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Terms of Use
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The copyright in all materials provided on this Site is held by Aqua MCG or by the original creator of the material. Except as stated herein, none of the materials may be copied, reproduced, distributed, republished, downloaded, displayed, posted or transmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Aqua MCG or the copyright owner. Permission is granted to download one copy of the materials on this Site on a single computer for your personal or internal business use only provided that you do not modify the materials and that you retain all copyright and other proprietary notices contained in the materials. This permission terminates immediately if you breach this Agreement. You may not "mirror" any material contained on this Site without Aqua MCG’s express written permission. Any unauthorized use of the materials contained on this Site may violate copyright laws, trademark laws, the laws of privacy and publicity and/or communications regulations and statutes. All content and
Last Updated On:10/22/2008 1:03:43 PM
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Transportation Management Systems : An Indian Perspective
Thumbs-Down to the Global Meltdown
The global melt-down is here and the nay-sayers are all on a roll about the impending doom. Companies are looking at multiple options to manage the challenging situation that the occurrences in the global economy have put them into. Supply Chain costs therefore are of special significance in such market conditions as they hold the key to managing profitability and ensuring better health of the organization.
India is no exception!
Logistics costs in India are estimated to be nearly 13-14% of the GDP of around $1 trillion. This cost is significantly higher as compared to the developed economies where the logistics costs are around 7-8% of the GDP. What this means to companies is that there is a huge potential to optimize the costs of logistics.
Supply Chain costs are spread over multiple domains starting from Import-Export Logistics to Transportation to Warehousing and finally Distribution. In a country like India which has a large geographic dispersion and manufacturing clusters based at key locations, transportation becomes a key link to managing the costs. In fact, Transportation accounts for the largest single cost component of logistics, estimated to be nearly 35%-40% of the total logistics costs.
There are multiple reasons for this. India has traditionally been a country that thrives on the entrepreneurial spirit of the hinterland. Hence all transportation needs, especially ground transport, were being met by small transport operators (more than 80-85% of the market) who own less than 5 trucks of smaller tonnage. This leads to an extreme fragmentation of the industry and thereby the cost of managing the overall delivery is high.
In addition, the Indian transportation industry has multiple layers of demand and capacity agents who are essentially people who play the intermediary role of matching demand and capacity albeit a
Last Updated On:7/30/2010 1:39:54 PM
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Cost Management Initiatives
The Importance of Sales and Operation Planning :
An S&OP process helps in balancing supply and demand with the help of a single operating plan spanning across all functions to achieve profitable growth. It also helps align the company’s strategic business goals with the daily operations plan in the most cost-effective manner. Effective planning results in better forecast accuracy and better visibility. Effective planning of the supply chain helps in maintaining balanced inventory levels, increase inventory turns and a better utilization of the resources. All these three factors together help achieve supply chain cost reduction.
The demand forecasts developed by the Sales personnel are generally inflated to buffer the effect of late deliveries from the manufacturing plant. The manufacturing personnel in turn give an inflated projection to the sourcing and procurement team. The finance team gives another set of forecasts to the manufacturer purely targeted at meeting goals of the finance group, without any idea of either the capacity constraints or the inventory levels. The result is a number of forecast figures most of which are inaccurate and unreliable. On the other hand a poor planning process results in higher costs due to expedited shipments, frequent stock-outs, higher inventory levels, higher transportation costs due to large number of small shipments and lower customer service levels. The chart below shows a typical 5 step S&OP process.
Most companies today have some sort of an S&OP process in place. However, in most cases the existing process in place is far from an ideal state. Even in companies where there is a rudimentary traditional S&OP process where a forecast number is agreed by marketing, sales, finance and production planning teams; forecasts tend to be poor.
A company thus needs to first do a diagnostic to determine at what stage of maturity it is at present, and t
Last Updated On:9/16/2010 2:41:39 PM
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