 Namaskar. I'm Professor Devade Purkayastha from IIT Bombay. Welcome to my course, Business Fundamental for Entrepreneurs, Part 2, External Operations. Today's module is about supply chain and logistics. But before I get into the module for today, let me very quickly recap the flow of the discussions in this course. This is about external operations of a company, and therefore I started with sharing, how can you as a manager or an employee or an aspiring entrepreneur, study the market, study competitors, products, emerging trends, and technologies. Then I talked about customers and customer segments, B2B customers, B2C customers, and then I talked about how you can create and you should create a compelling value proposition for your customers. Once you have your customer proposition, then we talked about how do you have a great value-based marketing program? How do you create value, how do you deliver value, how do you communicate value, and how do you capture some value for yourself? Then we talked about advertising, branding, and positioning as part of your communication strategy. We then went into the sales part of it, starting with sales distribution, sales channel, and then B2B selling and B2C selling. Then we talked about how do you build great customer loyalty and customer advocacy, so that customers keep coming back to you over and over again, and your business grows, and your profits grow, and today we're going to talk about supply chain and logistics. How do you manage the flow of goods from raw material all the way to the finished goods reaching your customers? So we'll start with an introduction to what is supply chain, and then I'll talk to you about how do you plan your supply chain, and I'll give you a glimpses about the warehousing and transport part of supply chain, which is the operating part of supply chain. Then I'll talk to you about the skills that you need if you want to build a career in supply chain. Remember, supply chain is a huge industry by itself, because every company, every product, every business needs to manage a supply chain, and it's one of the largest employers, and it's one of the fastest growing, and you'll see later on how with digitalization and AI, and all the new technologies coming into supply chain itself is modernizing. So it can be a very rewarding career for all of you watching this video. What is supply chain? A supply chain is a network, it's a chain, it's a network or a chain of processes, and I'll show some examples, infrastructure, multimodal transport, and technology. Basically, they're involved in several flows, the flows of goods, the flow of information, and the flow of money. I'll talk about that. It starts from inbound logistics, where suppliers are supplying raw material, and packaging material, and components, and chemicals, and raw food products into a factory, and then outbound logistics, where from the factory, stage by stage, it goes ultimately to the last step, which is a consumer like you or me. And supply chain management is an effective and efficient management of the supply chain itself. It's huge a network of people, processors, technology, warehouses, transport, cash flows, goods flows, information flow that happens in any supply chain. And if you manage all of that, you become a supply chain manager. So what are the components of a supply chain? As I said, and if you can look at the screen, it starts with raw material supply. So if you're a soft drink manufacturer, like a cola manufacturer, the raw materials will obviously water, sugar, flavorings, some specific component that a cola company will have, some juices, but also the bottle, the cap, the labels, all of that will be raw material for cola drink or a soft drink. So it includes all of those suppliers. It includes the plants and the factories because goods are coming in and going out and the plant itself will have an implant supply chain. Other components are the warehouses and the chefs where you store the goods. And I'll show you some examples. And of course, moving the goods. And you can move the goods in trucks, ships, planes, sometimes in a cycle rickshaw, auto rickshaw, et cetera. It also includes people, people who are moving the goods, people who are working at what are called the distributors and managing the supply chain at the distribution locations. Even retail, the stores that you go to will have a small supply chain for each store. So these are all the components of a supply chain. What's very important is that supply chain ultimately is like a chain. There's a lot of flows happening in a supply chain. So what are the flows? The obvious flows are the flow of goods and material. As I said, it could be raw material, components, finished goods, and also space. Remember, if you buy a car, the car manufacturer has to give you space. So the space also moves through the supply chain. So there's a car supply chain and there are the space supply chain. If you buy a desktop or a laptop, there's a finished goods supply chain which is the desktop or the laptop, but there are also space which you may need for after sale service. So that's flow of goods. But there's also flow of money. Because the flow of goods are going like this, the money flows in the reverse direction. So the goods will come from manufacturer to customer. Money will go in the reverse direction from customer to manufacturer. Goods will come from suppliers to manufacturer. Money will go in the reverse direction from manufacturer when he pays the suppliers. And in all of these, there's flow of information, order information, invoice information, storage information, transport information, all kinds of information that's flowing continuously through the network. So there are another way of looking at