Sify’s SCM initiative

Forum, Sify's supply chain management solution, has enabled organisations to fine-tune their inventory management and streamline their distribution. Venkatesh Ganesh reports

Since its inception in the early nineties, Supply Chain Management (SCM) has become an important factor in an increasingly global marketplace. With companies under intense pressure to reduce costs, expand into new markets, and develop new products, every manufacturer’s supply chain is growing in size and becoming increasingly complex. However, complexity is not an enemy of the supply chain, and if it can be effectively managed it can even be an asset. This is where Sify’s Forum—a supply chain management solution—comes into the picture.

Flashback to 1994. Dell was a struggling second-tier PC maker. Like many other OEMs, the company ordered its components in advance and manufactured PCs. Then it began to implement a new business model. Dell converted its operations to a build-to-order process, eliminated its inventories through a just-in-time system, and sold its products directly to consumers. The results were spectacular—because Dell had developed a supply chain process that went far beyond the pursuit of efficiency and asset productivity.

Rapid growth

A part of the corporate services initiative that contributes about 50 percent of Sify’s revenue, Forum has grown by 100 percent annually (it has completed five quarters now), already has more than 2,000 installations, and has about 4,000 more to execute. What’s more, it has a presence in about 300 towns all over the country.

Says Debjyoti Paul, Deputy General Manager, Forum, “Companies need to integrate data from the distribution chain with their own information. A supply chain should equip a business to earn more revenue by ensuring the constant availability of stocks, and let it act on this feedback by coming up with timely inputs.”

A solution that can be deployed for thousands of partners in a typical distribution ecosystem is not an easy task. Sify’s apparently found the way to do it as it has installations in more than a thousand locations across India. Clients include GlaxoSmithKline (GSK) Consumer Healthcare, TotalFinaElf India, Perfetti Van Melle (India), Pidilite, Gillette India and several SMBs.

TotalFinaElf, the world’s fourth largest oil and gas company, deployed Forum to manage its distribution operations in India. The project is expected to cover about 100 distributors this year, followed by another 200 in later phases. These distributors will be able to connect securely via the Internet at the end of each day to exchange information online with their customers. The distributors will use Forum for their sales, distribution and inventory management functions, including billing, inventory monitoring and generating goods receipts and sales reports.

Similar is the case at GSK Consumer Healthcare, where Forum has been deployed at more than 400 distributor sites. The pharma giant uses Forum to manage its purchases, inventory, and financial accounting. Apart from this, it generates MIS reports.

Gillette has deployed Forum at 50 distributor sites. The company needed to address out-of-stock situations by improving product availability. It was also looking for greater visibility into its sales pipeline, and wanted to manage stock placement in retail outlets. Also on the agenda: how to reduce inventory costs and improve efficiencies in distribution management. Forum helped Gillette address these issues.

At Pidilite, the first phase of implementing Forum has just been completed, and the company has decided that the second round will commence in Kerala a few months from now, followed by Tamil Nadu and other states. All the implementations are for 700-1,000 users. Explains Zoeb Adenwala, Chief of IT at Pidilite, “We wanted to automatically collate stock and sales information from branch offices, distributors and retail outlets through a simple, user-friendly online process.” The organisation was also looking at increasing the profits of its supply chain partners by implementing a solution for the continuous replenishment of goods and creating a two-way communication channel between itself and its distributors. Also, the issue of effectively connecting new applications of trading partners to their legacy applications was handled well by Forum.

The SMB market

SMBs have also noticed the value of Forum. Distributors are using it to improve their efficiency, integrate the operations of their branches, and interact with their principals.

Take Chennai-based Sri Lakshmi Agro Foods, which produces and supplies pulses to over 30,000 retailers in Tamil Nadu. Says Paul, “They use Forum for managing invoicing, debtors, inventory and sales order booking at their head office.” This is the first phase of the implementation. In the second phase, which commenced in April 2005, Forum has been installed on the sales force’s laptops. “We currently run a night shift to manually enter details about the orders and collection receipts. There was no escaping the night shift since the next day’s dispatches had to be scheduled on time,” explains Sudhakar, Director at Sri Lakshmi. The company felt that once the sales force was empowered, it would be able to take orders and even issue cheque and cash collection receipts, thus speeding up the process. The idea was that sales reps could periodically connect to the Internet and upload details about the status of cheque and cash collection to the head office. Sri Lakshmi felt that this would do away with one of the biggest bottlenecks in its supply chain.

