in India have adopted various supply chain tracking technolo- gies, including ERP systems, information technology-based supply chain services (e-commerce, ...
Improving logistics in India More manufacturers are adopting sophisticated supply chain tracking technologies By Sidhartha S. Padhi and Pan Theo Grosse-Ruyken
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Adopting new supply chain tracking technologies can help improve the traceability and visibility of a company's products and processes. Furthermore, it helps to reduce costs by optimizing materials management and increasing the efficiency and speed of supply chain processes. Companies that can improve information accuracy and facilitate management through real-time information gain market share and earn a reputation as a technology leader. In India, the use of such technologies has been increasing over the years. The advancement of sophisticated Internetbased technologies is helping organizations reap the benefits of locating materials precisely and controlling damages and losses. Add in the ability to track store receiving, replenishment productivity and control depot inventory, and the movement cascades to lure investment into even newer, more innovative tracking technologies, as S. Chopra and P. Meindl report in Supply Chain Management: Strategy, Planning and Operation. Technology and process upgrades at forward-thinking firms reveal that supply chain excellence is accepted as an element of overall business strategy. Effectively moving products, services, finances and information from a source to a consumer is the key to survival and strategic well-being. Major organizations in India have adopted various supply chain tracking technologies, including ERP systems, information technology-based supply chain services (e-commerce, e-business, e-procurement), electronic data exchange, automatic identification and RFID technology to increase end-to-end supply chain transparency in the hypercompetitive marketplace. In the late 1980s, fewer than 5 percent of major corporations based in India (e.g., Suzuki India, Tata Motors, Hero Honda, etc.) were using barcodes, portable printing, magnetic strips, or smart card supply chain tracking technologies. The usage jumped to more than 25 percent in 1995 and 75 percent in 2000. From 2010 to present, almost all manufacturing companies, such as Mahindra & Mahindra, L&T and Nokia India, are using the most advanced supply chain tracking technologies. Real-time locating systems, cloud computing and GPS are used to track pallets, cases and individual products, along with reusable assets such as bins and containers. Supply chain tracking technologies can be defined as the “application of technology to support both operational processes and business activities of a supply chain.” Hence, according to “Intelligent Tracking in Manufacturing” from the Journal of Intelligent Manufacturing, along with “Increasing Efficiency in the Supply Chain for Short Shelf Life Goods Using RFID Tagging” from the International Journal of Retailing & Distribution Management, supply chain tracking technologies include supply chain activities (in general) and materials management (in particular), including the flow of goods, services and information in a supply chain.
In a nutshell, supply chain tracking technologies are transparency enablers.
Adoption and classification of technologies Major companies are seeking to address two glaring needs in today’s hypercompetitive market: to provide cost-effective products of high quality and reliability, and to offer customerfriendly sales and services to enhance customer satisfaction. Additionally, major corporations face many other issues, including requirements for tailor-made material management systems, reduction of lead-times and non-value-added activities (e.g., moving inventory, storing, waiting, rework, expediting orders and excessive paperwork), improvement in materials quality (e.g., too much time spent on fixing flaws, recycling waste, handling complaints and customer retention efforts), reduction of excess inventory (e.g., excessive amounts of raw material, work-in-process, and/or finished inventories), improvement in production scheduling and supplier relations, and establishment of proper performance metrics. But in the drive to address these needs and issues, it is good that companies pay attention to their actual requirements and supply chain activities. Simply adopting an advanced technology, especially if that technology does not fit the organization’s needs, does not help improve performance. The various attributes that go into an organization’s decision-making process can be classified into three categories: 1. Inhibitors: Success of the legacy technology, the high cost of implementing new technology, privacy and security concerns, and a lack of consensus on standards. 2. Enablers: Reduced shrinkage, proper material handling, increased data accuracy, faster exception management, improved information sharing, production tracking, quality control, supply and production continuity, efficient space utilization, asset management, reduced stock-outs, improved customer service and lower inventory 3. Critical success factors: Reduced material disruption, increased data quality and reliability, high execution rate, high privacy and security, uninterrupted material monitoring, material handling, failure of legacy technology, high equipment uptime, yardstick inventory management, high shop floor discipline and low capital investment. This classification can help your organization choose the best supply chain tracking technologies, but selection can be daunting because more and more options are available. As the infrastructure and skill sets needed to implement these technologies – solo or in combination – vary, selecting the proper technology to fit your organization becomes key. The wrong choice can be expensive and lead to negative consequences in monitoring and tracking operational activities.
