Management Development Institute

An Operations Magazine by OPSESSION

TETE – E – TETE“The biggest operational challenge in E-Commerce is to marry Human Behaviour & Technology”

- Rahul Dash COO, Purplle.com

IN FOCUS

EDWARD DEMMING

Volume. I – 2013-14

Dear Reader,

Warm Greetings!

We welcome you to the first edition of Opstakes: Annual

Operations Magazine of MDI, Gurgaon. The editorial team

has new blood altogether and we bring this edition to you

with lot of enthusiasm and hope that it helps build new

perspectives and insights to add to your knowledge.

In this world of cut throat competition, operational

effectiveness is a must have for establishing a clear

monopoly. Rapid evolution in operational trends and

increasing importance of supply chain have not only rendered

Operations management as being a subject of prime

importance but have also evoked interest among the

intellectual class. Companies are investing in latest

technologies, implementing latest systems and integrating

process strategies to establish a competitive edge.

In this edition we have received an overwhelming number of

articles from students of top B-schools and had a really tough

time selecting the best amongst them. The articles included

provide interesting analysis of latest in the world of

Operations ranging from customization through 3D printing

to the latest buzz word of Internet of things. The magazine

also throws light on the challenges and hurdles faced in

Operations of a nascent e-commerce business via an interview

with the COO. The puzzles and interesting news facts from

the year throw in the attractive punches of the Operations

industry.

On behalf of the entire Opsession Team, we would like to

express our gratitude towards Prof. Manoj K. Srivastava who

accepted our requests to judge article entries received for

Opstakes. We are also thankful to all who had submitted their

articles entries for Opstakes.

Happy Reading!

Editorial Team

OPSTAKES

Volume I

The Editorial Team

Anubhav Bajpai

Arun Ahlawat

Ankit Aggarwal

Amar Verma

Mohit Batra

Pankaj Singla

Shashank Shukla

Teetas Banerjee

Vaibhav Dash

Zaid Ali

For any information/feedback

please feel free to contact us at

opsession@mandevian.com

Follow us on facebook

Opsession - MDI

for all latest updates on the

field of operations.

An analysis of implementation of

third party logistics

Current Scenario | Critical

Problems | Potential Solutions

Exciting pointers to critical

Operations Terms

Get abreast with the latest in Supply

Chain Management

Supply chain opportunity for mass customized Donuts

A comprehensive & detailed analysis

of 3D Printing & Supply Chain

The weak link optimization in food

Processing

Exploring the challenges of Supply chain

and Operational exigencies of a growing

e-commerce business

A sneak peek into the year of 2013 from the perspective of

Operations

Understanding Quality from the one who helped

define it

If you think economies of scale are the sole

factor for this then probably you are

mistaken! Numerous supply chain

strategies are being employed by the firms

in a competitive world of free economy.

Logistics has been a key part of operation

for any firm. For large manufacturers it has

been always a source of dilemma whether

to outsource the logistics and focus on

their core competencies or involve in

vertical integration to own the logistics

system as well.

Innovation has become necessity in this

industry and even shippers are ready to

invest in innovation of these outsourced

companies. 3PLs could able to

demonstrate innovation by introducing

process improvements, improving

execution, offering new services and

adding technology. But shippers do not see

these activities as truly innovative; instead

they seek disruptive innovation in 3PL

industry like a new product or service idea

which when implemented significantly

disrupts the market and/or value chain by

simplifying, automating, generating value,

or reducing costs. Further, role of these

outsourcing companies is increasing day

by day. Initially, companies used to only

ship the goods but then it further added

the value with inventory management,

warehouse management, order acceptance

and processing, pick-and-pack operations,

order fulfillment, assembly, packaging,

and other value-added activities, credit

card verification, invoicing, credit, and

collection, pre-sort capabilities, and

returns handling.

Thus, Utility of third party Logistics (3PL)

has increased drastically. Global Supply

Chain Management is the new trend in big

manufacturers which requires sourcing and

dispatching from different locations

around the world to counter, by using

different approaches such as Hub and

Spoke, Cross Docking utilize their

3 W’s (What, When, Why) of 3PL

Have you ever wondered when you walk in big retail stores for shopping, that why the

same product is priced at different rates in different retail stores? Why big retail

stores are able to provide huge and daily discounts to its consumers? Well, as a

consumer you should not really worry about it but yes, as a manager you should!

Ankit Verma, IIM Kozikode

Chandan Bharambe, IIM Kozikode

economies of scale and expertise in

moving products efficiently along the

global supply chain.

Evolution of 3PL:

Pre 1980s, it started with companies

with strong logistics and who could

store big inventory gave their services to

retailers and manufacturers

In the early 1990s, Express networks

and experience came in picture with the

rise of companies such as DHL, TNT, and

UPS with the rise of Global Supply Chain

In the late 1990s, their value proposition

changed from service provider to solutions

provider. Many companies emerged with

extensive knowledge in information

technology, consultancy, and financial

services such as Accenture, GE Capital

Services, and IBM.

With the change in value delivery the 3PL

market witnessed phenomenal growth. As

a result many organizations spun off their

logistics businesses to focus on their core

business. Table 1 shows global 3PL market

and 3PL as a part of logistics.

Growth of revenue in 3PL business for

North America is sluggish with compared

to Asia Pacific and Latin America which

shows maturity stage of 3PL market

whereas for Europe growth has been

declining which is due to economic

challenges faced by Europe.

The figure1 (on next page) indicates types

of logistics service providers depending

upon their functions. This matrix can also

be viewed as solutions by these companies

from standard services to highly

customized services.

Region Global 3PL Revenues (US $ Billions) 2010

Global 3PL Revenues (US $ Billions) 2011

% change 2010 to 2011

Logistics as a % of GDP 2011

3PL (as a % logistics cost)

2011

North America

149.10 159.90 7.20% 8.90% 10.00%

Europe 165.1 160.4 -2.80% 8.90% 10.20%

Asia-Pacific 157.6 191.1 21.20% 12.80% 7.80%

Latin America

27.5 39.5 43.60% 12.30% 7.70%

Other Regions

42.3 65.2 54.00% 11.30% 3.70%

Source: Armstrong & Associates (2013) and apics.org Table 1

3PL companies have huge presence in

Europe and North America so the

logistics costs average 8.9 percent GDP,

while the percentage of logistics costs to

GDP is higher in the rest of the world.

Then the core question arises how

companies should decide whether they

should go for 3PL or not? What can be

possible criteria to judge the performance

of 3PL Company? Here are some of them. If

shipper thinks that any of the following

tangible or intangible benefits are

associated with adopting 3PL to its

operations then it should give deep

thought for it.

Lead Time Reduction: If company is

able to reduce its Lead time to replenish

inventory, by efficient and close

coordination of goods movement,

especially when changing from one

The service developer offers advanced value-added services such as forming

specific packaging, cross-docking, track & trace, and special security systems.

The standard 3PL provider supplies typical 3PL services including warehousing,

distribution, and pick and pack.

handling efficiency

The customer developer is the most advanced form and involves high integration

with the customer, taking over its whole logistics operations. This is similar to

what is now known as fourth-party logistics (4PL).

mode to another; hassle free official

work and clearances in movement of

goods.

Reduction in Bull-whip effect: By proper

time management and economies of

scale 3PL Company should be able to

utilize its big network to minimize

interruptions and delays. This Reduction

in variability helps in better inventory

management and much improved

productivity and building of trust

between partners

More focus on core Business: Airtel-

IBM joint venture in management of

operations has provided fillip to Airtel to

expand in other regions as well because

Logistics management in extended

supply chains is itself a very complex

process which has been reduced and

eliminated and Airtel is now focusing on

its primary business functions.

Increased supply chain flexibility: The

customer shall have a better bargaining

power over its suppliers. Access to big

network of suppliers and leveraging that

could be one point of differentiation in

business. 3PL facilitates sourcing from

different locations just like Apple,

Walmart extract majority of revenues

and small portion of revenue goes to

their suppliers. In this way, supply chain

is flexible and adaptable to market

forces.

Market development and Market entry

vehicle: There is certain demand for

some products in different locations but

due to unavailability of raw materials

market is unexplored. 3PL providers can

solve this problem through their huge

network and help customers explore

new market opportunities and assisting

with marketing in new territories by

triggering demand in those regions by

sharing of information, expertise and

network.

Expertise in Logistics: 3PL integrates

various supplies from different

customers, hence have access to huge

information. This information can help

to identify potential growth areas and

help in introduction of new products,

new processes, trends in business

climates in foreign countries, trends in

transportation modes, and more.

Over the years there are major changes in

the reasons for not employing the 3PL

strategies for the operations. Figure 2 shows

these changes in the reasons over the time.

Other than IT compatibility all other issues

has observed drastic decline. Even those

who considered logistics as their core

competencies do not think it the same over

the years. Decline in cost reductions

indicates modern technology has reduced

the cost for total logistics for the shippers.

Challenges in 3PL Implementation:

Incompetent suppliers with variable

supplies: In global supply chain scenario,

a company has its suppliers spread all

over the world. It is highly unlikely that all

of your suppliers are able to keep the

same pace throughout the operations.

This poses a great challenge for 3PL

implementation.

Lack of integrated Solution provider:

There are few players in 3PL industry

which offer full range of services needed,

and their services might not be suited to

the supply chain. Figure 3 shows different

kinds of services provided by the 3PL

player and use of the services in different

regions

Less autonomy: Any incompetency in

supply and logistics can lead to huge

amount of shortage costs or non-

utilization of assets leading to business

failure. In a way, this creates variety and

hence uncertainty in supply chain. So

competent and qualified human resource

is required

Thorough tangible and non-tangible

value analysis: Customers shall be able

to carry out cost-benefit analysis with

outsourcing. The value from outsourcing

should offset the value by internal

management of logistics

Checklist for 3PL outsourcing:

1) Compatibility with supply chain

2) Cost, delivery time quality of service

3) Performance measurement Mechanism

4) Hassle free paper work

5) Management of service provider and

organization

6) Information sharing and mutual trust

7) Operational performance and use of

modern technology

8) Size and quality of fixed assets

9) Experience in specific industry

10) Financial performance, Market share of

the company

11) Geographical spread, range of services

provided and network

12) Risk management and reduction in

variability/uncertainty

13) Quasi rents management and effective

remuneration system

14) Cost of delivery and solutions

15) Financial Stability

References:

Daugherty, P.J, Sabath, R.E. and Rogers, D.S. (1992), "Competitive advantage through

customer responsiveness", The Logistics and Transportation Review, Vol. 28 No. 3, pp. 257-72

Lieb, R.C., Millen, A. and van Wassenhove, L.N. (1993), ''Third-party logistics services: a comparison of experienced American and European manufacturers", International Journal of Physical Distribution & Logistics Management, Vol. 23 No. 6, pp. 35-43

Zeng, A. Z. and Rossetti, C. (2003), "Developing a framework for evaluating the logistics costs in global sourcing process: an implementation and insights" International Journal of Physical Distribution & Logistics Management, 9, 785-803.

Gilmore, D. (2002), "Achieving transportation excellence", World Trade, 11, 36-38

Results and Findings of the 17th Annual -Party Logistics Study: The

Cooper, M.C., Lambert, D.M., Mason, R.E. and

Pagh, J.D. (1998), "What should be the transportation provider's role in supply chain management?" in Proceedings of the 8th

World Conference on Transportation Research, Antwerp, WCTR-S

Gilmore, J.H. and Pine, B.J. (1997), "The four faces of mass customization", Harvard Business Review, Vol. 75, January-February,

pp. 91-101.

