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Supply Chain Management Assignment(Research Paper & Case Study)
Submitted to: Submitted by:
Dr. J.P Saxena Vaibhav Taneja
A0101909065 (E - 45)
MBA Class of 2011
Amity Business School
Noida
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Part I: Research Paper
Benchmarking in supply chain
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Summary:
It is currently common knowledge that companies must adopt the latest techniques and
technologies in order to compete effectively in a more demanding environment. Customer
satisfaction requires service quality and those companies offering higher service quality are able
to ask higher prices for comparable product. A key method of monitoring performance is
benchmarking. It may be classified in four types: internal, parallel industry, competitive, best
practice company. Supply chain management has been introduced to provide a single
coordinated perspective of the logistical process of linking suppliers with customers in order to
ensure that each of the above qualities is delivered with the right product, to the right customer at
the right time.
The emphasis is also laid on the importance of bench marking processes and performance at each
of the supplier customer interfaces. (Transportation/distribution, warehouse/inventory
management, communication/data management, supplier interface, customer interface). In order
for companies to increase their competitiveness they need to address their logistics service
attributes, by identifying customer expectations and then developing their plans and strategies to
meet these expectations. These attributes for the measure of performance for the company used
in benchmarking. These Mops may be different for different companies.
The benchmarking methodology consists of five phases as: planning, analysis, integration, actionand maturity. The methodology for benchmarking supply chains in particular have also been
explained in the paper. The applications, benefits and drawbacks of benchmarking the supply
chain are also explained herein. The paper also explains the difficulties which may be faced
during benchmarking. An assessment tool (Glosup) is also explained for its functionality.
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Learning objectives:
To understand the concept of benchmarking in industry.
To gauge the importance of benchmarking in supply chain management.
To understand and study in detail the process of benchmarking a supply chain along with its
applications advantages and disadvantages.
Introduction:
It is currently common knowledge that companies must adopt the latest techniques and
technologies in order to compete effectively in a more demanding environment. Increased
competitiveness has inspired new breeds of customers: ones that evaluate their total interface
with the supplying organization and not just the product they receive.The new customer places greater emphasis on the services received, such as reliability, timeliness
and efficiency in order to rank their satisfaction from the services of their suppliers. Customer
satisfaction requires service quality and those companies offering higher service quality are able
to ask higher prices for comparable product. The higher price is further justified if it acts as a
guarantee for good service as customers are willing to pay more for increased responsiveness.
The key to providing high level of customer satisfaction is therefore in providing what the
customers wants, when the customer wants it. Feedback on customer requirements should enable
companies to set these objectives aimed at providing high levels of customer satisfaction and
therefore companies need to continuously monitor their performance and compare it with others
in order to establish how they rank against their competitors and define the areas in which they
are leading or lagging.
Benchmarking:
A key method of monitoring performance is benchmarking. Xerox Corporation, the pioneer of
competitive benchmarking, proved its use initially in their manufacturing operations. Since then
it has been used for comparing many other operations, including functions such as distribution
and inventory management. Benchmarking has been defined by David Kearns, chief executive
officer of Xerox as:
The continuous process of measuring products, services and practices against the companys
toughest competitors or those companies renowned as industry leaders is benchmarking.
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Types of benchmarking:
There are four types of benchmarking;
1. Internal benchmarking: this is the most accessible as the comparison is normally
conducted between very similar operations in other parts of your company. It has been the
advantage of no confidentiality problems and therefore should always be performed first before
embarking on any other type of benchmarking.
2. Competitive benchmarking: this type of benchmarking involves the investigation of
competitors services , processes and products, possibly through reverse engineering and therefore
the data for this can be the most difficult to collect.
3. Parallel Industry Benchmarking: Companies in parallel industries having similar
problems may have very different approach to solutions than companies in your industry,
therefore this type of benchmarking will often provide worthwhile results.4. Best practice Company Benchmarking: this considers the practices of identified leaders
irrespective of the business sector where benchmarking is performed against very specific
activities. This type of benchmarking opens great opportunities for companies to collaborate and
exchange information as it can only be advantageous to both parties. Information is therefore
easier to obtain as neither company is perceived as threat.
