Supply Chain View

I’ve just picked up this interactive chart from The Economist. I’m particularly interested in the risk of overheating in the Indian economy, as my most recent trips there certainly make me feel there is a bubble inflating, if only based on the simple heuristic of the number of property speculation SMSs I get on my Indian phone.

The domestic logistics infrastructure in India is still very undeveloped. A post-bubble crash would undoubtedly pause physical infrastructure investment, and without an expansion in the domestic consumer market the sector will struggle.

China looks less risky in this analysis, but Hong Kong looks dicey, as do countries in China’s backyard such as Vietnam.

Read more here: http://www.economist.com/blogs/dailychart/2011/06/overheating-emerging-markets-0?fsrc=scn/tw/te/dc/temperaturegauge

I’ve just posted up a development version of a centre of gravity model for distribution centre location. It uses Google Maps, and it is really easy to use, and completely free. Try it here now.

I regard it as a “toy” application, but I’m surprised how usable it is (down to the familiar Google interface I think rather than my design skills). And it really does work.

I am going to use it to demonstrate the principle of COG in logistics networks, as a teaching and communication aid rather than a serious analysis tool. But maybe the next time the team is debating where to go for a night out we can plot all our home locations and see where the most convenient spot is.

It is an early release so quite buggy and breakable, and all feedback is welcome – just drop me a comment.

That link again: Centre of Gravity Model.

(with apologies to Peter Norvig)

Some time ago, the wise and well-respected computer scientist Peter Norvig wrote an article called “Teach Yourself Programming in Ten Years”. I read it recently and found it so full of good sense I couldn’t resist taking the spirit of Norvig’s thoughts and applying them to supply chain management.

Norvig’s attention had been taken by the slew of books – you may have seen them yourself if you’ve walked past the computing section of a bookstores – with titles such as “Learn C++ in 3 days” (not a made-up title).

Study hard... only 9 more years to go - photo by Mateusz Stachowski

In response to the misleading claims, trivial treatment and impossible promise of instant gratification of these titles, Norvig set out a series of practical ideas for how to “Teach Yourself Programming in Ten Years”. He draws on well-attested notions of deliberative practice: the way learning comes from long and repeated application of “not just doing it again and again, but challenging yourself with a task that is just beyond your current ability, trying it, analyzing your performance while and after doing it, and correcting any mistakes”. (These ideas have recently been popularised by Malcolm Gladwell in Outliers – you will have come across his “10,000 hours” rule.)

I’ve seen a lot of bright young people apply themselves energetically to supply chain management positions, and while many do remarkable things they have all admitted there is an incredibly steep learning curve. Not only that, more experienced managers often say that the more they know, the more they recognise the gaps in their knowledge. Whereas the most experienced people often have seemingly effortless intuition for getting to the root of problems, seeing pitfalls, identifying workable solutions and guiding them to completion. I believe that intuition comes from long and varied deliberative practice in supply chain and general management.

Here are my ideas for how to do that:

■ It doesn’t matter where you start from, whether you have a degree, what kind of degree. You need some aptitude (including good numeracy and a capacity for conceptual thinking), but you also need a curiosity about the world and an interest in solving problems and making things work better.

■ Get experience of some general operational excellence approaches, preferably outside a strictly supply chain role. Most supply chain issues are enmeshed in general business issues, and knowing how to improve the quality and productivity of processes in general is extremely useful. Learn Lean from a manufacturing engineer – for my money automotive engineers have the most depth of skill. Join a project with them and get out onto the shop floor. Pay attention to the soft skills too – bringing people along with the change. Learn John Seddon’s Systems Thinking approach on a project in a service operation, and see how customers interact with processes. Try not to get caught up in sectarian conflicts between supporters of different approaches – keep an open mind to the merits, weaknesses and appropriateness of various methods.
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Here is a stirring video from the World Food Programme about their humanitarian logistics capabilities. The scope and scale are remarkable.

Today I’m continuing my analysis of supply chain management in India with some discussion of the economic context. India’s economy is growing very quickly – recently we’ve begun to worry that it’s growing too quickly, running the risk of overheating . But it would be odd if such a rapid transformation of the economy didn’t hit a few bumps along the way, and my feeling is that over the long term India will experience sustained and considerable growth.

