MODEL

HUB

&

SPOKE

C P F R

E A M

TRENDS IN

AUTOMOTIVE

INDUSTRY 20

COVER STORY

INTERVIEW

WITH

PRAVEEN

SINHA 24

RFID

IN INDIAN

RETAIL 28

EMERGING

AREAS

COLLABORATIVE

PLANNING,

FORECASTING AND

REPLENISHMENT 1

SPECIAL

IT AND LEAGILE

SUPPLY CHAIN 13

E-COMMERCE AND

LOGISTICS 17

VOLUME 2 ISSUE 2 FEBRUARY 2013 . http://opepiimraipur.blogspot.in/

HUB AND SPOKE

MODEL 10

WORK

EXPERIENCE

IMPLEMENTATION

OF CORE BANKING

IN SBI 31

ROLE OF IT IN

OPERATIONS 35

ENTERPRISE ASSET

MANAGEMENT 6

REGULAR

GURUMANTRA 37

CROSSWORD 39

PHOTOGRAPH COURTESY: TEJIT MITTAL DESIGN: MANOJ H

ON THE COVER

The dispersion of light in the cover page shows the fast paced growth that

every sector is experiencing in their operations & supply chains with the

support of Information Technology. The blue-colored gear in the cover marks

the strong and much required presence of Information Technology in

Operations. In the background we have binary digits "1" & "0" to indicate

digitization in the corporate world

EDITORIAL

In today's dynamic business world,

organizations are changing their way of

functioning by relying more on information

technology - information systems and

operations management are critical to every

organization's success. IT infrastructure and

operations leaders are facing new and

unforeseen challenges everyday and hence

are required to keep themselves updated so

as to convert these challenges into

opportunities. The need to develop and

manage a flexible infrastructure has

emerged as a top priority.

OPEP, the Operations and Supply Chain

Club of IIM Raipur, through its e-magazine

'Strive', serves as a platform for the

Students, Faculty Members and Industry

Practitioners for sharing their knowledge in

the field of Operations and Supply Chain

Management.

This issue of Strive magazine focuses on the

role of Information Technology in

Operations. The magazine begins with an

article by Mr. S Srinivasan, the CIO of TVS

Infotech, who has given his insights about

the role that IT has played in automotive

sector operations right from the time it was

introduced to its contemporary issues. Mr.

Praveen Sinha, Cofounder and Managing

Director, Jabong.com, through an interview,

presents his outlook about the use of IT in

the online retail industry. In the academia

section, Dr. Sumeet Gupta, a faculty

member of Indian Institute of Management

Raipur has listed down the potential benefits

of RFID technology in retail sector and the

issues limiting its implementation.

The students have also written articles about

some of the contemporary issues including–

‘Collaborative Planning, Forecasting and

Replenishment (CPFR)’. This article

explores the various advantages which an

organization can gain from it and the

challenges in implementing it. We have

continued the column 'Gurumantra' from

Strive Issue 3 and Issue 2. Two 1st year PGP

students of IIM Raipur have shared their

work experiences in role of IT in varied

fields.

We are thankful to Prof. B. S. Sahay, Prof.

Vinita Sahay and Prof. Ajit Prasad for their

motivation and immense support & to Prof.

OmkarprasadVaidya and Prof. Sumeet

Gupta for teaching us the relevant subjects

in the field of Operations and Supply Chain.

We also thank all our authors for taking out

time from their schedule and contributing to

the magazine. My editorial would be

incomplete without acknowledging the

support of Manoj, Sujitha, and Thousif in

bringing out this issue and the whole Team

OPEP for their commitment and dedication

towards the club activities.

Akshay Agarwal,

Editor

Strive

DIRECTOR’S MESSAGE

From a humble beginning in 2010, Indian Institute of

Management Raipur has seen its pioneer batch

graduating and joining reputed corporate houses across

the country as well as abroad. Student-run initiatives

play a major role in the process of achieving such feats.

OPEP, the Operations and Supply Chain Club of IIM

Raipur, has played a significant part in setting up this

platform. The biannual e-magazine ‘Strive’ started by

our students has been successful since its launch last

year. Three issues of Strive have already been released.

In the current issue, the focus is on role of information

technology in managing operations and supply chain.

This has brought efficiency and transparency in the

entire value chain with significant impact on the

bottom-line.

I wish OPEP a great success in their endeavor and hope

that you enjoy reading this publication.

Prof. B.S. Sahay

Director, IIM Raipur

Prof . B.S. Sahay

FEBRUARY 2013 1

COLLABORATIVE PLANNING, FORECASTING AND

REPLENISHMENT (CPFR)

Functioning, Advantages and Challenges of Implementing CFPR

[BIR BAHADUR SINGH]

After winning the 2010 FIFA World cup

when Casillas was asked, what was their

winning mantra the answer was a single

word “Collaboration”. The point which I

want to stress here is that be it in business,

football or anything the success of the team

depends how better they collaborate?

In 80’s there was a huge cry for green

sustainable environment as a result Volvo

launched green cars but the market’s

response was opposite as a result Volvo had

a green inventory. To reduce this campaign

was initiated which proved successful. The

increase in sales was wrongly interpreted

and production department and started

producing more green cars. As a result the

company again had a growing inventory and

hence the whole motive behind the

campaign failed. This shows how important

it is for different entities in a corporation to

collaborate.

In a football match it may result to a game

loss but in business houses it costs million

of rupees hence the business houses are

continuously trying to increase the degree of

collaboration as much as possible in order to

minimize the losses. In the pasts we have

seen many great initiatives in the field of

supply chain like JIT (Just-in-time), ECR

(Efficient Customer Response) and VMI

(Vendor Managed Inventory).

Collaborative Planning, Forecasting and

Replenishment (CPFR) is the most recent

concept which came into existence from

1995 that “aims to enhance supply

EMERGING AREAS

The purpose of this article is to explain the functioning of the CPFR (Collaborative

Planning, Forecasting and Replenishment) technique in supply chain management system.

The article also focuses on the various advantages which an organization can gain from it

and what are the challenges of implementing it. Finally the article ends by citing some real

life examples of how companies are using this technique.

“It is a business practice

which combines the

acumen of various

trading partners in the

planning and fulfillment

of customer demand”

FEBRUARY 2013 2

chain integration by supporting and assisting

joint practices. It is a business practice

which combines the acumen of various

trading partners in the planning and

fulfillment of customer demand.” The basic

idea is to create an environment in which the

trading partners share the information which

results in benefit of both the parties. Also we

can see the added advantage in CPFR is that

it answers all the aspects of supply chain

problems unlike the earlier approaches

where one approach only answers one

aspect.

CPFR is nine step processes which can be

represented by a picture and is summarized

below

Phase-I Strategy & Planning

The initial step is to Develop Front End

Agreement - this step mainly concern

with the creation of the unstructured

documents that define the agreement.

The Business modules allow partners to

define and measure specific Key

Performance Indicators. Planning through

the use of Information Technology

ensures that all partners will have access

to the information simultaneously, while

the Portal makes all the data and

information visible across the whole

supply chain. The next step is to Create

the Joint Business Plan, after making the

agreement it is obvious that a lot of

information will start flowing between

FEBRUARY 2013 3

1•STRATEGY & PLANNING

2

•DEMAND & SUPPLY MANAGEMENT

3•EXECUTION

4•ANALYSIS

the partners, but the answers to the all

critical questions like who will get what?

When? Where? How? How much? will be

given by the joint business plan which

was created by the consent of both the

parties. Joint Business Plan also defines

the roles and workgroups.

Phase-II Demand and Supply

Management

The third step is to create the sales forecast; Collaborative forecasting is the engine which drives the success of the whole CPFR if suppliers have better understanding into the retailers’ sales forecast they can plan their operation better. In the subsequent steps again the same procedure is followed for order what was followed for sales. If the suppliers have better understanding into the retailers’ order forecast they can plan their replenishment better. By the same token, retailers can lower the frequency of their OOS conditions and mitigate their consequences by getting continuous information about the replenishment position. The next steps of identifying the exception and the resolution begins with order Forecasting’s statistical forecast, companies can create changes to an

existing forecast or import their own forecast based on the most up-to-date information. Multiple forecasts can be prepared to allow using a dominant algorithm that takes into report the historical accuracy of different forecast contributors. Exceptions are easily identified and when these exceptions are identified, messages are sent to reconcile unusual items. Each provider (partner, supplier, and customer) is a very important part of the real-time collaborative process.

Phase-III Execution

Sixth step of the process of creating

order forecast is mainly dependent on

causal information POS data and

inventory strategies in order to forecast

which supports the shared sales forecast.

Seventh step is of identifying exceptions,

actual results very rarely matches with

the forecast so to determine what is the

reason and why there is a deviation this

step is must. The output of this step is a

list of exception things that are

recognized using the criteria framed in

the front-end agreement. After

determining the exception we need to

“CPFR provides an

ample of opportunity

for the managers to

remove the

inefficiencies of the

supply chain.”

FEBRUARY 2013 4

sort out the issue in the eighth step of

resolving exceptions by querying pooled

data and submitting results to change in

the order forecast.

Phase-IV Analysis

Fourth and final phase mainly concerns

with the order generation and delivery.

To maintain or to increase the customer

base, the very important thing is to timely

delivery which means that the company

should stand on their promise of delivery

it will not only generate trust in the minds

of customer but also sets the benchmark

for the company itself.

There are lots of benefits of this system if

properly implemented some of them are

a) Improved responsiveness to consumer

demand because of reduction of out-of-

stocks and shorter cycle time.

b) Greater forecast accuracy - sharing a

single forecast throughout the supply chain

enables participants to benefit from

synergies. Also increased forecast accuracy

facilitates decrease in safety stock as a result

inventory reduces which further helps in

cost production.

CPFR provides an ample of opportunity for

the managers to remove the inefficiencies of

the supply chain. Europe and other western

countries have already realized its potential

and are exploiting this system to its full.

However, there is certain area which poses

challenge for implementation of this

technique. One of them is the selection of

trading partner with whom the information

sharing because the confidentiality has to be

maintained and the collaboration must be at

the lowest data level. Also, while sharing the

data any weak link in one partner can be

fully exploited by the other which again

calls for a great trust between the parties

before going to the agreement. Below we

will show how some companies

implemented CPFR system.