the flow which is called lead times. Because it's not just flow. It's also the times for the flow. So how do you look at the times for the flow? There are two timing cycles. One is at the production stage. So when goods are coming from raw material and components into a factory where they're assembled and produced and then it goes from a factory warehouse to where it goes out, there is a production lead time. For example, if you order a laptop or a PC on a laptop or a computer manufacturer, for him to make that, there is a lead time. There's a production lead time. The laptop manufacturer may have to import the screens from Korea, the chips from Japan, the body, the sashie of the laptop, or the box in your PC. He'll probably have to bring it from a local suppliers. The power adapter, he may have to bring in from China. So think about it. It's been produced in a factory that laptop or PC, but parts are coming in from Korea or Japan, China, or local manufacturer. And that's called the production lead time. Now if all of these goods flow takes one month, then the lead time for production of your laptop is one month. That's the production lead time. There's another lead time which is called the delivery lead time. So the delivery lead time starts from the factory to the customer. And it starts with when the customer places an order, because this is flowing in reverse. So customer places an order, then the goods have to go out from the warehouse. It has to be transported to the customer location and it has to be delivered. That same PC or laptop that you have ordered, once it made that the factory, let's say the factory is somewhere in Himachal Pradesh. And let's say you are sitting as a customer in Chennai. So the laptop has to come from Himachal Pradesh into Chennai. And that becomes the delivery lead time. And you'll have many steps to it. So I talked about flows, information money, and material, and we talked about lead times. But you have to manage all of that. Let's look at now some examples of the components of a supply chain. First, the warehouse. The warehouse that you see is a traditional warehouse. You see those cartons are put on the floor. It's not racked. There are no racks. There is no material handling equipment that's probably going around in that warehouse. There's probably no robots or automation. So it's a very traditional warehouse. And most of the Indian warehouses will probably look like this, big sheds. Sometimes in the 40s, during the war actually, some countries like the US, Australia, and some other countries came up with this idea called palletization. A pallet is a piece of wood that you can see on the screen. And what it does it, it allows you to put the goods on the pallet. The pallet can be put on a rack and I'll show you pictures of that. And you don't have to move it carton by carton. You can move the entire pallet. And the pallet can store one ton of goods or maybe one and a half ton of goods. So with that development of supply chain, lot of traditional warehouses became modern warehouses. And this is what a modern warehouse will look like. You'll find that goods are not on the floor. Goods are stored on pallets and they are stored on the racks. And you'll find that slowly, material handling equipment is coming in. So that person is not carrying it on his shoulder. That person has put it on a pallet jack and a trolley and he is moving in a trolley. So that's basic racking and basic development of warehousing. Slowly over the years, lot of sophisticated equipment got introduced into warehouses. And the purpose of all of them is to speed up the flow of goods. So there are some examples here. You can look up the internet yourself and these are basically equipment which helps move the goods. And this is like an assembly line for parcels. Remember in a big hub which may be operated by a DHL or a FedEx or a UPS. At any time, there may be a million parcels flowing through that hub. And it cannot be tracked individually. You cannot track a million parcels a day flowing through the hub. Lots of aeroplanes coming in, going out. Trucks coming in, going out. And you cannot be doing it manually. So you come into what is called assembly line sorting of the goods. And this is an example of assembly line sorting again, another level of development of supply chain within the warehouse. We're still talking within the warehouse. And then slowly in the recent few years we've got smart warehouses. Now there aren't even people in the warehouse. It's all robotized. So you see a picture of a robot. And this is a DHL warehouse. It's a robot which is actually lifting the goods. It's picking up that parcel that you can see on the picture and it's moving where it needs to be moved. So I've gone from traditional warehouse to racked warehouse with a lot of equipment which makes it easier to a smart warehouse which is robotized. That's the development cycle of warehousing. This is the second version of a robotized warehouse where the final sorting can be done on robots. So those round things that you see are actually robots. And unlike the previous one where big curtains are being moved, they will probably just move small, small boxes, small, small articles, small, small goods from place A to place B and all controlled by computer equipment. So this is the warehouse of the future. Now let's look at transport. So transportation started again traditionally by carriage of goods in carts like this. Either hand carried or in a cart pulled by a horse or a cow or a bull or an ox. That's how it started. But then slowly other modes started. So train. India operates one of the largest network of railways and one of the largest network of cargo trains. And this is probably an ore carrier which means coal, iron