OpsWorld 2012

EXPERT
OPINION
OP S WOR L D
E XP E RT OP I NI ON
5
OPINION
Sustainable Operations:
Key challenges and way forward
T
oday, the complexity of operations for most
companies has increased to levels hitherto
unseen. Massive globalization and the need to
respond to customer expectations in varied geographies
means that companies have to cope with operational
pressures on a 24X7 basis. This complexity has got
further elevated because of turbulence in the global
economy.
More than 50 percent of executives consider
sustainabilityvery or extremely important
in a wide range of areas, including new-product
development, reputation building, and overall
corporate strategy, according to the latest McKinsey
survey. Yet companies are not taking a proactive
approach to managing sustainability: Only around 30
percent of executives say their companies actively seek
opportunities to invest in sustainability or embed it in
their business practices.
Some of the key challenges that I see for sustainability
of operations going forward are as follows.
1. High pressure on companies to manage their
operations in an energy efficient and green way has
become a huge game changer in recent times. Companies
can no longer go for low cost option of generating
wastes and disposing it. There is a need to migrate to a
regime of waste generation prevention , which requires
new capabilities in operations management
2. High Inflationary trends in the global and
domestic economies means that companies need to be
much smarter in their cost management. Volatility of
prices of key commodities like Oil, Coal, Iron Ore , Zinc,
etc coupled with currency fluctuations means that
operations have to be managed in a different way going
forward.
3. As capital expenses are being deferred because
of huge increase in the cost of capital, there is very
high pressure on existing assets to deliver operational
performance. A trade-off has emerged between
performance and health of key assets, which poses a
huge operations risk
4. Working capital management is becoming
difficult as cash to cash cycle time has increased and
availability of credit is getting erratic.
5. Loss of critical skills because of cost pressures
and competitive environment means that some key
areas in operations are being managed through day to
day firefighting, resulting in high operations risk.
6. Government policies in most developed and
developing countries have imposed very stringent
norms for Safety , Health and Environment , threatening
companies with high risk if they do not shape up
Ernst & Young research shows that high performers
are more advanced in addressing these issues related
to operations sustainability . Excellence in one or more
dimension, complemented by competence and recognition
of the connections between the others, lies at the heart
of competitive success. Such companies have been more
successful at identifying and responding to opportunities
for maximizing their potential market ,either through
entering new geographical markets or through product
innovation- creating new ones. They have
o p t i m i z e d their speed and
flexibility to respond to these
opportuni ti es.
They have been building
the right balance between
price and cost to sustain
growth. And they have been
s e c u r i n g support that they
need from their stakeholders to
enable them to execute and achieve
their goals. The pursuit of these goals
is what lies behind the great increase that
we are seeing in cross border activity,
product and process innovation,
and in rethinking m a n a g e m e n t s
approach to both attracting and
developing talent.
This means that, going forward,
companies need to manage their
operations in a significantly different
way and build new capabilities to achieve sustainable
operational performance. These capabilities need to go
beyond the conventional efforts that companies have put
in for achieving performance improvements.
Here are 6 capabilities that are required for organizations
to achieve sustainable operations
1. Ability to deliver technological innovations in process
to improve product/material / component re-usability
2. Managing obsolescence of assets and planning
replacements in time to avoid failure of operations in the
future
a. Build long term maintenance strategy
b. Robust equipment replacement /refurbishment plan
3. Developing full life cycle view of operational carbon
footprint and arrive at abatement levers
a. Evaluate energy efficient platforms , for e.g.
recovering process heat to generate steam to run a
turbine to generate power, evaluating alternate fuels, etc
b. Evaluate alternate fuels
4. Timely and effective management of capacity
a. Achieve Full Technical Specification of installed
capacity through operational effectiveness and
efficiencies
b. For incremental capacity , optimize capital
expenditure(Capex) through smart Capex management
5. Effective procurement and supply management
a. Alternate sourcing
Author
Mr. Suvradipta Banerjee ,
Associate Director , Advisory Services ,
Ernst & Young
OP S WOR L D E XP E RT OP I NI ON
6
b. Supplier development
c. Hedging against commodity and currency fluctuations
d. Smart working capital management
6. Reduce operational risk due to human factors
a. Automation
b. Fail safe design
c. IT enablement
Organisations need to pro-actively build these capabilities
through a structured approach in order to sustain their
operations on a continuous basis.
4 step approach for achieving sustainability in
operations
An integrated approach is required to achieve sustainable
operations. This approach looks at achieving operational
sustainability through 4 key initiatives
1. Set performance aspirations for future. Aim at a
horizon of 8-10 years
Cascade down to key operational capability expectations
Identify operations sustainability themes
Define organization and governance for achieving these
themes
Set sustainability performance standards and
mechanism to review and manage
Leadership to role model expected behavior and
capabilities in areas identified
Plan investments for building operational sustainability
Effective communication by leadership on sustainability
to employees and stakeholders.
2. Develop operations sustainability blueprint based on
the identified themes. The blueprint needs to clear define
the architecture for keys sustainability themes such as .
This needs adaption of new toolkits and technologies to
prepare for operational expectations in the future state.
Energy efficiency and effectiveness of operations
High reliability of operations Innovations in product
/ process /material usage to reduce wastes and increase
material re-use
Effective management of capacities both for existing
assets , brownfield and greenfield expansions
Effective use of Information Technology and
Automation.
Effective procurement and supply management
3. Develop new skills required to manage the transition
from current state to future state
New analytical tools and sustainability methodologies
Continuous training of people (cross section of
employees) as per skill gap identified to meet aspirations.
4. Effective codification and knowledge management
Standardisation of templates , tools, methodologies
Modular training content
Process Reference Guides
Interactive and efficient knowledge retrieval
Conclusion:
Organisations will face severe operations sustainability
pressures as a result of huge complexity introduced into
the global and local operating environment. The learnings
from the past few years has indicated the challenges
confronting organizations in the next 10 years.
Organisations need to focus on the following 4 key areas
in order to achieve sustainable operations .
1. Setting performance aspirations for future. Aim at a
horizon of 8-10 years
2. Developing operations sustainability blueprint based
on the identified themes
3. Developing new skills required to manage the
transition from current state to future state
4. Effective codification and knowledge management
References:
1. How companies manage sustainability: McKinsey
Global Survey results , Mckinsey Quarterly , March 2010
2. Growing beyond cost competiveness, from complexity
to confidence , Ernst & Young , October 2011
______________________________________
GUEST
ARTICLE
OP S WOR L D GUE S T ART I CL E
8
W
hen Flipkart had started out in 2007,
the e-commerce landscape in the
country was not very well-developed.
Towards the earlier half of the decade, several
online companies suffered from the lack of
proper logistics and infrastructure, and several of
those problems still remained.
The premise of Flipkart, from day one, was built
on customer delight. Our aim was to satisfy the
customer at every point of interaction with the
company. We attempted to do this through some
key services - an extensive inventory that offered
them almost every title (since we started with
books) they could think of, and a speedy and
timely delivery system.
However, the biggest
roadblocks we faced
in the early days
were in the areas
of distribution and
supply-chain. Neither
of these was well-
established in India and
in fact are still a major area of concern as far as
e-commerce is concerned.
We rapidly realized that scaling up the back-end
and making it efficient was going to be integral
to our success. Customers were becoming
much more discerning. While earlier they were
satisfied just to get the product that they had paid
for, now they expected a high quality of service
in everything from choice and discounts, to
product quality, flexible payment options, speed
of delivery and even post- delivery servicing.
Though initially we did not have much of a
budget, once we started getting funds, one of the
first things we invested in was our supply-chain
network. Needless to say, that investment paid
off.
One of our biggest investments and successes as
far as the supply-chain is concerned, is the launch
of our own delivery system in order to ease the
bottle-necks in last mile delivery. Initially we
were entirely dependent on third-party courier
services to deliver our products.
However, there were a number of problems we
Our Supply-Chain Process
faced with this system. Timely delivery was becoming an
issue. The cash-on-delivery model did not work well since
these companies were trained to deliver , and not collect
cash or engage in reverse pick-up. The only way to tackle all
these problems was to deliver our own packages.
Flipkart Logistics now operates in 27 cities and is set to
scale up in the next year. With this, our order-to-delivery
time line has reduced drastically , leading to an increase in
the number of satisfied customers.
In order to meet the increasing demand, and ensure that
our customers have access to the widest variety and best
discounts, we have always tried to maintain an extensive
distributor network, which has rapidly grown over the
years. Today we work with over 1500 suppliers across the
country and stock a large inventory of products.
Flipkart initially started off with a consignment model
where we procured books on demand and delivered it to
the customer. However, the high rate of dependency on
suppliers and the additional time taken to procure the
orders were also affecting our efficiency.
Hence we decided to invest
extensively in warehouses
as well. Larger warehouses
meant larger inventory
which in turn led to faster
order -to-delivery turnaround
time and happier customers.
Today we have warehouses in 7
cities and delivery hubs in 50 cities.
This has gone a long way in removing inventory mismatch
(where a supplier tells us that the item is in stock with
them but is unable to supply the same when the orders
come in). Almost 80% of our orders are delivered through
warehouses and our customer complaint rate is also much
lower compared to consignment orders.
We also believe in a very high-level of automation. Starting
from the website interface, to the warehouse and logistics
aspects of the business we think high-end technology is
what helps create a superior user experience.
Some of our other investments and innovations were geared
towards creating a superior user experience in other areas
of the order-to-post-delivery service chain.
Our recent 30 day replacement policy has also been an
important area of investment. Now, we replace a faulty
/ damaged product with a brand new one if we receive
a complaint within 30 days of delivery. We take care of
all reverse pick-ups and replacements with suppliers /
merchants.
One of the biggest concerns consumers have about online
shopping, is the safety of their credit card details online. For
those ready to make online purchases, frequent payment
...One of our biggest
investments and successes as far as the
supply-chain is concerned is the launch of our
own delivery system in order to ease the bottle-
necks in last mile delivery...
Author
Mr. Sachin Bansal
Co-founder and CEO, Flipkart.com
OP S WOR L D GUE S T ART I CL E
9
gateway failures are another barrier.
We decided to address all these problems by
introducing our cash-on-delivery model. We started
with a small pilot in Bangalore and once that took
off, we took the service to a number of other cities. In
certain areas, we have even started a card-on-delivery
service. With this, the consumer does not need to
worry about having adequate cash or change with
them they can swipe their cards then and there, and
pay for their purchases.
We have also launched a wallet system a few days ago.
The Flipkart.com wallet has been launched keeping
in mind the ease and convenience of our heavy users
- those who shop with us multiple times during the
month, and particularly when individual transactions
have small ticket-size (i.e., micro payments).
Wallet offers our customers the convenience of
making payment once and shopping multiple times
with us. This also ensures that customers do not have
to go through the bank verification processes every
time they buy something on Flipkart.com. The wallet
cuts down on payment gateway issues as well.
Our aim is to reduce the time spent on the order
process as much as possible thus making online
shopping a simpler, faster and completely hassle-free
experience for our customers.
As far as future is concerned, we will be looking at
bigger investments in our supply chain and technology.
This should result in a more extensive network
of warehouses and increased automation of our
processes. We believe a higher level of independence
will improve our services further leading to greater
sales and a greater customer conversion.
Today, with our customer base growing by 30%
month on month, the importance of a robust and
extensive supply-chain network, better logistics etc.
have become even more paramount.
What other companies and entrepreneurs looking
to enter this space should remember is that the
challenges posed by the market in India are unique
- from supply-chain and logistics to warehousing and
payments. Any company which is starting operations
in this country will have to invest time and resources
to overcome similar problems.
It is important for large players to build their own
infrastructure if they want to succeed in this space.
_________________________________________
Across Clues
2. This is something customers will buy at a price they are
willing to pay.
3. Should indicate how the operations objectives will be
achieved.
6. This strategy defines what business the company is pur-
suing
8. This is what customer attributes represents of the cus-
tomer
9. This strategy indicates that the product should have a
technical advantage.
10. What competence must have a market and customer?
Down Clues
1. This is one of the common objectives of operations.
3. Concerned with designing the physical new product (2
words).
4. is one of the elements of operations strategy model.
5. Is responsible for supplying the product or service of the
company.
7. Is responsible for ordering and receipt of goods.
(Answers on Page no. 21)
CROSSWORD
SUSTAINABILITY
FACULTY OPINION
OP S WOR L D S US TAI NAB I L I T Y FACULT Y OP I NI ON
11
Jack of All Trades, Master of Two
Abstract
Companies attempting the
ultimate state of excellence do
fnd very less scope of further
improvement at the peak of the
pyramid. In fact, improvement
at this stage is very difcult
as the organizations have
tried every possible way to
improve. While most of the
organizations are adopting
developed technology and
advanced managerial skill at
individual department level,
they wittingly or unwittingly
ignore the impact of
interfaces and co-ordination
between these disciplines.
Tis missing link of proper
co-ordination between
various disciplines,eventually
carves the scope of further
improvements.
Tis task is not easy, as
the managers involved in
making the decisions need
to understand the pros,
cons and business tricks of
various departments. For
an individual to acquire
such knowledge and enable
implementation across
disciplines is very demanding
and challenging.
Tis article attempts to
provide a way out. Te
seemingly complex problem
can be simplifed with
involvement of a chain
(group) of managers: each
expert in at least two domains.
Tis suggests managers have
basic knowledge of all the
organizational functions and
possess expertise in at least
two streams. Here we discuss
some of the problems and
their possible solutions as a
result of an interface of other
streams with Operations
management.
W
ith globalization and
increased competition,
companies need to carve
new avenues and opportunities for
business growth. This is not sufficient
as the
c o mp a n i e s
have to ensure
s us t e na nc e
of existing
b u s i n e s s ,
along with its
growth. It has
been observed
that over a
period of time,
the companies
develop a unique feature or culture
which becomes an order winning
strategy for sustenance and growth.
For instance, Toyota production
system is a well known approach
adopted by Toyotas, implementation
of Six Sigma has made GE popular.
In India, TVS group is known for its
initiative in Total Quality Management.
One can cite many such examples of
companies that have exploited the
market opportunities and earned a
leading position.
Many a times, innovative
strategies are essential to maintain the
earned position. Leveraging domain
specific strength will certainly give a
competitive advantage. It will be more
beneficial if the companies develop
inter-functional competencies, and
understand the business tricks across
various disciplines.
The development of inter-functional
competencies posses many challenges
as it require various skill sets,
sometimes contradicting, and at times
complementing each other. However,
the complex challenge can be simplified
by developing a chain (group) of
expertise; each individual, expert in
two areas. In this article we discuss
some common issues that can be
handled in a better way if one possess
expertise in two domain areas; one out
of two being operations management.
In the following sections we explore through
some challenges and/or opportunities across
various disciplines.
Operations and Marketing Interface
Advertising has a very special place among
the many different facets of marketing
management. In fact, many people still believe
that marketing is just a synonym for advertising.
A manager in advertising has to take very
important decisions on a daily basis. Some of
these are which advertisement
should be used now?, what
should be the frequency
of appearance of
the advertisement?,
what is the best mode
for advertising?, what
should be highlighted
in the advertisement?
etc. Though at first
glance, these questions
do not seem to do much
with operations, however,
the decisions will be easy if the manager takes
into account the status of the inventories of the
various products. The decision will be more
appropriate if the manager is also aware of or
understands, the details of the supply chain
network and the basic processes involved in
the manufacturing of the products. This will
certainly give a complete picture regarding what
to emphasize upon, and the appropriate time to
advertise.
Retail is also considered to be one of the most
important aspects of marketing management.
The goods in retail are meant to be sold in
small lots, and are also meant for direct use or
consumption. Retailers purchase goods from
manufacturers, importers or wholesalers in bulk
quantities, and then sell them to the end-users,
which may be individuals or businesses. Retail
distribution governs the last mile connectivity
of the supply chain, and hence is a vital part
of the distribution channel for the marketers.
Retail sector has grown at an astonishing rate
in the recent years; the skill sets essential for
supply chain will be handy in managing the
retail chains. Understanding demand is also
an essential in retail. Forecasting methods
like moving average, regression analysis, Holt-
Winter approach, Box Jenkins technique will
be of use here. Some other techniques that will
enable retail management in a better way are
the queuing theory and layout planning.Another
major aspect of marketing that we can focus
upon (in the context of this article) is sales.

