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Supply Chain Management Centre

Indian Institute of Management Bangalore
not have supply chain issues that impact our brand’s perception in the market.’’

Vol. 2 No. 2 December 2010

Editors’ Note
We are happy to be releasing this year’s second issue of SCMC Digest, the Newsletter of the Supply Chain Management Centre at the Indian Institute of Management Bangalore. In this issue, we bring you articles by two international executives on topics of increasing interest in this region. Also in this issue is more information on our next major event, the Biennial Supply Chain Management Conference due to be held on 7-8 January 2011. You might have noticed that in our last issue, we have included news about research carried out outside IIMB that we thought would be of interest to our readers. We would like to bring you more such information about developments in research in Supply Chain Management in future issues. As always, readers’ reactions and feedback is vital to improve. Please send your views and suggestions on SCMC Digest and we would try our best to incorporate them in future issues. Happy Reading! Editors

PERSPECTIVE
Supply Chain Social Responsibility Requirements for Suppliers

Supply Chain Management
For decades, IBM has been committed to working with responsible suppliers. The company runs one of the largest, most complex supply chains in the world, spanning 28,000 suppliers in 90 countries. Engaging this many suppliers in social and environmental responsibility requires considerable resources. But IBM has embedded social and environmental checkpoints into every aspect of our procurement process and has for many years.
Industry Sector & Revenue Services 58% Software Hardware Global Financing Enterprise Investments/Other People 399,409 Employees Worldwide 22% 17% 2% 1%
$42.3 B Global Supply BTO Managed Spend $9.5B Global Supply Spend (34% of Revenue) $32.8B $95.8 B IBM Revenue

by Mike Meaden IBM Global Procurement, Vice President, Services and General Procurement

Introduction
From its inception almost a century ago, IBM has been based on a set of fundamental values. IBM’s values shape and define our company and permeate all of our relationships--between our company’s people and our shareholders, our clients, the communities where our people live and work, and among our network of suppliers. Corporate Social Responsibility in IBM • Governance and Financial Accountability • Corporate Community Relations • Environmental Affairs and Product Safety • Global Human Resources • Supply Chain Management • Governmental Programmes IBM’s commitment to social responsibility is part of our heritage and is reflected in the recently published Corporate Responsibility Report.

IBM Global Supply Spend Profile
2009 Services & General Procurement Spend by Category
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IBM Supply Chain Social Responsibility (SCSR) is part of IBM’s Corporate Citizenship activity. It is a requirement for all IBM suppliers who are viewed as an extension of IBM’s brand and is supported by the Chief Procurement Officer and Procurement managers/staff. In the words of John Paterson, Chief Procurement Officer, “SCSR is not optional; it is a requirement for IBM suppliers. IBM has the second most valuable brand name in the world and we can

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This article is based on “Commitment to Corporate Responsibility - Requirements for Suppliers”, a presentation made by Michael Meaden, VP Services & General Procurement, IBM at the “2010 North American Conference - Unlocking Your Operations Potential” on June 21-23, 2010 at Dearborn, MI, USA.”

