Samarth Gupta from the batch of 2009-11, shares his thoughts on - 'what it takes to be an SIIBian'!
It’s a hard fact of life that we never pay importance to things until we are deprived of them. The same happened with me, I never paid heed to my college life experiences to a great extent till I joined corporate life where I missed by engineering days badly…………..”Purani jeans aur Guitar…muhalle ki who chat aur mere yaar”……..
After 3 years of grind, God’s been kind enough to give me back those good old days…
Well….today is one of the most vella working days since I have joined SIIB(thanks to the cancellation of one of the classes out of the 2 scheduled for the day)..Hence I have decided to pen down some of the thoughts accumulated over the last 8 weeks at SIIB.
It was 6th June, 2009 which showed me a gateway to this new chapter at Symbiosis. I was excited and happy to be back to college…some of the reasons were a getaway from the extra formal and contrived corporate culture as well as a relief from wearing formals.
Much to my ignorance, at SIIB we were supposed to follow an extra formal dress code on Fridays unlike the casual wear /cake and coke parties on the Fridays better known as Fun Fridays in the IT firm I was working with. Well, one thing is for sure that life in a B-school is poles apart from that in a corporate. The biggest shock came to me when I realised that I had to share my room with 2 other students unlike my private rented apartment at NOIDA .Much to my despair, the rooms in the 2nd year are even smaller, but that’s life…”kuch pane ke liye kuch khone padta hai”.(the concept of opportunity cost in the economics class made me realise it even better).
We were put through induction programmes followed by an outbound trip to a picturesque surrounding nearby which a picnic/ice was breaking exercise (I was constantly looking for like-minded people, especially music lovers and luckily I am a part of a big circle of friends…adding new members gradually…). It was full of fun …much to our realisation that there were tough days ahead.
We were introduced to subjects ranging from boring HR to exciting Capital markets…one class after the other and the whole day is gone...phew!!...(we used to talk about work life balance …mind it .weekends is not in the dictionary at any B-school)...We all had a few jitters in a few subjects…but I guess we have acclimatised ourselves to this change…after all that’s what we need to learn …adaptability to change! Whatever exhaustion is caused due to these classes/assignments/presentations gets nullified by the pleasant weather at Pune…unlike the cruel weather at my Delhi where my ex-colleagues are still waiting for a respite….
And for nature and music lovers like me, this is an apt destination wherein I can appreciate beauty (whatever the form be…) apart from other musical and memorable instances at the symbi campus….aarambh , the talent show , a classical rendition organised by Spic Macay and extempore (wherein I had to craft an innovative story within 30 seconds)….hope there are many more to come .Thanks to the various clubs /teams in place.
I hope that I will stop cribbing about the formal wear protocol at SIIB and various exciting and learning experiences will take over in the days to come!
With recession fizzling out after its catastrophic spell on the world economy, experts across the globe are introspecting over the scarred remains of the global financial system. Barring a few prescient financial sages, majority of the lesser mortals have realized the futility of their beliefs only after enduring through the most painful part of the financial karmic cycle, the bust.
For the uninitiated, here is how the karmic cycle works. Financial stability creates confidence in the minds of the investors. With air filled with optimism, they begin to take risks. They place unshakeable faith in the markets in such euphoric times. Walter Bagehot, Editor of the Economist during the twentieth century, puts it succinctly. “All people are most credulous when they are most happy”. Optimism soon turns farcical, descending towards recklessness. In the end, it turns sinister, leading to the bust. Fragile institutions built over it collapse. After purging the market of its excesses, financial stability resurfaces and the cycle continues.
Is it possible to liberate the world economy from these vicious karmic cycles? Can there be a financial nirvana? These questions might sound like a philosopher’s rant with pressing problems in fiscal management and what not. However, looking at the way the medication of the crisis is taking us irrevocably towards it again, it is important to revisit several fundamental leverswhich manage the world economy. This would help us to establish the ambitious, “new world order” effectively.
The concept of risk needs to be demystified in simple terms, devoid of the baggage carried by mathematical models. These mathematical models borne from academia acquire different dimensions altogether whenever they are transported to the real world. The assumptions holding those models become more potent. This basic misunderstanding has had devastating consequences for the world economy. For instance, the popular Value at Risk Model assumes that the volatility of the asset prices and their correlation of the prices remain constant. This is a dangerous assumption laden with far reaching implications in assessing the original value of risk. Add this with the basic human fallacy which equates recent trends with future. A perfect recipe for disaster is created. Managers of the “new world” have tremendous responsibility to weigh the risk accurately rather than pushing them aside.
