Cover Story Key trends changing “Supply Chain” today Around the World with Operations Management ____
Automation in Supply Chain ____
Opsession December Issue This is the fifth issue from Volume three of Opsession, the monthly newsletter of X-Ops. The newsletter was introduced two year ago, by X-Ops with the intention of covering all the activities and events that took place during the span of a month.
Indian Automobile Supply chain – Opportunities and Challenges
Xavier Institute of Management, Bhubaneswar Volume#3
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Key Trends changing Supply Chain today An inefficient and poorly functioning supply chain will negatively impact all aspect of an organization. Here are six trends that will help you re-evaluate current processes. Technology and process upgrades at forwardthinking companies clearly show that supply chain excellence is widely accepted as an element of business strategy Trend 1: Demand Planning Begins at the End of the CyclesResources and capacities for manufacturing have increased, more companies have moved away from focusing on plant-level production planning and are adopting a demand-driven focus of trying to influence and manage demand more effectively. Rationalizing what your company is best at making and delivering, and aligning the sales force with that mindset, is critical for adopting a demand-driven model. Trend 2: Globalization The business landscape is becoming more global. Largely due to improvements in communications, globalization is impacting the way business is managed and transacted, even on the local levels. No area of a business is more affected by the
trend of global business environment than the supply chain Trend 3 Increased Competition and Price Pressures With the commoditization of many products, companies need better ways to differentiate themselves. Product innovation and brand equity no longer allowed the organizations to command a higher price in the market. In order to continue to compete with that commoditized product the firm made significant cost improvements with supply chain redesign and technology. Trend 4: Outsourcing- There can be significant benefits from outsourcing all or part of your supply chain operation, but without the right systems, processes or organizational structure the risk to success can increase to frightening levels. In an outsource-heavy environment, companies need to put more controls and systems in place to compensate for the fact that the supply chain capabilities no longer reside onsite. Trend 5: Shortened and More Complex Product Life Cycles One chief benefit of product lifecycle management (PLM)
processes and technology is to help companies design products that can share common operations, thereby reducing risks of obsolescence write offs, increasing cost leverage on purchasing of key materials and ensuring that infrastructure investments are utilized. Additionally, getting this right will help improve your time to market. Trend 6: Collaboration between Stakeholders in the Extended Supply Chain - Recent examples of collaboration have been seen in the expansion of sales and operations planning processes that include upstream and downstream value chain partners as regular participants. S&OP processes help maintain a wellcoordinated, current operating plan in support of customer demand, a business plan and strategy. The improved resulting operating plan provides the management of each partner with a complete picture of forecasted demand, supply capacity, corresponding financial information with financial implications and allows them to make critical decisions.
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Around the World with Operations Management Lenovo Goes About Creating the End to End Transparent Supply Chain Lenovo set-up a “Green Data Center” by acquiring the Data Center Group from IBM, and is learning how to create their “converged” network servers that are on the leading edge of being focused on sustainable high speed efficient performance. Lenovo has predictive models in planning and forecasting around run rates, seasonality, key deals with clients, etc. that are focused on protecting supply and product transitions.
There is a lot of flexibility in production planning also. Lenovo can build a product in multiple locations, and can balance supply even though some sites are further away and transportation can flex. “Supply Chain is all about speed, and Lenovo has a very innovative development team that is thinking about how their products are agile, in terms of converged infrastructure (networking, storage, and computing all in one rack). This is the future of the server market.
