In inventory management, the inventories looked at are raw materials, WIP, finished goods, goods in transit, accounts receivable, accounts payable, inventories at CFAs/DCs, distributors & retailers.

In India, the primary inventory replenishment process is the push system versus the pull system. It is often quoted in the industry that up to 85% of companies adopt the push system.

In a push-based supply chain, products are pushed through the channel, from the production side up to the retailer. The manufacturer sets production at a level based on historical buy patterns. However, it takes longer for a push-based supply chain to respond to changes in demand, which may result in overstocking or bottlenecks & delays (the bullwhip effect), unacceptable service levels & product obsolescence. On the other hand, in a pull-based supply chain, procurement, production and distribution are demand driven so that they are coordinated with actual customer orders, rather than forecasted demand.

The major divisions of logistics costs in India are: cost of materials, labour, production operations, inbound / outbound transportation, warehousing, primary/secondary movements and distributor’s margin. Delivering on these costs is itself a challenge and added to that companies must deliver on profitability & responsiveness.

Delivering on all three i.e. cost, profitability and responsiveness can therefore be the real test. In the surveys of many nations it was found that the reduction in cost has been replaced by the focus on quality in the top three objectives. And to meet these multiple objectives, supply chain leaders have realized that supply chain effectiveness requires more than efficiency and low cost. Supply chains are also an important driver of revenue growth and profitability, as well as the primary source of responsiveness. Many companies therefore are evolving toward the on-demand i.e. customer-driven supply chain.

The shared vision is to have an integrated end-to-end, customer-driven supply chain – integrated across the business and with key customers, partners, suppliers and service providers. All top-performing supply chain companies are actively adopting leading management practices, such as:

• Synchronizing supply and demand through more efficient planning & forecasting
• Developing mutually beneficial outcomes to strengthen supply chain relationships. This also means sharing information & risks with partners to reduce overall exposure
• Coordinating business functions horizontally across the supply chain
• Managing supply chain cycles – for example, for planning or for order-to-delivery
• Developing variable cost structures as alternatives to fixed costs
• Using real-time information to create responsive, customer-driven processes

In India too, organizations are responding to the challenges of cost control & customer responsiveness in five key supply chain areas:

• Synchronizing supply, managing demand by making planning customer driven
• The perfect product launch and lifecycle management
• Effective customer order management through real-time information
• The procurement opportunity by realizing the benefits of holistic sourcing
• Efficient logistics services by driving efficiencies in logistics operations

Another major development is the e-enablement of supply chains through various IT applications across the supply chain: computer aided process planning, manufacturing execution system, engineering data management, demand management, process control & optimization, supply chain management, warehouse management, scheduling & loading, CAD/drafting, sales, distribution, ERPs etc.