Thursday, 29 September 2016
Wednesday, 21 September 2016
Delta Consulting-solution for abroad education, Business Management & Export-Import, Kolkata: Role of Logistics in the New Product Development (...
Delta Consulting-solution for abroad education, Business Management & Export-Import, Kolkata: Role of Logistics in the New Product Development (...: Abstract- In today’s highly competitive environment, logistics plays a key role in any firm’s success. It also plays a critical role...
In today’s highly competitive environment, logistics plays a key role in any firm’s success. It also plays a critical role during new product development (NPD). There are several literatures available about the importance of different logistics activities at the time of NPD, but there is a gap of literatures to find out the most important activities during this period. This research work explores the most important logistics activities in a chemical industry specifically during NPD. The in-depth analysis and multiple case interviews enable me to identify few critical aspects of logistics during NPD in a chemical industry.
In the entire thesis, theories are presented from literature reviews, and then analysed by real-life cases from AstraZeneca, Tikkurila, and Aerosol Scandinavia. Several interviews have been conducted with the supply chain and product development professionals of these industries. A qualitative method has been employed, in order to achieve more precise and deep understanding about this topic. The finding of this thesis suggests that customer service, procurement, plant and warehouse site selection, traffic, and transportation are the most important logistics activities, on which organisation should focus to enhance the performance of a new product.
Key words: - Logistics, New Product Development (NPD), and Chemical Industry.
In recent years, industrial firms are concentrating on product innovation to satiate the customer’s dynamic need, and to sustain in the increasing global competition with the ever-changing technological phenomenon (Cooper, and Kleinschmidt, 1991). For many firms, an innovative new product is an essential criterion for long-term survival (Zacharia, and Mentzer, 2007; Balbontin, et al., 2000). It gives customers an additional reason to buy their products avoiding low margins (Fisher, 1997), creates new sales and profit (Takeuchi, and Nonaka, 1986), provides sustained growth and competitive advantage (Cooper, 1990), raises industry standards, attracts human resource, exploits non-utilized R&D discoveries, and builds confidence and momentum for the management (Wheelwright, and Sasser, 1989).
In today’s highly competitive globalised environment, NPD is one of the riskiest yet most important management challenges (Cooper, and Kleinschmidt, 1991). Firm’s market position will deteriorate without the introduction of new products for long-time (Yelkur, and Herbig, 1996). Previous research by Kellogg School of Management reveals that products less than five-years and one-year-old generate around 50 percent and 10 percent of company’s revenue respectively. According to Hanfield et al. (2002), 40 percent or more revenues come from new products introduced in the previous year. From the interviews of supply chain and production development professionals, I knew that new products (< 5 years old) in Tikkurila (paint industry) bring approximately 10-20 percent of total profit. For aerosol industry, this profit is around 25-30 percent even for the product less than 2 years old.
From the response of the professionals of AstraZeneca, Tikkurila, and Aerosol Scandinavia, I found that there are several motivational factors play key roles at the time of NPD in these chemical industries. Management also faces several challenges during this period. Management takes some primary strategies to increase the success rate of newly developed products. These several motivational factors, challenges, and primary strategies are plotted below using 'Likert' scaling technique (1-5 scale, 1-not important, 5-most important) from the ranking (average) of product development and supply chain professionals of these industries.
In the process of NPD, Supply Chain Management (SCM), as well as Logistics plays significant roles. Here, I experimented qualitatively through case study research over fourteen logistics activities related to NPD in the three chemical industry contexts. I found critical logistics activities during NPD are customer service, procurement, plant and warehouse site selection, traffic and transportation, warehousing and storage and logistics communication (Fig. below).
Fig: Importance of fourteen logistics activities during NPD (according to industry professionals)
On the other hand, according to my opinion, sustainability issues like energy preservation and pollution reduction policies should be integrated in the innovation process to save our planet from environment’s harmful effect as well as to reduce the cost of the new product.
Sunday, 4 September 2016
NPD, a core business process (Srivastava, Shervani, and Fahey 1999), has long been an important concern of management (Nakata and Sivakumar 1996), especially with the advent of shorter product life cycles and faster product development times (Griffin 1997). The focus on improving competitive advantage through NPD in recent years has been on time-to-market, overlapping problem solving, and multifunctional teamwork (Twigg 1998). Besides that, Kellogg school of management reveals that product less than five years old generate around 50% of company’s revenue and profit and 10% of the company’s revenues generated by products less than a year old. Clearly, effective new product introduction constitute the life blood for the future of the companies. That’s why NPD has found its way to the top of the agenda at organizations around the world.