Supply Chain Management:
People buy products not only for their obvious tangible qualities but for other intangible qualities
such as reliability, service and price, which influence the customers choice. Supply chain
management has therefore been introduced to provide a single coordinated perspective of the
logistical process of linking suppliers with customers in order to ensure that each of the above
qualities is delivered with the right product, to the right customer at the right time.
The traditional supply chain structure as shown in figure, highlights the scope of supply chain
management with the links between functional areas such as manufacturing, purchasing,
distribution, and sales revealing an integrated approach. Supply chain management aims to
control the flows of materials and information between each echelon, which is further defined by
Towill or level, in the supply chain in order to maximize the emergency of supply chain
operations with the ultimate aim of satisfying customer needs. The area of interest should be
interface between echelons in order to ensure material flow from supplier to end user. Here it is
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important to note that number of echelon can vary between supply chains, for example,
distribution to end user may be direct from manufacturing echelon or through a series of
echelons, such as warehousing and transport echelons. The emphasis is also laid on the
importance of bench marking processes and performance at each of these supplier customer
interfaces.
The concept of logistics supply chain aims to place emphasis on customer and supplier interfaces
in order to involve them in as many of strategic and management decisions as possible, thereby
strengthening the links and integrating the supply chain. Within the traditional supply chain
structure, interfaces of particular interest include:
The supplier interface: this is becoming increasingly important as the key to effective
purchasing and supply of the right raw materials at the right time and of the right quality and
quantity in order to prevent holding high raw material stocks and facilitating the move towards
just in time purchasing.
The customer interface: close links with customers reduces the need for forecasts as
demand is relayed in advance, thereby preventing high finished goods stock from building up
and becoming obsolete. Customers want high availability of stocks from the suppliers, but this
cant always be made practically possible, therefore it is essential that close links with customers
are maintained in order to determine their requirements and satisfy their needs and expectations.
Transportation/distribution: Distribution methods are of vital importance to a company
wishing to use a third party distribution company, depends on a number of factors, all revolving
The sco e of
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strategies to meet these expectations. Therefore, identification of factors important to customer
needs will help to define the logistics measures of performance required for inter firm
comparisons to be made effectively, with worthwhile results. It is considered that there is no
single or best indicator of performance for all firms, therefore an attempt should be made to align
performance measures with competitive priorities.
Consideration of an aftermarket supply chain reveals important logistics measures of
performance at each stage. It is suggested that causes of end customer satisfaction and
dissatisfaction can be identified through causal links using fishbone diagrams. The given diagram
highlights some aftermarket logistics measure of performance which contributes to the efficiency
of each interface. The major components are split in to their constituents, with the ultimate aim
of providing total customer satisfaction.
The above diagram represents some critical logistics measure of performance, determined fromanalysis of flow of material and information from the supplier right through the customer hence
they can be used in any benchmarking survey.
With emphasis on consideration of the after market supply chain, four logistics sectors were
identified as stock holding, warehousing, distribution and customer ordering, which were further
split to reveal some critical logistics m.o.p.
Fishbone diagram highlighting aftermarket logistics
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Companies need to optimize their supply chain and achieve best fit between conflicting
processes in the business. Before improving the supply chain it is necessary to consider all of the
above factors in order to determine which the most cost effective approaches are. Only when
companies can tie together these aspects into coordinated and integrated supply chain will they be in a position to achieve the benefits available through efficient logistics management.
Benchmarking Methodologies:
Various authors and practitioners have suggested different benchmarking methods. We found the
one proposed by Xerox the pioneer in benchmarking to be most relevant in present context. It
encompasses the fundamental principles of any benchmarking exercise and was used as starting
point for the survey. The process can be separated in to five main stages of planning, integration,
action and maturity. These can be further split into ten steps outlined in the diagram.
Planning:
What to benchmark: initially, one must decide what is to be benchmrked. Any activity
that can be measured can also be benchmarked. It is important to identify areas that could
make significant improvements to customer service since customer satisfaction is vital to the
success of any company. Most importantly, each benchmark should be aimed at contributing
to customer satisfaction or profit through improved performance.
