This concept is used by companies for products that are used inside the manufacturing locations and also for the bought out items that need to be sent to the customer, which do not require much of value addition. With the focus on reduction of costs and environmental impact, organisations are reviewing transport modes and switching to multimodal transport to get the maximum benefit (road to rail transport, air to ship travel). Also, utilisation of vehicle space is another critical metric being used to monitor logistics efficiency.

Future challenges

For Indian companies, one of the biggest challenges in optimising supply chains and making them more efficient is the availability of good infrastructure. With bad road conditions in many parts of the country, inefficient ports and conventional material handling and storage systems being used, organisations are left with no choice but to build a buffer at every stage and hence maintain higher levels of inventory. 

Use of IT systems to integrate the supply chain has increased significantly in the last decade but still vast ground needs to be covered to have a truly integrated supply chain with seamless information and material flow. This will require huge investments. Are companies willing to invest into building this kind of infrastructure and is the return on investment justified? For some companies, the answer is certainly yes, as they have already done it but a large number of companies are still holding on primarily because of the investment factor and not-so-clear/ justifiable return on investment.

A rational change will be required in the mindset of the organisations to look beyond its boundaries focusing on the extended supply chain/ vendor base and understanding the ultimate impact and benefits of a reliable, receptive and responsible end-to-end value chain! Companies have to start looking at the global picture instead of the local picture to reap bigger benefits. Optimised inventory in the supply chain, responsive and optimised vendor base immensely add to the companies' bottom-line.

Conclusion

The focus for the past few years in supply chain management has been on developing and managing vendors along with managing the global supply chain. While the focus remains unchanged, the expertise of third party logistic providers and efficient use of IT solutions to integrate the end-to-end supply chain is likely to be leveraged to enhance the same.

Costs, quality, and timely delivery are still the focus for many companies. With increasing competition, companies are focusing on reducing the total inventory in the supply chain by increased visibility and better planning.

Developments are taking place in the country's infrastructure with companies investing time and money into improving supplier's performance through implementation of systems. Advanced IT systems are also optimising the supply chain. Frost & Sullivan expects these changes to provide the required competitive advantage to organisations.

The author is Director, Manufacturing & Process Consulting Practice, Frost & Sullivan

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