BUILDING PARTNERSHIPS AS FOUNDATIONS OF SUPPLY CHAIN MANAGEMENT LT GEN D V KALRA, PVSM, AVSM (RETD)

1. BUILDING PARTNERSHIPS AS FOUNDATIONS OF SUPPLY CHAIN MANAGEMENTLT GEN D V KALRA, PVSM, AVSM (RETD)

2. ERP • ERP ATTACKS ONLY INTERNAL BARRIERS • ERP OPTIMISES AT ENTERPRISE LEVEL • THINKING WITHIN THE BOX • LINK LEVEL FOCUS • NEVERTHELESS ESSENTIAL TOWARDS SUPPLY CHAIN INTEGRATION

3. WHAT IS SUPPLY CHAIN MANAGEMENT? “TRADING PARTNERS WORKING TOGETHER TO GROW BUSINESS AND ELIMINATE NON-VALUE ADDED ACTIVITIES FROM BOTH INTRA AND INTER COMPANIES ACROSS THE ENTIRE MATERIAL AND INFORMATION FLOW PROCESS FROM THE SUPPLIER’S SUPPLIER TO THE BUYER’S BUYER TO ENHANCE CONSUMER VALUE AND CREATE SHARED BENEFITS."

4. BASIS FOR BUILDING EFFECTIVE SUPPLY CHAINS • BELIEF IN THE CONCEPT • NEED TO WORK TOGETHER • MUTUALITY • TRANSPARENCY • TRUST • COMMUNICATION • COMMITMENT • SHARED VISION OF THE FUTURE

5. TOWARDS SUPPLY CHAIN EXCELLENCE • CREATE STRONG STRATEGIC RELATIONSHIPS • MANAGE SUPPLY CHAIN AS A WHOLE • MAXIMISE CHAIN WIDE USE OF TECHNOLOGICAL APPLICATIONS • REFINE OPERATIONAL SYSTEMS AND TECHNIQUES

6. MOTORS INDUSTRY STOCK SITUATION 1990 Based on “The Three Day Car Challenge”-Matthias Holweg, Bernard Judge and Geoff Williams, Logistics and Transport Focus Volume 3 No 9- Nov 2001

7. EMERGING TRENDS SUPPLY CHAIN ARE STRIVING TO BECOME MORE : • RESPONSIVE • AGILE AND ADAPTIVE • LEAN • COLLABORATIVE

8. TYPES OF COLLABORATION • INVENTORY COLLABORATION- VMI • CAPACITY COLLABORATION • FORECAST COLLABORATION

9. BEST PRACTICES STRATEGIC SOURCING COLLABORATIVE FORECASTING OUTSOURCING VENDOR MANAGED INVENTORIES

10. SUPPLY CHAIN BEST PRACTICES • ALIGN SUPPLY CHAIN MANAGEMENT SYSTEMS WITH STRATEGIC INITIATIVES AND GOALS • FORGE PARTNERSHIPS WITH SUPPLIERS • CERTIFY SUPPLIER-PARTNERS • EMPLOY TECHNOLOGY TO IMPROVE SUPPLIER PARTNERSHIPS. • REFINE AND ENHANCE MANUFACTURING PROCESSES • FOSTER COMMUNICATIONS BETWEEN PARTNER ORGANIZATIONS • EMPHASIZE THE MUTUAL BENEFITS OF PARTNERSHIP

11. BEST PRACTICES • ALIGN SUPPLY CHAIN MANAGEMENT SYSTEMS WITH STRATEGIC INITIATIVES AND GOALS. COMPANIES THAT EXCEL IN THIS AREA HAVE ENTERED INTO PARTNERSHIPS WITH THEIR SUPPLIERS AND WORK TOGETHER TO REALIZE MUTUAL GAINS AND ACHIEVE STRATEGIC GOALS. Best Practices LLC, Benchmarking Report

12. BEST PRACTICES • FORGE PARTNERSHIPS WITH SUPPLIERS. WORLD-CLASS SUPPLY CHAIN MANAGEMENT SYSTEMS SELECT SUPPLIERS ACCORDING TO VARIOUS CRITERIA THAT GO BEYOND TRADITIONAL COST PER UNIT CONSIDERATIONS. BY WORKING TOGETHER ACROSS THE SUPPLY CHAIN, THESE COMPANIES ARE ABLE TO POOL TALENTS AND RESOURCES, YIELDING SUBSTANTIAL GAINS IN COST, QUALITY, FLEXIBILITY, SYSTEM RESPONSIVENESS AND OVERALL PERFORMANCE. Best Practices LLC, Benchmarking Report

