Indigenous Supply Chain Practices
It has been all too much a need for Indian organisations to improve their practices,where the rate of change is unheard of for many organisations. A large conglomerate with a rich tradition of being around of three generations will find the need to be much more acute. And then comes a management mandate to undertake an large scale improvement project. So does the top management do! A large scale project with consultants, who are trained & have delivered projects (and to spice it up GLOBALLY) using world class improvement philosophies like BPR, Lean, Six Sigma or Theory of Constraints, gets rolled out & delivered to perfection with all the principles of the philosophy in the right spirit of the philosophy. Let me work you through one such example in India.
The supply chain improvement solution needed the suppliers of the buying organisation to manage the inventory based on the pre-determined 'buffer' level to be maintained. The suppliers were given the target levels & also the formula to dynamically change the size based on the pre-determined variables. Naturally not all suppliers would follow the system. So did the suppliers of this organisation too. Some suppliers followed the system based on the policies & were able to maintain the stock levels appropriately, while some didn't care. For those, the management of the suppliers has no appreciation to the new system of work. They allot their capacity at their discretion & would never have sufficient stocks when needed by the buying organisation. Whenever the buyer in the buying organisation needs material he has no issues with the suppliers who follow the system. But on the reverse side he has to spend inordinate amount of efforts to get the material from the suppliers who don't follow the system. Obviously one needs the material, so you have to 'beg' to the supplier.
any guesses to the next action in the sequel...? A very Indian way of working...
Indian way of working, those who dont supply the material as per the new policy becomes the strategic supplier, because here you have to apply all kind of strategies to get (beg) material from them. Ironically the supplier who follow the system are not rewarded with what they deserve. Instead they are forced to share the inefficiencies of the so call strategic vendor by way of holding orders, delaying in taking delivers etc.
ReplyDeleteYou are right, Anonymous!
ReplyDeleteThe supplier who didn't follow the system, is the one who has no inventory,will make all sorts of noise for allocating the capacity to produce the product & worst the buyer actually agrees to pay a premium. The logic is that the supplier has stretched himself so much to get the product..
Conversely, what happens to the supplier who does follow the systems? The supplier would have inventory available based on the norms, has a smooth flow of the product & is willing to make the new system work. But the Indian buyer would interpret that as the supplier has material means has less business, is following the system means he has excess capacity & is willing to make the new system work means is in need of my business. Result, the supplier now gets squeezed for prices & is treated as a non strategic supplier...
Very indigenous supply chain practices! I feel the western improvement philosophies hence have a great limitation when applied to Indian Context unless one make them indigenous.