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Disclaimer: The views expressed in this Digest represent the authors’ personal views and they do not represent the official views of their organizations, the SCM Centre or the Indian Institute of Management Bangalore”.
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The SIP receipt is driven through the procurement organization and is reviewed by IBM’s Supply Chain Social Responsibility (SCSR) team. which require substantial commitments of time and resources from both customer and supplier. we are eager to make gains in the area of supply chain social responsibility. and ongoing monitoring of performance against goals. Strong social responsibility in the supply chain is very important to IBM. Business leadership in today’s interconnected global marketplace means. we have a responsibility to hold ourselves . 2 December 2010 Supply Chain Social Responsibility Program Within our supply chain relationships. More importantly. If problems areas are identified. for objectivity and consistency. The GS S&EMS also requires suppliers to have their own social and environmental management system and for them to cascade these requirements throughout their supply chain. Monitoring/record keeping 60 Minor 80 100 % Non Compliant to IBM code Supplier Improvement Plans Upon completion of a social responsibility audit. we know that our company’s sizable purchasing power is a unique resource that we must manage responsibly. they will improve their individual performance and results.Vol. Yet more than managing our spend.to high standards of behavior. This paves the way for a standards-based approach to monitoring suppliers’ compliance across several areas of social responsibility. New Supply Chain Management System Requirements: IBM’s suppliers are now expected to establish and maintain a management system under which they manage their intersections with the environment and other aspects of corporate responsibility. the SCSR team is able to work with the supplier and offer guidance regarding the proposed improvements and their likely impact toward code compliance. That’s why IBM. Re-audit is conducted in 6 – 9 months. The supplier will benefit. with the help of our suppliers. Communications 13.and our suppliers . These principles establish for our suppliers the minimum standards we expect from them as a condition of doing business with IBM. l l One of IBM’s key objectives is to help suppliers build their own capacity to effectively manage their responsibilities in a way that is long-term. As an organization. This integrated management system enables us to more efficiently and effectively manage — and continue to enhance — our programs and performance in these areas to promote IBM’s ongoing leadership as a premier provider of goods and services that meet high standards. Hewlett Packard. These efforts. We can not have supply chain issues that impact our brand’s perception in the market” John paterson. it means striving for continuous improvement. internal and external communications efforts. Forced involuntary labor Child labor Wages and benifits Working hours Nodiscrimination Respect and dignity Freedom of association 8. as a practical matter. IBM’s suppliers now must: l Define. Supplier Audit Results . 1. The supplier is then re-audited to measure improvements and compliance l Global Supply Social and Environmental Management System In 2009 we consolidated our existing social and environmental requirements involving supply chain management into a single comprehensive Global Supply Social and Environmental Management System (GS S&EMS). 7. however. and a number of large electronics manufacturing service providers have released an Electronic Industry Supplier Code of Conduct.deploy and sustain a management system that address escorporate responsibility. IBM’s Supplier’s Conduct Principales (SCP) IBM’s suppliers are required to comply with all 13 elements of its SCP Supplier Audits Suppliers’ Adherence of Supplier Conduct Principles is assessed by Audits. The SIP is intended to address audit noncompliance — to the respective provisions of the code of conduct — with priority given to major noncompliance. The new system better enables consistent execution of the requirements and programs by Global Supply employees worldwide. But it goes beyond that. ultimately benefit the many employees engaged in the extended supply chain. 5. it is a requirement for IBM suppliers . 2 No. including labor. and management systems are generelly not well devolepd 40 Significant . 3. These statistics illustrate the value and commitment of pursuing this work with our suppliers. quantifiable environmental goals Publicly disclose results associated with these voluntary environmental goals and otherenviromental aspects of their management sytems Cascade requirements to the supplier’s suplers who perform work that is material to the products. “SCSR is not optional.Global Cumulative (2004-2009) (base = 600 + suppliers) Health & Safety Working Hours Wages & Benifits Respect & Dignity Communications Record Keeping Nondiscrim Environmental Child Labor Forced Labor freedom Assoc Ethical Dealings 0 20 Industry Collaboration No company is an island. The implementation of this new system includes training and awareness programs. 6. in turn. Laws. We expect our suppliers to apply these principles not only in their own companies but to their extended sources of supply engaged in the production of goods and services for IBM will have the right to take action with suppliers that fail to comply with these principles. safety. Supplier Improvement Plans are required and tracked. as will the entire supply chain and the world. Health and safety 9. IBM’s Supplier Conduct Principles Core to our Supply Chain Social Responsibility program is the establishment of a set of Supplier Conduct Principles which outline the requirements for doing business with IBM. including regulations and other legal requirments 11. Protection of the environment 10. finding a way to influence all supply chains-not just your own-to adopt a common set of standards for socially responsible behavior. . We intend to work with our suppliers to help them achieve full compliance to these principles. IBM’s commitment includes doing business with responsible suppliers. This initiative is about working with suppliers to foster a common understanding of what socially responsible business practices are. sustainable and integral to their routine business operations. IBM believes that by raising suppliers’ awareness of their own accountability. and environmental impact. Our goal is to work with our suppliers to foster full compliance as they. This means complying with all applicable laws and regulations. apply these to their extended sources of supply engaged in the production of goods and services for IBM. including terminating our relationship with them. In this manner. health. parts and/ or services beingsuplied to IBM. Dell. . Ethnical dealings 12. Chief Procument Officer 2 . We consider these principles and adherence to them in our selection process and seek ongoing compliance by actively monitoring performance. A Third Party audit firm has been contracted for the assessments. 2. and then aligning the interests of all constituencies around industry standards to encourage soundpractices of social responsibility in the A number of issues are seen in most Grouth Markets. 4. IBM’s Supply Chain Social Responsibility Program formalizes a number of past initiatives into a comprehensive plan that has been implemented across our global network of suppliers. including supplier conduct and environmetal protection Measure performance and establish voluntary. and we do. IBM requires its audited suppliers to create and submit for review a Supplier Improvement Plan (SIP). It entails a strong commitment to work with suppliers to encourage sound practices and develop sound global markets. new procedures to maintain operation control.