Forum will also be deployed by retail organisations such as Inside Trading, which deals in apparel and fashion accessories. Says Glenn Trotman, Director at the company, “We use Forum in six of our retail stores, a warehouse in Hong Kong, and the head office in Delhi. It is used as a point-of-sale (POS) tool to manage inventory, and communicate with the head office and warehouse.”

The solution has found takers in the pharmaceutical sector too. A case in point is Palepu & Co, a large Chennai-based distributor that deals with several large principals and services thousands of retail pharmacists. Says P S Gopal of the company, “We use Forum at our two branch offices and head office for sales invoicing, inventory monitoring and debtors’ management.” Stock transfers between branches are also handled through this system.

Even clearing and forwarding agents (C&FA) have adopted Forum. Saheli Pharma, a C&FA for pharmaceutical company Acron (which supplies products in the east), uses it for billing and inventory management.

The licence situation

Sri Lakshmi uses Forum for managing invoicing, debtors, inventory and sales order booking at their head office Debjyoti Paul Deputy General Manager Forum, Sify

Sify has developed two licencing models for Forum. The first is a one-time payment model that is called the standard licence. This involves an upfront payment that ranges from Rs 11,000-20,000. There’s also an ongoing service charge of Rs 2,500-3,000 per year for support. In case of multiple users, charges are based on the number of nodes connected. The second model is subscription-based, and involves a service fee of Rs 800 per month plus a one-time software licence fee of Rs 4,000.

A user can choose the modules he needs. For example, he can pick the financial accounting model or opt to do without it. Forum also has retailer and distributor versions so that a company in a particular vertical can choose the solution it really needs—and not anything else. Forum is sold through a network of 200 channel partners plus 180 support personnel (of which 80 are from Sify) who work with channel partners.

Legitimate question: there are other system integrators (SIs) who do the same, so how is Sify different? Paul has a ready answer. “The others are hardware guys and have more of a box-pusher mentality. They have not yet got into the solutions model, and that is our strength.” Further, Sify has taken steps to set up a nationwide network of training partners to educate businessmen and students in SCM best practices. Paul adds, “The potential to realise more from our supply chain solution is immense.”

Forum uses XML data standards for information exchange, and enables connectivity with supply chain partners. All it takes is dial-up Internet connectivity, and it can be integrated into back end ERP applications of enterprises through standard application interfaces.

FMCG and beyond

We wanted to collate stock and sales information from branch offices, distributors and retail outlets through a user-friendly online process Zoeb Adenwala Chief of IT Pidilite

While the above instances clearly indicate that FMCG is a leading adopter of Forum, other verticals are not far behind. The basic problem of high inventory and/or frequent out-of-stock situations at the distributor or retail level is common the world over. Paul point out that “Even in the US, and even after electronic data interchange came to the fore in the late eighties, there are still 3 percent out-of-stock instances that result in about $30 billion revenue loss. In India, the equivalent figure is approximately 30 percent, so you can understand the gravity of the situation in an economic sense.”

So is Sify’s Forum the cure-all for all SCM problems? The answer is ‘Not yet.’ Paul himself agrees. “It will be far-fetched to think that all issues pertaining to SCM have been addressed. Companies need to understand that though IT plays a role as a business driver, if solutions do not produce the required benefits then they serve no purpose. Organisations ought to commit themselves completely to the demand-driven approach, and move away from the traditional dump-push-firefight approach. Driving change is never easy, and changing the mindset of external partners is especially challenging.”

Also, there are many vendors (such as Botree Consulting and Wipro Technologies) specialising in inventory management solutions, and even though biggies such as i2 and SAP have not yet zeroed in on this niche, it is only a matter of time before they do so. Says one of the leading SIs, “We feel there is a sizeable market in stock management solutions within the inventory management space.”

Analysts believe that the success of Forum depends on market maturity, and on whether Sify will be able to sustain its efforts over a period of time. Having said that, the company is banking on its end-to-end approach, wherein it plans to bring in everything—from its Internet backbone to addressing security through digital certificates—at an affordable price.

The initial thrust is yielding good dividends. Now it’s up to Sify to ensure that the momentum is sustained, and that organisations realise the value that Forum can bring to their business.