Supply Chain – Dutch Uncles

UrbanKisaan, Pioneering Hydroponic Space

Anju Nambiar — Wed, 18 Aug 2021 05:35:08 +0000

If you’ve come across UrbanKisaan, they have a beautiful website where you can purchase farm fresh produce, exotic vegetables, unique salad bowls, and hydroponics kits. Besides, their name is self-explanatory. Just by reading the name of their brand, you can understand that the company is into modern farming. These are a few reasons why they have ticked in the Agri-tech market and are currently one of the most popular hydroponic brands in India.

Who is UrbanKisaan?

UrbanKisaan is a Hydroponics start-up based in Hyderabad. It is an Indian early-stage business founded in 2017. The company owns and operates several suburban greenhouses and vertical indoor farms in two major Indian cities, Hyderabad and Bengaluru. They also have an e-commerce store consisting of their UrbanKisaan app and website where they sell fresh produce grown in their franchises. Their e-commerce store also features their specialty hydroponics starter kit to help budding hydroponic farmers grow their first produce.

What is Hydroponics?

Hydroponics is a new-age farming technique that skips the use of soil to grow plants and relies on mineral nutrients to give the growing crops their supply of nutrients. Through this technique, the herb or vegetable seedlings or saplings are planted into an inert growing media like a PVC pipe where they grow only through supply of nutrient rich water. Hydroponics farming is usually carried out indoors like a greenhouse or terrace.

How UrbanKisaan optimised Hydroponics technology in Tropical India

UrbanKisaan’s proprietary Hydroponics technology is more efficient than the conventional global standards in Hydroponics cultivation. Their approach is based on relatively little effort. They rely on Internet-of-Things (IoT) enabled technology for farm monitoring of nutrient content, pH levels, atmospheric humidity, CO2 concentration, light concentration which are controlled and adapted to the needs of the crops using an app. As such, it has created growing demand among customers in tropical climates which are generally not ideal for Hydroponics produce.

India offers limited resources in terms of farming area and freshwater reserves. By reducing water usage by about 90 per cent, UrbanKisaan is optimising Hydroponics for Tropical India by presenting an efficient way to grow crops in densely populated urban areas.

How the company has made Hydroponics cost-effective

UrbanKisaan has a very cost-effective approach to Hydroponics wherein they produce food at only one-tenth of the costs compared to traditional supply chains. Their network of indoor vertical farms in India requires less than 1% land and saves nearly 2,16,000 litres of water per farm per month. Their urban farms span an approximate area of 2000 square feet.

Their supply chain is inside and close to the consumption centres which are primarily urban cities. Thus, they are cutting down on thousands of food miles which makes their business model highly cost effective.

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Farm businesses with compelling business models like UrbanKisaan can see increased sales in India.

What’s in it for me?

Online food retailing is booming in India. There is growing demand among consumers. Businesses in the Hydroponics, Agri-Tech sector are being well received. Farm businesses with compelling business models like UrbanKisaan can see increased sales in India. Innovative agricultural and food-related businesses in Asia are a key focus area for Agri-Tech investors owing to the market opportunity.

India is a large consumer for fruits and vegetables. However, the market share for organised channels like modern trade and online retail is still at 20%. Which means there’s a big chunk of untapped opportunity awaiting start-ups. In the organised fresh produce market in India, Hydroponics is a fast-growing and efficient alternative to traditional supply chains. It is awaiting disruption and innovation by Agri-tech start-ups and small businesses.

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This is How Moglix Helps Over 5,00,000 SME Businesses

DU Desk — Wed, 04 Aug 2021 05:35:08 +0000

According to a study by FinancesOnline, 57 percent of the companies believe that efficiency in supply chain management enables them to further develop their business. For any business, the supply chain process entails integrating planning and executing a product’s flow right from the procurement of raw materials, its production, inventory management and its distribution to the end customer.

For any SME business in India, the major hurdle faced in the supply chain process is the procurement stage, where a significant time is spent processing orders, additional paperwork, and communicating with suppliers that tends to bring down the operational efficiency. The answer to this challenge is the digitisation of the procurement, provided by Moglix, a B2B e-commerce marketplace for industrial goods that has recently gained unicorn status.

What is Moglix?

Moglix is disrupting the procurement process by digitising it for 5,00,000 SME businesses in India. Aspiring to be an Indian Alibaba, Moglix is an e-commerce B2B marketplace that facilitates the procurement of industrial essentials in safety, electricals, lighting, cleaning and housekeeping, office stationery, power tools, and MRO (maintenance, repair, and operations). In addition to industrial supplies, it also offers an end-to-end procurement solution including resource planning and financing.