1). the importance of effectively operating multiple supply chains should to be taken as a given. When operating in a highly-competitive and rapidly-changing international environment. BAES MAS took the decision to further develop this capability and formed a Supply Chain Strategy team. With a global supply chain diversity program that has been in place since 1968. Mr. IBM accepts this code as an alternate to IBM’s existing Supplier Conduct Principles. Mike Meaden joined IBM in 1984 as a production planner. rapid engineering. and has held 6 dfifferent executive positions wihtim S&GP over the last seven years. BAE Systems Military Air Solutions (BAES MAS) operates in just such an environment and is currently deploying coherent supply chain strategies to both optimise its existing supply chains and also to underpin its business aspirations for the next 10-15 years.500 people across 23 separate locations. both inside and outside the United States. For the purposes of this article it has been appropriate that I exclude any reference to specific BAES MAS business objectives/ targets. false starts. and developing capabilities to meet the future demands on the business. with a turnover of ~£4bn. In addition. they add significant value. the company has initiated a Mentor Program to facilitate the development of diverse suppliers. a focused vision. In the case of BAES MAS. Initiating some ‘Actionable first Steps’. To ensure that the supply chand strategtes were seen to be relevant to the future of the business it was necessary that the supply chain strategy team: 1. Nimrod MRA4. and in 2000 he was appointed Director of Production Procurement Sourcing. He held various management positions within Production Procurement. This initiative grew from external engagement with environmental NGOs that brought our attention to issues surrounding nonsustainable logging of old-growth and virgin forests. maintenance. 3. smelting and blending masks the identification of the original source of the materials — thus creating a significant challenge to the ability of end users to understand (with full clarity) where the materials originate. and the varied scope of supply chains supporting the aircraft platforms. responsible for further aligning the supply chain strategies operating across the various BAES MAS lines of business. Recognising the diversity of BAES MAS’s business portfolio. Because diverse suppliers are typically smaller and more nimble. BAES MAS employs approximately 15. and ideas to address increased use of sustainably sourced wood-based commodities. the potential for conflicting supply chain strategies is very real and increasingly demands an integrated and coherent approach to minimise any conflict. and Taranis). processes. Hawk. we grew usage of sustainably sourced materials from 40 percent to over 95 percent of our global demand. by Phil Humphreys 1. Remove any one of the elements and you can be assured of low priorities. In 2008. the ‘Pressure to Supply Chain Minerals Identifying and mitigating the use of so-called conflict minerals throughout the electronic supply chain is an ongoing work effort. manufacturing. he joined Services and General Procurement (S&GP). working in conjunction with our suppliers. Harrier. But IBM doesn’t just contribute to the advancement of diverse businesses by contracting with them. it was time to set-out a robust and coherent set of supply strategies that would be a key enabler for future business success. minimal action. Paper-and Wood-based Packaging Over the timeframe of 2004 to 2009. critical to delivering successful supply chain transformation. BAE Systems. and by utilising what has subsequently become known within BAES MAS as the ‘Supply Chain Wheel’ (see Fig. IBM also participates in international organizations focused on supplier diversity. Taking each of the four elements in turn. Military Air Solutions Definition of supply chain: “An integrated system of functions. operating a through-life portfolio across sixteen aircraft platforms (including Typhoon. defining our longterm supply chain strategies. Ensured that the business had the ‘Capacity to Change’. and his three children. systems integration. vision and strategic objectives have to form the foundation for the strategic and tactical approach for supply chain. Forming the BAES MAS Supply Chain Strategy Team BAES MAS has invested in the strategic development of its supply chain capability throughout the last decade. l Supply Chain Diversity IBM has long been considered an industry leader in supply chain diversity. Michael (11). we transacted $2. F35 Lightning. and still is. information and resources that adds value to the two-way flow of goods and information between source and user”. Mike currently lives in New York with his wife Mary Anne. As ores move through the supply chain. although the four-step approach should be suitable for utilising in the majority of business environments. Introduction Director Supply Chain Strategy. people. and actually got on with transforming the supply chain activities by 4. we are successfully optimising existing performance levels. and relative failure. together with Portfolio 3 . a mature set of Strategic Objectives (covering period 5 years+). In 2009. repair & upgrade. Clearly articulated Change’. 2. and as a consequence secured significant new business and positioned itself to secure further business in partnership both with UK and International customers. Tornado. which promotes economic and cultural stability in local communities. The following is a short case study of how this challenge is being addressed by BAES MAS. including a tow year assignment in Hong kong as the Director of Asia Pacific Sourcing. Patrick (7) and Anna (5). Successful management of the four elements was. IBM has consistently encouraged and embraced businesses owned by diverse groups. FOCUS Pre-requisites for a coherent supply chain strategy 2. Against this backcloth. and has long been recognised as a pre-requisite for achieving business success. Step 1-Pressure to Change For a supply chain strategy to be relevant it has to be aligned to the strategic direction set out by the company. Developed a ‘Clear Shared Vision’. They also provide a diverse mix in our supplier base. and military training. we have a defined mission statement. In 2003. frustration. 3. In summary: BAES MAS has supplied most of the UK’s fixed wing fleet l Has a track record of partnering with the UK customer to support in-service aircraft l Has a long-established relationship with many international customers l Are a prime systems integrator l Has proven capabilities in prime contracting. The company mission.global marketplace.1 billion in First Tier spending with diverse businesses worldwide.