On the other hand, one of the most significant paradigm shifts of modern business management is that individual businesses no longer compete as solely autonomous entities, but rather as supply chains. Business management has entered the era of internetwork competition. Instead of brand versus brand or store versus store, it is now suppliers-brand-store versus suppliers-brand-store, or supply chain versus supply chain. In this emerging competitive environment, the ultimate success of the single business will depend on management’s ability to integrate the company’s intricate network of business relationships [Lambert, Cooper]. As told by John Kasarda (Forbes, October 18,1999) “Manufacturers now compete less on product and quality — which are often comparable – and more on inventory turns and speed to market. So supply chain Management plays a crucial role in today’s market. Wal-mart, Dell and Seven-eleven are examples of companies that have built their success on superior design of their supply chain. This is the belief that supply chain management will increasingly be the principal determinant of the ability to compete. Supply Chain Management (SCM) is "Maximizing added value and reducing total cost across the entire trading process through focusing on speed and certainty of response to the market." Due to globalization, SCM has become a tool for companies to compete effectively either at a local level or at a global scale. SCM has become a necessity especially for manufacturing industry when it comes to deliver products at a competitive cost and at a higher quality than their competitors.
Logistic as well as Supply Chain Management has been shown to play an important role in New Product Development. The role includes customer service, product availability, time advantages, low cost distribution and global manufacturing. It also interfaces with manufacturing, marketing and R&D to deal with procurement, inventory, warehousing and distribution.
Wednesday, 17 August 2016
Information is a key supply chain driver because it serves as the glue that allows the other supply chain drivers to work together with the goal of creating an integrated, coordinated supply chain. Information is crucial to supply chain performance because it provides the foundation on which supply chain processes execute transaction and managers make decision and they must understand how information is gathered and analyzed. This is why IT comes into play. IT consists of the hardware, software, and people throughout a supply chain that gather, analyze, and execute upon information.
Now a day’s, Electronic commerce and the Internet are fundamentally changing the nature of supply chains, and redefining how consumers learn about, select, purchase, and use products and services. The result has been the emergence of new business-to business supply chains that are consumer-focused rather than product-focused. They also provide customized products and services. E-commerce impacts on supply chain management in a variety of keyways. These include cost efficiency, improve data accuracy, streamline business processes, accelerate business cycles, and enhance customer service. Besides that, E-commerce gives businesses more flexibility in managing the increasingly complex movement of products and information between businesses, their suppliers and customers. It is a vital link in the support of logistics and transportation services for both internal and external customers to give better services to their customers. E- Commerce also helps to company and its suppliers and customers in Shipment tracking, shipping notice, Freight auditing, Shipping Documentation and Labelling, online Shipping Inquiry etc.
Monday, 1 August 2016
Joint replenishment inventory systems are used whenever a number of items are involved in replenishment and it is possible to share the fixed cost associated with replenishment. This fixed cost takes the form of a manufacturing setup cost in the case of manufacturing multi-items using the same facility. In the case of pure inventory systems, the fixed cost of replenishment is that part of ordering cost which is independent of the number of items on order.
When a product is packaged into more than one type of container immediately after manufacture, there is a saving in cost if these items are manufactured jointly and then packaged individually. The economic advantage of manufacturing jointly and packaging individually is due to the fact that if items are manufactured and packaged individually, then each item is accountable for the full setup cost for each of its manufacturing and packaging setups. As a result of manufacturing the items jointly, it is possible to reduce the cost of setups required for manufacturing.
The joint replenishment problem is also similar to the inventory control problem faced by a company procuring several items from a single supplier. In this case, ordering items jointly reduces the ordering cost and may enable utilization of the same transportation facility and/or group quantity discounts. In real-life procurement processes, joint replenishment of items is the common practice used as opposed to independent replenishment of single items. On the manufacturing side, joint replenishment of multi items on single machinery is becoming more widespread through the utilization of flexible machine tools which provide product, operation and routing flexibilities.
Friday, 22 July 2016
Designing of distribution channels are among the most important supply chain decisions, as their implications are significant and long lasting. While designing, we need to consider how all supply chain drivers-facilities, transportation, inventory, information, sourcing, and pricing- should be used together to support the competitive strategy of a firm and maximize supply chain profits.