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According to a study by FinancesOnline, 57 percent of the companies believe that efficiency in supply chain management enables them to further develop their business.

What Does Moglix Aim to Solve in the Manufacturing space for SMEs?

A digitised procurement process in businesses helps the manufacturers and companies to cut expenses on the cost of supply from the production to the delivery. SME businesses can supply their goods and services and scale business to international markets with good supply partners and networks.

Here is how Moglix aims to digitise the procurement:

Spend benchmarking and analytics: Helps businesses to manage spends in maintenance, repair, and operations by comparing it with industry benchmarks and optimising it. It helps businesses to keep track of expenditures like price spread, category-wise spending, and turnaround time of suppliers.
Data Quality Assessment: Using Moglix’s AI and ML tools businesses can assess MROs’ master data quality, as most items have incomplete or duplicate information. It is necessary to digitise the MRO process to optimise inventory levels, streamline procurement, improve supply chain relationships and stay ahead of any equipment failures.
Catalogue based buying and tracking: Enterprises on Moglix’s rich digital catalogue can easily select tools and machinery and put orders.
Seamless integration with ERP systems: Moglix’s eProcurement platform seamlessly integrates with ERPs or any other e-procurement solution.

Tech Capabilities of Moglix

Moglix’s cloud-installed spreadsheet application enables faster integration of the ERP (Enterprise Resource Planning) suite. The cloud integrator which comprises tools and technologies that connects various applications, systems, and IT environments ensures fast set up-of data lakes and a centralised event management system for real-time exchange of data. To an enterprise, its benefits include customised spreadsheet features, real-time auto-filling and validation of data and other Excel-like features.

What Lies Ahead for the Startups in the B2B E-commerce marketplace?

The growth of the MSME sector is crucial for India’s GDP, which in the pandemic has been severely impacted. The pandemic has also highlighted the vulnerabilities of the procurement and supply chain processes that have hampered productivity, demand and spending habits.

To stay relevant amidst disruptions, SME businesses in the manufacturing space are considering digitising procurement for cost reduction, optimisation of processes, reducing redundancies and saving time. The pivot to digitisation will ensure enterprises have a smooth supplier network for procurement and focus more on spend analysis, this will create ample business opportunities for the B2B e-commerce marketplaces.

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Crofarm, On a Mission to Streamline Farm-to-Fork Supply Chain

Mohit Pandey — Fri, 23 Jul 2021 12:30:09 +0000

Who does not want to set up a farm in their backyard and get fresh vegetables daily for healthy intake of resources? Or better, would it not be great if we could get fresh vegetables directly from the farm, as per our demands and delivered within a day? It is like taking a big step towards a healthier and hassle-free lifestyle, avoiding even stepping out of the house, while still getting the freshness straight from the farm delivered at doorsteps. Crofarm is doing just that.

This agri supply chain start-up buys fresh fruits and vegetables directly from the farmers and supplies them to the online and offline retailers in a cost effective manner.

Crofarm: The Necessity of a Direct Farm-to-Fork Supply Chain in India

The agricultural sector in India, even though being massively unorganised, employs around 50 per cent of the workforce of the country and accounts for 18 per cent of the gross domestic product (GDP). It is still astonishing to see that due to the absence of transparency, more than 90 per cent of the agricultural produce is eaten up by the middlemen who are well entrenched in the system, leaving very little for the farmers. Additionally, 20 metric tons of the harvest is lost due to an inadequate supply chain.

In 2017, India ranked 100 in the Global Hunger Index (GHI) out of 119 countries. This also results in the wastage of about 7 per cent of the total food produced in a year – which is worth about Rs 58,000 crore. When we understand that farmers are indeed the backbone of society and agriculture is the biggest sector of the economy, farmers’ plight due to the layers of intermediaries denying them a fair price for their produce becomes more visible.

Due to these reasons, Varun Khurana and Prashant Jain took the responsibility onto their shoulders and started towards solving the problem by streamlining the supply trade, removing the middlemen and establishing an efficient trade relation between farmers and retailers by incorporating Crofarm in May of 2016.

To ensure a better price for both sides, Crofarm serves as a platform to form a relation between the farmers and the retail market, building direct trade. Also, by reducing wastage and offering better value of their produce to the farmers, Crofarm is friendly and meaningful for both the farmers and the retailers. By optimising the logistics of supply chain management using AI-enabled proprietary tools, Crofarm supplies to big retail chains like Big Bazaar, Reliance Retail and online stores like Big Basket, among others.