robust and sustainable l Effective Supplier management: To manage sources of supply strategically. The foundations were in place to take the strategy forward. and Performance Measurement). l l l l l Arising Rate Management Solution Development Supply Chain Design Inventory Optimisation Physical Logistics Capacity Management Asset Visibility & Tracking Supplier Management & Development Value Engineering Repair Validation Customer Returns Supply Chain Integration Export/Import Assurance & Governance l l We are progressively under-pinning the supply chain capabilities with an integrated capability model that incorporates consistent supply chain processes and capability development programmes. we have completed a full scoping of the required supply chain capabilities. As can be seen. When the ‘pressure to change’ together with the associated supply chain challenges had been fully quantified and agreed. process & infrastructure) are developed to meet the challenges. I know that it sounds obvious. Supply chain had been scoped. we found that a critical step was to define the scope of supply chain. Step 3 . and supply chain vision & imperatives understood by the BAES MAS business.Actionable Steps Taking the BAES MAS vision and strategy as the ‘landscape’. Step 2 . Supply Chain Governance. While others view supply chain as ‘Logistics’ or storage and distribution. Primary Customer Supply Bace Customer Interface Customer Partnerships Concept Assessment Demostration Manufacture In-Service Enabling BAE Systems Functions (Finance.Clear Shared Vision As part of developing a clear shared vision for supply chain within BAES MAS. l Figure 2 . all the way through our internal business structure and into the various tiers of our supplier base at the 4 . Effectively. but ignore this activity at your peril! Some consider supply chain to be the same as Procurement. the approach taken was both ‘top down’ and ‘bottom up’.Capacity to Change As I outlined in the introductory paragraph. it was necessary to provide BAES MAS with the capacity to make the change. together with the component capabilities. Stradgy) 0 1A 1B 2A 2B 2C Procurement 3A 3B 4 5 6 7 Maintenance 8 Manufacturing / Operations / Logistics Engineering Life Cycle Management BAE Systems Programme / Supply Chain Influence Tier-n Suppliers (SMEs) E2E Raw Materials END-TO-END SUPPLY CHAIN End-Users Logistics Network: To optimise the logistics network to support the ‘internationalisation of the business’. Sponsoring and supporting the generation and sustainment of the BAES MAS supply chain strategies and objectives Optimising the alignment and capability model and deployed cost coherence of supply chain strategies generated by the three lines of business Helping the three lines of business to exploit synergies and to identify risk within their supply chain strategies Promoting and facilitating supply chain innovation and best practice transfer across the lines of business. responsible for directing. With a formal business review process. as follows: Long-Term Planning: To align longterm supply chain planning. services and information across the end-to-end supply chains. we now have an integrated framework of strategic and tactical supply chain activities across the BAES MAS business. Leagle. and primarily about managing the external supplier base. and should be viewed as an end-to-end process that cross-cuts our internal functional boundaries. 2 December 2010 Actions (12 months+).e. we produced a detailed and focused set of supply chain strategies and objectives. we simplified the message for the broader BAES MAS business by issuing a small number of ‘strategic imperatives’ (i. We now had the wherewithal to take the supply chain strategy forward. By ensuring that Supply Chain activities are explicit within several of the BAES MAS Strategic Objectives Actions has enabled the associated supply chain challenges to be clearly articulated. HR. Supplier Management & Development. below). this goes way beyond the more traditional definition of supply chain. l l l Acting as the focal point for BAES MAS supply chain strategic outputs. The reality is that supply chain is much more. in support of our supply chain strategy. To ensure that the required level of change was realised. Supply Chain Capability. imperatives to be owned and facilitated by the broader BAES MAS business operation). Step 4 . In summary.Supply Chain Scope within BAE Systems MAS 5. designated owners for all the strategic supply chain objectives and the under-pinning initiatives. delivered through three separate lines of business. Accountabilities included: l In support of this “factory to fox-hole” approach. 2 No. 4. l Technology Infrastructure: To develop a technology infrastructure that provides a clearview of the flow of products. Comms. Designated senior business and functional stakeholders became component parts of the BAES MAS Supply Chain Steering Board. make vs buy strategy and operations planning l Segment Customers: To recognise customers’ different needs and to adapt supply chains to deliver these requirements l Supply Chain Solutions: To ensure that supply chain solutions are lean. we had a solid foundation for progressing our supply chain strategy. we had the ‘capacity to change’.Vol. Supply Chain challenges might include any of the following examples: other end of the spectrum (see Fig. at the same time incorporating our customers (and end users) at one end of the spectrum. 2. and we are progressively embedding what we refer to as ‘under-pinning’ supply chain activities (these are the more generic supply chain projects/initiatives such as: Logistics. BAES MAS operates a broad product portfolio.IT. and for BAES MAS includes ‘end-to-end’ capabilities such as: l l l l l l l l l l l l l l l Implications of transferring supply chains to other parts of the world Re-shaping industrial models to support ‘internalisation’ of the business Ensuring that the future relationships are in place with strategic partners / suppliers Identifying who you consider to be the ‘Industry Shaping’ partners Understanding how you will be able to operate multiple international supply chains Ensuring that supply chain capability (people. Strategic supply chain objectives were aligned to specific elements of the BAES MAS strategy. Having defined the scope of supply chain. managing and sustaining the supply chain strategies in support of the BAES MAS vision and strategy. 6. all of which will be key enablers to achieving the BAES MAS strategic objectives.