Author
Prof. Omkarprasad S Vaidya
Operations Management and Quantitative Techniques Group,
Indian Institute of Management Raipur
12
Though sales can be simply defined as selling of a product
or service, the people working in this department should
understand the supply chain network of the organization,
and the basics of supply chain for having a better
insight into the delivery conditions and the lead time
required for any given order. Supply chain network is the
collection of physical locations, transportation vehicles
and supporting systems through which the products
and services are managed and ultimately delivered. The
physical locations can be manufacturing plants, storage
warehouses, distribution centers, ports, suppliers,
transport carriers, third-party logistics provider and
retail store.
Operations and Finance Interface
Activity based costing (ABC) is one of the most popular
tools to measure and improve upon the cost associated
with a manufacturing, business or administration process,
or any service. It is basically finance and accounting
concepts used predominantly for supporting strategic
decisions such as pricing, outsourcing, identification
and measurement of process improvement initiatives.
ABC determines all the resources and processes that act
as the inputs to create a particular product or service.
Then, it evaluates the costs associated with each of them,
including the time taken. Thus it is able to zero-in on the
cost drivers for each resource and evaluate the overall
coat of the product or service. Briefly ABC helps in make
the following decisions:
Identify, and if
required, eliminate the
unprofitable products,
processes and services,
and reduce the costs
of those which are
overpriced.
Identify, and if required, eliminate the products
and processes which pay little role in the final output, or
have better alternatives for.
Though ABC is a tool mainly associated with finance and
accounting stream of management, to use it effectively,
one must also understand the aspects of operations
management involved in it. ABC segregates the overall
costs into fixed costs, variable costs and overhead
costs. This split helps in identifying the cost drivers. But
then, one needs a good knowledge base in operations
management to do such classifications effectively.
The optimization skills that very commonly used
in making decisions in operations can be of vital
importance in many finance related areas. Most of these
tools are statistical or probabilistic in nature. They
are used extensively in portfolio selection, derivatives
management, risk management, financial products
valuation and pricing policies. The optimization tools
and models have been used in manufacturing since a very
long time and thus were developed, initially, specifically
for them. Another application of forecasting techniques
is predicting the share prices in stock market.
Operations and HRM Interface
Operations management and Human Resources
Management (HRM) have always been considered as very
distinct fields. They have been developed separately with
little or no interaction except administrative issues. A
closer look however suggests something else. Researchers
(Boudreau et.al, 2002) claim that these two disciplines
are intimately related at a fundamental level. Many
effects of human resource activities like pay, training,
communications, and staffing can be better explained or
moderated by using operations tools One can also note
various real-life events to illustrate how the application
of the two concepts together have been quite successful
at resolving issues which could not be tackled using one
of them alone. Briefly, models in operations management
area could provide insight into the search for pivot points
that may be affected by talent. HRM could offer insights
about factors that affect development of the appropriate
talent and the extent to which satisfaction among workers
affects retention and performance. But by truly bringing
the two perspectives together, we can design hybrid
systems that combine the motivational benefits of team-
build with the efficiency of progressive-build. Thus it can
be safely concluded that operations and HR managers, if
work in synchronization, can accomplish a lot and resolve
many serious problems. On the other hand, if a human
resources manager has a sound knowledge of operations
management, he/she alone can make real differences in a
similar fashion.
Operations and IT Interface
Operations management
has been around for a
long time now, at least
much before anyone even
anticipated anything even close
to Information Technology (IT). Today, IT has become very
prominent in not only the industry and economy, but even the
life of almost anybody. Moreover, IT has found applications
in every length and breadth of the industry, be it any of the
management streams or any feld of business. One very
simple example could be the popular sofware used in almost
every organization for manufacturing resource planning and
enterprise resource planning. Tese systems come in handy
especially in case a large number of parts are involved in
material resource planning.
On the other hand, though not as evident as the previous case,
operations management has a lot of potential application(s) in
IT. One of the very obvious ones is the application of process
improvement methodologies like the Teory of Constraints
(TOC). TOC is a very versatile tool and is used in many
distinct felds with the same purpose- to make the process
or system more goal (or proft) oriented by identifying
and eliminating constraints in a systematic manner. For
instance, Coman and Ronen (1995) explain and illustrate
using a case study how the principles of TOC can be applied
in IT. This work states some breakthrough statistics like
around 15% of all projects in IT industry never deliver
anything and overruns of 100-200% are very common.
...though ABC is a tool mainly associated with
finance and accounting stream of management, to use
it effectively, one must also understand the aspects of
operations management involved in it...
13
This analysis appears to be based on the gap between
the optimal and existing situations. These figures can
be improved upon, to a large extent by using TOC. The
publication concludes that coupled with some other
tools, TOC can be mobilized to examine potential future
constraints, and not only the present constraints. It
also suggests exploitation of competitors constraints
to establish barriers for entry in the market, and offers
a hierarchy of constraints across various levels of the
organization.
Thus operations management and IT have a lot to do
with each other, and a manager in IT having a sound
background of operations certainly will have an edge
over his/her peers devoid of this knowledge.
Operations and Economics Interface
Economics is somewhat more related to operations.
One of the well-known phenomena that display this
link is the Bullwhip Effect. Briefly stating, it refers to the
amplification in the variations in stocks as one moves up
in the supply chain or away from the consumers. Though
the main reasons behind Bullwhip Effect are behavioral
(eg. panic ordering reactions after unmet demand) or
operational (eg. forecast errors, lead time variability,
etc.) in nature, its effects
are easily observed
as variations and
fluctuations in supply
and demand curves-
a feature largely
attributed to economics.
Besides, several research
publications have concluded that operations and
economics have a lot to do with each other. Powell and
Schmenner (2002) present a detailed analysis of the
complex link between throughput time, price, and profit
maximization. From this analysis, economists can gain
a working example of how to open the black box of
production in terms of theoretical analysis and better
specify labors role in the production process.

Conclusions
In this article, an attempt is made to explain that no field
in management is isolated from the others. Emphasis is
given to explain briefly the interface of operations and
other major disciplines: marketing, finance, HR, IT and
economics. A careful and detailed study will enable the
managers carve scope for further improvements and
attain the desired goal.
It is also essential that leading B Schools take an initiative
and guide the students (tomorrows mangers) towards
developing and understanding the skills across various
disciplines, rather than providing focused guidance in one
specialized area. It is hoped that the student community
will get a brief idea of the cross disciplinary opportunities,
and help in choosing an appropriate career. The executive
officers on the other hand can introspect their strengths
and weakness, and work accordingly. With a chain
(group) of connoisseurs, having basic knowledge of all
disciplines (Jack of all trades) and an expertise in various
interdisciplinary areas (master of two), the companies
will certainly achieve better heights.
Acknowledgement: The author acknowledges the
help and support from Mr. Akshay Agarwal and Mr.
Rohit Bhagat, students at IIM Raipur.
Further reading (Print):
Boudreau, J., Hopp, W., McClain, J. O. & Thomas, L.
J. (2002), On the interface between operations and
human resources management (CAHRS Working
Paper #02-22). Ithaca, NY: Cornell University, School
of Industrial and Labor Relations, Center for Advanced
Human Resource Studies. http://digitalcommons.ilr.
cornell.edu/cahrswp/63
Coman A. and Ronen B., (1995), Information
Technology in Operations Management: a Theory-
of-Constraints Approach, International Journal of
Production Research, 33 (5), 1403- 1415
Philip T. Powell and Roger W. Schmenner, (2002),
Economics and Operations Management: Towards a
Theory of Endogenous Production Speed, Managerial
and Decision Economics, 23(6), 331342
Rajiv D. Banker, Inder S. Khosla (1995), Economics
of operations management: A research perspective,
Journal of Operations Management, 12, 423-435
Tang, Christopher
S., A Review of
Marketing-Operations
Interface Models:
From Co-Existence
to Coordination and
Collaboration (October
26, 2009). Available at SSRN:
http://ssrn.com/abstract=1568947
Vandaele, N. and Perdu, L. (2010), The operations-
finance interface: An example from lot sizing,
Proceeding of 7th International Conference on
Service Systems and Service Management, Japan, 1-6

Further reading (Internet) as accessed on 30 October
2011:
h t t p : / / www. q f i n a n c e . c o m/ c a s h - f l o w-
management-calculations/activity-based-costing
http://www.artelys.com/gb/services/finance.html
http://faculty.haas.berkeley.edu/hoteck/PAPERS/
Special%20Issue.pdf
http://www.boozallen.com/media/file/110165.
pdf
____________________________________
...it is also essential that leading B Schools
take an initiative and guide the students (tomorrows
mangers) towards developing and understanding the
skills across various disciplines rather than providing
focused guidance in one specialized area...
14
Cold Chain Management:
A Conceptual Design for
Sustainable Performance Improvement
Abstract
Te supply chain of perishables, of-
ten referred to as a Cold Chain, can
be considered to be a series of equip-
ments and processes used to protect
perishables, starting from source until
consumption. As all perishables fall in
fragile category and have limited lives,
their handling is far more complex and
prone to much higher risks compared
to handling of non-perishable prod-
ucts. And, with perishable food prod-
ucts forming one of the fastest grow-
ing items of Indian grocery sector, cold
chain management is assuming greater
importance and drawing the atten-
tion of practitioners and researchers.
Tis study is an attempt to identify
the driving Performance Attributes
and Decision Factors to evaluate cold
chain performance and then imple-
ment continuous improvement that
could help an organization to sustain
in todays fast changing milieu. Man-
agers can identify better processes and
can benchmark them for improving
the identifed weaknesses. Tey can
further analyze the efectiveness of the
potential improvement opportunities
as per the current operational condi-
tions and strategies of their company.
Prelude
G
iven that most food,
pharmaceutical, and
chemical products get
degraded by inappropriate
exposure to temperature,
humidity, light and certain
contaminants (Smith, 2005);
a consistent management of
controlled environment all
along the supply chain is a key
in maintaining the quality of
perishable products till the final
delivery point. A Cold Chain is a
physical process that dominates
the supply chain of perishable
products. It includes a series of
equipment and processes used to
protect the perishables, by keeping
them chilled and frozen, starting
from the source of origin to the
destination of consumption (Salin
and Nayga, 2003). The perishable
products can be categorized into
two types viz., living products and
non-living products. The living
Products include fruits, vegetables,
live seafood, flowers etc., where
respiration is an on-going process,
which uses up stored energy or
food reserves by emitting heat and
water vapors. Here, temperature
is an imperative constraint,
and the impact of non-optimal
temperatures results in the loss
of quality in form of earlier ageing
and natural senescence. Too high
temperature results in loss of
quality, rapid deterioration and
microbial spoilage whereas, too
low temperature causes remove,
chilling injury, freezing destructions and
death (Ames, 2006). The non-living products
include meat, dairy products, processed food
products, medicines, blood, frozen products,
etc. Similarly, if these products were not kept
in a controlled or an optimum temperature, a
microbial spoilage loss of quality in the form
of flavor and texture degradation would be
perceptible (Sowinski, 1999).
The cold chain starts at farm level (harvest
methods, pre-cooling) and continues during
first handling, processing, distribution
and finally covers up to the consumer level
(cooling practices and behavior) as shown
in Figure 1. It is the continuous degradation
in quality and value of the product from
source to destination, which differentiates
the cold chain from the supply chain of non-
perishable items.
Management of a controlled environment
during the cold chain is a key to keep
perishable products at the required level
of quality and quantity at the final delivery.
Bogataj et al. (2005) have stated the formal
definition of global Cold Chain Management
(CCM) as, the process of planning,
implementing and controlling efficient,
effective flow and storage of perishable
goods, related services and information from
one or more points of origin to the points of
production, distribution and consumptions
in order to meet customer requirements.
A temperature disturbance occurs when
perishables are allowed to warm up or when
the surrounding temperature fluctuates.

Author
Dr. Rohit Joshi
Assistant Professor, IIM Shillong
15
To maintain the temperature in the entire route from
producers/manufacturers to consumer end, specialized
facilities and technologies are essential to constitute a
robust cold chain. The major issues involved with the
implementation of a cost-effective and efficient CCM are:
(i) pre-cooling facilities at farm, (ii) awareness among
farmers regarding cold chain practices (iii) cold storages
facilities (iv) refrigerated logistics, (v) packaging, (vi)
product tracking and tracing, (vii) information technology
enabled network (viii) inventory control, (ix) dynamic
pricing (x) quality and safety throughout the chain, (xi)
retailers practices, (xii) consumers knowledge and
awareness, (xiii) government support, (xiv) laws and
regulations, (xv) cold chain performance measurement
etc.
In this study, the concentration is on performance
management of cold chain that includes all the links
from a farmer to a consumer. Here, an attempt has been
made to identify the Performance Attributes and Decision
Factors that assists in evaluating cold chain performance,
and then to implement the continuous improvement and
to develop a novel Consistent Measurement Scale (CMS).
The identification of Performance Attributes and Decision
Factors, and the development of CMS are based on actual
scenarios of the cold chain in Indian market.
Cold Chain Performance Management
In todays competitive milieu, the quality of perishable
products could be one of the main drivers for retailers
to attract additional customers and thus increase
profitability. Thron et al.
(2007) stated that the
quality of perishable
goods assortment
is becoming the core
reason many customers choose one retailer over another.
The global market for perishable goods such as cooled
products and processed foods is growing due to changing
lifestyles and overall declining prices. Any variation in
time/distance or temperature in the cold chain could
hamper the net present value of the activities, and thus
adversely affect the overall performance (Bogataj et al.,
2005).
The cold chain management is not easy even when
operating in a developed economy such as the US and UK.
It gets even more challenging in developing economy like
India. In most developed economies, with affirm support
from robust infrastructure, there are limited uncertainties
in business process related to logistics. However, in
developing economies logistics tends to poses several
types of challenges due to unpredictable environment,
weaker infrastructure and uncertainty in availability of
basic necessities like water, power etc (Joshi et al. 2009).
For example, in India it is estimated that around 35% to
40% of the total production of fresh fruits and vegetables,
is wasted only because of inadequate and inefficient cold
storage, poor logistics and lack of other infrastructure
supports (Viswanadham, 2006). At the current level
of production, which makes India the second largest
producer of fruits and vegetables in the world, the wastage
of farm produce is valued at Rs. 70,000 million ($1400m),
which is almost equivalent to the total production of Great
Britain (Khan, 2005). At a time when cold chain is a key
domain for the food sector, an effective development of
the cold chain is becoming an important issue. The high
margin of product losses offers a significant opportunity
for improvements, and advocates for technology and
research advancement within this domain.
In the business of perishable products, there is a
direct correlation between the cold chain performance
(CCP) and the quality of the end deliverable. For a
considerable period of time, the cold chain data has
been underutilized and used solely for the purposes
of evaluating the integrity of individual shipments, i.e.
facilitating the accept or reject decisions. This data could
be gathered to measure performance of the cold chain,
which in turn could identify flaws and weaknesses in the
processes for eliminating problems before they occur. A
well defined performance measurement system (PMS)
aims at supporting the setting of objectives, evaluating
performance and determining future courses of action on
a strategic, tactical and operational level (Gunasekaran
et al. 2001). PMS allows comparison of planned and
actual parameter values, and taking certain reactive
measures in order to improve performance or re-align
the monitored value to the defined value (Beamon,
1999). However, measuring the performance of a cold
chain is difficult as it has certain characteristics that set
it apart from other types of supply chains, namely:
shelf life constraints,
seasonality in production,
physical product features like appearance, taste, odour,
colour, size and image,
long production
throughput time,
refrigerated transportation and storage requirement,
traceability,
product quality and safety. (Aramyan et al., 2007;
Mangina and Vlachos, 2005)
The framework for consistent measurement scale (CMS)
of cold chain attributes
There are a number of attributes of a cold chain PMS.
In this study, these attributes have been identified based
on an exhaustive literature review and discussions
with academics and industry practitioners. In the
initial phase, a visit to the selected organizations was
undertaken to understand their use of cold chain
operations. Literature related to cold chain performance
was then circulated among the experts. Within a period
of fifteen days, a brainstorming session was organized
to identify the performance attributes. In all, thirty-
six attributes were identified during this session.
Based on a continued analysis, the number was then
systematically reduced to twenty-seven, as some were
overlapped and some were combined. These attributes
were further grouped into seven major categories and a
cause-and-effect diagram was created (Figure 2). Once
the attributes were finalized, a consistent measurement
scale (CMS) was developed to rate different attributes
on a consistent scale for evaluating performance more
consistently. Thus evaluators can judge the performance
of the attributes in a better way, as data collection is
relatively easy and accessible due to this quantification.
...the quality of perishable products could be
one of the main drivers for retailers to attract additional
customers and thus increase profitability....
16
Based on the CMS, managers could quantify the
performance of each cold chain attribute, as well as the
overall cold chain performance of the company. Further
they can compare and evaluate these values against the
competitors to examine their companys competitive
gains and losses, and to understand the weaknesses in
their cold chain processes. Managers could then identify
better processes which could be benchmarked for
improving the known weaknesses. After short listing the
potential improvement alternatives, the next step would
be to assess if those are suitable for implementation as
per the operational conditions of the company. After
discussions with experts, the consensus was arrived upon
to conclude with eight decision factors, based on which
the efficiency and effectiveness of potential alternatives
could be judged. These decision factors are discussed
later in detail.
Before something can be measured, it must be defined. The
definitions of the attributes and how an attribute affects
a company are explained in Table 1. This understanding
could be significant for obtaining relevant information
during evaluation, and for evaluating the relationship
between attributes. Different levels of ratings are
established depending on the type of sub-attributes.
In order to evaluate performance more consistently,
consistent measurement scale (CMS) for each sub-attribute
are shown on Table 2 (last column).
Table 1: Defnition of Attributes and Sub attributes for performance evaluation
Attributes &
defnition
Attributes afect on a
company
Sub attributes Defnition of Sub-attributes
Cost: Running
expenditure on
whole cold chain
operations of an
organization.
Microbial spoilage
in the food industry
represents a huge cost
and waste of a valu-
able resource. Lower
product losses, energy
costs, cost of opera-
tion and maintenance
of refrigeration
system and lost time
costs can enhance the
competitiveness.
Operation Cost Includes costs of refrigeration including internal or
external service, maintenance costs, lost time costs,
salary of dedicated employee and energy costs
Inventory Cost Includes storage cost and carrying cost
Distribution cost Cost associated with delivery activities like refriger-
ated transportation and handling
Cost of Expired/
wasted product
Includes cost of product losses, which perish due to
overage or mishandling
Cost of staf training Amount spent on training of staf for attaining
required skills and knowledge
17
Attributes & defnition Attributes afect on a company Sub attributes Defnition of Sub-attributes
Quality & Safety: Te degree of customer
satisfaction with a product's characteristics
(safety and hygiene) and features (freshness
and juiciness) are the measure of quality.
Consumers are increasingly con-
cerned with food quality and safety,
and give freshness very high priority
while purchasing chilled and frozen
foods.
Certifcation Includes costs of refrigeration includ-
ing internal or external service, main-
tenance costs, lost time costs, salary of
dedicated employee and energy costs
Customer satisfaction for
Q&S
Includes storage cost and carrying cost
Categorization as per
remaining shelf life
Cost associated with delivery activities
like refrigerated transportation and
handling
Traceability: Te ability to trace product
information regarding transaction (order,
shipment, payment), location (ware-
house, trafc, inventory), condition
(temperature, humidity) and time (self life)
through all stages of production, processing
and distribution.
Product temperature may vary in
each step, especially when loading
and unloading is performed outside
controlled temperature conditions
and so traceability is today a key
concept. Traceability can help in
identifying faws and weaknesses
in the processes and eliminating
problems before they occur.
At farmers place No. of points of monitoring (condi-
tion) at farmers level
During transit No. of points of monitoring (condi-
tion) during transit
At retail store No. of points of monitoring (condi-
tion) at retail store
Te degree of details of
information about items
monitored
No. of information secured about the
product while monitoring
Te degree of automation Te degree of automation (Manual,
semi automatic, automatic) of item
identifcation and data collection
process.
Service level: An ability of organization to
supply their customers wants and needs.
A good service always delights
customer. For a cold chain it can be
viewed as a feature distinguished
from other competitors and can in-
crease sales and image e.g. refriger-
ated home delivery, operating hours
and convenience etc.
No. of Billing stations Number of billing counters /square
meter
Convenience Ease of reach by customers
Operating hour No. of hours for which store is open for
customer
Payment method No. of modes of payments
Delivery coverage Refrigerated home delivery area
covered
Product availability Presence of large assortment and no
stock out
Return on assets (ROA): Ability of organiza-
tion to generate production and make proft
utilizing its existing assets.
Efciency in utilizing refrigeration
assets can enhance productivity at
a low cost without hampering the
quality.
product of operation
margin
Net proft to sales
Total asset utilization Sales/ Total assets
Innovativeness: Any creative idea, getting
implemented or realized successfully as an
individual or a part of the existing operation
with the purpose of improving the current
performance level.
Innovativeness is the only answer
to continuously changing customer
requirement and highly intense
competition.
New launch of technology Percentage of reduction in time or cost
by new technology to earlier ones.
New launch of service Percentage of increase in sale by new
service / total sale
New marketing event Percentage of increase in sale by new
event / total sale
Relationship: A logical association between
customer, employees and partners.
A satisfaction level of customer,
employees and farmers has direct
impact on organisations perfor-
mance.
Customer Average satisfaction of selected
customer
Farmer (training, interac-
tions)
Average satisfaction of selected farmer/
supplier
Employee (training for
req. knowledge)
A measure of job satisfaction of an
employee
18
Attributes Sub-attributes Rating Evaluation Standard

