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Article by Mohan Babu


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.




About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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