002 0. wheat. which is both a central and important location in India. Lancashire. These cities which regularly figure in the solutions cover all regions of the country.DEFINE THE PRESSURE TO CHANGE • Align to company business strategy and vision • Clearly define your supply chain challenges based on company business strategy STEP 2 . He has worked within the Aerospace industry for 32 years. In a sample of solutions for 36 sample cases. However. 16 cities figured in DC locations in at least 50% of the cases. Consumer electronics like CTVs valued at 1500 Rs/kg. In summary. this assumption can be relaxed. There have been many approaches to determining optimal location of DCs. The Central Warehouse is assumed to be located at Mumbai.01 0. Current performance is measured against the following success criteria: l Managing a single process for the maintenance and development of the supply chain skill base l Ensuring consistent supply chain solutions that exploit cross-business synergies l Ensuring that supply chain capabilities are developed based on the supply chain effectively across the BAES MAS business l Accelerating the enhancement of the end to-end supply chain performance l Providing a framework for the effective management of supply chain resources and processes l Providing a training infrastructure for supply chain specialists l Minimising the risk of duplicate investment The process outlined in this article has proved to be invaluable to BAES MAS.000 /yr. To minimize the impact of differential sales tax. and if adopted can be utilised and modified to suit localised requirements across a wide range of business environments.01 kg/person/yr to 0. Given the rising product variety in recent times.005 0.02 0. both and combination Facility Costs were reckoned at a fixed Rs 100.5 kg/person/yr and Consumer Electronics – 0.inventory.0. rice.1 kg/person/ yr to 5 kg/person/yr. Most commonly occurring hub locations were found based on the road network in India. Groceries like sugar. a DC can serve more than one demand point. To the existing main components of logistics costs in India . From the initial scoping of tactical supply chain activities. These locations can be developed as transport hubs.1 0. and currently leads a supply chain strategy team based at Warton. incorporating both strategic and tactical ‘under pinning’ supply chain projects • Define overall supply chain strategy • Embed supply chain reporting framework STUDENT PROJECTS Optimally Locating Distribution Centers by Atif Hussain.001 0.5 1 2 5 Groceries (15 Rs/kg) A 10 13 20 23 29 37 B 10 17 27 38 53 76 FMCG (150 Rs/kg) A 1 3 6 12 15 20 B 4 8 12 21 27 38 Electronics (1500 Rs/kg) A 0 1 4 7 10 16 B 2 7 11 16 25 33 - Phil Humphreys is the Director of Supply Chain Strategy for BAE Systems.05 kg/ person/yr. the solution gave lesser no. For the distance metric. Conclusions It has been a two-year journey for the BAES Supply Chain Strategy team. using a deterministic demand structure.2 0. a fourth component of cost -Loss of Revenue due to delay in servicing has been introduced. of facilities. That said. the process has not been without its challenges. Revenue loss due to Secondary leg of transport not properly formulated. Research typically ignores multiple levels of DCs. and pulses with 15 Rs/kg. For each product type.000 /yr + 0. distances between each pair of cities was used. Scalability is affected due to the complexity of the problem. the process checklist reads as follows: PROCESS CHECKLIST STEP 1 . a 2-step algorithm using Dijkstra’s algorithm to find shortest paths from source to all DC nodes. Military Air Solutions. England A – fixed Facility Cost + variable Handling Costs B – fixed Facility Cost only 5 .001 kg/person/yr to 0. This project studies outbound logistics.DEVELOP A CLEAR SHARED VISION FOR SUPPLY CHAIN • What is the scope of supply chain within your business? • Define your supply chain vision(s) • Define the ‘strategic imperatives’ required to underpin the supply chain strategy STEP 3 . Student of Post-Graduate Programme 2007-09 One of the important drivers of distribution strategies of Indian firms is the complex taxation structure consisting of central sales tax (CST). It is assumed that a demand point can be served by one DC only. wherein shipping is done by road from a Central Warehouse through Distribution Centers (DC) to Retail Outlets. obtaining a tree structure for the distribution network. The gradual phase out of Central Sales Tax and introduction of uniform tax structures call for restructuring of the Supply Chain Processes within the industry. the algorithm needs to be extended for distribution of multiple SKUs.ENSURE THAT YOU HAVE THE CAPACITY TO CHANGE • Embed senior supply chain forum to promote the supply chain activities and change programme STEP 4 . as well as the main sourcing point for most imports. Demand Uncertainty = 20% of mean.7. A variant of dynamic programming was applied to the tree structure. the relevant costs considered in this model are the fixed cost of installing and operating the DC. and of fixed and variable costs at Rs 100. and giving further confidence in the results. we now have a business environment that primarily talks the same supply chain language. to embedding a fully-integrated framework of supply chain strategies and objectives.5% of value handled respectively. The model was tested on a books distribution in India and yielded expected results. The mean demand was assumed to be proportional to population distribution. set-offs and concessions leading to differential tax burden on inter-state sales. Other assumptions included Transport Speed = 450 km/day.IDENTIFY YOUR ACTIONABLE FIRST STEPS • Produce a Supply Chain Framework. to compute the optimal location of DCs along each sourcing path.5 /km/ton. Shown below are the results for each product type and demand pattern and the optimum number of DCs (excluding the central warehouse at Mumbai): As the facility cost increases. the state taxes. Heuristics methods are employed for solving the problems. A more challenging task would be to solve this problem using multiple warehouses. The results can be computed for central warehouse locations other than Mumbai. transportation and warehousing costs. 6 demand patterns were considered in the respective ranges: Groceries . Service level to be maintained = 98%. where each DC node is supplied from not more than one parent DC which gives it the shortest overall route. For each DC. The model was then run on three classes of typical products with different Value Densities viz. Indian firms with a national presence have located their distribution centers (DCs) in each state.05 0. confirming their stature as a gateway to their nearby regions. and more importantly where supply chain has become a key enabler for the BAES MAS strategy and vision. Product Type (Value Density) Demand (kg/head) 0. Average cost of carrying inventory as safety stock at the DC and the in-transit inventory were taken @15% pa and average cost of transporting material from Central Warehouse to the DC was taken @ Rs 1. Packaged FMCG goods at 150 Rs/kg. Packaged Goods – 0. In the present study. This adversely affects logistics efficiency. Daily shipments were assumed and cycle stock ignored.