13. BEST PRACTICES • CERTIFY SUPPLIER-PARTNERS. CERTIFICATION ESTABLISHES A COMMON LANGUAGE FOR COMMUNICATION. THIS IN TURN FOSTERS AN INCREASED LEVEL OF TRUST AND UNDERSTANDING BETWEEN PARTNERS. EXCELLENT COMPANIES OFTEN CERTIFY SUPPLIERS AT DIFFERENT LEVELS, REFLECTING THE STRENGTH, DEPTH AND MATURITY OF THE RELATIONSHIP.  Best Practices LLC, Benchmarking Report

14. BEST PRACTICES • EMPLOY TECHNOLOGY TO IMPROVE SUPPLIER PARTNERSHIPS. Best Practices LLC, Benchmarking Report

15. BEST PRACTICES • EMPHASIZE THE MUTUAL BENEFITS OF PARTNERSHIP. THE BENEFITS GAINED THROUGH THE ENHANCED TRUST AND COMMUNICATION OF A PARTNERSHIP EXCEED THOSE OF A TYPICAL COST-FOCUSED RELATIONSHIP Best Practices LLC, Benchmarking Report

16. BEST PRACTICES • REFINE AND ENHANCE MANUFACTURING PROCESSES. IN PARTICULAR, PARTNERS ARE ABLE TO IDENTIFY WHICH ORGANIZATION IN THE SUPPLY CHAIN CAN PERFORM A SPECIFIC PROCESS AT THE HIGHEST QUALITY AND LOWEST COST. Best Practices LLC, Benchmarking Report

17. BEST PRACTICES • FOSTER COMMUNICATIONS BETWEEN PARTNER ORGANIZATIONS. RATHER THAN CHOOSING ONE OR TWO WAYS OF WORKING WITH THEIR VENDORS, WORLD-CLASS COMPANIES EMPLOY A PLETHORA OF COMMUNICATION TOOLS. Best Practices LLC, Benchmarking Report

18. SUPPLY CHAIN “GURU MANTRA” • “SYNERGY OF CO-OPERATIVE EFFORT INVOLVING COMPLIMENTING STRENGTHS OF PARTNERS IN A SUPPLY CHAIN, SKILLFULLY HARNESSED AND INNOVATIVELY APPLIED WITH CUSTOMER IN VIEW, CANNOT BUT PRODUCE CUSTOMER DELIGHT. STRATEGIC PARTNERSHIP IS THE SELF EVIDENT “GURU MANTRA” FOR BUSINESSES OF THE FUTURE”.

19. THIRD PARTY LOGISTICS • What is 3PL? • 3PL is outsourcing • Opportunities • Advantages • Disadvantages • Automotive Industry Peculiarities • Practices

20. What is 3PL? • First PL is the company itself, • Second PL is the customer, and • Third PL is an independent party which is willing to provide support activities that are complimentary to the company’s operations.

21. What is 3PL? In our context, 3PL refers to all those transporters or warehouse-owners who provide the consolidation and bulk breaking or event-order-picking till delivery to the customer.

22. What is 3PL? Thus, 3PL providers become a useful and cost-effective link in the chain connecting the supplier (first party) and customer (second party).

23. 3PL is outsourcing In strict materials management terms, 3PL can be equated to the outsourcing concept used in processing. Hence, 3PL is an outsourced SERVICE.

24. Opportunities The complex relationships between suppliers and customers extending from the immediate channel partners to the extended supply-chain links provide umpteen opportunities to the companies for identifying links which can be profitably outsourced.

25. Opportunities Each link in the supply-chain provides the organization with an opportunity to evaluate the possibility of being outsourced subject to it not being technologically or economically unfeasible .

26. Opportunities These opportunities exists wherever the activity is not an organizational core strength or would not adversely affect the market standing or security of proprietary information.

27. Advantages • Company can concentrate on its strength areas • Funds and manpower not bogged down with non-priority activities • Opportunity cost of freed resources • Benefit from the core strengths of the 3PL provider

28. Disadvantages • Control over the complete chain is weakened • Possibility of organization’s trade secrets getting leaked • If partner not properly selected, could lead to complete chain break-down • Need for excellent MIS

29. Automotive Industry Peculiarities In India (unlike Japan), suppliers are spread over 1000’s of kilometers and the poor infrastructure further adds to transportation delays and transit losses. 3PL suppliers can only bridge this time, space, place and quantity gaps.

30. Practices In India, 3PL suppliers are usually transporters who have modified their traditional godowns to bridge the gap between suppliers and customers. These enlightened transporters have understood the opportunity and have created hubs near major auto makers.

31. Practices In these hubs, the service providers maintains necessary inventory which he also transports from the manufacturing unit to the hub. He also maintains liaison with the customer and provides him with the exact materials on time.

32. Future The 3PL service providers role is bound to become more and more critical and vital for the success of any automotive supply-chain. It is bound to become an essential feature of any automotive supply chain from a mere cycle to the huge trucks.