Paradigm Shift Period for

Communication:

In the 1840s Samuel Finley Breese Morse,

the American co-inventor of Morse code,

envisioned laying cable across the Atlantic

to enable telephonic communication from

US to Europe.

The business benefit metric of the

solution was a reduction in message

transmission time from 10 days to only a

few minutes. The project ultimately took

over 18 years to complete when US

president James Buchanan finally

conversed with Queen Victoria over the

transatlantic cable, hence demonstrating

the first business benefit.

◌ Did You Know???

Background: India is a land of contrasts and

paradoxes. One such extreme example is

that every day some 300 Million Indians

go hungry and around 3000 children die

from illnesses related to malnutrition1. Yet

India today holds record stocks of wheat

and other food grains that rot in

Government store houses. The green

revolution ensured in increasing the yields

of our land considerably and India

drastically reduced its dependency on

imported food grains. Today, India is the

vegetables and the second largest

producer of wheat & rice. Despite such

abundant supply of food, very little

trickles down to the population. This has

resulted in shortages, high inflation and

rampant malnutrition. This extraordinary

situation is created by a complex regime

of subsidies to farmers, lack of adequate

grain storage facilities, inefficient

procurement process and a corrupt public

distribution service. Worse, around 40% of

the food is wasted at various stages of the

supply chain even before it reaches the

consumers2.

The agriculture supply chain in India can

be broadly divided into two categories:

one which is highly regulated by the

government and the other run by private

sector. The private sector usually handles

fruits and vegetables at a local level. This

segment is dominated by small players

and is highly fragmented. It is

Perspective on India’s Agriculture

Supply Chain

Current scenario | Problems | Potential solutions

Name: Pratheek Hegde

Campus: Indian School of Business

Email ID: Pratheek_Hegde2014@pgp.isb.edu

Mobile Phone: 8288095354

Photograph

1. As crops rot, millions go hungry in India (http://uk.reuters.com/article/2012/07/01/uk-india-wheat-idUKBRE8600KB20120701) 2. Global Food Losses and Food Waste Jenny Gustavsson Christel Cederberg Ulf Sonesson Swedish Institute for Food and Biotechnology) Gothenburg, Sweden

unregulated and disorganized without any

national or pan state players.

This segment is of less significance in

terms of economic value and food

security.

The government run supply chain was

created in 1960s by passing key

regulation on the movement of

agricultural produce such as wheat, rice,

edible oils, pulses and sugar. Thus, from

hence forth this article focuses on the

highly regulated government supply

chain. The focus is on current scenario,

pressing problems and possible solutions

to them.

Current scenario and problems: Most developing countries struggle with

investments in rural infrastructure. This

leads to poor quality of roads, unreliable

and expensive energy access (electricity),

lack of primary health services etc. This

has a direct effect on agriculture sector in

terms of storage and logistics which leads

to high losses of the produce from farm to

consumer. In addition to the above, India

has the following unique problems:

The magnitude of food wastage is colossal

(16 Million tons wasted in 2010: enough to

feed around 120 Million people3). In

addition the production and consumption

patterns in India have significant impact on

world food security and prices. Even a

marginal improvement can have huge

impact on the lives of people by stabilizing

prices and reducing malnutrition.

Second, the supply chain and logistics is

highly fragmented at the downstream

(transport companies, wholesalers and

traders). Often, the fragmentation of land

holding is discussed and debated upon

and the supply chain does not get enough

attention. The critical issue is that any

efficiency improvements in the sector will

largely benefit farmer community

compared to agricultural companies. Thus

there is no or very little private investment

from private sector and farmers do not

have access to technology or the means to

raise the necessary capital.

Another unique aspect is that most of the

food is wasted from farm to market place

unlike in developed countries where most

of the food is wasted at the consumer end.

Remarkably, in India once the produce

reaches the market there is very little that

is wasted. Even damaged fruits and

vegetable have uses and are not thrown

away. The above issues make this supply

chain a complex problem to solve.

The current scenario and problems with

various elements in the supply chain is

elucidated in the following pages.

Commissioning Agents: Commission agents are the first point of

contact to farmers when they bring their

produce from the field to local markets.

These markets tend to be just a few

kilometers from the farms. The

transactions are handled by the

3. Food waste as a global issue International Solid Waste Association Report

commission agents who negotiate and

come to a deal with the farmers.

Interestingly the commission agents do

not take ownership of the produce

throughout the process. They just tend to

find a suitable buyer for the product and

broker the deal. Their revenue comes

from 6-10% commission that they make

from the value of the deal4. Another

important role of the commission agents

is that of a financer. Typically farmers

tend to get a maximum amount equal to

the value of the next harvest from the

agents. This gives enormous power to the

commission agent against the farmer.

Typically the agent aggregates similar

produce into one and finds a buyer.

Quality of produce and grading is of little

consequence as it has no major impact

on his commission revenue. Thus the

incentive to the agent is to trade more

and more produce to increase his

income. Thus in turn farmer loses out

with low income and there is no incentive

for improving quality of the produce. The

farmer realization would be higher if

quality of the produce were marketed

well. Here is the first of many

mismatched incentive structure in this

whole supply chain.

Role of government: After the commission agents buy the

produce, they sell it either to private

sector or the government. If the crop

being traded is a regulated one, then the

government purchases it at a minimum

support price that is pre-set. The Food

Corporation of India (FCI) is the largest

buyer of wheat and other crops and

transacts with the commission agent.

These grains are then distributed to below

poverty line families (who are given a

ration card) at affordable prices through

the Public Distribution System (PDS). Due

to the level of fragmentation in the supply

chain form farm to the consumer, India

faces tremendous challenges in its ability

to plan and make quick supply

adjustments to the system. In addition to

this, the need to feed 1.2 billion people

made government intervention and

regulation necessary in agriculture sector.

This has both positive and negative

effects. On one hand government

provides food to millions of people below

poverty line. But this comes at a

tremendous cost in terms of wastage,

public spending and inefficiencies.

Even though agriculture was the main stay

of the Indian economy, the first ever

integrated policy framework on

agriculture was laid out in July of 2000!5

Till then many departments, commissions

and five year plans laid out independent

policies and vision for agriculture. Like

most aspects of the government they

were not in sync with one another. Thus

many cooks were stirring the pot leading

to inconsistent policies. To complicate

matters, successive governments made

changes to the policies without allowing

time for the policy to show its impact.

Result was an incredible number of policy

4. Marketing of Fruits and Vegetables in India: A Study Covering the Ahmedabad, Chennai and Kolkata Markets - Vasant P. Gandhi and N. V. Namboodiri 5. Policy dynamics and competitive advantage: quiet revolution in Indian agriculture - C.S. Sundaresan

shifts and many populist measures were

undertake such as Minimum Support

Prices (MSP), fertilizer subsidies, free

electricity etc. which have bankrupted

state exchequers and have had

detrimental ecological effects. The

government still has the last say in

exports of agricultural produce, listing of

commodity futures, trading in food grains

and heavily regulates these businesses.

Recent ban on sugar export and trading

of commodities are few examples of

government interventions in the sector.

There is also a lack of consensus between

Ministry of Agriculture and Ministry of

commerce on policies regarding food

processing sector.

The images that follow provide a visual

detail of a typical journey of the farm

produce.

Starting from the left hand side first image,

the journey of farm output is traced. From

the farm it is harvested, packed and

transported to local markets. In the second

image the collection agents are striking deals

and produce exchanges hands. If the Govt.

purchases the produce, they are most likely

stored in temporary warehouses which leads

to huge losses due to rotting. If the produce is

sold to private agents then they are either

exported or sold at retailers or sent to

restaurants. As seen in image five, the

damaged produced is loaded n carts to be

sold at low cost. Very little produce is wasted

at the markets as seen in image six*

The Image below Illustrates agriculture

supply chain in a typical Indian farm to

consumer scenario

Another failure on the government part is

to address the legal uncertainties that

arise when leasing land for agricultural

purposes. Corporates and contractors can

aggregate vast amount of land by leasing

and exploit economies of scale in

farming. The current regulations on land

makes owners vary to leasing options.

Thus city dwelling individuals with

agriculture land are forced to leave the

land barren and this also prevents small

farmers from focusing on urban job

opportunities.

Infrastructure: As described earlier, the FCI buys the bulk

of the wheat produced in the country to

distribute it through the PDS. A part of

this is stored as a buffer stock (Some 17

Million tons). The irony of the situation is

that FCI has no grain silos to store these

grains. Instead, the grains are stored in

unmaintained warehouses and outdoor

depots. Both these do not have basic

structures such as roofing to protect the

produce from environmental elements.

The result is approximately 20% of the

grain that was stored is lost6. The total

economic loss is higher considering the

minimum support price paid to the

farmers to procure the grain. Even the

private owned ware house capacities are

woefully inadequate. Government is

unable to attract investment to build

modern grain silos since operating these

silos would mean working with FCI that is

notorious for its late payments.

Instability: Usually farmers tend to choose those

crops to grow that have been profitable in

the past seasons. This logic is flawed

since most farmers tend to do the same

leading to a herd mentality. This leads to

oversupply of the commodity that result

in steep drops in prices that in turn leads

to wastage. Thus farmer incomes become

uncertain and hence they cannot avail

long term loans. This is currently limiting

much needed investments in the

agriculture sector.

Potential Solutions: From the above description of the supply

chain it is clear that the root cause for the

wastage lies in improper packing, storing

and poor policy framework. Potential

solutions should address all the three

factors.

The government must partner with MNCs

to construct grain silos in areas such as

Punjab and Haryana which produce the

maximum amount of grains. In other

areas such a huge investment cannot be

justified. Instead innovative solutions to

storing such as using polymer storage

bags (this eliminate rotting of grains),

equipped regional warehouses, etc. can

be built. A hub and a spoke model would

be ideal in this case where in the regional

warehouses would feed the silos as and

when stocks are depleted. A revenue

sharing model or ton basis storage

revenue agreements can lure the MNCs.

On policy front the government must

allow market to decide the prices of the

produce and must do away with minimum

support price mechanisms. This would

result in farmers producing only those

crops that would be economically viable.

In addition, the traditional role of the

commission agents must be altered. The

agents can be trained to provide farmers

with information about the crops, best

farming practices, prevalent prices etc.

Also commission agents can be made

loan officers of banks since they have a

deep understanding of the business and

have established contacts with farmers.

The FCI has to be made more accountable

and its transactions transparent. Another

measure could be to privatize the FCI to

align incentives of the entire supply chain

to reduce wastage and boost productivity.

Export policy regarding agriculture

produce needs to be relooked to allow

farmers to export their produce. This has

two significant advantages: Farmers

would realize the importance of quality of

their produce. Second, it would raise their

income. Thus, the policy if framed right

98% of the total fruit and vegetables

produced in India are consumed fresh7.

This results in extreme fluctuations in

price to both the consumers and growers.

When supply is in excess during the

harvest season, prices plummet leading to

severe losses. One tried and tested

method to avoid this is to process the

produce. This would add value to the farm

output thus raising the monetary value of

the products. These can be then exported

under brand names or sold in urban

areas. This would tilt the bargaining

power in favor of the farmers. Currently

once the produce is brought to market it

has to be sold. Farmers would incur a loss

if this is carried back. Traders knowing

this exploit the situation and offer below

market prices.

The above recommendations are only a

few possible initiatives that could reduce

food wastage and make the entire supply

chain efficient. In short, there is no magic

chain.