It is equally pertinent to understand the concept of innovation, especially in this globalization age. Although innovations have been the survival mantra during difficult times, they can also be an albatross around the neck when they tend to complicate things and make us naively believe in their sophistication. Several financial products which were built on mind boggling mathematical models stupefied the common investors and regulators alike. Globalization, with its present avatar, has brought thechaos theory to life in our everyday lives where the actions of a banker in one corner of the world affects our day to day lives.Innovation should strive to simplify this highly networked world created by globalization. This would equip us with the much sought commonsense to confront the challenges of the globalized world.
Recession, in a broader sense, is similar to the pralaya metaphorof the Hindu mythology. Pralaya signifies dissolution and cosmic flood, with its ambit expanding far beyond Joseph Schumpeter’s creative destruction. Creative destruction refers to a revolutionary idea destroying an old idea, changing the rules of the game, whereas Pralaya decimates the playing field and we are let with no option but to start the game afresh. Every Yuga (unit of cosmological time, equivalent to 1000 years)comes to an end with a pralaya signifying the end of the most cherished philosophies of the times. Just like the early nineties busted the bubble of communism with its utopian ideas of equality, 2008 has laid bare the flaws of capitalism.
The ongoing recession has brought to end the Greed Yuga which deified greed as the panacea for poverty and other ills of the world. Greed is no longer good. Experts of the West who had derided savings as an essential trait of the conservative east have begun to extol the virtues of savings. Alan Greenspan, former Federal bank chairman of US, who once condescendingly wrote that “only insecure people of developing nations….need to save”, in his book The Age of Turbulence, has admitted that he was wrong in his presumptions, looking at the “once in a century” financial crisis. Several investment gurus and eminent journalists have begun to question the ludicrous logic of borrowing to spend. It’s true that consumption spurs growth by increasing demand. However, isn’t it too obvious to note that consumption needs to be balanced by adequate savings?
It will be sagacious on our part to look at this recession as an essential pralaya that was bound to happen to break the crutches we placed on the ‘irrational exuberance’ of the markets. Something drastic, beyond the shores of imagination, had to occur to break the arrogant egos and confront our fears long forgotten in euphoria. This pralaya perspective although might not compensate the common investors who have lost their wealth in the market meltdown, will definitely stop the nasty blame game that is happening in the media circles across the world. It’s indeed shameful to see ugly accusations being made on the reputation of the economics profession as a whole without proper understanding of the fundamentals.
We need not be so apologetic about this recession as long as we learn the lessons taught by them and understand the new reality we are living in. At the foremost, we need to re-evaluate our priorities towards finance in our economy. Finance should not be the prime mover of the economy. Entrepreneurs, the original risk taker, engineers, scholars rather than bankers, should be the helmsmen of the economy. Finance should return to its original duty of managing the checks and balances of the economy. They however should be understood by everyone. Finance is too costly a subject to be left understood by bean counters, investment bankers and economists alone. Financial education should begin right from the day we put pocket money in piggy banks. Ignorance can never be an excuse for any disaster, no matter what.
I would be living in utopia if I were to assume that recession would never occur in the “new world”, with the vast expanse of information that is being disseminated across the world through summits, documentaries, et al. We will do mistakes again, although not in the immediate future. I earnestly hope that we don’t make the same mistakes again (although history has several contradictory evidences to offer). New bubbles will be created, burst and there are chances that we might have to be awakened again with another pralaya.
My spiritual guru’s words, “Pain is inevitable. Suffering is optional.” resonates well for markets and individuals alike. Rather than hoping against hope that such cataclysmic events will never occur, it will be wise to look at how we are going to respond towards them. I am optimistic enough to believe that with proper sadhana (read as prudent financial actions) and commonsense wisdom, financial nirvana isn’t difficult to achieve.
Nisha Solanki, from the batch of 2009-11, shares her Experience in "Aarambh - Inter SIC college cultural extravaganza"
A month before when we joined SIIB, we felt b-school was all about tough competitions, arguments, debates and presentations. The month passed by struggling for market research grades, speculating capital markets surprise tests, understanding eccentric economic fundas, simplifying statistics, greeting each other in Chinese, French, German and Spanish, along with endless discussions, tremendous brain storming and challenge of putting forth winning arguments. For freshers it was all about coping with the intimidating work-ex guys and for the work-ex guys it was time to leave the comfort of the cosy ergonomic chair and get back to the real world.
Then came the responsibility of representing SIIB at Aarambh - the joint cultural fest of SIIB, scmhrd and SCIT - completely written, edited and directed by the students and produced by Symbiosis. It was an opportunity to prove ourselves as enthusiastic, energetic and enigmatic juniors who not only make break through presentations but also give path breaking performances. The rock show, modern dance number, traditional bhangra, skit and fashion show rocked the evening. Slogans of "IB rocks! IB rocks!!" filled the auditorium.
