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Introduction
SUPPLY CHAIN MANAGEMENT (SCM)
A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into
intermediate and finished products, and the distribution of these finished products to
customers. Supply chains exist in both service and manufacturing organizations,
although the complexity of the chain may vary greatly from industry to industry and
firm to firm.
Supply chain management is typically viewed to lie between fully vertically
integrated firms, where the entire material flow is owned by a single firm and those
where each channel member operates independently. Therefore coordination between the
various players in the chain is key in its effective management. Cooper and Ell ram
[1993] compare supply chain management to a well-balanced and well-practiced relay
team. Such a team is more competitive when each player knows how to be positioned
for the hand-off. The relationships are the strongest between players who directly pass
the baton (stick), but the entire team needs to make a coordinated effort to win the race.
Below is an example of a very simple supply chain for a single product, where
raw material is procured from vendors, transformed into finished goods in a single step,
and then transported to distribution centers, and ultimately, customers. Realistic supply
chains have multiple end products with shared components, facilities and capacities. The
flow of materials is not always along an arbores cent network, various modes of
transportation may be considered, and the bill of materials for the end items may be both
deep and large.
To simplify the concept, supply chain management can be defined as a loop: it starts
with the customer and ends with the customer. All materials, finished products,
Information and even all transactions flow through the loop. However, supply chain
management can be a very difficult task because in the reality, the supply chain is a
complex and dynamic network of facilities and organizations with different, conflicting
objectives.
Supply chains exist in both service and manufacturing organizations, although
the complexity of the chain may vary greatly from industry to industry and firm to firm.
Unlike commercial manufacturing supplies, services such as clinical supplies
planning are very dynamic and can often have last minute changes. Availability of
patient kit when patient arrives at investigator site is very important for clinical trial
success. This results in overproduction of drug products to take care of last minute
change in demand. R&D manufacturing is very expensive and overproduction of patient
kits adds significant cost to the total cost of clinical trials. An integrated supply chain
can reduce the overproduction of drug products by efficient demand management,
planning, and inventory management.
Traditionally, marketing, distribution, planning, manufacturing, and the
purchasing organizations along the supply chain operated independently. These
organizations have their own objectives and these are often conflicting. Marketing
objective of high customer service and maximum sales dollars conflict with
manufacturing and distribution goals. Many manufacturing operations are designed to
maximize throughput and lower costs with little consideration for the impact on
inventory levels and distribution capabilities. Purchasing contracts are often negotiated
with very little information beyond historical buying patterns. The result of these factors
is that there is not a single, integrated plan for the organization---there were as many
plans as businesses. Clearly, there is a need for a mechanism through which these
different functions can be integrated together. Supply chain management is a strategy
through which such integration can be achieved.
i.
ii.
Logistics and SCM. Supply Chain is inter-company integration of business process and
relationships and where as Logistics is intra-company integration.
Providing enhanced value to customers at the least Total cost Value, Velocity and
Visibility
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iii.
Producers:
Producers or manufacturers are organizations that make a product.
This includes companies that are producers of raw materials and companies that are
producers of finished goods. Producers of raw materials are organizations that mine for
minerals, drill for oil and gas, and cut timber. It also includes organizations that farm the
land, raise animals, or catch seafood. Producers of finished goods use the raw materials
and subassemblies made by other producers to create their products.
Producers can create products that are intangible items such as music,
entertainment, software, or designs. A product can also be a service such as mowing a
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lawn, cleaning an office, performing surgery, or teaching a skill. In many instances the
producers of tangible, industrial products are moving to areas of the world where labor is
less costly. Producers in the developed world of North America, Europe, and parts of
Asia are increasingly producers of intangible items and services.
Distributors:
Distributors are companies that take inventory in bulk from
producers and deliver a bundle of related product lines to customers. Distributors are
also known as wholesalers. They typically sell to other businesses and they sell products
in larger quantities than an individual consumer would usually buy. Distributors buffer
the producers from fluctuations in product demand by stocking inventory and doing
much of the sales work to find and service customers. For the customer, distributors
fulfill the Time and Place functionthey deliver products when and where the
customer wants them.
A distributor is typically an organization that takes ownership of
significant inventories of products that they buy from producers and sell to consumers.