◄

Zookal started world’s first “delivery-

by-drone” service in Sydney:

Zookal, a textbook rental startup, is sick

of relying on slow trucks and traditional

delivery systems to get its textbooks to

people. Now, this Sydney, Australia-based

company has decided on a fresh approach

to deliver the textbooks via drones. It has

announced that by using unmanned aerial

vehicles to ferry textbooks to renters it

will cut delivery times from 2 to 3 days

down to a matter of minutes, while saving

shipping costs down to a tenth of their

normal prices. The drones are big enough

to carry the weight of a textbook and

delivery it to a specific GPS point at an

outdoor location, where the renter can

collect the package at his or her

convenience.

6. Indian Wheat Market Western Australia Trade Office India 7. IPC Seminar- Challenges facing the Doha Development Round Trade Negotiations on Agriculture

◌ Did You Know???

◌ Crossword: Mind @ work

2

1 15

3 4

5 6

8

10

7 9

11 12 14

13

CLUES :

Across :

1. A data-driven approach and a

measure of quality striving for

near perfection by eliminating

defects.

3. Scheduling system to control

the logistical chain from the

production point of view.

5. A phenomenon in supply

chain causing serious

inefficiencies borne out of

improper ordering.

7. Recognized as industry leader

in manufacturing and (2)↓ is one

of the principles described in

philosophy.

10. A statistical tool involving

probabilistic analysis in project

management.

11. Right→ A business

management software allowing

an organization to use a system

of integrated application.

11 Left← An optimal quantity

that minimizes inventory

holding cost.

13. Developed by Dr. Yoji Akao,

helps transform user needs into

engineering characteristics.

Up:

14. A combined pool of tangible

products and intangible service

designed to fulfill specific

customer needs.

15. Most popular way of

introducing (4) and empasizes

empirical feedback throught its

3 roles.

Down:

2. First implemented in several Japanese businesses after the Second

World War.

4. Alternative to project management, responds through incremental

iterative work cadences known as sprints.

6. A technique that identifies top portion of causes that need to be

resolved.

8. A production strategy that strives to reduce in - process inventory and

associated carrying costs.

9. Highly successful product development strategy adapted by Intel.

12. Used to record real time operational transaction.

15. A simulation game conceptualized by a group of MIT professors.

INTRODUCTION

Supply Chain Management encompasses a

series of activities which involves

procuring raw materials from suppliers,

transporting them to manufacturing units,

transforming the raw materials into

finished goods and distributing them to

the customer. Since the entire process

comprises of complex network of

suppliers, factories, distribution cells and

customers, the system has to be efficient,

effective and robust. This was the

traditional SCM Model. It had some

limitations, such as, in most of the cases

it had fixed designs that could not be

changed according to the real time

environment. Also the model used to be

cost oriented and not revenue oriented.

To save upon the recurring cost, a

generalized Supply Chain System was

implemented.

For this process to work in the desired

manner flow of material and information

becomes pivotal. But the flow of

information is often outpaced by the flow

of materials in the SCM. Information

technology is used passively to study the

processes but no real time information is

available which could help analyze them

and the inefficiencies associated with it

deeply. This is where Internet of Things

can be extremely useful. It is how

materials can interact using internet/web.

In SCM this can be used to obtain real

time information regarding the materials

right after procurement to the distribution

of materials. This technology not only

helps to track the materials but also

through real time analysis helps to

remove inefficiencies in the system real

time eventually assisting us in taking and

implementing decisions.

Visibility structure of Internet of Things based on

Supply Chain

INTERNET OF THINGS IN SCM

Anubha Taneja, SPJIMR

Prabhash Sharma, SPJIMR

The above diagram depicts the business

layers at various levels of back end,

distribution to retailers and eventually to

users, and usage of internet to get real

time information on the input provided.

This layer gets the data, processes it, and

transmits the output to the application

layer.

STUDY SO FAR

IOT is a system where the physical objects

are connected to sensors making the

objects omnipresent. The sensors use the

RFID technology to communicate among

the materials.

THE TECHNOLOGY ROADMAP: INTERNET OF

THINGS

Source: SRI Consulting Business Intelligence

SCM being a network of suppliers with

factories and distributors, eventually

connecting to the consumer, IOT would

contribute in making the process simpler

and more efficient. There are 2 types of

SCM:

Planning applications

Execution applications

Planning applications include different

algorithms to make and fill an order.

Whereas Execution applications include all

the intermediate steps in delivering of the

order like, flow of finances, tracking the

current location of dispatched material

and cost computation of reaching the

warehouse.

The technology used in making Internet

of Things practical is Electronic Product

Code (EPC), Radio Frequency Identification

(RFID) and EPC global Networks.

EPC is a unique number on every item,

which becomes the identity of the item. It

is like a barcode on every item, only

difference being that it is associated with

dynamic data of the item. Unlike the

barcode, which has only the product

category, EPC holds the identity of the

item through the unique features of the

item, like date of production or

independent serial number. This makes

the item equipped enough to be tracked

throughout its journey, from the

manufacturer to the buyer.

RFID is a wireless technology, used to

store and process information, modulate

radio frequency signal and transmit and

receive signals. EPC, along with the RFID

chip is stored on an RFID tag. The RFID

chip transmits the information of EPC

through EPC global Network. The EPC

global Network comprises of the devices

and services used for automatic

identification and immediate transfer of

information on the items (EPC). These

devices include the EPC Readers and EPC

tags, EPC Middleware and EPC Services,

for smooth and undisruptive transmission

of information.

IOT in SCM has currently also moved to

offers on the spot information to the

customers. As soon as a customer picks

up a hanger, a screen displays the clothes

giving a visual experience to the user.

This helps in making the customer make

the purchase decision.

The RFID chip inside the RFID tag on the

clothes allows the automatic identification

of the object. This information passed

through the network is read by the

wireless RFID reader, passing on the data,

thus displaying the item.

CISCO defines the Internet of Everything

as a connection of people, data,

information, devices and things which will

be more valuable than processing and

transferring of signals from one item to

market can be depicted by the following

experiences:

1. High profitability by involving the

customer- Internet of Everything will

help not only the business in a sector,

but will even improve the customer

experience, hospitality, and service.

This will in turn give more profits to

the business and a convenient

experience to the customers.

2. Maximising value of retail space- the

space in a mall can be utilized by

putting up devices with IOT given real

time information of type of items, sale,

available stock, price and other related

information in a store. This will reduce

the requirement of excess or untrained

staff in the mall.

3. Location based services- this service

can help the retailer detect if their

valued customer is in the vicinity; they

mobile phone. This message can be

about latest collection, new stock, or

discounts within a limited duration.

4. Optimize inventory- RFID sensors on

the items available at an outlet can

help the shopkeeper to detect the

sales in surrounding region. The

retailer can check the sales of other

stores on some parameters like

season, inventory sold and also the

colour sold maximum number of

times. This would provide the

information regarding sudden increase

in sale of a particular item. The retailer

can then increase the inventory in

his/her store accordingly, based on

weather, popularity and so on.

5. Assisting customers- Sometimes due

to time constraints or various other

reasons, customers are not able to try

on the clothes of their choice before

buying them. In that case, a customer

can just put a particular piece of dress

in front of him/her and check the

fitting, colour and other colours

available in different sizes of that

particular piece of cloth. Also, to know

real time information, the customer

can ask for further help through the

interactive machine present in the

store. This provides fast access of

information to the customer,

increasing sales and thus increasing

profitability

6. Connecting customers- this can help

in connecting customer to different

sales outlets of the same brand. The

customer can look into his phone to

know which all stores have the same

clothes, in the required size and

colour, in a particular locality.

These features help in reducing confusion

among different stores, create a level of

consistency among them and provide

flawless information to the customers

having different needs and requirements.

Also it would reduce significant amount of

staff in the stores creating a clearer and

greater level of understanding among the

customers. This creates not only a network

among people and material, but also

creates value for this network. Thus in

a typical term given by CISCO.

CHALLENGES

Current Research

The research has to be done more

extensively as the technology with the

required efficiency and security is currently

insufficient.

Transparency in Logistics

Logistics has always been an area wherein

all the departments have to have complete

transparency for IOT in SCM to be

functional. This might necessitate some

changes and amendments to the Standard

Operation Procedures.

Cost

With unexplored areas still persisting in

IOT, there is an inevitable need for in

depth research of IOT in SCM. Operations,

research and procurement of materials for

the implementation of IOT and

maintenance will make it highly expensive

to execute in everyday life.

Efficiency

All the machines and sensors in IOT are

interconnected to each other therefore

even a smallest problem in any of the

machines or services in the system can

lead to the failure of the entire IOT system.

This can only be prevented by

implementing an efficient system and

reliable materials.

BENEFIT

Improved Inventory Management

Inventories are kept as a buffer to meet the

demand. Businesses usually hold stock to

meet the demands of the customer

because supplier might not be able to

produce that much and meet the demand

immediately; it might take supplier many

days to produce and deliver so as to meet

the demand. Moreover holding stock for

businesses is very expensive as it requires

infrastructure to hold the inventories. This

is where IOT helps, using IOT real time

information is available to the supplier

about the stock available and decisions can

be taken regarding production in advance

which reduces the number of days it takes

to supply goods from supplier to

businesses and hence helps the businesses

to reduce the stock stored.

Process Optimization

IOT has a great impact in optimizing the

processes and hence increasing

production. IOT uses the combination of

sensors and actuators to enhance

productivity. During the process sensors

collect data and this data is sent to the

computers and analyzed. This is used in

turn to send signals to actuators that alter

the process based on the feedback given

by analyzed data. For example in paper

and pulp industry where the temperature

of kilns is important for the productivity,

this technology helps to reduce the

variance in temperature and increase the

productivity.

Resource Optimization

IOT can help in changing the usage

pattern of scarce resources like water,

power etc. by providing the real time

automated feedback for the same. For

example some energy companies are

providing real time information to their

customer like power usage and the real

time pricing for the same. Based on this

information customer can make the

decision to shut down a particular device

and this helps immensely in saving energy.

Increased Logistic Transparency

IOT helps to make information pervasive

across the entire supply chain rather than

in the hands of only logistic operator. For

example while transportation of goods if

the conditions are not favorable for the

goods driver is informed by the automated

system and he can take steps to prevent

the damage of good. This also increases

accountability on the part of everyone

involved in SCM. It also helps to reduce the

number of damaged goods and hence

losses to the business and enhances

customer satisfaction.

CONCLUSION

The Internet of things will help in evolving

new business models going in future.

Following can be the potential businesses

opportunities:

Data Storage and Analysis

With the increased use of IOT vast amount

of data will be available and that data can

be analyzed to make important business

decisions like pricing decisions. This data

and analysis can expand the business of

data analytics manifold.

Data Security

With so much of data available, it will open

new opportunities for data security

vendors to protect the confidential data

from potential cyber-attack.

Carbon Footprint

IOT could be used to capture the carbon

footprint per product and vast databases

will be used for the same. Moreover when

the environmental issues assume pivotal

importance businesses will thrive using

this data to cut down significantly on

carbon footprint of different products,

IOT has started shaping the way things

interact with each other and open plethora

of opportunities for businesses. It has

immense potential in improving SCM as

discussed above. Companies in future will

expand using IOT and new businesses will

emerge based on IOT.