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Whom to benchmark against: here it is
necessary to home in those companies with world
class practices, but the problem is actually in
identification of these companies, i.e. who is best
practice? The search should start by identifying
competitors of your processes or operations,
followed by a search for similar practices in
dissimilar industries. Consumers can provide
useful information as to who they perceive to be
best practice; similarly many consultancy
associations have up-to-date surveys on the best
company practices. Analysis:
Data collection methods: A great deal of
information is currently available from a wide
range of sources. In order to identify best
practices companies, bench measures should be
used before benchmarking. The bench measuring
should be seen as a prerequisite towards best practice benchmarking as it involves measuring
success against a number of companies in order
to identify that is best practice.
Determine current performance levels: before
extending the information search outside the
company, it is essential to have a clear
knowledge of your companys present
performance in order to be in a position to
identify any gaps.
Integration:
Project future performance levels: from the
data collected, performance levels of best
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practice companies can be quantified and compared with your current performance, thereby
identifying the gap to be negative, positive, or zero. The areas in which gap is largest
highlights the areas requiring the most improvements in order to achieve a leading edge.
Communicate benchmarking findings: results of the benchmarking survey should be
reported to all employees within the company in order to gain acceptance. New ideas of
change are most likely to be accepted if the benefits are explained to employees providing a
vision of the future state of the company.
Action:
Establish functional goals: Previous performance goals should be revised in order to set
new standards for expected performance, based on best practice performance.
Develop action plans: Design specific plans for implementation and continuous
assessment of any achievements.
Implement actions: put the actions into practice and ensure they reach the new standards
by monitoring the progress.
Recalibrate benchmarks: Continue to benchmark, to ensure your company can keep up
with improvements and make the change being proactive rather than reactive.
Maturity:
This stage is only achieved when all the best practices are implemented and benchmarking is
adopted as a way of life for continuously researching new ideas and maintaining best practicestatus.
Benchmarking methodology for supply chains:
Any company wishing to attain supply chain excellence should adopt a benchmarking procedure
in order to identify areas for improvement and methods for achieving change. The procedure for
conducting a benchmarking study of best practice supply chain involves following steps:
Internal evaluation of your company in order to identify current performance levels andweaknesses in your operations.
Analysis of customer requirements, through feedback from customers in order to identify
areas of particular importance to their satisfaction.
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Identification of critical logistics measures of performance, which should relate to those
identified as important to customer satisfaction and it should be ensured that they can be
measured within your company.
Identification of best practice companies through benchmarking procedures in order to
establish who is considered to be best practice and whether they satisfy the identified customer
requirements.
Benchmarking methodology for supply
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Design of a data collection plan in order to maximize the chances of success, involving
questionnaires and field visits.
Conduction of field visits to collect data and establish what the best practice companies
do, how they do it and whether they satisfy the identified customer requirements.
Analysis of performance gap between your current performance and best practice
performance. Identification of ways to improve based on what the best practice companies are doing.
Implementation of actions by considering how the best practice companies have achieved
such high performance levels. Monitoring of progress by comparing new performance levels with the required levels of
customer satisfaction and monitoring of the identified measures of performance.
Adoption of continuous benchmarking in order to identify areas for improvements by
persistently observing best practice companies and their practices.
A critical stage in methodology is the identification of critical measures of performance or
logistics attributes common to all market sectors. A method for analyzing the characteristics of
market in manufacturing terms enabling a company to evaluate its competitive position against
that of major competitor or against market requirements has been suggested. The method
introduces two criteria:Market qualifiers are those criteria which are necessary even to be considered by a customer as a
possible supplier.
Order winners are those criteria which win the order. Order winners are always market qualifiers
but market qualifiers are not necessarily order winners.
Application of the Methodology:
If the above explained steps are followed it is possible to:
Identify a number of key criteria important to a particular market sector.
Evaluate the importance of each factor in the market by awarding each factor a fraction of
100% (the total importance for all factors)
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Indicate whether each factor is a market qualifier or an order winner. Depending on the
value of its importance in the market, the higher values are most likely to be order winning
criteria.
Award each company, whose performance is being evaluated, a proportion of the points
that have been awarded for each factor.
Enter scores for each company and market as a whole in order to identify the
performance gaps.
It is also possible to define important logistics attributes common to all market sectors as
follows:
Quality of products and services: the level of reliability of the products and the efficiency
of the services provided.
Availability of goods and services: the case with which a company can satisfy the needs
of the customer, by providing what the customer wants when it is wanted.