Warner-Lambert & Wal-Mart Warner-Lambert was a American

pharmaceutical company which was later on

acquired by Pfizer faced a problem in the

demand fluctuation of its products. The

demand fluctuation was mainly the result of

Wal-mart’s promotion. The only solution to

the problem was collaboration. The partners

shared the weekly forecast and worked

together to resolve any variation which

occurs. Optimal application of CPFR

aroused when other retailers joined Wal-

mart in sharing their weekly forecast. This

helped Wal-mart to keep effective inventory

levels. Also it helped Warner-Lambert to

gauge market demands more effectively.

Kraft food & J. Sainsbury Plc Kraft is a worldwide famous food

manufacturer and J. Sainsbury Plc is world’s

leading retailers. Both the companies were

facing a major problem of out of stock

inventory which resulted in loss of sales and

high inventory level across Kraft and J.

Sainsbury Plc’s supply chain. Both these

companies adopted CPFR as a pilot project

and the results were breath taking on-shelf

availability increased by 20%.

Super Drug & Johnson and Johnson Superdrug operates more than 700 stores

throughout the United Kingdom. J&J is a

global American Pharmaceutical company.

FEBRUARY 2013 5

Superdrug faced a major challenge of

trimming the inventory as per sales also;

they wanted to improve forecast accuracy so

they started a pilot project with J&J with the

use of CPFR due to similar culture of two

companies. As a result of the

implementation many future issues were

avoided due to proper highlighting of the

issues. Superdrug’s also got the access for

the first time to a range of data which were

unavailable to them earlier. Superdrug also

saw a heavy reduction of 23% in RDC

Cover (Present Stock on hand/Last week’s

sales).

Godrej Consumer Products Limited Godrej implemented CPFR as a part of its IT

initiative which included Customer

Relationship Management and Business-to-

employee portal. Godrej implemented the

project with a name “Sampark”. The

company appointed Accenture to design the

IT roadmap for the project. It addressed

various issues like overstocked distributors

who were looking to reduce service levels,

out of stock scenario due to unexpected

demand. All these issues were solved to a

very greater extent with the implementation

of CPFR and one of the remarkable

outcomes was the better integration between

the distributor & C&F (Clearing &

Forwarding) agents. Company also achieved

a reduction in working capital of the

distributors.

Thus, we can see how CPFR is helpful in

achieving the desired results in the supply

chain of organizations. Though, west has

adopted it but it is not being practiced in

India on a large scale. The advantages are

unmatchable. With the increasing IT power

in India we can say that sooner all supply

chain managers in India will also be

enjoying the wonderful technique.

REFERENCES:-

1. http://www.decisioncraft.com

/dmdirect/cpfr.htm accessed

on 01.01.2013

2. http://web.mit.edu/sheffi/ww

w/documents/genMedia.theVa

lueOfCPFR.pdf accessed on

31.12.2012

3. http://www.ecr.no/data/f/0/7

0/62/2_2401_0/2001_a_guide_

to_cpfr_implementation.pdf

accessed on 02.01.2013

4. http://www.sccori.com/SCM/

COLLABORATIVEPLANNINGFO

RECASTING.pdf accessed on

30.12.2012

5. https://committees.vics.org/co

mmittees/cpfr accessed on

01.01.2013

6. http://en.wikipedia.org/wiki/

Collaborative_planning,_foreca

sting,_and_replenishment

accessed on 01.01.2013

BIR BAHADUR SINGH is a B.Tech in Electrical Engineering from NIT Silchar, after a brief stint at

Schneider Electric Infrastructure Limited he took admission in IIM Raipur as a Post graduate student.

His academic interest includes areas of Operations and Marketing. He can be reached at

pgp12014.birbahadur@iimraipur.ac.in

FEBRUARY 2013 6

ENTERPRISE ASSET MANAGEMENT

Integrating & Improving with EAM

[ANAND SIVAKUMAR J]

Industries like utilities, manufacturing, and

real estate are capital intensive and physical

assets like equipments, buildings form a

considerable proportion of their total assets.

They operate in highly competitive markets

and they know the harsh realities of

operating in such markets. They deal with

high value assets and equipments and

whenever there is a failure of these assets it

costs them a lot and also disrupts their

business. As downtimes and idle time

become more and more expensive, both in

terms of loss in production and revenue loss,

it becomes imperative for the organizations

to maximize the productive life cycles of

assets via optimized operations

management.

Enterprise Asset Management emerged in

the 1980's in Europe as Terotechnology. BS

3811 defines Terotechnology as, Now, the

companies are focusing on profits rather

than costs. The standard practice of

Terotechnology is concerned with focusing

on the reliability and maintainability of

physical assets of an organization like

machinery, equipment, plant, buildings with

their selection, installation, testing,

commissioning, maintenance and repair with

compilation of information on design,

performance and costs. Based on the data, it

also involved feedback to the original

manufacturer to improve equipment design

and development.

As the companies were very much interested

This article briefly looks into how Enterprise asset management integrates all the principal

interface of an organization namely, physical, financial, human, intangible and information

assets to strategically reduce the operational costs and improving both the value of the

organization and value provided by the organization. It also analyses how the emerging

technology can also be integrated with the existing systems to improve the efficiency.

EMERGING AREAS

"a combination of

management, financial,

engineering, and other

practices applied to physical

assets in pursuit of economic

life-cycle costs ".

FEBRUARY 2013 7

in achieving high reliability of operational

assets it became imperative to replace the

word 'Terotechnology' with the more

acceptable term ‘Enterprise Asset

Management' or EAM. The phrase

'Enterprise Asset Management' implied that

the achievement is a result of involvement

of the entire company.

An organization’s strategic plan will be to

increase the profit which involves low

operational costs and better customer

service. The principal interfaces of an

organization namely, physical assets,

financial assets, human assets, intangible

assets and information assets have to be

managed holistically. These interfaces build

the important relationships between those

who work on these assets and those who

ensure their availability.

Any organization will face the challenges

like provision of high asset availability

without increasing the costs of procurement,

identifying the critical assets and an

optimizing the asset maintenance strategy,

improving asset efficiency, reducing

reactive maintenance costs and finally to

decrease the Total Cost of Ownership

(TCO). A well planned strategy along with

implementing appropriate solutions will

ensure high availability of assets at low

maintenance costs, improved efficiency and

low Total Cost of Ownership (TCO) of

assets.

To build an effective system, asset

management system and quality

management system have to be combined to

focus on the process of continual

improvement by following Plan – Do –

Check – Act methodology of Deming.

The concepts and duties of finance,

engineering, operations and maintenance

must not be seen in isolation. A good asset

management system has to be seen in the

context of getting the most out of assets of

an organization at lower operational costs.

This can be achieved only when Finance,

Engineering, Operations and Maintenance

are working together across the life cycle.

Operational Excellence can be achieved

when there is improved asset reliability and

performance. By whatever name it can be

called Terotechnology, Enterprise Asset

Management or Operational Excellence- it

can be achieved only by a significant change

in thinking and attitude at all levels.

Now a days, accounting, HR and

manufacturing information functions are

standardized and consolidated by most

companies using enterprise resource

planning systems, but very few companies

have integrated their calibration and

equipment management systems. The

integration of systems involves various

dimensions, like integrating the systems

horizontally over time axis, vertically

between lifecycle functions or integrating

the systems across the enterprise. But

achieving this level of integration involves

implementing a very comprehensive

solution.

Real time analysis of data and reporting

across different systems connect individual

asset performance with the entire business

performance by enabling the users to find

“An organization’s strategic

plan will be to increase the

profit which involves low

operational costs and better

customer service.”

FEBRUARY 2013 8

out the 10 assets out of 10000 assets which

require immediate attention. This

information provides an understanding and

some valuable insights to make quality

decisions about where the employees are

spending more time and which resources are

being used at what level. This system also

provides the option of notifications, through

which the concerned operator or shop floor

manager will be informed automatically

about the preventive maintenance activities,

warranty services etc. Based on this, staff

can identify more efficient ways to operate

the equipment, utilize and manage the assets

to get the best business outcomes.

Retrieving data from different computerized

management systems used in different

business modules will take long time which

will not help us much in taking real time

decisions. Using an integrated information

system will make the data from different

business modules like physical assets to

finance easily available and analyzable. A

common language is particularly important

in modern enterprise systems wherein the

user will be empowered to inquire on and

make selected updates to his equipment and

machinery data. The technical solution is

straight forward-simply define a common

set of tracking attributes and establish

validation tables and logic to enforce the

values.

EAM provides us a single database where

even Vendor details, previous transaction

details can also be included. We can design

our own customized approval system

through workflow management where

routing the workflow through the

application is enough to approve the task.

Workflow can be approved, rejected,

escalated to high level, can be paused until a

specific job is done. And remember this

workflow management can be applied to all

modules like finance, human resources, and

operations in a single application without

going for different ERP solutions.

Asset descriptive attributes have to be

standardized and structured in consistent

formats and values. Equipment Cataloging

serves the purpose. Equipment cataloging

enhances the asset management process by

automatically combining attribute data into

useful management information.

In any database, we can easily search for

equipment by attributes such as model

number, manufacturer using modern search

algorithms like SQL. However, unless the

data is structured very well in the database,

searches are going to be slow, unreliable,

particularly as the data volume grows

beyond a few thousand items. Structured

cataloging methodology will solve this

problem.

Now, mobility technology also becomes a

part of EAM. Companies are implementing

mobility solutions as a part of EAM, to

enable their technicians to access and refer

data on-site. This helps the employees to

“An integrated information

system will make the data from

different business modules like

physical assets to finance easily

available and analyzable”

FEBRUARY 2013 9

capture more data which can be easily

entered into the system, which can be

accessed by anyone who is using the system

in the organization.

Dubai municipality’s public transport

system, manages the maintenance and

procurement of components and to monitor

all processes relating to periodic preventive

and corrective maintenance, spare parts and

equipment for its fleet of 2000 light and

heavy vehicles using EAM solution.

EAM maximizes the value of critical

business and assets over their complete

lifecycles with workflows by providing best

practices that yield benefits for all types of

assets, including transportation, delivery,

facilities, production, communications and

IT. Industry-tailored EAM solutions are

available for nuclear power, transportation,

utilities, life sciences, government,

telecommunications and oil & gas. Now,

Organizations like TCS, Mahindra Satyam,

Genpact, IBM are offering these solutions as

Integrated Asset Management (IAM)

solutions.

REFERENCES [1]. Ricky Smith, CMRP, Ivara

Corporation. (n.d.). Connecting

reliability to EAM.

[2]. Kennedy, S. (n.d.). Innovations in

CMMS and EAM are making life

easier for the plant maintenance

department.