Cost Operation Cost VH
[a]
(Corresponding cost/ total cost) x 100 >50%
Inventory Cost H 35%-50%
Distribution cost A 20%-34%
Cost of Expired/ wasted
product
L 10%-19%
Cost of staff training VL <10%

Quality & Safety Certification VH No. of certifications (HACCP, GMP,
GAP, GLP, ISO 2000, ISO14000 etc.) a
company have
>3
H 3
A 2
L 1
VL 0
Customer Satisfaction for
Q&S
VH How likely is that you will recommend
(company X) to a friend or colleague?
(0 to 10 scale). Random customers are
asked and the average score is
calculated.
9-10
H 7-8
A 4-5
L 2-3
VL 0-1
Categorisation as per
remaining shelf life
VH Sorting on information on the
remaining shelf life of entity updated in
the function of temperature condition
experienced in cold chain
Automatic
H Semi-automatic
A Manual
L Occasional
VL Never

Traceability At farmers place VH No. of points a product is traces with
RFID/ barcode/ smart tags and Trucks
with temperature indicators/ GPS etc.
>10
During transit H 7-9
At retail store A 5-6
L 2-4
VL 0-2

The degree of details of
information about items
monitored
VH No. of information (time, temperature,
humidity, expected shelf life, price,
colour, weight, volume, sell by date
etc.) secured about the product while
monitoring.
>10
H 7-9
A 5-6
L 2-4
VL 0-2

Degree of automation VH The degree of automation (Manual,
semi-automatic, automatic) of item
identification and data collection
process.
Automatic
H In between
A Semi-automatic
L In between
VL Manual

Service level No. of billing stations VH No. of counters/ 1000m
2
>4
H 4
A 3
L 2
VL <1

Convenience

VH No. of store in a city >10/ city
H 8-10/ city
A 5-7/ city
L 3-4/ city
VL 1-2/ city
Operating hour VH Operating time for store 16-24hr
H 9-16
A 7-9
L 6-7

VL

<6

Payment method VH No. of methods ( Credit card, Debit > 4
19

Payment method VH No. of methods ( Credit card, Debit
card, Cash, membership card, on-line
payment, phone payment , other
payment gateways)
> 4
H 4
A 3
L 2
VL 1
Delivery coverage VH Refrigerated home delivery area
covered
> area of the city
H area of the city
A area of the city
L area of the city
VL < area of the city
Product availability VH Average no. of items out of stock <3
H 3
A 4
L 5
VL >5

Return on assets
(ROA)
Net profit to sales VH (Net profit/ total sales) x 100 >80%
H 60-80%
A 40-60%
L 20-40%
VL <20%

Total asset utilization VH Total sales/ total asset owned >80%
H 60-80%
A 40-60%
L 20-40%
VL <20%

Innovativeness New launch of technology

New launch of service

New marketing event
VH Reduction in time (or cost)/ total time
(cost) x100

(Sales after new service or event/ total
sales) x 100
>80%
H 60-80%
A 40-60%
L 20-40%
VL <20%

Relation Customer

Farmer

Employee
VH Average satisfaction of selected
customer/ farmer/ employee (0-10
scale)
8-10
H 6-8
A 4-6
L 2-4
VL 0-2
[a]
VH: Very High, H: High, A: Average, L:Low, VL: Very Low
The aim of the second stage of the framework is to provide guidelines for attaining continuous improvement, by
the selection of more efficient processes learned from the competitors. These processes could be considered as
potential alternatives to improve the cold chain performance of the company. There could be various alternatives
for an improvement, which can be compared to a set of decision factors (or companys strategy). As discussed
earlier in this section, eight decision factors are finalized on which the potential alternatives would be judged. The
definitions of decision factors are explained in Table 3. The rating and evaluation standard of decision factors are
given in the last column of Table 3, to enable consistency during the entire selection process.
20
Table 3: Consistent measurement scale of companies decision factors for improvements assessment

Decision Factors & Definition Rating Evaluation Standard
Effectiveness: Improvement from an alternative
is a prime concern. Degree of effectiveness
divulges how much the alternative can help and
its suitability to improve the current situation.
VH Forecasted degree of change
in the corresponding sub-
criteria
>90%
H 60-90%
A 30-60%
L 0-30%
VL <0%
Payback period: Payback period is the simplest
method of looking at any proposed
improvement. It refers to the period of time
required for the return on an investment to
"repay" the sum of the original investment on the
improvement alternative.

VH Forecasted time period
between the installation of
alternative and improvement
begin
<2 days
H 2-7 days
A 1-3 weeks
L 2-3 weeks
VL >3 week
Added cost: The extra costs associated with
improvement alternative must be considered for
improving the existing situation and for the
future strategy and development. It includes
expenses during the set-up and operation cost of
the alternative.

VH Forecasted (Added cost in
set up, running and
maintenance/ total cost) x
100
>50%
H 40-50%
A 30-40%
L 10-20%
VL <10%
Added time: Time is an important criterion as
more cost is involved if more time is spent on
alternative improvement. This includes the extra
amount of time spent for investigating the
suitability, setting-up and operating the
corresponding alternative.

VH Forecasted research and set-
up time
>8 weeks
H 5-8 weeks
A 3-5 weeks
L 1-3 weeks
VL < 1 week
Capability: It is defined as the ability of a
company to manage and monitor the alternative
so as to achieve the improvement. It is vital, as it
may be possible that the alternative itself is very
effective, but the company does not have any
knowledge and technique to operate the
alternative.

VH Forecasted percentage of
delay or error caused
0-3%
H 3-5%
A 5-15%
L 15-30%
VL >30%
Adhesion with Existing system: A complete
adhesion of the improvement with the existing
system is must for better overall performance of
the system. This can be measured in terms of
time required to integrate the alternative with the
existing system completel y, without causing any
disturbance of performance.

VH Forecasted time required by
alternative to adhere with
existing system
< 1day
H 1-3 days
A 3-7 days
L 1-2 weeks
VL > 2 weeks
Top management: This refers to the degree of
willingness of management to accept the
alternative with the belief of improvement and
further participation by the highest-level
executives, which results in more efficient and
effective preparation and implementation.

VH Degree of willingness from
top management to accept
the alternative (0-10 scale)
8-10
H 6-7
A 4-5
L 3-4
VL 0-2
Constraints: A constraint is a condition that a
solution or answer must satisfy. The number and
variety of limitation and restriction existed in
selecting any particular alternative is considered
as a constraint. Constraint is treated as unwanted
factor to lower the choice of selecting
alternative.
VH Internal and external
constraints
>8 constraints
H 8-6 constraints
A 5-4 constraints
L 3-2 constraints
VL 0-1 constraint
21
Once the CMS has developed, a consistent measuring scale
and benchmarking methodology may be implemented
by a cold chain performance manager (evaluator) for
understanding the present strengths and weaknesses
of their companies vis-a-vis their competitors. They can
identify better processes from their competitors, and
benchmark them for improving the weaknesses. Managers
can further analyze the effectiveness of the potential
improvement opportunities, as per current operational
conditions and strategies of the company. This framework
also facilitates the decision makers to understand the
complex relationships of the relevant attributes in the
decision-making, which may consequently improve the
accuracy of the decision. Different companies can choose
their own attributes
and sub-attributes
with different values of
relative influences, to
best suit their own goals and business strategies.
Conclusion
Maintaining a cold chain is a far complicated process than
it is perceived to be. This study has attempted to present
a performance improvement system that tries to address
the complexities of cold chain evaluation with a focus on
the practicing managers efforts towards improvement.
The cold chain managers (evaluators) can judge the
performance of the cold chain in a more effective way, as
data collection is relatively easy and accessible due to the
consistent measuring system defined for all the qualitative
and quantitative attributes. The consistent measurement
scale has facilitated to evaluate performance more reliably
for each attribute and sub-attribute.
References
Ames, H. (2006), Authentication from a cold chain
perspective, Pharmaceutical Commerce. Internet resource
http://www.pharmaceuticalcommerce.com/frontEnd/
main.php?idSeccion=327
Aramyan, L.H., Oude Lansink, A.G.J.M., Van der Vorst, J.G.A.J.
and Van Kooten, O. (2007), Performance measurement
in agri-food supply chains: a case study, Supply Chain
Management: An International Journal, Vol. 12 No.4, pp.
304315.
Beamon, B.M. (1999), Measuring supply chain
performance, International Journal of Operations &
Production Management, Vol. 19 No. 3, pp. 275-92.
Bogataj, M., Bogataj, L. and Vodopivec R. (2005), Stability
of perishable goods in cold logistic chains, International
Journal Production Economics, Vol. 9394, pp. 345356.
Gunasekaran, A., Patel, C. and Tirtiroglu, E. (2001),
Performance measures and metrics in a supply chain
environment, International Journal of Operations &
Production Management, Vol. 21 No. 1/2, pp. 71-87.
Joshi R., Banwet D.K. and Shankar R. (2009), Indian cold
chain: modeling the inhibitors, British Food Journal, Vol.
111 No. 11, pp. 1263-1280.
Khan, A. U. (2005), The domestic food market: is India
ready for food processing? Conference on SPS Towards
Global Competitiveness in the Food Processing Sector,
5 September Pune, India. Internet resource http://
nationalrenderers.org/assets/essential_rendering_book.
pdf
Mangina, E. and Vlachos I.P. (2005), The changing role
of information technology in food and beverage logistics
management: beverage network optimization using
intelligent agent technology, Journal of Food Engineering,
Vol. 70 No.3, pp. 403420.
Salin, V. and Nayga, R.M. (2003), A cold chain network for
food exports to developing countries, International Journal
of Physical Distribution & Logistics Management, Vol. 33
No. 10, pp. 918 933.
Smith, G.C.,Tatum, J.D., Belk, K.E., Scanga, J.A., Grandin, T.
and Sofos, J.N. (2005), Traceability from a US perspective,
Meat Science, Vol. 71 No.1, pp. 174-193.
Sowinski, L. (1999), Keep your big deal from melting away:
shipping perishables call for efficiency and expertise,
World Trade, Vol. 12 No.3,
pp.70-72.
Thron, T, Nagy, G. and
Wassan,N. (2007), Evaluating
alternative supply chain structures for perishable products,
The International Journal of Logistics Management, Vol.18
No.3, pp. 364-384.
Viswanadham, N., (2006), Can India be the food basket for
the world? working paper series ISB Hydrabad. Internet
resource www.isb.edu/faculty/Working_Papers_pdfs/Can_
India_be_the_Food_Bask et_for_the_World.pdf
------------------------------------
...Maintaining a cold chain is a more complicated process
than it is perceived to be.....
Crossword Answers
Across Answers
2. VALUE
3. POLICIES
6. CORPORATE
8. VOICE
9. INTERFUNCTIONAL
10. DISTINCTIVE
Down Answers
1. QUALITY
3. PRODUCTDESIGN
4. OBJECTIVES
5. OPERATIONS
7. INVENTORY
22
Carbon Footprint in Supply Chains
and Ways to address the same
What is Carbon Footprint?
Carbon footprint which results in global warming is a
subject that is being hotly discussed all over the world.
In fact, the countries of the world have got together un-
der Kyoto Protocol ( an international agreement linked
to the United Nations Framework Convention on Cli-
mate Change) to discuss this major issue and to commit
to corrective action. As of August 2011, 191 countries
have signed and ratified the protocol. Before understand-
ing what carbon footprint is, it is necessary to know the
meaning of Greenhouse gases. (GHG)
Greenhouse gases include the many heat-trapping trace
gases that reside in the earths atmosphere. Two common
greenhouse gases are water vapour and carbon dioxide.
Methane, ozone (03), CFCs, and nitrogen oxides are some
others. These gases absorb infrared radiation and help
regulate the planets climate. This regulation is called the
greenhouse effect.
While we actually need the gr e e nhous e
effect to survive on planet earth, ex-
cessive GHG become h a r m f u l ,
resulting in global warming or
climate change. Cur- rently, the
world has excess of Greenhouse
Gases. Activities such as burn-
ing coal and oil, driving cars
with gasoline, raising livestock
and other human- based activities
create greenhouse gases. Natural calamities
like volcanoes also result in greenhouse gas-
es, but human activity results in the largest
amount of greenhouse gases.
Carbon Footprint refers to the amount
of greenhouse gases produced in
our day-to-day lives through burning
fossil fuels for electricity, heating and
transportation etc. A carbon footprint is a
measure of the impact our activities have on the
environment, and in particular climate change. Just as we
leave footprints when we walk on sand or mud or with
wet feet, our activities leave carbon footprints. Thus the
carbon footprint is a measurement of all greenhouse gas-
es we individually produce and has units of tonnes (or kg)
of carbon dioxide equivalent. There are different methods
of calculating the emissions for different activities. The
measurement techniques are outside the purview of this
article but a few examples are mentioned as below.
A 2.5 tonne AC emits 3 Kgs of CO2 in an hour. A geyser
generates 3.3Kgs of carbon per hour. A car that gives a
mileage of 10 kilometres per litre of petrol leaves 232
grams of CO2 per km.
Between 1991 and 2005, CO2 emission has gone up by
25% worldwide. It is expected to increase at a faster rate
if actions are not taken to reduce carbon emissions.
Effects of Global Warming
Recent studies have shown that unimaginable catastrophic
changes in the environment will take place if the global tem-
peratures increase by more than 2 C (3.6 F). A warming of
2 C (3.6 F) corresponds to a carbon dioxide (CO2) concen-
tration of about 450 ppm (parts per million) in the atmos-
phere.
As of beginning of 2007, the CO2 concentration is already at
380 ppm and it rises at an average of 2 - 3 ppm each year,
so that the critical value will be reached in
approxi - mately 25 to 30 years from now.
The increase in temperature will
lead to significant disruption in
a g r i c u l - ture, like food availability
l e a d i n g to increased food prices.
There will be increase in heat related
di seases, like malaria, heatstroke
etc. Storms and hurricanes like Kat-
rina may become more frequent. Wild
life species will either become extinct or will be
close to extinction. If the carbon levels keep
increasing at the present rate, by middle of this
century, a quar- ter of our existing species
will be non- existent. This will have a lot of
damaging effects, because of the reduced
bio activity. For e.g. some pests which are con-
trolled by such species will roam more freely
and will significantly reduce food available to
human beings.
Another issue is the rise in sea levels. In the 20th century,
the worldwide average temperature climbed 0.6 degrees Cel-
sius. In 2001, the IPCC (Intergovernmental Panel on Climate
Change) reported that the worlds average temperature will
increase by between 1.4 and 5.8 degrees Celsius by end of
this century As these rising temperatures melt ice, especially
in Greenland and Antarctica, and create thermal expansion,
sea levels will rise by 20 inches to three feet higher by the
end of the century than they are today. 70% of human activi-
ties in the world happen by the side of sea and a rise in sea
level will erase a significant portion of our civilized world.
In Australia, over 700,000 buildings have been estimated as
being at risk of the effects of rising sea levels. There will be
mass migration of population from the coastal areas to the
interior and Governments will be hard pressed to handle
such a migration.
How to reduce Carbon Footprint in Supply Chain?
In a supply chain, carbon footprints exist at every stage,
starting from the supplier and downstream up to the cus-
tomer. Even when the customer uses the products, he cre-
ates carbon footprint. There are various ways by which an
organization can reduce carbon footprint in supply chain.
Even a small job like replacing a tube light with CFL will
help. Avoiding photocopies or taking printouts on both sides
of the paper will contribute their own small bits to reduced
carbon footprints.
1. AVOID WASTE
One most important factor is avoidance of waste. A waste
means that the item has to be produced again, which re-
sults in unwanted CO2 emission.
Author
Prof. K.L. Bhaskaran CFPIM, CSCP, CTL,CPM
Adjunct Faculty, IIM Kozhikode
23
It is essential that companies control their quality and
inventories closely to ensure that wastage is avoided.
2. MAINTAIN YOUR MACHINES
Another aspect is proper machine maintenance. A ma-
chine that is not maintained properly tends to contrib-
ute more CO2 than a well maintained machine.
3. REDUCE USE OF ENERGY
One method of reducing carbon footprint is to analyse
the use of energy and reduce the same. This should
start at the stage of product design itself. For exist-
ing products, companies should analyse various ways
of reducing use of energy and other resources used in
manufacturing.
4. USE RENEWABLE ENERGY
Companies should try their best to use renewable en-
ergy rather than fossil fuels.
5. RESUE/RECYCLE
The companies should try to reuse/ recycle materials.
Products should be designed so that the components
and packaging materials can be more easily separated
for reuse/ recycle. A well planned end of product life
cycle design should take into account potential for re-
use at its best and recycle at its worst. Recycling con-
sumes far less energy and thus emits less CO2 as com-
pared to fresh manufacture. Countries like Germany
require that the domestic brewers should use refillable
bottles.
6. ACHIEVE COMPONENT COMMONALITY
The product design should also aim to reduce the va-
rieties of components among different product groups,
so that longer production runs can be made to reduce
energy consumption. Also, if a product becomes obso-
lete, the components can be used in other products,
without the need to produce new components.
7. PLANT TREES
Tress should be planted wherever possible, as they ab-
sorb CO2. An I.T. Company in its tech park in Bangalore
has planted plants and preserved the old trees which
absorb atmospheric carbon dioxide, leading to the car-
bon sequestration and reduced emissions. The compa-
ny is positive in carbon foot prints and has become an
environment-friendly company
8. REVIEW LOGISTICS
One area in Supply Chain where Carbon Footprint plays
a major role is in Logistics. Every mode of transporta-
tion emits CO2. In India, with road conditions being
what they are, there is excess fuel consumption than
what it should be and as such, excess CO2 is released
into the atmosphere.
While developed countries follow B-O-O-T or B-O-T
business model, we seem to follow the business mod-
el of B-N-R, namely, Build, Neglect and Rebuild. Poor
roads in India cost the Government Rs.35, 000 crores
every year. Poor roads result in excess wear and tear of
the vehicle, excess fuel consumption, increased travel
time, all leading to increased CO2 emission.
Another aspect is proper Logistics planning by which
the Logistics department should always strive to load
the trucks fully rather than send less-than-truck loads.
This will save fuel and result in less carbon emission.
9. AVOID UNNECESSARY PACKING
Unnecessary additional packing should be avoided as
this will lead to increased weight and additional fuel
consumption. Also, the additional packing will need to
be manufactured which again results in carbon emis-
sion.
Conclusion
The increased carbon footprint in the environment
is a threat to our life and it is not a problem of only
Governments and industries. (Some Governments are
planning to bring in legislations for the same.) At the
end of it all, it is the individual who will be affected. It
is absolutely essential that the efforts to reduce carbon
footprint is ingrained in the minds of every individual
and organization. This is a war and the world has to
win, if humanity has to survive.
__________________________________
24
A Note on
Sustainable Supply Chain Management
Introduction
Sustainability or sustainable development is a
much-discussed and significant topic of today in
the light of increasing environmental degradation
(global warming, depletion of the ozone layer
etc.) and violation of human rights (Gladwin et
al., 1995). Sustainable development is defined
as the development that meets the needs of the
present generation without compromising the
ability of future generations to meet their own
needs (World Commission on Environment
and Development, 1987, also known as the
Brundtland Commission). Sustainability has three
dimensions: economic, social and environmental,
also known as the triple bottom line or 3BL, as
shown in Figure 1.
While economic viability is necessary for an
organization to survive, it is not sufficient to
sustain the organization in the long run if it
causes irreversible damages to the ecosystem
by emitting greenhouse gases (GHG) and toxic
wastes and depleting non-renewable resources
or it fails to ensure safety, security, dignity,
healthcare, minimum wage, indiscrimination and
better working conditions for its employees, the
community and the society in general. Therefore,
it has become imperative for any organization
to behave in a socially and environmentally
responsible manner while trying to achieve its
economic goals.
Evolution of Sustainable Supply Chain
Management
Although supply chain management has been
widely studied since the last two decades, the
discussion on sustainability in the supply chain
literature has gained momentum since the early
2000s.
Author
Prof. Subrata Mitra
Operations Management Group
Indian Institute of Management Calcutta
25
Figure 2 traces the evolution of supply chain management
(SCM) through the last four decades.
The evolution of SCM can be traced back to distribution
management in the 1970s where there was no coordination
among the various functions of an organization, and each
was committed to attain its own goal. This myopic approach
transformed into integrated logistics management
in the 1980s that called for the integration of various
functions to achieve a system-wide objective. SCM, which
evolved in the 1990s due to increased competition and
globalization, further widens this scope by including the
suppliers and customers into the organizational fold, and
coordinating the flow of materials and information from
the procurement of raw materials to the consumption
of finished goods. The objectives of SCM are to eliminate
redundancies, and reduce cycle time and inventory so as to
provide better customer service at lower cost (Mitra and
Chatterjee, 2000). In the 2000s, it became imperative for a
company to not only incorporate suppliers and customers
into the supply chain, but also take into consideration the
interests of all the stakeholders including the community,
society, government, NGOs and other public interest
groups. The notion that besides fulfilling its economic
objectives, a supply chain has to behave in a socially and
environmentally responsive way gave birth to the concept
of sustainable supply chain management (SSCM).
SSCM in Relation to JIT, TQM and Lean
Manufacturing
SSCM is a natural extension of the earlier philosophies of JIT,
TQM and lean manufacturing, as argued by Corbett and Klassen
(2006). According to the authors, any system that minimizes
inefciencies is also more environmentally sustainable. Te
goal of TQM is zero defects while the goal of SSCM is zero
waste. Te statistical process control (SPC) tools for TQM are
also applicable to SSCM. TQM that integrates internal process
controls of suppliers, manufactures and customers, gives rise
to Total Quality Environmental Management (TQEM) when
other stakeholders and the natural environment are also taken
into consideration (See Figure 3).
Environmental and Social Dimensions in SSCM
In the context of supply chains, sustainability has been
referred to more in terms of conforming to environmental
norms and standards than meeting social expectations.
However, that does, in no way, mean that supply chains
are indifferent to their social responsibilities. The
agenda is gaining momentum in an increasing number
of global supply chains, and as a result, the International
Organization for Standardization (ISO) has initiated the
development of the ISO 26000 international standard
on social responsibility, following the well-known ISO
9000 and ISO 14000 standards on quality management
and environmental management systems, respectively
(Piplani et al., 2008). The role of environment comes more
often in the discussion on sustainable supply chains in
the context of environment-friendly product and process
design, supplier collaboration for green purchasing,
adoption of cleaner technologies, environmentally
safe storage and transportation of goods, and returns
management including disposal of end-of-life products
and product recovery for reuse and reselling on
secondary markets, leading to the evolution of phrases
such as reverse logistics, closed-loop supply chains
and green supply chains. Figure 4 represents a closed-
loop supply chain and the different product recovery
options based on the quality of returns and the degree
of disassembly
Implementation of SSCM Practices
In many developed countries in North America and
Europe, manufacturers are being held responsible
by law for collection, transportation and disposal or
recovery of their products and packaging after use since
areas earmarked for land-filling are gradually shrinking.
Even the awareness among the general public towards
environment-friendly products and processes has
substantially increased. There is a market for green
products, which is estimated to be in excess of USD 200
billion (Carter and Ellram, 1998). Since manufacturers
are now being held accountable for the entire life cycle
of their products, they should strive to design more eco-
friendly and easily recoverable products, and recover the
economic value as far as possible from returns. This would
not only help them achieve economic sustainability,
but also facilitate projecting their environmental
responsibility and building a green corporate image.
Incorporating SSCM practices into their organizations,
companies can realize first-mover, competitive
advantages that would be difficult for their competitors
to easily imitate. Also, they can explore new market
opportunities and lobby with the government to frame
laws and regulations to their advantage. For example,
BMWs initiative towards design-for-disassembly for
product take-back and recycling became a standard
for the German auto industry and gave BMW a definite
cost advantage over its competitors (Porter and van der
Linde, 1995; Shrivastava, 1995; Kleindorfer et al., 2005).
26
Further reviews and more on the implementation of SSCM
practices are available in Linton et al. (2007), Carter and
Rogers (2008), and Guide and van Wassenhove (2009).
Large MNCs such as Xerox, GE, GM, Volvo, HP, 3M and Dow
Chemical have made SSCM a part of their corporate mission.
3Ms Pollution Prevention Pays (3P) and Dow Chemicals
Waste Reduction Always Pays (WRAP) programmes have
saved the respective companies millions of dollars and
prevented thousands of tonnes of pollution over a number
of years. Du Pont invested in quality monitoring devices
to reduce production stoppages that not only lowered the
generation of scraps but also improved productivity. Tetrapak
innovated packaging technology to use recyclable materials
that conserves energy. Toshiba and Hitachi gained competitive
advantage by developing renewable acid-free batteries. Hitachi
redesigned its consumer products to reduce the disassembly
time (also the assembly time) for easy recovery and fast-
time-to-market. Toyotas hybrid petrol-electric car, Prius,
signifcantly reduced GHG emissions. Mazdas clean engine
using the rotary technology reduced carbon emissions. Tere
are many more examples of successful implementations of
SSCM practices in multinational corporations (Shrivastava,
1995).
Indian companies, especially the exporters, are also pressured
into implementing environmental standards by their
international clients. Automotive components manufacturers,
drugs and pharmaceuticals majors, and large buyers of textiles,
handicrafs, leather goods and food products in the USA and
Europe are now demanding environmentally responsive
behaviour from suppliers globally, including India (Mitra,
2004).
India is one of the top emitters of GHG, emitting about 1.5
billion tonnes of CO2 into the environment. India ranks
fourth in terms of total emissions and ffh in terms of per
capita emissions in the world (Source: http://www.worldbank.
org). In the event that India succumbs to the pressure from the
developed countries to agree to a mandatory cut in emissions
or it voluntarily sets a target for itself (e.g. 20% reduction in
emissions by 2020), there are signifcant implications for
Indian supply chains to reduce their carbon footprints in the
coming years. Although product take-back and recycling have
not caught up in India as much as in Europe due to a lack of
awareness and regulations, there are immense opportunities
for Indian corporations to participate in Clean Development
Mechanism (CDM) projects and earn carbon credits, which
can be traded on international climate exchanges. ITC Ltd., for
example, is currently involved in 8 CDM projects that will
significantly reduce the emission levels of ITCs different
divisions and enable it to earncarbon credits (Source:
Sustainability Report 2010, http://www.itcportal.com).
Therefore, it is imperative for both the policymakers and
the corporations that appropriate regulations are framed,
incentives are offered and awareness among the general
public is created to facilitate the widespread adoption
of SSCM practices that will not only fulfil the economic
objectives, but also address the environmental and social
dimensions of sustainability.
References
1. Carter, C. R. and L. M. Ellram (1998), Reverse
Logistics: A Review of the Literature and Framework for
Future Investigation, Journal of Business Logistics, Vol. 19,
No. 1, pp. 85-102.
2. Carter, C. R. and D. S. Rogers (2008), A Framework
of Sustainable Supply Chain Management: Moving
Toward New Teory, International Journal of Physical
Distribution & Logistics Management, Vol. 38, No. 5, pp.
360-387.
3. Corbett, C. J. and R. D. Klassen (2006),
Extending the Horizons: Environmental Excellence as
Key to Improving Operations, Manufacturing & Service
Operations Management, Vol. 8, No. 1, pp. 5-22.
4. Gladwin, T. N., J. J. Kennelly and T-S. Krause
(1995), Shifing Paradigms for Sustainable Development:
Implications for Management Teory and Research, Te
Academy of Management Review, Vol. 20, No. 4, pp. 874-
907.
5. Guide, Jr., V. D. R. and L. N. van Wassenhove
(2009), Te Evolution of Closed-Loop Supply Chain
Research, Operations Research, Vol. 57, No. 1, pp. 10-18.
6. Kleindorfer, P. R., K. Singhal and L. N.
van Wassenhove (2005), Sustainable Operations
Management, Production and Operations Management,
Vol. 14, No. 4, pp. 482-492.
7. Linton, J. D., R. Klassen and V. Jayaraman (2007),
Sustainable Supply Chains: An Introduction, Journal of
Operations Management, Vol. 25, pp. 1075-1082.
8. Mitra, S. (2004), Managing Environmental Issues
in Supply Chains, In: Sahay, B. S. (Ed.), Emerging Issues in
Supply Chain Management, Macmillan, pp. 60-68.
9. Mitra, S. and A. K. Chatterjee (2000), Managing
Relationships in Supply Chains of the 21st Century, In:
Seth, J. et al. (Eds.), Customer Relationship Management:
Emerging Concepts, Tools and Applications, Tata McGraw
Hill, pp. 336-345.
10. Piplani, R., N. Pujawan and S. Ray (2008),
Sustainable Supply Chain Management, International
Journal of Production Economics, Vol. 111, pp. 193-194.
11. Porter, M. E. and C. van der Linde (1995), Green
and Competitive: Ending the Stalemate, Harvard Business
Review, Vol. 73, pp. 120-133.
12. Shrivastava, P. (1995), Te Role of Corporations
in Achieving Ecological Sustainability, Te Academy of
Management Review, Vol. 20, No. 4, pp. 936-960.
13. Tierry, M., M. Salomon, J. van Nunen and L.
N. van Wassenhove (1995), Strategic Issues in product
Recovery Management, California Management Review,
Vol. 37, No. 2, pp. 114-128.
14. World Commission on Environment and
Development (1987), Our Common Future, Oxford
University Press, Oxford, England.
___________________________
SUSTAINABILITY
STUDENT OPINION
OP S WOR L D S US TAI NAB I L I T Y S T UDE NT OP I NI ON
28
Industrial Ecology
Improving Operations Management
Definitions
Sustainability can be defined as development that meets
the needs of the present without compromising the ability of
future generations to meet their own needs.
i
As operations management is concerned with systems
that handle the delivery of a firms principal product or
service, the concept of sustainable operations management
projects the belief that it is possible to conduct efficient and
successful operations management while also addressing the
organizations impact on the environment.
Within successful adoption of such policy, all elements of an
organizations systems including procurement, operation
and delivery are impacted by
the need to conserve and
protect our environment.
As long ago as 1976, the
authors CJ Constable and
CC New projected that 80%
of an organizations capital
investment will be within the operations area. In a typical
industrial application, the majority of employees are retained
within the operating arena.
Sustainable operations management is not just concerned
with the ubiquitous supply-chain and the process of
introduction of raw material through completion and
delivery, but must also address the wider issue of design and
development, byproduct and waste disposal. An enterprise
should conduct a comprehensive life cycle analysis to ensure
that its sustainability efforts are as inclusive as possible.
As such, because all organizations must now be concerned
with and must proactively reduce their carbon footprint,
sustainable practices must be developed not just throughout
their business, but specifically targeted to operations.
ii

