INTRODUCTION:

A few years ago, logistics and SCM were seen as necessary evils in India; today they are seen as a matter of survival and competitive advantage. As companies look at logistics and SCM strategically, they turn to specialized service providers to cut out non-core activities from within. A rising focus on outsourcing is leading to a surge in business performance for logistics service providers. One offshoot of the demand for logistics services is that many companies are changing their names to include ‘logistics’ somewhere as well, much like the dot-com boom times in the early 1990s.

Supply Chain Management is a set of approaches, which help to remove the inefficiencies, occurs in the flow of goods and services. Supply Chain Management is the oversight of materials, information and finances as they move in a process from supplier to manufacture to wholesaler to retailer to consumer. The SCM involves coordinating and integrating these flows both within and among companies. The flow includes the movement and storage of raw material, work in process inventory and finished goods from point of origin to point of consumption. The main goal of any supply chain is to reduce the inventory and it is only possible when the network between demand and supply work perfectly.

Small and Medium Enterprises sector has emerged as a highly vibrant and dynamic sector of our economy over the last five decades. They are not only providing large employment opportunities, but also doing help in rural industrialization. SME’s also playing a significant role in national development through high contribution to domestic production, and significant export earnings. The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:

(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;

(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

Small and medium enterprises have been the backbone of the Indian economy. That is both a good thing and a bad thing. The good part is, employing close to 40 % of India’s work force and contributing 45 % to India’s manufacturing output. SME’s play a critical role in millions of jobs, especially at a low skill level. The country’s 1.3 million SME’s account for 40 % of India’s total export. The bad thing is that SMEs in India, due to their poor adoption of technology, have very poor productivity.

Although they employ 40 % of Indian work force, they only contribute 17 % of the Indian GDP. Sickness in the SME sector is a big issue.

Despite the capability to grow, SME’s are facing number of issues, which can be clubbed and named as Supply Chain Inefficiencies. SME’s face a wide range of problems, which include lack of IT support, coordination between the linkages, high operational cost, lack of planning tools, inventory mismatch, delayed delivery time, lack of tracking of processes. To survive and compete in International market, SME’s require efficient as well as responsive supply chain. Supply Chain is a linkage between demand and supply. SCM is a right combination of certain factors: Right quantity and quality of product through a right source (Source and relationship) in a right place at a right cost and time.

LITERATURE REVIEW:

Literature portrays logistics and SCM practices from a variety of different perspectives with a common goal of ultimately improving performance and competitiveness. Based on literature, we find that the important supply chain practices concerns are mainly related to:

1. Supply Chain Collaboration and Partnership with various stakeholders such as the product developers, suppliers, channel partners and end-users.

2. Supply Chain Structure including facilities network design taking into account related transportation and logistics.

3. Forecasting and Demand Management to cope with supply chain complexity in a cost-effective and delivery-efficient way.

4. Use of Information and Communication Technologies (ICT) to facilitate the above.

While there is plenty of published literature that explains or espouses SCM, there is a dearth of empirical studies examining logistics and SCM practices. Galt and Dale (1991) study ten organizations in the UK and find that they are working to reduce their supplier base and to improve their communications with the suppliers. Fernie (1995) carries out an international comparison of SCM in the grocery retailing industry. He finds significant differences in inventory held in the supply chain by the US and European grocery retailers, which could be explained by difference in degrees of their SCM adoption. Tan and Wisner (2000) compare SCM in the US and Europe. Tan (2002) relates SCM practices and concerns to firm’s performance based on data from US companies. He lists nine important supply chain concerns such as lack of sophisticated ICT infra-structure, insufficient integration due to lack of trust and collaboration among the supply chain stakeholders and thereby lack of supply chain effectiveness and efficiencies. Basnet et al. (2003) report the current status of SCM in New Zealand, while Sahay et al. (2003) discuss supply chain strategies and structures in India. These surveys rank the perceived importance of some SCM activities, types of hindrances and management tools on the success of SCM using representative samples mostly from manufacturing. Quayle (2003) surveys supply chain management practice in UK industrial SMEs (Small Manufacturing Enterprises) while Kemppainen and Vepsalainen (2003) probe current SCM practices in Finnish industrial supply chains through interviews of managers in six supply chains. They analyze the change of SCM both in terms of operational practices and organizational capabilities. Chin et al. (2004) conduct a survey that examines the success factors in developing and implementing supply chain management strategies for Hong Kong manufacturers. Moberg et al. (2002) state that there is little literature on information exchange. Feldmann and Muller (2003) examine the problem of how to establish an incentive scheme to furnish reliable and truthful information in supply chains. There is little literature on logistics and SCM practices in India. Available literature focuses either on the best practices (Joshi and Chopra, 2004) or on re-engineering of internal operations of the firms (Deshmukh and Mohanty, 2004, Kankal and Pund, 2004). In context of ICT, Saxena and Sahay (2000) compare the manufacturing intent to be an agile manufacturer and their Information Technology (IT) infrastructure in terms of scope of use, extent of use and integration of IT-based systems. The more recent studies are mainly based on questionnaire surveys and secondary data sources (Sahay and Mohan, 2003, www.etintelligence.com, Sahay et al., 2006). Vrat (2004) discusses some issues and challenges as well as the potential of SCM in India. All these studies find Indian firms generally lagging behind their counterparts in the developed countries.