Shoppers in Delhi's M-Block Market

Where is this growth coming from? Partly it comes from exports, both of goods and services (most notably BPO and IT services). But significantly it comes from a growing domestic consumer market, driven by a broadening of the middle classes and an increase in disposable income across the population. Rajev Pal noted recently that 3PLs are experiencing growth from the Indian FMCG sector. I think growth of the domestic consumer market has profound implications for supply chain management in India.

Again I’ll point you in the direction of the McKinsey India website and their report The ‘Bird of Gold’: The Rise of India’s Consumer Market. This paper originally came out in May 2007, but it’s conclusions have not been countered by the evidence of the last 4 years. (McKinsey based their models on compound growth rates of 7.3%, which turns out to be very close to reality even during the period of global financial crisis. This sustained growth reinforces the conclusion that domestic consumption has become the most important economic driver.)

McKinsey forecast that by 2025 India will be the 5^th largest consumer economy in the world (in 2007 it was in 12^th place). Now this won’t make Indians rich – 2025 per capita consumer spending will still only be just over $1000 a year in today’s money – but it does represent a sizeable shift and will pull huge numbers of people out of poverty. In fact they expect the proportion of people they classify as “deprived” (household incomes of less than Rs 90,000 p.a. at year 2000 prices) to more than halve by 2025 (54% of population in 2005 down to 22%). This is not wishful thinking – in 1985 this section of society represented 93% of the population, so growth in the last 25 years has been effective in lifting large numbers of people out of desperate conditions.

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I am planning to write a few posts about supply chain management in India. I am in the country working with a local client for a couple of weeks, back for the first time since my 6 weeks living in Delhi earlier in 2010/11.

This is a very exciting topic, and though I have been visiting the country for nearly 20 years I am addressing it with some trepidation, as I know that India has its own very well-informed and qualified experts in SCM, some of whom may stumble upon this blog (big news: the internet is global). So apologies for those on the subcontinent for whom this is very basic stuff and old news. But I know from speaking to colleagues here in the UK that professionals in Europe and the US have very little idea of what goes on in India, so I hope this is of use to some.

A really good starting point to learn more about SCM in India is a study McKinsey published in July 2010 titled . “Transforming the nation’s logistics” Without trying to paraphrase a 70 page report, here are some points that stood out for me.

• Freight movement in the country is forecast to triple in the next decade
• Economies with similarly large populations and geographical area (China, USA) transport more freight by rail and water than India – in fact if current investment plans hold rail’s share of freight in India will decline from 36% to 25%
• The skilled logistics will have to increase from 10 million now to 20 million in 2020, including over 100,000 warehouse managers
• Waste caused by poor logistics infrastructure is estimated at USD 45 billion a year, which is a massive 4.3% of GDP, and this will rise to 5% by 2020

Read more »

Here is something very useful for humanitarian logisticians: the Logistics Operations Guide, or LOG for short, brought to you by the Logistics Cluster. But not only is it useful for those in the humanitarian sector, it is an excellent model for the clear communication of logistics know-how: succint, practical and well-referenced. Click here to go to the LOG online.

In the words of the website, the LOG is

a single source of best practices comprising of logistics templates, operational tools, references, and guidelines that should be of use to all humanitarian logisticians, regardless of the size of their organisation, or its area of specialisation.  Specifically, the LOG targets all humanitarian logisticians deployed in ongoing operations and new emergencies.

The LOG is presented as a website, but importantly it can also be made accessible offline, either by downloading a Windows executable file, or by using Google Gears. (I tried the latter out on my Mac because it wouldn’t run the Windows file, and it worked perfectly.)

This means that staff deployed on operations can take a laptop with a full copy of the LOG website (and if they get to connect to the net they can pick up any updates). This is very neat, and the WFP IT people who put it together did a great job in selecting a Gears-enable CMS that supports this.

You can read more about the LOG at www.logcluster.org/tools/log or go directly to the LOG site log.logcluster.org. If you want to set it up on your laptop using Gears I recommend you read the technical guide pdf as the main site steers you towards the Windows exe file. If you get stuck drop me a note and I’ll clarify.

Now is clearly the time for reflection on the logistics operations during the response to the Haiti earthquake in January this year (see my posts on articles by Mike Whiting and Maggie Heraty).

Dr. Paul S. Auerbach is Professor of Surgery in the Division of Emergency Medicine at Stanford University School of Medicine. A few days after the earthquake he joined the relief effort in Haiti via the International Medical Corps. He is an authority on wilderness medicine, useful for Ray Mears-style adventures, but also an incredible background for dealing with trauma cases in an emergency amid the shattered infrastructure of Haiti.