[3]. Philip M. Parker, P. (n.d.). The 2009-

2014 Outlook for Enterprise Asset

Management Systems (EAM) in The

Middle East.

ANAND SIVAKUMAR J is a graduate in Production Engineering from Madras Institute of Technology,

Anna University. He worked in Engineering and Industrial Services of TCS for 3o months. He is

currently pursuing post graduate from IIM Raipur. His areas of interest include Operations. He can be

contacted at pgp12007.anand@iimraipur.ac.in

FEBRUARY 2013 10

HUB AND SPOKE MODEL

In IT-BPO with INDIA as “HUB”

[SINDHUJA A]

Tertiary sector in India is the fast growing

and most contributing of all the sectors.

More specifically, in this sector, Information

Technology- Business Process Outsourcing

(IT-BPO) has grown remarkably in the past

decade and acted as a catalyst for the growth

of the country. The phenomenon growth in

this industry can be attributed to the

perceived cost advantage of outsourcing to

India. Demographics, geography and

availability of skill led to this IT revolution.

Though initially outsourcing to India was

seen as a way to cut costs, over years the

customers are realising that it is turning to

be a strategic driver. The vendors now are

not just providing services at low cost but

also providing high quality services by

building strong expertise in technology,

operations, business-knowhow and

management capabilities. India has emerged

as the leader in IT offshore outsourcing with

a share of 55 percent in global offshore

market for IT. India can leverage all these to

move from an offshore site to a global

“Hub” for IT.

The outsourcing in IT has evolved over

time. It has changed from onsite in 1980s to

offshore in 1990s to near-shore in 2000s.

Each one of this has a special purpose to

serve. Onsite is best when the desired

customer interaction is high. Offshore

reduces cost to a great extent. Nearshoring

moderately reduces the cost while still being

close to the customers. Each has advantages

and disadvantages. The new model that is

emerging in the field of outsourcing of IT-

BPO is the Hub and Spoke Model. It is a

multi-tier operating model with a

standardized governance structure.

In the Hub and Spoke model, “Hub”

provides a single face to customers with

each “Spoke” as an extension to it.

“Spokes” are distributed across various

EMERGING AREAS

India has a major share of IT-BPO. With the strong base it can now leverage the position to

turn into a “Hub” of global delivery. Hub and Spoke Model is new to IT-BPO but it has been

put in practice in many industries. Indian IT can analyze the cases of Hub and Spoke in other

industries, develop some necessary skills, put all its strengths to work and attain the position

of “Hub”. The Hub and Spoke Model has many advantages over other outsourcing model.

Though it is not completely without disadvantages, implementation of this model would give a

strategic advantage to our country.

FEBRUARY 2013 11

regions and provide services to the

customers. The Hub and Scope Model is not

a new model to experiment with. It has

already been successfully implemented in

various industries like automobiles,

electronics, consumer goods and aerospace.

In aircraft industry, this model helped to cut

down the production timelines. Also it

helped the companies to concentrate on their

core competencies like aircraft design and

assembling while outsourcing the

component manufacturing. Few major

players in Consulting and Technology also

use this model. They split the process

outsourced into various components like

voice, data, etc and routes these processes to

locations that serve them the best. Finally,

the Hub integrates all the services and

provides to the customers.

“Hub” in the Hub and Spoke Model is

responsible for customer management,

quality and performance management,

training and development, man-power

management and regulatory compliance. On

the other hand “Spoke” has to meet the

performance expectations, manage local

projects and support the “Hub” on legal and

tax compliance.

Initially it is good to keep management

activities at “Spoke” minimal with a

“Spoke” working under only one “Hub”.

But as time passes, there would be “Spokes”

addressing multiple “Hubs” by developing a

management layer and finally the evolution

FEBRUARY 2013 12

would lead to a closely knit Hub and Spoke

Model of operation.

Hub and Spoke Model mitigates of risk by

locating in different locations. It takes

advantage of favourable tax and legal

structures of various countries, cost

advantage arising because of emergence of

Tier-II and Tier-III cities and the high

quality talent available at these locations.

Above all it helps to be close to customers

so that their needs are well understood. Also

the cultural affinity helps the vendor offer a

better customer experience. Centralized

training coordinated by “Hub” ensures a

consistent employee quality.

The model however faces some challenges

like ensuring data security, addressing tax

issues, integrating services and managing

the difference in regulatory environment,

culture and time zone.

The companies that are planning to employ

this model for their business need to

concentrate of few aspects before the actual

implementation. They must build a globally

consistent brand, advanced technology, pro-

active location strategy, flexible governance

structures and harmonized and standardized

delivery system. They must ensure

compliance with global information security

standards.

With good base in IT-BPO, increasing

quality regulations, emergence of Tier-II and

Tier-III cities, government initiatives (like

tax benefits for IT-BPO), developing

infrastructure, India has every chance of

being a global “Hub” for IT services. Many

leading MNCs of the world are considering

India as a “Hub” in their global delivery

strategy and developing spokes in other

countries like Philippines, China, Uruguay

and Mexico.

References [1]. Greenbaum, J. (2010, May). Inside

the Hub and Spoke Model.

Managing Automation , 25 (4), p. 14.

[2]. KPMG, NASSCOM. (2012). Hub

and Spoke Model: A new Paradigm

for Indian IT-BPO Industry.

SINDHUJA A is a graduate in Electronics and Communication Engineering from University

College of Engineering, Osmania University. She is interested in corporate banking. She can be

reached at pgp12001.sindhuja@iimraipur.ac.in

FEBRUARY 2013 13

IT AND LEAGILE SUPPLY CHAIN

Emerging IT Trends in the Application of Leagile Technology

[PULAK JAIN]

Adding value to the shareholder by

generating higher revenue is the main

objective of any firm that can be achieved

by providing service or product that fulfils

the customer requirements. Therefore the

objective of the supply chain of any

organisation would be to ensure that it

satisfies the consumer requirements. Going

through the history of supply chain, craft

shop was the first supply chain that

delivered exactly what the customer wanted,

but it was done at a very high price. Henry

ford introduced assembly line for mass

production of model T at low cost, but no

choice was given to consumers. In the recent

times in order to gain competitive advantage

the companies are focusing on mass

customization and flexible manufacturing. In

the light of this requirement, lean and agile

supply chain management are heavily

studied and adopted across the

organisations.

Lean supply chain management, first created

at Toyota, focussed on reducing cost by

eliminating wastes (muda). Leanness means

“developing a value stream to eliminate all

waste, including time, and to enable a level

schedule.” On the other hand Agility means

using market knowledge and a virtual

corporation to exploit profitable

opportunities in a volatile marketplace. In

short lean is ‘supply what, when needed, but

do this perfectly’, whereas agile aims at ‘be

first, fast and best’.

High level of product quality as well as the

lead time is an important requirement for

both the lean and agile supply chain system

in order to satisfy the consumer demands. In

lean system the lead time has to be small

because the time is considered as waste and

should be removed, while in agile system

shorter lead time is required to fulfill the

volatile customer demand as quickly as

possible to gain competitive advantage. The

following matrix shows that the key order

winner for the agile system is the availability

of the product to the customer whereas in

lean system it is the minimization of the

cost.

Leanness and agility in a supply chain do

not have to exclude each other. Combination

The article deals with the application of the Leagile system in companies and the role IT in

aiding this system. It talks about the emerging IT trends in the application of leagile technology

to gain competitive advantage.

SPECIALS

FEBRUARY 2013 14

of these two concepts within the scope of

one firm or a single supply chain can be

called as ‘‘leagility’. Naylor et al. defined

leagility as “the combination of the lean and

agile paradigm within a total supply chain

strategy by positioning the decoupling point

so as to best suit the need for responding to a

volatile demand downstream yet providing

level scheduling upstream from the

decoupling point.” The decoupling point

separates the part of the supply chain geared

towards directly satisfying customer orders

from the part of the supply chain based on

planning. The decoupling point is also the

point at which strategic stock is held as a

buffer between fluctuating customer orders

and/or product variety and smooth

production output. On the downstream side

of the decoupling point is a highly variable

demand with a large variety of products,

where as upstream from the decoupling

point the demand is smoothed with the

variety reduced. As shown in the diagram

below, the lean paradigm can therefore be

applied to the supply chain upstream of the

decoupling point and thereafter the agile

paradigm can be applied downstream from

the decoupling point as demand is variable

and the product variety per value stream has

increased.

Stalk and Hout in 1990 warned of the

dangers arising from slow information lead-

times in supply chains stating that “the

underlying problem here is that once

information ages, it loses value... old data

causes amplifications, delay and

overhead...the only way out... is to compress

information time''. Overcoming these

problems leads naturally to the concept of

the ``Information Enriched'' supply chain

(Mason-Jones and To will, 1997) wherein

the visibility of demand; by means of timely

information sharing reduces complexity of

control. Harrison and Van Hoek presented

an integrated model for enabling the agile

supply chain in 2005. It consists of four

elements:

1. Market sensitive (or customer

responsive)

2. Virtual (or IT-based sharing of

information)

3. Process integration (of business pro-

cesses)

4. Networked-based (partners with a

common goal).

Market winners and market qualifiers for agile vs

lean system, source: mason-jones et al.

Effective supply chain strategies combine a

range of approaches from operational

flexibility(e.g., postponement, assemble-to-

order (ATO), make-to-order (MTO), and

lead time (LT) reduction), channel

alignment (e.g., contracts, vendor-managed

inventories (VMI), and efficient consumer

response initiatives (ECR)), and joint

decision making through information

FEBRUARY 2013 15

deployment (e.g., point of sale (POS) data,

collaborative planning forecasting and

replenishment (CPFR), and schedule

sharing). The partners are cross-linked and

are all contributing to the value generated

for the final customer.

Examples of IT that enhance supply chain

capability are:

Mobile and wireless technologies for

real-time data collection

Integration technologies (Web

services) for real-time monitoring of

events through Portals

Business process re-engineering and

management tools for business

process automation and redesign of

supply chain system or enterprise

system.

Flow diagram linking Lean, Agile and Leagile

Synchronizing all the essential IT activities

to achieve supply chain agility is crucial. IT

enables a supply chain with a high degree of

visibility, connectivity, responsiveness, and

flexibility. Among different IT

competencies, IT integration and IT

flexibility are deemed to provide the most

obvious contributions to supply chain

agility.