ore, manganese, copper, whatever commodities. But it could also be a cargo carried in containers. So cargo trains speed up the movement of goods from one part of the country to the other part of the country. So the iron ore is being produced or the coal is being produced, let's say for example in Jharkhand and it needs to come to let's say West Coast port for export, then you use trains like this. Then as motor vehicles started, goods also started moving by road and this is a cargo truck. And you get them in all sizes, all shapes and you can see them when you're going around in the road. But what happens if there's a sea or a river in between? Then you use cargo boats. So this is how coastal shipping, coastal movement happened. But this cannot go, this kind of a boat that you see on the screen will not be able to travel very far. So they'll carry small lots of material and goods. They'll probably move in a river or probably they move from around the coast. So they'll travel from the West Coast all the way to South of India and the East Coast of India. So it's coastal shipping or river shipping. But then again, earlier in the 20th century, just like pallets, another development happened which is called containerization which means a lot of goods could be put into a standard size container like this and instead of moving the individual cartons you move the entire container. So that speeds up the movement of goods. So these containers, once they are stuffed which means loaded with goods, they can move in trucks. So you can see this is a containerized truck. Sometimes you have to move goods across the ocean from China into India, from Japan into US, from Germany into Africa. And this is a container ship. So this ship, a very large ship which is carrying lots of containers is looking small in the picture, but actually they're very big. And this one ship may be carrying thousands of containers but they'll move it long distance. I showed you containers moving in trucks and ships. India now also has containerized trains. So you can see a picture of what is called a double stack container train. So if you have commodities you move in cargo trains like the ones I showed and talked to you about earlier but you've got finished goods which fits into a container. You can use a container train like this and this is a double stack container. The advantage of a standardized container is the same container can move across the ocean in a container ship. It can move across the country in a container train. It can move port to a warehouse in a container truck and the same container can then be taken back and put to some other use. So we talked about land, sea, train but for important goods, expensive goods which have to move fast, smartphones, watches, medicines like vaccines, the COVID vaccines. They have to move fast because they're expensive or they have a short shelf life. So you move it in planes and they're very large operators of aeroplanes like DHL, FedEx, UPS, or Blue Dart in India. And you see the examples of cargo planes and these planes don't carry passengers. Inside the plane, this is what it looks like. So this is sea that there is a pallet which are very specialized air cargo pallets. You put the goods and you put them into the aeroplane and they can be used for civilian or defense users where you can actually put tanks and armored vehicles, et cetera, onto a plane, on a cargo plane or military cargo plane. So far I've talked about movement of large volumes of goods, bulky items, but there's also something called the last mile, which is the delivery to your house or my house. And these are not large bulk. These are in smaller lots. So you have a picture here of a store delivery. A store will not buy a whole container or a ship load or a plane load or a truck load. Your neighborhood store will probably buy a few cases or a few bottles of Coca-Cola. And this is how the goods will get delivered to your neighborhood store. You may order a very small packet of food and this is an individual order delivery to an individual home, like your home or my home. And these are the delivery services. This could be done by Swiggy or it could be done by Zomato. It could be done by Danzo or any of the delivery services which goes right to your house. So bulk movement of goods. Then you have the store delivery and then the delivery to your own house. So with that, let's have a reflection point. Remember, right through the course, I will request you to reflect and write down in a course journal what you have learned, what you have heard from me and your thoughts on some of the questions that I'm putting on the screen. So now please reflect on a product that you use, whatever product you use. It could be a biscuit that you eat, a dress that you wear, a smartphone that you use, a pen that you write with, et cetera. Think about what raw material would have gone into it. If it's a chocolate, cocoa, sugar, the paper wrapper, et cetera, what raw material have gone into it? Try to research where the raw material was sourced from. So in the chocolate example, where did the cocoa come from? Is it from India or did it come from Ethiopia in Africa or some other part of the world? So think about where the raw material came from. Think about what would have been the supply chain flows involved, electronic or chemicals or commodities. What are the supply chain flow? Try to visualize it or research it on the internet. And think about what is the production lead time and the delivery lead time for that product, starting from the raw material all the way to your house. And as you start thinking about it or researching it on the internet, you will develop an understanding of the basics of supply chain. So please reflect for three minutes.