons was identified by RFID tags with information like country of origin, technical details of the content, source and destination, expiry dates of the goods inside and temperature to be maintained. This enabled the concerned handling staff to properly prioritize the cartons carrying perishable items or items like medicines and deliver it to Malls before the expiry date. This way they could make most of the items including FMCG goods always available on the shelves for the customers who came to Wal-Mart in huge numbers because of lower prices being offered. Wal-Mart was also ahead of their competitors in reducing the lost sales arising due to non availability of goods on the shelves.
Global supply chain management is now imitated by most of the companies in the world after the success story of Wal-Mart who starting from a small place called Bentonville, Arkansas in United States is now world’s largest company in the world with innovative approach of Sam Walton , the man behind the success of Wal-Mart.
Case of Boeing, the Aviation Conglomerate
Today the supply chain is no longer contained within countries borders, but encompasses all nations, whether they are vendors, manufacturers or customers. Boeing which is a premier Aviation multinational manufacturing aircrafts is able to assemble the Aircrafts in 3 days flat while outsourcing most of the parts and components from suppliers located far and wide throughput the world. It takes advantage of best of what is available in different countries in terms of best of research and development facilities, cheap labor, skill set and technology and coordinates its value chain amazingly well to maximize its production delivering aircrafts of topmost quality in an unparalleled innovative approach.
In the past decade China has become a global economic leader and will soon be the world’s largest economy. Economists predict that the few of the current developing nations will be some of the most important economic powers in the next decade practicing global supply chain.
Cultural nuances
Further companies will have to give due regards to cultural differences existing in various countries involving social, religious and ethical beliefs prevalent in each country and adjust themselves accordingly. American businesses have sometimes failed in countries such as Japan which has a very difficult business environment to the US . Companies can overcome these barriers by using local agents to sell the products in a foreign nation or by licensing their products. The licensing of a product is sometimes more beneficial as it allows the licensing company to terminate the agreement if the products fails to be marketed or sold appropriately. Joint ventures can also be a way of entering a new market. By using a partner company’s local expertise the product can have a greater opportunity for success.
Global Supply chain respects Green.
Further all over the world there is a growing realization of making world green by avoiding the harmful effects on the environment due to pollution caused on air, water and soil during process of extraction, manufacturing operation, physical distribution and logistics by sea, air, road and rail and consumption of the end product by consumers. Multinationals all over the world are focussing on Green supply chain management involving negotiating policies with suppliers and customers resulting in better alignment of business processes and principles so as to improve the environment and ecology. Wal-Mart, world’s largest Retailer enforces his suppliers to follow green supply chain policies making it mandatory on his suppliers to revaluate the material content and adopt environmental practices so much so that it refuses to do business with defaulters who do not follow green practices and environmental management systems. Green supply chain management mitigates risks and speeds up innovations. Recently Chinese toys were banned by America including other countries as they were found hazardous to children due to harmful ingredients used in making of the toys. Such risks could have been avoided had the Chinese toy manufacturers studied closely the product life cycle management up to the stage of consumption. In global supply chain management, companies as such can ill afford to ignore green supply chain.
Importance of Infrastructure
Infrastructure in terms of good port facilities both for sea and air route, mobility on roads and good telecommunication infrastructure plays a vital role in handling global supply chain. Wal-Mart used Satellite communication very effectively in terms of VSATs installed in every store in reaching their Chinese and Taiwanese suppliers sharing the information such as inventory, customer’s buying behaviour and Sales data. Apart from that they used ERP software with modules like warehouse management system, transport management system, supplier relationship management and customer relationship management system to name a few. They forced their suppliers to adopt EDI
(Electronic data Interchange) saving on time and improving responsiveness to the customer’s needs.
Indian Scenario
Indian business conglomerates are now expanding their operations beyond the frontier of the nation and many like Tatas, Reliance and Bharti Group have taken over foreign companies. In this background of Indian expansion of trade in foreign countries, Global supply Chain Management shall play a very vital role towards long term sustenance and growth of Indian business. As the global supply chain becomes more complex with every passing year, companies must adapt to this change and incorporate them into their supply chain strategies. This change could mean using vendors from developing nations or exporting goods to new markets. Companies that have traditionally operated within national or regional trading groups may feel ill-equipped to extend their global supply chain. Such closed door operations without knowing what is happening elsewhere in the world can be fatal and even shall be detrimental to their survival if they are unable to select and manage a foreign vendor or not knowing how to sell items in a new country. On the infrastructure front in India so much is happening with improvement of airports at Delhi, Mumbai and Bangalore and Aviation cargo hub at Nagpur and privatisation of sea ports and Rail networks. Telecommunication infrastructure with Wi-Max and 3 G facilities in the country shall improve the connectivity and solve last mile problems for Logistics 3 PL Companies giving impetus to international connectivity as well. Indian Companies are now more receptive to ERP implementation with companies like SAP, Oracle and the home grown software companies. Time ahead is interesting to watch in India as Indian companies are bound to join global supply chain Conglomerates.
Written By
Professor Akhil Chandra
Institute of Logistics and Aviation Management