Responsiveness to customer order and queries: the ability of a company to process
customer orders quickly and effectively.
Delivery reliability and speed: the ability of a company to provide and meet guaranteed
delivery times, with the shortest distribution lead time possible.
An example of assessment tool for supply chain benchmarking (Glosup):The Glosup tool provides an integrated view of supply chains and helps to identify priorities and
trade-offs for cost reduction and value creation. A Glosup analysis allows a retailer or supplier to
internally or externally benchmark supply chain performance for consumer goods across
categories and across companies, thus helping to identify priority areas for improving supply
chain performance, and allowing changes in performance to be measured over time. A Glosup
analysis is consistent with the GCI Global KPIs but can provide a deeper assessment by working
at a more detailed product level. It also includes additional key performance indicators. For a
more comparable analysis, it requires some basic information describing the supply chain under
analysis.
Having entered the relevant data, a participant can then start benchmarking! The participant
chooses the required peer group of comparable data. If this is done at a very high level, then the
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Benefits of benchmarking:
The formation of objective comparisons providing a new perspective and new targets. Breakthrough ideas resulting from new insights and best practices and motivation
Attainable from new areas to focus on ans methods for overcoming barriers.
Sample Glosup deeper diagnosis
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comparisons to be made, thereforecare must be taken when defining these measures in order to
obtain the maximum attainable benefit from the benchmarking project.
Identification of suitable benchmark companies: having defined the suitable performance
measures likely to have the greatest impact on the company, other companies performing similar
practices should be identified, therefore compareable companies can only be identified through
considerable research, both internal and external to the company. Data comparability and relevance: this was again identified as one of the main difficulties
encountered during a benchmarking project. Verification of data and performing of comparisons
can prove to be particularly difficult if the performance measures are not clearly defined.
Resources and time: these form another two difficulties encountered. The benchmarking
program should be resourced effectively in terms of the number of people required in the form of
benchmarking team and the time required to carry out the necessary work if the maximum
benefit is to be achieved from the benchmarking project. Support from entire organization: in order for a benchmarking exercise to be approved,
the potential benefits must be emphasized to the entire work force. Without this support a project
could fail to even get off the ground.
The above factors, if not considered carefully, can provide considerable hindrance to a
benchmarking project and could result in a lot of wasted time and effort.Trouble in conducting supply chain benchmarking:
Dr. Skip Grenoble & Dr. Bob Novack of Penn State University researched and found three main
reasons which stop people from taking up benchmarking.
The number one reason, surprisingly, wasnt time (that finished at number four) it was a lack
of resources. Without enough people (and the right people) to participate in benchmarking
activities, and certainly without a sufficient budget, companies efforts to benchmark are doomed
before they even get started.
The number two reason was that internal measures and processes are difficult to define If you
dont know what you want to measure, then how can you ever discern if what youre doing is up
to industry standards?
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And the third most prevalent deterrent to benchmarking is the difficulty in identifying proper
benchmarking partners.
Conclusion:In todays competitive environment customers expect much more than just a good product. If the
service and reliability is not taken care of he may switch to some other option. Also providing
such service in a way superior to your competitors makes it more challenging. Benchmarking is
the need of the hour in present scenario. Benchmarking helps you to beat the best in the business
i.e. it leads to continuous improvement by measuring the products and services provided against
the industrys best people. Care should be taken while selecting the measures of performance for
every particular case as per the requirement and need. The methodology explained above is a
typical case of benchmarking an aftermarket supply chain the process may see minor
modifications when adapted to any particular situation. There are a lot of benefits in
implementing benchmarking but it is not a very easy task, it needs an elaborate and careful study
about your business and how others are doing it in same or even different industry. The changes
require changes in culture which sometimes become difficult to inculcate. Looking at the long
term benefits of such improvement process benchmarking has become the need of the hour.