g. The retailer has two cost components namely production/ purchasing cost of counterfeit product and non-detection cost for evading detection of illegal goods from law enforcement agencies. In 2007 counterfeit medicine Lipitor (for lowering cholesterol) and Zyprexa (for treating bipolar disorder and schizophrenia) were seized from legal supply chain in United Kingdom. the manufacturer does not have the complete information regarding level of retailer counterfeiting. Manufacturers can use various methods to monitor counterfeiting. several questions arise. Under these phenomena while most players in the market individually try to develop green technologies\products. The Center for Medicines in the Public Interest predicts that if action is not taken to curb the illegal trade counterfeit drug sales could reach US$75 billion globally in 2010. The increasing volume of counterfeit parts entering the aerospace supply chain poses significant performance. Naveen. automobile. Different countermeasures would require different level of investment by the manufacturer and it could lead to varying level of monitoring effectiveness. manufacturers also face increased greening competition. the solution could comprise of technology and robust process management. to complex RFID solutions and nanotechnology based non-clonable technology to deter the retailer from counterfeiting. reliability and safety risks. We find that along with increased price competition in market. Thus. We built stochastic models in different contract settings to understand best strategy of manufacturer for various levels of uncertainty regarding counterfeiting. deterministic models with non-linear cost functions and linear penalty functions. routers. This means increased costs of greening for the manufacturer in addition to the costs incurred on failure to meet governmental regulations. The manufacture and retailer strategy in a supply chain would depend on relative cost of counterfeiting when compared to genuine product. We estimate the optimal wholesale price that maximizes manufacturer profit for various 6 counterfeit cost structure of retailer. In the first model we try to understand the retailer counterfeiting behavior for various counterfeiting cost structures. Doctoral Student of IIM Bangalore During the past two decades `sustainability’ has emerged as the new paradigm of conducting business driven by increased societal and . What should be the strategy of manufacturer to deal with authorized retailer who indulges in selling counterfeit goods along with original products? In our study we use game theoretic models to comprehend the issue of counterfeiting in supply chain and identify the ideal strategy for manufacturer to mitigate counterfeiting. It is observed that under green product development. The authors study two policies namely the National Clean Energy Fund Policy in India and the Corporate Average Fuel Economy (CAFE) regulations in the United States which levy a certain amount of tax which a manufacturer has to pay in lieu of falling short of government set environmental standards multiplied by the total production of the manufacturer for each financial year. Using single period.Vol. We also identify the optimal level of investment by manufacturer in anti-counterfeiting mechanisms to mitigate counterfeiting in the supply chain. the authors explore various policy changes that several Governments have initiated fairly recently. The countermeasures to curb counterfeiting could involve legal. Using analytical optimization methods we identify the optimal level of monitoring the manufacturer should invest to mitigate counterfeiting. Doctoral Student of IIM Bangalore Counterfeiting is a widespread phenomenon in many industries like pharmaceutical. The model can assist the manufacturer decide the wholesale price to be offered to retailer under various counterfeiting cost scenarios. In most cases. political or business techniques. fixed-fee contract. we study several contracts and conditions under which players would participate in those contracts vis-à-vis non-contractual product development. Government policies across the world are rapidly changing course and the implications of such change for companies can be far fetched. In aerospace sector the number of counterfeit incidents has increased by more than 140 per cent in 2008 according to the US Department of Commerce Bureau of Industry & Security. Similarly recent ACMA report estimates the proliferation of counterfeit parts has caused the Indian auto component industry a whopping loss of $1 billion till date. 2 December 2010 INSIGHT Managing Counterfeiting in Supply Chains by S. our research provides insights into the manufacturer. Counterfeiting is no longer confined to luxury products and has become a health and safety issue in addition to economic problem. aerospace. Our results also show that manufacturer will benefit if he opts for a two part tariff (franchise) mechanism compared to simple wholesale price contract. In our research we model the supply chain setting where manufacture has to decide the ideal monitoring level to mitigate counterfeiting. several companies form joint ventures in order to develop cleaner technologies. Competition and Cooperation in Product Greening under Government Legislation by Debabrata Ghosh. We evaluate the effectiveness of alternative mechanisms like two-part (franchise) to wholesale pricing contract. The use of counterfeit medicines that are deliberately and fraudulently mislabeled with respect to their identity/ source can result in treatment failure or even death. There are increasing cases of selling of counterfeit medicines in authorized supply chains. What is the impact of Government regulations and greening costs on a firm’s decision on the level of greening to be achieved? Further. We also study the case of cooperation between the players. we analyse the case of a single firm and extend this model to a duopoly under price and greening competition analysis. players often enter into contracts to share the costs of development.“RFID coupled with EPC and electronic pedigree enables to know if particular product is genuine and will make the copying of medications either extremely difficult or unprofitable”. revenue-sharing and wholesale price contracts are discussed. The case of cost sharing contract. We develop a three-stage game to model the strategic decision making of each player in the market. e. and computers are infiltrating authorized channels. Sun Microsystems and SupplyScape offers a comprehensive RFID package which enables companies in the pharmaceutical supply chain to combat counterfeiting and diversion. Under co-operation the players still compete on prices. According to a special report in Business Week counterfeit electronic components like bogus chips. The accuracy of information regarding retailer counterfeiting could play an important role in manufacturer pricing decision and type of contract he chooses. Overall. 2 No. These cost the electronics industry up to $100 billion annually. Further. how do they impact the price of the green product? What happens when there is price and greening competition between two large manufacturers? What is the impact on the level of greening and price of the green products in such a case? Are the results any different when the two players cooperate in the market to develop a cleaner technology/ product but compete on prices? Which strategy can best suit a firm under prevailing regulations and costs? In order to answer the above questions we build game theoretic models. we studied the role of information regarding counterfeiting by retailer on manufacturer strategy. Given these prospects.retailer decisions in supply chains with counterfeiting. There is wide range of solutions varying from micro tags with unique ids. electronic components and software products. few invest in third party research organisations to develop environmental friendly technologies while others share best practices and knowledge of their processes with their competitors and suppliers in order to build a better knowledge base for green technologies and products. Hence. Cooperation is modeled as a joint decision making on the level of greening. governmental pressures.