In 2020, Crofarm shifted from a farm-retail business to become a B2C platform using Otipy, which is a community-based platform that helps connect the farmers directly to the consumers, bringing the freshness directly to the doorsteps. After this new strategy and integrating WhatsApp to their business structure, the company gained more authenticity and helped the farmers and consumers build a direct connection removing the need of retailers as well.

The Founders: Bringing Crofarm to Life

The problem and the inefficiency of the ‘mandi system’ always bothered founders Varun and Prashant. This made them start their previous business venture in 2014 – Greenbox – which was a smartphone-based grocery delivery platform. Later, the platform was acquired by Grofers which was building a supply chain directly from the mandi to consumers. Varun joined as the Chief Technical Officer of the app while Prashant was the Vice President of Operations.

While working at Grofers, they understood the problems of the supply chain system and wanted to create a direct link between the farm and retail entities. Therefore, after leaving Grofers, Varun and Prashant spent time across the major farming states like Haryana, Uttarakhand and Uttar Pradesh meeting vegetable and grain merchants, understanding their problems and figuring out the inefficiencies of the supply chain that gets their fresh harvest to the public. Through all the research, they were able to build the platform, Crofarm, with the aim of eradicating the problem and hassles of a mandi.

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Crofarm helps farmers get their fair share by removing the middlemen and also by providing the retailers with freshness from the farm.

How Crofarm Brought in Much-Needed Innovation of the Supply Chain

The revenue model of the business is pretty simple – procure the fresh fruits and vegetables directly from the farmers and deliver them to retailers or consumers, with the company getting their commission for the delivery. This direct trade makes the system transparent and easy for both the farmers and the consumers. On every sale it makes, Crofarm is able to get a commission ranging from 15-20 per cent depending on the quality of the produce.

Starting with a $1.5 million seed funding from Pravega VC and a couple of angels including Rajan Anandan (MD, Google India) and Jitendra Gupta (MD, PayU India), the founders have been able to raise around Rs 15 crore in the venture. In 2018, the company raised Rs 5 crore pre-series A round from Factor[e] Ventures and other existing investors, and planned to raise another round soon. Since its integration with WhatsApp, the company has been able to cater over 5,000 daily orders from over one lakh registered customers across NCR.

During the fiscal year 2019, Crofarm, after directly serving the consumers, managed to grow its sales by nearly 2X to around Rs 11.26 crore compared to fiscal year 2018 when they posted a top line of Rs 6.7 crore. In FY20, the new business model showed its true efficiency, when the company was able to raise a little over Rs 24.4 crore which is nearly 2.2X of their sales in FY19.

The company had to expense around Rs 30.72 crore in total in FY20, growing by 86.8 per cent from the total expenditure in FY19 of Rs 16.4 crore. Since the demand for their services increased, the majority of these expenses, around 72 per cent, incurred in collecting farm produce, which grew by 2.15X from Rs 10.31 crores in FY19 to Rs 22.15 crore in FY20.

Expansion and Consumer Satisfaction

Focusing on the growth of the employees is also the biggest target of a company. Crofarm’s employee benefit expenses grew 47.4 per cent from Rs 2.5 crore in FY19 to nearly Rs 3.7 crore in FY20. The company also incurred around Rs 4.44 crore in operating expenses during the same period.

With current supply in cities like Gurgaon, Noida, Mumbai, Bengaluru and Delhi, Crofarm is also planning to raise $10 million this year to expand Odipy, the farm-to-fork chain, more in tier II and tier III cities of the country. The company had already raised $2 million in 2020 from Inflection Point (IP) Ventures and the Smile Group.

Not just driven by economic motives, Crofarm also helps in supporting social causes. In 2020, the platform was able to produce a robust fresh produce category supporting over 2,500 women and stores as resellers. This group earns a commission of more than 9% of all group sales, which is the highest across all social commerce brands in the country.

With the use of AI powered engines for better traceability, transparency and hassle-free designs, Crofarm has been able to make its place known in the agricultural industry of India as the most trusted and reliable brand. The growth of a company is always dependent on factors like employee satisfaction, economic growth and satisfaction of the customers, and Crofarm has been able to provide a surplus of these values in their venture.

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In 2020, the platform was able to produce a robust fresh produce category supporting over 2,500 women and stores as resellers.

How Crofarm Dealt with Maintaining Quality and Its Place with the Competitors

India being one of the largest producers of fruits and vegetables, maintaining the quality of the farm produced freshness is a challenge that all agricultural sector companies face. Around 30 per cent of the wastage of the produce happens because of inadequate logistic support and inefficient supply chains. One of the biggest advantages that Crofarm was able to take was using cold storage for perishable vegetables and protecting them from moisture. While commodities like potato and onion can have a higher shelf life, leafy vegetables like spinach, methi etc., require a certain moisture level to ensure maximum life.