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1. Which of the following are types of benchmarking?
a. Internal
b. Competitive
c. Parallel
d. Best practice company
e. All of above
Ans. (e) all of above
2. State true or false. People buy products not only for their obvious tangible qualities but
for other intangible qualities such as reliability, service and price
Ans. True
3. Supply chain management:
a. Means procurement only b. Means delivery to end customer only
c. Means transportation of good only
d. Means linking the supplier to the customers
Ans. (d) links suppliers with customers
4. State true or false. there are standard best indicators of performance that can be used for
any firm
Ans. False
5. In aftermarket supply chain which of the following can be considered as logistics sectors
with reference to selecting the measures of performance.
a. Stock holding
b. Warehousing
c. Distribution
d. Customer ordering
e. All of above
Ans. (e) all of above
6. Five phases of benchmarking methodology may be scheduled as:
a. Planning-analysis-integration-action-maturity
b. Planning-integration analysis-action-maturity
c. Planning-integration-action-analysis-maturity
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d. Planning-analysis-action-integration-maturity
Ans. (a) Planning-analysis-integration-action-maturity
7. Benchmarking helps in:
a. Identify the key criteria important to a particular market sector
b. Evaluate importance of each factor
c. Score the companies and sector as a whole to identify the performance gap
d. All of above
Ans. (d) all of above
8. Which of these is not an input to benchmarking process?
a. Customer demand
b. Political change
c. Cost savingd. Identification of best practice company
Ans. (c) it is a benefit gained out of benchmarking
9. Benchmarking helps us:
a. To know our competitors better
b. Become proactive
c. In continuous improvement
d. All of above
Ans. (d) all of above
10. Some of the limitations of benchmarking can be:
a. Data comparability and relevance
b. Resources and time
c. Identification of suitable benchmark companies
d. All of above
Ans. (d) all of above
11. Scope of SCM lies in:
a. Procurement order
b. Manufacturing order
c. Factory order
d. Distribution order
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e. Customer order
Ans. All of above
12. In planning stage the questions to be answered are:
a. What to benchmark
b. Whom to bench mark against
c. Both (a) & (b)
d. None of above
Ans. (c)
13. The tasks involved in action stage are:
a. Establish functional goals
b. Recalibrate benchmarks
c. Communicate benchmarking findingsd. Both (a) & (b)
Ans. (d)
14. The most critical stage in methodology is:
a. Internal evaluation of company
b. Analysis of customer requirements
c. Identification of critical measures of performance
d. Identification of best practice companies.
Ans. (c)
15. State true or false. Glosup analysis is consistent with the GCI Global KPIs but can
provide a deeper assessment by working at a more detailed product level
Ans. True
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Part II: Case StudyBrightpoint: A bright point in your supply chain
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Brightpoint: A Bright point in your supply chain
Brightpoint India Pvt. Ltd (BPI) started its operations in 2003 with the distribution of Nokia
2280 CDMA. It is a subsidiary of Brightpoint Inc, IN, USA. Brightpoint is globally present in 28
countries and deals in distribution of wireless devices. Brightpoint boasts of efficient and flexible
systems as its strength. BPI operations working efficiently till now may fall short at standards
with the companys ambitious growth and expansion plans in the pipeline. Its staff may get
overburdened due to some redundant and unproductive procedures adopted as standard operating
procedure over here
Robert Laikin, in 1986 started with Century Cellular Network Inc., with retail of cell phones (car
phones) and charging customers as less as $500 from its competitors in a small city of
Indianapolis, IN, USA. The wireless technology has proved itself to be the fastest growing
consumer product of the century, with this tremendous growth manufacturers became short of
supply, their focus was on developed urban markets as a result retailers like Cellular Inc had to
wait for quite a long before they were supplied the phones.
Dismayed by this practice, Laikin decided to establish the wholesale business in order to supply
retailers like Century at cheaper prices by making bulk purchases from manufacturers. Hence in
1989 Laikin in partnership with Daniel Koerselman founded Wholesale Cellular USA. Its
strategic location in the Midwest helped Wholesale to grow even faster with manufacturers now
preferring new markets outside big urban markets. Laikin kept wholesale cost to minimum andmade sure to pay the manufacturers promptly for all orders, so that he would be on the top of
their priority list whenever there was a shortage of supply. Wholesale was able to take over the
major market share due to its enormous buying volume, undercutting the competitors prices.
Within a year of its incorporation, Wholesale had sales of $12 million.