REFERENCES

1. http://www.mckinsey.com/insights/high_t

ech_telecoms_internet/the_internet_of_things

2. http://cmuscm.blogspot.in/2013/03/internet-of-things.html

3. http://referaat.cs.utwente.nl/conference/17/paper/7328/the-impact-of-the-internet-of-things-on-revenue-in-supply-chains.pdf

4. http://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=5998314&url=http%3A%2F%2Fieeexplore.ieee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D5998314

5. http://www.journals.elsevier.com/international-journal-of-production-economics/call-for-papers/supply-chain-management-era-internet-things/

6. http://link.springer.com/chapter/10.1007%2F978-3-642-27287-5_74

7. http://searchmanufacturingerp.techtarget.com/definition/supply-chain-management

8. http://www.digi.com/blog/community/the-internet-of-things-and-retail-what-to-expect-on-black-fridays-to-come/

9. http://internetofeverything.cisco.com/see/ioe-work-retail-0

10. http://link.springer.com/chapter/10.1007%2F978-3-642-17578-7_26#page-1

11. http://www.zebra.com/us/en/solutions/getting-started/rfid-printing-encoding/epc-rfid-technology.html

12. http://www.stephensonstrategies.com/iot-will-streamline-supply-chain-reduce-environmental-impact/

◌ IOT Trolled

An army of robot baristas could be the

end of Starbucks as we know it

competitor. The technological marvel, the

Briggo Coffee Kiosk can be used by the

people to create their ideal coffee

experience. It needs just 50 square feets

(4.6 sq m) of floor space, and it can be

dropped anywhere an airport, a

hospital, a company campus, a cafe with

tables and chairs and WiFi just like

Barcelona Startup lets you print your

own dinner

Natural Machines, based in the Barcelona

Activa Centre is working on a 3-D printer

that will produce not just chocolates, but

pasta, breads in fact, anything that

starts life as a dough, paste or stiff liquid.

Apart from making things like pasta, other

uses include decorating cakes or adding

complicated designs to foods. Unlike

other 3-D printers, which typically print in

can use six capsules, allowing much more

complicated foods to be made. It also has

a heater built in to keep the

food warm during the

printing process. The

device will be Internet-

enabled so Natural

Machines can use the full

panoply of social tools to

build up a user community.

◌ Did You Know???

INTRODUCTION

gourmet donut brand which serves

donuts. Its current positioning is as

very own donut chain serving wide

variety of fresh and tasty donuts. Its target

group is kids and youth who would like to

have donut for Breakfast, lunch, dinner,

desert or snacks. Currently in India, it has

47 stores out of which 20 are in Mumbai.

It is currently present in Delhi-NCR,

Mumbai, Pune, and Bangalore.

We will talk about the supply chain

opportunity that we identified for Mad

Over Donuts in the further sections of this

article. In Section I, we will talk about the

current supply chain model of MOD, their

current offerings. Based on our analysis,

we will discuss about the identified supply

chain opportunities i.e. Mass

Customization, reducing mismatch costs,

consolidating distribution which we may

Your Own Section

III we will talk about the implementation

details of our new service.

CURRENT SUPPLY CHAIN FOR MOD

The donuts are made at one centralized

kitchen in the city as per the donut

making process explained in Field Visit

Report: Exhibit 1. The current supply

chain of MOD works on a Hub-and-Spoke

Make your own Donut !!!

Swati Aggarwal, NMIMS

Aditya Aggarwal, NMIMS

Supply chain opportunity for mass customized Donuts

model. The model has one big centralized

kitchen catering to rest of the smaller

retail outlets. The detailed supply chain

flowchart is stated in Exhibit 2. The

centralized kitchen and retail stores are

owned by the MOD, thus leading to a

vertically integrated supply chain. These

donuts are then transported to the various

retail stores where the icing is done as per

the fixed options available i.e. 18 types of

donuts available for sale. Replenishment

Frequency: The donuts are supplied at the

stores twice in a day in special boxes

through the MOD owned supply vans (as

per field visit data done in Mumbai).

If in any case, the donuts of particular

type are finished and there is a demand

for that donut, then it is prepared on-the-

spot at the store depending on the

demand by customer. The filled donuts

take more time than the plain ring type

donuts at the stores. The donuts left after

the day is over are waste and everyday

fresh donuts are received at the store. We

observed that sometimes there were

stock-outs of the most selling donuts.

M.O.D has been conventionally serving

donuts from its retail outlets that facilitate

delayed differentiation.

We observe from the study conducted on

with the consumers at present. This has

great opportunity to differentiate your

service in the competitive scenario and

also reduce the mismatch costs

simultaneously. It would reduce the

chances of my stock-outs too.

Donuts can be coated with specific icing

and filled with a specific filling based on

the demand for variety within the retail

outlet. Less time, efforts and costs

associated with customizing the donuts

make them ideal for mass customization.

Moreover, the retail outlets throughout a

city are served with un-customized donut

bases (donuts without icing) by a

centralized kitchen. In the event of a new

channel opening up, it would be

connected to the centralized kitchen for

its donut base supplies. In addition to

that, new demand because of emergence

of a parallel selling channel would be

serviced through the existing network of

retail outlets and the centralized kitchen;

Thus, creating way for effective

consolidation of distribution.

M.O.D has been very recently delivering

donuts for orders placed over the phone

by customers. However, the opportunity

lies in delivering mass customized freshly

prepared donuts to customers at their

door-step within a specific time. This is

achievable with the onset of a donut

delivery service linked to mass

customization of donuts through the

online portal.

M.O.D, to a good extent, already has a

vertically integrated supply chain. The

production of donut bases, stocking of

topping/icing material, transportation and

logistics, and the retail outlets are all

owned by M.O.D. To implement the donut

delivery service M.O.D will need to go one

step ahead and achieve forward

integration by creating a unit for making

deliveries. On the other end of the supply

chain, (customized donuts) order

collection will be done through the online

portal. Demand forecasts will now account

for the existing demand from the retail

outlets and the orders placed online

through the portal.

We will discuss more about this

opportunity design and its

implementation in the subsequent

sections.

SUPPLY CHAIN OPPORTUNITIES AT MAD

OVER DONUTS: DESIGN

Opportunities identified here are:

Mass Customization of donuts to cater

to end customer needs

Donut delivery SERVICE to deliver fresh

doorstep

(a) Introduction to Mass Customization:

It is the customization and

personalization of products and services

for individual customers at a mass

production price. The concept was first

conceived by Stan Davis in Future Perfect.

It was then further developed by Joseph

Pine in his book Mass Customization -

The New Frontier in Business Competition.

Eg. mi-adidas mass customization

initiative was launched in April 2000 by

Adidas to provide consumers with the

chance to create unique athletic footwear

produced to their personal specifications.

Traditionally customization and low cost

have been mutually exclusive. Mass

production provided low cost but at the

expense of uniformity. Customization was

the product of designers and craftsman.

Its expense generally made it the preserve

of the rich. Today, new interactive

technologies, like the Internet, allow

customers to interact with a company and

specify their unique requirements which

are then manufactured by various means,

some may be automated.

Mass customization can be described as

"enabling a customer to decide the exact

specification of a product or service, and

have that product or service supplied to

them at a price close to that for an

ordinary mass produced alternative".

Whereas increased product variety is

sometimes cited to support descriptions

of mass customization, it is also argued

that the customer must be involved in

specifying the product for true mass

customization to take place. This type of

mass customization is sometimes known

as 'collaborative customization', a term

which was coined in a 1997 Harvard

Business Review article 'The Four Faces of

Mass Customization', by B. Joseph Pine

and James H. Gilmore. The second part

of the definition refers to the price, which

must be 'close to that for an ordinary

mass produced alternative'. This

addresses the 'mass' in mass

customization. This separates mass

customization from the traditional 'made

to order' approach, which by nature

involves high cost, for example in tailored

suits.

An issue relevant to achieving

customization at or near mass production

cost is the need to avoid creating

inventories of finished stock. The use of

build-to-order methods, where an item is

not constructed until an order is received,

is an important factor in minimizing the

cost of a customized product. To avoid

build- up of finished stock, the producer

must have in place a system that can

quickly produce an item only when an

order is received.

Variants of Mass Customization:

Collaborative customization (also

considered co-creation) firms talk to

individual customers to determine the

precise product offering that best

serves the customer's needs. This

information is then used to specify and

manufacture a product that suits that

specific customer. For example, some

clothing companies will manufacture

blue jeans to fit an individual

customer.

Adaptive customization firms

produce a standardized product, but

this product is customizable in the

hands of the end-user (the customers

alter the product themselves)

Transparent customization firms

provide individual customers with

unique products, without explicitly

telling them that the products are

customized. In this case there is a

need to accurately assess customer

needs.

Cosmetic customization firms

produce a standardized physical

product, but market it to different

customers in unique ways.

Fig 1. Variants of Mass Customization

For our service ‘MYOD’: Using this mass

customization concept, we propose to

start a new donut chain, say called

lacking in current MOD process, we can

use this to gain competitive differentiation

and provide value added service to

customers at almost the same prices. We

plan to use Collaborative customization

where customers will be given the

freedom to customize the donut they

want. It would involve customization at 3

levels: donut base, donut dressing and

extra topping. Mass Customization model

necessitates that the exact customer

demand be known beforehand as it draws

a direct line between the end consumer

and the manufacturer. A direct benefit of

such a model is that it would reduce

mismatch costs. One of the most effective

means of interacting with customers (and

thus knowing exact demand) is through

online portals which would facilitate mass

customization of donut orders. Such

orders can be collected and consolidated

to determine demand at a retail outlet

level which would serve the end

customers. Consolidation of demand

would also be done at the centralized

kitchen to determine production outputs.

(b) Donut delivery service design:

Doorstep delivery of donuts exists for

M.O.D but there are no parameters to

measure and rate it as a service. The

existing service is arbitrary and not

Pizza is

benchmarked for its pizza delivery

service. Such may not be the exact case

with donuts but service parameters well-

defined and communicated as value to the

customers would bring in more sales.

Delivery of donuts within 45 minutes

Delivery to any area within 5km of the

retail store

(c) Supply Chain Implementation for

MYOD

Before detailing the design and

implementation of the supply chain, it is

important to understand the deliverables

of the MYOD supply chain in terms of

service to the end customer. The

deliverables of the supply chain in order

will be:

Availability of mass customization

options and ordering facility to the end

customer through the website

Quick and correct flow of order

information to the entity making

delivery

Delivery of mass customized donuts to

the customer in a stipulated time

Supply chain elements for MYOD are

discussed subsequently.

Mass Customization Process

Mass customization of donuts will be

available to the end customer on the

website

(http://www.makeyourowndonuts.com).

To facilitate personalization of service, the

website would allow the customer to

create his/her profile and then customize

and place orders. Three levels of donut

customization will be available to the

customer as shown in Exhibit 3. Mass

customization is facilitated in MYOD

supply chain by the kitchens at retail

outlets, distribution centers and

centralized kitchens. Broadly there are

three main elements to the mass

customization process:

Facilities

Online Portal is the key to delivering mass

customized donuts to the end customers.

MYOD will enable customers to customize

and order donuts online through the

website (www.makeyourowndonuts.com).

Identification of customers through their

past orders would serve to create a

personalized experience for them. Four

levels of customization will be provided to

customers along with delivery options

home delivery, take away and gift MYOD.

Retail outlets in the form of MYOD owned

stores and/or franchisees will be the most

important part of the supply chain. Such

outlets would initially serve the purpose of

branding of MYOD donuts and create

much required brand visibility. Brand

establishment and visibility will be

ensured by selection of prime locations in

major cities. Retail stores will be equipped

with kitchens that facilitate customization

on top of base donuts. Along with selling

donuts directly to end walk-in customers,

the kitchens would produce mass

customized donuts based on the orders

received online. Retail stores would also

serve the purpose of a distribution center

closer to the end delivery location. The

existing vendors would cater to same

materials requirements easily.