The Triple Bottom-Line
In the past, the traditional models had taken only economic
development as the driving force for a firm. With the advent
of sustainability, the bottom-line has extended itself into
three congruent goals
Economic goals
Social goals
Environment
The concept of TBL demands that a companys responsibility
lies with stakeholders rather than shareholders. In this case,
stakeholders refers to anyone who is influenced, either
directly or indirectly, by the actions of the firm. According to
the stakeholder theory, the business entity should be used as
a vehicle for coordinating stakeholder interests, instead of
maximizing shareholder (owner) profit.
iii

Theoretical discussions of sustainability tend to cover
all three elements of the triple bottom line. Research,
however has focused mainly on the relationship between
social performance and operational performance, or the
relationship between environmental performance and
operational performance.
Sustainability is then well developed theoretically, but
robust and generalizable simultaneous examinations
of all three elements of the triple-bottom-line are
generally absent. This is especially true in the operations
management literature where almost all of the research
examines environmental issues while overlooking the
people / social component of sustainability.
iv

One of the highly talked about approach to create
a balance between operations management and
environmental issues is Industrial Ecology.
Industrial Ecology
Industrial Ecology aims at viewing the need of operation
management not in isolation from its surrounding
systems but in concert with them. One seeks to optimize
the total materials cycle from virgin material to finished
material to component to
product, to obsolete
product, and to ultimate
disposal. Factors to
be optimized include
resources, energy, and
capital.
v

In the words of Graedel and Allenby:
Industrial ecology is the means by which humanity
can deliberately and rationally approach and maintain
sustainability, given continued economic, cultural, and
technological evolution. The concept requires that an
industrial ecosystem be viewed not in isolation from
its surrounding system, but in concert with them. It is
a systems view in which one seeks to optimize the total
materials cycle from virgin material, to finished material,
to component, to product, to obsolete product, and to
ultimate disposal. Factors to be optimized are resources,
energy and capital
vi

Methods and Tools of Industrial Ecology
Industrial ecology offers a realm of methods and tools
to analyze environmental challenges at various levels
process, product, facility, national, and global and then
come up with responses to facilitate better understanding
and provide suitable remedies. We discuss some of the
important components in the industrial ecology toolbox
below:
Life Cycle Assessment
vii
A central tenet of industrial ecology is that of life-
cycle assessment (LCA). The essence of LCA is the
examination, identification, and evaluation of the
relevant environmental implications of a material,
process, product, or system across its life span from
creation to disposal or, preferably, to recreation in the
same or another useful form. The formal structure of
LCA contains three stages: goal and scope definition,
inventory analysis and impact analysis, each stage being
followed by interpretation of results (SETAC, 1993).
...Industrial ecology is the means by which
humanity can deliberately and rationally approach
and maintain sustainability, given continued economic,
economic, cultural, and technological evolution...
Author
Mr. Himanshu Joshi
Executive Post Graduate Program,
Indian Institute of Management Bangalore
29
The concept is illustrated in Figure as under:
First, the goal and scope of the LCA are defined. An inventory
analysis and an impact analysis are then performed. The
interpretation of results at each stage guides an analysis of
potential improvements (which may feedback to influence
any of the stages, so that the entire process is iterative).
There is perhaps no more critical step in beginning an
LCA evaluation than to define as precisely as possible the
evaluations scope: What materials, processes or products
are to be considered, and how broadly will alternatives
be defined? To optimize
utilization of resources in
an LCA exercise, the depth
of analysis should be keyed
to the degree of freedom
available to make meaningful choices among options, and to
the importance of the environmental or technological issues
leading to the evaluation.
Design for Environment
viii

Product design engineers are always faced with the
challenge of optimizing the multitude of attributes that
determine the success or failure of the product. The
paradigm for such design considerations is termed Design
for X (DfX), where X may be any of a number of attributes
such as assembly, compliance, disassembly, environment,
manufacturability, reliability, safety and serviceability.
Design for Environment (DfE) is the DfX-related focus of
industrial ecologists. The core theme of DfE philosophy is
that it should improve the environmentally related attributes
of a product while not comprising other design attributes
such as performance, reliability, aesthetics, maintainability,
cost, and time to market. DfE approaches systematically
evaluate environmental concerns during the product life
cycle stages of pre-manufacture, manufacture, delivery &
packaging, use, and end of life and accordingly set targets
for continual improvements. The choice of materials during
pre-manufacture and their efficiency of utilization during
product manufacture, energy use during manufacturing
and product use, environmentally friendly disposal or
reincarnation of products at end of life are some of prime
considerations in DfE. DfE is also a win-win proposition
in that it provides a corporation with a competitive
edge in an ever-tightening regulatory environment thus
providing ongoing product innovation.
Industrial Symbiosis
ix

The industrial ecologist views the economy as a
closed system, similar to a natural system, in which
the residues from one system are the nutrients for
another. The concept known as industrial symbiosis is
a current topic of research for industrial ecologists and
environmentalists in identifying strategies to enable
businesses to `close the loop. The objective is to create
or encourage the formation of industrial production
systems that function similarly similar to biological
food chains. In either natural or industrial systems,
symbiosis occurs when two or more organisms form
an intimate association, either for the benefit of one of
them (parasitic symbiosis) or for both or all of them
(mutualistic symbiosis) such that there is high degree
of synergy between input and output flows of resources.
Industrial symbiosis may occur opportunistically or can
be planned. Planned industrial symbiosis appears to
offer the promise of developing industrial ecosystems
that are far superior environmentally to unplanned ones.
Such a system would need to involve a broad sectorial
and spatial distribution of participants, and be flexible
and innovative. The formation of ecologically balanced
industrial systems results in numerous environmental
and economic benefits. Economic benefits, which are
shared by participating businesses, governments,
and communities, are the primary driving force for
setting up such industrial
c o n f i g u r a t i o n s .
Entrepreneurs can
gain appreciable cost
savings from reduced
waste management, reduced infrastructure costs, and
improved process and product efficiency. There are
opportunities for other cooperative ventures such as joint
purchasing, combined waste recovery and treatment,
employee training, environmental monitoring, and
disaster response. The tangible environmental benefits
include the reduction of greenhouse gas emissions and
toxic air emissions, improving efficiency and conservation
in the use of energy, materials and water, improving
land use planning and green space development within
the industrial complexes, and promotion of pollution
prevention and recycling approaches.
Transforming the concepts into Framework