IT integration is defined as the extent to

which information systems are linked and

information is shared among different

functions and supply chain parties, thereby

effectively creating a virtual supply chain

(Knapp et al., 2006; Lin et al., 2006). IT

integration helps coordinate supply chain

functions and partners through the sharing of

information related to demand forecasts,

production schedules, inventory, and

production quality that dictate supply chain

activities (Li et al., 2009). IT integration also

includes the exchange of knowledge with

partners up and down the supply chain,

allowing them to collaborate and to create

synchronized replenishment plans.

IT flexibility is defined as the ability of IT

infrastructure to adapt to both incremental

and revolutionary changes in the business or

business process with minimal penalty to

current time, effort, cost, or performance

(Conboy, 2009; Nelson et al., 1997). It is

characterized by

(1) Connectivity, which refers to the ability

of the information technology

component to attach to other

components within the organization or

with other organizations

(2) Compatibility, which pertains to the

ability to share information across any

FEBRUARY 2013 16

information technology component

within the organization or with other

organizations

(3) Modularity, which denotes the ability to

add, modify, and remove information

technology components with ease and

without negative effect on performance

(Byrd and Turner, 2000; Fink and

Neumann, 2009)

Moderated by the effect of firm scale, IT

competence acts as the foundation of supply

chain competence, in which IT integration

supports a better supply chain integration

and flexibility, whereas IT flexibility

supports better supply chain advancement.

Moreover, inter-organizational collaboration

is important in achieving a complete IT

integration along the whole supply chain,

which, in turn, supports supply chain

integration and flexibility. IT has facilitated

the formation of global supply chain

markets; changed the relationships among

customers, manufacturer, and suppliers; and

accelerated and visualized the product,

financial, and information flows that need to

be accurately and promptly delivered to

reflect the status in the supply chain.

REFERENCES

1. Mason-Jones et al. (2000), Lean,

agile or leagile? Matching your

supply chain to the marketplace,

International Journal of Production

research

2. Martin Christopher et al. (2000 vol.

5), Supply chain migration from lean

and functional to agile and

customised

3. Mason-Jones et al. (2000),

Engineering the leagile supply chain

4. Childerstone and Towel (2000),

Engineering supply chains to match

customer requirements

5. Moron, Haan (2011), Improving

supply chain performance to satisfy

final customers: ‘‘Leagile’’

experiences of a polish distributor

6. Eric W.T. Ngai et al. (2011),

Information technology, operational,

and management competencies for

supply chain agility: Findings from

case studies

7. A. White et al. (2005), The role of

emergent information technologies

and systems in enabling supply chain

agility

8. Cheri Speier et al. ,The Role of

Information Integration in

Facilitating 21st Century Supply

Chains: A Theory-Based Perspective

PULAK JAIN has done B.Tech in Electronic and Communication Engineering from IGIT, GGSIPU

Delhi. She is an avid reader of philosophy and fiction. She can be reached at

pgp12113.pulak@iimraipur.ac.in

FEBRUARY 2013 17

E-COMMERCE AND LOGISTICS

Wind of change in the field of logistics

[POUSALI CHAKRABARTI]

One of the interesting definitions describes

logistics as “having the right item at the

right time at the

right place in the

right quantity to

the right

customer”

(Susan Mallik,

2010). The all-

inclusive

definition talks

about the holistic

nature of the

traditional business logistics – right from

production, procurement, distribution,

inventory management and of course

delivery across the entire supply chain.

Logistics industry used to rely heavily on

individual skill and dexterity of the

employees. Efficiency used to be thought as

an outcome of practice. However, with

invent of technology, especially with

information technology, revolution is

happening across the business sectors.

Logistics industry also has become equipped

with new ways of doing things. In many

instances, manual labour has become

eliminated or has been reduced significantly.

Skill requirement has enhanced as well, in

terms of grasp and capability around the

new methodology. The new skill set

required includes efficiency in using new

technologies; the faster one gets hold of the

technology and starts using to its full

potential, the stronger it makes it presence

felt in the

industry. IT-

Operations

integration paved

way for a faster

and smoother

logistics industry

by reducing the

frequent errors

and glitches.

With the advent of e-commerce, nature of

business is undergoing changes. Along with

it, the conventional logistics problems are

also changing. Earlier the process used to be

supplier driven, whereas now the drive

comes from the customer. It is more of order

fulfillment rather than stocking. The good

old logistics is getting changed. Typically, in

Indian e-commerce industry, the back-end

operation is often outsourced to some

logistics firm who would take care of the

physical supply-chain process with the e-

commerce sites providing the user-interface

with the front end operations. However,

there are a few players who do manage their

own distribution network partially.

In a conventional supply chain, there are two

distinct players in between the

manufacturers and the customers. In the e-

SPECIALS

FEBRUARY 2013 18

commerce business, the middle two layers

are becoming more and more overlapping.

In the conventional structure, the

warehouses used to be located in the

distribution level of supply chain across

various places including both rural and

urban locations. However, in e-commerce,

the warehouses are often integrated with the

manufacturing stage and are located in

outskirts of a medium to big city. According

to the order placed online, the goods are

moved to the exact locations in smaller

truckloads. The transportation has become

more frequent and less bulky. At the same

time, the transportation need has become

more intensive because of the B2C

(Business-to-Customer) outlook. This shift

in the logistics eventually has impacted the

whole supply chain. Since there is no

physical presence of retailers in e-

commerce, the retailing objective has been

changed entirely. Instead of making a good

physically available to the customer through

the intelligently planned retail layout, the

retailers are attracting customers online

through pages. There too, competition is on

for giving the customer more and more real

life look and feel of a product. Order-to-

delivery time is also increasingly becoming

a competitive feature for the various e-

retailers. As a result, the onus is often on

these retailers so far the stocking or

inventory management is concerned for a

particular product. For instance, let us take

the example of e-retailing of a novel by

Chetan Bhagat just before the launch of the

movie made on it. It is expected that there

would be huge demand for the book. Since

publishing rights would be restricted, there

would be a limit over the number of prints

available of the book. So, the various e-

retailers would eventually be competing for

the share of an almost fixed pie. The more

the stock, the more profit a company would

make. The more profit a company foresees,

the more discount it can offer. The more

discount is on, the more is the chance of a

money transaction by the customer.

More and more e-commerce sites are now

investing in strengthening their logistics.

They are cutting on the outsourcing. One

prominent example would be Flipkart. As a

start-up, it started in 2007 in the Amazon

model. Becoming the most popular choice

for online book-retailers, Flipkart has

ventured into FMCG, apparels and small

and medium sized electronics as well. It has

now 7 warehouses across 25 cities to cater to

the customers.

However, building your own logistics does

not necessarily mean that you have to cut

down on outsourcing. Specially, in a

country like India, where distribution has

always been an issue for some and also the

competitive advantage for some others, it

does make sense to reach as many customers

as you can by all means. Naaptol has been

following the same strategy of a mixed

distribution. They are continuing to follow a

mixed model where they are outsourcing, as

well as banking on the self owned delivery

mechanism for the last mile delivery.

According to Naaptol, in Indian e-commerce

context, the mix-model will rule for at least

a while as to have a fully self owned

logistics will need money and the revenue –

investment only manages to provide a slow

but steady support in the entire process.

FEBRUARY 2013 19

As far as the challenges are concerned, one

major challenge in e-commerce lies in the

geographically and demographically

dispersed traffic these sites cater to. In a

conventional retail based supply-chain

system, it is comparatively easier to

understand your customers, their needs and

also to trace their purchase patterns.

However, in case of an e-commerce site, the

trend analysis could be difficult. Here comes

the demand of better analysis procedure.

Often, the information provided by an online

shopper is so minimal in nature, it is

practically impossible to trace any sort of

correlation between his or her background

and purchase pattern. This problem qualifies

to be a two-way sword as it puts you in a

dilemma whether to ask your customer

about personal information or to make the

process as hassle free as possible for the

customer. Bombarding the customer with

questions makes you lose to your

competitors and otherwise you end up losing

the factor which connects your customer to

you. We must also acknowledge the

dynamic nature of e-commerce in contrast to

the traditional business. Here, the customers

are from varied background. Since, there is

no geographical boundary; the customer

base is also continually changing. Challenge

remains in correct prediction of the demand.

One solution to mitigate the risk of faulty

prediction could be to switch to a dynamic

business model altogether. This model will

ideally have zero or negligible inventory and

also a supporting strong distribution so as to

minimize the order fulfillment gap.

It is true that e-commerce rejects many of

the facets which were crucial for

conventional logistics problems. For

instance you no more need to worry about

your physical shelf space, physical layout

design. But, at the same time, e-commerce

also introduces many newer aspects to the

logistics problems. E-commerce calls for a

more dynamic, more versatile framework of

logistics. In order to achieve that, we need to

have an efficient data-collection and

analysis methodology. This, together with a

dynamic and flexible implementation, will

help us integrate the e-commerce and

logistics.

References: [1]. Susan Mallik (2010). Hossein Bidgoil.

ed. The Handbook of Technology

Management: Supply Chain

Management, Marketing and

Advertising, and Global Management,

vol 2 (1 ed.). Hoboken, New Jersey:

John Wiley @ Sons, Inc.. p. 104

[2]. E-commerce matures, players invest

in logistics, warehouses, Business

Standard

[3]. Anshoo Sharma, AEmerging Trends In

Indian E-Commerce: On Logistics, No

Poach, Payment Gateways & More,

http://www.medianama.com/2012/05/22

3-emerging-trends-in-indian-e-

commerce-on-logistics-no-poach-

payment-gateways-more/

POUSALI CHAKARBATHI is an Electronics and Instrumentation Engineer from Heritage Institute of

Technology. Her interest areas are Operations and Supply Chain. She can be reached at

pgp12032.pousali@iimraipur.ac.in

FEBRUARY 2013 20

TRENDS IN THE AUTOMOTIVE INDUSTRY

The Journey of Automotive Industry with Information

Technology

[S SRINIVASAN]

In the Indian context, while computers made

their mark in operations as much as half a

century ago, there has been a profound shift

in their role in business. Earlier they were

confined largely to processing data in

commercial areas such as payroll and

purchase where their utility was seen in

number crunching operations. On the other

hand, today they are integrated to such an

extent into the operation that the line

separating business and Information

Technology, is fast disappearing.