Supply Chain management comprises a variety of planning process within an organization:

Demand planning, production planning, distribution planning, inventory planning and capacity planning. Proper planning formation and its execution has the capability to remove majority of inefficiencies of the system.

Supply chain exists in nature from a long back even if that term had not yet been coined. Before the Industrial revolution, supply chain existed, but off course in a very simplified manner. And then Standard supply chain models, addressing both the upstream and downstream sides, were developed. These models often produced more questions than answers, but it advanced the concept of a Supply Chain and unifying all diverse activities that swirl around the concept of Six Sigma and Lean supply Chains were embraced by most organizations. Efficient, effective processes were the focus and some amazing advances occurred.

In the 1980s, the term “Supply Chain Management” was conceived to express the need to integrate the key business processes, from end user through original suppliers. Over the next two decades, organizations began to focus more on inventory, demands, logistics, relations, benchmarking and other key lines in the chain. Outsourcing and off shoring become widespread during this time and 3PLs and 4Pls came into picture.

Then came the more enlightened term” Supply Chain Excellence”, which placed a greater focus on technology, real time information, visibility and collaboration, During last decade SCM is positioned as an agent to transform companies for a profitable growth.

SCM empowers organizations to efficiently manage their inventory and process and cost optimization, thus give comparative advantage. Large companies are well recognized the benefits of SCM, but small and medium enterprises have yet to understand the need.

The 2015 MHI Industrial report states Supply Chain Innovation as “Making the Impossible Possible”. Supply Chain face conflicting demands to be better, faster and cheaper. Innovation is the key to achieving all three. Survival of the fittest is the rule of nature. Companies that continue to utilize traditional supply chain models will struggle to remain competitive and delivers orders that are complete, accurate and on time. Despite extensive initiatives taken in the area of Supply Chain Management throughout the world, SCM practices have not yet beenadopted in SME’s. In order to set their house in order and to improvise their working, SME’s in India are often found to struggle with constraints like finance, infrastructure, human resources etc. The problem looms large especially when they deal with large size organizations and responsible to keep the process in place. There is no denying the fact that most SMEs lack skilled personnel who have knowledge of sophisticated supply chain. With their approach of focusing on local inefficiencies rather than on cross- enterprise opportunities SMEs tend to have higher total cost, lower overall efficiencies resulting in higher costs per unit because of low volumes.

The problems become more accurate when SMEs decide to work with outsourced supply partners, Inconsistent product data and IT and communications systems make it difficult to match the manufacturing and Distribution activities.

If we look into supply chain transformation, there is a huge difference between the traditional and today’s Supply Chain. Our recent past decade has been witnessed for so many changes in the process of supply chain. Many Companies have changed their balance sheet after adopting the right tool of supply chain. The most valid example is JIT and Kan Ban used by TOYOTA. The Toyota production system is the benchmark used throughout the world for: lean” thinking. The eight wastes were highlighted in Toyota production system andremoved. They define waste as anything that interferes in the smooth flow of production. Over production, waiting time, unnecessary conveyance, over processing, excess inventory, motion defects, unused employee creativity were identified as waste and removed in the Supply Chain Management. There are plenty of examples of Supply Chain Innovations, used by different organizations. Some of them are quoted below:

Caterpillar:

They have made sure service part availability via integrated network.

Cisco:

Proactive and upstream Supply Chain risk management, monitoring, and measurement.

Dell:-

Make to order, selling direct, Supply Chain tailored to market segment.

FedEx: –

Hub and spoke system and network.

Ford:-

Vertically Integrated assembly line.

P and G:-

Streamlined logistics, Efficient consumer response, and continuous replenishment.

Walmart:-

Everyday low pricing, Upstream supply Chain Management.

Zara:-

Hi automation and near market production aligned for Supply Chain for Fast fashion

Reebok: –

Responsive Supply Chain via product redesign

Lucent :–

Plateform standardization, Supplier contract margin management.