The Food and Agriculture Organisation (FAO) stated that due to the lack of good refrigerated storage space, vegetables and fruits worth around $8.3 billion, which is about 40 per cent of the total produce of the country, get wasted. Additionally, if the commodities have to get transferred through various vendors, middlemen, mandis, the amount of food wasted is increased substantially. In NCR, Crofarm promises to deliver vegetables from farm-to-fork within 12 hours. This makes sure that there is a lesser need for storing commodities and delivering them fresh.

With major competitors like Bijak, BlueCart, Agrowave and AgroCenta, Crofarm is constantly applying new technology and techniques to keep up with the increasingly competitive market. Keeping in mind the separate requirements of each part of the supply chain, five separate engines have been created to help in the efficiency of the supply chain.

Here are some of the technologies that Crofarm employs:

Procurement Engine: It is made for the farmers for better traceability of the produce and its quality. This app also helps farmers in complete transparency of their POs and payments.

Distribution Centre Engine: It uses AI-based demand prediction based on historical data-efficient procurement. It also helps in tracking the shelf life of the vegetables by alerting in case of aging inventory.

Transport Engine: Providing optimal routes to reduce delivery time and real-time tracking of the delivery vehicles.

Reseller App: Uses AI powered CRM enabling better communication and tracking customer orders and deliveries, while also earning incentive on sale.

Consumer App: It is filled with catalogues and offers a simple interface to place orders and track delivery.

With the introduction of AI based technology, Crofarm has been able to take big leaps ahead of its competitors, therefore, building its proper place in the market.

Crofarm: the Present and the Future

After recently extending services in Bhiwadi, Crofarm is constantly taking big steps to cater to more and more cities of India. With the introduction of the new farm bills by the Indian Government, which present farmers with an alternative platform to sell directly to a retailer without going through mandis, Crofarm’s Odipy will work with the farmers to create a level playing field. With the asymmetrical information system of the agricultural sector, where the farmers had no knowledge of the price of their produce, now with the help of these new emerging agritech platforms, they will be able to negotiate well with their customers. Moreover, by the elimination of the gulping middlemen, the farmers can now establish their own stand in the chain.

Varun and Prashant’s aim to provide a solution to the plight of the farmers by incorporating Crofarm and giving them a platform of their own now seems to be taking big steps in every part of the country. By giving the farmers an assured price, bringing efficiency into the supply chain and reducing wastage of the commodities, the company has already proven to be a contributor to the ‘Atma Nirbhar Bharat’.

For more inspiring stories, check out our Inspire Section!

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How to Raise Funding for Your Start-up: Learnings from Supply Chain Startup Zetwerk

Smruthi Krishnan — Mon, 22 Feb 2021 06:35:04 +0000

Starting a new venture is always a daunting experience especially when you need financial backers or seed investors to kick start your start-up journey. Before you go ahead with your operations, it is important to look for funding’s whether you pitch your start-up to angel investors, self-finance or apply for financial grants. To understand how to raise funds for your start-up, let us look into Zetwerk, a start-up that connects global companies with manufacturing facilities in India.

Zetwerk current scenario

Zetwerk raised $120 million in order to strengthen their technology and also to reach out to more clients. The funding round consisted of their existing investors including Lightspeed Venture Partners, Sequoia Capital India and Greenoaks Capital. This brings the total that Zetwerk has raised to $193 million according to a statement passed by them. The Bangalore-based start-up has tripled its sales in 2020 even as the pandemic hit the global supply chains industry.

How does Zetwerk work?

Zetwerk offers a technological platform and project-management for their customers who seek manufactures for everything including luxury apparels, electric equipment, etc. Their aim is to reduce or eradicate friction in the supply chain. They initially started with smaller trial order cycles. Today, they have reached a position where customers place large multimillion-dollar orders. Founded by four alumni of Indian Institute of Technology in 2018, the company sped up project management connecting over 2,000 small manufacturers with more than 250 global customers. They also connect their small manufacturers with suppliers, logistics providers and banks. When they began, they started with industrial goods and have now shifted to consumer goods with increase in demand for the same. The start-up plans to put in the fresh capital to improve and develop their technology and also expand into newer areas and categories.

What can you learn?