If we were to broadly analyze the impact of

Information Technology on business in the

automotive industry, we would see the

following phases. In the opening phase, the

role of IT was almost exclusively to save

clerical effort. This was marked by

applications such as payroll and billing in

large organisations, where large mainframe

systems could compress the time for such

documentation and bring high levels of

accuracy in mass scale work. The style of

doing business was however, completely

Mr. Srinivasan S (Chief Information officer – TVS InfoTech) has over 38 years

of experience in materials management, corporate planning, manufacturing

planning, logistics and information technology in leading organisations in

India and Oman. In his tenure at Sundram Fasteners Ltd., he implemented

SAP at a dozen plants of various types and sizes and also handled all aspects

of IT, ranging from hardware and software to connectivity and special

applications.

Srinivasan is a B Tech from IIT Madras and an MBA from IIM Calcutta.

He was nominated by the Automotive Component Manufacturers Association

(ACMA) to discuss the methodology of data exchange with vehicle

manufacturers and was deputed by the Ministry of Commerce to UN-ESCAP

for understanding EDI and data exchange issues.

FROM THE INDUSTRY

FEBRUARY 2013 21

"Information Technology is a

very powerful tool and the

ultimate benefit can be extracted

only when the application

directly impacts business"

unaffected. Next, with the advent of desktop

systems in the eighties, the emphasis shifted

to empowering individual users to create

their own local applications, which would

bring relief to the user. This was based more

on individual creativity and hence users

developed applications more from the

viewpoints of their interest and ability.

Typical applications revolved around

information that had to be submitted

periodically to some authority such as daily

material receipt or cash collection data.

Some relief was available to individual users

but again, these were in pockets and did not

materially alter the business scenario or the

overall working environment in any

significant way.

In the nineties, the emphasis shifted to the

use of IT over a wider horizon, marked by

the introduction of larger applications such

as Enterprise Resource Planning and the use

of advanced software in technical areas such

as planning, design, quality and

manufacturing. These helped to tackle some

of the chronic issues such as, suboptimal

decision through the use of inappropriate

local applications, or, difficulty in churning

out drawings and developments

expeditiously, with changing customer

requirements. In addition, with the shift to

larger servers with wide area connectivity, it

became possible to give access to large

number of users at different locations and all

could share information from the same

database. Real time systems became the

norm and across the organization, the

integrity and consistency of information

were enhanced substantially.

It is significant to note that through all these

transformations, several areas were being

addressed such as cost reduction,

information reliability, rapid developments,

quicker processing and enterprise wide

participation. However a key aspect was still

missing. Information Technology is a very

powerful tool and the ultimate benefit can be

extracted only when the application directly

impacts business. One index is that final end

customers, outside parties, agencies and

institutions with whom the business

enterprise has a relationship should perceive

the benefit of technology and two, business

itself needed to go through a change, in

order to be relevant in the changing world.

From these viewpoints, several changes are

occurring in the business environment that

can be traced to the powers of technology.

Having seen the various phases of IT

applications in the industry, it would be

useful to examine in depth, some of the

developments taking place as of now.

The business process starts logically from

the customer and it would be interesting to

see the developments taking place here.

Customers demand immediate and complete

information. In the automotive industry

unlike the old days, this takes the shape of

enormous choice of models, variants,

colours and products, each of which is

processed appropriately so that the customer

gets delivery on time. This backward

FEBRUARY 2013 22

“Vehicle manufacturers insist

on systematic documentation

of production through well

defined processes and IT plays

a part in the generation of

such documents.”

scheduling of customer deliveries is

facilitated by complex dealer software that

absorbs inputs in the form of customer

preferences and translates these into

shipping schedules from the manufacturers.

In turn these are exploded further into part

requirements from various suppliers so that

they get a schedule for delivery of parts in a

seamless manner.

Engineering and design software play a key

role in product development and in ensuring

rapid turnaround of new products to gain

competitive position in the market place. In

addition to providing a design platform,

such tools are performing a range of

comprehensive functions. These include

a) Search mechanisms for locating similar

products or tools to avoid reinventing the

wheel during a new product

development,

b) Providing a framework for traceability

so that the complete history of design

changes, their impact on the inventory of

products, remedial action taken and final

resolution of inventory are all preserved,

to enable future investigation.

Collaboration between suppliers and vehicle

manufacturers is the name of the game and

increasingly business processes are

becoming collaborative in nature. Areas

include design and development where

customer and supplier cooperate over the

web electronically for product design and

development, submission of product data,

display by manufacturers of supplier

performance parameters and conducting

transactions through portals.

Being the heart of an automotive enterprise,

manufacturing has evolved significantly in

the use of technology. Use of shop floor

automation through either hand held devices

or through SCADA and similar technologies

help to control groups of machines and their

outputs, as also to report production. Also

machine performances, downtimes and

reasons are being captured through such

avenues. Vehicle manufacturers insist on

systematic documentation of production

through well defined processes and IT plays

a part in the generation of such documents.

An area that is well addressed is planning at

the shop floor level as well as the enterprise

level through advanced planning software

and Manufacturing Resources Planning

software. At the shop floor level, the

challenge is to optimize a deliverable such

as customer satisfaction and to arrive at the

best manufacturing plan for the week,

month, quarter or the year. Complexity

arises since the best plan to maximize sales

may not maximize other parameters such as

profits or customer deliveries or satisfaction.

While scheduling looks at these issues, MRP

goes beyond, to generate or regulate orders

for supply of materials and requirements for

all the inputs necessary to make the final

product. Other developments that are

helping to bring sophistication in shop floor

operations include

a) Supplier portals that assist in interaction

with suppliers through electronic mode

for all transactions

FEBRUARY 2013 23

b) Quality control tools such as in- process

gauging, calibration software to monitor

the quality of gauges and statistical

quality control software for real time

quality analysis.

Shop floor material management and control

is a crucial area since day to day shop floor

scheduling has to be based on the position of

material availability. Demands by various

agencies such as auditors, excise authorities

and customers are compelling organisations

to have clear data on material movement

between manufacturing organisations and

their subcontractors and customers, as also

accounting of rejections, scrap,

reconversions and dispatches. With large

volumes of transactions involved, stock

status and monitoring has become a concern

area and this is a focal point for every

commercial and enterprise software.

With customers demanding Just in time

(JIT) based deliveries, there is a major need

to build complete transparency in the final

delivery. This is required to empower field

personnel who interact with customers, to

apprise them of delivery position. This calls

for total integration of data between

manufacturing, transport and warehousing

organisations. A well executed integration

facilitates the tracking of consignments with

clear geographical location, from the

moment they leave the manufacturing unit,

till the time the customer accepts the

material. To enable tracking of products

with high level of accuracy, several aids

such as barcodes and RFID tags are being

employed in the dispatch and warehousing

process.

Finally we come to current developments

where technology and products have started

to merge. With a view to vastly enhance the

reliability of vehicles, developments are

taking place wherein software will reside in

the vehicle and operate, to close a vital need.

The simpler examples are where vehicle

controls can be made to respond to

individual drivers based on say fingerprints

or biometrics and everything from seat to

mirrors can be automatically adjusted based

on the driver. The more advanced involve

applications using software embedded in

components such as engines or brakes so

that the component behavior can be

transmitted directly to say service centers,

which can diagnose faults and prescribe

remedies.

Thus, the impact of information technology

in automotive organisations spreads not only

into the management of its operations but on

to the end product itself. Success of

organisations depends on their ability to

foresee customer preferences, emerging

business processes and other changing

requirements and adopt technology to

suitably close the gaps.

FEBRUARY 2013 24

“One of the major challenges

that we faced was scaling up

really quickly while

maintaining the high service

levels.”

INTERVIEW WITH PRAVEEN SINHA

Co-founder and Managing Director at Jabong Founding Jabong.com in the autumn of 2011, Praveen Sinha

envisions an online E-commerce portal that delivers the trendiest

and the fastest, while inducing a memorable customer experience.

The present sees him as MD and Co-founder of Jabong.com,

however, his past achievements bring to light someone who is considered a maven in

start-ups and a turnaround specialist. Having worked in companies like Microsoft, Maruti

and Mckinsey, he has also played a pivotal role in effectuating energy conservation

initiative across the span of Asia. In addition, known for a keen interest in new business

initiatives, like establishing Aquabrim, he exhibits an immense passion for

entrepreneurship that is highlighted in his frequent sharing of work experiences and

insights at various institutes like IIMs, XLRI, Great Lakes to name a few.

1. What were the reasons behind

taking up an entrepreneurship route

when you had the safety of a corporate

life?

The idea to start business was there since my College days, during my MBA in IIM C I started my first venture - Aquabrim.com which is still active and present in NCR and has plan to go to national level. However finally, I left Mckinsey and got full time into start ups with Jabong.com as opportunity was huge and I was prepared to take the required risks and challenges

2. What are the factors that you would

look into while investing in a start-up?

I think investing in a start-up is about believing in the quality of the team, the size of the opportunity and the scalability of the idea. While the idea can be worked upon or pivoted, the core team cannot be changed; hence

investing in a start-up is a huge bet on the team.

3. Could you please tell us about the

idea that resulted in establishment of

Jabong.com?

After assessing the utility and popularity of

e-commerce in electronics market, I realised

that there was a huge scope in the arena of

fashion and lifestyle. Given the economies

of changing lifestyle patterns, e-commerce is

the future of retail and Jabong.com was

established to capitalize on this huge

opportunity as I had a firm belief that India

was ready for it.

FROM THE INDUSTRY

ENTREPRENEURSHIP

FEBRUARY 2013 25

“We have also built

strong, cross-functional

teams to ideate and

improve processes.”

4. Could you please explain the work

culture at Maruti and McKinsey? Also,

what was your most important

learning from your experience in these

companies?

Maruti as an organization takes pride in

some of the best practices prevalent in the

industry. The operational excellence and 5S

processes are the way of life at Maruti.

Working with large teams under stiff

timelines and disciplined execution are the

key learnings for me.

Mckinsey, on the other hand, gave me an

opportunity to work on a varied set of

assignments across industries. The challenge

was to walk into a company, understand the

problem and turnaround quickly with

workable solutions. Developing the ability

to add value and create a significant impact

was the key takeaway for me.

5. What were the major supply chain

challenges faced by you while working

in Maruti Suzuki Limited?

Maruti’s operations thrive on efficiently run

supply chain. One of the major challenges

was to maintain the service level, given the

involvement of multiple stake holders and

operational complexities.

6. Could you please give us some

examples on how IT is leveraged by

Maruti Suzuki to solve their issues in

Operations and Supply Chain?