Trump’s 35% import tax, and how US companies can utilize “Parallel Manufacturing” to grow globally If Donald Trump does in fact establish his “35% import tax” as he has threatened of late, it would significantly change the design of current production supply chains for major industrials and pharmaceutical companies. Most US companies that manufacture products overseas have two distinct set of customers, domestic customers in which they import and sell their product back in the US, and foreign customers, in which typically they ship directly from their manufacturing plant to the country of consumption. The “parallel manufacturing” model focuses on these two customer sets. This strategy will create parallel manufacturing strategies, whereby the same raw and semifinished suppliers remain, allowing procurement leaders to keep their costs down by consolidating supply, however the final assembly will be conducted in parallel in two separate locations depending on where the customer is based. This model is used to a lesser extent with companies that supply the US government. Assuming there is 35% tax rate, there will also be an almost immediate increase in prices for products sold in the US. Those companies that have already
adjusted their supply chain, and taken advantage of parallel manufacturing will be able to keep their prices stable, and position themselves to take major market share from both domestic and global competitors alike. Amazon’s Drone Delivery from a Flying Warehouse The e-commerce giant has been awarded a patent that describes a logistics technology it calls "airborne fulfillment center" which essentially is an airship that's capable of flying at altitudes of 45,000 feet or more that would house items the company sells through its online marketplace. Analysts have discovered a recent Amazon patent for an "airborne fulfillment center utilizing unmanned aerial vehicles for item delivery" - i.e., a giant flying drone mothership zeppelin warehouse.
The patent envisions the airborne fulfillment center (AFC) in the form of a giant airship, that would fly at high altitudes of around 45,000 feet in the air, and would then deploy individual drones to deliver Amazon's goods to customers.
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UPS Invests in Reverse Logistics Specialist Optoro UPS has formed a strategic alliance with Optoro, providing a one-stop shop solution for retailers and manufacturers to optimize the transportation and disposition of returns and excess inventory. The companies’ joint reverse logistics solutions combine UPS’s operational and logistics expertise with Optoro’s software platform that maximizes recovery value and reduces environmental waste.
within Amazon-esque timeframes, a TMS platform that automates the transportation component can literally be worth its weight in gold once fully optimized. According to recent ARC research, TMS users achieve an average freight savings of 7.5 percent thanks to increased usage of preferred carriers, better procurement negotiations, and use of lower-cost mode selections.
operation of the newly installed logistics centre, Sanofi redesigned its distribution networks for the complete Brazilian market and the corresponding export processes. The development of the new site means investments of 200 million Euros between 2015 and 2020. Already today, it is one of the largest distribution centres of Sanofi worldwide and the largest operated by DHL in Brazil for the healthcare sector. “The objective of this project was to simplify and enhance Sanofi's storage operations and distribution network in Brazil by consolidating these operations into a single distribution centre. Fujitsu and DHL use IoT to disrupt the logistics market Fujitsu today announced a strategic co-creation partnership with DHL Supply Chain UK to develop new services based on wearable technology and the Internet of Things (IoT).
Cloud-Based Solutions Augmenting TMS
Are
DHL establishes Supply Chain Distribution Centre in Brazil
Tasked with managing a shipper’s routing, scheduling, carrier selection, load tendering, and shipment consolidation capabilities, transportation management systems (TMS) are increasingly seen as one of the most important tools in the everchanging, omni-channel distribution environment.
DHL Supply Chain, the contract logistics specialist within Deutsche Post DHL Group, consolidated the logistics operations of three Sanofi divisions in Brazil by establishing a new distribution centre in Guarulhos, near São Paulo. The project, initiated by Sanofi in 2014, covers all portfolios of Sanofi, Sanofi Pasteur and Medley Brazil. In addition to the
With carrier capacity, an ongoing issue, an epic driver shortage looming, and customers expecting their goods to arrive
Building on its successful managed procurement services collaboration with DHL, which provides a new business approach to procurement solutions including uniform and protective equipment, Fujitsu will share its industry and technology expertise to jointly develop innovative solutions that improve safety for emergency services, whilst delivering operational efficiencies. Fujitsu and DHL also plan to use the partnership to drive the creation of entirely new markets in other sectors, such as airline logistics.
