Monday, April 2, 2007

Potential market trend in Supply Chain sector in India - Supply Chain Process Outsourcing (SCPO)

Article on "Supply Chain Process Outsourcing (SCPO) in India"
Published - September 15, 2005 - SupplyChainDigest Newsletter - Logistics Edition

Importance of supply chain in India can be gauged from the fact that logistics cost is in the range of 10-12% of our GDP. As per the recent CMIE database, over Rs. 1,00,000 crores of total capital is tied up in inventories in industrial sector. This is close to 22% of aggregate industry sales. Besides this, all the industry brands are already in the Indian SCM sector.

Amidst a continuously growing market, as a next step, Indian organizations are looking or can look for new options like collaboration and coordination with their supply chain partners in US & Europe. Several key dimensions have emerged in the recent times namely - information integration, workflow assimilation, technology assimilation, synchronization, and trust to make supply chain integration.

Now coming to the topic on whether traditional supply chain jobs in planning & execution could be moved to India, I feel that following aspects/processes can be moved/outsourced to India.

1. Information Integration: Processes like shared demand information, inventory status, capacity plans, production schedules, promotion plans, demand forecasts, and demand schedules etc.

2. Workflow Coordination: Streamlining workflow activities among supply chain partners could be made possible by workflow coordination of a host of activities encompassing procurement, order execution, engineering change, design optimization, and financial exchanges.

3. Technology Assimilation: Entire supply chain integration can be based on a platform of technology-enabled network solution for sustained future prosperity. Supply chains should access the market through both physical channel and cyber-based channel to serve the needs of the consumer. Both channels should accentuate e-Commerce features to distinguish the supply chain in the eyes of the customer. Thus, all these cyber-based support can be easily outsourced to India.

4. IT based tools for Synchronization: IT Companies in India are already creating customized IT solutions for Supply Chain Industry in US & Europe, which are used in various phases in a Supply Chain network in these companies.

In a nutshell, I feel that the entire process of Supply Chain Management can be outsourced to India except the actual delivery part. Companies in India can emerge as a back end support for all the activities starting from planning to execution i.e. setting up the virtual infrastructure (technology based), providing back end support for the operations and finally handling the execution. Factors like low-cost & IT expertise would act as a catalyst to make this concept a reality.

However, as there has been a concern on outsourcing due to BPOs and emerging KPOs, companies and their executives would certainly not accept this concept right from the very first day. This concept is going to face lots of obstacles and barriers but it’s the call of the wave - no company could deny this fact that this move could save lots of money as well as enhance their supply chain network.

I am quite sure that very soon this vision will become a reality and India will be a hot destination for Supply Chain Process Outsourcing (SCPO).

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