In order to save retail space costs, an

alternative to exclusive MYOD donut

stores could be existing bakery outlets in

a city that would customize base donuts

(provided by MYOD) and serve them as

MYOD branded donuts. However, since

the product is MYOD branded, requires

customization and emphasis on quality

(also consistency) is high; introduction of

foreign elements in the supply chain

would pose a huge threat. Hence, this

alternative seems unviable initially but can

be explored later for retail sale of

standard assorted MYOD donut packs.

Initially a small number of retail stores in

each city would build demand for the

product. Important parameters for

determining location of retail stores are:

Cities with established market for the

product category donuts

Areas with huge populace of kids,

teenagers and youth with adequate

spending capacity

Locations with high store visibility

to serve the purpose of branding.

Examples Koramangala in Bangalore,

Bandra and Juhu in Mumbai and

Connaught Place in Delhi

Locations having adjacent catchment

areas with high density of young,

educated population who would form

the major portion of the online

customers

Store locations at major malls in metro

cities to ensure brand visibility.

Example Oberoi Mall at Malad in

Mumbai, Garuda Mall in Bangalore

Centralized kitchen produces donut

bases and supplies them to the retail

stores. Centralized kitchen would also be

equipped to facilitate delivery of

customized donuts to the end customers.

Demand at each retail outlet will be pre-

determined and shared with the

centralized kitchen. Demand through

online ordering will be distributed

between the retail stores based on the

ordering patterns from respective stores

locations. Thus, a consolidated demand

for each store will be shared with the

centralized kitchen. The centralized

kitchen would plan production by adding

the respective demands from retail stores.

Extreme fluctuations in demand are not

expected. The production facility will be

MYOD owned and hence production

required due to reactive demand would be

serviceable at no additional cost.

Inventory

MYOD retail stores will not stock inventory

for more than half-a-

Donuts are perishables and in-order to

important that replenishment of fresh

donuts is done within the day and no

inventory is carried forward. Inventory for

the morning slot will be usually fixed and

supplied to retail stores in the morning

while the second slot delivery will be

based on the demand quoted by the retail

store managers for the rest of the day.

The leftover inventory at the end of the

day is disposed off. With the online

ordering and delivery service in place, the

demand is expected to become more

predictable and settling in of demand

patterns over a period of time would allow

better demand predictions. This will help

reduce mismatch costs associated with

stocking more or stocking less. More than

one delivery of donut bases from the

centralized kitchen also ensures

responsiveness to change in demand,

thus, ensuring lower lost sales and reduce

risk of leftovers. Stocking of non-critical

inventory icing, fill creams, toppings and

packaging boxes at the retail outlet would

be done on a weekly basis in a single

delivery from the warehouse. Stocking of

such non-critical items at the central

warehouse would be a function of the

combined weekly demand of all retail

stores combined. Demand forecast would

be assisted by customer insights from the

retail stores and online orders combined.

Thus, the central warehouse, that would

service the combined demand for all the

outlets, will not hold more than two weeks

of inventory (considering a week of buffer

stock) and will be replenished weekly.

Distribution and transportation

Closed mini-trucks or vans will deliver to

the retail stores the stock of donut bases

(from centralized kitchen) and the supply

of other material. Larger closed trucks will

deliver weekly stock of supplies to the

central warehouse from the suppliers.

Lead time for procurement of raw material

from suppliers will not be more than three

days. Hence, orders placed in the middle

of the week would be serviced towards the

end of the week ensuring a weekly

replenishment.

On the end customer side, doorstep

delivery of orders would require a fleet of

delivery vehicles (mopeds) and

deliverymen. Nearby orders at a given

outlet would be clubbed since the service

time will be 45mins.

Service parameters for doorstep delivery

of donuts service:

Delivery of donuts within 45 minutes

Delivery to any area within 5km of the

retail store

Minimum order size should be 4

donuts

In case of unavailability of required

donut at a particular outlet, the order

will be serviced by the next nearest

retail outlet

No provision of free donuts in offers

Discount offers on subsequent

deliveries or walk-ins at the store

Information Management

All outlets will be connected to the

centralized kitchen as well as the central

warehouse through a simple IT system

that will facilitate communication of daily

and weekly orders. Such a system would

also allow tracking of inventory at the

stores, centralized kitchen and the

warehouse.

Order information from the website will

directly translate into order to one of the

retail store (the one closest to the place of

delivery). Thus, order processing will be

centralized and retail stores will get only

the necessary information. The centralized

kitchen will track all orders and the

consolidated online demand would help

keep estimates of production. The final

production decisions will be made by the

consolidated demand (retail + online)

collected from each of the retail stores.

Since, retail stores would serve the end

customer through their inventories; it

becomes important that their demand

estimates incorporate online demand

though the online ordering is centralized.

Flow of product and flow of information

through the distribution channel is as

depicted in Exhibit 4.

Sourcing

Sourcing of raw material would be done

from established suppliers on a weekly

basis and it would be stocked at the

central warehouse. Raw material would

include flour for donut base, oil, icing,

cream, toppings and packaging boxes.

Shelf life of the raw material is long and

hence excess inventory at times won

big concern.

Product and Pricing

MYOD donuts would be priced around

Rs.55 per piece. More exotic/customized

donuts would be charged at Rs.70 per

piece. Donuts ordered online will be

priced the same as in-store donuts.

Delivery of donuts will be free and any

delivery past 45mins will be subsidized by

50% of the price. A minimum order of four

donuts makes a case for delivery.

Customization can be done on a single

donut but such orders will not be

delivered. Customers will have to come to

the retail store with an allowance of

20mins post ordering to collect their

donuts. No free donuts will be given in

any of the online promotional offers.

However, subsequent purchases can be

incentivized offering discounts to ensure

repeat purchases and walk-ins.

Future Scope for MYOD

MYOD has a unique positioning of

delivering customized donuts at the

supply chain efficiencies, it is important

that the focus remain on online ordering

and not opening of new retail outlets. The

only rationale for opening up a retail

outlet or a distribution center should be to

facilitate online demand arising in a

particular locale. The online portal would

be fruitful in developing a loyal customer

base that can be leveraged for introducing

new product lines.

Decline of the U.S. Auto Industry

The average age of an automobile in the

United States has gone up more than 50%

since 1990 and is now sitting at an all-

time record of 10.8 years. The average

length of a marriage in the United States

that ends in divorce is only 8 years. Back

in 2000, about 17 million new

automobiles were sold in the United

States. During 2011, less than 13 million

new automobiles were sold in the United

States. Do you remember when the United

States was the dominant manufacturer of

automobiles and trucks on the globe?

Well, in 2010 the U.S. ran a trade deficit in

automobiles, trucks and parts with the

rest of

the

world

of $110

billion.

Gujarat’s canal-top solar power plant

-top 1 MW solar

project on Narmada branch canal network

in Gujarat was commissioned within 1000

days of conception. The power plant

which is located at Chandrasan village

near Mehsana, 45Kms from Ahmedabad

will generate 1.6 million units of

electricity per year. The fact that the

panels are built over the canal is meant to

ensure that around 9 million litres of

water does not evaporate. The Solar plant

has been set up at the cost of around Rs.

17.50 crore by the US-based Sun Edison.

The entire length of SSNL canal network in

Gujarat is around 19000 Kilometres. Even

if 10% of it is

used for this

type of

projects it

could

generate

2400MW of

clean energy

annually.

◌ Did You Know???

Disruptive innovation

Innovation is the key to success of any

business. It enhances their ability to stay

longer in the market. But a wave,

popularly known as disruptive innovation

has always threatened the way in which an

industry works and as a result many

companies have been forced to either

adapt or fizzle out. The wave, frequently

creating a new market, struck with a

different and unique set of values. From a

low cost mass produced Ford Model T,

which revolutionized the transportation

business to digital photography,

disruptive innovation has made its

presence felt at unknowing times.

We are currently living in an era where

technology is changing at a rapid pace.

Many companies doing business by the

traditional methods are living in the fear

of being outpaced and outmatched by

companies that readily accept and

incorporate such disruptive innovation in

their business. 3D printing is yet another

classic example of disruptive innovation

that has garnered much attention lately.

Though used for prototyping in early

stages, it has now gained acceptance in

the daily business operations. As this

technology gains momentum and because

of its simpler, smaller and more

convenient nature, many industries will be

forced to rethink their business strategy

and realign with the change.

The impact of 3D printing can be felt in

different industries at different levels,

biggest being on the supply chain of any

industry. IBM has identified 3D printing as

one of the leading disruptive innovation

which in conjugation with intelligent

robots and open source electronics has

The impact of 3D printing on supply

chain and operations

Shaurya Gulati, XIMB

Vivek Jajodia, XIMB

the ability to transform the global supply

chain.

A typical supply chain consists of

manufacturing, assembly line,

distribution, warehouse and retail. All

these departments work in sync with each

other to help the product reach its final

destination i.e. end customer. Currently,

the challenge for the industries is to keep

the average costs down while the

maintaining high volume of production.

This puts a lot of pressure on the supply

chain of the company which becomes

complex and operates at various levels.

Also there are suppliers and sub-

contractors that take on different roles of

raw materials supplier, manufacturer,

assembler etc. The production itself is

very scattered and distributed. We have

factories in different parts of the world

with China being the hot favourite at the

moment. The traditional methods have

been benefitting all those involved in the

process and the economies on the whole.

But as seen in the past, new technology

demands new rules to be laid down thus

changing the economics of the market.

With 3D printing a product can directly

move from ideation/conceptualization

stage to end user bypassing all the

intermediate steps as shown in the above

diagram. This will change the foundations

of a traditional supply chain management.

The current model has its roots deeply

embedded in standardization,

modularization and digitization. Each of

these processes has helped productivity

reach new heights. Standardization has

reduced the production time of a good,

modularization has produced assembly of

integrated modules and digitization has

made the processes simpler. Together

these three have impacted global trade,

investment opportunities and changed the

employment scenario. Standardization has

made supply chain big because it

supports economies of scale and as each

company today wants low cost, efficient

products supply chain has truly turned

global.

3D printing has more or less reversed the

standardization approach as companies

will again turn to customization instead of

mass production. Goods can be tailor

made to suit personal and demographic

needs and need not to be made at an

isolated location. 3D printers accustomed

with software defined designs have

started to redefine the old age hardware

driven approach. Listed below are some of

the key impacts of 3D printing that will

alter the landscape of supply chain

management and open new retail

opportunities in the coming future.

Economies of Scale: Low volume,

batches of one, low cost, low carbon

footprint

Customization

On demand production

Localization (Consumption and

Production at one place)

Shortened Development Cycle

Change in Manufacturer-Wholesaler-

Retailer relationship

Economies of Scale

The economies of scale is very evident as

use of 3D printing can help manufactures

produce lower volume of goods suited to

the needs of particular demography.

Though the cost of 3D machines is higher

it can be compensated with reduction in

transportation costs, cheaper cost of

finished goods in that particular area,

improved efficiency in production and

elimination of other in between processes.

The era of small and simple has already

begun. As per IBM, the standout result of

using the software defined supply chain

will be lowering of costs and that too an

extent of 23% in ten years.

Customization

A 3D printing machine has the capability

to produce different models and it will be

a big blow to the traditional methods of

manufacturing where an assembly line is

setup to produce one type of models.

Altering the assembly line means long

term investments and also stopping the

production thus lowering the productivity.

But now with a small change in software

and computer programs, machine will be

able to produce different products on the

go.