The above mentioned concepts can be formulated into a
framework as under:
Application
Applying the above mentioned tools in a real life
operations management scenario changes the supply
chain as per the following diagrams.
x
Please note that the
supply chain ended at Ship Landfill in the traditional
approaches. It has been extended to include the disposal
and reusability of the various parts from the products
that came back to the company as:
Commercial Returns
Warranty Returns
End of Use Returns
...Industrial symbiosis may occur opportunistically
or can be planned....
30
31
References
i
Sustainable Operations by Mark Pagell, Stephen A.
Dobson & Iuri Gavronski (http://www.scholarpedia.
org/article/Sustainable_Operations#WCED_1987)
ii
Sustainable Operations Management by Verisae
(http://www.verisae.com/page/1/sustainable-op-
erations-management.jsp)
iii
Wikipedia Triple Bottom Line (http://
en.wikipedia.org/wiki/Triple_bottom_line)
iv
Sustainable Operations by Mark Pagell, Stephen A.
Dobson & Iuri Gavronski (http://www.scholarpedia.
org/article/Sustainable_Operations#WCED_1987)
v
Teaching Sustainable Operations Management at
BGI and PWC by Dwight Collins (http://nbis.org/
nbisresources/operations_product_service_man-
agement/teaching_sustainable_operations_man-
agement%20_dwight_collins.pdf)
vi
Graedel and Allenby, 2002
vii
Industrial Ecology Amit Kapur and Thomas E
Graedel
viii
Industrial Ecology Amit Kapur and Thomas E Graedel
ix
Industrial Ecology Amit Kapur and Thomas E Graedel
x
Teaching Sustainable Operations Management at BGI and
PWC by Dwight Collins (http://nbis.org/nbisresources/op-
erations_product_service_management/teaching_sustain-
able_operations_management%20_dwight_collins.pdf)
________________________________________
32
Inventory Management of
E-waste Processing Plants in India
1. Introduction
Electronic waste or E-waste is a generic term used for
electronic products after the end of their useful life, once
they are no longer desired (end-of-use) or can no longer
be used (end-of-life) by their user. In a
recent report by Toxics Link (2011),
the global e-waste market
is forecast to reach 53
million tonnes by 2012
increasing at 6% every
year. The exponential
growth of electronic
products and its rapid
rate of obsolescence have
resulted in significant
amount of e-waste piling
up in India (UNEP 2007).
E-waste management
in India is dominated
by the unorganized
sector. Their practices
negatively impact the
environment and health.
E-waste is typically composed
of materials that are 1) toxic
for health and environment when
processed in uncontrolled conditions or
left untreated 2) valuable based on whether the material is
precious, non-renewable resource etc. Thus, closing the loop
of e-waste has an economic and environmental dimension. The
economic dimension attracts private firms to set-up
e-waste processing plants (EPPs) with government
approval. India has about 40 EPPs registered with
the government. Government of India has drafted
E-waste Management and Handling Rules 2011 that
makes manufacturers responsible for managing
their electronic products after it is discarded by
consumers. The legislation would come into effect
from May 2012. This has resulted in more EPPs being
set up with government approval, expecting that
manufacturers would outsource this requirement.
The EPPs are stand-alone plants that process
only e-waste. There is growing interest of venture
capitalists in this sector. The market for authorized
EPPs is anticipated to grow at a compounded annual
growth rate of 24 % and touch Rs. 1,500 million by
2013 (Frost & Sullivan 2009).
Stand-alone plants that process end-of-use (EOU) and
end-of-life (EOL) products faces unique challenges
that are not extensively studied (Gunter et. al.
2003). This paper focuses on stand-alone plants that
process only EOU and EOL electronic products or
e-waste. The paper explores unique characteristics
of EPPs inventory that necessitate studies exclusive
to such inventories.
2. Product recovery system
The product recovery system of EPPs is illustrated
in Exhibit 1. This is a conceptual framework and
highlights the key phases.
Phase 1
EOU electronic products or e-waste is procured
from:
a) foreign market through legal imports
b) domestic market that includes
end consumers like firms and households
producers who outsource e-waste processing
scrap dealers
Author
Mr. T S Krishnan
FP in Production and Operations Management,
Indian Institute of Management Bangalore
33
Phase 2
Though various processing operations are employed we
simplify them to the following: recovering components,
recovering materials and disposal. Typically EPPs are
involved in repair and refurbishments (component
recovery), recycling (material recovery) and disposal.
They may not have the technical know-how to
remanufacture EOU products of various brands to the
desired standards.
Phase 3
Recovered components are sold to dealers in the
secondary market and manufacturers. Recovered
materials are used by manufacturers to produce new
products. The remaining components and materials
that cannot be sold are disposed of safely.
An example of a used computer entering the EPP would
help understanding the product recovery system
(Toxics Link 2003). EPP receives EOU computers from
firms. The computer has
various components like
Cathode Ray Tube (CRT),
circuit board, Poly Vinyl
Chloride (PVC) wire,
hard disk, capacitor etc. If
the components are intact and functional or can be made
functional with minor repair and refurbishments it is
sold. Ex: a functional CRT is regunned (a refurbishing
operation) and used for manufacture of televisions
and computers for local brands. If components are not
functional or cannot be made functional, materials are
recovered. Ex: Aluminium, gold and copper recovered
from capacitor, circuit board and PVC wire respectively.
The operations done by EPPs in India vary from one
to another. One EPP, Ash Recyclers, focuses only on
refurbishing. Another EPP, E-Parisara, focuses on
component and material recovery. Many EPPs sell
the recovered components to smeltors, outside the
country, for precious metal recovery.
3. Inventory management issues
Inventory issues that are unique to EPPs are discussed
under different headings below.
a) Types of inventories
A natural categorization of inventories (based on
value added in each processing stage) in the context of
e-waste processing is:
1. E-waste inventory in Phase 1
2. WIP (Work-in-process) inventory in Phase 2 during
processing operations
3. Recovered components inventory in Phase 3
4. Recovered materials inventory in Phase 3
5. Components and materials for disposal in Phase 3
It is interesting to observe that in the context of
manufacturing, this order is reversed starting from raw
materials to the final product
b) Inventory holding motivation and characteristics
1. Uncertainties in e-waste supplies
EPPs have to hold e-waste inventories to ensure continuity
of processing operations. One interesting characteristic is
that the EPPs cannot order for a specific quantity and type
of e-waste. The uncertainties could be summarized as:
when would e-waste be supplied ?
what quantity would be supplied ?
what type of e-waste (computers, televisions etc.) would
be supplied ?
If a large information technology firm sells its computer
and peripheral scrap, it would take 3 to 5 years for
the firm to sell another fresh scrap. Thus the supply of
e-waste in general is lumpy. EPPs cannot afford to lose a
bargain saying it cannot accept a particular quantity. The
uncertainties are reduced by signing long term contracts
with firms.
2. Uncertainties in rare earth supplies
This could be better understood through an example.
China accounts for 97% of
the worlds supply of rare
earth; materials that play
an essential role in many
electronic products. China
has shown itself willing to exploit that monopoly to the
fullest during political disputes. On many occasions they
have restricted rare earth exports to other countries like
Japan and America by violating international trade laws.
The world needs to develop non-Chinese sources of these
materials (Krugman 2010). A prominent alternative would
be to recover materials and components from e-waste.
Holding such inventories would help EPPs play a strategic
role in the high-tech supply chain.
3. Speculation
If the value of natural resources like aluminium, gold etc. is
expected to increase, holding inventories of that resource
or material may be more economical than selling it at
current prices. This is the motivation for holding recovered
materials.
4. Obsolescence
An interesting characteristic is that the rate of obsolescence
in the electronics industry impacts the inventory of
recovered components. Such components are disposed
or material is recovered from the components. Even if a
component becomes outdated and no more used in the
original product, its material can be used for manufacturing
other products. Government regulations would also impact
the use of some materials. Ex: minimizing or eliminating
the use of conflict minerals like coltan, a mineral used
in capacitors, from the high-tech supply chain (Nathan
and Sarkar 2010). Though obsolescence and government
regulations also impact inventory management in a typical
manufacturing context, the focus is on the input side i.e.
phase 1. For EPPs the focus is on the output side i.e. phase
3. If the rate of obsolescence for a component is very high,
the recycler may dispose it or recover material (depending
on profitability) rather than repairing/ refurbishing it.
...an interesting characteristic is that the rate of
obsolescence in the electronics industry impacts the
inventory of recovered components...
34
c) Relevant inventory costs
1. Holding costs
For EPPs, holding costs have to be considered for
finished products too i.e. recovered components,
recovered materials, and disposal items. The holding
costs of finished products is more important than
e-waste inventory holding costs. High uncertainties
in e-waste supplies necessitates excessive holding
of e-waste inventory. Volatility in prices of materials
like gold impact the holding costs as c changes every
week/month. EPPs would be willing to incur high
holding costs of recovered materials by delaying
the selling if higher profit could be made. Holding
costs are a function of type of inventory and market
speculation.
2. Ordering costs/ Procurement costs
Procurement costs would vary depending on the
mode of procurement.
E-waste could be
delivered to the plant
by the source (firms,
households or scrap
dealers). EPPs could pick up e-waste from a pick-up
point or the source. As discussed earlier, EPPs cannot
order a particular quantity of e-waste. Hence the term
ordering cost need not be used. They procure e-waste
reactively (responding to tenders, auctions floated by
firms) and proactively (signing long term contracts
with firms, partnering with NGOs). EPPs can afford
to incur high e-waste procurement and holding costs
if the processing operations are cost efficient and
recovered products inventory are smartly managed.
d) Key questions
Unique inventory management issues of EPPs were
discussed under different headings. The key questions
to be answered to manage inventories efficiently are:
How to tide over uncertainties in e-waste
procurement?
Can quantity and type of e-waste supplies
be predicted with reasonable accuracy to reduce
e-waste inventory costs and utilize resources better?
What should be the optimal inventory size of
recovered components/ materials to earn maximum
profit?
When to liquidate recovered components/ materials
inventory to earn maximum profit?
The answers to these questions are a function of the
relevant costs and characteristics (uncertainties,
speculation and obsolescence) that are specific to
EPPs.
4. Conclusion
Improving the operational efficiency of EPPs would
ensure its economic survival and provide benefit to
the environment by reducing the e-waste disposal
levels. Inventory management is one of the important
measures to improve operational efficiency. This study
highlights the unique issues faced by EPPs in managing
their inventory. These issues need to be substantiated
by a complete literature review coupled with field
studies. This could be followed by building a model that
reasonably explains the inventory management issues.
Models would help in analyzing what-if scenarios. Such
studies would serve as a welcome addition to the scant
existing literature on operations management of EPPs.
5. References
1) Frost & Sullivan, Study on the Indian Waste
Management Services Market, March 2009.
2) Gunter K, Bee D, Sutherland J, Inventory
Management in Demanufacturing Facilities, Proceedings
of the Colloquium on e-Ecological Manufacturing, Berlin,
Germany, March 2003.
3) Krugman P, Rare and foolish, The New York Times,
October 2010.
4) Nathan D, Sarkar S,
Blood on Your Mobile?,
Economic & Political
Weekly, 2010, Vol. 45, No.
43, 22-24.
5) UNEP, E-waste: Volume-1 Inventory Assessment
Manual, 2007.
6) Toxics Link, Scrapping the high-tech myth:
computer waste in India, 2003.
7) Toxics Link, Waste Electrical and Electronic
Equipment- The EU and India: sharing best practices,
2011.
_________________________________
...improving the operational efficiency of EPPs
would ensure its economic survival and provide benefit to
the environment by reducing the e-waste disposal levels..
35
Life Cycle Assessment:
the Future of Sustainable Operations Management
D
uring the past three decades, there has been
an increasing pressure on the businesses to
pay attention to the environmental and social
consequences of their products and services. As a result
of this, the corporates have moved towards the concept
of triple bottom line, whereby they imbibe the three
dimensions profit, people and planet in their business
decisions. With the concept of people and planet coming
in, sustainability has now become the buzz word in the
corporates around the world. With the evolving need of
the businesses to analyse the impact of their operations
on the environment they interact with, new methods
and concepts have evolved over time. One of them is Life
Cycle Assessment (LCA).
History of LCA:
LCA had its beginnings in the 1960s. Concerns regarding
the limited supply of raw materials and sources of energy,
sparked interest in exploring ways to account for energy
usage cumulatively and projecting the future supply and
use of resources.
In 1969 an internal study was initiated at the Coca Cola
Company which laid the foundation of the current Life
Cycle Inventory Analysis in the United States.
LCA the next big thing:
Unlike the conventional methods, where the impact of
a particular operational activity on some dimension of
the environment is quantified, LCA helps in bringing
out a more holistic view of the operational activities as
a whole. The perspective on which the concept of LCA is
based, is that all the processes are interdependent i.e. the
effects are transferred from one sub-system to another
in a large system.
LCA is a cradle-to-grave approach for gauging industrial
structures. Cradle-to-grave begins with the gathering of
raw materials from the earth to manufacture and process
the products and ends at the point when all materials are
returned back to the earth.
LCA helps the industries and businesses to assess
the impact of their activities on the environment.
Incorporating LCA based operations helps the companies,
federal facilities, industrial organisations and academia
to understand and evaluate their environmental
performance, thereby assisting them in their decision
making process.
How does LCA help?
While deciding between two or more available
alternatives, LCA helps the decision makers compare
all the major environmental impacts caused by the
products, processes or services.
The transfer of environmental impacts from one media
to another and from one life cycle stage to another is
identified in the process. This information coupled
with other factors such as cost, performance and
feasibility helps the decision makers select a process
or product. This is done with the help of Life cycle
management.
Life Cycle Management (LCM):
Since, LCA does not determine the most cost effective
or most efficient process all by itself. The information
developed in an LCA study needs to be used as one
important component of a more comprehensive
decision process assessing the trade-offs with cost and
performance, e.g., Life Cycle Management.
LCM is the application of life cycle thinking to
modern business practice, with the aim to manage
the total life cycle of an organizations products and
services towards more sustainable consumption
and production. LCM is about systematic integration
product sustainability e.g. in company strategy and
planning, product design and development, purchasing
decisions and communication programs. (Jensen and
Remmen 2004)
[1]
Phases of an LCA:
The framework of Life Cycle Assessment has been
shown below:
Fig. 1 - Phases of an LCA
Source: ISO 1997
Author
Shubhi Bansal
PGP 2011-13,
Indian Institute of Management Shillong
36
Fig. 2 Life Cycle of a product and closing the loop
Source: Background Report for a UNEP Guide to Life Cycle Management, Feb 2006
The four phases involved in conducting an LCA have been
described below
1. Goal and Scope definition In this step the product,
process or activity is defined and described. The context
in which the assessment is to be made and the boundaries,
within which the analysis needs to be performed, are
identified. That is, the
scope of study is
defined - whether one/
all of the stages (raw
material acquisition,
manufacturing, use/
reuse/maintenance, re-
cycle/ waste management) should be included in the study
or not. Also, the environmental effects to be reviewed for
the assessment are recognized. In totality, this step helps to
determine the time and resources needed for the process.
2. Inventory Analysis This step identifies and quantifies
energy, water and materials usage and environmental
releases (e.g., air emissions, solid waste disposal, waste
water discharges) in the process, within the boundaries
defined in the first step. In the Life Cycle Inventory (LCI)
phase of an LCA, all the data that is relevant is collected
and structured. LCI provides the basis for evaluating the
comparative impact on the environment and potential
improvements.
The four steps in this process include:
-Developing a flow diagram of the processes being
evaluated
-Developing a data collection plan
-Collecting data
-Evaluating and reporting results
3. Impact Assessment
This step considers
the potential human
and ecological effects
of energy, water, and
material usage and the
environmental releases
identified in the inventory analysis. For example, what
are the impacts of 10,000 tons of carbon dioxide or
6,000 tons of methane emissions? Which one of these
impacts more? What are their prospective effects on
smog? On global warming? Etc.
An important distinction which exists between life cycle
impact assessment (LCIA) and other types of impact
analysis is that, LCIA does not necessarily attempt to
quantify any specific actual impacts associated with a
product, process, or activity.
For example, risk assessments are often very narrowly
focused on a single chemical/effluent at a very specific
location or for a very specific process.
...an important distinction which exists
between life cycle impact assessment (LCIA) and other
types of impact analysis is that, LCIA does not necessarily
attempt to quantify any specific actual impacts associated
with a product, process, or activity...
37
In the case of a traditional risk assessment, it is possible to
conduct very detailed modelling of the predicted impacts
of the chemical on the population exposed and even to
predict the probability of the population being affected.
In the case of LCIA, hundreds of chemical emissions (and
resource stressors) which are occurring at various locations
are evaluated for their potential impacts in multiple impact
categories, thus giving an inclusive picture of the situation.
4. Improvement Analysis/ Interpretation In the final
step, information from the results of the LCI and LCIA are
systematically identified, quantified, checked and evaluated
to communicate it effectively for decision making. A clear
understanding of the uncertainty and the assumptions used
to generate the results is involved in the process.
Application:
To understand how LCA can be applied to a system let
us consider a hypothetical soap bar system. Tallow is the
major raw material for soap production, and its primary
raw material source is the grain fed to cattle. Production of
paper for packaging soap may also be included. The fate of
both the soap and its packaging mark the end of the life cycle
of this system. Minor inputs could include, for example, the
energy required to fabricate the tires on the combine used
to plant and harvest the grain.
In the bar soap example, one possible usage unit could
be a single bar. However, if the product packaging were
being analysed at the same time different SKUs need to be
considered.
Now, if the LCA were intended to examine whether bar
soap should be manufactured using an animal-derived
or vegetable-derived raw material source, the system
boundaries and units of analysis would be more complicated.
Suppose it is required to compare bar soap made from tallow
with a liquid hand soap made from synthetic ingredients.
Because the two products have different raw material
sources (cattle and petroleum), the analysis should begin
with the raw materials acquisition step. Because the two
products are packaged differently and may have different
chemical formulas, the steps of material manufacture and
that of packaging would need to be included. If the usage
patterns of both the products differ, then the consumers
use & waste management needs are to be looked into. Thus
for this comparative analysis, the analyst would have to
inventory the entire life cycle of the two products.
Here, one of the soaps is solid and the other is liquid, each
with different densities and cleansing abilities per unit
amount. It would not make sense to compare them based
on equal weights or volumes. Thus, an acceptable basis
for comparison might be equal numbers of hand washings.
Because these two products may be used at different rates, it
would be important to find data that give an equivalent use
ratio. For example, x amount of bar soap and 2x amount of
liquid soap are used per hand-washing. Thus, the equivalent
use ratio is 1:2 which would be used for the comparative
analysis.
Because the two soap product types are packaged in different
quantities and materials, the analyst would therefore, need
to include packaging in the system. Contributions of extra
ingredients, such as perfumes, moisturizers etc. might
also be considered. Moreover, if market studies indicate
that consumers purchase the product in preference to an
identical product without a moisturizer, or if they
subsequently use a moisturizing lotion after using a
non-moisturizing soap, then equivalent use would
entail including the separate moisturizing lotion.
Conclusion:
Thus, it is clear that application of LCA study helps
the manager(s) realise the implications of their
operations in a comprehensive manner. However,
since performing an LCA study requires defining the
boundaries of the system as per the requirements
specific to the organisation, standards need to be set
in order to make use of the LCA application in a more
widespread manner. Suppose, two companies A and B
produce a competitive product say, paper. It is possible
that the operations at Company A are better and less
damaging to the environment than that of Company B,
but Company B may be able to report better numbers
in terms of its impact on the environment as compared
to company A, because it may not have included certain
sub-systems in the analysis, which A had included.
Therefore, it is required that regulatory measures be
taken by the government in terms of LCA studies to
enable the industries apply the concept effectively and
achieve Sustainable Operations Management.
References:
1. http://www.unep.fr/shared/publications/
cdrom/DTIx0889xPA/UNEP%20SETAC%20Life%20
Cycle%20Initiative/Other%20publications/UNEP_
Background_document_LCM_2006_Febr.pdf
2. http: //opi m. wharton. upenn. edu/ri sk/
downloads/06-04-PK.pdf
3. SAIC May 2006, Life Cycle Assessment:
Principles And Practice By Scientific Applications
International Corporation (SAIC) 11251 Roger Bacon
Drive Reston, VA 20190
__________________________________
38
Reverse Logistics of
Hazardous Automobile Waste
Abstract
Simply defined, Reverse Logistics is the
process of return from the consumer.
For example, when a customer
returns a recently bought damaged
shirt, reverse logistics processing
commence. Reverse logistics is
increasingly becoming an area of focus
owing to the tremendous volumes of
E-waste, used vehicles, batteries, etc
that are being generated, and which
need to be disposed/re-used properly
in order to contain the environmental
impact. This article looks at how
reverse logistics is applied in the
handling of two major hazardous
automobile wastes - Car Batteries and
Used Engine Oil, as well as understand
how certain commonalities between
the battery recycling and used oil re-
refining industries can be exploited
for sustainable and competitive
advantage.
What is Reverse Logistics?
A
s defined by Reverse Logistics magazine, Reverse Logistics or
Aftermarket Logistics or Retrogistics, or Aftermarket Supply
Chain is the process of planning, implementing, and controlling
the efficient, cost effective flow of raw
materials, in-process inventory,
finished goods and related
information from the point of
consumption to the point of origin
for the purpose of recapturing value
or proper disposal.
1
Simply defined,
this is basically a process of return of
goods from consumers.
The returned products can be
broadly classified into three
categories as displayed below
2
:
1. Manufacturing Returns: These
include any factory excess such as
raw materials as well as products /
components that may be defective. In
addition, they could be by-products of
current manufacturing process. E.g. Fly ash from burning coal.
2. Distribution Returns: These include products that
may have been outdated, defective, discontinued or
need to be replaced by newer versions.
3. Customer Returns: These include products that
may not meet customers demands, product defective
on delivery, products that need replacement, and
end-of-lease returns.
Typical steps that are followed in a reverse logistics
system are
3
:
1. Gatekeeping: This is the process of deciding
whether a product should be allowed into the reverse
logistics system. If a product is going to be thrown
away (non-recyclable or non-repairable) then it is
important to identify that early in the process, so as
to avoid incurring wasted costs for the entire supply
chain. Efficient gatekeeping can thus significantly
save costs incurred by the value chain.
2. Collection: This is the process of assembling
the products for the reverse logistics system.
The products can be collected in a centralized or
decentralized retail location.
3. Sortation: This process is where the best channel
for disposing the product is decided, so as to generate
maximum revenues. If the collection is centralized
then the system benefits from economies of scale. In
case of a decentralized collection system, the volumes
are much smaller, scattered and generate lower
revenues. Due to the low volumes in a decentralized
system, the recycling process may not have enough
scale to use the most advanced solutions.
4. Disposition: This is the final step where the
products are sent to their selected destinations. With
larger volumes in a centralized location, the seller
will have a higher bargaining power in the secondary
markets to command better prices.
In this paper, we focus on the return of the hazardous
wastes generated by the automobile industry,
specifically Batteries and Used Engine Oil.
Authors
Agnel Joseph & Alok Gangaramany,
EPGP, Indian Institute of Management Bangalore
39
Due to shortage of lead, recycling of used batteries
for recovery of lead is being undertaken by both the
organized and unorganized sectors of the country. The
diagram below depicts the reverse flow of battery scrap.
4