Zetwerk has carved its own path to success but there is a lot we can learn from them. There are reasons why they ended up attracting investors from across the world and scaled up. First, they started out with a distinct and unique idea of a global supply chain that connects various businesses with each other. They catered to both consumer and producer problems in an effective and efficient way and provided real value. This shows investors something unique they want to invest their money in as they see the potential of profits and growth. Second, they practised rapid scaling-up. They started with a few trial orders and then scaled it to a large-scale consumer-producer base. This shows investors you are committed to your venture and that you have the power to take it to a wider platform, instilling their confidence in your product. Last, Zetwerk diversified its operations across businesses, lowering the risk factor of investments. They are also looking for other sectors to expand to, brainstorm and know which products work and where and how they work. Your research and development should reflect in your pitch, this is something that will always catch the attention of investors.

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Procurement Process Simplified: The Inner Working of Business

DU Desk — Tue, 29 Dec 2020 09:42:31 +0000

No matter what kind of business you run, small or big, a tea shop or multinational company, you need to have something to sell to the customer and you can only do that if you purchase the goods, raw materials and other items needed for the final product, service or deliverable. Every business needs to think about procurement to provide a product or service.

What Is The Procurement Process?

The process in which a business spends time and money acquiring goods and services, from several select vendors and suppliers. Most often this is seen when a business gets raw materials from these sources to create a finished product to sell to the customer. This process, though common for all businesses, is not a uniform one. It will vary for each industry and each business, depending on the nature of the products/services being created for the customer and the needs of the business itself.

Why Is An Effective Procurement Process Important?

It is a crucial part of a business’s operations for a few important reasons. Procurement is known for being a cost-effective way for a company to purchase and acquire certain goods or services from external vendors. This lends itself to higher profit margins for one. The second reason is that it helps the business find the right vendors and sources for procuring things, this ensures the company can keep a close eye on the quality and nature of the source giving the finished product/service more quality control.

Apart from saving cost and giving the business better control over the quality, it also helps the brand establish business relations and build a vast network with these vendors and suppliers. This means that it keeps the company in the loop when it comes to the goings-on in the market. The first to know of any changes in the trends, prices, and customer preferences are the suppliers and vendors. Having this knowledge and building a good working relationship with them helps keep the entire process moving as efficiently and as productively as possible.

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To make the most of the procurement process it is important to note that it is not a standalone concept. It works in tandem with logistics and the supply chain of a business.

The Connection Between Procurement, Logistics And Supply Chain Management

Procurement is an intricate network of vendors with several stages that account for many things such as acquiring logistics, building connections with manufacturers and vendors, negotiating the prices, invoicing, shipping notifications, placing orders and tracking receipts.

That being the case, it is still just a small part of a larger process that is known as ‘supply chain management’. Supply chain management is the movement or flow of goods or services throughout the organisation. This includes the procurement of the raw materials or primary services from vendors, the storage and/or refinement stage, shipping to consumers and so on. In essence, it is the active streamlining of the business’s supply and distribution side to maximize the value brought to the customer.

‘Logistics’ is the smallest link on this massive chain, but still important. It refers to the actual moving of products or services from the point of origin to the point of consumption by the customer. So, for example, if a business sells eggs, it needs to get the eggs from the farm to the customer. To do that it will need trucks, crates and drivers to get those eggs from point A-to-B. These physical assets are what is known as logistics and they come under the process of procurement, as one part of the overall procurement process.

The 7 Stages Of Procurement

Stage 1: Identifying the goods/services

From the outset, a business needs to be aware of what is needed to function smoothly. That is why, before initiating the procurement process, the company needs to identify two things the internal and external goods or services needed. The internal is everything that the company will need to run the business. The external refers to the things that will be sold to the consumer. Identifying these things also helps identify the budget for the operations.

Stage 2: Finding the right supplier

A good brand needs good sources to bring them high-quality materials. This stage is all about finding those sources. While sourcing potential vendors may seem straightforward, there are a few key things to look out for. During the evaluation, check and compare different pricing for services, the quality of service, the vendor’s reputation as a source as well as the warranties and guarantees that are provided by the vendor.

Stage 3: Negotiate contracts and prices with the selected suppliers

This is exactly what it sounds like negotiating with the vendors until all parties can settle on a fixed price for services and signing a contract for the same. The contract plays an important role as it sets the tone for the delivery time, the job description, the number of materials needed and so on. Another important factor in this, is that it also takes care of the ‘enablement of logistics’ for the entire process. That is to say, if you were to organise and procure logistics for the movement of goods and services from start to finish, this is the stage in which you should take care of that.

Step 4: Raise a purchase order with vendors

This is the part of the process where the actual purchasing of goods and services happens. Once the purchase order is looked-over and finalised by the finance department, it is sent to the vendors. In the special case that there were no contracts signed at the beginning, these purchase orders are considered as legally binding documents.

