Indian Supply Chain A Sutradhar in the Making

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Supply Chain Leaders

Indian Supply Chain A Sutradhar in the Making

On the back of a resilient supply chain aided by GenX technology adoption, India holds tremendous potential to script a success story in times to come. With the COVID-19 pandemic being a great leveler in pushing companies to adopt & up their technological prowess quickly, it’s about time that companies ace their supply chain game and take India’s growth trajectory to unprecedented heights. The panel discussion on Resilient & Sustainable Supply Chain, hosted by NASSCOM CoE during Enterprise Innovation Challenge, threw light on companies’ preparedness & strategies to deal with disruptions and how technology can play an enabling role. Excerpts collated by Kunal Kulkarni, NASSCOM CoE…

While moderating the session, Vraj Gokhlay, Partner – India Lighthouse at KPMG, aptly described the resilient quotient of Indian companies, "The pre-COVID-19 era saw organizations focusing on globalizing their supply chains to optimize the costs. However, the COVID-19 pandemic uncovered the weaknesses of these supply chains. While many organizations have been able to provide immediate solutions, the fundamental assessment of the strategy is required with a presumption that COVID-19 may not be a rare one-off disruptive event, and we could see other events of geo-political, environmental, and technological nature, among others. A customer centric resilient supply chain strategy leveraging a digital-first approach is expected to be the key to unlocking value. It is high time we draw attention to the significance of building a buoyant and sustainable supply chain, one ready for the future. What does it mean to be resilient as far as the supply chain is concerned? What does it mean to have a sustainable supply chain? It's objective to ask – are you a resilient supply chain? As every company is different, every supply chain is different, and every company's environment is changing today at a very rapid pace”. The insightful panel demystifies what it means to be a truly resilient and sustainable supply chain…

What do you think about having a direct-to-customer model in the context of your business?

Venkata Sridhar, Senior Associate Director, Kellogg Company

I think it dates back just before the pandemic, and we have spoken at length about omnichannel presence - that's the vision we have set in. It has helped us fight the pandemic and prepared us to make sure that we serve the requirements. We have defined the omni-channels in four different segments, which were pertinent at the time of defining the strategy in 2019. We disregarded the impact of the explosion that is going to happen due to this pandemic. We now defined it more in terms of getting very close and changing our approach from a forecast-based servicing model to a demand-driven servicing model and omnipresence, omni-availability across the channels. Due to the pandemic, we had to course-correct because the roadside store(s) were the winners. During the initial period, even e-retail had multiple challenges related to logistics. We also dynamically changed our models to get into retail. We went in with a 3-1-Q model – We looked at the last three weeks for sales pattern, looking at every week in isolation (because no demand predictability model existed at that time for retail) and developed a very quick and responsive mechanism (Q-quick). We had a 190% growth rate in the first few weeks, which went close to about 400% as we moved forward.

Sanjeev Gupta, Executive Vice President, Diageo India

When I look at my industry (Alco-Bev), there was a different kind of turbulence when COVID struck us in the year 2020. We've predominantly got two route-to-markets: Off-Trade and On-Trade. On-Trade was completely disrupted because all the hotels, bars, hospitality industries were closed. The whole demand shifted to the Off-Trade as retailers had more demand to be fulfilled from the customers coming into the shops. We also observed another kind of demand volatility where people moved from smaller to bigger packs as they wanted to sit at home instead of going to the market every day/week. We realized the demand for bigger packs had gone up many folds within a week, and we had never planned for that. Our industry is famous for managing disruptions, so generally, we use scenario planning/ disruption planning. While COVID happened in 2020, we already had tools that helped us prepare for a situation where demand or supply are disrupted.

On the other hand, the supply chain also got disrupted big time because people were quite uncertain whether to come to the factory/operations. How do you make them feel confident? We also looked at things inside the factory: beer operations are manual, requiring many people and many touchpoints - How do you automate them? We used to think about digitization earlier as well – like a digital access control for the factory. But post-COVID, the whole thing got accelerated big time. Today we have got paperless/touchless access control in our factories. We have observed that over the past 12 months, automation has been picking up in the industry. We've installed robots, which have completely transformed the way we used to do end-of-line packaging.

Rapidly scaling production up/down and reconfiguring production lines to adapt to changing consumption patterns, shortage of materials, delayed shipments, longer lead times, etc., was a common sight during the pandemic. How did your organization tackle such challenges?