The scale of operations cannot be managed

without strong IT backbone. Maruti has a

strong IT system to support all its

operations. In fact, IT has helped in multiple

froms by not only bringing in efficiency in

operations but also reducing overall cost of

operations.

7. What have been the major issues in

the Operations and Supply Chain of

Jabong.com and how have you resolved

them?

One of the major challenges that we faced

was scaling up really quickly while

maintaining the high service levels. From

day one, we were clear that whatever we

build has to be scalable. To achieve this, we

adopted modular approach so that processes

could be replicated and scaled easily. We

designed the capacity on base load but

developed flexibility in the system to take

care of peak demand situations. We

leveraged technology wherever possible to

automate or semi-automate the processes.

We also made adequate checks and took

measures through detailed and intelligent

MIS reports which helped us in identifying

our areas of improvement.

WORK EXPERIENCE

OPERATIONS AND SCM

FEBRUARY 2013 26

8. Jabong.com claims to deliver

products in top 10 cities within 48

hours and to other places within 1-3

days, while it is delivering products on

the same day in metros like Delhi.

Could you please explain how

Jabong.com has achieved this

remarkable feat within one year of its

inception?

We have actually revolutionized the industry

by offering same day delivery in Delhi NCR

and next day delivery in metros. It has been

a team effort and has been achieved by

strong co-ordination across functions like;

customer care for order confirmation,

warehouse for order processing and logistics

for delivery. We have also built strong,

cross-functional teams to ideate and improve

processes.

9. Flipkart has started its own courier

service, perhaps to reduce their

dependence on third party courier

services. Does Jabong.com have any

such plans?

JaVAS, which stands for Jabong Value

Added Services has been operational for

almost as long as Jabong.com has been

taking orders from customers. It is currently

present in close to 50 cities. The same day

and next day deliveries mentioned have been

achieved through JaVAS.

10. Could you please let us know how

Information Technology is leveraged

by Jabong.com in its Operations and

Supply Chain?

Information & technology is the backbone

of our warehousing, customer care and

logistics operations. We have implemented

ERP at warehouse and built CRM and

logistics management systems for in-house

operations. In addition, we have introduced

Mswipe facility at the point of delivery and

developed content management system for

production.

11. Wal-Mart has the largest

information technology infrastructure

of any private company in the world.It

helps Wal-Mart to accurately forecast

demand, track and predict inventory

levels and create highly efficient

transportation routes. Is Jabong.com

using any Demand forecasting tools so

that it can reduce inventory levels and

forecast demands effectively?

Being in the e-commerce industry, we have access to consolidated data involving clicks and page views on our website. We have also gone granular in our customer segmentation. We have a dedicated forecasting team which uses state-of-the-art methodologies and tools to predict the demand based on the huge chunk of data as well as industry trends.

12. Jabong.com is now the most

trafficked e-commerce site in India.

What are the steps taken by

Jabong.com to achieve this?

We always believed in big bang approach to

enter the market and went for online

advertising aggressively at the start of last

year, which was complemented by presence

in traditional advertising channels like

television and radio. We have strong focus

on organic growth through Google and

Facebook which helps in driving hits to our

web shop. Aligning all our operations with

these steps, we ensure customer delight

JABONG.COM

FEBRUARY 2013 27

“E-commerce is still

evolving in India and the

current players are

focusing on expanding the

market - getting more and

more end users to transact

online.”

which is a result of high standards in service

and product quality to help spread the

customer base and loyalty.

13. How do you see the future of

online retailing in India, given the

tough competition and thin profit

margins?

E-commerce is still evolving in India and

the current players are focusing on

expanding the market i.e. getting more and

more end users to transact online. This is a

long drawn process as it involves changing

habits. In this quest for new customers,

companies are offering free shipping,

returns, COD, etc which are impacting the

margins. In our view, after a few years, there

will only be a few large players and a set of

few niche players who would successfully

maintain profitability.

14. How does Jabong.com

differentiate from other players in the

e-retail segment?

The DNA of Jabong.com is all about widest

assortment, speed, efficiency and process

excellence. We differentiate ourselves in

being the first to get new styles and options

on our website, first to get the products

shipped to the customers and the first to

refund customer’s money in case of returns.

In the process, we have redefined the market

by introducing options like instant returns

(open delivery), same day delivery in NCR

and next day delivery in metros, instant

refunds, etc. And we have done it on a large

scale.

15. Does Jabong.com have plans to

enter into Brick and Mortar models of

retail?

Jabong.com believes that in the long run, e-

commerce is a scalable and cost efficient

way to reach out to maximum customers.

We do not plan to enter into offline retail.

However, we have and may continue to have

some strategic, located touch points to create

awareness, establish customer connect and

build trust.

16. What is the one advice that you

would give to young managers aspiring

to join the supply chain management

sector?

Supply chain is about continuous

improvement and operational excellence. In

order to bring in significant improvements,

it is important to get into the details of each

process, understand the involvement of

stakeholders and work on incremental

improvements. It is very easy to fail in this

sector; however, to be successful, one needs

to work diligently and have strong checks

and balances. This sector gives huge

opportunity to create next level of service

experience.

GENERAL

FEBRUARY 2013 28

Prof Sumeet Gupta is a professor in the area of Information and Technology Systems. His areas of research includes Management Information Systems (Technology Adoption), Virtual Communities, Supply Chain Management. He Is a member of Association of Information Systems, USA. He has numerous paper and publications in the field to his name.

RFID IN INDIAN RETAIL SECTOR

[PROF. SUMEET GUPTA & AKSHAY AGARWAL]

It was in the year 2005 that Wal-Mart made

it mandatory for its suppliers to use RFID.

In 2008, the Future Group incorporated this

technology in their operations through a tie-

up with Cisco Systems. Given that the

technology isn’t new, and has huge potential

to tackle many issues in modern retail

sector, its penetration has been rather slow.

RFID tags were first used commercially in

1960s by Sensormatic, Knogo and

Checkpoint which developed systems to

counter the theft of merchandise. At that

time, they could only detect the presence or

absence of tags; however the tags could be

made inexpensively and hence were quite

effective in reducing pilferage. These

systems were known as Electronic Article

Surveillance (EAS).Over half a century

later, widespread application of this

technology is still in its nascent stage.

Issues The various hurdles on the way of wide

acceptance of RFID systems can be

categorized as either technical or

managerial. The major technical issues are

1. Collision: RFID tag readers face

problems when they 'collide' with each

other. The signals from one reader may

interfere with those from another, especially

when their physical coverage overlaps.

2. Lack of allotted frequency band: RFID

works on radio waves, which are regulated

by the governments all over the world.

There exists no international agreement on

the frequency band to be allotted for RFID.

Given that this technology can heavily

change the face of supply chains globally,

this is a huge hindrance in the way of its

global adoption.

3. Signal detection and interference: The

RFID tags also have a tendency to interfere

with each other's signals, thus making it

difficult for the tag readers to detect them.

Adding to the difficulty, the signals are

partially blocked by certain types of

packaging materials, metals and liquids.

On the other hand, the following are the

managerial issues:

ACADEMIA

FEBRUARY 2013 29

1. Lack of Technology Standards: Many

organizations prefer to have their own

proprietary RFID systems because of the

fear that their RFID tags could be read by

their competitor, leading to a serious leak of

sensitive information. Thus it has been very

difficult to reach a consensus on a universal

technology standard for RFID.

2. Lack of Acceptance by Supply Chain

Partners: Even a giant like Wal-Mart had

faced some difficulties in implementing

RFID in its supply chain due to resistance

from some of its supply chain partners.

RFID might not make sense to everybody,

especially given the high initial costs of

implementation.

3. Returns on Investment: Implementation

of RFID usually costs a lot and the break-

even period and returns on investment might

not be acceptable for every retail business.

4. Customer Privacy: Some of the

applications of RFID come with a baggage –

customer privacy issues. Hence a lot of

contemplation has to be done on these

aspects.

5. Data Management Problems: RFID

systems generate a lot of data in real time.

Managing this data would require major

changes in the data structures of master files

to maintain consistency across the firm and

its value chain participants.

6. Expensive for Low-Value Merchandise: The cost of RFID tags varies from Rs.5/- to

Rs.100/-, largely depending on the type –

passive (not self-powered, derives power

from the signals of the tag reader), Active

(completely self-powered) and Semi-

passive. Even the cheapest RFID tags would

not justify their item-level application on

low-value merchandise like small toys,

chocolates etc. Currently, the tags are used

on pellet-level, box-level or container-level

in such cases, thus limiting its capabilities.

APPLICATIONS

Now let’s have a look at some well-known

applications of RFID in retail sector:

1. Out-of-stock Warning: Stock out is a

bigger evil than excess inventory in retail.

RFID tag readers can detect the number of

units of each SKU on the shelf in a retail

store in real time. This enables the

implementation of an out-of-stock early

warning system. This system can also be

integrated into a vendor-managed inventory

platform. The same concept would work in

warehouses, thus benefitting the whole retail

supply chain.

2. Shoplifting: Shrinkage, i.e. unaccounted

losses in retail, is perhaps the most daunting

reality for retail businesses, and its major

cause is shoplifting. It should also be noted

that the RFID usage mostly seen around us

relates to security of the merchandise, which

shows that the benefits of RFID in this

aspect already exceed the investments.

3. Supply Chain Visibility: The ability to

detect each unit or pellet of each SKU in

retail setup as well as warehouses and even

during transportation (RFID readers can be

placed in the vehicles and connected to the

GPS) can be translated into very high

visibility across the supply chain. This helps

in combating the dreaded bullwhip effect,

making better forecasts and avoiding

shrinkage and other losses in the supply

chain.

4. Rapid Inventory Counting: Inventory

counting is an essential exercise in any retail

business to avoid or at least detect

shrinkage. It is executed very frequently in

FEBRUARY 2013 30

high-value retail businesses, eg. once every

24 hours in some jewelry retail outlets. But

even in FMCG retail, it is done once every

few months. Needless to say, inventory

counting is heavy on both manpower and

time. RFID can make this process very

quick and easy.

5. Rapid Check-out: Though shopping in

an organized retail setup has become a

means of social interaction and recreation

for many consumers, it also has some trade-

offs, and the worst, undoubtedly, is waiting

in a queue for checking out. The currently

popular UPC (Universal Product Code)

barcode system makes a particular

alignment of the barcode with the barcode

reader necessary for proper detection and

reading. This, and the fact that each item in

the shopping cart must be read individually,

constitute a major part of the waiting time of

the customers. RFID system would allow

almost immediate check-out and virtually

zero waiting time by reading all the items in

the shopping cart instantaneously and in one

go.