In addition to product promotion and sales, other functions the distributor performs are
inventory management, warehouse operations, and product transportation as well as
customer support and post-sales service. A distributor can also be an organization that
only brokers a product between the producer and the customer and never takes
ownership of that product. This kind of distributor performs mainly the functions of
product promotion and sales. In both these cases, as the needs of customers evolve and
the range of available products changes, the distributor is the agent that continually
tracks customer needs and matches them with products available.
Retailers:
Retailers stock inventory and sell in smaller quantities to the
general public. This organization also closely tracks the preferences and demands of the
customers that it sells to. It advertises to its customers and often uses some combination
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of price, product selection, service, and convenience as the primary draw to attract
customers for the products it sells. Discount department stores attract customers using
price and wide product selection. Upscale specialty stores offer a unique line of products
and high levels of service. Fast food restaurants use convenience and low prices as their
draw.
Customers:
Customers or consumers are any organization that purchases and
uses a product. A customer organization may purchase a product in order to incorporate
it into another product that they in turn sell to other customers. Or a customer may be the
final end user of a product who buys the product in order to consume it.
Service Providers:
These are organizations that provide services to producers,
distributors, retailers, and customers. Service providers have developed special expertise
and skills that focus on a particular activity needed by a supply chain. Because of this,
they are able to perform these services more effectively and at a better price than
producers, distributors, retailers, or consumers could do on their own.
Some common service providers in any supply chain are providers of transportation
services and warehousing services. These are trucking companies and public warehouse
companies and they are known as logistics providers. Financial service providers deliver
services such as making loans, doing credit analysis, and collecting on past due invoices.
These are banks, credit rating companies, and collection agencies. Some service
providers deliver market research and advertising, while others provide product design,
Engineering services, legal services, and management advice. Still other service
providers offer information technology and data collection services. All these service
providers are integrated to a greater or lesser degree into the ongoing operations of the
producers, distributors, retailers, and consumers in the supply chain.
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OBJECTIVE
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Objective
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Custom duty
Duty rates differ by commodity and level of assembly
Duty drawback
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Export regulation
Export licenses
Denied parties list
Time
Lead time
Cycle time
Transit time
Export license approval cycle
Customs clearance
Exporter
Exporter custom
Logistic (service provider)
Importer custom
Importer
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Logistics is the process of movement of goods across the supply chain of the company.
This process is consisting of various functions, which have to be properly managed to
bring effectiveness efficiency in the supply chain of organization. The major logistical
function are shown in figure
1.
Order processing:
Warehousing refers to the storing and assorting products in order to create time utility.
The basic purpose of the warehousing activity is to arrange placement of goods, provide
storage facility to store them, consolidate them with other similar products, divide them
into smaller quantities and build up assortment of products. Generally, larger the number
of warehouses a firm has the lesser would be the time taken in serving customers at
different locations, but greater would be the cost of warehousing. Thus, the firm has to
strike a balance between the cost of warehousing and the level of customer service.
Major decision in warehousing is as follow:
Location of warehousing facility
Number of warehousing
Size of warehouse
Design of the building
Ownership of the warehouse
3. Inventory Management:
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Linked to warehousing decisions are the inventory decisions which hold the key to
success of physical distribution especially where the inventory costs may be as high 15
as 30-40 per cent (e.g., steel and automobiles). No wonder, therefore, that the new
concept of Just-in-Time-Inventory decision is increasingly becoming popular with a
number of companies. The decision regarding level of inventory involves estimate of
demand for the product. A correct estimate of the demand helps to hold proper inventory
level and control the inventory costs. This is not only helps the firm in terms of the cost
of inventory and supply to customers in time but also to maintain production at a
consistent level. The major factors determining the inventory levels are: The firms
policy regarding the customer service level, Degree of accuracy of the sales forecasts,
Responsiveness of the distribution system i.e., ability of the system to transmit inventory
needs to the factory and get the products in the market. The cost inventory consists of
holding cost (such as cost of warehousing, tied up capital and obsolescence) and
replenishment cost (including the manufacturing cost).
4. Transportation:
Transportation seeks to move goods from points of production and sale to points of
consumption in the quantities required at times needed and at a reasonable cost. The
transportation system adds time and place utilities to the goods handled and thus,
increase their economic value. To achieve these goals, transportation facilities must be
adequate, regular, dependable and equitable in terms of costs and benefits of the
facilities and service provided.