Supply Chain Innovation is a broad term, which includes all the factors behind the development of Supply Chain excellences. But the main focus of this development is only to remove the inefficiencies, minimizing the error and enhance productivity and profitability. The development process through the traditional supply chain, conventional supply chain and supply chain excellence is nothing else but SCM Innovation.

Supply Chain Innovation has always focused on right combination PQRST factor:

P stands for product quantity

Q stands for right quality

R stands for right kind of relationship with the vendors and sourcing partners

S stands for right kind of source

T Stands for tight time

After taking consideration of all these factors, several SCM modules have been developed. These all innovation has rejuvenated the life of so many organizations. SCM Innovation is an essential element to operational efficiency. SCM can be applied to customer satisfaction and company success, as well as within societal settings, including medical missions; disaster relief operations and other kinds of emergencies; cultural evolution; and it can help improve quality of life. Because of the vital role SCM plays within organizations, everyone seek with an abundance of SCM skills and knowledge. Supply chain management is critical to business operations and success for the following reasons:

· Boost Customer Service - SCM impacts customer service by making sure the right product assortment and quantity are delivered in a timely fashion. Additionally, those products must be available in the location that customers expect. Customers should also receive quality after-sale customer support.

· Improves Bottom Line-SCM has a tremendous impact on the bottom line. Firms value supply chain managers because they decrease the use of large fixed assets such as plants, warehouses and transportation vehicles in the supply chain. Also, cash flow is increased because if delivery of the product can be expedited, profits will also be received quickly.

Supply chain management helps streamline everything from day-to-day product flows to unexpected natural disasters. With the tools and techniques that SCM offers, we’ll have the ability to properly diagnose problems, work around disruptions and determine how to efficiently move products to those in a crisis situation.

In the same way Supply Chain Innovation steps can be integrated in the SMEs sector to make them sustainable, more profitable and competitive in the global world. To remain competitive, small firms have to offer superior quality goods at the lowest prices possible. The need to minimize product costs makes effective supply chain management vital. There are costs involved in every process of the product life cycle, and it is the responsibility of SCM to ensure that these costs are kept low, so the company can continue to pass along these savings to the consumer. SCM module will help SMEs in:

Reduced Costs:

Supply chain management involves identifying those processes that increase cost without increasing the value of the final product. These processes are wasteful and do not add value, and should be eliminated whenever possible.

Increased Efficiency:

Resource wastage is a common source of increase production costs. Often this is due to improper planning. A company that employs supply chain management is able to achieve efficiency of its operations since only those value adding activities are encouraged. This ensures that the organization’s processes flow smoothly and output keeps in line with the company's needs.

Increased Output:

A company that employs supply chain management can foster close-knit relationships with its suppliers and customers, ensuring the timely fulfillment of orders. A company known for its timeliness and responsiveness will attract more customers, and will grow as a result of increased output and sales.

Increased Profits:

Businesses exist to make profits. One of the most efficient ways of increasing a company’s profits is by ensuring that costs are kept as low as possible. The application of supply chain management by a small company leads to cost reductions due to elimination of wasteful processes. Since these are operating costs for the company, the savings on these costs reflect increased profits by the company.

The need for SCM for SMES is more than ever before because of the challenges unleashed on the competitiveness of the Indian industry by deregulation and globalisation. The mammoth challenge for SMEs is to maintain the balance between demand and supply and, while doing so, provide the best possible products or services at the lowest possible cost. SMEs, obviously, do not have enough resources to employ at various stages of the chain. Hence, they often concentrate on individual components for optimizing their internal operations.

"Effective SCM brings down operating costs by a reduction in cost leakages like inventory pile-ups and reverse logistics, thereby ensuring a better planned environment wherein the production and supply sides are better synchronized and optimized. Thus, SCM is really about enhancing the efficiencies of the supply chain right from the planning stage to the execution stage while coordinating with diverse partners located at different locations. "As Indian SMEs go global it becomes even more imperative that their supply chains are linked with their global suppliers as well as vendors.

Supply Chain Innovation will improve the way that materials are sourced from suppliers or refreshing methods of product delivery to customers a financial innovation – like credit, risk sharing, ownership or liquidity in order to develop a full-fledged network from producer to end user.

Efficient SCM needs an integrated approach; Indian SMEs need to start identifying and addressing various factors of their businesses so that they can enhance their supply chains accordingly. "An essential first step in the process is to assess the current supply chain capability and then linking that strategy to deliver bottom line results through SCM, competitiveness, order fulfilment, inventory management, etc.