Consumers typically return the batteries at their
local workshops or dealers, or else recondition them
after a period of use. The replacement market can be
categorized into trade and non-trade segments. The non-
trade segment represents the Government departments
/ undertakings and institutional buyers, who generally
liaise with the organized smelters. The dealers/ service
centers have the option to sell the battery scrap to either
the trader which may be routed to the unorganized
smelters or the non-traders that route this scrap into
the organized market. The traders typically pay a higher
price and give better margins to the dealers as a result of
which the unorganized sector is much bigger (over 80%
approximately).
Car Battery Reverse Logistics Process
Major challenges facing the battery recycling industry
a) Collection and return of battery scrap is the
biggest challenge in the chain. The fragmented nature
of the recycling industry makes it difficult to complete
the reverse value chain in the process, something more
pronounced in non-major cities since the recycling
service providers are generally located closer to metros.
b) Automobile dealers prefer selling battery
scrap in the unorganized market due to higher trading
margins than those offered in the sustainable organized
markets.
c) Safety is a critical concern, especially in the
unorganized sector. The unsafe, rudimentary practices
of lead extraction and smelting leads to lead poisoning
which can affect vital organs, cause blood disorders and
are sometimes fatal.
Used oil is allegedly one of the major hazardous materials
in the world, including India. Used motor oil picks up
metals (including toxic metals), particulates, chemicals,
etcduring engine operation. These, along with the
special additives that are added to improve lube oil
performance, create greater environmental damage that
virgin crude. Disposal is a major concern facing industry
and society, with typical methods including pouring
onto the ground, dumping into trash and even pouring
directly into waterways, which can cause substantial
ecological damage.
But this need not be how the lifecycle of used oil ends.
The very property of lubricating oil that makes it a
pollutant its difficulty to be destroyed, can in fact be
effectively used to restore it for re-use. Once used oil is
uplifted from collection points such as service stations,
workshops, recycling depots and factory sites, it can be
transported to re-refineries where it would go through
the following steps :
1. Dehydration Heat the oil at 1200C to boil off
emulsified water and fuel diluents.
2. Diesel stripping Feed the dehydrated oil into a
Used Oil Re-refining Process
vacuum distillation plant for fractionation into lighter
fuel and diesel, followed by the lubricating oil and
finally non-distillable residues such as carbon, wear
metals, degraded additives etc.
3. Lube oil distillation and condensation Pass the
lubricating oil faction through an extraction tower to
remove all unwanted aromatic components and color.
Finally add any appropriate additives to reuse the
reclaimed oil.
Major challenges facing the Re-Refining Industry
a) Producing re-refined lube that is substantially
cheaper than that produced from virgin crude. The
price must match the customers willingness to pay,
given the perception of reduced quality of recycled
lube. Access to unadulterated, quality synthetic waste
oil substantially reduces the processing costs for the re-
refiners.
b) Sourcing of input used oil in the absence of
stronger governmental intervention to prevent the
illegal burning or combustion of used oil, as well as
difficulties in importing used oil.
40
Leveraging Commonalities in Reverse Logistics
Processes
Analysis of the battery recycling industry, its reverse
logistics processes and comparing against the used/
waste oil re-refining industry enables us to identify
commonalities and complementariness, which can be
exploited to benefit both these industries.
Fundamentally, a major source of inputs to both
these industries originates from the automobile
sector. Consequently, the projected growth of Indias
automobile industry will lead to substantial increases
in quantities of both disposed batteries and used oil.
Two of the important actors involved in the reverse
logistics chains of both these industries are also
common automobile service centers and end users of
vehicles, which helps in targeting efforts for collection
of waste battery & used oil, regulation/enforcement
by government authorities as well as conducting
informational/awareness campaigns.
Purely in terms of reverse logistics operations, it is
in the collection activity where firms can leverage
commonalities, since the subsequent recycling stages
are different in both industries.
A combined effort in the collection activities of used oil
and batteries will allow exploiting economies of scale
in activities such as establishing relationships with
the authorized and unauthorized service centers to
planning and periodic pick-up of batteries and used oil
from even the smallest/remotest service centers. Such a
consolidated effort in collection will help mitigate some
of the challenges faced by both these industries, such
as ensuring reliable supplies, overcoming costs of de-
fragmented collection, reducing unsafe units (through
increased competitiveness of organized players over
the unorganized) and ensuring quality of the raw
material. The used oil industry is especially reliant on
quality input waste oil, where the broader relationship
maintained by the collection providers with the service
centers will incentivize these centers not to adulterate
the oil, in order to prevent jeopardizing a long standing
relationship. A combined collection effort will also
incentivize 3
rd
party logistics providers to undertake
such services, given the economies of scale possible.
Finally, if the recycling units are co-located or near
located, firms can employ common end stage safe
disposal, where the scale can compensate for the use of
better, expensive technologies and techniques.
Way Forward
Several of the critical challenges faced by both Battery
Recycling and Used Oil Re-refining industries within the
organized sector can be addressed by having a sound
reverse logistics strategy. This strategy should include
regional strategies as well as consider involving third
party logistics providers, who can leverage economies of
scale (from multiple clients) as well as reduced shipping
costs. Moreover, by having regional level strategies, the
non-metro cities can also be handled using processes
similar to those used in the forward supply chains.
Apart from the collection issues, we also need to look at
the recycling plants.
It is crucial that these plants are established using
superior technologies that may be more expensive,
which in turn means they should be able to leverage
scale in order to be economically feasible. In order to
further improve the ecosystem of the organized units,
the government needs to play a more active role through
better regulations enforcement, providing start-up
subsidies and technology sharing. A centralized effort
is required to collect the data on the compliances of
the battery companies, service centers, dealers, etc
as well as the recycling units, with stricter imposition
of penalties for those who fail to meet the regulatory
requirements. It is after all in the interest of the society
to promote the fledgling organized battery recycling
and used oil re-refining industries that complete a
sustainable reverse logistics chain.
References
[1]http://www.rlmagazine.com/edition01p12.php
[2]http://www.autoidlabs.org.uk/presentations/
AKSupplyChainForum.pdf
[3]Going Backwards: Reverse Logistics Trends and
Practices, Rogers & Tibben-Lembke
[4]Adapted from Recent Indian Policy Initiatives in
Lead Battery Scrap Management and their Impact
on the domestic Demand-Supply Gap of Lead by Dr. V.
Rajagopalan
[5]The Re-refining of used lubricating oils, by J. Buckland
and G. Vincent
___________________________________
41
Supply Chains in Disaster Management
An Indian Perspective
D
isasters have affected the human civilization
for ages. Although there have been many
attempts to mitigate the destruction caused by
them, the number of casualties and loss of property
during disasters still remain a concern for many
developed and developing economies. Disasters
are not only a hindrance to the development of any
economy but they also leave trails of tragedy, both
mental and physical.
The economic impact of disaster is immense. It
disrupts the regular business activities in the region,
affects future investments by changing investors
mind-set and results in capital outflow as more and
more investors pull out their investments. Also huge
investment is required in restoring normalcy in the
region. Managing disasters efficiently and being
prepared for them are thus essential for any nation.
The basis of disaster management lies in mitigating
the disaster by training people, taking quick action
during the disaster and ensuring a fast recovery.
All these are part of different phases in a disaster
management plan which comprises of a Pre-disaster
phase, disaster phase and a post-disaster phase.
Each stage requires different kind of planning and
responsiveness.
Some of the supply chain decisions in disaster
management include-
Logistics how to reach the site
Required Manpower mobilizing and deploying
them at the disaster site
Flow of information communication of the
developments during the disaster
Evacuation plan how to evacuate the people in
less time
Supply of food and other resources
Priority Based Supply Chain Model
The proposed SCM model focuses on a distributed and
a highly integrated system to meet the requirements
of the preparedness, mitigation, response and
recovery phases. The model caters to various stages
of a supply chain i.e. planning, sourcing, storage/
processing and delivery in various disaster scenarios.
There is a gradient of the planning scope and horizon
(strategic to operational planning) while moving
from the planning to the delivery stage. At lower
level of planning, it includes the finer details and
adaptive measures branching out based upon the
type of disaster. The prioritisation of activities has
been done on the basis of a heat map based matrix.
The different colour codings signify various levels of
priorities attached with the respective tasks.
The priorities were established based on the literature review
and secondary research as to what local bodies consider high
priority while designing mitigation plans.
Supply Chain Functions:
Planning: Distributed supply chain model design with
location finalisation. Delivery planning with efficient inventory
management is a necessary ingredient.
Sourcing: There is need for establishing ties with multiple
vendors (facilitated via the IT backbone, discussed later).
Additionally, its involvement with the defence services will be
beneficial.
Storage/Processing: Warehouse network design in tandem
with the utilisation of the existing public framework e.g. FCI
warehouses, hospitals etc. fall in the ambit of this function.
Delivery: The focus must lie on the high utilisation of the available
network and infrastructure. Through increased information
points (kiosks, terminals etc.) in remote locations, the delivery of
information must be ensured.
Enablers:
In the background, the model draws heavily from five major
enablers, i.e.
Information Technology backbone: The IT backbone can be
administered as a web hosted multipoint entry portal for vendors,
victims, officials, logistics partners etc.
Human Resource Development: It is very important to build a
pool of quickly deployable disaster management force borrowing
from civilians, defence services, police, NGOs, NCC etc.
Knowledge and Skills development: Creation and periodic
updation of a diverse knowledge pool is important to feed the IT
backbone and the human resource development. E.g. - detailed
contact list of emergency service centres, vulnerability index,
hazard profiling.
Finance: Appropriate fund allocation from the government and
gathering fund in the form of aids, domestically and abroad. It
assumes greater importance in the recovery/rehabilitation phase.
The IT backbone must provide for easy donation procedures.
Procedural/Legal setup: The Disaster Management Act, 2005
has streamlined the organization of disaster management
at central government level and also delegated to the state
government level.
Authors
Abhishek Anand & Amit Mirchandani
PGP 2010 - 2012,
Indian Institute of Management Lucknow
42

Planning Sourcing
Storage /
Processing
Delivery
Pre-
Disaster
Distributed disaster
recovery cell location
planning
Delivery Planning
Categorization of
Essential & non-
essential goods
Setting up new facilities
Integrated warehousing
with IT backbone
Transport network
planning for quick
response
Optimized delivery
schedule
Vulnerability estimation
Disaster Profiling
Emergency rescue kits
Centralized IT
backbone
Ensuring high
availability of
information points
Disaster
Early warning system
and mobilisation
Evacuation plan
Strengthening media
outreach in remote
areas
Enhancing
Communication
network
Proper utilisation of
established networks
Post-
Disaster
Water & medical
facilities planning
Epidemic mitigation
Readiness planning of
Govt. depts. for food
(FCI)/ Water / Housing
Efficient management of
donations/aids received
Strengthening Public
distribution system
Leveraging the UIDAI
project
Exit Strategy when the
disaster relief operations
have to stop
Deployment of NGOs/
independent bodies for
awareness creation
Reconstruction and
rehabilitation
completion
Ensure fast delivery of
shelter and
rehabilitation

High Priority Medium Priority
Low Priority
E
n
a
b
l
e
r
s

Information
Technology
Human Resource
Development
Knowledge and
Skills
Finance Procedural/Legal
National portal &
information backbone
Vendor/Suppliers
Data
Logistics provider
data
Transportation
network data
Civilian Database
(UIDAI Project)
Training of trainers
(Preparedness Phase)
Training of people
Disaster Management
Teams at Panchayat,
Block, District levels
Planning the
availability of skilled
professionals for
deployment when
needed
Awareness
Campaigns
Early Warning
System
Manuals & Standard
Operating guidelines
Inputs from the
meteorological and
intelligence wings
(natural &
technological
disasters)
Monitoring of funds
Tracking of expenses
Domestic fund raising
Raising Foreign Aid
Financial Planning for
affected region ( In
Recovery phase)
Fund disbursement
process
Establishing proper
roles/responsibility,
jurisdiction &
hierarchy of
command
Legislations at
Central/State levels to
enable quick action
and financial
allocations

High Priority Medium Priority Low Priority
Fig.1 Priority based Supply Chain Model
43
India opportunities and challenges
India has been witness to many natural disasters
given its vast territory, large population and unique
geo-climatic conditions. Whereas the problem of mass
land movements continue to affect the hilly regions of
northern India, the escalation of terrorism and internal
separatist activities have compounded the damages due
to man-made disasters.
In terms of an integrated backbone to fight disasters,
India Disaster Resource Network has been incorporated.
IDRN is a nation-wide electronic inventory of resources
that enlists equipment and human resources, collated
from district, state and national level Government line
departments and agencies.
Conclusion
Effective disaster management is the key to the
development of any economy. The proposed priority
based model would come in handy while devising
strategies for an effective supply chain management
during a disaster. It calls for a unified and committed
effort from the Government as well as the community to
ensure that disasters dont leave behind trails of tragedy.
References
Cavallo E., and I. Noy. 2009. The Economics of
Natural Disasters: A Survey. IDB Working Paper
124. Washington, DC, United States: Inter-American
Development Bank
Cavallo E., Powell A. and Becerra O. Estimating the
Direct Economic Damage of the Earthquake in Haiti.
IDB Working Paper 163. Washington, DC, United
States: Inter-American Development Bank
Introduction to International Disaster Management,
Damon P. Coppola, ISBN 0-7506-7982-4
Disaster Administration and Management, S.L. Goel,
ISBN 978-81-8450-033-2
http://www.ndmindia.nic.in/
ht t p: //www. responsenet . org/show. det ai l .
asp?id=2168
http://as.wiley.com/WileyCDA/Section/id-397133.
html
http://www.unisdr.org/
http://www.emdat.be/ (erstwhile www.em-dat.net)
Craighead Christopher W., Blackhurst Jennifer,
Rungtusanatham M. Johnny, Handfield Robert B.
(2007), The Severity of Supply Chain Disruptions:
Design Characteristics and Mitigation Capabilities,
Decision Sciences Journal, 38, 131-156
Knemeyer, Michael A., Zinn, Walter, Eroglu, Cuneyt
(2009), Proactive planning for catastrophic events
in supply chains, Journal of Operations Management,
27, 141-153
Van Wassenhove, L.N. (2006), Humanitarian aid
logistics: supply chain management in high gear,
Journal of the Operational Research Society, 57, 475
489
Paul R. Kleindorfer, Germaine H. Saad (2005),
Managing Disruption Risks in Supply Chains, Journal
of the Production and Operations Management Society
____________________________________
Fig. 2 Earthquake Vulnerability Map of India
GENERAL
OP S WOR L D GE NE R AL
45
Barriers to Lean supply Chain in India
Perspective of an Indian Automobile OEM
A
supply chain can be defined as a system of organizations,
people, processes or activities that are involved in
moving a product or service from the suppliers to
the end customers. In the case of an OEM, the supply chain
originates at suppliers or sub-suppliers, and terminates at
the final buyer. In the entire length of this chain, there exist
various avenues for wastage and occurrence of non-value-
adding activities, due to a variety of reasons, both internal and
external to the company.
A lean supply chain defines how a well-designed supply chain
should carry out its operation by minimizing wastes and
delivering the products in minimum time to the end customer.
Researchers have tried to identify a common framework for
the implementation of lean supply chain, but there exist a lot
of different versions. However, most researchers agree to the
following set of parameters that one should consider when
implementing lean supply chain:
This article highlights the barriers against implementation of
lean supply chain in Indian conditions, from the perspective
of an automobile OEM. This firm had settled for around 290
suppliers for different parts that it required for production.
Each supplier had on an average, 5-6 tier of sub-suppliers. The
suppliers were chosen mainly from India and were dispersed
geographically. 44% of the suppliers were located in southern
parts of the India, whereas 50% were located in northern
Lean Concepts Requirements Requirements
Continuous
Improvement
Design to Manage Demand Volatility
Change Management
implementation
Assess where standardization is
feasible and to what level
Utilize advancement in
Technology(IT, RFID etc)
Multi-discipline team for project
Assess the impact of international
sourcing
Single point-of-contact for a supplier Milk-Run system for suppliers
Develop Systems
Thinking
Systemic view for whole supply chain Understand Customer Value
Create and Asses Value Stream Eliminate Redundancy
Establish strong
relationship
with suppliers
Create and Develop Sole Suppliers
Remove the obstacles to the free
flow of information
Low-tier of suppliers Create Flow
Benchmark Best
Practices
Create Performance Metrics (Based on Quality, Reliability and Cost)