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Automation in Supply Chain Automation is the use of control systems for operating equipment such as machinery and vehicles with minimal or reduced human intervention. The main objective is to reduce human effort and reduce the errors and delays arising due to the same. A Supply Chain is an arrangement of sorting out individuals, alongside related exercises, data and assets required in moving an item or supplier from provider to customer. Supply Chain activities involve the transforming of raw materials into a finished product deliverable to the customer. The subject of Automation in Supply Chain would mean inculcating control systems to automate the processes in Supply Chain that would involve use of robotics in manufacturing of final goods from raw material and distributing the final product. Some who are critical to this approach would strongly believe that automation would lead to reduction of human’s role in the process thus leading to people losing their jobs. But what they fail to understand is amalgamation of Technology
would help businesses improve operations in a number of areas, including warehouse management, order fulfilment strategy, improvement in purchasing decision and reduce waste of Man, Machine and Materials. In this article, we would discuss 2 classic examples for automation of supply chain and then we would draw the inference and discuss the further prospects of improvement or change of design of the existing supply chain. First, we would see how Amazon has pioneered in implementation of automation of supply chain and the benefits it has reaped out of the modified or newly innovated supply chain
design. In the year 2012, Amazon commitment to the technology when it acquired Kiva Systems. Kiva's robots guide the item to a warehouse employee, as opposed to the employee strolling to the racks. The robots find the things in a consumer's request, move the items around stockrooms and get stuffed boxes to a last stacking dock. The most recent innovation guarantees that those tasks are firmly planned, in order to make a smooth move from situation of the first request to satisfaction and conveyance to the customer. Replacing the existing units of Amazon Robotics, the company quickly deployed robots within its ever-growing
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network of distribution centres. Amazon has continued its investment in research and systems that will shave time off order fulfilment. Recently there has been a shift towards robotic process automation which integrates multiple systems that had been traditionally working in silos and dedicated to order taking and fulfilment. Amazon has been able to reduce its cost but due to commendatory performance by the Kiva system leading to aggressive investments, its profits have been down by 57%. Following Amazon, many e-commerce vendors have tried to incorporate automation in the supply chain. The learning would be more grounded Supply chain management practices help organizations streamline operations and lessen overhead thereby reducing cost of operations and increasing profitability. Next, we would see how the automation and robotics are presenting the Indian IT-BPM industry with a tremendous opportunity— to lay a strong foundation for future competitivenes s while creating
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exciting journeys for their workforce. The challenges faced by the industry are Insufficient understanding of automation technology and Misdirection of investment i.e. lack of a strong position on the future of automation technology. To address this problem, the companies have come up with a strategy which involves focusing on internal resources to cater to innovation and design needs, looking for future opportunities when the workforce mindset changes, forming strategic alliances to drive flexibility along with innovation and collaborating with each other to effectively adopt to new technologies. The disruptive effect of robotization and apply autonomy is implanted by the way it is changing the way of work, and accordingly, the exercises of whole associations. Indian IT-BPM organizations can grab this as a standout amongst the quickest chances to pioneer new advancements and procedures of awesome significance and esteem to
worldwide customers, and in the process, assemble another personality for the Indian IT-BPM industry. The learning from this is would be by the use of disruptive innovation; rapid automation of supply chain process of an ITBPM is possible and this would drastically reduce cost and time utilized along with increasing the profitability of the firm and also provide them with competitive advantage over the competitors. The future prospects for modification or changing of existing supply chain would Augmented Reality that involves optimization of the picking activities, optimal planning of facilities, automated fright loading/unloading and use of AGVs along with GPS to have a Dynamic traffic system. The next prospect would be use of Artificial intelligence which would integrate the silos of different supply chain activity and make controlling and managing them dynamic. Also, Lean and Agile technologies can be consolidated with Artificial Technology to reduce loss of restricted resources.