October 2015 | Industrial Engineer
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Improving logistics in India
FIGURE 1 Furthermore, past studies on An upward trend advanced technologies, such as In this overview of supply chain tracking technology adoption in Indian manufacturing industries, information technology and the numbers in parentheses are each technology’s serial number in the survey of Indian group decision support systems, manufacturing companies. suggest that positive results from 2010 ONWARD adopting technology depend not only on the technology, but perCloud computing (5) haps more on how the technolBiometrics (3) Bokodes (4) 2005-2010 ogy is used by the people. Mobile computing (12) In other words, the pattern of Radio frequency identification (16) technology used is an important Real-time locating systems (17) factor that should be considered. Digital imaging (8) 2000-2005 Looking at cost alone is not Speech recognition (20) Remote management (18) enough; other factors include Bar coding/label printing (2) Cellular networks, bluetooth Portable printing (15) the ability to move and store and Wi-Fi (6) Smart cards (19) Artificial intelligence data reliably and simultaneously. Electronic data interchange (9) and multi-agent systems (1) The trends shown in Figure 1 Electronic product code (10) Data logger (7) reveal that major Indian indusMagnetic strips (11) Voice and GPS communication (21) Optical character recognition (14) Wireless and device security (22) tries adopted a number of supNear field communication (13) ply chain tracking technologies between 2000 and 2010, known In other words, the direct and indirect benefits of the techas the “technology revolution phase” of Indian manufacturing nology are key to its growth rate (or rate of decline) in the industries. During that decade, major Indian companies used mostly Indian market. Direct benefits include an increase in producsemiautomatic technologies for the initial five years. For the tion efficiency, supply chain profit through cost reduction, and next five years, companies adopted applications that were valuable information gathering and sharing. Indirect benefits more sophisticated, holistic and IT-integrated. Since 2010, include customer satisfaction, shortened response times and companies have shifted their focus to mobility and wireless low inventory misplacements and losses. The results show that major organizations in India have technologies. We tested the adoption of supply chain tracking technolo- been moving from individual tracking-based supply chain gies with 89 companies in India (for details see the sidebar tracking technologies (classical) to intelligent, sophisticated, on Page 46). From 2007 to 2012, the growth in adoption of IT-enabled, wireless-based, mobile platforms that can receive remote management was 41 percent; RFID was 37 percent; and control information. These newer and more sophisticated real-time locating services was 31 percent; comprehensive applications can track and trace goods for transport, intelligent connectivity using cellular networks, Bluetooth, Wi-Fi and interaction and integration of physical products. Data also reveal that in the last decade, the adoption of electronic data interchange were 29 percent; and speech recnewer supply chain tracking technologies has increased these ognition was 28 percent. All of these were higher than the average growth rate of organization’s supply chain performances by 15 percent to 40 23 percent with a standard deviation of 10.9 percent of all 12 percent. Although a few companies have shifted their focus from one application to another, the ultimate aim of each is to growing supply chain tracking technologies. In contrast, portable printing was down by 33 percent, achieve higher yields. Thus, we can conclude that a company’s performance is smart card use was down by 26 percent, and the use of magnetic strips was down by 20 percent. These technologies were correlated positively with its adoption of a new technology. For example, Maruti Suzuki India and Tata Motors moved being phased out rapidly compared to the average decline rate away from using barcodes, portable printing and smart cards of 21 percent, with a standard deviation of 9.4 percent. Such trend analysis is important for organizations to deter- to deploying RFID and real-time locating systems. The results mine whether investing in such technology will pay off. The for companies were a reduction of inventory levels by 60 pertrend analysis (growth/steady/decline) of the 22 supply chain cent and an improvement in service levels from 82 percent to tracking technologies in the last five years is shown in Figure 94 percent. The companies also reduced their administrative 2. Positive growth seems to depend on its technology, im- costs by re-engineering their supply chains. Companies like Mahindra & Mahindra, L&T and TVS plementation, maintenance and service costs, along with the Motors decreased logistics losses during transit by 15 percent availability of hardware and software components. 44
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FIGURE 21
Ups and down This trend overview reveals that manufacturers in India are replacing some supply chain tracking technologies (SCTT) with other options. The SCTT serial number of each technology corresponds with the numbers in parentheses in Figure 1.