Aarambh introduced us to the best things in a b-school - late night slogging, real life planning, strategising, co-ordinating your own events and highlighting the creative streak in you. Aarambh brought forth the leader, organiser, co-ordinator, motivator and performer in each one of us. Aarambh marked the beginning of a new journey - a journey which promised tonnes of masti and loads of management gyan. Welcome to one of the best b-schools.
The Tesco supermarket chain in Britain has been a pioneer in retailing for more than a decade. In the mid-1990s, as he looked at the opportunities for retailers provided by the emergence of lean logistics, Graham Booth, Tesco’s supply chain management director (now retired), had a very simple insight: A rapid replenishment system triggered by the customer would work in any retail format. What’s more, it would work even better if the same replenishment system, using the same suppliers, cross-dock distribution centers, and vehicles serving many stores, could supply every retail store format. Booth saw that there might be very little difference in real costs in supplying the same item through any store format.This was because the purchase price from the supplier could be negotiated for the whole network, not by format,and the same replenishment system making frequent milk runs to larger stores could also stop at small stores to share logistics costs. The cost disadvantage of smaller outlets, due to weak supplier leverage and expensive logistics, would largely disappear.
Booth approached Dan Jones and his research group, asking how Tesco could benefit from Toyota’s supplier logistics methods to reduce time and effort. Dan suggested “taking a walk”—examining a typical provision stream, in this case the one for cola soft drink products. He urged Graham to invite the other functional directors at Tesco—retail, purchasing, distribution, and finance—along with the operations and supply chain directors of Britvic, the company supplying the cola. On a cold day in January 1997 this group set out, walking back through the provision stream for cola from the checkout counter of the grocery store through Tesco’s regional distribution center (RDC), Britvic’s RDC, the warehouse at the Britvic bottling plant, the filling lines for cola destined for Tesco, and the warehouse of Britvic’s can supplier.
Along the way, Dan and his team from Cardiff kept asking simple questions: “Why are products missing from the shelves? Why does a sales associate need to re-sort products from roll cages that have just come off the truck from the RDC? Why is so much stock needed in the back of the grocery store, at the Tesco RDC, and at Britvic’s RDC? Why are there huge warehouses of cans waiting to be filled near the bottling plants?” And so on. The walk was an eye-opener. When Tesco and Britvic directors analyzed the map they drew of the process as they walked, they could see waste at every step, along with huge opportunities for saving costs while increasing the satisfaction of the end customer. As Booth looked at the situation, he realized that practically all of Tesco’s practices for getting goods from the supplier to the shelf would need to change. The first step was to hook the point-of-sale data in the store directly to a shipping decision in Tesco’s RDC. This made the end customer at the checkout point the “pacemaker” regulating the provision stream. Tesco then increased the frequency of deliveries to the retail stores. After several years of experimentation, Tesco’s trucks now leave the RDCs for each store every few hours around the clock, carrying an amount of cola proportional to what was sold in the last few hours.
At the RDC, cola is now received directly from the supplier’s bottling plant in wheeled dollies. They are rolled directly from the supplier into the delivery truck to the stores. And once at the stores, the dollies are rolled directly to the point of sale, where they take the place of the usual sales racks.This innovation eliminates several “touches,” in which employees moved cola from large pallets to roll cages, to the stores, and then onto dollies to reach the shelves, where they were handled one last time. (In drawing the provision stream maps of the original process, Tesco discovered that half its cost in operating this provision stream was the labor required to fill the shelves in the store.For fast-moving products like cola, the Tesco RDC is now a cross-dock rather than a warehouse product, with goods from suppliers spending only a few hours between their receipt and their dispatch to the stores. To guard against sudden spikes in demand, a buffer stock of full dollies is still held aside. But because of the frequency of replenishment, the buffer is very small. Back at the cola supplier, even larger changes have taken place. Britvic improved the flexibility of its filling lines, so it can now make what the customer has just requested in small batches with very high reliability. This means that there are practically no finished goods awaiting shipment in Britvic’s filling plant.
The final logistics step is for Tesco’s delivery truck to take the dollies several times a day from the RDC on a milk run to a series of Tesco stores. At each store it collects the empty dollies and then visits several suppliers to return them. At each stop it also picks up full dollies and then returns to the Tesco RDC to restart the cycle. That may sound like a good way to increase truck miles and logistics costs, and many traditional managers, including those at Tesco and Britvic, have assumed it must. However, in practice, these methods substantially reduce the total miles driven along with freight costs, while also reducing total inventories in the system.