parts of India ; the rest
were from Korea and
Japan.
For transportation,
the firm implemented
different systems
depending on the
location of the suppliers.
The firm followed hub-
and-spoke mode and
established two hubs
across India, one at
Bangalore and another at
Delhi. The Delhi hub handled north Indian suppliers
, while Bangalore handled south Indian suppliers
who were located far from the manufacturing base
(Chennai). For local suppliers within Chennai and
nearby, they maintained a milk-run system.
The Motion Waste: One of the major problems for
implementation of lean supply chain is the size of
the sub-supplier and its management practices. Sub
suppliers in India are small in size, lack infrastructure,
quality human resources and are not professionally
managed (many are family-run businesses). This
results in inadequate management of operations
and high degrees of bureaucracy, and restricts them
from having state-of-the-art machines and requisite
facilities. Due to lack of these, a job may often move
to-and-fro , multiple times, between a sub-supplier
and a sub-sub supplier.
Author
Prasoon Mazumdar
Co-ordinator, OMEGA-Operations Interest Group,
Indian Institute of Management Kozhikode
46
In this OEMs case , this factor increased the lead time of
the process significantly along with costs associated with
transportation and waiting time.
The Transportation Waste: Many states in India have their
own transit taxes and regulations for inter-state logistics.
Lean supply chain requires a fairly stable logistics system.
Irregular transit barriers at different state borders make it
difficult to determine the lead time, and involve unusual
supervision and tracking costs.
Standardization Issues: The OEM had standardized many
of the assemblies but it was yet to do that for its packaging
system. Packaging and its design was left for the suppliers
and hence there was no standard packaging system across
their supply chain. A standardized packaging system can
help firms reduce transportation costs and point-of-use
storage in the manufacturing.
Redundancy in the System: The firm adopted
postponement strategy which was evident in the process of
designing , but not in their supply chain. Most of the designs
of parts for different variants and product families were
already standardized , but the firm had different suppliers
for them. Not only did this increase redundancy of the
system, but it also added extra transaction, transportation
and other costs in the supply chain. This violated the req
requirements of the lean supply chain of a sole supplier ,
and added ambiguity and extra transaction cost in the
supply chain.
Management Issues:
A Lean Supply Chain
Management should have
a single point-of-contact
for individual suppliers.
But the firms suppliers had multiple points-of-contact
for different requirements in departments like logistics,
procurement and supply chain. The whole process was
missing the systemic perspective and departments were
working according to their priority and convenience. This
kind of system creates ambiguity in whole supply chain
and disrupts the flow. There had been incidences where the
information provided by procurement team to a supplier
was not known to others.
Systemic View and Traversal of Lean Concepts: The firm
did put a lot of emphasis on development of suppliers and
hence most of the suppliers selected as Tier-1 suppliers
were either ISO or TS certified suppliers. But the same was
not true for the whole supply chain as many of the sub-
suppliers were not ISO or TS certified. This was pertaining
to the small size of the sub-suppliers and requirement of
huge cost for getting such certification. The firm was mostly
concerned with the activities of the Tier-1 supplier and the
management only dealt with Tier-1 supplier, whereas the
management of sub-suppliers were either neglected or left
in the hands of Tier-1 suppliers.
The On-Site Assessment (OSA) and Supplier Risk Assessment
(SRA) were mostly done for the Tier-1 suppliers and sub-
suppliers were mostly ignored in such process and the
responsibility of such activities for sub-suppliers was given
to the Tier-1 suppliers. This kind of system completely
missed the systemic view of the supply chain and
ignored the traversal of lean concepts across supply
chain.
The traversal of the lean concepts across the supply
chain was also disrupted by the IPR systems. Many of
the suppliers have proprietary parts whose designs
were created by the suppliers and the production of
such parts was also with the suppliers. Sub-supplier
development was also with the suppliers, and the
firm had no information about the system prevailing
for such parts.
IT Issues: Lean Implementation in the current
scenario requires implementation of IT Systems
for tracking the whole supply chain, but this kind
of arrangement is currently missing in the Indian
conditions more often than not. This makes tracking
of whole supply chain cumbersome as the records
related to the same are still maintained in paper
format in registers, which makes it quite difficult to
track. This system of administration is way old in
Indian scenario and requires a change for successful
implementation of lean supply chain where company
can place data in portals and the demand can be
gauged by suppliers. There is need for a single
platform for OEM and the suppliers to interact,
which is currently missing leading to higher amount
of waste and disruption of information flow along the
supply chain.
Most of the Tier-
1 suppliers of the
firm had IT systems
implemented in their
respective firms. But
since the size of sub-suppliers
was small and implementation of IT system required
extra cost and change in the way of working,
many small sub-suppliers became reluctant to
implementation of the IT system across the supply
chain. This disrupted the effort of the OEM to have a
sound and continuous information flow system. One
of the other reasons was the reluctant behavior of
the internal employees of OEM towards adapting to
IT systems.
Behavioural Issues: The success of lean supply
chain implementation depends much on behavioural
aspects . This was eminent in the supply chain of
the firm as suppliers denied direct commitment
or acceptance of mistakes. This lack of trust and
commitment resulted in blame game and distributed
responsibilities disproportionately among suppliers,
which hindered the implementation of corrective
measures in the whole supply chain.
...Lean supply chain requires a fairly stable
logistics system. Irregular transit barriers at different
state borders make it difficult to determine the lead time,
and involve unusual supervision and tracking costs...
47
A mind map (Fig.1) can depict the barriers more easily and provide a consolidated view of the barriers currently faced
by the firm in Indian conditions.
__________________________________________________
48
Unique Challenges in
Humanitarian Logistics
Abstract:
The article starts with a description of the Disaster Profile
of India and emphasises the need for research in the field
of Humanitarian Logistics keeping in mind Indias risk
profile. The article brings out the challenges that need to
be addressed while undertaking humanitarian logistics.
Disaster Profile of India
Indias physical location in the subcontinent makes it
susceptible to natural disasters like Earthquakes, Famine,
Drought, Wind Storms, Floods etc. and man-made
disasters like Terrorist Attack, Chemical Leak, Industrial
Explosions, Fires, Train and Road Accidents and Refugee
Crisis etc.
According to a report by World Health Organisation
(WHO), almost 57% of Indias land is vulnerable to
earthquake (high seismic zones III-V), 68% to Drought,
8% to cyclones and 12% to Floods. About 30 million
people are affected annually by Floods and Droughts!!
In such a scenario, it is needless to emphasise the
importance of Humanitarian Logistics.
What is Humanitarian Logistics?
T
he Fritz Institute of San Francisco has defined
humanitarian logistics as the process of planning,
implementing and controlling the efficient, cost-
effective flow and storage of goods and materials, as well
as related information, from the point of origin to the
point of consumption for the purpose of alleviating the
suffering of vulnerable people. The function encompasses
a range of activities, including preparedness, planning,
procurement, transport, warehousing, tracking and
tracing, and customs clearance.
The different operations can be distinguished in the
preparation phase (before a disaster strikes), immediate
response phase (instantly after a disaster) and
reconstruction phase (aftermath of a disaster).
An old adage, Prevention is better than Cure is apt here.
Preparation in advance to avert and respond to a disaster
is much better than responding to it without preparation.
In fact, according to a USA report, On average a dollar
spent by FEMA (Federal Emergency Management
Agency) on hazard mitigation (actions to reduce disaster
losses) provides the nation about $4 in future benefits.
Similarly, according to the then UN Under-Secretary for
Humanitarian Affairs (Jan Egeland): In Niger in 2005, it
would have cost $1 a day to prevent malnutrition among
the children if the world had responded immediately. By
July 2005, it was costing $80/day to save a malnourished
childs life.
The above facts in addition to the dearth of existing
research in the field and lack of public awareness and
appreciation on the need for disaster preparedness
present a strong case for researchers and academicians
to carry out research in the field of Humanitarian
Logistics. This will not only lead to cost saving at the
time of a disaster, but will also lead to saving human life.
Challenges in Humanitarian Logistics
To undertake humanitarian logistics and prepare for a
disaster, let us understand the challenges that are faced
in ensuring logistics at the time of a disaster:-
Destabilised Infrastructure Disasters often lead to
loss of property and hence relief has to be carried out
usually in absence of transport infrastructure, lack of
electricity etc. Some disasters like Famine, Drought occur
in underdeveloped regions where there is already a lack
of proper infrastructure. Besides, the underdeveloped
regions are the ones that suffer more in case of disasters
like earthquakes, hurricanes due to inadequate
construction requirements. The problem is aggravated
when hospitals and relief camps are destroyed during
the disaster. Unavailability of proper Infrastructure
hinders the relief operations.
Unpredictable Demand It is caused due to
unpredictable nature of disasters. Several simulation
techniques have been developed that create realistic
disaster scenarios but they assume that demand is
known. When demand becomes unpredictable, such
techniques are not as effective. Use of IT can become
useful here in getting and sharing accurate information
to create a realistic disaster scenario and respond
accordingly. Unpredictable demand is also due to
difference in cultural preferences.
Unpredictable Supply Goods commonly needed
in disaster relief are water, medication, chlorination
tablets, tents, blankets and protein biscuits. Location
and commitment of suppliers is unknown. Suppliers
are limited and sometimes we have to also deal with
unwanted suppliers. At times, it is even unknown which
resources are available. Maintaining good relationship
with suppliers of these goods hence becomes important.
Many a times, suppliers have to look beyond their profit
making objective because customers are not generating a
voluntary demand which will hopefully not be repeated.
Many times, aid agencies receive unwanted supplies like
expired medicines, inappropriate clothes (that are not
suited to the climate) etc. This leads to the problem of
clogging airports, warehouses etc.
Problem of last mile connectivity in transporting
the necessary goods to disaster victims Lack of
transport infrastructure and unavailability of fuel lead
to the problem of last mile connectivity. At times, Fuel
shortage is caused just because fuel storage pumps are
demobilised due to shortage of electricity. This problem
can however be averted by air dropping of goods. The
shortage of material handling equipment is the main
problem and hence one needs to ensure that the package
size is such that it can be handled. Other issues include
the problem of ensuring food safety and hygiene.
Author
Rohit Bhagat,
PGP 2010 - 2012,
49
Also, some medicines need proper temperature control
which is unavailable due to shortage of power. Many a
times, the disaster hit region is affected by riots and rebel
forces may hinder the transportation of goods to the
needy. Looting may occur which may lead to deviation
of trucks from the intended destination. Therefore, it is
important to depoliticise the relief operations. Challenge
lies in positioning supplies out of the reach of potential
demolishing factors while at the same time close enough to
the disaster so as to deliver aid quickly and effectively to the
needy.
Lack of Coordination During a disaster, several agencies
come to the aid of people and make efforts with their own
ways of operating and structures. At times, the efforts are
redundant and duplicated. Coordinating the efforts of the
different agencies is an important and a challenging task.
Preparation phase can be used to coordinate the efforts of
the different aid agencies.
Need for Quick Response After a disaster has occurred,
it is required to put in place a Supply Chain quickly even
though we may have limited knowledge of the situation
as high stakes are attached to the timeliness of deliveries.
Delays may lead to loss of lives.
Preparation and Training are often neglected
Humanitarian Logistics is often mistaken to be limited
to immediate response phase and hence the preparation
and reconstruction phase are often neglected. Due to lack
of awareness, donors often insist that their money is used
only for relief activities and is not used to fund back-office
operations. After the disaster response, the reconstruction
phase shouldnt be neglected.
Uniqueness of Disaster Each Disaster is unique in its
magnitude, location, warning time and impact. This problem
is aggravated due to the difference in demand which results
due to cultural peculiarities and languages barriers. It
is difficult to replicate the experience of one agency in
successful disaster management to another disaster.
Conclusion
Indias location in the sub-continent makes it susceptible to
both Human and man- made disasters. In the given scenario,
it becomes all the more important for us to prepare and
respond to such disasters. Humanitarian logistics brings its
own set of challenges which are unique and are different
from Business Logistics. In this article, we have taken a
look at some of these challenges which are Destabilised
Infrastructure, Unpredictable Demand, Unpredictable
Supply, Problem of last mile connectivity in transporting the
necessary goods to disaster victims, Lack of Coordination,
Need for quick response, Preparation and Training are often
neglected and uniqueness of disaster.
However, a lot of research is required to be undertaken
by leading practitioners and academicians in the field of
humanitarian Logistics to improve our preparedness for a
disaster.
References
[1] Emergency and Humanitarian Action, Country
Report India, available at http://www.whoindia.org/
LinkFiles/Health_Action_in_Crises_country_profile.pdf (last
accessed 21/10/2011)
[2] Cassidy, W.B. (2003), A logistics lifeline, Trafc
World, October 27, pp. 1.
[3] Gyongyi Kovacs and Karen M. Spens (2007),
Humanitarian logistics in disaster relief operations,
International Journal of Physical Distribution &
Logistics Management Vol. 37 No. 2, 2007, pp. 99-114
[4] Gyongyi Kovacs and Karen M. Spens (2009),
Identifying challenges in humanitarian logistics,
International Journal of Physical Distribution &
Logistics Management, Vol. 39 No. 6, 2009, pp. 506-
528
[5] Jerome Chandes and Gilles Pache (2010),
Investigating humanitarian logistics issues: from
operations management to strategic action, Journal of
Manufacturing Technology Management, Vol. 21 No. 3,
pp. 320-340
[6] Long, D.C. and Wood, D.F. (1995), The logistics
of famine relief, Journal of Business Logistics, Vol. 16
No. 1, pp. 213-29.
[7] MMC (2005), Natural Hazard Mitigation Saves,
Vol. 1, Multihazard Mitigation Council,
Washington, DC, available at: www.agiweb.org/gap/
workgroup/Vol_MitigationSaves-1.pdf (accessed 20
May 2010) , pp. iii.
[8] Meikle, A. and Rubin, V. (2008), Living on the
Edge of Emergency, CARE International, London,
available at: www. careinternational.org.uk/lote/
resources/Living-on-the-Edge-Paying-the-price-of-
inaction.pdf (last accessed 25 October 2011), pp. 4.
[9] Murray, S. (2005), How to deliver on the
promises: supply chain logistics: humanitarian
agencies are learning lessons from business in bringing
essential supplies to regions hit by the tsunami,
Financial Times, January 7, p. 9.
[10] Thomas, A. and Kopczak, L. (2005), From
Logistics to Supply Chain Management: The Path
Forward in the Humanitarian Sector, Fritz Institute,
San Francisco, CA.
____________________________________
50
Impact of GST on Supply Chain Industry
A
ccording to the concepts of the operations, the design
of distribution network for a logistics company is
a network design problem. That network has to be
optimized to meet the demand at different nodes of the
network for the given distance between the nodes, cost of
goods transfer in the pipeline and cost of warehousing. But,
in India, historically, the supply chain or logistics of any
organizations are driven by tax considerations rather than
the operational efficiency. Introduction of Goods and Services
Tax (GST) will change the situation and the logistics industry
is expected to go through a major transformation providing
opportunities for new players and new business models.
Current scenario
The current tax structure is quite complex - there are central
level taxes in form of excise, customs duty and Central Sales
Tax (CST@4%), and then there are varying state level taxes in
form of VAT and other levies like cess etc. The problem is that,
state level taxes are applicable on top of central taxes which
mean the supplier is paying taxes on taxes.
Tax structure has created an interesting exemption from
central tax if there is a stock transfer between the states where
as, any inter state sale is taxable. For example, an organization
having warehouses in two different states can transfer the
stock between the two warehouses without paying CST and
get away by paying only state taxes after selling the goods in
that state. But any sale between the two states will be taxable
under CST and state taxes are applied over the CST.
Now, the only way to avoid this double taxation is to create
warehouses in every state and perform stock transfer
between inventory stocking points. Hence, most industries
- like manufacturing, FMCG and third party logistics players
- generally have warehouses/offices in each state to reduce
tax burden of Central Service Tax (CST). Thus, distribution
network planning is more driven by logic of saving taxes,
rather than achieving operational efficiency.
The network planning is divided into two stages
where you first decide whether to have a warehouse
in that state or not and if yes, then decide where to
setup the warehouse in the state. The decision of
whether to have a warehouse in a particular state or
not is simply a trade off between the CST incurred if
there is no warehouse and inventory costs incurred
if there is a warehouse. Both the tax payable and
the inventory costs are driven by the demand in
that particular state. As shown in the figure, only if
the total demand in the state is greater than d*, it is
profitable to setup a warehouse in that state. When
the demand is less than d*, it is profitable not to have
a warehouse in that state as the cost of tax is less
than the inventory cost.
After deciding to setup a warehouse in a state, now
the decision of where to setup in that state should
be addressed. As shown in the figure, majorly two
strategies are followed for this problem namely,
entry point strategy and centre of gravity strategy.
Primary shipping cost (shipping from factory to
warehouse), warehousing cost and secondary
shipping cost (shipping from warehouse to retailer)
are the decision variables here. The total weighted
average cost of shipping (demand at retailers are
the weights) determines the strategy to be followed.
Entry point strategy is profitable if the secondary
shipping cost is less than primary shipping cost and
centre of gravity is profitable if secondary shipping
cost is more than primary shipping cost.
With 28 states and 7 union territories in India, it
accounts to 25-40 small warehouses (depending on
trade off explained above and scale of operations)
instead of 6-8 large warehouses which would
be needed for geography of this size. For some
manufacturers with countrywide operations, the
warehouses are as high as 55 60 in number.
Introduction to GST
From the newly proposed tax structure (GST) which
treats goods and services alike, only the inputs
that affect supply chain are reproduced here. GST
is a comprehensive value added tax on goods and
services where the tax is levied on value added at
each stage of supply chain and provides seamless
input tax credit throughout the supply chain.
GST does not distinguish between goods and services
and the tax is collected at the point of consumption.
Authors
P. Babu Ravi Kumar & Ajay Miryala
PGP 2010 - 12,
Indian Institute of Management Ahmedabad
51
Same taxable value base for computing Central and State
GST hence no cascading impact of tax. There is no cascading
effect of tax on cost under GST and the tax incidence is
fully transparent. Hence the present taxable events such as
Manufacture in case of Central Excise and Sale in case of
VAT or CST will lose relevance.
Changes in supply chain due to GST
Under the tax structure proposed by GST, the tax is levied
only at the point of sale irrespective of whether it is inter-
state sale or intra-state and both the state and central taxes
are collected on the same base. The final tax on a product
would be the same, irrespective of the structure or location
of its production, procurement of inputs and the nature
and complexity of the distribution chain. This primarily
eliminates the need for having warehouses in different
states. Hence the supply chain would be undergoing a drastic
shift towards re-aligning/merging the smaller warehouses
to most productive and logical locations - without having to
think of tax burden.
With GST, the decision of where to setup the warehouse will
be guided by the distance between the manufacturing unit
& demand centres, service levels to be satisfied, primary
shipping costs, warehouse costs and secondary shipping
costs.
As shown in the below figure, the primary shipping cost is
the cost of shipping goods from manufacturing unit to the
warehouse where the secondary shipping cost is the cost of
shipping from warehouse to the retailer.
Distribution network should be designed in such a way
that, the sum of primary shipping cost, inventory cost and
secondary shipping cost should not exceed direct shipping
cost from supplier to retailer. If a warehouse is shipping
to multiple retailers, then the weighted average cost at
that warehouse should be minimized to get the optimum
distribution network. In general, the primary shipping cost
per unit is less than the secondary shipping cost per unit
because of the good quality of road transport infrastructure
between cities and the economies of scale. In general, there
should be a warehouse within 600Kms of any demand centre
(city) to meet the service level of delivery within two days of
order (industry norm).
Impact of GST
GST would force the suppliers to optimize the supply chain
and gain cost advantage. The optimization would impact
many areas and few of them are discussed here.
Cost reduction: Due to the optimization of distribution
network, the overall shipping cost of the product would
be reduced and the profit margins of the supplier would
increase. Some part of these cost reductions will be passed
on to the customers and there by impacting the demand for
the product.
Automation: In addition to the inefficiency of the
existing distribution network, Indian logistics industry
is highly fragmented resulting in extreme competition
and low margins. Due to the small size, using any
ERP solutions for effective demand prediction would
be costly affair. Hence, most of the small & medium
businesses have stayed away from technology
implementations. This impact of inefficiency and cost
burden is passed to end consumer, either in terms of
quality; Service-level agreement or in terms of cost.
With GST, the number of warehouses will be reduced
and the suppliers would be able to think of using
automation which will deliver efficient operations
and cost benefits.
Service levels: In the distribution network, service
levels will be specified in terms of number of days
required to deliver an order. Generally accepted norm
is 2 days and to meet this service level, warehouses
are ensured to be within 600Kms of distance from
demand centres. Before the introduction of GST, a
demand centre very remote in a state A which is not
within the acceptable distance to meet the service
level could not be served in time by the warehouse in
state A(see the figure). Because of CST, that particular
city cannot be served by the warehouse in state B
even though it is very near. This leads to sacrificing the
service levels at some places. With GST, this problem
can be resolved and that remote city can be served by
warehouse in the adjacent state and meet the service
levels.
Overall, introduction of GST would impact the supply
chain industry in a positive way and the organizations
which change themselves to the new structure very
quickly will have competitive advantage. Especially
this is a major opportunity for 3PL firms to gain early
market and establish themselves.
References:
1. Learnings from the class of Logistics
Management on 25-10-2011, an elective by Prof G.
Raghuram, Public systems group, IIM Ahmedabad
2. h t t p : / / w w w. i n f o s y s b l o g s . c o m/
logistics/2010/11/gst_impact_on_logistics_indust.
html
___________________________________
52
ICT and Supply Chain Practices in
PDS (Chhattisgarh)
P
addy procurement and Public Distribution
System are old schemes with complaints of large
diversion and leakage. Monitoring of the scheme is
difficult partly due to the insufficiency of staff and partly
due to their complicity. Various innovative methods of
reducing leakages and diversion have been tried in the
country including bar-coded food coupons, food stamps,
biometrically coded ration cards etc. None of these have
been entirely successful.
This project which is an end to end solution based on
information technology, developed and implemented in
Chhattisgarh is giving very encouraging results. There
are examples of innovative use of ICT (Information and
Communication Technology) and Supply chain practices
adapted in the projects, which are described below.
Adopting Motor Cycle Riders for data transmission:
Primary Agricultural Cooperative Societies (PACS) are
generally in remote locations where internet connectivity
is not available. An interesting innovation has ensured
data transmission on a daily basis to the central
server. V-Sat based internet connectivity is
available in Chhattisgarh at block headquarters
in the office.
Motorcycle riders have been hired to bring
data everyday from procurement center
computers to block headquarters, where they
upload the data on the central server through the
internet. Similarly any new version of software
or other information is downloaded from the server
at the block level by these motorcycle riders, and carried
to the procurement centers. This innovation has resulted
in having near real time data without having internet
connectivity.
Truck Dispatch Information to Citizens through SMS:
Citizen interface web-site provides a method of citizen
participation in monitoring of PDS. Citizens can register
their mobile numbers on this web-site for participation
in the monitoring of PDS by selecting one or more FPS.
Whenever PDS commodities are dispatched to an FPS
from the warehouse, an SMS is sent to all the mobile
numbers registered for that FPS.
This message has the truck number, the quantities of PDS
commodities being sent by that truck, and the date and
time of dispatch. This improved transparency .
SMS Sample: Shop 441001073/SHANKAR NAGAR, Truck
CG056369, Rice 26qtl,
Wheat: 0 qtl, Sugar:0 qtl, Salt:0qtl, Date:01June 11
Chawal Utsav (Rice Festival):
The government of Chhattisgarh has marked 7th day
of every month as the Chawal Utsav (Rice Festival).
The officers of the Chhattisgarh State Civil Supplies
Corporation (CGSCS) have to ensure that the food
grains reach the FPS at least one day before. The
beneficiaries get the intimation through the Short
Message Service (SMS). The ration is carried in special
yellow colored truck of the department. This vehicle is
welcomed even in the notorious naxalite (armed tribal
and backward people who are anti-state) affected
regions.
A typical Chawal Utsav is a very special day for people
specially the rural people. It is as good as any other
festival. Elderly men, women, children and young
boys and girls can be seen gathered at the FPSs. A
small village haat ( temporary market) can be seen
at some of the places. People also carry out shopping
on the day. The government also exploits the day to
implement other welfare activities. Polio vaccinations
are given on the day. Other benefits to BPL families like
old age pension etc. are also distributed on this day
along with PDS commodities. The day also contributes
to maximum crowd at the Village Anganwadi Kendra
(Health Centers).

