Maj Gen (Dr) Rajan Kochhar
The Indian Army with its geographical spread across twenty-nine states of the country probably has the most overstretched logistics chain amongst all armies of the world. For the Army to serve its objective i.e. to win a war, it needs to keep on evolving enhanced capabilities taking into account the ever-growing threat and an extremely sensitive operating environment. However, the acquisition of such capabilities requires much more than just hardware. Hence, Supply Chain Management plays an important role to provide a resource to our users in real-time.
The Army Ordnance Corps (AOC) is the premier logistics organisation of the Indian Army which performs a huge role in supplying the needs of men, material and equipment for the Indian Army. It has a supply chain model which is multi-echelon based with larger depots like Central Ordnance Depots and then others like Ordnance depots, Divisional Ordnance Units, Brigade Ordnance Units and so on. The model is interspersed with manufacturing agencies such as Ordnance Factories, Defence public sector, DRDO and the private industry. The inventory has recently been digitalised centrally and interfaced with a robust SAP/ERP based system lending better transparency and visibility to the entire inventory management process.
The supply chain model envisages a mix of a pull and push model, wherein the requirements of formations/units are met through a robust three dimensional supply chain system comprising of land, air and rail. The military supply chain has no parallel to any commercial supply chain both in terms of scope and the criticality of the operations. The advanced winter stocking of units in Leh and Ladakh as well as the recent logistic build-up due to the Chinese threat are a testimony to the fact that the supply chain model has delivered and stood the test of time. The proper functioning of such support services is paramount for the soldiers at war and even small delays could result in catastrophic consequences to the security of the nation.
The military supply chain can be divided into three distinct chains. The first chain encompasses fast and light stores, the second chain deals with heavy equipment and the third chain deals with the movement and deployment of soldiers. Unlike any commercial supply chain, the Army supply chain is known to have reverse and lateral flows.
Up gradation and Modernisation
We have in recent times seen the Army Ordnance Corps undergoing a sea change in the up-gradation of its processes and modernisation of its depots by the integration of computer technology and adoption of flexibility in its structure. It is doing away with unproductive practices and outsourcing them to private players in the market. The various maintenance and upgradation contracts with private players is an initiative to bring inefficient resource management.
Today, the entire process from provisioning to procurement and finally to the delivery is automated and available to the head of the organisation for a better decision making process. It is extremely important to remain ahead of the OODA cycle to achieve the required objective with success. We need to give this upgradation and modernisation a further fillip to include all the 100 odd units of the Army Ordnance Corps in a phased manner.
We have seen in recent times how the industry has adapted itself to employ innovative methods of cost-cutting and improved efficiencies. One such measure has been to concentrate on the core activities and outsource the non-core activities.
Individual companies have ensured that their supply chains are more resilient and competitive. It is important to note that if anyone link in the supply chain is disturbed, the entire supply chain gets stalled. For example in the case of the manufacture of gears; automotive production of mesh parts takes place in Pune, sub-assemblies are made in Hosur and the final assembling is done at Manesar. If any one activity is shut down at any one place, the entire supply chain gets stalled.
Therefore, every supply chain model will have to have a contingency plan inbuilt. Resilient capabilities will have to be developed to respond to uncertainties. Warehouses will relocate closer to customers. The private industry has adapted well to this model. According to a report, companies in India currently outsource an estimated 62 per cent of their logistics requirement.
Supply chain management is considered a function crucial to a large number of industries to achieve and maintain their global competitiveness. For instance, in the airline industry, logistics is not only the scheduling of flights and passengers but also meticulous planning, implementing, and control of a variety of activities, such as scheduling for crews, ground support, airport scheduling, preventive maintenance, luggage, meals, etc.
Global supply chain management is most crucial to the competitiveness of global retailers, such as Wal-Mart, Carrefour, etc., and e-retailers like Amazon.com. Nike does not own a complete manufacturing facility in any part of the world but gets all its products manufactured by sub-contracting in various parts of the world. It focuses primarily upon design, supply chain management, and marketing.
Supply chain management aims at minimization and elimination of all wastes through vertical integration of all functional activities in managing the suppliers’ suppliers all the way through to managing the customers’ customers and focusing on scheduling and time efficiency.
The Government can play a major role in supporting the logistics sector by giving focus on the development of infrastructure like roads, railways, ports, airports, logistic parks, warehousing and inland container depots. This would help to improve the storage and handling of goods and materials by providing facilities to logistics companies at reasonable costs.