Speaking recently at a Stanford conference on social issues in global supply chains, he said:

Everything I know about supply-chain management, I learned in the two weeks after the earthquake in Haiti.

Dr Auerbach is quite typical of the resourceful people who become involved in humanitarian logistics. They are full of energy, and often highly skilled in other disciplines, but they find that in order to get things done they need to learn about logistics. Dr Auerbach cites “space and supplies” as key problems, and his blog describes how he took responsibility for administration and medical logistics for the team. (He also notes that the team had to become plumbers and electricians too – there’s a great story of improvisation to get the job done.)

Dr Auerbach’s story is inspiring stuff, and to me it underlines the importance of the work Mike Whiting and many others have been doing with CILT’s HELP Forum (and at RedR) to improve the professionalism of humanitarian logistics. If the IMC had brought a logistics coordinator, more time would have been freed for surgeons to provide medical care. The toll of running the operation, practising medicine and learning about emergencies logistics all at once is clear in Dr Auerbach’s account – at one stage he collapsed and it took 9 litres of IV fluid to get him going again.

Do visit his blog and read the entries – they are informative, educational, and above all extremely humane.

More interesting stuff in Focus (shock, horror!) In the May 2010 edition Maggie Heraty describes what she saw and experienced while on mission with RedR. Maggie arrived in Haiti just over three weeks after the earthquake to identify training needs for NGO staff in the immediate disaster response phase, and longer term looking at recovery and rebuilding. This was a joint programme by RedR and the French NGO Bioforce and covered water, sanitation, shelter, site planning and other subjects, including of course logistics.

As with Mike Whiting’s article in April which I summarised last week, Maggie’s account makes clear the scale of the problem. She describes: people camped informally throughout the city; a government infrastructure so shattered that vehicle registration and testing was wiped out (leaving NGOs to drive vehicles with foreign or no number plates); Land Registry destroyed making it harder to take over new sites for formal camps.

The UN Cluster system under OCHA seems to have helped (where NGOs got took advantage of the clusters). The Logistics Cluster was well attended, though Maggie notes that Logs Cluster staff mostly struggled with the meetings that were held in French – Maggie’s too modest to mention she is a fluent French speaker herself. Where agencies didn’t join Cluster efforts, she notes, there was duplication of effort.

Good to see that technology was put to use (albeit with difficult comms infrastructure – satellite links creaking at busy times causing slow connections). Info was shared on Googlegroups; Google Earth updated with refreshed satellite pics and overlaid with coordinates of sites. United Nations Disaster Assessment Group (UNDAG) provided free wifi at the Log Base, as did Télécoms Sans Frontières.

Again, CILT members should be able to read this on line. There’s supposed to be another article next month specifically about the Logs Cluster in Haiti.

Mike Whiting has written an excellent article on the emergency response to January’s Haiti earthquake in the April 2010 edition of Logistics and Transport Focus. My copy of Focus often languishes in the in-tray for a couple of weeks before I even get the plastic wrap off, but I’d urge all CILT members to read this article.

Mike gives an overview of the logistics systems that were put in place to support the relief and subsequent recovery operations. The scope of the challenge and the solutions that were designed an implemented against a ticking clock are actually quite inspiring.

But he also gives some very valuable background, particularly around learning in the profession and NGOs about improving the quality and effectiveness of the response. He refers to the 2008 ALNAP (Active Learning Network for Accountability and Performance) report on earthquakes.

Among the lessons from that report that caught my eye was the observation that “recovery operations are not neutral: they will reinforce or reduce existing inequalities and must be actively designed to do the latter”.

There is more interesting discussion of the ALNAP report in a blog post on the ODI’s website.

There was a good deal of criticism of the operations in Haiti at the time – particularly that things were slow to get started. Haiti is a very difficult place to work in – recent kidnappings of aid workers are just one example. Mike concludes his detailed and informed discussion of what actually happened with the judgement that:

Given the unique circumstances, the response was as good as one could realistically expect.

If you are a CILT member, you should be able to read the article online – look for volume 12, number 4, April 2010.

You can find the ALNAP report from their website (link above) or download the pdf here.

Mike Whiting, by the way, is chairman of CILT’s Humanitarian Logistics (HELP) Forum.