Many success stories do exist in our recent past where SCM module is highly successful in rural transformation. One of such success story is of ITC’s e-choupal, a universal platform for rural India, is a very successful case study taught at Harvard and Michigan Schools. Management gurus C K Prahlad and Venkat Swami cite the e-choupal example to explain co-creation. Every other day, an ITC executive is making a presentation on this initiative somewhere in the world. The initiative has won the Stockholm Challenge award apart from several others.

e-Choupal is an initiative of ITC Limited, a conglomerate in India, to link directly with rural farmers via the Internet for procurement of agricultural and aquaculture products like soybeans, wheat, coffee, and prawns. e-Choupal tackles the challenges posed by Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of intermediaries. The programme installs computers with Internet access in rural areas of India to offer farmers up-to-date marketing and agricultural information.

ITC Limited has provided computers and Internet access in rural areas across several agricultural regions of the country, where the farmers can directly negotiate the sale of their produce with ITC Limited. Online access enables farmers to obtain information on mandi prices, and good farming practices, and to place orders for agricultural inputs like seeds and fertilizers. This helps farmers improve the quality of their products, and helps in obtaining a better price.

Each ITC Limited kiosk with Internet access is run by a sanchalak — a trained farmer. The computer is housed in the sanchalak's house and is linked to the Internet via phone lines or by a VSAT connection. Each installation serves an average of 600 farmers in the surrounding ten villages within about a 5 km radius. The sanchalak bears some operating cost but in return earns a service fee for the e-transactions done through his e-Choupal. The warehouse hub is managed by the same traditional middle-men, now called samyojaks, but with no exploitative power due to the reorganisation. These middlemen make up for the lack of infrastructure and fulfill critical jobs like cash disbursement, quantity aggregation and transportation.

Since the introduction of e-Choupal services, farmers have seen a rise in their income levels because of a rise in yields, improvement in quality of output, and a fall in transaction costs. Even small farmers have gained from the initiative. Farmers can get real-time information despite their physical distance from the mandis. The system saves procurement costs for ITC Limited. The farmers do not pay for the information and knowledge they get from e-Choupals; the principle is to inform, empower and compete. e-market place or spot transactions and support services to futures exchange. e- choupal is a perfect example , how a perfect demand - supply system can change the game.

The need is to optimize the supply chain in its totality and derive the highest possible value from it. "The objective of every supply chain is to maximize the overall value generated by an enterprise. SCM is an ongoing process that involves precision in demand forecasting, inventory optimization, reduction in warehouse costs and efficient as well as cost-effective handling of both incoming and outgoing stocks. Thus it is obvious that a small business with utilization of proper supply chain strategy can be a giant of industry. If proper supply chain can innovation can be afford by the SMEs , definitely the comparative advantage will be gained by them.

CONCLUSIONS:

We examine the state of logistics and supply chain management practices in India covering a wide spectrum of firms with at least one field visit and substantiate on-site observations and informal discussions and interviews with data and information from secondary sources. Thus, we assess the current level of logistics and supply chain practices as suggested by Sahay et al. (2006). Our findings indicate that logistics and SCM practices are influenced by contextual factors such as the type of industry, firm size, its position in the supply chain, supply chain length and the type of supply chain. They are also influenced by regulatory and economic environment, available infrastructure and competition with other supply chains. We identify the logistics and SCM practices of these firms and discern various emerging trends as well as areas of concern. We also suggest opportunities for improvements. Indian firms need to act fast to capitalize on these opportunities to be competitive with the world market. The findings from this study provide the type of information on logistics and supply chain management practices in India that may help the Indian industry to benchmark these practices vis-à-vis corresponding practices in other countries.

The management and structures of supply chains in India have transformed since the early 1990s when they were perceived as linear chains of companies and managements focused on improving the efficiency of material flows. Indian firms are quite aware of the best logistics and SCM practices, but many of them are yet to practice them actively. They are generally adopting these practices piecemeal and supply chain integration is yet to take place in most of the chains. Increasing customer requirements and improved ICT have affected SCM efforts. Today the extended multi-tier structure of supply chains as well as the need for better forecasting, collaborative planning, effective logistics and information sharing is better understood. In future, ongoing outsourcing and specialization are expected to result in demand-supply networks, with shared technology and systems, extended decision rights and non-territorial services. The awareness of planning and control techniques and communication means is high and work on increasing and improving supply chain integration and collaboration is likely to be intensified in the near future.