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Indian Automobile Supply Chain – Challenges and Opportunities In spite of the fact that the Indian car industry had originated in the 1940’s, there has been extensive development in the last two decades predominantly because of financial advancement along with 100% FDI in the segment. Constructing agents, multinational constructing agents, Indian part providers, multinational segment providers, each with particular qualities and shortcomings are the different stakeholders in the sector. Indian automobile industry is the world’s 6th biggest maker of autos as far as volume and economic value are concerned. A growth of 14.4% in the sector in the last decade. The contribution of industry to Indian GDP is 7%. Automobiles are used by 7-8% of the aggregate populace (around 13 million individuals). Out of the total FDI in the country 39%is in automobile sector. It contributes 17% of the taxes collected. 77.4% of all the sales in domestic market was from motorbikes and scooters. It was followed by passenger vehicles (15.1%) and commercial vehicles (4.45%). Number of units manufactured has risen from 10.85 million vehicles in 2007-8 to 20.63 million vehicles in 2012-13. Even though
number of dealerships. Customer demand for varied specific configurations and features add to the high level of response needed from automobile supply chains. The order lead time required by a customer is averaged at 4-6 weeks in the automobile industry and there is a definite correlation between implementation of Supply Chain Management (SCM) practices and quality and conformance of design. Toyota’s Production System enshrining lean thinking has long since been an industry benchmark. Trends in the auto industry which impacts the supply chain are depicted in below table
2012-13 has seen practically stagnant deals, exports have expanded by 10%. But globally, even with an export earnings of 4 billion USD (including 1.8 billion USD as fares of auto segment area), the automobile production contributes just 2.37% of total global production and is at a low 26th in rank in the world. The mission of Indian car industry in making progress toward worldwide aggressiveness is clear from the way that major car makers are the second-biggest number of beneficiaries (after Japan) of the Deming grant for quality. Fundamentally, India has the best-in-class efficiency rates and in addition moderate aggregate cost of ownership. The complexity of the automotive supply chain may be gauged from the fact Demand-Side Trends that a typical vehicle comprises Uneven Growth approximately 20,000 components with Fragmentation about 1000 subAccelerated assemblies or Volatility modules. The Importance of After automotive supply market chain includes multitude of Tier 1, 2 and Tier 3 suppliers or manufacturers with many assembly operations and a
Supply-Side Trends Differentiated Outsourcing Low-Cost-Country Sourcing Risk Management Transparency / Accountability
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The expenditure on logistics is very high in India about 14% of GDP, compared to a lower proportion of 10-11% in Europe and 9% in USA. The average inventory is about 22% of total aggregate sales. Inadequate infrastructure, lack of effective technology and absence of large players result in high logistics cost. Indian automotive companies have a great opportunity to streamline their supply chain process and become more competitive. Major competition between automakers in India is at the level of assemblers rather than between entire supply chains including first tier component suppliers. The automotive supply chains lag behind other supply chains in five parameters – visibility, cost containment, risk management, increasing customer demands and globalization. This indicates that there is a need for considerable improvements to make them more effective
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and responsive. Supply chains in Indian Sector are different from their western counterparts. End to end integration of supply chain is the greatest challenge faced by the Indian manufacturers. The spare parts industry is troubled by the frequent changes in costs of raw materials, customer demand for product quality, timely deliveries and sourcing of raw materials. India pose a series of unique challenges for foreign companies entering Indian markets. The Indian market prefers vehicles which are cheaper, but require very good mileage. Hyundai is a company which adjusted well to Indian environment by modifying the Santro with reduced engine output which increased the fuel efficiency.
They also made sure that the spare parts were available at competitive rates. To overcome the problems of quality, safety and production many spare parts manufacturers are providing training for its workforce. An example Bosch Ltd which has the Bosch Vocational Centre (BVC) to impart training. To overcome the challenges in the Indian automotive supply chains, following action should be undertaken increasing investment in Information Technology and process improvements vendor/dealer consolidation improving internal infrastructure (8%). Original equipment manufacturers should give more focus on module assembly, planning, scheduling and inventory management as they tend to outsource logistics.
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Opsession Monthly XIM, Bhubaneswar
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