There are also some potential applications of

RFID that are not so obvious, like:

1. Identifying Consumer Behavior

Patterns: This is already being done with

the help of membership cards by recording

and analyzing the buying patterns of the

respective customers (card-holders). To go

further, RFID tags can be embedded in the

smart shopping cards, and then the presence

or absence of the respective customer in the

store can be detected. In fact, it is possible to

track even the movement of the customer

within the store. This data can throw up

new, fruitful insights in consumer behavior.

It is also technologically possible to identify

how customers observe and react to different

items on offer in the retail store. For

example, for a particular SKU’s trial pack,

the number of times it is picked up and

placed back on the shelf can be determined.

2. More Efficient After-Sales Services:

The ability to uniquely identify a particular

product can be used to create a history of its

service which is easily accessible. This

would be something similar to sharing of a

person’s medical history across different

hospitals for better diagnosis.

Though we have a long way to go before the

huge potential of RFID is identified and

utilized by the retail industry, the hopes have

gone up owing to the recent developments in

“FDI in Retail” and the efforts of

organizations like EPCglobal Inc.

Acknowledgement: The author

acknowledges the help and support from Mr.

Akshay Agarwal, a student at IIM Raipur.

References

1.Sumeet Gupta, Sanjib Pal; An Analysis of

Issues and Possible Remedies in the

Adoption of RFID in Retail Chains of India,

in Cases on Supply Chain and Distribution

Management, IGI Global, Eds.

MitiGarg&Sumeet Gupta, Pgs. 387-400.

2.http://articles.economictimes.indiatimes.co

m/2008-03-25/news/28387628_1_retail-

biggies-future-group-future-in-hypermarket-

format

3.read.pudn.com/downloads165/doc/comm/

755010/RFID.doc

FEBRUARY 2013 31

IMPLEMENTATION OF CORE BANKING IN STATE BANK OF

INDIA

[SHWETA MALLICK]

A graduate in life sciences from Patna University and has an experience of working with both SIDBI -a

financial institution and SBI for more than five years. She is presently pursuing her PGPM from IIM

Raipur. Her areas of interest are corporate banking and business strategy. The author can be reached at

pgp12041.shweta@iimraipur.ac.in

With the advent of private-sector banking,

banking sector witnessed implementation of

modern centralized core banking systems

and electronic delivery channels that

allowed introduction of new products and

provide greater convenience to customers.

Due to which, the private-sector banks

attracted the major chunk of middle and

upper-class customers at the expense of

existing old public-sector banks. Foreign

banks such as Standard Chartered Bank and

Citigroup used their advanced automation

capabilities to gain market share in the

corporate and high-net-worth markets. To

remain competitive with its private-sector

counterparts SBI began the implementation

of a centralized core banking system in

2002. The State Bank of India selected Tata

Consultancy Services to customize the

software and to implement the new core

system, and also to provide ongoing

operational support for its centralized

information technology.

The implementation of the Tata Consultancy

Services (TCS) BaNCS-24 Core Banking

software at the State Bank of India (SBI)

and its affiliate banks represents the largest

centralized core system implementation ever

undertaken. It included the conversion of

approximately 140 million accounts held at

14,600 domestic branches of SBI and later

also at its affiliate banks. Unlike private-

sector banks, SBI has a dual role of earning

profit and expanding banking services to the

population throughout India. This tradition

of "banking inclusion" later posed a major

challenge to core banking implementation.

SBI had undertaken a massive

computerization effort in the 1990s to

automate all of its branches when it

implemented a highly customized version of

Kindle Banking Systems' Bank-master core

banking system. However due to the

extensive use of local processing and the

lack of reliable telecommunications in some

areas, it deployed a distributed system with

operations located at each branch. In 1992, it

had just one fully-computerized branch - at

Nariman Point. During next ten years, it

computerized about 4,000 branches. By

2004, it managed to complete its

computerization drive by connecting all of

its 9,000 branches (then). The

computerization task has often been

WORK EXPERIENCE

FEBRUARY 2013 32

“In 2005, the bank suffered a

loss of transactions for about

three days, when the nation

fell prey to the Tsunami as no

separate hubs were established

and there wasn’t any disaster

recovery plan in place.”

compared to something like repairing a car

engine while it is running. SBI now boasts

of 14,000 plus computerized branches, apart

from a heavy balance sheet to the tune of Rs

13.35 trillion. It now has about 8.96 million

Internet banking customers out of the 154

million savings bank account holders. More

than 22,000 SBI ATMs across the country

today serve customers. In 2011-12, SBI

again topped the charts in terms of growth in

operating profits at 24% as against 14-16%

recorded by ICICI Bank and HDFC Bank

Ltd.

In 2002, it approved the KPMG-

recommended strategy for a new IT

environment that included the

implementation of a new centralized core

banking system. This then encompassed the

biggest 3,300 branches of the bank that were

located at major places.

The main objectives were:

Delivering of new product capabilities

To unify the processes across the bank to

realize operational efficiencies and

improve its customer service

Provide for a single customer view of all

accounts

Ability to merge the affiliate banks into

the State Bank of India

Support for all SBI existing products and

provide for developing new ones

Reduced turnaround time and controlling

the customer attrition

The bank faced several extraordinary

challenges in implementing a centralized

core processing system. These challenges

included finding a new core system that

could process approximately 75 million

accounts daily — a number greater than any

bank in the world was processing on a

centralized basis. Also, the bank lacked

experience in implementing centralized

systems, and its huge employee base took

great pride in executing complex

transactions on local in-branch systems. This

practice led to a doubt whether the

employees would effectively use the new

system or not. Another challenge was

meeting SBI's unique product requirements

that would require the bank to make

extensive modifications to a new core

banking system. The products range from

gold deposits (by weight), to savings

accounts with overdraft privileges, and

activities like posting of extraordinary

number of passbook savings accounts

amongst others. The services it provides

vary between extremes from boutique

banking to mass banking in rural areas.

The migration of existing software Bank

Master and Credit Information System for

Loan & Advances (CISLA) to single

software of BANCS – 24 was a challenge.

The branches were migrated from local

server to servers situated at CBD, Belapur. It

was difficult to manage as now the branch

had to deal with the suspense/dummy

accounts managed at central as well as local

level. There was a lot of duplication of data.

FEBRUARY 2013 33

ATMs which were initially connected with

the local server at branch were now to be

connected with the central server and entries

pertaining to disputes now to be handled by

the central team. The basic transactions of

clearing and funds transfer to other branches

which initially would have been done

through suspense accounts and taken

days/months to reconcile were now online

and any wrong entry would have created

havoc for the customers. Account opening

process which was best at the local level as

branch was sure about the credentials of the

customer, now needed a thorough

verification as customer could transact from

any part of the country. Overall, the bank

was now more vulnerable to mistakes

caused by non-reconciliation of entries, any

erroneous data entered and the risk of fraud

was higher than in the earlier system and

could send a panic wave across the

organisation and a bad repute among the

customers. Apart from this, branches which

migrated from manual transactions to

computerized environment faced lot more

challenges in installation of hardware /

software, training of employees and

managing network – WAN/Leased Lines

were major challenges. As the branches

were spread across country ranging from

planes to hilly terrain, geographical

constraints came across as one of the factors

that the bank kept in mind while setting up

its branches and ATM network. Constraints

ranging from installation of V-SAT to

arranging the leased line in interior parts of

the country for smooth banking experience

to the locals were severe. In 2005, the bank

suffered a loss of transactions for about

three days, when the nation fell prey to the

Tsunami as no separate hubs were

established and there wasn’t any disaster

recovery plan in place. The organisation was

midway in the transition between

Bankmaster and BaNCS -24 and thus

suffered huge loss in business and repute.

Also, as the employees were not fully

acquainted with the technology, frauds took

place in the branches wherein the funds

from internal accounts of Bank were

misappropriated due to lack of track and

supervision of suspense accounts (inter

branch funds transfer, charges accounts,

interest payable/receivable accounts etc.).

The banks were not only supposed to train

staff on IT security, but also to educate their

customers on compromise of passwords and

ATM pins. Phishing, spam attacks and

cloning of cards were now the challenges

faced by the banks.

The contract for the initial project was

completed in May 2002 and the target was

to complete converting 3,300 branches by

mid-2007. TCS then began a gap analysis

effort to determine the required software

changes to the BaNCS-24. The changes

included installing required interfaces with

more than 50 other systems as well as

making enhancements to support the bank's

product requirements. They placed a priority

on the needed changes that would allow

branches with high-net-worth individuals

and then corporate accounts to be converted

as soon as possible. The primary data centre

was established at Navi Mumbai and a

backup centre was established at Chennai.

The bank then also decided to extend this

core banking implementation to include all

of its (then) eight affiliate banks. TCS

created a separate processing environment

FEBRUARY 2013 34

within the Mumbai data centre used to

provide support SBI. The conversion effort

for each of the affiliate banks spanned 18 to

24 months. The branch conversions

overlapped among the banks, allowing all

the affiliate banks to be converted in 30

months.

No matter what application/technology an

organisation adopts, it is the people who will

be required to enable the effective

implementation and smooth transition of

products and services toward new systems.

Employees need to gain education and

expertise in these systems to enable the

banks to leverage on the investments and

convert them to returns. It has been observed

that large technology initiatives usually face

a lot of resistance to change and low

acceptance by the employees and therefore

become the main reason for the failure of

such implementation. Bank needed to focus

their efforts on the training and education of

employees to enable the successful

implementation of their information

technology and convert the heavy cost

incurred into returns. In SBI, where many of

the employees were about 50 + years,

adoption of technology and its

implementation been a major challenge.

Apart from the employees, the bank is still

facing an uphill task in convincing its

customers to increase the usage of net

banking/mobile banking services offered by

the Bank.

Several critical factors contributed to the

success of the SBI core banking

implementation:

• Senior management commitment

• Staffing and empowerment of project

team

• Ownership by business heads

The bank has further launched various

platforms to reduce human intervention and

provide for increased automation to serve

anywhere, anytime like mobile banking

(though, IMPS (Inter Bank Mobile Payment

Services) facility is yet to be fully

functional), internet banking, offering

several value-added services through their

electronic channels such as tax collections,

trading, bill payments, and viewing demat

accounts, electronic funds transfer etc.