5. Information:
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through. However, not withstanding its importance and size (INR 4 trillion), it has
traditionally not been accorded the attention it deserves as a separate sector in itself.
Country
LPI Score
USA
3.85
UK
3.84
Singapore
4.19
India
3.07
China
3.64
Mexico
2.64
The level of inefficiency in logistics activities in the country has been very high across
all modes. With the evolving business environment creating a strong demand pull for
quality and efficient logistics services, core issues around enabling infrastructure,
regulatory environment and the fragmented nature of the industry are being overcome
gradually.
The required pace of efficiency and quality improvement will demand rapid
development of capabilities of logistics service providers. And with logistics being a
service oriented sector, skill development will emerge as a key capability while skill
issues exist in varying degrees in all segments of logistics; those segments where the
gaps are not only wide but also widening at a relatively fast pace. The most severe and
immediate requirement for skill development is found to be in the road freight and
warehousing segments.
Indias spend on logistics activities - equivalent to 13 percent of its GDP is higher than
that of the developed nations. The key reason for this is the relatively higher level of
inefficiencies in the system, with lower average trucking speeds, higher turnaround time
at ports and high cost of administrative delays being just a few of the examples.
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These inefficiencies have arisen over the years from a combination of a non-conducive
policy environment, extensive industry fragmentation and lack of good basic
infrastructure. India's indirect tax regime discouraged large centralized warehouses and
led, over time, to fragmentation in the warehousing sector. At the same time, the absence
of a single logistics 'champion' (whether in form of a ministry or otherwise) in the
government (or industry) led to a disintegrated approach to development of the sector.
Country
Logistics Cost/GDP
India
13%
U.S.
9.9%
Europe
10%
Japan
11.4%
Extensive fragmentation meant the incapacity of industry players to develop the industry
as a whole and poor support infrastructure, such as roads, ports and telecom, led to a
situation where the opportunity to create value is limited.
However, much of this is changing with the government now demonstrating a strong
commitment towards providing an enabling infrastructure and creating conducive
regulations. There is significant current and planned investment in infrastructure to the
tune of (INR 15 trillion) over the next few years and an increased emphasis on publicprivate partnership. At the same time, regulations around rationalization of tax structures
and prevention of overloading for example are creating an environment of positive
change. Players now have the opportunity to leverage economies of scale,
complemented with better infrastructure, to provide integrated logistics solutions which
are cost effective.
In addition, the evolving business landscape and increasing competition across
industries, is creating the need for more efficient and reliable logistics services than what
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exist today For example, rapid growth of organized retail and the need to reach out to the
large untapped rural markets in India are necessitating development of strong back end
and front end supply networks.
Fundamentally, a fragmented industry with low average scale - and consequent limited
investment and market development capability - is worst placed to serve these needs. It
is not surprising therefore that there is a frantic pace of consolidation and organic growth
that the industry is witnessing (refer box and figure 4). While logistics service providers
are struggling to keep pace with the growth, logistics service users with limited or no
outsourcing are finding it increasingly difficult and / or undesirable to manage this noncore activity in-house. The result is a wide need gap that is seemingly widening much
faster than it is being filled.
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Indian Supply Chain and Logistics Industry is more than USD 100 Billion in size and is
the backbone of Indian Economy. Our industry is growing at a rate of 8-10% annually
and has been a crucial contributor in the growth and development of the Indian
economy. In the near future, Traditional Logistics services like Transportation and
Warehousing would continue to growth at a good rate. However, the big ticket growth
would come from the Value Added Logistics services in the near future.
At present, Outsourced Logistics accounts for only one-third of the total Logistics
market in India, which is a significantly lower proportion vis--vis the developed
markets. Growth in this industry is currently being driven in India by over USD 300
billion worth of infrastructure investments, the phased introduction of VAT, the
development of organized Retail and Agro-processing industries, along with a strong
manufacturing growth. In addition, we expect strong Foreign Direct Investment inflows
in the Indian markets, which would lead to increased market opportunities for providers
of Third-Party Logistics in India.
Therefore, India possesses substantial opportunities for growth in the Supply Chain &
Logistics industry in the coming years, notwithstanding the temporary jolt due to the
economic slowdown.
