RATIONALISATION IN YARN SUPPLY CHAIN MANAGEMENT

ABSTRACT
The present yarn supply chain management system for the small and medium enterprises is inefficient by virtue of following the age old process of unnecessary unloading and reloading the yarn at the intermediaries’ premises. Given the enormous developments happened in the logistics systems and Information & Communication Technology, we can very well eliminate this time consuming and expensive practice. This paper attempts an approach to reduce, if not eliminate, this inefficiency and, a simple method to enhance the profit and productivity of yarn supply chain management process.
INTRODUCTION
Small and Medium Enterprises (SMEs) by virtue of their inherent nature and activities, are unable to achieve the economics of scale in their inward or outward supply chain processes. Thereby, they are loosing their competitive edge in comparison with large enterprises.
Prudent applications of Information and Communication Technology (ICT) will help SMEs to overcome this avoidable obstacle by reducing their procurement / distribution expenditure in terms of time, money, and inventory cost. Naturally the profits will also significantly add up.
The following case analysis is particularly meant for SMEs in textile weaving sector with a specific reference to yarn supply chain management (from spinning mills to weaving units/ warping and sizing units / yarn dyeing units).
Nevertheless, it can be applied to any sector of industry / service where the raw materials are of commodity type.
For example
a) Transport of cement bags from factories to construction sites,
b) Rice / Wheat / groceries from millers,
c) vegetables & other perishable goods from farms to consumers(hotels, hostels / marriage houses / temples / canteens / industrial & domestic caterers / big joint families etc.).
Analysis of existing Supply Chain Process in Textile SMEs Weaving Sector.
Presently, due to the small lot purchase of yarn from spinning mills by the SMEs, they are paying more money per unit of procurement. Because, the spinning mills are supplying to the trade intermediaries (yarn merchants, stockiests, brokers etc.,) and they in turn supply the yarn to various SMEs in weaving sector. It involves essential loading operation of yarn to the transport vehicle in the spinning mills, avoidable unloading, safe keeping and reloading operations at the yarn traders’ premises and subsequent essential unloading operation at the weavers’ premises/ warping / sizing units / yarn dyeing unit.
Due to this avoidable operations, the cost of yarn increases from 0.3 % to 2 % depending upon the distance, warehousing and the time factors.


Flow Chart of the Present Yarn Marketing Arrangement for SMEs
SPINNING MILL

YARN
MONEY
GODOWN OF MIDDLEMEN


MONEY YARN

CONSUMERS’ FACTORY GATE

Figure 1
In some cases, the distribution chain may have even more layers of unloading and loading and safe keeping activities. It is obviously inefficient.
Stating the problem is easy.
How to Make it Efficient?
Whenever the need arises from the bonafide consumer, she / he can order the required quality and quantity of the yarn from the spinning mills, either through middle men or through association of consumers or directly. After ensuring payment details / credit worthiness, the yarn can be delivered at the consumers’ door steps at the right time directly from the mills by combining significant number of small lot orders from the same region.
Flow Chart for the proposed SCM for Textile Weaving SMEs
SPINNING MILL

DIRECT
DELIVERY OF
YARN

ACTUAL PAYMENT &
CONSUMER
FEEDBACK
PAYMENT NEGOTIATIONS &
CREDIT AUTHORISATIONS
THROUGH MIDDLEMEN



CONSUMERS’ FACTORY GATE
(WEAVING / WARPING / SIZING UNITS / YARN DYING UNITS)


Figure 2
PRACTICAL SIGNIFICANCE
What are We Gaining by this Processes ?
1. The unloading and loading of yarn in the intermediaries’ godowns is totally eliminated.
2. The cost of warehousing at the middlemen’s facility is avoided
3. Time delay involved in the supply process from the spinning mill to the consumer gate is nullified
4. The possibility of yarn damage in transit is minimised.
How Payment Can be Ensured ?
The present role and the significance of the intermediaries are not at all eliminated. In fact, she/ he is the main link between supplier and the buyer. Therefore, she/he acts as a buffer between them. In many cases, the buyers’ financials credentials are authenticated by the intermediary only.
In the proposed IT based supply chain management system, What he is not doing is, the safe keeping of yarn in his facilities.
If a handful of people only ( one or two mills / and one or two buyers ) are involved, simple cell phone/ telephone calls will do wonderfully. But, in the real world, numerous suppliers, intermediaries and buyers are involved. Therefore, we should use a web based information system to display the following information.
1. The availability of yarn (with all possible technical and commercial details) at the various mills.
2. The route map & delivery schedule of transport vehicles from spinning mills to major weaving regions with information related to time, transport cost, accepted intermediaries addresses (banks, financial agencies, credit guarantors, agents ) etc.
These two sets of information should be periodically updated to make it meaningful and worthwhile.
This electronic display of all the relevant information both in the internet and the cell phone based specially created trading portal, regarding trading will cut down the cost of procurement significantly.
Further, it will reduce the cost of inventory at every stage of yarn production and consumption. A bonus point is the avoidance of quality deterioration at the totally unnecessary and easily avoidable intermediate unloading, safe keeping and loading operations.
What are the possible hurdles for the proposed system?
1. Middlemen (as they are likely to get mariginalised in this process)
2. Expensive warehouse owners in trading towns ( as they are loosing their lucrative rent / lease income )
3. The unloading and loading operators at the middlemen’s facilities ( they are loosing their livelihood )
4. Transporters ( now, as their unloading operations are fragmented)
5. Last, but not the least, our mind set in keeping the trading operation details unnecessarily secret.
Description of the Proposed System
Cell phones are a very common but sophisticated Information and Communication Technology devices available with almost every one in the trade. Therefore, it is not a Herculean task to interact with the various stake holders of this supply chain management system by creating suitable template. Given the huge capacity available in the telecommunication sector an IVRS (Interactive Voice Response System) will be much beneficial We have attempted a sample template to be viewed in the cell phone screen or in the web pages for discussion and refinement.
To access this supply chain system the customer should have an user id and password either individually or in association with like minded customers. All the registered and potential customers should be given familirisation sessions at important yarn trading / consuming markets. Further it is needless to say, online Internet based help desk / promotional campaigns accompanied with road shows and print media awareness campaigns will help in popularizing / gaining acceptance of this system.

Customer(s) Queries
A) User id and Password
B) Count of the yarn and quantity required :
C) Date, time and place of delivery :
D) Choice of Mills :
The customer(s) need not enter all the above text. By just pressing the Alphabets they can order the yarn of their choice.
Supply Chain System Response
Yarn Price :
Transporters Name(s) :
Transport tariff :
Accepted intermediaries / Banks / Credit guarantee agencies
Customers contact with Intermediaries / Banks / Credit guarantee agencies for financial conclusion
On approval from the financial front, the transaction is completed.
CONCLUSION
1. Creation of Cell phone (Messaging & IVRS facility) / web based trading portal with easy interactivity: regional language content should be ensured
2. Educating all the stakeholders about the benefits of this system.
3. Demonstrating the cost reduction possibilities.
4. Involving all the stakeholders in the planning stage itself
Spinning mills
Weaving units / warping units / sizing units
Transporters
Inter mediators ( yarn merchants, stockiests, brokers)
Web page content developers in association with cell phone service providers
Associations of spinning/ weaving/ yarn trading sectors
Bankers / financial institutions / credit guarantee agencies