‘Market mediation gaining importance’

Our Management Bureau in Chennai

The market mediation function of supply chain will gain importance in the near future as the products supplied by corporations are becoming more innovative in nature. Market mediation works towards ensuring that the variety of products reaching the marketplace matches consumers’ wants, said Prof M G Korgaonkar, head, Shailesh J Mehta School of Management, Indian Institute of technology, Mumbai. He was speaking at Natcom 2001.

“The function is particularly important for innovative products since market reaction to innovation increases the risk of shortages, excess supplies, obsolescence and inappropriate inventory positioning. The cost of mediation includes discounts, lost sales opportunities and dissatisfied customers,” said Prof Korgaonkar.

The physical distribution aspects of the supply chain are important such as converting raw materials into parts, components, finished goods and transportation. The costs of production, transportation and inventory carrying have to be taken into account. These are aspects of the physical distribution process. It is particularly important in case of functional products with predictable demand.

In an environment with highly bottlenecked infrastructure, diminishing sources of competitive advantage for the firms and even more seriously, diminishing returns from these sources and severe pressures on delivered cost, service, cycle times, speed and value, what can firms do? “They should find newer ways of designing supply chain delivery networks by incorporating principles of modularisation, flexibility, postponement and thereby improve value propositions.
They should develop speedier, more responsive business processes in the supply chain to reduce costs, cycle times and improve response and flexibility. They should exploit the power of information technology to explore more cost-effective options in arriving at strategic and operational decisions such as transportation mode choices, vehicle routing, shipment sizes, warehouse sizes and locations, inventory stocking patterns and service levels,” says Prof Korgaonkar.

Amul is a good example of a good supply chain management system in the Indian context. It a model that should be emulated by Indian companies and other countries with similar external environment, he adds.