Nitin Gupta, VP, Olam Agro India

Before moving onto this topic, to give a brief background that why exactly today this resilient and sustainable supply chain is getting more relevance and it is even more relevant for the Agri sector where we are operating, as it was the only silver lining during the pandemic. The world population would be reaching close to 10 billion by 2050, and India's population would be close to 2 billion by that time. So, if India must feed that kind of population in 2050, the productivity has to be improved, and the production has to be doubled, but unfortunately, the land resources are finite. So, the only way is to improve productivity, and this pursuit of enhancing productivity in agriculture has been negatively impacting the environment. That's why global warming and climate change are happening, and we can clearly see its impact - weather conditions are extreme today, some part of the world is seeing droughts, whereas, at the same time, some parts are experiencing floods. We need to reimagine how agriculture is done today; that's where these resilient and sustainable supply chain solutions are gaining more importance. On top of it, the millennial generation is becoming more conscious of their eating habits, especially after the pandemic. That's where digitalization plays an important role - the only way to create stickiness with the customer is to have an end-to-end presence in the value chain and create that presence right from upstream to midstream to downstream – which is farming, processing, and connecting directly with the customer to offer that kind of visibility. Otherwise, companies like us are no longer going to flourish; in fact, they will perish over a period. So, the only way to survive and sustain in this volatile environment is to create and develop a sustainable supply chain solution.

Nandakumar Kulkarni, Integrated Supply Chain Director, Mondelez International

I will divide my response into two parts – 1) how we approach the short term; and 2) in the long term. The short term was all about crisis management – handling concerns around safety and security during COVID-19, creating a war room kind of a situation to get all stakeholders together and bring multiple elements together, which would help tide over the crisis. During such times, the supply chain gets tested like never because although disruptions are not new, the kind of disruption which has happened during COVID – the scale and duration is unique. It has created challenges, which were probably invisible in the past across the value chain, and not just the supply chain across the organization. Hence, it was essential to create scenario planning at a different level: Move from static planning to dynamic planning; Add up the technologies which can make a difference as you walk the tightrope; Prepare simultaneously for a long term - understand consumer behaviors and channel shifts, and Understand long term technology impact and embed them into the overall supply chain strategy for the future. We need to keep our end goal in mind and remember, "don't lose the focus on the immediate needs but at the same time, don't get overwhelmed by only immediate needs. Create seeds for the future and bring a very balanced approach.

How do you see exponential technologies like AI, ML, IIoT, Blockchain, etc., playing a significant role in making the Supply Chain more "resilient"…in terms of demand sensing, planning, distribution, etc.? What trends do you see in the market?

Gowrishankar Paramasivam, Head of Startup Accelerator- Maersk

As a logistics player, the need to stay adept with all the technologies in the market right now is a lot more important in today's arena. And it's not that logistics companies started looking at it only after the pandemic; we've been looking at it for quite some time. But as many have attributed to – it's accelerated quite a bit, or rather the applications have been a lot more relevant in today's scenario.

Some of our ethnic methods have completely gone for a toss – like the methods we use for forecasting our customers' demand and supply; it's not going to be relevant anymore for us. So, the idea started about working on data integration methods: How do I stay entirely connected with my customer and the supply to know what is happening at their end even without them telling me so? That's how the technology play started; it's mainly in the data integration piece. That's one big emerging trend. Another aspect is the trainability of forecasting models – earlier, we used to believe in statistics alone for forecasting – that is not the case anymore. Now, we do a significant amount of data modeling to understand how the progress would be for every supply chain change.

Also, all of these models cannot be set in stone, to the extent that we can't even procure some of these from the market, so we are forced to build technologies in-house. Maersk is investing heavily in building its own technology and has started looking at the startup landscape more extensively to reap instant results from emerging tech companies. To manage the operations, there was a need for technology that we had to bring into play. It also required a shift in our ground operations because earlier, our network was primarily focused on ocean business, but in the last three years, especially when there is a lot of approach towards D2C business models, the need for ground operations to be muscled up is much heavier. So, there's a lot of intermodal operations that we've beefed up, and this also talks about the end-to-end traceability of every single commodity that moves through logistics partners.

Akhil Srivastava, Director Planning & Logistics Business Unit, ABInBev

spent my hard-earned money going to Stanford and learning about demand distortion concepts. And I regret it because two years later, I'm literally figuring out this demand distortion every day in our industry, and that's true for everyone who's doing a pipeline based business, for that matter! We used to have a concept called FAV – Freshness, Availability, and Visibility. There's only so much we have done in the last few years for visibility - Tell me how many people have visited malls, but everyone has ordered from various omni-channels, right? So, it's all about the freshness and the availability, and that's where the tech innovations have to work. Cost, capacity, delivery, and capability are significant factors to be combined. Capability building emerged as one of the biggest drivers during COVID- those who were able to service the consumer and customers are the winners, as their models had evolved. I would circle this back into a single statement: 60-30-10 rule. It will enable future supply chains (60% is about People, 30% is about Processes, and 10% is about the Tools that will allow people and processes to be efficient).

