Unit 3: Supply Chain Operations and Coordination

Supply Chain Operations and Coordination

Supply chain operations involve planning, sourcing, making, delivering, and returning products across multiple partners. Effective supply chain performance depends on coordination among suppliers, manufacturers, logistics providers, distributors, and retailers.

Coordination Mechanisms & Collaboration Among Supply Chain Partners

Supply chain coordination ensures all partners work as one integrated network, not as separate companies.

A) Why Coordination is Needed?

Without coordination, companies face:

Excess inventory
Stockouts
Bullwhip effect
Higher costs
Longer lead times

Coordination solves these issues by improving communication and data sharing.

B) Key Coordination Mechanisms

1) Information Sharing

Partners share real-time data on:

Demand forecasts
Sales data
Inventory levels
Production schedules
Shipment status

Tools: ERP, EDI, IoT, Blockchain, Cloud platforms
Benefit: Reduced uncertainty and demand variability.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

A joint planning approach where:

Retailers share POS (point of sale) data
Manufacturers plan production together
Replenishment is automatic

Example: Walmart & P&G use CPFR successfully.

Vendor-Managed Inventory (VMI)

Supplier manages inventory at customer’s warehouse.

Benefit:

Lower stockouts
Higher supplier-customer trust

Examples in India: Maruti Suzuki & its Tier-1 suppliers.

Strategic Partnerships

Long-term contracts for:

Technology sharing
Joint new product development
Shared investments
Transportation collaboration (milk runs)

Financial Coordination

Partners share costs & risks:

Profit-sharing contracts
Revenue-sharing
Buyback or return contracts

Logistics Collaboration

Shared use of:

Warehouses
Transportation fleets
Distribution centers

Example: FMCG companies sharing warehouse space with logistics providers like Delhivery.

Types of Supply Chain Collaboration

Type	Characteristics	Example
Transactional	Short-term, price-based	Commodity suppliers
Collaborative	Joint planning, forecasting	HUL & rural distributors
Strategic Partnership	Joint investments, technology sharing	Tata Motors & Cummins
Integrated SCM	End-to-end integration via digital tools	Amazon, Reliance Retail

Role of Indian Logistics Infrastructure & Regulatory Factors

India’s logistics performance directly affects supply chain efficiency.

A) Indian Logistics Infrastructure

1) Roads

6.3 million km network
Backbone of road freight movement
Issues: congestion, poor last-mile connectivity

2) Railways

Indian Railways moving towards multimodal freight terminals
Dedicated Freight Corridors (DFC) → faster transit, reduced delays

3) Ports

Major ports:

Mundra
JNPT
Chennai
Vizag

Issues:

Port congestion
Slow customs clearance (improving with digitalization)

4) Airports

Air cargo hubs in Delhi, Mumbai, Bengaluru
Used for high-value, urgent shipments

5) Warehousing Infrastructure

Rapid growth of Grade-A warehouses
State-of-the-art logistics parks
High demand due to e-commerce and manufacturing growth

6) Emerging Infrastructure Projects

PM Gati Shakti National Master Plan
Bharatmala & Sagarmala
Logistics Policy 2022

These aim to reduce logistics cost (14% of GDP → target 8%).

Regulatory Factors Affecting Indian Supply Chains

1) GST (Goods and Services Tax)

Impact:

Unified national market
Reduced checkpoints
Consolidated warehouses
Faster interstate movement

2) E-Way Bill System

Reduces:

Delays
Manual inspection
Paperwork

3) Customs Reforms

Faceless assessment
ICEGATE portals
Faster clearance for exporters/importers

4) Make in India & PLI Schemes

Encourage:

Local manufacturing
Reduced import dependency
Global competitiveness

5) Labour Laws & Contract Regulations

Impact warehousing and transportation workforce.

6) Environmental Regulations

Affect:

Packaging
Waste disposal
Reverse logistics
Emission norms for vehicles

Supply Chain Performance Measurement

Performance measurement is essential for identifying areas of improvement.

A) Key Performance Indicators (KPIs)

1) Cost Metrics

Total supply chain cost
Transportation cost per unit
Warehousing cost
Inventory carrying cost

2) Service Level Metrics

On-time delivery (OTD)
Order fulfillment rate
Lead time
Customer satisfaction

3) Inventory Metrics

Inventory turnover ratio
Stockout rate
Days of inventory held

4) Operational Metrics

Perfect order rate
Supply chain cycle time
Capacity utilization

5) Quality Metrics

Defect rate
Return rate
Supplier quality rating

6) Sustainability Metrics

Carbon emission
Energy efficiency
Waste reduction

B) Performance Measurement Frameworks

1) SCOR Model (Supply Chain Operations Reference Model)

Evaluates supply chain on:

Reliability
Responsiveness
Agility
Cost
Asset utilization

2) Balanced Scorecard

Measures:

Financial
Customer
Internal processes
Learning & growth

3) Benchmarking

Comparing performance with:

Competitors
Industry leaders
Global best practices

Case Analysis: Supply Chain Coordination & Performance

Case: BigBasket – Indian Online Grocery Leader

Problem

BigBasket faced:

High last-mile delivery cost
Frequent stockouts
Delay in replenishment
Poor coordination with suppliers

Steps Taken (Coordination Strategy)

1) Joint Planning with Farmers

Long-term contracts with farmers
Daily sharing of demand forecasts
Direct procurement centers → reduced intermediaries

2) Logistics Optimization

Mini-warehouses near city centers
Dark stores for faster picking
Route optimization using AI

3) Vendor-Managed Inventory (VMI)

Selected suppliers manage inventory levels in BigBasket warehouses.

4) Technology Integration

Real-time order tracking
Automated inventory system
Mobile apps for farmers to update produce availability

Results (Performance Improvement)

Metric	Before	After
Stockout rate	18%	5%
Delivery time	14 hrs	6 hrs
Fresh produce wastage	30%	10%
Logistics cost	High	Reduced by 15%

Summary Table

Topic	Key Points
Coordination Mechanisms	Information sharing, CPFR, VMI, strategic partnerships
Indian Logistics Infrastructure	DFC, ports, airports, warehousing, multimodal connectivity
Regulatory Factors	GST, e-way bill, customs reforms, PLI, Make in India
Performance Measurement	KPIs, SCOR model, balanced scorecard
Case Study	BigBasket improved speed, reduced cost, better coordination