With an efficient management, sufficient financial resources & great flexibility wholesale was
able to survive in an Industry driven by rapid technological change, cut throat competition,
constantly falling prices and hairline profit margins. In april 1994, Wholesale went public, in july
J Mark Howell was appointed the executive VP in charge of Wholesales financial operations,
administration, information services and HR. by this time Wholesale was focused on
international expansions and started operations in Chile, Argentina, Columbia, Mexico, Israel,
India (a JV with Pertech Computer Ltd), Latin America. By 1995 10% of Wholesales total sales
were from international markets.
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Wholesale maintained its market position as independent supplier by not striking any contractual
deal with a single manufacturer. Apart from distribution Wholesale also provided services like
custom phone labeling, branding & packaging. As Wholesales business expanded far beyond
distribution, Laikin started searching for a new name to reflect the companys growing scope and
potential. In September 1995 Wholesale was officially named as Brightpoint Inc.
On the strength of Brightpoints 91% return on equity, Forbes Magazine ranked it among the top
three Best Small Companies in America in 1995. Year 1996 may be considered as one of the
most glorious years in Brightpoints history where it saw a lot of acquisitions and expansions. By
1996 Brightpoint has become the second largest US cell phone distributor with the acquisition of
Allied Communication Inc. (the then number four).
Brightpoint Inc Today:
Today Brightpoint operates in three regions with its 28 subsidiaries. The three regions are:Americas (North America, Latin America, Columbia & Guatemala)
Asia pacific (Australia, Hong-Kong, India, New Zealand, Philippines, Singapore)
EMEA Europe Middle East Africa (Austria, Belgium, Denmark, Finland, France, Germany,
Great Britain, Italy, Netherlands, Norway, Portugal, Russia, Slovakia, South Africa, Spain,
Sweden, Switzerland, UAE)
It is one of the worlds largest distributors of wireless networks in the world. It has been included
in the list of Fortune 500 Companies in 2009 and has been accredited as Fortune worlds most
admired companies in 2007, 2009 & 2010. They support 25000 B2B customers globally and
handled 84 million wireless devices worldwide in 2009.
Brightpoint India Pvt. Ltd:
In late 1995 Brightpoint formed a JV with Pertech Computer India, the then leader in Indian
Computer Industry & started with the distribution of mobile phones, pagers & other wireless
network devices, but due to financial crunches and various irregularities in PCL, it wound up in
1998.
Brightpoint Inc. registered its subsidiary Brightpoint India Pvt. Ltd. on 3 rd July 1998 with
registered office at New Delhi. But it was only in 2003 when company started its operations in
India with the Distribution of Nokia 2280 CDMA (Reliance Infocoms own a phone in just Rs.
500 scheme). Persequor Limited provided management services to BPI and had 15 % shares in
the Indian Subsidiary, these services were terminated in 2006 and Brightpoint had acquired the
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Operations at Brightpoint India Ltd.:
The hierarchical structure for operations department at
BPI:
The
major
functions
performed by operations department are: Raising the Purchase Order Looking after Imports Processing Customer Order (release, invoice and dispatch, arrangement of various road
permits and other required forms as per state regulations) Maintain Stock Count Material Receipt Internal Stock Transfer Purchase and Sales Return (reverse logistics)
The ERP system used in Brightpoint globally is IFS (Industrial finance system) along with it a
serial tracking software developed by Brightpoint IT team is also used to keep a track of location
of the material based on its ESN. The ERP system supports all the above listed functions except
the internal stock transfer which is done with the help of XPP.
Third party logistics service provider:
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It must be noted here that BPI has appointed a third party logistics service provider (Gati) to look
after their warehousing and transportation operations. To reach to its customers faster and
efficiently currently BPI is working with warehouses in 22 locations with a pan India presence.
Company consider it wise to operate with 3PL as the space requirements at most of the locations
is less (due to high cost but less volume nature of product) so it is better to have shared services.
Along with the cost benefits this model come with some disadvantages also as the BPI
management control is reduced on material movement.
Although deliveries at customer end are going fine with an average of 93% deliveries on time
(see annexure for sample hotline report May 2010) frequent problems are faced in case of
internal stock transfers where in product has to be transferred to distant locations ultimately
leading to delay in fulfilling customer order. One can easily find operations people arguing and
shouting on phones to Gati people due to such delays. Moreover due to difference in culture andsystems of the two organizations the process adaption and standardization becomes difficult. 3PL
is using some other software and different reporting methods so integration of data becomes
difficult a lot of work has to be done manually in order to create the required reports which can
be of more than 2000 rows of a excel sheet hence increasing the risk of error. The relations with
current service provider are not going so smooth and management is considering switching to
other 3pl.