Sanjeev Gupta: I would say if I look at the emerging technologies like AI, ML, or Blockchain that are big buzzwords nowadays – our approach has been to focus on what is the problem we want to solve for our business and what are they going to do for our supply chain? We came across a situation where we didn't have a sound track & trace system in place and had many challenges to doing it manually. So, we have now gone into a blockchain technology solution for the same. Having succeeded in that area, we are exploring how we extend the same concept to solve our interfaces within the supply chain, which will help us deliver best-in-class products and services.

Another focus area is in the factory or manufacturing – a lot of work happens in finding out bugs in our lines, why efficiencies are low or why wastages are high, etc.? So, can we use ML and other Industry 4.0 technologies to figure out how this could be solved? Through Machine Learning, we can create solutions for multiple issues in multiple lines together. Different algorithms can be developed to help our operators solve the problems on a real-time basis. We're working with startup companies to explore what they can do for us to solve these problems. There are particular problems for us, such as checking bottles. We carry out 35 parameter checks, and it takes a long time for a person to check bottles one by one. So, we have gone to a startup to develop a computer vision based, AI-enabled solution to help us do it in five seconds.

Venkata Sridhar: Our approach is fitto-purpose automation when we look at the segmentation. We also looked at the pyramid of affordability – what is the value that an average consumer is looking at today? There is a disruption in the whole supply chain, and there is a disruption in the economy for the consumers – not all the consumers will sustain their economy. We looked at demand sensing as the most significant opportunity and value maximization for each consumer – the perceived production services we are offering. Value maximization travels all the way back to our farmers, making them understand the impact of environmental moisture on the yield of the crop; ways to maximize yield with the use of technologies; helping them build cold storage units; the right time to cut the crop, and so on. We have used SAP as a significant enabler both downstream and upstream. We embraced a little bit of AI in a few areas; we choose the models that fit our purpose rather than relying on pre-existing ones - they were tailor-made for the organization.

How do you balance the trade-off between Resilience vs. Sustainability concerning growth? What are some of the best practices you can share in this regard?

Nitin Gupta: I would like to give a small but pertinent example about how rice is grown in India. The paddy is grown under flooded conditions; it's an entirely anaerobic process. But, when you apply chemicals and fertilizers, it releases methane gas, which is the most significant contributor to global warming today - 70% of man-made methane gas is released only due to agriculture. So, clearly, there is a need to change the way we are doing agriculture today, and I think that's where it is becoming more and more pertinent to see how we can develop a sustainable, transparent, and traceable supply chain, which can be done by adopting different kinds of technology.

Continuing with the rice example, there are technologies like alternate wet and drying methods, wherein you are not supposed to flood the field across the season. It's all about wetting the field first and then alternatively drying it. Drip irrigation is picking up fast, wherein you are just two supposed to apply water at the plant level and not irrigate the entire field. Land laser leveling mechanism is essentially a water-saving technology that uses scarce groundwater optimally by ensuring even coverage.

Gowrishankar Paramasivam: Maersk, as an organization, is pretty serious about its carbon neutral efforts. Earlier, when we made these promises that by 2030, we will have our first carbon-neutral vessel on float, and by 2050, we will be a zero-carbon shipping company, it sounded like a flamboyant flaunting for the media sake. But now we've ordered 8 vessels, which are run on alternate fuels. The three elements that we looked at in terms of having a sustainable value chain as a logistics integrator are:

  • Decarbonizing logistics: How do we do things? Can we fix the machinery that we use? Can we stop polluting in as many ways as possible?
  • Building a sustainable end-to-end offering: It is not an independent responsibility, as it has to work from the customer's point of view as well. There's a lot of good customers who joined hands with us in terms of having a green logistics or sustainable logistics model, which incurs a definite amount of additional cost as well. And they are okay to incur that, as long as they don't impact the environment.
  • Having responsive business practices: What do we do to ensure that it percolates down to every bit of the organization? As a company, between 2008 to now, in the last 12 years, we've sliced our carbon footprint by 46%, and we plan to cut it down at least annually by 2.5%, which means by 2030, with baseline as 2008, we would have cut down by 60%. 

Building these responsive business practices will obviously affect the end consumer because there is a 20% potential increase in shipping rate, which commonly gets attributed to carbon neutral shipping whenever it comes to the play. But if you cut it down to the smallest component that a consumer would eventually incur, an $800 laptop would incur an additional $0.60. That's how much consumers would eventually bear as an additional burden to ensure a sustainable environment.

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