Based on our exploratory study, some emerging trends can be discerned. There is a growing focus on customer and end-consumer in terms of higher product availability, customer reach, and responsiveness. Concepts like Customer Relationship Management (CRM) are being tried. Most of the firms have a good facilities network design under given constraints. A very conspicuous trend is towards higher degree of collaboration and partnerships both upstream and downstream the supply chain. The degree is different in different firms. However, the economy of scale/ scope for supply chain entities to experience win-win situations is still awaited. Transportation and logistics are getting due attention and as a result some good third party and fourth party logistics service providers have emerged. The long-stressed importance of focusing on core competences is taking shape due to increased outsourcing of non-core operations. There is a growing trend towards implementation of ICT. However, most firms have a long way to go to take full advantage of the promises of supply chain integration.

Logistics and supply chain practices in India show that visibility is still limited. The companies have a realistic view on the advantages and risks of information sharing and so information is shared only selectively. Our study reveals that most Indian firms have aligned their logistics and supply chain objectives with their business objectives. However, due to some aberrations and diseconomies of scale/ scope most of them are not able to reap full potential benefits. Action is required by the Indian government to improve the infrastructure for better functioning of various supply chains. Firms and their supply chains need to closely integrate themselves into a network, carefully manage the complexity that ensues, align their business strategy with logistics and supply chain operations, and leverage information and communication technology with process improvement and pioneer operational innovation for superior performance. They also need to rigorously measure and monitor critical operational performance metrics such as customer service, responsiveness, supply chain costs, asset utilization, product quality and operational flexibility in order to achieve overall business success. Our findings are in agreement with Kemppainen and Vepsalainen (2003) that the distinction between partners and standard suppliers or customers guides collaboration.

The level of collaboration and partnerships upstream the supply chain still requires significant efforts. Concepts like Vendor Managed Inventory (VMI), revenue sharing and long-term contracts are exceptions rather than norms. Same applies to level of collaboration and partnerships downstream where trust and genuine information sharing are conspicuous by their absence. There are numerous infra-structural bottlenecks for transportation and logistics and various stakeholders need to address it on an urgent basis. ICT implementation is costly and many times has not been utilized to its full potential. Given advances in other logistics and supply chain practices, it was really disheartening to note that for most firms, forecasting is still not based on PoS data. This is a prime area for collaborative efforts. Another point to note is that India is still a sellers’ market despite growing competition and this has introduced inertia in some supply chains. Growing incomes and consumer awareness will probably force such supply chains to shed this inertia. The low level of application of some of ICT and insufficient skills should be the main concerns for government, academic and professional institutions, as well as for senior and middle management. Establishing trustworthy relationships among whole supply chain partners is the most important factor to share accurate information and to establish effective and efficient logistics and SCM practices. If managed well, reduction of system wide costs can be achieved, let alone increased customer service level and satisfaction.

There are many avenues for improvements for logistics and supply chain management practices in India. We are in total agreement with Tan (2002) that a massive commitment by important stakeholders is required for evolving truly efficient and effective supply chains. There is ample scope for facilities network redesign. Infra-structural bottlenecks need to be overcome. The golden quadrilateral project and initiatives by railways and ports administration in the last few months are good indicators that the concerned authorities are waking up. The golden quadrilateral road project will address some of the connectivity issues, but the larger problem is not so much a six-lane road as good roads. Ventures like BOT (Build-Operate-Transfer) and tolled roads all exist - but the essence is that law enforcement about technical standards must be made stringent. ICT implementation and utilization is low and needs to be spruced up. Forecasting based on PoS data is likely to come into use once there is more collaboration and trust, economies of scale and scope for supply chain entities and enabling-ICT are in place. Benchmarking and learning good practices should be encouraged by government, industry associations and other stakeholders. Government should move from a regulator’s role to a facilitator’s role. A high degree of operational efficiency and cost efficiency will provide the much needed competitive edge to various supply chains in India.

REFERENCES:

1. http://smallbusiness.chron.com/advantages-supply-chain-management-small-companies-20595.html

2. http://articles.economictimes.indiatimes.com/2008-07-14/news/27727512_1_supply-chain-scm-indian-smes

3. http://articles.economictimes.indiatimes.com/2013-06-09/news/39834857_1_smes-workforce-small-and-medium-enterprises

4. http://www.tompkinsinc.com/supply-chain-past-present-and-future/

5. http://www.supplychain247.com/paper/2015_mhi_annual_industry_report_supply_chain_innovation

6. http://www.smechamberofindia.com/about_msmes.aspx

7. https://rbi.org.in/Scripts/FAQView.aspx?Id=84

8. https://en.wikipedia.org/wiki/E-Choupal

9. www.etintelligence.com

Received on 14.02.2018 Modified on 28.02.2018

Asian Journal of Management. 2018; 9(1):745-751.

DOI: 10.5958/2321-5763.2018.00116.6