Distribution is a key driver of the overall profitability of a firm because it affects both the supply chain cost and the customer experience directly. Distribution related costs make up about 10.5 percent of the U.S economy and about 20 percent of the cost of manufacturing. Two of the world’s most profitable companies, Wal-Mart and Seven-Eleven Japan, have built the success of their entire business around outstanding distribution design and operation.
A manager must consider the customer needs to be met and the cost of meeting these needs when designing the distribution network. Some key customer needs to be considered include response time, product variety/availability, and convenience, order visibility, and return ability. Important costs that managers must consider include inventories, transportation, facilities and handling, and information.
Tuesday, 12 July 2016
Optimal supply chain performance requires the execution of a precise set of actions. Unfortunately, those actions are not always in the best interest of the members in the supply chain, i.e., the supply chain members are primarily concerned with optimizing their own objectives, and that self-serving focus often results in poor performance. However, optimal performance can be achieved if the firms coordinate is such a way that firm’s objective becomes aligned with the supply chain’s objective. Supply chain coordination requires all stages to take actions that maximize total supply chain profits. A lack of coordination results if different stages focus on optimizing their local objectives or if information is distorted as it moves as across the supply chain.
A key obstacle in coordination in the supply chain is misaligned incentives that result in different stages optimizing local objectives instead of total supply chain profits. Other obstacles include lack of information sharing, operational inefficiencies leading to large replenishment lead times and large lots, sales force incentives that encourage forward buying, rationing schemes that encourage inflation of orders, promotions that encourage forward buying, and a lack of trust that makes any effort toward coordination difficult.
Managers can help achieve coordination in the supply chain by aligning goals and incentives across different functions and stages of the supply chain. Other actions that managers can take to achieve coordination include sharing of sales information and collaborative forecasting and planning, implementation of single-point control of replenishment, improving operations to reduce lead times and lot sizes, Every Day Low Pricing (EDLP), and other strategies that limit forward buying, and the building of trust and strategic partnership within the supply chain.
Tuesday, 21 June 2016
How Information Technology helps Operation Management?
Information is one of the key drivers in operation management as it coordinates with other drivers to work together to make an integrated, coordinated organization. In recent years, almost all business processes and functions are based on information systems and technology. Several tools of information technology such as SAP help to take right decisions and gives company competitive sustainable advantages from the competitors. Information technology helps to be aware of information, analyse this information and execute on it to increase the performance of operation management. Utilizing Information Technology, managers can know in least possible time with lowest possible cost and maximum accuracy about customer’s needs, inventory stocks, and products movement etc. Information Technology serves as the eyes and ears of management in operation capturing and analyzing information necessary to make the good decision.
Information technology is the communication tool to communicate inside the organization as well as outside the organization. Nowadays, E-commerce has great impacts on business in a variety of keyways. These include cost efficiency, improve data accuracy, streamline business processes, accelerate business cycles, and enhance customer service etc. Besides that, Ecommerce gives businesses more flexibility in managing the increasingly complex movement of products and information between businesses, their suppliers, and customers. It is a vital link in the support of logistics and transportation services for both internal and external customers to give better services to their customers. E- Commerce also helps a company and its suppliers and customers in shipment tracking, shipping notice, freight auditing, shipping documentation and labeling, online shipping inquiry etc.
Nowadays, due to the shorter product life cycles of the products, increased product proliferations, more demanding customers with higher expectation and ever-changing needs, just-in-time manufacturing and globalization of marketplace, companies are using Information technology as a weapon to get competitive advantages from the competitors. Due to the emergence of Electronic Data Interchange (EDI), E-Commerce Company can handle large number of suppliers and customers in a lowest possible time. Improvements of Information Technology reduced logistics transactions costs and promoted better communications between organizations.
Traditional logistics distribution systems involve long processes. It involves the movement of goods from manufacturers to the distributors, distributors to the retailers and finally from retailers to the end customers. But Company like Dell’s does not follow these usual routes. Part of their success depends on proper logistics management and efficient utilization of Information Technology. Dell computers directly reach to the end customers without any activities of distributors and retailers. Customers can order their products online according to their preferences. The product will be reached to the destination with the help of logistics and information technology. The Customer can trace their product easily. With the help of logistics and information technology, the company as well as the customer is saving their costs. It also helps to minimize the agency costs associated with distributors or retailers who do not act in the producers' interests.
