Virtual Vertical Integration Model of Scm

Abstract: The main objective of this paper is to understand scm and explore

the various challenges and opportunities evolving day by day. Firms fromestablished and mature economies are increasingly expanding into emergingmarkets. Globalization forced companies to change their competitivepriorities and redesign the supply chain aggressively with a global focus. Forsome companies the driving factor is the new market for its products and forsome other it is the access to new suppliers or raw materials from any wherefrom the world at low cost, for a third it is about lowering the cost ofmanufacturing and services through outsourcing . Regardless of a galore ofopportunities there are many common supply chain challenges as they enteror expand their business in emerging markets: new risk of disruption ofquality, financial uncertainties of the partner, unfamiliar cultures, variedinfrastructure, historical reasons and rapid growth and change. Globalization,vertical disintegration, outsourcing and off-shoring, shorter product lifecycles, lesser lead time, JIT inventory are also some factors which led tochallenges like information integration, co-ordination and resource sharing,organisational relationship linkage.Information is the power of modern scm.A company with modern technology and having and effective supply chainmanagement system with information integration as its foundation will have adefinite edge over competitors and various scm challenges

2.1.4 E-Choupal- Virtual Vertical Integration Model of SCM

E-Choupal links the Indian farmer with consumers in local and global markets, byleveraging ITC's time-tested and proven competencies in marketing and distribution. E-Choupal leverages the seamless workflow capabilities of IT to virtually integrate severalbest in class players along the chain and offer the service on a single platform to everyfarmer. E-Choupal empowers the farmer's decision-making with information. In theprocess many overheads like multiple transportation and handling, bagging etc areerased. Thus through V2I model of SCM,E-Choupal secures benefits for country'seconomy without displacing the small farmer. From the conception of the model, an IT-based solution was recognised as fundamental to optimizing effectiveness, scalability, andcost.

2.2 Supply Chain in Food Sector

The food supply chain consists of various players. Logistics is thread which connects thedifferent components of the supply chain. The supply chain is consists of farmers who sellproduce directly into consumers or to traders or manufacturers, cold storage units, foodprocessing entities, packaging units, wholesalers or distributors, retail chain or other formof retailers, hotels, restaurants, caterers and consumers. Supply chain in the case of foodsector varies from product to product in terms of no of players and value addition at thelevel of each player. The efficiency of a supply chain depend upon the way in which therelative activities or processes are conducted such that cost, time and efforts are savedand productivity increases. These cover forecasting supply of and demand for products,sourcing of raw materials and intermediaries, production, inventory, orders, distribution andmaking the products available to customers. A connecting thread in these cases is thelevel of technology used, technology-backed information systems and logistics whichintegrate the various players in the supply chain.

2.3 E-Financial Supply Chain Systems

Cross border transactions, decreasing cost of technology, speed of transaction and a 24hour 365 day facility has lead to development of e-financial supply chain. Though e-financial supply chain has been growing it needs to accelerate at a much faster pacetokeep up with global business demands. Comprehensive laws and mitigation of risk offraud would enhance its use and acceptance. Proper financial supply chain managementusing e-payment mechanism can reduce the cost of working capital and improve supplierrelationship management by providing speedy payment.

2.4 SCM in Pharmaceutical industry

Outsourcing- the current mantra of pharmaceutical industry is being used morestrategically as on going part of a company's overall business strategy. Outsourcedactivities can be in various field right from "drug discovery" till manufacturing of theproduct. Pharmaceutical companies have a long outsourced function such asmanufacturing, packaging, clinical trials and sales force mobilisation. Bio-technologycompanies which have almost doubled in number during the past five years, alsocontributed to this trend as they seek ways of bringing their products to markets without

making capital investment in their own manufacturing facilities, the major benefits of

outsourcing are given below

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Outsourcing reduces the overall cost by 30 to 35 percent

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Reduces problems faced during the regulatory process

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Improve manufacturing efficiencies

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Reduces excess production capacity by divesting facilities

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Improve net earnings and cash flow

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Fast and cheaper to have discovery work outsourced as it reduces the drug

development cost

3.0 CHALLENGES OF SCM

The demands made to a manufacturer by a client are dependent upon demands made byclient's