Customer order processing:
Customer order (for detailed procedures refer annexure ) is obtained in two forms online and
manual. In case of online order the CO is directly punched into IFS taking care of the delivery
address and tax rates but for manual CO the operations executive manually enters the part code,
quantity and other required details for invoicing taking care of the stock available at respective
site. This means if the stock is not available at a given site the order will not be punched or only
partially punched such that no partially delivered back orders are created in the system. Then
sales department maintains a record of partially fulfilled customer orders and a list is provided to
the operations to punch those orders again (it is quiet possible that stock again is not available).
This reserve an employee for unproductive work (maintaining pendency) moreover it is waste of
time for operations also as they again have to punch the order in to the system.
E.g. on 18 may 2010 an order from The Mobile Store was received at 6:20 P.M so it was
punched on 19 may morning. But some of the orders (such as order no.94683 Orissa, 94690 AP,
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94730 Chandigarh, 94731 Rajasthan) were cancelled due to unavailability of stock at respective
locations.
Then again these orders had to be punched on 21 may according to a pendency list provided by
sales.
What happened here is the operations executive had to practically punch an order twice, because
in first instance when order was cancelled the executive had already invested the time which he
takes for order punching but had to cancel it when he found stock deficient then again same order
is punched on a later date.
Also here is manual interference in order processing which could lead to errors such as one could
miss out a partially delivered order.
The possible solution could be that order must be punched as it is received and if the stock is
deficient it may go to partially delivered list (as it is done in online order case or sometimes inmanual case also).
But the problem here is once an order is approved by finance with status released the
money of the customer is blocked for that order even if the stock is not available and hence
cant be used for orders of location where the stock is available (e.g. in case of a OT if order
is for say Delhi and Orissa and stock is unavailable at Orissa but it is released by finance with
amount say 5 lakhs and now Delhi order is punched with value say 5 lakhs where stock is
available but the credit limit available with OT is 5 lakhs only so both the orders would be
blocked one due to stock unavailability and other due to finance unavailability)
Hence it is considered better to waste some time than to make customer suffer.
Manual Tax Rate Selection:
While punching a customer order the tax rate has to be selected manually. Due to a very complex
tax structure of India, the tax rate varies with state and also with product; rate also varies with the
cost of the product. Presently IFS selects the tax rate options based on the location but executive
has to select the tax rate product wise. This poses a great threat of manual error as executive will
have to remember the tax rates. Moreover say, if a new executive is appointed for order
punching, this threat becomes even more serious.
On closely looking at the customer order processing system, it is seen that each invoice is first
saved in a folder on local hard disk and than manually mailed to the respective location
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warehouses. As no integrated warehouse management system has been installed in the
warehouses.
It was often said that there remains a delay in order processing due to which customer orders do
not get fulfilled in time. Although operations maintains a delivery time tracking report and
according to that report on an average about 93% of orders are dispatched within three days of
receiving order, but this data only tells about the orders that are punched. As already mentioned
many a times the stock deficient orders are not punched hence cant be tracked.
Summarized Delivery time tracking report
On manual observations for a week the main reasons for delay were found as:
1. Approval pending from finance
2. Stock unavailable at respective location.
3. Order received in the evening (after the systems have shutdown)
After tracking 30 customer orders (one CO may have a number of orders) it is found that 4 of
them were delayed due to overdues and no approval by finance. But in all the cases the delay was
of the order of an hour or so. That means the order was processed on the same day as punched.
Out of more than hundred orders tracked it was found that a few were canceled due to stock
deficiency and a significant number of orders were partially billed. Due to which the pendencyrate is very high. This seems to be an area of biggest concern.
All the orders that are received in the evening start getting processed by 11:00 a.m the next day.
Here we found that delay due to finance approval is not in control of BPI, it depends on the
customer to a larger extent, moreover it doesnt comes under the purview of Operations hence
liberating us from the accountability of the delay.