Stage 5: Receive invoice and process the pay

After the supplier gets the purchase order from the company, an invoice with the price for that particular goods/service is sent back. The procurement team then has to match the invoice to the purchase order and see if everything adds up in terms of quality and quantity. The payment is then given to the supplier.

Stage 6: Receive and audit

Once all the paperwork is finalised, the vendors will then deliver the materials to the business. Then it falls to the business to perform a full audit of the inventory to make sure that everything that was ordered has been delivered. This is also when you would check for quality-control before moving forward.

Stage 7: Maintain a proper record

At the end of the procurement process, it is very important to thoroughly organise and keep track of all your purchases, invoices and orders placed with vendors, so that you have an easy reference system for future audits.

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The procurement process is a delicate balance of various networks and individuals, that being the case, it needs a watchful eye.

Some Key Tips For More Efficiency

Keep re-negotiating contracts

Even after having signed the contracts with vendors, try to keep negotiations open, because the best way to make the most of it is to keep with the current market trends. Market trends can be wildly unpredictable at times and are constantly changing, so are the demands of consumers. It is your job as the provider of the product or service to ensure that those needs are being met. To stay current with these changing trends and changing needs re-negotiations are a must.

Do regular assessments

While it is good to build a strong working relationship with vendors, the business’s needs must always come first. That said, you need to do regular assessments of your current vendors and suppliers to see if they are meeting the standard you expect in terms of delivery schedules and quality of materials. It also helps to take that data and make a comparison with other vendors’ performances to see which is doing better. If your current vendor fails to meet the requirements you either have to reassess the contract or change sources.

Automate as much as possible

In the age of digitalisation, your business would greatly benefit from making use of the things it has to offer. Automating the majority of your procurement processes from invoicing, supplier enquiries, reviews, updates, and delivery schedules will greatly improve the overall performance of the process. Much of this can be achieved by using a procurement software.

A procurement software is simply a management platform that allows the organisation complete visibility into all the stages, tasks and activities needed to maintain a smooth workflow. It can also help do regular assessments and update you on the same.

Though all this might seem like a massive process, it is just one small part of a larger system of moving products and services through the body of business. Once you understand the bigger picture things become clearer. Go check out our article on ‘supply chain management’ for that big picture!

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Logistics: Move Past the Barriers to Maximise Performance

Kiran Kennedy — Tue, 22 Dec 2020 07:24:48 +0000

A business is nothing but an idea unless you give it a concrete shape by turning raw materials into finished products which will bring value to customers. But to do that, you must acquire and move the raw materials needed to your office, workshop or factory floor. Similarly, all finished products must be sent out for sales and distribution. The way you move the material and the information needed for your business and the way finished goods are moved to reach end users are known as logistics.

In brief, logistics is the movement of goods, services, data and other tangible and intangible assets across the entire chain of supply of a business. It involves all processes and stages to get goods/services/deliverables moving, from sourcing to production to sales. In ‘The Handbook of Technology Management’, author Hossein Bidgoli, a professor of Management Information Systems at the California State University, has nicely summed it up as the 7 R’s of logistics – the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer.

It may sound like a straightforward definition, but things tend to get a bit more complex than that. So, it is best to keep the 7 R’s as a set of rough guidelines when you set up your logistics network. Remember, it is not just about getting products or services from point A to point B. It is about making sure that it is transported efficiently enough that it reduces both time and costs involved. The core concept is minimal wastage and maximum operational efficiency.

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In order to run the business you need to be able to deliver products and services to the customer. You cannot very well do that if you do not have the right logistic support.

Logistics Is Not Distribution

Logistics is the area of the supply chain that is concerned with the physical flow of products and goods, as well as non-physical elements such as planning, implementation, organising, mapping and upscaling where needed.

It will vary from organisation to organisation but the general premise remains the same for any logistics activities. The non-physical flow is pretty self-explanatory. The physical elements however are a little more intricate. Let us take a look at the different types of logistics:

Procurement: This encompasses all the logistics needed for procuring goods and raw materials for manufacturing from the external suppliers and vendors. It falls under upstream logistics which is just a broad term that means, the process is located at the start of the production cycle. It is basically sourcing. This area did not receive much attention in the past, but nowadays it is key for sourcing cost reduction by companies. What that means is, just keep an eye on how much you order and get the most cost-effective way to transport it. It will keep the cost of production relatively low throughout the production process.

Production: In this phase, acquired materials move within the various production units of a business and stay within its boundaries. It includes how items are manufactured, packaged, distributed and moved to factories where they are refined, shipped and then stored in warehouses. This comes under the internal stage of the logistics network.