we gathered practitioner inputs on challenges in the drug discovery and development process and perspectives on India’s current role in the global value chain and where India could aspire to be in this value chain going forward. the Chief Scientific Officer of Actis Biologics and the R&D Director of Apotex Research. national and international level in order to identify unique features of supply chains operating in different contexts and the extent of uncertainties which may exist and the strategies used by different companies to overcome or alleviate these uncertainties. The University of Nottingham (UoN). Our focus over the first year has been on the drug discovery and development process. IIM Bangalore BioPharm 2020 (a UK-India Science Bridge Programme) is a collaborative R&D and technology transfer partnership jointly funded by The Research Councils UK (RCUK) and the Indian Department of Science and Technology (DST). the Vice President Scientific Affairs of UCB India. During this one day workshop. Prof. distribution and logistics with the overarching purposes of increasing research and commercial collaboration between India and the UK in the biopharma industry.It is found that greening costs have a negative impact on the greening levels of the product as with increased costs firms tend to reduce their greening levels. the Indian Institute of Technology . As part of our approach. Quoting Jean-Pierre Garnier. Science Bridge Project. Additionally. including major losses of revenue owing to patent expirations. analysis throws interesting insights on strategies of companies under pricing and greening competition. We have also begun some primary research in the form of focused group workshops and one-on-one interviews with R&D professionals. Management teams from the Indian Institute of Management Bangalore (IIMB). where we secured the participation of 12 senior R&D executives including the R&D Director of AstraZeneca’s R&D Centre in Bangalore.India and Shanghai . We conducted the first focused group workshop on ‘Opportunities and Challenges in Drug Discovery and Development in India’ for senior R&D executives. the Indian Institute of Technology Kanpur (IITK) and the Indian Institute of Management Bangalore (IIMB) are building on existing extensive collaborations with the goals of producing (a) clinical and commercial benefits from patent protected research.China). Peeyush Mehta of IITK and Prof. increasingly cost-constrained healthcare systems. we set out to carry out an analysis of the R&D process from a portfolio optimization and process management perspective. with the purpose of studying the value chain across the biopharmaceutical industry beginning with the process of new product development and going into the latter parts including procurement. Ranbaxy. we gathered practitioner inputs on supply chain issues from developed economy and emerging economy perspectives. we carried out extensive secondary research based on comprehensive. recent. Prof. During this workshop. (2) to study the manufacturing. and (c) to assess the supply chain and outsourcing potential for long term business engagement and policy formulation between the two countries. Kulwant Pawar of University of Nottingham. Research Associate. GSK and Actis Biologics FRONTIER BioPharm 20 UK-India Science Bridge Project by Christabel Singh. to explore what specific strategies could have the most substantial impact in improving R&D productivity.UK India Science Bridge. legal entanglements and declining R&D productivity. capacity management) in the context of drug discovery process were discussed Over the past 6 months. We also specify bounds on costs below which firms achieve the greening levels as mandated through Government regulations. The present research work contributes to the ongoing discussion on impact of Governmental legislations on companies. lead time reduction strategies. pricing pressures. on the 5th Feb 2010 at IIMB. supply chain. ‘while all of these trends are problems for the industry. analysis of contracts contributes to the growing literature on contracts specific to green supply chains. A third workshop was held at IIT Kanpur on the 13th August 2010 focused on identifying some key operational challenges in the early stage research process from a supply chain perspective and formalized the structure of collaboration between the science and management groups in the Indo-UK Science Bridge project. more demanding regulatory requirements. maximizing the acceleration of innovation in biopharma between India and the UK and aiding policy-level decisions in the biopharma industries in the UK and India. We perform numerical analysis and specify conditions under which firms would participate in contracts or cooperate or develop the products independetly. between the two countries and suggest recommendations to capitalize on the opportunity. decline in R&D productivity is at the heart of it’. during the Shanghai Expo 2010 and explored key trends and developments in managing Pharma supply chains at the regional.Kanpur (IITK) and the University of Nottingham (UON) have come together under the umbrella of BioPharm 2020 . The second workshop was held on the 2nd June. We began with a three-fold objective: (1) to study the drug discovery and development process and suggest recommendations to improve the process. Further. Janat 7 . we have also initiated one-on-one discussions with several industry partners including AstraZeneca (Bangalore . manufacturing. (3) to study successful models of industry-academia collaborations and best practices in the protection of jointly invented IP and suggest recommendations for productive collaborations. industry-wide data to identify the relative contributions of each of the steps in the drug discovery and development process to overall R&D productivity. Possible techniques to measure uncertainty across various stages of drug discovery process and the application of some generic operations management tools (bottleneck management. a ‘perfect storm of trends’. Given this backdrop. Shah of IIMB will be guiding the study of Pharma Value Chain. UCB India. The workshop discussed the declining R&D productivity in the biopharma industries and a case study related to management of drug discovery process at a big pharma company along with the complexities and trade-offs in the process. Glenmark Pharmaceuticals. We intend to produce two case studies – one on the drug discovery and development process and the other on supply chain management in the pharma industry in the first year (by Nov 2010). supply chain. (b) world class human resource with a focus on interfacing with Industry. The pharmaceutical industry worldwide is under growing pressure from a range of issues. risk management and outsourcing potential in the biotech and pharma industries. the Managing Director and Head of Operations & Project Management of the Bristol-Myers Squibb Biocon R&D Center in Bangalore. ex-CEO of GlaxoSmithKline.