Truck photograph
to server with latitude and
longitude of truck position:
An application in J2ME has been developed and loaded
in a GPS enabled mobile phone with camera to be
used at warehouse. When a truck with rice and other
commodities reaches the warehouse for delivery, the
truck is photographed using the application and sent
to the server. The truck and receivers photograph
along with latitude and longitude reaches the server.
Server side program compares the latitude and
longitude of truck with latitude and longitude of
the warehouse to ensure that the truck is in the
warehouse premises by the said date and time. The
application also helps in real time tracking of trucks.
This innovation is helping to check claims made by
receiving centers without actually receiving the truck
dispatched to a certain extent.
Authors
Aditya Kumar Konathala & Amit Sharan Singh
PGP 2010 - 12,
53
Outcomes / Changes:
Time gap in giving cheques as payment for the paddy
procured from farmers is reduced to one day from 3 to 6
days delay in earlier years. During Kharif season 2007-08
(Kharif season in general refers to monsoon season. Kharif
crops are usually sown with the beginning of the first rains
in June-July, during the south-west monsoon season.The
month from June to November is generally termed as Kharif
season in India. ), cheques are generated through computers
on cheque roles and the generation of cheques was instant.
Nearly 7.8 lakh farmers were benefited during the season by
receiving computer generated cheques.
Centralized miller data base and uniform procedures:
Computerized millers registration was introduced in to
check execution of agreement with fake millers. Giving
permission for milling, execution of agreement and
generating delivery orders are done through web based
application. Web application led to micromanagement of
inventory, resulting in quicker milling, less damage to rice
and paddy, and substantial savings.
Automatic Calculation of monthly allotments eliminated
irregularities and mal-practices in granting allotments to
FPS. Now it is calculated automatically based on the number
of cards in the shop. Computerized receipt and issue of PDS
commodities at distribution centers resulted in effective
monitoring of lifting and increased transparency.
The SMS alert system, citizen interface web site is
encouraging citizen participation in monitoring of PDS.
Complaint monitoring system increased the speed of
action on different complaints due to close monitoring.
Call centre operating to accept complaints on department
of food has many success stories in controlling diversion.
Data is available on web in the public domain for creating
transparency.
Ration Card database:
About 3.7 Million ration cards have been prepared through
computers in 2007-08. The data is available in a database
which is a base for the computerization of PDS. The data
is made accessible to public on web. Public can access the
following
1. Village-wise, ward-wise or FPS-wise details
individual ration card holders along with his name, fathers
name and type of ration card.
2. Village-wise, ward-wise number of beneficiaries.
3. Fair price shop (FPS) details: 10800 FPS details are
available online.
4. FPS wise allotment details: Allotment of commodities
for PDS schemes are automatically calculated by the system.
Allotment for other welfare schemes like mid day meal,
hostels etc. are entered by District Food Controllers every
month. FPS wise no. of cards and allotment of different
commodities for the selected month are available online for
public view.
5. Lifting details are available online: The quantity
of commodities reaching FPS from Distribution Centers is
known as lifting. Delays in lifting are one of the big challenges
that department faces. For day to day monitoring of lifting
by different districts and distribution centers, lifting details
are made available online.
6. Sales details of individual FPS: FPS owners are
supposed to submit an affidavit every month with the details
of the sales actually made against the allotment for
that month. The sales quantities are used to calculate
entitlement of quantities that actually be issued to
the shop, keeping into account the previous months
balance quantities available in the shop.
7. Details of RICE FESIVAL: The details of the
ration card holders benefited in the rice festival and
the centers where it was celebrated are available on
web.
8. Details of paddy procurement:
Details 0.78 million farmers that sold paddy to
different societies.
a. Procurement of paddy by different societies
and its transport to FCI, Miller or Storage centre.
b. Details of stock at storage centers.
c. Payment details to farmers.
d. Purchase Details.
9. Rice procurement-CMR and levy: Details of
CMR and levy rice received by Chhattisgarh State Civil
Supply Corporation centers. Details of registered
mills, permission granted for milling and agreement
executed. Complaint lodging and its status and SMS
alerts whenever trucks are dispatched to FPS to
registered users.
References:
1. Right to Information, http://cg.nic.in/citizen/
(as accessed on May 1st 2011).
2. Computerization of Paddy Procurement and
Public Distribution System in Chhattisgarh by Vivek
Kumar Dhand, Dinesh Kumar Srivastav, Somasekhar
A.K., and Rajeev Jaiswal.
3. Computerization of Paddy Procurement and
Public Distribution System in Chhattisgarh 2007-08,
National Informatics Center, Raipur.
4. Annual Report (2007-08), Chhattisgarh Civil
Supplies Corporation Limited .
_________________________________
54
RFID in Supply Chain
Radio Frequency Identification (RFID) is a wireless
technology which uses radio frequencies to identify
and track down objects bearing the radio tags.
Though it was introduced during the 2nd world
war for military purposes it was not until the late
1980s that its commercial usage began starting
with livestock tagging. By the end of 1990s, RFID
was being implemented for a variety of uses such
as access control, shipping container identification,
air freight tracking, motorway e-tolling, automobiles
manufacturing, etc. Despite its widespread
application in other fields, it was not until Wal-Mart
announced its intentions to implement an RFID-
tagging program in collaboration with its suppliers
that the technology made
a big splash in the
area of supply chain
management. A pallet-
level tagging program
spanning in nearly 250
stores and 6 DCs was rolled out by the company
in 2003. In October 2005 the retail giant claimed
that the program helped reduce the retail out of
stock (OOS) incidents by 16% but the suppliers
complained about the high cost of tagging. The
lukewarm response to this first trial was followed
by a second unsuccessful attempt that was stalled
in 2009. Wal-Mart proved third time lucky with its
item level apparel tagging program in 2010 which
gave it many positive takeaways. So, what are these
incentives warranting the determination with which
Wal-Mart is pursuing RFIDs?
The health of a supply chain is directly proportional
to the amount of useful, accurate information
extracted from it and utilized effectively. When
implemented properly, RFIDs can help us gain
this valuable information almost effortlessly. The
primary benefit of RFID is that it lends a distinct
identity to the tagged product by storing valuable
information pertaining to it. Smartcards and Bar-
codes also perform the same task but unlike them
RFID tags can read the product even when it is not
in line of sight. RFIDs can also store more data, are
reusable, durable and offer improved tag read rates
since multiple tags can be read simultaneously.
The following example illustrates the advantages of
RFID technology in detail.
Consider 2 companies Firm A (The Supplier) and
Firm B (The Retailer). Firm-A is a manufacturer who
dispatches finished goods to the Firm-B who is a
multi-brand retailer.
Both firms have invested collaboratively in RFID
technology and have integrated it with their ERP
systems. Using VMI systems, Firm-A takes care of the
inventory at Firm-B. Both the pallet and the items are
RFID tagged enabling Firm-A to read the movement of goods in
Firm-Bs inventory. Both firms are automatically alerted when
Firm-Bs inventory reaches replenishment levels. This way an
order is placed automatically at Firm-A as and when required
and both firms have a real time data about the stock levels. At
the shop floor in factory of Firm-A, RFID readers identify the
pallet-tags and matches it with the truck number/tag thereby
confirming the dispatch location of the items. Readers installed
at the exit point of Firm-A and entry points of Firm-B confirm
dispatch and arrival respectively of the goods to both firms
simultaneously. Thus, the tags also help both the parties to keep
themselves constantly updated of the location and delivery
status of the goods. The retailer can easily record the entry &
discriminate between shipments received from various such
suppliers by reading the attached tags. Due to RFID, Firms A and
B can complete the identification of outbound/inbound traffic in
shorter time duration and with more accuracy than it would take
if were done manually thus turning a labor intensive process in
to a simple automated process Discrepancies such as delivery
delays or faulty items can be promptly identified by Firm-B
using the tag number and
communicated easily to
Firm-A.
Apart from inventory
tracking and management,
the tags can also help track sales at Firm-B. This first hand
data can be utilized by both firms to identify demand patterns
and plan accordingly. This way the information flow is smooth
and the discontinuity which often leads to data redundancy,
duplication and errors is eliminated. Accurate data is
instrumental in reducing the bull whip effect as well.
Take a scenario where Firm-A has introduced a sales promotion
and has dispatched products to Firm-Bs store to meet the
demand surge. Visibility of the products extends beyond the
entry point of the retailers storage area and continues till
the box crushing machines. If Firm-A observes that the pallet
tag reads at crusher are missing, it implies that the box is still
lying in the storage. Firm-A can immediately follow up with the
retailer to ensure that the products go on display thus reducing
out-of-stock incidents and thereby capturing sales which
would have otherwise been lost. Firm-A can reach the targeted
audience and control its promotional activities better through
such better visibility of products.
Theft detection is enhanced due to RFIDs. Auditing software
which monitors item movement off the shelf can be programmed
to alert when it detects sweeping of items (unusual bulk
movement). Inventory/Store theft can also be detected by
cross-checking the tag information recorded against the sales
list in the main server.
Asset-tracking is another major advantage provided by RFIDs.
The tags can be used to store information about the availability,
location, maintenance and performance records of an asset
on the shop floor. A stock of products stored by the retailer is
also an asset and these tags help boost the shelf replenishment
speed by reducing the time taken to identify the products
in the storage yard thereby minimizing lost sales. The RFID
self-checker applications which constantly keep auditing the
movement of goods off shelves provides real time data about
the demand patterns at different times of the day and thus assist
retailers in planning their inventory.
...Radio Frequency Identification (RFID) is a
wireless technology which uses radio frequencies to
identify and track down objects bearing the radio tags...
Author
Rakesh Donempudi,
PGP 2010 - 2012,
Indian Institute of Management Calcutta
55
The improved demand prediction accuracy can help
them maintain light stock levels of heavy or low-shelf life
merchandise. Waiting time at Point of Sale is also reduced
significantly since product tag reading and billing is easier
now.
So we can see that RFID tags help firms to become
more productive by eliminating several supply chain
inefficiencies, automating processes and providing useful
data. The above example cites only few of the advantages
that can be derived from product tagging using RFIDs while
many more can be gained by creatively employing this
technology. It is essential that a company implementing
the technology must evaluate the suitability of its current
operations with respect to the new technology and adapt
it suitably. In the earlier case if RFID was implemented as
a stand-alone technology without integrating it with ERP,
the effortless data capture benefit could not have been
realized. RFID readers sometimes encounter difficulties
in identifying tags in presence of certain metal used
in shelves. This can be resolved by replacing the metal
shelves with plastic ones or by retaining barcodes (they
function with equal accuracy in all conditions) for specific
products. The key point here is that RFID implementation
must be augmented by a suitably readapted supply chain if
we are to realize the technologys full potential.
As of today the technology is yet to gain the confidence
of Supply Chain managers and high investment costs
are the major deterrent for RFID acceptance. Moreover,
RFID is not an off the shelf technology but requires a
customized deployment architecture and the fact that it
requires the user firm to proactively adapt to it in order
to realize its full potential is another demotivating factor.
Nevertheless, there are few pioneering companies whose
successful endeavors are bolstering user confidence in
this technology and it is only a matter of time before the
demand rise will drive down the prices of RFID. With the
promise of a healthier ROIs and improved productivity
for store level associates, a company can use the gains
resulting from RFID implementation and pass on in
savings to their customers and succeed by winning
their hearts.
References:
1) http://msdn.microsoft.com/en-us/library/
aa479355.aspx#rfidintro_topic5
2) ht t p: //www. scdi gest . com/asset s/On_
Target/10-07-28-1.php?cid=3609
3) http://www.tutorial-reports.com/wireless/
rfid/walmart/tag-advantages.php
4) ht t p: //www. scdi gest . com/asset s/On_
Target/09-02-23-1.php
5) http://www.ti.com/rfid/timeline/timeline.
shtml
6) Pedro Reyes, RFID in Supply Chain.
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