The main impacts of Information Technology are reduced cost on physical distribution, lower search and product costs for end users, and improved communications between end users, distribution channel operators, and manufacturers. With the ‘Holy Grail’ of Information Technology, company personnel can recognize the new parts just looking at computer screen. With the help of Internet, managers can compare several suppliers, their products with price list. After observing product review and all they can order their products and pay the bill online instantly. There would be a reduction in response time as well as in communications and information processing costs. Even he can receive the product on next day through express delivery.
With the help of Information Technology tools the manufacturer could own or control all data associated with own products. This would minimize the decision information costs of keeping the producer informed of the status of the goods (whether ordered, in transit, delivered, or paid for), referred to in the messages passed through the information substructure. It needs less manpower and it saves company’s cost.
Effective coordination of logistics activities is essential to organizational performance. However, for improved coordination to be possible, Information Technology must play a larger role than simply providing status information on existing flows of goods. Effective utilization of Information Technology helps in cheap, fast and effective connectivity between business and with the consumer. To be effective, logistics processes such as just-in-time (JIT) delivery require effective Information Technology support to share information between buyers and suppliers.
Information technology provides rich opportunities in transaction efficiencies, when-
Organization engages in many small transactions, especially among a multitude of buyers/sellers.
Significant buyer/seller qualification is not required in a transaction
Organization suffers from out-of-stocks, long lead times, and/or high inventory levels
Communication is the key to the efficient functioning of any system, whether it is the distribution system of an organization or the wider supply chain. Logistics communications are becoming automated, complex and rapid. The Logistics Communication takes place mostly between
· The organization and its suppliers and customers
· The major functions within the organization, such as logistics, engineering, accounting, marketing and production departments.
- Various logistics activities such as inventory management, warehousing, parts and service support, Procurement, customer service etc.
- The various aspects of each logistics activity such as coordinating warehousing of materials, work-in-process (WIP) and finish goods (FG).
- Various members of the supply chain such as Intermediaries and secondary customers or suppliers who may not be linked directly to the firm.
Information Technology helps business in several ways. Some of these are -
Production Process- Information technology helps production process in analyzing and selecting the process, designing and scheduling process, and monitoring and controlling the process. It helps a company to acquire the raw materials in write time to maintain the flow of the operation. The effective utilization of information technology tools can help a company to reduce the costs of operating, and maintenance, produce the highly quality of products and services, shorter cycle times, and speed up operating, delivery flexibility, new product introduction speed, etc.
Inventory Planning- Setting optimal inventory policies is one of the important concerns for the management. Low inventory levels means low working capital but chance of dissatisfying customers on the other hand high inventory level means high working capital but satisfy the customers. To optimize inventory level requires information that includes demand patterns, the cost of carrying inventory, costs of stocking out and costs of ordering. Evaluation of Information technology helps the organization to integrate its functions as a result low inventories and improved financial performance. It helps to reduce transaction cost for the company. The company like Dell holds very less inventory because customers order their product online and the company starts assembling the products only after getting the order.
Transportation- Now in the age of cut-throat competition companies are going global to acquire cheap products and to sell their product worldwide. At the time of transferring goods, which transportation mode (e.g. rail, water, air, truck, pipeline etc.) to use with proper routes which will provide lower cost but on time delivery is a crucial decision for the management. Moreover, Traffic and Transportation department is the major investment of whole business and it contributes larger part of products selling price. Information technology with the help of reliable information can help the company to decide on transportation networks, routing, modes, shipments and vendors requires information including costs, customer locations, and shipment sizes to make good decision.
Purchasing - The term purchasing means to acquire materials from outside the organization to facilitate the firm’s operation from production to logistics. In the recent years, companies are crossing the national boundary to acquire its raw materials. Suppliers are becoming one of the main resources for the manufacturer because purchase materials consider more than 50 percent cost of whole goods around the world. Companies are making a long-term relationship with the key suppliers to get good quality products in lower price and to reduce development times. Vendor Managed Inventory (VMI), Collaborative Planning, Forecasting and Replenishment (CPFR) and Collaborative Transportation Management (CTM) are different types of collaborative pattern between suppliers and organizations. Information on suppliers and company’s product margins, prices, quality, delivery lead times, and are all important in making sourcing decisions. Recently companies are using E-procurement while purchasing.
