Orchestrating the Value Chain

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Orchestrating the Value Chain

“While strong management is needed to foster a Triple-A supply chain, technologies such as IoT based solutions can play a role in improving the monitoring and orchestration of supply chains. There is an opportunity for nascent and yet undeveloped technologies to facilitate traceability, finance, logistics, trade, and other activities across the value chain to improve system orchestration,” asserts Akhil Srivastava, Director – South Asia, AB InBev and Venture Partner, Agroecology.

You have been pioneering supply chain domain for over a decade by bringing innovative practices. What prompted you to join this industry?

Akhil Srivastava, AB Inbev
The use of new technology in supply chain is necessary to move the business to a more productive path. Over the next few decades, a rising global population will put great pressure across resources and existing systems. Technological innovation in supply chain is one lever that can address some of the environmental, social, and economic challenges and opportunities in the growing industry. As has historically been the case, advancements in technical applications within supply chain can serve as an enabler for improvements in business models to build productivity and welfare in smarter ways.

To me, the world is navigating fast from conventional pipeline models of business to digitally native business models. While servicing on the sales side early on during my career, I envisioned that the most successful business models will be those which embrace innovative disruptive initiatives to build agile and responsive value chain. While FAV (Freshness, Availability and Visibility) is the spirit to build and scale successful business, I saw businesses flounder/de-accelerate when the focus is only on sales and visibility. Those businesses, which took a holistic approach of building agile supply chain, flourished both in profitability and customer loyalty by being more responsive and following the FAV spirit in totality. These early insights influenced my decision to gravitate from pure sales to build customer centric business models with focus on supply chain.

How complex is the supply chain in India and how can it be synchronized by effectively utilizing all the channels?

India is a growing and focus market for any and every global MNC. Anything (product or service) which can strike a chord with masses has an enormous opportunity to scale and become high grossing venture when one puts 1.4 Bn multiplier to the ventures. So purely, it is the scale which puts India on top of business footprint for any business. A substantial Promise is a degrowing world for several ventures. Having said that India has several limiting factors including but not limited to ease of doing business, transparency in operations, infrastructure and semiskilled workforce. The latter two are being addressed with Private Public Partnership models but these are not at scale. Hence India has an opportunity to leapfrog from its current status to delivering the promise at scale.

The current challenges in today’s business often surround value drivers in operational excellence (i.e., improving productivity, efficiency and quality). Supply Chain is thus being critical lever to synchronize functionalities across internal and external circle of influence for business to create winning models. Leveraging technologies such as AI, IoT, Blockchain, Cloud Computing, can evolve Intelligent Supply Chain for monitoring raw materials, production, distribution, consumers and circular economy. These will help in increased performance, efficient manufacturing, higher consumer engagement or even evolve new industries.

You have recently authored an interesting piece on “Blockchain Redefining Identity Preservation across Supply Chain”. Could you share some more insights into the same?

The use of new technology is necessary to move the world’s agriculture to a more productive path. Over the next few decades, a rising global population will put great pressure on food systems. While the overall demand for food is expected to be met over this timeframe, it is unclear whether it can be met in a sustainable manner. Technological innovation is one lever that can address some of the environmental, social, and economic challenges and opportunities in the growing food and beverage industry. As has historically been the case, technology can serve as an enabler for improvements in food system productivity and welfare.

Creating an efficient supply chain involves fostering an efficient flow of information, materials, and money between suppliers and customers. Efficiency is only one element of supply chain performance. Research has shown that Agility, Adaptability, and Alignment of supply chain actors are more critical in developing a competitive advantage for firms. While strong management is needed to foster a Triple-A supply chain, technologies such as IoT-based solutions can play a role in improving the monitoring and orchestration of supply chains.

There is an opportunity for nascent and yet undeveloped technologies to facilitate traceability, finance, logistics, trade, and other activities across the value chain to improve system orchestration. Blockchain is one technology that has the potential to be applied to improve system orchestration in several areas. Initially used as a key component of the digital currency system known as Bitcoin, blockchain works as a decentralized database with a shared distributed ledger. Digital transactions are stored in sequentially ordered and cryptographically protected blocks, building traceability across the value chain and reducing the need for intermediaries. Companies in agribusiness have begun to use blockchain to create systems that will record the journey taken by food through the supply chain. Given that transactions are unchangeable under blockchain, it can play a key role in getting trusted information to end consumers.

Trade transactions can be complex and cumbersome, involving numerous entities, including buyers, sellers, logistics providers, banks, customs offices, and other third parties. Lack of trust, long shipment distances, and slow feedback loops add cost, complexity, and time to the process. Trade transactions are largely still paper-based, with original documents forwarded around the world. Blockchain has the potential to be applied for monitoring social and environmental responsibility, improving provenance information, facilitating mobile payments, credits and financing, decreasing transaction fees, and facilitating real-time management of supply chain transactions in a secure and trustworthy way. Firms in Blockchain are working on tracking and tracing systems for agribusiness companies to build trusted relationships between stakeholders.

How have consumer preferences changed over the years and how are companies quickly aligning themselves to meet the ever-evolving consumer expectations?

I would say a food supply chain in a typical context right now is a prehistoric or a pre-dated system. For example, when the system was made, initially we had the infrastructure of rails and roads through which the food system, which is grown by the farmers, goes to the aggregation points, which we call elevators. On these elevators, the system then goes across and mixes all the grains together and then get distributed globally.