Adopting Best Practices
It is well recognised that the Indian Army operates in some of the most adverse environmental conditions. The existing multi-echelon system based on manual store keeping needs to be urgently modernised. There is excessive provisioning at each store holding echelon and huge costs are incurred on account of an idle inventory. To some extent, the CICP (Computerised Inventory Control Project) model would help resolve this issue.
Another area of concern is the warranty issue. In most cases by the time a spare part or sub-assembly is used, its warranty period is over and no claim can be raised for any defect or premature failure. This is particularly true for tyres, tubes and batteries.
Therefore, state of the art supply chain management tools needs to be employed to minimise idling inventory to a bare minimum, perhaps to the level of war wastage reserves. Adopting technology into supply chain processes is no longer considered proactive, but a standard operation.
The trick is to choose a platform that meets your needs. Platforms, such as ERPs and SAPs, are a great tool to streamline processes, increase visibility, minimize paperwork, and automate certain activities. Transportation management systems and transportation spend management systems are ideal tools for the bigger picture in the supply chain—they help increase efficiency, reduce risk, and provide data-driven insights into business decisions. A strong platform helps streamline supply chain management and works in tandem with the laid out strategy.
In the last two decades, the logistics distribution networks of Indian manufacturers have significantly improved especially of the common user items. We need to have maximum items under a centralised “rate contract” (RC). The action already initiated on this needs to be stepped up to increase the range and depth of items under RC. This would be far cheaper than the costs associated with idling inventory. Once successfully implemented, stocking norms can be reviewed and inventory carrying costs reduced significantly.
We also have several items on the transportation model. The scope of this could be widened and numbers of items enhanced and thereby ensure all stock holding echelons right to the formation level are covered.
Areas for Outsourcing
The provisioning of clothing and general stores, as required by the Indian Army is the responsibility of the Army Ordnance Corps. We are largely dependent on Ordnance Factories that provide the complete range of clothing items; 80 per cent of the items manufactured by Ordnance factories are based on the requirements projected by the Indian Army.
It would be worthwhile to move away from our clothing requirements to the private sector to enable improvements in availability and quality.
The military should—and can—operate more efficiently. One area that has potential for major savings is logistics. As combat capabilities grow, the logistics system must adapt. Performance-based logistics is an approach that organizes logistics around these increasing combat capabilities, offering huge savings in the process. Performance-based logistics changes the metric by which the effectiveness of the logistics system is gauged to drive an alternative approach to managing the system.
The new method involves taking bids and hiring private contractors for jobs that used to be performed using government workers. Since a private company could precisely control manufacturing and delivery costs, this method cuts waste and improves resource availability. Since processes are itemized, individual accounts became responsible for specific activities. This system could be explored for its efficacy and applicability to the Indian Armed Forces especially when catheterization takes place.
Impact of Theaterization of Commands
Gone are the days when battles dragged on for years. Now battles are instant. It's all about striking swiftly and stealthily. And to do this, you need instant decision making and state-of-the-art weaponry. Hence, amongst the defence reforms which have been announced, theaterization of commands is a major one. This will largely impact the chain of command and duplication of work. In today’s environment, a person in charge of an operation doesn’t have full control of all the assets. The Army will always have to requisition for close air support. Therefore, like all major armies of the world have done, theaterization has become a necessity.
With the coming in of theaterization, the logistics will have to undergo a major change. The first step would entail digitalisation and networking of the logistics elements of the three services. Every item will need to be given a unique identification code common to the three services employing techniques like radio frequency identification.
There would also be a requirement for a separate Defence Logistics Agency to take on the requirement for the three services. We may also look to have a roll-on budget instead of a yearly budget. This will facilitate the procurement process and proper utilisation of the allotments made. These are some of the issues which would need greater deliberation.
The Army Ordnance Corps must keep pace with the constantly changing technological environment in our country. On account of a massive restructuring of the armed forces on the anvil, the supply chain management which includes logistics must also transform. A de novo look needs to be given and concepts and best practices need to be adopted to synergise the logistics towards our military and national aim. The time for reckoning is drawing near. As is often said, “Innovation and best practices can be sown throughout an organization - but only when they fall on fertile ground.”
*Author is an Indian Army veteran. Views expressed here are personal.