The advantages of E-procurements are
• Significant reductions in order processing costs
• Faster, more accurate order processing
• Centralized purchasing for volume discounts
• Prevents “maverick” (off-contract) buying
• Improved accountability
Through satellite communications, company can incorporate strategic alliances with suppliers; carefully select their store locations etc. Part of WalMart’s success can be attributed to computerized advance communications systems which link their suppliers to their actual customer sales on a regular basis, so that suppliers can plan based on up-to- date demand information, and provide timely and adequate replenishment to Walmart stores.
Customer service- Customer service involves getting the right products, at the right place, in right conditions, at the right time with lowest possible cost. Customer service is the output of logistics systems. Information technology helps a company to improve its customer service. It helps customers to select their products among various options, make their purchase order online, and track their products. Good customer service supports customer satisfaction which is the output of entire marketing process. Through information technology company can market their product worldwide. Information technology helps a company to maintain data about the customers and treat them according to profit gained from the customers.
Warehousing- Warehouses allow an item to store for later consumption saving time and place utility. Information technology helps in warehousing and storage activities such as warehouse layout, design, ownership, automation, training of employees and related issues. Information technologies such as telemarketing, express delivery, and improved inventory forecasting have already reduced the need for local warehousing and distribution networks.
Monday, 13 June 2016
Research questions- How logistics can help to reduce environmental effects in Sweden?
Today logistics is a ‘part and parcel’ of our life. In our daily lives, logistics helps us to acquire our daily stuffs from the retail outlets, provides life-saving drugs for the patients on time, and delivers important letters to our letter box etc. From the New Product Development to the product recycle as well as product disposal to maintain the green environment everywhere logistics plays a crucial role.
Proper logistics management can help the environment in several ways-
• Thorough properly arranging rail and road network (inter-modal network), people will use more rail transport than road transport which is less harmful for the environment.
• Utilizing road transport in its fullest efficiency such as while transporting goods from the company, the truck should be fully loaded (FTL); frequency of busses should be to fill it with maximum number of passengers.
• Company can reduce the pollution by selecting proper transportation mode while acquiring raw materials or transporting finished goods.
• The packing size should be to optimize to utilize maximum space in the carrier vehicle.
• Using reverse logistics to collect waste materials to dispose it in a correct way.
• Selecting right materials at the time of packaging which have less environmental effects.
Fig: Environmental effect of road transportations. (Source: - EUROSTAT)
From morning to night, we are using several transportation modes (rail, car, bus etc.) to go to our work places or using daily stuffs which we are acquiring through the logistics carriers. Several transportation modes have different environmental effects. From the Table 1, we can conclude that Global warming potential of road transport is increasing year by year. From above Fig. we can see the road transport is one of the main sources of environmental pollution (almost four times than rail transport). Therefore, optimizing logistics carriers, logistical impact on the environment can be reduced to make Sweden safer and better place to live.
From the discussion with the professionals from Aerosol industry, Sweden, I got to know that in Aerosol industry, the finished goods are mainly transported through road transport, because transporting through water need to maintain several formalities such as Dangerous Good Documents (DGD) declarations etc. But using more road transport enhances the probability of air pollution. Through increasing flexibility in rules and regulations and encouraging the aerosol manufacturer to transport through water air pollution can be reduced.
In case of Car Industry, optimizing length of the cars, one car-carrier truck can carry more cars and can utilize 100% efficiency to save company’s cost as well as the environment. Due to lack of resources or keeping inventory level low, several companies order small amount of materials, and transport-company carry this material without fully loading the truck.
In case of a city called city-logistics, through properly arranging rail connections between main destinations and encourage (by keeping fare price low, increasing frequency at peak time,) the people to go by train rather than road transport which will make less air pollution.
If we look at separate transportation mode used in Sweden, we will see Railway division is decreasing from 1970 to 2005, but Motor way transport is increasing in year by year which is harmful for the environment. Similarly, Inland water ways is still (until 2005) same as it was in 1970. And oil pipeline is not used in Sweden. But country like United Kingdom, Italy (Source: - EUROSTAT) oil pipeline is used extensively for transferring liquid, which will save our environment from the pollution created by automobiles.
In case of Freight transport in Sweden, we can see the percentage of total tonne - kilometres are decreasing in rail transport while it is increasing in road transport.
For passenger Transport by Rail and Buses and Coaches in Sweden using Rail transport is increased little bit, on the other hand, Buses and Coaches are same for four years. Therefore, from the above Fig. and Tables we can conclude that with properly managing logistics, properly planning intermodal transports, environmental effects due to logistics can be reduced.
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