The consequence, in terms of performance, is remarkable.Total “touches” on the product (each of which involves costly human effort) have been reduced from 150 to 50. The total throughput time, from the filling line at the supplier to the customer leaving the store with the cola, has declined from 20 days to 5 days. The number of inventory stocking points has been reduced from five to two (the small buffer in the RDC and the roller racks in the store), and the supplier’s distribution center for the items has disappeared. As he grasped the logic of lean logistics, Booth realized that his simple insight was valid: A rapid-replenishment system triggered by the customer would work in any retail format. What was more, it would work even better if the same replenishment system, using the same suppliers, crossdock distribution centers, and vehicles serving many stores, could supply every retail format.
Using those insights, Tesco set out to create a range of formats, beginning in Britain, so that households could obtain fast-moving consumer goods from a complete variety of outlets. This has led to tiny Tesco Express convenience stores at gas stations and in busy urban intersections; Tesco Metro stores (at the small end of the “supermarket” range) on busy streets and in high-density urban areas; traditional Tesco supermarkets in urban and suburban areas; Tesco Extra on the suburban perimeter as an answer to “big boxes” retail stores operated in Britain by Wal-Mart’s ASDA subsidiary; and Tesco.com for the Web shopper. The strategy has worked quite brilliantly, permitting Tesco to establish the lowest cost position among British retailers (including Wal-Mart) while posting progressively higher margins and steadily increasing its share in every format. But this is just the beginning. By offering households a range of formats for every circumstance and pioneering the use of loyalty cards, which give discounts to frequent shoppers, Tesco is in a position to know everything a household buys during the course of a year at all formats, and where and when they buy it. In fact, 80 percent of items currently bought in Tesco stores are bought by loyalty-card holders. These loyal customers obtain close to 100 percent of their needs at the range of Tesco outlets.
Source: James P. Womack and Daniel T. Jones, “Teaching the Big Box New Tricks,” Fortune, November 14, 2005.
QUESTIONS
1. What key insights of Tesco’s SCM director Graham Booth helped revolutionize Tesco’s supply chain and range of retail store formats? Can these insights be applied to any kind of retail business? Why or why not?
2. How did Dan Jones and his research group from the Cardiff Business School of Wales demonstrate the inefficiencies of the Tesco and Britvic supply chains? Can this methodology be applied to the supply chain of any kind of business? Why or why not?
3. What are the major business and competitive benefits gained by Tesco as the result of its supply chain initiatives? Can other retail chains and retail stores achieve some or all of the same results? Defend your position with examples of actual retail chains and stores
In early 1979, two Texas billionaires, W. Herbert Hunt and his brother, Nelson Bunker Hunt, decided that they were going to get into the silver market in a big way. Herbert stated his reasoning for purchasing silver as follows: "I became convinced that the economy of the United States was in a weakening condition. This reinforced my belief that investment in precious metals was wise . . . because of rampant inflation." Although the Hunts' stated reason for purchasing silver was that it was a good investment, others felt that their real motive was to establish a corner in the silver market. Along with other associates, several of them from the Saudi royal family, the Hunts purchased close to 300 million ounces of silver in the form of either actual bullion or silver futures contracts. The result was that the price of silver rose from $6 an ounce to over $50 an ounce by January 1980.
Once the regulators and the futures exchanges got wind of what the Hunts were up to, they decided to take action to eliminate the possibility of a corner by limiting to 2000 the number of contracts that any single trader could hold. This limit, which was equivalent to 10 million ounces, was only a small fraction of what the Hunts were holding, and so they were forced to sell. The silver market collapsed soon afterward, with the price of silver declining back to below $10 an ounce. The losses to the Hunts were estimated to be in excess of $1 billion, and they soon found themselves in financial difficulty. They had to go into debt to the tune of $1.1 billion, mortgaging not only the family's holdings in the Placid Oil Company but also 75,000 head of cattle, a stable of thoroughbred horses, paintings, jewellery, and even such mundane items as irrigation pumps and lawn mowers. Eventually both Hunt brothers were forced into declaring personal bankruptcy, earning them the dubious distinction of declaring the largest personal bankruptcies ever in the United States.
Nelson and Herbert Hunt paid a heavy price for their excursion into the silver market, but at least Nelson retained his sense of humour. When asked right after the collapse of the silver market how he felt about his losses, he said, "A billion dollars isn't what it used to be."
Source: G. Christian Hill, "Dynasty's Decline: The Current Question About the Hunts of Dallas: How Poor Are They?" Wall Street Journal, November 14, 1984, p. C28. Republished by permission of Dow Jones, Inc. Via Copyright Clearance Center, Inc. 1984 Dow Jones and Company, Inc. All Rights Reserved Worldwide.
