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Supply
chain in want of more innovations
Researchers around the world study supply chain problems and try to come
up with optimal solutions to routing them. MOHAN BABU writes that
apart from big players, hundreds of Indians contribute to the global supply
chain industry from their base in academia and the industry
Along with accounting, finance and payroll, one of the first areas in the
mainstream business to be automated using computer technologies included
Supply Chain Management (SCM). Over four decades later, supply chain
management (SCM, MRP, inventory management, logistics control, etc)
continues to be a mainstream functional area of IT where innovation thrives.
The size of the industry is nothing to sneeze at either. As per a recent
estimate by The Economist magazine, the SCM industry is worth about one
trillion dollars. Companies across the globe spend a good percentage of
their R&D dollars in trying to streamline their manufacturing, inventory and
supply chains. Efficient movement of goods and services continues to receive
focus from industry leaders.
Case in point: Air Liquide, the French industrial gas giant that supplies
liquid oxygen, nitrogen, and other gases to 10,000 customers from more than
300 sources through 30 depots using 200 trucks and 200 trailers. Air
Liquide’s supply chain can create three trillion daily combinations among
all its constituent parts. Until recently, the company needed about 22
full-time logistics analysts to generate a delivery schedule that would get
to every destination on time. This is a classic supply chain management
problem faced by thousands of companies around the world everyday.
Interestingly, even militaries spend huge amounts of money managing
efficient supply chains, moving men and material and supplies wherever
operational requirements dictate. SCM experts around the world are eagerly
studying the current mobilisation by the US military in the Middle East.
Researchers around the world study such supply chain problems and try to
come up with optimal solutions to routing them. Recently, Eric Bonabeau, a
French student of The Chaos Theory who has spent nearly a decade studying
organisation, coordination, and work habits of social insects had a Eureka
moment when thinking of colonies of ants and how they manage their supply
chains. If ants can run efficient supply chains with brains that weigh less
than the ink in this comma, why do we humans have such trouble, he wondered.
Bonabeau deduced that ant colonies are so efficient because they lack
centralised control. He described this notion in his 1999 book Swarm
Intelligence, where he talks about an organisation’s “ants”, its myriad
individual parts.
In the book, he went on to add that thinking of business units as colonies
of ants could help them find solutions to problems that elude ordinary
top-down ana-lysis. Bonabeau’s ants, for example, can be found crawling all
over Air Liquide, the French industrial gas giant. During his research,
Bonabeau consulted with Air Liquide to study how they chose to run
agent-based simulations to see how they could draw up more efficient
delivery routines. Like ants, Air Liquide trucks were programmed to find the
shortest routes, or to follow the equivalent of pheromone trails. Subsequent
trucks were ordered to retrace shortcuts found by others. Then, using data
from Air Liquide’s business operations, engineers tested their computer
simulations until they found the most efficient combination of rules. The
result was startling: Just one Air Liquide analyst was able to create daily
shipping and production schedules across its numbingly complex supply chain
in about two hours every day.
Innovations in supply chain industry such as Bonabeau’s discovery are a
continual process. Use of newer technologies such as RFID (Radio Frequency
Identification) continue to change the way SCM systems are designed and
managed. Until recently, barcodes were the primary means of tracking
packages. The advent of cheap, reliable RFID technologies have eliminated
the need to physically scan packages in shipment, storage, etc, since
packages with the embedded chips can be remotely scanned.
With a continuous stream of innovation around the globe, can Indians be far
behind? Of course not! Sanjiv Sidhu, a Hyderabad native, founded the current
global leader in SCM software systems, I2 technologies. I2, a multi-billion
dollar SCM giant, makes Sidhu one of the richest, most successful men in
Texas. Another successful entrepreneur who has made a name for himself is
Deepak Raghavan, co-founder Manhattan Associates. Manhattan is an
Atlanta-based niche market leader in extended supply chain execution
solutions, specialising in designing warehouse management software.
Raghavan conceptualised, designed and developed Manhattan Associates’ PkMS
solution, the industry’s first “packaged” distribution management software
system for the consumer supply chain. Fortune magazine named the company in
its 2002 list of the 100 fastest growing companies in America. Apart from
these big players, hundreds of Indians contribute to the global supply chain
industry from their base in academia and the industry.
Contrary to popular myth, a slowdown in the global economy is a perfect time
to capitalise on innovations. With the entry of multinationals into the
Indian market, and with the expansion of India’s consumerism, we are
perfectly poised to utilise some of the innovations in the supply chain
industry. For those willing to innovate, design and development of
innovative supply chain management systems still offer huge challenges.
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