Each Workshop had about 15-20 invited participants.in\node\1889 . Mr. Tyco Electronics shared his insights in an invited experience sharing session. The contact e-mails are: scm_conference_chair@iimb. the leading retailers of the world . It is believed that service businesses can benefit by applying principles of supply chain management to their processes. India’s large service industry accounts for 62.Ms. 2 December 2010 NEWS AT SCM CENTRE Supply Chain Management Conference “Opportunities and Challenges in Services Supply Chain” on January 07 . The Programme had 25 participants from various industries. Raguram Krishnapuram of IBM Research Labs & Mr. Nadja Moser and their two children Joel & Jerome on the eve of their departure to Switzerland after nearly 3 years in Bangalore. Business services (information technology. Devanath Tirupati. 2 No.in. 23 Aug. l l l l The distinguished senior faculty members of the Indian Institute of Management and other leading Management Institutes and Universities as well as Business Leaders of Corporate India.000 Rs 8. 8 . Moser plans to use the study and workshop results for academic publications. The theme of the conference is “Opportunities and Challenges in Services Supply Chain”. 2011 at IIM Bangalore The Biennial Supply Chain Management Conference of the Indian Institute of Management Bangalore will be held on January 7-8. J Shah and Mr. The authors examine the validity Keynote Addresses by Dr. Parasuraman of Toyota Kirloskar Auto Parts. Indian Institute of Management Bangalore and Supply Chain Management Centre.” A 5-day Executive Development Programme on Strategic Sourcing & Supply Chain Management conducted by Profs. It is jointly organized by EADS-SMI Chair for Sourcing and Supply Management. scmc-iimb. Service Economy has become an important driving force in the modern day economy. our farmers would receive higher share of the retail price and consumers would enjoy food products at lower prices.ernet. Sanjay Handu. We need to look at FDI in retail as just another approach and not look at it as panacea for all our problems in agriculture.000 Rs 6. Roger Moser conducted two ScenarioDevelopment Workshops on 5th and 6th August 2010. Yes. The recent business press articles strongly supported FDI in retail often leaving readers with this perception that once FDI is allowed in multibrand retail. Roger Moser . We request all leading Corporates to take active interest in the Conference and support it by Sponsorships. Chairperson of the Conference. services supply chains has not attracted researchers’ attention.org and http://eads-smichair-iimb.earnet. critically analysed and codified for the benefit of the Service Economy. carried an erudite article “Mythical Benefits of Retail FDI” by Prof. practitioners’ opinions and perspectives on policy issues Uniform Participation Fee for delegates from SAARC Countries of these assumptions by looking at experience from the US and Europe. 2011 at IIM Bangalore. However. Yes. seven Indian firms were among the top 15 technology outsourcing companies in the world.ernet. M G Subramanian. In the 1990s the service sector grew rapidly due to accelerated growth in the communication. Director – International Purchasing.08. 2010. social and technological (PEST) environments of this industry sector and to integrate the PEST scenarios into a common framework and for creating the Big Picture & Next Steps. we need to improve productivity in agriculture and reduce wastage in supply chains.R.in . to Sep 3. update themselves and benefit from key research findings in contemporary areas in the field of Management. In 2009. Participation Fee Delegate Category Authors Academic Delegates Corporate Delegates Students SAARC Rs 4. information technology enabled services. The Conference targets academic researchers and professional practitioners whose main interests are the issues of Supply Chain Management. for the Automotive Industry and for the Aerospace & Defense Industry respectively at IIMB. 2010. T. business process outsourcing) are among the fastest growing sectors catering to outsourcing by global firms and contribute to about a third of the total output of services. scmconference2011@iimb. … it would be naive for us to assume that global organised retail chains would do the tough task of solving these complex set of problems in agriculture production and distribution.Wal-Marts and Tescos would enter India and revolutionise the agricultural practices and supply chains for food products. especially those with a focus on Services Supply Chain Management.Vol. There is wealth of managerial practices and expertise in these sectors which need to be shared. Due to its complex nature. senior managers from the respective sectors to discuss the results of the Delphi Studies conducted earlier and to jointly develop scenarios for the political. financial services. methods and solutions to fulfill its great promises. Key Features of the Conference Include: l l Plenary sessions featuring CEO’s of top companies on theme related to services upply chain management Panel discussion on “Opportunities and Challenges in Services Supply Chain” ~50 authors representing both academia and industry and international participation to present their work in the field of Supply Chain Management An exclusive session for Industry papers covering best practices. business services (IT) and community services (education and health). the service sector needs a lot more attention. org. More details on Sponsorship Packages are given in our websites http://www. The Conference Committee is headed by Prof.6% of the country’s GDP and about 34% of employment. Economic Times. The article highlighted the “assumptions” or myths prevailing in the entire debate on FDI in retail needed to be questioned. investments and efforts on innovative theories. new technologies. we have problems for which we do not have ready-made solutions. economic. The article concludes by observing: “What worries one is the wishful thinking on the part of public in general and industry and policymakers in particular who assume that FDI in organised retail in India is the one stop solution to all problems. please visit http:\\www. Faculty and families of EADS-SMI Chair and Supply Chain Management Centre met on Friday 30 April 2010 evening to greet and bid farewell to the family of Prof. Prof. Devanath Tirupati and Jishnu Hazra was held at IIMB from Aug 30. from international companies are associated with the organization of the Conference. iimb.000 Rs 500 International US$ 100 US$ 150 US$ 200 US$ 25 For registration details. The International Conference on Supply Chain Management is intended to provide a forum for management professionals and academics to share their knowledge and to enable a large pool of management practitioners and educators to gain a deeper understanding of the current industry practices and challenges in Supply Chain Management with focus on Services Supply Chains. Prof.