Friday, November 30, 2007

Importance of Supply chain management to financial institutions

Supply chain integration is quite a popular topic these days. Clearly, this is not a recently discovered area of economic activity; nor has it been neglected over the years. Supply chain management — or "business value chain" management, to be more precise — has assumed a much broader importance in the commercial world, with corporate treasurers, government officials, technology providers, bankers and logistics professionals all sharing a critical interest in the many facets of the worldwide flow of goods and services.

Corporate treasurers need to keep a control on the drain on cash flow caused by inefficiencies in the handling of day-to-day businesses of producing, distributing and selling their core products. Cost reduction, process outsourcing and real-time management of financial information are all factors of critical importance to treasurers.

Although bankers have been involved in the financial aspects of supply chain management for a long time, they need to be engaged with the various physical aspects of global commerce. Major financial institutions serve the entire range of a corporate client's trade needs through the provision of a comprehensive commercial management program. Banks need not undertake the actual physical aspects of trade logistics, but they can increasingly play a crucial intermediary role between their customers and all of the numerous participants in the extended supply chain. For this role, banks are acquiring a broad range of knowledge and operational skills, not traditionally present with financial institutions. It also requires a commitment to understanding the specific needs of clients in different industries, particularly their various logistical and regulatory business requirements.

Logistics companies remain the most obvious players on the scene. These are the many firms that actually arrange, coordinate and execute the physical movement of raw materials, components and finished goods around the world. Much like bankers, logistics companies have been pushed by their customers to vertically integrate their services and adopt greater levels of interoperability among the whole range of industry participants. Some of the largest global operators have begun to combine the physical and financial streams of supply chain management through the acquisition of banking licenses, thereby giving themselves (and their customers) an entry into the full end-to-end range of trade services. While these ventures have not yet attained maturity, it is clear that the barriers to entry across the supply chain spectrum are falling rapidly and that these trends will only accelerate in the near future. Technology providers are facing rising market demand for solutions that improve supply chain functionality and flexibility. Also, governmental institutions find importance for supply chain management to address issues of national growth, to enhance customs and tax collection opportunities and to expand and enforce regulatory compliance and security requirements.

Thus in the present scenario, there may be some firms that are further down the track than others in terms of understanding and adapting to these new developments, but there are virtually no firms that are oblivious to the seismic shifts taking place in their traditional business models

Adapted from article by Bruce Proctor, head of global trade services at JPMorgan Chase

Supply Chain Strategies in Retail

Retail industries involve the sale of new or used goods to end consumers for personal or household consumption. Cut-throat competition is becoming tougher in retail space with growing supply and demand. Hyper-markets and Super-stores are battling each other on every major corner while direct marketers (including catalogs and online sites) are stealing customers from stores.

Retail industries need to continuously improve on the process and leverage on the core competencies and therefore there is a need for a foundation that provides accurate information wherever and whenever required. This calls for a strategic management of supplies and inventory. A change from in-store paper based environment of registering sales in retail shops to an online shopping environment. For this there is needed an integration of the data to increase customer satisfaction and increase productivity.

Enriching category, item planning, streamlining product introductions and other business strategies alone are not sufficient to sustain and over-grow in the market place. Real-time visibility to sales and order status, in-store kiosks, and service desk enhancements and strategic technologies to track inventory have become the call of the hour to improve the customer experience and further differentiate the brand. New efficiencies in managing stock and collaborative forecasting and replenishment help ensure that the products customers want are readily available on store shelves. This can be done by employing a strategy as given in the figure:

The basic challenges handled by this are forecasting and Inventory Management for JIT replenishments of products, peak season demand handling, order management in case of retailers with multiple outlets, warehouse management in case of multiple outlets, introducing new products and handling variety of items.

These strategies for retail industry can be summed up in 4 points: -

1. Bulk-Breaking: Orders can be done in smaller lots with a good understanding with the supplier. This can be achieved by following ways: -

· Spatial Convenience: Strategically locating the outlet with distribution networks and warehouses located proximally.

· Suppliers hold inventory

2. Vendor Managed Inventory: In this case, the vendor himself is given the responsibility to handle the inventory. A space for the vendor is rented in the outlet, and he takes care of the shelves and the space. It is a 2-way agreement wherein the vendor gets the space to market his product by interacting one-to-one with the customers.

3. Point of Sale Information System: As soon as one stock keeping unit moves out of the store when purchased by a customer, the information readily flows to the supplier.

· He is given access to the inventory database.

· A re-order point can be imposed based on consumption pattern and the supplier is asked to fill the shelf upon inventory reaching the re-order point.

4. SRM - Supplier Relationship Management:

· Relationship with supplier should not be a marriage of convenience. Supplier has to act in ways more than what is required.

· By providing special offers, discounts and incentives, the supplier savors the relationship. This also serves as a promotion strategy for the outlet.

Also a relationship with the direct manufacturer can be established as in Farmer-Corporate Relationship.

With the retail sector booming its way through the country, the need of the hour for every retailer in the industry is to cut across the competitive boundary and bring in cost-effective methodologies that work out ways of providing enhanced customer service and satisfaction.

Adapted from various sources

American Society for Quality (ASQ) Directives on Food Safety

The American Society for Quality has submitted a statement on food safety to the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce, a subcommittee that is focusing on food quality and safety in the United States. They should focus on the following areas when assessing the FDA’s ability to ensure safe food

System and process focus Current food-safety challenges demand less focus on end-item testing and more emphasis on the process and the supply chain.

SCM Although much of the existing inspection effort has been concentrated at points close to the ends of the food chain, specifically at import and processors, a focus on innovative methods of evaluating the hand-offs further down the chain might yield better food-safety results.

Joint agency activities. As the subcommittee hearings have pointed out, federal food-safety oversight is a fragmented undertaking, with multiple agencies each playing a role. Joint agency activities in complementary fields would permit more thorough oversight with existing resources.

Government/industry partnerships. There will never be enough inspectors, no matter what the design ends up being. What is also necessary is for the agencies to focus on the weak areas.

International data system for traceability. Food-safety professionals are emphasizing the need to share data internationally.

Carbon monoxide process. Although seafood has always been labeled to indicate CO treatment, this is not the case in meat and poultry. ASQ supports the concept of labeling to identify all foods that have been treated with CO.

Implement recommendations of IOM . The Institute of Medicine’s 2003 report, “Scientific Criteria to Ensure Safe Food,” made numerous recommendations that would strengthen the food chain and reduce the incidence of food-borne illness. Congress and the FDA should take steps to implement these recommendations.

Congressional and HHS support and funding of FDA proposals . In recent years, certain FDA programs and legislative proposals that demonstrated innovative approaches to the agency’s food-safety challenges have died due to lack of funding or congressional or administration inaction. These prevention-oriented initiatives should be supported and funded by Congress and the U.S. Department of Health and Human Services. Funding should promote better use of existing fee-for-service programs that strengthen buyer-supplier relationships and ease taxpayer burden

Adapted from article in October issue

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