Distribution and sales: Historically, logistics at this point referred to the transportation of goods and services from warehouses or storage, but that has changed. Now it refers to all the equipment and transportation needed to deliver these goods and services to the end-user from warehouses and production units of the company. This comes under the downstream stage of the logistics chain. The logistics of distribution and sales, is not to be confused with the distribution process. Logistics encompasses many different aspects of the movement of goods and services across the business, whereas the distribution process’s primary concern is with activities related to the sales of those goods and services to customers. In this context, distribution is a sales and delivery network that focuses on giving the end-user what they want, and logistics focuses on the ways in which the business can physically make that happen.

Recovery: This process refers to the movement of products that have been returned or recalled, back to the company through logistics channels. Hence the name, ‘recovery’ as the company is recovering the items. It is also known as reverse logistics as the items are moved in the opposite direction of the normal product flow. Recovery logistics can be segregated into five main activities:

1. 1. 1. This includes recycling waste by-products
    2. Handling and overseeing customer returns
    3. To refurbish and repair
    4. Providing full-scale reverse logistics for recalls of faulty products. A good example of a recall is when Samsung had to recall all of its Note 7 units because of dangerous and faulty batteries.

All recovery logistics come as a cost to the company, especially if it is large-scale recalls like that of Samsung. Therefore, you need to budget for recovery logistics before setting up the network.

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Key tips for a better logistics management strategy are good to have but it is also important to customise those tips to best suit your specific needs, according to the industry.

Key Tips For Better Logistics Management

Planning is everything: Once the process gets going, it should not be interrupted because that could severely disrupt productivity and efficiency. The solution to this is to plan well in advance. A good way to go about planning is to turn the entire process into a flow chart and take a look at the budget for each of the stages before diving in.

Create a contingency backup: It is impossible to be ready for anything and everything, but a good contingency plan takes care of the most obvious things which could go wrong. The rule of thumb is to closely monitor the logistics chain at every stage and be ready to switch to plan B if the primary one fails.

Identify a specialist (logistics manager): Hire someone with great interpersonal skills to ensure effective communication across people and processes so that inter- and intra-company communication can happen. He/she should also have relevant contacts in case certain services are needed at a pinch.

Plug the loopholes: Just like all other business processes, your logistics infrastructure will be prone to mistakes and failures. In fact, it will be a case of trial and error. You will have to plug the loopholes as they come, refine the procedures and tweak the strategy accordingly to keep things going. Hold regular meetings, review and discuss the problems and get detailed feedback from everyone involved. The aim is to improve operational productivity and ensure that both employees and customers are satisfied. Keep in mind that both logistics and supply chain are intertwined, and as supply chain changes with the market, so will your logistics requirements.

That is to say, if your supply chain has to address a hike in demand for any product or service that you are providing, then there has to be an equally robust logistics network to help get the goods/services to the end-user.

Automate: As logistics involves so many different elements of the chain of supply, it needs to be closely monitored and well-managed. This is where logistic management software comes in. It is an integral cog in the giant machine that is logistics. It helps automate much of the coordination and management efforts by giving the business an easy way to curate, track and map out deadlines, deliveries and inventory.

At the end of the day, the goal is to have a flexible yet sturdy logistics strategy in place, so that your business can grow and succeed. Read our article on ‘supply chain management’ to hone your plan to a refined edge and outrun the competition.

The post Logistics: Move Past the Barriers to Maximise Performance appeared first on Dutch Uncles.

Supply Chain Management: The Ins and Outs of Business

DU Desk — Fri, 18 Dec 2020 06:12:53 +0000

All About Supply Chain Management

The supply chain is exactly what it sounds, the entire process from procuring the raw materials to delivering it to the end customer. This is achieved through effective planning and coordination across different sections of the business both external and internal. The core components that make up a basic supply chain are supply, operations, logistics and integration.

Supply

It is the beginning of the chain where a company gets its supply of raw materials to begin the manufacturing process. But supply does not stop at procuring goods and it also includes both upstream and downstream supply.

Operations

This component refers to people, process and equipment required for production and manufacturing. The chain consists of a lot of moving parts so, maximising the scope of operations helps move things along smoothly.

Logistics

Do not confuse supply chain with logistics. Even though the two seem similar, they could not be more different. The supply chain is the flow of products and services throughout the business (both upstream and downstream) and the linking of major business processes into a single high-performance business model. Logistics is the ‘muscle’ that helps these products and services get from point A to point B.

Integration

it is basically how well a supply chain is integrated with the business, that is to say, how smoothly the data flows between different departments of the business. Businesses nowadays, use specialised supply chain management software to give them more control and monitoring power over the whole process. Moreover, digital-era integrations provide more effective oversight of various moving parts and help the management take quick action where needed.