SCTT serial number
16%
21 -26%
19 24%
17 -33%
15 13 -20%
-8%
-30%
-20%
0% 0%
9 7
0%
5
0% 0%
37% 29%
28%
14%
41% 5%
1 -10%
31%
14%
11
3
-17% -40%
22%
14% 0%
to 20 percent and improved the availability of raw material by about 18 percent. Sun Pharmaceuticals and Ranbaxy reduced their misplaced items by 20 percent to 25 percent. And BHEL and Ultratech Cement reduced their inventory losses by 18 percent. Pioneering Indian manufacturing firms like Maruti Suzuki India, Tata Motors, Hero MotoCorp, Sun Pharmaceuticals, CIPLA, Ranbaxy, Ashok Leyland, IFB and TVS Motors have implemented important supply chain tracking technologies. Industries like automotive, pharmaceuticals and engineering products have made significant progress. From less than 5 percent of manufacturing firms (Suzuki India, Tata Motors, Hero Honda, etc.) using barcodes, portable printing, magnetic strips and smart cards in the late 1980s, the usage jumped to more than 25 percent in 1995 and 75 percent in 2000. At present, almost all Indian manufacturing firms use multiple supply chain tracking technologies (Wi-Fi, RFID, realtime locating systems, optical character recognition (OCR), GPS, near-field communication (NFC), cloud computing and biometrics). Of these firms, the most prominent users of WiFi, RFID, real-time locating systems and GPS are the automotive firms, including Suzuki India, Tata Motors and TVS, and engineering product firms like L&T, BHEL and SKF Bearings. Electronic data interchange, cloud computing and OCR are used by electronics firms like Birla Ericsson, Nokia India, Microteck and Intex. Electronic product code and digital imaging are used by pharmaceutical firms, such as Sun Pharmaceutical, Ranbaxy and CIPLA. Data loggers, GPS and remote
10%
20%
30%
40%
50%
management are used by energy and utility firms, including IFB, Reliance Power and NTPC. This equals an average growth of 23 percent of advanced and sophisticated IT-enabled supply chain tracking technologies and a phasing out of “classical” technologies by an average rate of 20.8 percent.
Managerial implications Manufacturing firms in India and elsewhere should follow a four-step plan when deciding whether to make the move toward a newer, more sophisticated supply chain tracking technology. First, study and analyze the return on investment (ROI) and risk of implementation before spending money on state-ofthe-art technologies. Second, always go for requirement-based and firm-specific technologies rather than falling into a technology-based trap. Third, create a trade-off between the old, reliable technology with the advanced ones that have not yet undergone reliability tests before adoption. And fourth, check for standardization of the technology based on the company’s requirements and system integration criteria so that old goods and products can be tracked with the new technology. Technology has contributed substantially to improvement of supply chain efficiency. With the passage of time and emerging technologies, major Indian companies also have shifted their focus to more improved and sophisticated technologies. Your organization must consider carefully exactly how it can benefit from increased item information gathering and sharing through adopting sophisticated supply chain tracking technologies.
October 2015 | Industrial Engineer
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Improving logistics in India
Sample and data overview In order to receive insights regarding supply chain tracking technologies, data collection for the study discussed in this article employed structured interviews based on the research literature and objectives. All of the interview questions were asked using a combination of dichotomous and five-point Likert scale. For example, “Is your firm using any supply chain tracking technology? If yes, then which supply chain tracking technology is your firm using and what is its year of adoption?” Additional questions included year-wise adoption trends (in case of multiple technologies) and associated improvements in efficiency (or performance) based on adoption of a technology. The target respondents were managers in the information systems department or top managers of Indian manufacturing companies. To avoid interviewees misunderstanding the meaning of the questions, trial interviews were conducted with management students. The interviews were conducted between December 2011 and January 2012 in Delhi, Gurgaon, Pune, Aurangabad, Chennai, Bengaluru, Surat, Kolkata and Bhubaneswar in India. A total of 117 officials were interviewed from 89 organizations. The figures below provide an overview of the underlying industry sectors and of the sales volume of the 89 firms, ranging from less than 10 million Indian rupees to more than 100 million rupees. For our data analysis, we used a few statistical properties, such as standard deviation, skewness and kurtosis. Standard deviation shows how much variation, or “dispersion,” exists from the average or mean value, i.e., a low standard deviation indicates that the data points tend to be very close to the mean, whereas high standard deviation indicates that the data points are spread out over a large range of values. Skewness is a measure of the asymmetry of the probability distribution, i.e., a negative skew indicates that the tail on the left side of the probability density function is longer than the right side and the bulk of the values lie to the right of the mean. A positive skew indicates that the tail on the right side is longer than the left side and the bulk of the values lie to the left of the mean. Kurtosis is any measure of the “peakedness” of the probability distribution, i.e., a high kurtosis distribution portrays a fat tail and a low, even distribution, whereas a low kurtosis portrays a distribution with a skinny tail and a distribution concentrated toward the mean.
industry industry
sales salesvolume volume
(percentage (percentageofofrespondents, respondents,8989firms) firms)
(million (millionIndian Indianrupees) rupees) 40% 40%
Pharmaceuticals Pharmaceuticals
Energy/utilities Energy/utilities
13.33% 13.33%
24% 24%
15.56% 15.56% 20% 20% Electronics Electronics
17.78% 17.78%
31.11% 31.11%
16% 16%
Automotive Automotive
22.22% 22.22% Engineering products Engineering products 100
degree in scientific computing and a bachelor’s degree in mechanical engineering. Pan Theo Grosse-Ruyken is a postdoctoral researcher at the Swiss Federal Institute of Technology Zurich. He earned his Ph.D. from WHU – Otto Beisheim School of Management and graduated in business economics from the University Witten/Herdecke. In addition, he studied at Harvard University, the European Business School and California State University. He also has been a visiting scholar at the Department of Management Science and Engineering at Stanford University.