Globally, retail has been a key growth driver for the logistics industry and India is no
exception to this phenomenon. Organised retail in India has been growing at over 30 per
cent year-on-year.
The total retail industry in India is expected to 1 grow from US$ 320 billion in 2006 to
US$ 421 billion by 2010. The growth of organised retail has created demand for
specialised logistics services, wherein every retailer relies on strong logistics and
warehousing infrastructure for the success of its business. This changing business
environment should give further impetus to the logistics sector by generating increased
demand for high-quality and efficient logistics and warehousing services.
In 2007, the Indian economy witnessed a growth of 13 per cent in exports and 17 per
cent in imports. India's current share in global trade is around 0.8 per cent and is
expected to increase to 1.6 per cent by 2012. Robust growth in foreign trade will
increase the demand for good quality and timely logistics and warehouse services.
The world over, India is being recognised as a destination for outsourcing of custombased, high-technology manufacturing activities. According to Confederation of Indian
Industries (CII), India will emerge as one of the global 'manufactured product'
outsourcing hubs and reach revenues of approximately US$ 50 billion by 2015. In order
to remain cost-competitive, contract manufacturers will be required to provide integrated
logistics solutions that will bolster the cost savings potential of the outsourcing
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initiative. The increasing trend of outsourcing will, in turn, drive strong demand for
logistics solutions in the country.
Union Budget 2008-09 has proposed the phasing out of Central Sales Tax (CST) 201011. Once implemented, this measure will promote outsourcing of logistics operations
and encourage the creation of large warehouses at key strategic locations that could
operate on the 'hub-and-spoke' model. The implementation of Value Added Tax (VAT) in
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2006 has played a role in reducing logistics costs. The proposed implementation of
Goods and Service Tax (GST) could lower logistics costs further. According to the
Confederation of Indian Industry (CII), improvement of logistics and warehousing
industry can make Indian industries more cost-competitive, thereby enabling a GDP
growth of 11 to 12 per cent, from the existing 7 to 8 per cent.
c) Improvement in infrastructure
Transportation in India accounts for nearly 40 per cent of the total cost of production.
One of
The major barriers faced by the Indian logistics industry have been the lack of quality
physical infrastructure. However, India's core sectors are witnessing a significant
change. The country is expected to increase its infrastructure development spend from
4.7 per cent of GDP in 2007 to 8 per cent of GDP by 2012. This increased spend will
help boost the logistics industry. However, delays in critical projects may lead to a
failure of this measure to provide the much needed impetus to the growth of this sector.
Better connectivity to small towns and cities is another area planners need to work upon.
Road transportation is currently the most dominant form of transportation with more
than half of the goods in the country being moved by road. Almost every mode of
transportation in India is fraught with inefficiencies.
For instance, ports that are vital for foreign tradehave very high turnaround times
when compared with statistics for other countries. Similarly, the railways, which were a
popular mode for freight transportation (especially the movement of bulk goods), have
lost ground to road transportation due to limited access to smaller towns. Air, on the
other hand, is a costly mode and its use is restricted to courier shipments. It is rarely
used for bulk transportation.
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This is easy to understand because the per capita disposable income of the people has
gone up remarkably. Over the last five years, per capita personal disposable income has
gone up by around 8%, which has increased purchasing capacity of the people in the
country. Other factors have also contributed to this high growth in Indian automobile
sector. These include lowering age of first car users, shorter replacement cycles, rising
duel income families, new technology, which is lowering cost of ownership, low car
penetration in the country and most importantly growing steel production in the country.
In addition, wide variety and easily available financing options are also some of the
major reasons for surge in demand for automobiles in India.
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Domestic sales have grown at CAGR of 14.27% from 2002-03 to 2008-09. The
commercial vehicle segment, in particular, has increased at CAGR of 24.35% during the
above-mentioned period; whereas total sales of passenger cars in domestic market have
increased at CAGR of 14.02%. In terms of production, commercial vehicles have
registered a CAGR of 24.55% from 2002-03 to 2008-09; while passenger vehicles have
registered a CAGR of 18.24%. There is a declining trend in mopeds production as well
as in sales in the domestic market. During 2002-03, mopeds production and sales have
declined at CAGR 2.93% and 5% respectively.
