In a candid conversation with Economic Times Global Logistics Show team, Professor Sajeev Abraham George shares the transformational growth in the emerging trends of the logistics industry and Gaps between Inventory Management and Customer service. He talks about the current market scenario of logistics in India and key performance measurement tools used in the Supply chain management. Professor Sajeev Abraham George has 25 years of diversified and rich learning experience in Industrial Engineering, Operations Research, Supply Chain Management, Service Operations Management and Performance Benchmarking.
Q. 1 What are the Gaps between Inventory Management and Customer service?
In the many manufacturing processes, inventory is used to decouple production from consumption to efficiently integrate capacity with demand. The finished goods inventory has the potential to optimize production levels to achieve superior efficiency by leveraging the economies of scale, though it may have an adverse impact on the flexibility and responsiveness of the firm. The classic inventory management theory talks about the tradeoff between inventory and customer service. Significant gaps exists between inventory management theory and practice. Most of the academic theory focusses on the minimizing costs. Higher inventory does not necessary mean superior customer service because of the tradeoff between efficiency and service and product availability is only one of the components the overall service quality. Today, there is a need to focus on overall customer experience to gain superior customer satisfaction and loyalty. Also, the inventory management policies of a firm should be in alignment with the strategic priorities of a firm.
Q. 2 What are the emerging trends in supply chain and logistics industry?
Supply chains are becoming increasingly complex and therefore firms need totake necessary steps to design, coordinate and improve the supply chain processes to provide superior customer experience and thereby adding more value for the customer. E-commerce, with various delivery options, have already changed the way currently logistics and supply chains work. New Technologies are disrupting the traditional supply chain and logistics practices. Companies are understanding the importance of effective use of massive volumes of data and use of analytics to improve the decision making process. IoT could again be one of the most disruptive technologies as it helps to acquire large amounts of data and together with big data analytics has the potential to enhance the end to end visibility in the supply chains and influence decision making on how products are designed, produced and transported. In addition, many other the emerging technologies such as 3D printing, deliveries using drones, driverless vehiclescould also have the potential to disrupt the current logistics and supply chains practices.
Q. 3 What are the key performance measurement tools in the Supply chain management?
Performance measures drive the actions of the managers and therefore the correct metrics are a critical element of a firm’s performance. Some of the key supply chain performance metrics would include cost measures (e.g. Total cost, Cost per unit at each stage, Cost per sales, Inbound freight, Outbound freight, Inventory carrying cost, Inventory turnover ratio, Cost of returned goods, Cost of damage, Cost of back orders), Customer service measures (e.g. Fill rate, Prefect order percentage, Lead time, On time delivery, Stock outs, Delivery consistency, Response time to enquiries, Customer complaints, Sales force complaints, Overall satisfaction, Price competitiveness), Quality measures (e.g. Defect rates, Order entry accuracy, Billing errors, Number of customer returns, Shipping accuracy), Asset management measures (e.g. ROI, ROA, Profitability of partners in the chain) and Innovation and learning measures (e.g. Product developmental lead time, Frequencyof new product introduction).
Some of the deficiencies of the above mentioned metrics are addressed in philosophies such as Balanced Scorecard, Supply-Chain Operations Reference Model (SCOR), Theory of Constraints approach, Value Stream Mapping. In addition to this, analytical toolssuchas DEA (Data Envelopment Analysis) and AHP(Analytic Hierarchy Process) could also be helpful.
Q. 4 What do you think about Global Logistics Show and what kind of importance it holds in Logistics industry?
I am sure the Global Logistics Show will help firms to share their new cutting edge practices and learn from each other. It has the potential to influence the supply chain decisions makers to be more innovative and help their firms to be ready for the competition in the future.
Q. 5 How can you keep the logistics costs down, while dealing with delays, damages and enhancing the customer experience at the same time?
I think the right use of technology will be the key. Firms should, in alignment with their competitive priorities, leverage the adoption of the right mix of emerging technologies to customize the logistics network to suit the customer segment that they serve.
Q. 6 What are the ways of optimizing operations in storage and warehouses?
Layout design paly a very important role. The layout design should take into account the inbound processes, storage and outbound processes to achieve optimum use of resources as well as smooth flow of material.Better accuracy in demand forecasting can also go a long way in lowering costs and to ensure success to the efforts to streamline the flow of materials. This demand data should be supported by other considerations such as process flows, material handling equipment, types and styles of racking equipment, special handling requirements, and personnel. Implementing Lean warehouse processes can also have a great impact on cost optimization in storage and warehouses.
Q. 7 An International platform such as 'Global Logistics Show' is contributing towards the growth of Indian logistics industry? What do you think about that?
The Global Logistics Show as a powerful international platform will help to provide the much needed boost to the Indian Logistics and supply chain industry to be innovative and competitive in a global level and thereby to contribute to the countries’ economic growth in a big way. The various seminars and conclaves on different key sectors of the industry will no doubt provide opportunities for tremendous learning and adoption of new practices by Indian firms that could potentially help them to prepare for competition in the future.