So the food system as of now is pretty complex in terms of supply chain. As I say, it goes from farmers’ field to various intermediaries in between, which could include holders, processors, manufacturers, or even just storage agencies and traders. And from there, it goes and travels across the global value chain going all the way to the end consumer after passing 7-8 steps, which means our food system is more like a pipe system and is not a platform or digitized system.

This entails that there is a very limited flow of information or, as we call, information symmetry. And that has been the prime cause in terms of high inflation and changes in the commodity prices ever since the trading platforms have come up. This information system has been becoming more ubiquitous, and that has resulted in lots of consolidation recently within the agriculture value chain. We recently have seen a merger between Dow and Dupont, a merger between Bayer and BASF.

But we have also seen that within the trading vertical, which was predominantly dominated with A, B, C, Ds of the world, which is Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus is also consolidating. Eventually, that means the supply chain for agriculture, both at the upper stream and at the trading window, which is down the stream, is becoming a monopolistic scenario.

As I told, in short, we will need a complete overhaul to meet the requirement efficiently and sustainably. The food grown today is not being consumed in the same local economy. It travels half the globe. What’s produced in China comes all the way to US. What’s produced in the US goes all the way to China and vice versa, across globe. So the issue, which is happening right now is the movement of food through the supply chain: A – efficient and effective? B – sustainable?

What I see is we are at a verge of another green revolution. And this time, it will come with an onset of infusion of technology, which will help solve issues with higher operational efficiency, building up supply chain orchestration, and higher level of transparency in the system.

The technology in itself, of course, is somewhat value-neutral, and hence there is to be a lot of work which has to be done in terms of integrating this technology with the activity, which is involved with people across the value chain. Which means, we are looking at more analytics and automation. We are looking at efficient and effective business management, maybe no more individual farms but probably business farms, which are much more analytical & automated and capable in terms of infrastructure with their own marketplace and an overall innovation system with the help of new age technologies. That is what I am seeing in agricultural supply chain. That is what is happening as we see more and more innovative companies coming up to disrupt this value chain, again, from these existing inefficiencies across the system.

You have been quite vocal on driving change through sustainability. Can you kindly cite some examples that can help logisticians drive holistic benefits for the organizations?

The next 10-15 years will likely see rapid changes in the food system, driven by changing consumer demand, technological advances, trade dynamics, and other factors. To achieve the United Nations Sustainable Development Goal (UNSDG) Number 2, to “end hunger, achieve food security and improved nutrition, and promote sustainable agriculture” by 2030, the FAO is calling for more productive, efficient, sustainable, inclusive, transparent, and resilient food systems. The FAO has discussed promoting agribusiness development through various initiatives aimed at resolving critical factors across the agriculture value chain to mobilize private sector investment that improves productivity and efficiency.

These have helped evolve entirely new ways of designing food value chain, with technologies such as cellular agriculture and gene editing evolving quickly. Examples of cellular agriculture involves producing agricultural food products from cell cultures. Firms such as Impossible Foods, Memphis Meat, Motif Ingredients, have been transforming the landscape for labbased meat and food production by designing food producing systems that use fewer natural resources. Gene editing, which involves modifying DNA in a particular cell or organism, is being explored to improve the sustainability of food, feed, fiber, and fuel.

How do you envision supply chain network of tomorrow? What are the upcoming trends that we are to witness in times to come?

The next step would be, in terms of getting the new age technologies like artificial intelligence, machine learning, blockchain to get infused into the pre-dated agricultural system. And that would help provide a chain of custody for building:

  • Operational efficiency
  • A much more efficient, orchestrated supply chain because, as we said, it’s about the global value chains, and
  • Build a lot of transformational symmetry for information as well as transparency of the overall value chain right from the farm to the consumer.

I see an opportunity, which persists to cultivate a more comprehensive food system that can be designed for optimally meeting demand. So, the higher public and private investments in developing countries will be happening right now as we see a lot of investments happening in Asia and Africa. These activities will help close the gaps between these low-productivity areas. Technology investments will also boost up in both, developed and developing countries and will be part of a multipronged approach to sustainably feed a growing population with a more productive, efficient, inclusive, transparent, and resilient value chain.

Would be really interested in knowing from you, “Why is supply chain the new pathway to CEO?”

Two of the most powerful leaders in the world – Jeff Bezos and Jack Ma own the biggest e-commerce companies, which have fundamentally disrupted supply chains through innovative business models. By the way, they do not own product but have the most evolved supply chain. Tim Cook and Mary Barra, on the other hand, evolved careers from supply chain leadership to successful CEOs. So, what is the common cord here?!

Chief Supply Chain Officers (CSCOs) increasingly control 50% or more of a company’s annual budget, responsible for cost leadership and optimization of operations. More importantly, CSCOs play a vital role in strategy development, product and service innovation, and even sales by virtue of collaborations, which gets ingrained in their leadership style collaborating diligently across organizational footprint. They know the business (inside out) by virtue of their supply chain functional leadership. These leaders, with holistic business knowledge actively influencing organizational outcome by optimizing internal and external stakeholders, are best suited for CEO roles. I personally envision CSCO elevation to CEO roles provides organization with a sustainable growth trajectory for building and scaling GREAT COMPANIES banking on SUPPLY CHAINS OF FUTURE!

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