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The supply chain is a highly integrated and complex chain mechanism that is key to the daily functioning of businesses.

How Supply Chain Evolved

Supply chain management (SCM) had started in the colonial era, long before the term was coined in 1982. The New World was being discovered and shipping routes were being established. The need for a supply chain was ever-growing and so, a primitive form of such a chain was developed. The massive shipping routes and delivery systems were broken up into segments where more and more traders and suppliers came into play.

With the advent of the Industrial Revolution, the need for more efficiently mass-produced goods became necessary. This led to the development of the supply chain management to keep up with the sudden spike in demand. By the time Henry Ford had introduced his revolutionary car assembly line for maximum efficiency in 1913, the supply chain had nearly been perfected.

Later in the century, businesses were struggling to keep up with demand. As a solution to reduce cost while still meeting demand, businesses started to vertically integrate the chain of supply into their operations. They absorbed the supply chain from the top-down, so that they owned and controlled the sources, suppliers, manufacturing and so on. For example, newspaper publications that absorbed all aspects of the business from the supply of raw materials to the distribution of the final edition in order to have a better control of the chain of supply and the final price of the product.

The arrival of globalisation in the 1980s made integration and cross-communication that much easier with the aid of the internet. This grew into what we know today as ‘SCM 2.0’, where even the most complex of supply chains can be managed by companies both big and small, thanks to things like social media, digital democratisation and other collaborative platforms.

Seven Golden Principles

There are no hard and fast rules when it comes to managing a supply chain. Every business will need to find its feet and unique methodology, based on the type of service or product it provides. There are, however, seven principles to keep in mind if you want to play a long game.

Principle 1

Identify the different kinds of customers that you want to target and look at what they need. Adapt the supply chain according to those needs.

Principle 2

Develop and customise a logistics network for each of those customer segments so that their specific needs are met.

Principle 3

Check the pulse of the market and current demand trends. Identify the pattern and align your planning with the supply chain accordingly. The better your demand forecast is, the less likely the plan is to fail.

Principle 4

The further a product moves down the supply chain and the closer it gets to end users, the more the regulations change. For instance, if a product crosses an international boundary, it would have to meet certain regulatory compliances in the country of arrival. So, you need to differentiate how the delivery regulations would change the closer they get to a particular segment and adapt accordingly.

Principle 5

Manage your outsourcing carefully. Avoid owning too many components of the supply chain in-house. It is better if you keep just the core components, that is to say, what you absolutely need to have, and outsource everything else. Lessen the load on your internal teams as much as possible.

Principle 6

Opt for tech support that specialises in curating, managing and monitoring various points in the supply chain. It helps your business have a more transparent view of the processes. This will allow you to quickly identify the needs and improve the lacking areas.

Principle 7

Find ways to measure the performance of the supply chain. Establish a method that allows you to do regular checks. This will also help measure the customers’ responses to your efforts to meet demand.

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There is no set rule or principle in business, but it never hurts to have a strong set of guidelines to follow to make sure your efforts remain as uniform as possible.

Five Best Practices

Increase supply chain visibility

Allow your suppliers and distributors a transparent view of your business’s inventory needs so that they can easily identify where you are lacking, giving them ample time to prepare for future demands. Such real-time transparency allows not only better forecasting but a degree of autonomy for the supplier, which means less stress on the management.

Go for automation

It can be a boon or severely crippling if used in wrong places. Keep it as a rule of thumb to automate only where necessary. Machine-aided operations can greatly increase efficiency but if you fully rely on that, and something does go wrong the entire chain is affected.

For example, let us say you have a supply chain that is entirely dependent on the automation software, and suddenly the software malfunctions. You will be left sitting in the dark or at the very least struggling to keep business going smoothly till the software is up and running again.

IT check-ins

Have a regular check-up run by your IT department to make sure that everything is updated and running smoothly and that there are no technical glitches in the automation system. The IT team has an overall perspective of the goings-on in the business and this puts them in the unique position to sniff out problems.

Offer in-house training

Give your internal staff better training so that even if something goes awry, you will have covered all your bases internally. Brings down the chances of liability on your side of the fence.

Set up a project plan

You should implement a central framework to map risks and opportunities, elaborates the distribution, procurement and logistics, and facilitates cross-functional communication. This will act like a pivot based on which you can set new goals, milestones or even develop new strategies. Think of it as an anchor as you venture out into stormy weather.

To maximise the efficiency of your supply chain management, check out our article on ‘The 5 Ms of Management’ and understand the core elements crucial for every business.

The post Supply Chain Management: The Ins and Outs of Business appeared first on Dutch Uncles.