The various electronic delivery platforms

have helped the bank to reduce the crowding

of lobbies, transactional cost of branches

and also the stationery cost of vouchers &

instruments incurred. The technological

advancement has helped in reduction of

customer complaints. The new core system

has resulted in benefits throughout the bank

for both the customers and the employees of

SBI. The new core banking system has

allowed the bank to redesign processes,

establish regional processing centers, and an

increase in employee productivity.

Implementation of the TCS BaNCS system

has provided the bank with the ability to

consolidate the affiliate banks into SBI.

FEBRUARY 2013 35

ROLE OF IT IN OPERATIONS

Learning from the IT industry

[VIRINCHI ACHARALU M]

As time passes, it can be observed that a

luxury becomes necessity. Telephones for

example which once were luxury is a

necessity now. Imagine a company which

operates millions of transactions and handles

terabytes of data every day. You can simply

state that there is no choice. Information

Technology has a huge role to play in day-

to-day operations of such a company so

much so that, you have to change your way

of operation in accordance with its

limitations.

Based on my experience in an IT company I

would like to share some insights in to how

IT plays an important role in day to day

Operations of a company like its Business

Process, investment on IT infrastructure,

negative aspects and new trend that is

emerging.

1. IT & Business Process During my tenure in an IT company, I was

managing data warehouse system of world’s

leading manufacturer of sports goods. It has

operations all over the world and all

transactions were handled by tailoring

systems to the local way of doing business.

However, senior management needs reports

that integrate data from all over the world in

a predetermined format. This was

implemented using SAP Business

Intelligence. This application used to handle

7-8 terabytes of data.

Russian data was not integrated in to this

application till then. If it is done data size

increases up to to 10-11 terabytes. The

current application does not have capacity to

handle such a huge data. A huge investment

is needed to increase its hardware capacity.

However, an innovative solution was

proposed. The requirement would be

fulfilled with a small change in report

design. However, this needed a change in

Business process. A new way of classifying

its retail stores had to be done. This solution

reduced data by 85% saving huge amount of

money. The company adopted it.

The learning is that there can be a situation

where Business process of a company was

changed to accommodate the limitations of

IT, thus illustrating how important its role is

in Operations.

2. Investment in IT The same company reduced spending in IT

during 2008 recession. A huge IT system

was initially not maintained and later

managed by only 5 engineers because of

lack of budget. The result is that 50% of data

was not useful. But when the economy

recovered the company had to spend huge

amounts of money to make use of it

effectively. Today the same system is

maintained by 30 engineers. It is used for

many activities like replenishment of stores,

WORK EXPERIENCE

FEBRUARY 2013 36

decision on offering discounts, planning for

opening new stores, comparing various

stores etc. The conclusion is even though

company ignored some of its IT

infrastructure in short term, they came back

rescuing it as soon as they can emphasizing

its importance.

IT is also used for very short term purposes.

For example this same sports manufacturing

company had a huge investment opportunity

during 2012 London Olympics. They

expected a sudden surge in the sales but for

a very short term. To tackle such a situation

they developed IT solution for a very short

term. The investment proved to be useful.

Sales as expected were so high that existing

infrastructure would have never supported it.

The learning is that IT plays a vital role

while trying to exploit an opportunity.

3. Negative effects of IT on

operations While working for Energy Utilities

Company in US our team was called for an

emergency meeting early in the morning.

Issue was, Employees had their salary

credited one day in advance. Reason was

that the newly implemented HR solution

was not tested properly. Imagine the impact

of it for a multibillion dollar company with

more than 10000 employees. The conclusion

is if not properly handled in all steps IT

implementation will seriously hamper your

operations.

A government sector company in India once

implemented major changes in its system

architecture for efficient billing mechanism.

They received many complaints about

inflated bills. The main reason was company

did not pay proper attention to data

migration from legacy system to new

system. There was a script that ran for hours

to migrate data which stopped abruptly

because of insufficient hardware

infrastructure and loaded inconsistent data.

So much effort was invested in to load the

data while the solution was simply to

implement effective code in the script. By

the time it was identified junk data was

already live in production system.

The learning is that you can’t ignore any

step of IT development and it is very crucial

to identify the underlying reason for a

problem.

4. Emerging trends of IT in

operations IT product developers have been releasing

standard Industry specific packages so that

you can just do little customisation and start

using it. Today companies are a step ahead

wherein they are forming strategic alliances

with IT product producers, where even

before the product is released it is tested for

adaptability for their organisation. Recently

I have seen a major manufacturing

company, IT product Development

Company and IT consulting company all

were working together for the release of the

new version of the packaged software.

The learning is that IT is expanding its role

in operations across industries.

I would like to conclude that IT has multi

dimensional affect on operation of any

major player in any Industry across the

world

FEBRUARY 2013 37

CLOUD SUPPLY CHAIN

THE GURU ANSWERS

Q) Sir, the term Cloud Supply Chain has

generated a significant interest among

supply chain enthusiasts in the recent

times. What does it refer to?

A) To understand the underlying concepts of

Cloud Supply Chain, let’s begin with an

introduction of cloud computing. Cloud

computing refers to the use of computing

resources as a service, that is delivered over

a network, usually the internet. Supply chain

has emerged as one of the biggest

applications of this model, and a supply

chain using this model is called a Cloud

Supply Chain.

Q) Interesting, but can you explain in

simpler terms?

A) Imagine that you are operating a

computer or a mobile handset with an

internet connection. You can run a program

or store a file on the internet without using

the computing power or disk space of your

device. For example, any online service that

convers a document from one format to

another is called as SaaS (Software as a

Service). Google Drive allows you to store

your files on Google’s servers. It can be

categorized as STaaS (STorage as a

Service). Both of these are different types of

cloud computing services.

Q) Why is there so much furor around

cloud computing?

A) Cloud computing offers many

advantages over the traditional IT models.

Some prominent ones are:

1. Very low initial investment since

developing the IT infrastructure and

manpower is not required to a large

extent. Also, the need of buying

expensive software is eliminated.

2. Very flexible model, and hence easy

to for expansion and reap the

benefits of economies of scale.

3. Very convenient payment options,

like one-time-payment and pay-as-

you-go.

4. Easy access to the data as well as

monitoring of projects on the cloud.

5. Low manpower investments – less

training and less number of people

required.

Q) And where does Supply Chain come

in?

A) A usual problem in any supply chain is

that the different partners – suppliers,

manufacturers, distributors and retailers, use

different software platforms to collect and

analyze various kinds of information and

data. This makes the integration of the

supply chain data a difficult task. On the

other hand, when all the supply chain

GURUMANTRA

FEBRUARY 2013 38

partners are on the cloud, the relevant data

from each other is accessible to them. The

improved supply chain visibility makes it

more efficient and well-armed against

bullwhip effect and other such problems.

Q) Please elaborate on the benefits of

cloud to a supply chain.

A) The data-accessibility and high degree of

visibility in a supply chain allows it to

1. Make better forecasts

2. Identify gaps and react quickly to

plug them

3. Better and quickly identify the shifts

in customer demand

4. Minimize bullwhip effect

5. Work with lesser inventory and

higher service rate

Besides, as discussed before, the cloud

model benefits each partner by rationalizing

the IT resources and providing a lot of

flexibility.

Q) Can you name some companies who

are operating on cloud supply chain?

A) The list would be huge, but some

prominent organizations who have recently

moved their supply chains to cloud are

Pfizer, Renault and P&G. Nonetheless, there

are ample media reports suggesting

significant improvements in their supply

chains and hence competitive advantages

that cloud has brought to them.

Q) Who are the major players

providing cloud services for supply

chains?

A) Some well-known players are Oracle,

SAP and JDA. Also, since each supply chain

is different from another, many companies

prefer to use cloud services for some

specific part of the supply chain. This has

worked in favor of some companies who

specialize in and are reputed for such

services. Some examples are Salesforce

(Customer Relationship Management),

AMAC Logistics (Transportation

Management), Lighthouse Systems

(Manufacturing Execution Systems) and

eBizNET (Warehouse Management).

Q) Is there any pitfall of cloud supply

chain?

A) There are some concerns regarding the

security of the data stored on cloud. Since

the leakage of the supply chain data, say

through hacking, can be highly detrimental

to a company, many organizations are still

“on the fence” when it comes to

implementing cloud in supply chain. They

don’t trust a third party service provider

with the sensitive data.

Another risk is that any technical fault in the

system would do more damage to the entire

supply chain than in case of the traditional

IT models. High degree of maintenance is

required to avoid such problems.

References

1. http://finance.yahoo.com/news/renau

lt-moves-export-supply-chain-

110000711.html

2. http://www8.hp.com/uk/en/hp-

news/press-release.html?id=1330013

3. http://www.verio.com/resource-

center/articles/cloud-computing-

benefits/

4. http://mobiledevices.about.com/od/a

dditionalresources/a/Cloud-

Computing-Is-It-Really-All-That-

Beneficial.htm

5. http://en.wikipedia.org/wiki/Cloud_c

omputing

FEBRUARY 2013 39

CROSS WORD

Across 3. The registering and tracking of parts, processes, and materials used in production, by lot or

serial number.

4. This allows you to expand your wireless local area network into an asset tracking system

6. Type of analytics software that tells a manager what's going on in his supply chain now

7. First Indian company to create a hub and spoke distribution model in the express package

industry in India

11. A wireless locator device for high-value cargo that provides real-time tracking data for

increased security and is the first device of its kind to meet FAA specifications.

REGULARS

FEBRUARY 2013 40

12. Systems link management functions with engineering, manufacturing, and support

operations.

13. A computer software system used in a number of industries for order entry and processing.

16. Type of warehousing which refers to the use of the voice direction and speech recognition

software in warehouses and distribution centres.

17. Software system which aims to control the movement and storage of materials within a

warehouse and process the associated transactions.

Down 1. The system that allows suppliers to access large amounts of online, real-time, item-level data

to help those suppliers improve operations

2. DHL's temperature monitoring technology device piloted to customers from the food and

pharmaceutical companies to ensure every shipment is kept at a specific temperature without the

need of opening the packages.

5. Management software systems that enable shippers to automate planning and execution,

connect electronically with carriers, and reduce freight costs though optimal mode selection and

optimal carrier assignment

8. A type of two-dimensional bar code initially introduced in automobile industry. It has become

very popular due to its ease of use and storage capacity

9. Type of Analytic software that tells the supply chain managers of the future risk,Example-

Alternatives to be followed when price of oil changes from $50 to $100

FEBRUARY 2013 41

SOLUTION TO CROSSWORD

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