Dec-09 Delivery% Cumm. Jan-10 Delivery% Cumm. Feb-10 Delivery% Cumm.Total Nos. of
Delivery 1461 1737 2093 Time0 Day's 82 6 6 87 5 5 45 2 21 Day 613 42 48 595 34 39 845 40 432 Day's 468 32 80 628 36 75 588 28 713 Day's 239 16 96 367 21 97 488 23 944 Day's 18 1 97 10 1 97 94 4 985 Day's 26 2 99 7 0 98 0 0 986 Day's 7 0 99 2 0 98 25 1 100
7 Day's 1 0 100 15 1 99 2 0 100> 7 Day's 7 0 100 26 1 100 10 0 100
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This order processing tracking project suggested that as the capacity is currently underutilized
(four executives work on order processing three of them are fully dedicated to this work), no
order is delayed due to manpower reasons. Major reason that came to light was stock shortage.
Purchase order planning:
It was also pointed that operations play no role in planning a purchase order it is only sales
people who based on their sales forecast prepares the purchase order. Micromax is currently the
highest selling brand (by volume) with BPI, it was also observed that Micromax doesnt
precisely stick to the given purchase order which leads to disturbance in inventory management.
MIS reports:
Operations in order to attain a better control over the customer service maintain various tracking
reports such as master file (purchase order tracking file), hotline report (delivery tracking from
invoice date), delivery tracking report (from order punched date), sales MIS, Stock Count Report(location wise).
Most of these reports are generated through IFS and converted to excel format for further editing
according to there usage. Redundancy of data is found in these reports, a large amount of
information has to be copied from one place to other, moreover some data is required from 3pl
also that data is received by mail and fitted to the BPIs required format. E.g. master file is
partially generated by IFS and then the receipt data has to be entered to it based on GIN received
(this GIN is received from warehouse) also the sheet have to be updated by copying data from
open purchase order report. Similarly for maintaining a hotline report waybill no. and delivery
date is required from 3pl hence a partial report is generated by IFS and is completed manually.
XPP was designed for warehouse management purposes but company is not able to implement it
in the warehouses till yet, hence operations staff at corporate office has to maintain XPP also.
In case of receipt process also the goods inward note is received at corporate office from each
warehouse and here the gate entry is performed for each warehouse which actually should be
performed at receiving warehouse. Similar is the case of internal goods transfer.
With ambitious expansion plans in the pipeline and work load on the staff set to increase, the
above problems if go unattended may cause hindrance to the efficient working of Brightpoint
which has been the strength of the organization globally since its inception.
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Annexure 1
Customer order processing:
Yes
Yes
No
N
o
Stock is reserved and it getsadjusted in IFS
Now the CO is ready forreport picking or getting
invoiced
CO will bereleased/partially
delivered in IFS
Is stockreceive
d?Released CO awaits inback order list of IFS
Invoice is generated andsaved in the dated folder
under invoice folder oncommon hard drive
The invoices are thenmailed to respective
warehouses of 3Pl formaterial dispatch
Operations check forCO (either online or
manual)
Manual
Online
Order punched(planned) in IFS by
entering productdetails and quantity
Order appears incustomer order list of
IFS and can be directlyplanned there
Planned order wait forfinance approval (once
approved the order is saidto be released)
Operationscheck if stockis available atthe respective
location inIFS?
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Annexure 2
Purchase Process:
Sales dept. request
for raising PObased on the sales& sales forecast
Doesproduct
codeexist in
IFS?Operations
generate code andmaintain systemgenerated form
Operations generatePO based on Salesdept. requirements
No
Director OperationsSign the PO
Goes to salesdept. for
resolution
Approved byCFO?
No
Yes
PO is mailed to
supplier & respectivewarehouse isinformed of the PO
raised
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Annexure 3
Receipt Process:
Material is received at thewarehouse based on the PO
sent to the supplier
Goods Inward Note isgenerated at the warehouse
Soft copy of GIN along withpick list (list of ESN) is mailedto operations by warehouse
Gate entry is performed atthe respective site in IFS and
the stock is updatedsimultaneously the inwardnote start appearing in XPP
The picklist is then used to
fulfill the note in XPP; hencethe material is entered to a
respective site
Hard copy of GIN, Invoice &related forms is also sent to
operations