Localization

models of business are under huge threat

as 3D printing expands its wings. Today

in a traditional supply chain, point of

consumption is geographically isolated

form point of manufacturing. This leads to

large transportation costs and increased

lead time. Any change in the consumers

buying pattern generally leads to

alteration of the product to reflect the

latest trends. In traditional methods a lot

of time is wasted in transit which may also

lead to spoilage of some products. But

with 3D printing as production and

consumption takes place at the same

place, companies will be in a better

position to distribute the goods and serve

the customers. The distribution channel

will be very short and will involve

minimum movement of goods and that

too directly to the consumers.

Shortened development cycle

Big companies usually have various

assembly lines for their different products

which require huge manpower to operate.

3D printing will eliminate this phase

altogether and thus reduce the labour

costs and the lead time of new products.

New products would be built at a much

faster pace. A recent experiment by

Akaishi, a Japanese manufacturer who

used 3D printing to make footwear and

massage devices reported reduction in

almost 90% of the production time as

opposed to normal methods. 3D printing

will also help in reducing redundancy that

is present in the supply chain to dispatch

some parts in very short span and get

machines working again. These

expenditures can be avoided by just

clicking and downloading the design of

that part from internet.

Manufacturer » Wholesaler » Retailer

relationship

3D printing involves process called

additive manufacturing, which essentially

builds solid objects by depositing a layer

over the other one at a time. This is a shift

from modern day manufacturing which is

based on tearing and cutting to make the

product. This will lead to less stock of raw

materials in the warehouse and also

printing will be done on the basis of

demand (made to order). Ideally products

saving huge costs on supply chain.

Combing these advantages we will be able

to remove the need to have warehousing

altogether and stocks of inventories will

be a thing of past. Manufactures will save

money on storage, handling and

distribution. In addition to lesser

inventory and warehousing cost, the scrap

generated by this method of

manufacturing will be negligible and

companies will be able earn higher profits

due to lesser wastage.

As 3D printing gains momentum, build to

order strategies will be employed by all

the manufacturers. This will eliminate the

need to have retailers in some sections or

they will turn into shop windows for

manufacturers. Orders will be directly

delivered from manufacture to consumer.

These cost benefits will make companies

commit for the switch in their approach.

Industries Example

10 years from now and we will see our

markets be flooded with goods made from

3D printers. Consumer Products,

transport, fashion, food, medical, defense,

auto and various other industries that rely

heavily on supply chain management to

carry out their business in an efficient

manner, need to rethink their strategies.

Auto Spare parts: The automotive spare

part industry is large and growing. There

are many organized big as well as small

players that have built their business in

this domain. As 3D printing comes of age,

manufactures and end consumers will

directly print the parts needed to replace

existing ones rather than buying it from

these vendors. The after sales service

provided by these players will also go

down as the accuracy and durability of

printed parts improve. This industry which

is close to 2.7 Lakh Crores will definitely

take a hit and many players will be force

to adapt quickly.

Defense Industry: Defense Industry is

riddled with products like guns, tanks,

missiles that have been built using an

extensive and very complex

manufacturing process. If the machine

breaks down in the middle of a training

exercise or battlefield, instead of

discarding the machine altogether or

ordering the part from the manufacturer,

it will be possible to replace the defunct

part by printing the new one then and

there.

Food Industry: Though 3D printing started

with plastics it has now expanded its

portfolio by producing materials like

human tissue and food. Many attempts

have been by researchers in Universities

like Cornell and Exter to produce different

food items like chocolates and cheese.

This will drastically impact the food

supply chain where farm inputs form a

major componen

Fashion/Garment Industry: 3D printing

will have a huge impact in the fashion

industry where the product life cycle is

low and customization is the key. Artists

and designers will be able to work

together to make infinite models and

come up with a new fashion every other

day. The designers will be the new

manufactures and distributors. They can

then send the design to the customer at a

given price who can in turn produce the

output at his home.

Conclusion

3D printing as seen above is a new wave

in engineering. The traditional hardware

based design of products is taking a

backseat and is slowly giving way to new

software based model. A new model of

logistics and supply chain will emerge that

will feed raw material directly to 3D

printers. These printers can be at a

As 3D printers become more affordable,

extensive training would be required to

make people aware of this technologies

full potential. Today, companies are

reluctant to absorb this technology

because of the costs and lack of

knowledge. At least 70% of leading supply

chain leaders are yet to assess the impact

of 3D printing on their business. But latest

data suggest that the big shift is already

in place. The costs are reducing, accuracy

of the printers are improving i.e. build

quality of products is improving and

supported materials are increasing in

variety. Though at present, printing very

matter of time when this transition picks

up pace.

References

1. The new software-defined supply chain-

IBM Global Business Services Executive

Report

2. 3D printing and the future of

manufacturing

3.

TechCrunch, 1 March 2011.

http://techcrunch.com/2011/03/01/printi

ng-food-with-3d-printers/

4. Wohlers Report 2011: Additive

Manufacturing and 3D Printing State of the

Industry, p. 130.

5. http://www.wohlersassociates.com/2011c

ontents.htm

6.

2012.

http://www.industryweek.com/articles/ad

ditive_manufacturing_goes_mainstream_2

6805.aspx?ShowAll=1

Introduction

Food processing industry in India is a

sector that has gained prominence in

recent years. Raw materials availability,

lifestyle changes and appropriate fiscal

policies has given a tremendous positive

makes the sector serve as a vital link

between the agriculture and industrial

segments of the economy. Strengthening

the link is of critical importance to

reduce waste of agricultural raw materials,

improve the value of agricultural produce

by increasing shelf-life and by

fortifying the nutritive capacity of the

food products; ensure remunerative

prices to farmers as well as affordable

prices to consumers. Adequate focus on

this sector could greatly alleviate concerns

on food security and food inflation

For years, Warehouse Managers were

urged to get control of the operations

inside their warehouses. That meant

moving from paper based manual

operations to real-time wireless data

collection systems and supply chain

execution software systems like

warehouse management software (WMS),

transportation management software

(TMS), yard management systems (YMS),

and small parcel manifest systems.

Food Processing: Definition

According to the ministry of Food

Processing Industries, India, items

pertaining to the following processes are

included:

Manufactured Processes: If any raw

product of agriculture, fisheries or animal

husbandry is transformed through a

process (involving employees, machines,

power or money) in such a way that its

original physical properties undergo a

change and if the transformed product

is edible and has commercial value, then

it falls within the domain of Food

Processing Industries.

Other Value-Added Processes: If there

is a significant value addition (increased

Warehouse Optimization in Food

Processing Industry

Sthitaprajnya Samal, XIMB

Sayed Atif, XIMB

shelf life, shelled and ready for

consumption etc.) in any of the processes

then such produce also comes under food

processing, even if it does not undergo

manufacturing processes.

Primary Processing relates to conversion

of raw agricultural produce, milk, meat

and fish into a commodity that is fit for

human consumption. This involves steps

such as cleaning, grading, packing,

sorting etc. Secondary and Tertiary

Processing Industries usually deal with

higher levels of processing where new or

modified food products are manufactured.

Warehousing which is a key requirement

in the overall supply chain, is mostly

dominated by unorganized players. 20% of

warehousing is organized currently with

70% of the organized market controlled by

the Government (FICCI-EY Report,

2011).Involvement of more private players

will help in the better development of

warehousing facilities.

Tools/Techniques used for Warehouse

Optimization

Automated storage and retrieval systems

(AS/RS)

Automated storage and retrieval systems

(AS/RS) can help improve food and

beverage warehousing companies by

quickly moving high volumes of products

and increasing visibility in the warehouse.

The benefit of energy efficiency, more

strategic use of labour power, and

improved supply chain velocity are making

the case for AS/RS even more compelling.

Streamlining operations using AS/RS:

Industry experts have noticed a high

turnover rate for employees, particularly

in freezer applications. Warehouse

employees are also less likely to stay

inside of a freezer environment in

comparison to a regular warehouse

environment due to employees needing to

Inputs

Production

Procurement & Storage

Primary Processing

Secondary Processing

Retailing

take periodic breaks in order to warm up.

The concept of creating a blended

warehouse with manual labour and AS/RS

is also gaining traction, especially in the

U.S. An enhanced approach can help food

and beverage companies address issues

that may be occurring in the warehouse

while decreasing the initial cost of the

automation equipment.

Easy to integrate:

Automated storage and retrieval systems

have become more dependable and better

integrated with warehouse management

systems and warehouse control systems

in recent years. They are becoming more

adaptable in traditional warehouses. And,

AS/RS provides a quick solution for food

and beverage companies and warehouse

operators who are looking to free up

additional floor space.

Using AS/RS saves a tremendous amount

of floor space in a building. Accuracy

increases as well because once AS/RS

takes a load away they will be assigned a

position within the storage racks and

it was labeled properly.

Another advantage of utilizing AS/RS is to

gain real time visibility into warehouse

inventory is knowing what product is

visibility reduces the amount of days-on-

hand (DOH) inventory. A reduction in DOH

helps keep perishables from spoiling

there by keeping costs in check and

customers happy.

Automatic Guided Vehicle (AGV)

Food and beverages like cereals, candy,

packaging materials, beer, snack foods,

soft drinks, in-process ingredients etc.

are handled using automated guided

vehicles either in a palletized form or in

unit loads when it is used in

manufacturing, cross-docking,

warehousing, trailer loading etc. The

intermediate storage of food products is

taken care by AGV. It also organizes

warehouse shelves accordingly by taking

into account the expiry dates of final

products. This ensures optimal food

conservation at every point of the

workflow.

Any intermediate stage of food &

beverage supply chains from trailer

unloading, raw materials receiving and

transport can be successfully

implemented with automated guided

vehicles. Some specific applications are:

Transportation of food in cold storage

and freezers (less operator-friendly

environments)

Fish transportation in tubs mainly in

salty and oily areas

Cheese storage racks and movement to

and from ripening rooms which are

controlled by software

Automatic handling of beer pallets

from automatic warehouse to dock.

Automatic storage applications with AGVs

also include:

Pallets, containers, racks, boxes and

tubs which are stored in blocks

Warehouse racks pallet storage

Storage of reels which are mainly

vertical

Storage of reels in cradles which are

mainly horizontal

Warehouse Management System

Warehouse management system (WMS) is

a tool which helps manage the control of

real-time inventory thereby helping food

processing and distribution companies

improve their accuracy significantly and

reduce inventory levels. This would reduce

their costs and give them a competitive

edge. From the time raw materials arrive

to the plant or the manufacturing facility

to the shipping of finished goods,

wireless, hand held RF (radio frequency)

mobile PCs and bar code scanners are

used to track inventory. The inventory

information is captured at the receiving

dock and then this data is utilized to

optimize all facets of your warehousing

operations.

The various advantages of having a

warehouse management system which

uses a combination of RF data collection

technology, bar code identification, and

specialized warehousing software tools

are:

Better inventory management- reduces

the inventory level

Better accuracy for stocking inventory

Reduces time needed to receive, pick

and replenish inventory

Improvement of Order fulfillment

leading to increase in customer

satisfaction

Material movement improvement and

better space utilization

Minimizes errors in stocking, picking,

packing and shipping

Increases productivity, employee

accuracy and efficiency

Simplifies cycle counting

Warehouse Slotting Solutions

Inventories when placed at the

appropriate locations in a warehouse can

improve the efficiency of handling

inventories drastically. Warehouse slotting

is one such process for identifying the

most efficient location for each item. This

optimizes productivity. The type of

product, its movement, storage

characteristics, and distribution

management needs will result in proper

warehouse slotting and productivity

optimization. Workers will be able to pick

items quicker and more accurately and

reduce the risk of injuries if proper

warehouse slotting techniques are

employed. It will also enhance

distribution management. Effective

warehouse slotting and productivity

optimization depends on many important

factors.