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Exports on a roll
The significant development in Indian automobile sector is the
outstanding growth of its exports. From 2002-03 to 2008-09, total exports of automobile
sector has gone up at CAGR of 44.56%. Exports of motorcycle segment have registered
highest annual growth rate of 71.42% during this period. This has clearly indicated that
Indian automobile sector is going global.
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Uses
Cold chains are common in the food and pharmaceutical industries and
also some chemical shipments. One common temperature range for a cold chain in
pharmaceutical industries is 2 to 8 C but the specific temperature (and time at
temperature) tolerances depend on the actual product being shipped.
This is important in the supply of vaccines to distant clinics in hot
climates served by poorly developed transport networks. Disruption of a cold chain due
to war may produce consequences similar to the Smallpox outbreaks in the Philippines
during the Spanish-American war.
Traditionally all historical stability data developed for vaccines were
based on the temperature range of 2-8 C. With recent development of biological
products by former vaccine developers, biologics has fallen into the same category of
storage at 2-8 C due to the nature of the products and the lack of testing these products
at wider storage conditions.
The cold chain distribution process is an extension of the good
manufacturing practice (GMP) environment that all drugs and biological products are
required to adhere to, enforced by the various health regulatory bodies. As such, the
distribution process must be validated to ensure that there is no negative impact to the
safety, efficacy or quality of the drug substance. The GMP environment requires that all
processes that might impact the safety, efficacy or quality of the drug substance must be
evaluated, including storage and distribution of the drug substance.
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Farm
Pack house
Cold storage
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Retail
Reefer van
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outlets
Trend 1:
Globalization
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Analysis
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Country
LPI Score
USA
3.85
UK
3.84
Singapore
4.19
India
3.07
China
3.64
Mexico
2.64
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Interpretation: The Logistics Performance Index (LPI) and its indicators provide the first
in-depth cross-country assessment of the logistics gap among countries. As the above
graph shows that LPI score of USA, UK, Singapore, India and Mexico, indicates the
performance of logistics in global transport and logistics hubs. Also as the performance
of developed countries in logistics are high as compare to the developing nation.
Singapore has high performance in global logistics as compare to other countries also
gain rank 1st among all by World Bank. USA, UK, Mexico and China are ranked in
logistics performance in global market at 9th, 14th, 56th and 30th respectively. India is
ranked 39th in the Global market show the high logistics performance than in the global
market.
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Country
LPI score
India
3.07
Vietnam
2.89
2.87
Guinea
2.71
Sudan
2.71
Mauritania
2.63
Pakistan
2.62
Kenya
2.52
Gambia
2.52
Cambodia
2.50
Interpretation: This graph shows that India had performed well among all the low-income
countries. India has scored 3.07 LPI score and ranked 1st among all other low income countries.
This shows the among the low income countries Indias performance in global transportation
and logistics hubs is better.
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Country
India
U.S.
Europe
Japan
Logistics Cost/GDP
13%
9.9%
10%
11.4%
Interpretation: Above graph show that in India logistics cost high than developed
countries and contribution in GDP is 13 %. High logistics cost is due to the incomplete
and under developed infrastructure, non conductive policy, environment, indirect tax
regime and extensive industry fragmentation.
Country
India
Logistics
10 %
50
U.S.
Europe
Japan
57 %
30 %
80 %
Interpretation: Above graph shows that in Japan share of 3PL in overall industry high
as compare other developed countries is 80 %. In India share of 3PL is 10 % show that in
India 3PL service provider are less.
2005
890
2008
1622
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2012 E
3556
Interpretation: The above graph shows that 3pl share in the logistics industry
increased with the increased in revenue of the 3PL in the logistics industry in India .
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Limitation
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Limitation of study
The study is based on the secondary published in news papers, books and journals of the
researcher. So some time data witch is publish by the researcher can not analysis fresh
stimulation means old &wrong data is collected by the inbuilt error.
This study based on only Indias global supply chain
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CONCLUSION
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Bibliograp
hy
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Book:
Global Supply Chain Management:
Author -Masaaki Kotabe, Michael J. Mol 2006
Websites:
www.google.com
www.scribd.com
www.thehindu.com
www.supplychain-forum.com
www.supply-chain.org
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