Various Warehouse Slotting Softwares,

Warehouse Vision Softwares, determine

product placement within distribution

centers so that safety, operational

productivity, and space utilization are

significantly improved. Warehouse Vision

Software contains sophisticated

algorithms and user defined and flexible

slotting rules which differentiate it from

other warehouse slotting approaches.

Warehouse Vision Software is a slotting

and warehousing optimization tool

currently used by over 1000 food

processing centers including many owned

by PepsiCo and CVS.

Warehouse Space Optimization

In order to store more products in a given

space we must make better use of the

total available space. The various ways by

which we can achieve this are:

Utilize over-head space

By using drive-in rack or pallet flow rack

can easily pick up 25% more storage

space. Another use of overhead space is

to utilize the storage rack over the pick

slots to store the extra inventory of the

product being picked below. When

replenishment is required, it is necessary

is to drop the product from above. An

added benefit is the elimination of

additional conveyor and mezzanine

expense.

Reduce aisle sizes

Aisle sizes can be reduced by using

narrow aisle fork trucks. At times aisles

are kept at a uniformly large distance

because it seems to be required by the

building's column spacing and fork truck

requirements.

Deep pallet storage

Storing stacked products, more pallets

deep, will increase the percentage of

space used for storage and eliminate

several access aisles. Normally, there is

one half aisle for each facing of pallet

rack. If the product does not stack well,

using portable/removable stacking frames

for at least the lower levels can be a good

option. It also works well to store stable

product on the lower 2 levels with the

more fragile products on top.

Eliminate empty space above product in

individual slots

If the average pick slot is 1/3, increasing

it to 1/2 full could generate 1/3 more

cube. By using a range of pallet and pick

slot sizes will allow correct sizing for each

individual item based on its carton size

and movement.

Stack pallets on top of each other

Each rack bar requires a clearance above

the floor or lower level product. By having

fewer bars, cube lost to the space needed

by the bars themselves will be reduced.

Each extra bar can mean up to 15 cubic

feet lost. If there are 300 bays of pallet

rack, eliminating one level of bars could

free the equivalent of 9000 cubic feet for

pure product storage.

Store high cube/high movement products

in one reserved area of the warehouse

Reserved areas need to be filled with as

many pallets as it can hold. This works

best for holding product that does not

have to be rotated by lot number or date.

It can also be used for storing out-of-

season items.

Using double deep pallet rack

This option requires the purchase of

special pallet rack and at least one double

reach fork truck, as well as wider aisles to

accommodate the fork truck reach

assembly. This will allow the pallets to be

placed 2 deep and several levels high. It

has an additional advantage for

replenishment - once the front pallet is

depleted, the uncovered rear pallet is

immediately available. For this option to

be feasible, the WMS needs to be set up to

support double deep slot numbering.

Conclusion

Advancements in real-time technology are

also facilitating the performance-driven

warehouse. In fact, the transformation of

RF technology from mobile data collection

devices into smart, mobile computing

devices is really analogous to warehouse

optimization: transforming WMS into a

new, more powerful tool. Companies that

have not yet implemented a real time data

network, WMS, and TMS, must do so first.

However, if the building blocks are in

place, optimization systems can take

advantage of the foundational work

implemented by the best enterprises.

money within the four walls of the

warehouse.

An optimization engine is a component of

a supply chain execution suite, one of the

applications that make things happen. By

activities in the warehouse, yard, or

transportation department. And while it

has visibility into inventory and order

chain visibility and event management

solution either. Rather, an optimization

application is a layer of software that sits

atop and communicates with the other

supply chain execution solutions,

including warehouse, transportation,

small parcel manifest, and yard

management systems.

References

Shook, J., Rother, M., 1999, Learning to See: Value Stream Mapping to Create Value and Eliminate Muda, The Lean Enterprise Institute, Brookline, MA.

http://dipp.nic.in http://mospi.nic.in www.apeda.gov.in http://agricoop.nic.in http://www.thomasnet.com/white-

papers/abstract/100527/warehouse-optimization-the-next-step-in-the-supply-chain.html

http://2012.modexshow.com/seminars/?id=594

http://www.raymondcorp.com/industry-solutions-food-processing

http://www.foodlogistics.com/article/10780644/warehousing-sector-report-optimizing-your-warehouse-with-as-rs

http://automation.ssi-schaefer.us/food-logistics-optimizing-your-warehouse-with-asrs-2/

http://konyvtar.uni-pannon.hu/hjic/HJIC33_105_111.pdf

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

Google’s “Project Loon”

Project Loon is a research and

development project being developed by

Google with the mission of providing

Internet access to rural and remote areas.

The project uses high-altitude balloons

placed in the stratosphere at an altitude of

about 20 km to create an aerial wireless

network with up to 3G-like speeds.

Because of the project's seemingly

outlandish mission goals, Google dubbed

it "Project Loon". The balloons are

maneuvered by adjusting their altitude to

float to a wind layer after identifying the

wind layer with the desired speed and

direction using wind data from the

National Oceanic and Atmospheric

Administration (NOAA). Users of the

service connect to the balloon network

using a special Internet antenna attached

to their building. The signal travels

through the balloon network from balloon

to balloon, then to a ground-based

station connected to an Internet service

provider (ISP), then onto the global

Internet. The system aims to bring

Internet access to remote and rural areas

poorly served by existing provisions, and

to improve communication during natural

disasters to affected regions.

◌ Did You Know???

Purplle.com completes the experience

with personal care experts on board

(www.purplle.com/finder/chat) who

provide guidance on how to find/compare

and use these products and services. One

can also see videos and use the virtual

makeup studio

(http://purplle.com/virtualstudio.html) to

make the right beauty choice as well.

The portal has products related to men,

skin care, make-up, hair care, body-care

and beauty appliances. A few famous

brands available at purplle.com are

Davidoff, Hugo Boss, Elizabeth Arden,

It

also has tie ups with wide range of spa

and salons in Mumbai like Jawed Habib, B

Blunt, Jean Cluade Biquine etc.

Core Idea, COO says, “Provide a complete

personal care and grooming experience to

our customers (who are pan India) using

technology as a medium. The focus lies

from low-end products to Premium

products within the brands, in order to

attract a larger audience.”

Founder & CEO – Manish Taneja, Has

been financial Analyst for Fidelity Growth

Partners and prior to that as an Associate

in Avendus Capital.

Co-Founder & COO – Rahul Dash

Competition – Huge

I. VoiletBag, MedPlusBeauty, LadyBlush,

etc are few websites that deal with

beauty and skincare products.

II. Jabong, Myntra and Infibeam etc also

offer beauty and ecommerce products.

III. Velvette a subscription based

eCommerce dealing with beauty

products has also raised an

◌ Company Profile

It is a holistic and convenience based portal exclusively dealing in Personal Care and

Beauty products. Purplle.com offers products for all beauty enthusiasts ranging from

those who follow an ordinary beauty regime to a beauty aficionado or a professional. In

addition, it also offers Salon and spa services (www.purplle.com/finder) in Mumbai and

NCR region.

undisclosed amount of funds from

India Quotient.

Seed Funding Feb 2012 (Amount

undisclosed)

Serie A Funding Aug 2013 (Amount

undisclosed) from Blume Ventures,

Mumbai Angels and Chennai Angels to

be invested for increasing merchandising

strength from 10,000 stock keeping units

to 15,000 stock keeping units and the

number of withstanding brands from 400

to 500 plus. It will also invest in supply

chain capabilities, technology, and

warehousing and consumer experience.

Industry Overview:

Wellness Industry in India

2012 Estimates:

I. Beauty Care Industry - 29,000 Crores

II. Fitness and Slimming Market 60,000

Crores

III. 60% of market is dominated by

products

2015 Projections:

Total Industry Size: 1,00,000 Crores (from

70,000 Crores in 2012) at CAGR 15-17%

I. Beauty Care Industry 49,000 Crores

II. Alternate Therapy 21,000 Crores

III. Health and Wellness Food and

Beverages 27,000 Crores

Wellness services: expected to generate

more than 3 million jobs.

Major Issues: (These are relevant to the

wellness services Industry)

I. Lack of skilled manpower

II. Standardization issues across the

country

III. Need for skilled development, training

centres, accredited and certified

courses, consistency in products and

services FICCI president and HSBC

Country Head Naina Lal Kidwai.

Good interest from Private equity and VCs

since 2009 Enrich Hair and Skin

Solutions, VLCC, YLG, Four fountain spa,

trichology chain Richfeel, Healthkart.com

and Guardian Lifecare are key players to

have received investments from Venture

Capitalist firms.

E-commerce Sector:

Issues:

I. Regulatory Constraints

II. High Costs

III. Less number of companies raising

funding. Only successful companies

are Flipkart, Myntra, Zovi, Snapdeal etc

have managed to raise funds.

QnA

1. When and how did you get associated

with e-commerce sector?

Ans:

once you start a company in the sector

☺ Technology and technology enabled

businesses have always been a keen

inclination. Beauty and grooming

clearly lacked a lot of technology and

we saw an opportunity.

2. How is the concept of lean applicable

to the service industry, especially the

e-commerce sector?

Ans: Lets just take the case one major

cost in any e-commerce business,

supply chain. E-commerce with the

use of technology works on a pull

system from the customer till the time

products are delivered to the

certain criteria like quality and time to

deliver. E-commerce operations need

to continuous make sure that anything

either removed or modified. The

parameters to track might change but

3. How important according to you is

technology in improving supply chain

of an e-commerce company?

Ans: I think its one of the most critical

pillar of an e-commerce supply chain.

Just to cite an example technology has

enabled us at purplle.com to correctly

ship 2000 products with the same

manpower that was doing 500 in a

day. Our systems get integrated with

logistics providers to provide exact

information to the customer regarding

their shipment. Technology is very

very important to run a successful and

profitable ecommerce setup.

4. What are the major operational

challenges in a technology based

startup like Purplle.com?

Ans: The biggest operational

challenge is to marry human

behaviour and technology. As the

number of people dealing with

technology increases the variability of

the system goes up manifold.

5.

in India. How do You handle the

operational challenges of using this

system?

Ans: I would not put it that strongly.

We are still a huge cash economy.

Cash on delivery has been a great

enabler for e-commerce. There were

two distinct issues with CoD as a

service:

Returns We have best in the industry

return rates (<2.5%). With the help of

technology we have made sure there

are enough checks in the system for

that to happen.

Cash Cycle- There are e-commerce

focus logistics players have emerged

in the country. The way cash

remittance is done has improved

significantly over the last year or so.

We get our money within hours of

product delivery nowadays.

6. Purplle.com has recently received

Series A investments from top Angel

investors. How do you plan to improve

supply chain capabilities using these

investments?

Ans: You will see a lot more

technology coming in, a larger

processing center (may be multiple

ones) and investment in our inventory

management capabilities. We are

gearing up for the next phase of

growth which should take us to a

leadership position amongst beauty &

grooming platforms.

7. With a large number of players in e-

commerce providing home delivery

services, how do you think the

concept of collaborative logistics can

be utilized in this?

Ans: If you mean having your own

courier which others can use, then I

have a slightly different point of view

on this. I do understand that India has

unique infrastructural challenges for

last mile delivery for e-commerce and

companies have taken the path of

setting up their own logistics for the

same. However logistics business in

itself is a mammoth task. There is no

other way but to lease out your spare

capacity, or collaborative logistics as

you mention, to break even there. I

wagging the dog.

8. How are you planning to capture the

growing mobile ecommerce market

and in what way do you think it will

impact your current business model?

Ans: We already get 30% of our traffic

from out fairly rudimentary but

optimized mobile website. We are

working on the improving the

experience on the mobile and would

be launching our app very soon.

Purplle.com as combination of

product, services and content play

would invest heavily on its mobile

presence. Lets see the consumer

behaviour evolve and we would be

ready to quickly iterate.

9. What are some of the future plans of

purplle.com and how do you plan to

further expand?

Ans: Right now you see Purplle.com as

a products e-commerce store and a

salons and spa services listing

platform. We are serving a million

beauty enthusiasts a month and have

tied up 2500 salons & spas across

Mumbai, Delhi n Gurgaon. Next year

would be to consolidate leadership in

both segments. You should see us in

8 cities with 10,000 salons and spas

serving about 10 million consumers

on a monthly basis.

10. The wellness industry seems to suffer

from a lack of skilled manpower. How

do you think should the industry go

about improving this?

Ans: I think the organized part of

wellness industry is in a nascent stage

and it will come with its own set of

challenges (one being lack of skilled

manpower). As we get more

organized, we should see better

acceptability of the industry as a

career path. Industry needs to

evangelize before people start getting

attracted to it. You would see a lot

more certified training academies

coming up. A standardization of

required skills and qualification would

become the need of the hour.

11. What would be your advice to young

entrepreneurs wishing to enter into

the world of e-commerce?

Ans: Focus on the basics. Have a lot

of patience. E-commerce is an

amazing roller-coaster and things

change very quickly. So you have to be

on your toes all the time. And yes, its

24 X 7 X 365 ☺

Track and Trace Coming to India’s

Liquor Industry

a pilot of a 2D bar code system to prevent

illegal liquor and impede tax evasion.

Starting February 15, each bottle of

alcohol will be uniquely identifiable by a

bar code, enabling verification that the

bottle is legitimate and increasing

government revenues. Customers will be

able to scan the bar codes themselves.

At distilleries, a bar code sequence

number is obtained before each lot is

scheduled. The bottles are scanned and

sent to government warehouses, then to

retail outlets. The Delhi government

expects the tracking system to curb the

sale of illegal liquor and enable real-time

reports on inventory, sales, and revenue.

◌ 2013: Lookback

Samsung Looking to Apple’s Supplier

Base

Samsung Electronics has overtaken Apple

Stretched thin by its efforts, the company

plan could lead to higher costs,

production bottlenecks, and disruptions

of product launches for Apple as it

prepares for expansion of its product

portfolio, including a cheaper version of

the iPhone intended for emerging

markets.

-house supply chain is one

of its core strengths, and Samsung still

sources about 80 percent of its

components from these suppliers.

However, its recent pushes into both

cheaper- and higher-end areas of the

marketplace have left the manufacturer

looking elsewhere to ensure it is able to

meet demand.

Volvo Trucks to conduct test run on

DME

Volvo Trucks announced a partnership in

California last week to test trucks that run

on a fuel called dimethyl ether (DME). DME

can be created from various sources and

burns so cleanly that engine does not

require an exhaust gas circulation, diesel

particulate filter, or variable geometry

turbocharger. It produces 95% fewer

carbon emissions than diesel, and some

70% fewer than natural gas.

http://www.youtube.com/watch?v=QqY4e

uAix3M

High Tech Eyeglasses: The world in

your eyes

Google has come up with its revolutionary

Google Glass, the smart-phone on a

headband that Google hopes will lead to a

disruptive innovation in the Smartphone

industry. Disruptive innovation is that type

of innovation which, with the help of

technological advancements or changes in

the business model is able to create a

whole new market and the existing norm

of doing business. There have been at

least three other new eyeglass

technologies which have the potential to

disrupt their respective industries and this

are O2AMP, Glasses.com and ADlens.

http://www.youtube.com/watch?v=pwP21

NmykDw

Product Recall: Yamaha & GM

India

Yamaha Motor has voluntarily recalled

56082 of its Ray scooters after it detected

insufficient strength in the handlebar of

some scooters due to inadequate welding.

General Motors has announced the call-

back of 1.14 lakh Chevrolet Taveras

manufactured between 2005 and 2013 to

address emissions and specification

issues. In both the cases the companies

principle and did not effectively check for

quality at various stages of the production

cycle leading to quality issues visible once

the products reached to the customer.

Quality at the source is a lean

manufacturing principle which defines

that quality output is not only measured

at the end of the production line but at

every step of the productive process and

being the responsibility of each individual

who contributes to the production or on

time delivery of a product or service.

E-Fulfillment Wars: eBay expands its

same day Delivery Service

On-line e-commerce and auction platform

company eBay announced in August that

another log in the growing e-fulfillment

fire. Under the program, eBay features

products from brick and mortar retailers,

picks up the products in store for those

orders, and then delivers them to

customers in as little as one hour.

Currently, it is partnering with AutoZone,

Babies "R" Us, Best Buy, Finish Line, GNC,

Guitar Centre, Home Depot, Macy's, Office

Depot, Radio Shack, Target, Toys "R" Us,

Urban Outfitters and Walgreens. The

service was first launched as a test last

year in San Francisco, San Jose, and

Manhattan. Last week, the company said it

has now expanded the service to the

Brooklyn and Queens areas of New York

City and to the Bay Area peninsula,

between San Francisco and San Jose. The

Chicago and Dallas markets will be rolled

out later this summer. The eBay strategy

is a hybrid in that it will not have any

distribution centers, and will exclusively

use its retail partners' own physical store

inventories in the markets it serves.

Customers order from the eBay store and

eBay driver pick-up the merchandise and

deliver it to customers at whatever

location they specify.

Apple’s Supply Chain Strategy: The best

in the world

Apple has been named as having the best

supply chain in the world for the year

2013 by Gartner. It is the sixth

consecutive year that the maker of the

IPhone and IPad has come out at the top

of the study.

In the recent ti

than depending on third-party suppliers

like other companies, Apple designs the

hardware, software and services that set

its products apart.

Secondly, Apple has built a closed

ecosystem of few selected suppliers.

Because of its volume and occasional

ruthlessness, Apple gets big discounts on

parts, manufacturing capacity, and air

freight. The company makes third party

suppliers compete head-on for prices and

quality.

Thirdly, Apple comes very hard at its

competitors. Apart from its unique value

proposition of its products and service,

Apple has developed certain strategies

making other players uncompetitive. Some

of the strategies include buying out

inventories of technology components and

ordering up all the air freight space so

other companies can't compete.

Genpact Partners with Jaguar Land

Rover to optimize procurement

Genpact Limited, a global leader in

transforming and running business

processes and operations, has partnered

with Jaguar Land Rover to provide

extensive business process management

and analytics services to help optimize the

operations. Genpact is already managing

analytic projects for JLR in production

purchasing. In addition, plans to initiate

projects dealing with non-production

purchasing also reside with Genpact. Its

Smart Enterprise Processes (SEPSM)

framework, which employs granular data

analysis, ultra-sophisticated diagnostics

and cross-functional benchmarks to

maximize process effectiveness, will help

JLR reduce costs, develop sourcing

strategies and minimize the complexity

associated with managing the large supply

base that encompasses the company's

global operations.

Foxconn enters supply chain of

Mercedes Benz and BMW

Foxconn, world's leading manufacturer of

computer components and systems, has

entered into the supply chains of

Mercedes Benz and BMW with its auto

parts and components. Foxconn's

development in the car product business

is not limited to infotainment devices, but

also high-technological systems related to

car electromechanical, central control

security and car electronics, which will

generate high profits. Foxconn is trying to

expand in China's electric car business

also.

AvtoVAZ joins Renault-Nissan alliance

for collaborative procurement

Renault-Nissan alliance, which overlooks

global procurement for Renault and

Nissan, has joined hands with Russian car

manufacturer AvtoVAZ to setup central

purchasing organisation for industrial

equipment, powertrains and vehicles. This

would attract global companies to the

supplier base and help the partners in

achieving better supplier prices with

increasing volumes leading to large

savings on procurement operations.

Kalyani Forge to add high tonnage

press lines; focus on lean processes

Kalyani Forge Ltd is one of India's oldest

and most established manufacturers of

precision forged and machined

components. They have initiated a

transformation in business process

management with an emphasis on High

Tonnage Press Lines (6000T) and cold

forging expertise.

Over the next 3-5 years, Kalyani Forge will

deploy a capital expenditure of Rs 200

crore for modernization and value

addition of their manufacturing facilities

in Pune based on lean principles;

continuous evolution of modern systems

and cutting-edge processes while

enhancing productivity.

The Company is exploring several

strategic initiatives to meet globally

accepted norms on waste management

and environment friendliness. The

Company is concentrating on process

improvements and removal of non-value

adding activities through Lean

Management Systems as a strategy to

grow aggressively.

http://www.youtube.com/watch?v=Y2xhc

wOzEmc

Reshaping the logistics: Algorithms @

work

Each time we buy something from the

xyz karts in India, we initiate a parallel

marketplace in the virtual world. It's a

marketplace where logistics companies

big and small, new and old, countrywide

and regional bid for the business to

ship the purchase to the doorstep. At the

helm of all this is an algorithm, which

powers it, and it is reshaping the

logistics business and is providing new

legs to a flagging sector.

Ecom Express, a company setup by five

former executives of Blue Dart is

reshaping the elements of logistics in

India in order to support the marketplace

created by e commerce websites. Ecom

Express serves around 1500 pin codes in

India, which is miniscule as compared to

25000 of India Post & 10000 of DTDC.

However, e-commerce logistics is Rs 600

crore segment growing at approximately

50% a year. Amazon and eBay employ

similar algorithms on their platforms. On

some e-commerce sites, the algorithm

Being on a wheelchair and tethered to an

oxygen tank could not stop him from

delivering a week long seminar on his

business philosophy, 10 days before he

passed away. Deming at that time told his

W. Edwards Deming - the American

statistician credited with helping Japan

become the global symbol of industrial

reliability - persists in his seemingly

quixotic effort to bring his lessons of

quality control and management

excellence to Corporate America.

- Do -

Check -

him. Trained as a statistician, Deming

developed methods that allowed

businesses to improve the quality of their

manufacturing and other operations by

charting the variations in their activities

William Edwards Deming

and then refining the processes to reduce

those differences. He also expanded those

methods into a complete management

philosophy that stressed the importance

of worker involvement, cooperation over

competition, and, most critically, the value

of continued improvement

Deming made a significant contribution to

Japan's world class reputation for

innovative, high-quality products, and for

its economic power. At first when Japan's

products started moving to overseas

markets during the 1950s and early

1960s, their quality was often a joke.

Then Deming taught top business

managers how to improve design, product

quality, testing, and sales by various

means, including the application of

statistical methods, he also urged

companies to concentrate on constant

improvements, improved efficiency and

methods helped Japanese companies a

long way in improving their quality.

Deming never established an institute or

school like other quality gurus, but mostly

was in private consulting business.

Deming had more influence on Japanese

manufacturing and business than any

other individual not of Japanese heritage

and he influenced than American business

much more than almost any other person.

His teaching and methodologies are still

followed throughout the world.

opsession@mandevian.com Mohit Batra, Secretary Opsession

pg12mohit_b@mandevian.com

+91-9717672007

Exploring the side ofOPERATIONS

An initiative of : Operations Club of MDI