“The key pillars for supply chain growth in the coming times are most definitely going to be People who are fearless to accept and adopt changes, working on the right processes, imbibing the ever-evolving technology, while ensuring Sustainability” affirms Mukta Khanna, Partner & Chief Supply Chain Officer, i2V Cinergy.
FMCG has always been perceived as one of the most demanding sectors to work with, since this is a sector which is directly impacted by the consumer moods, fan followings, reactions, loyalties, besides environmental conditions and seasons, making it quite unpredictable, forcing supply chain managers to shift gears to alternate plans. This sector has also now evolved to a certain degree and there is a method to the madness, which is now helping the organizations get into a certain degree of predictability. Also, there are more qualified people in supply chain, who are taught subjects like forecasting and planning, for coming times, new developments such as artificial intelligence, machine learning are now coming in the supply chain of FMCG too, making them predictable to a reasonable degree.
Retail supply chains are complex because here the consumer expectations actually meet the availability. Consumers are flooded with far more relative choices; hence all good products have competition from better shelf placed ones and still lose out. I remember many times seeing the Kurkure Namkeens kept in the highest shelf where I could never pick them, despite they being better Namkeens in taste vs the more known brands! Besides this, challenges ranging from fast-changing technology, shifting retail formats, overabundance of consumer choice, greater focus on quality and price, and a tough economic climate also tend to add complexities in the supply chain, if not given due attention at the right time. The challenges are leading to dropping profit margins, operational complexities, ever-changing regulatory compliances, disassociated omni-channel integration, etc. To deal with these challenges, in the coming times, retailers are expected to be undertaking the following steps:
• Invest in faster and more convenient ways to tackle final-mile delivery in 2020 plus
• Select future-compatible technology, which seamlessly integrates with self, vendor and customer tech base, enhancing presence in the virtual world
• Create omni-channel inventory pools
• Partner with consolidators as an intermediate between distributors and retailers to service low volumes
• Adhere to compliance norms; and
• Train the staff to handle consumers in a personalized manner.
Fortunately, I have worked in different industry types and sectors be it manufacturing or services and at each one of them I have had the opportunity to contribute, starting with ISO 9000 systems in my first organization, supporting TQM, and using Lean Six Sigma concepts in creating process excellence. I have largely worked on digital transformations and automation in supply chain for creation of direct decision tools. But, I have also worked from the basics. My journey, both in Reliance and PepsiCo, fortunately gave me scope to build from scratch, hence pushing me to work on fundamentals and creating industry suiting processes like working on TCO concepts in procurement, capex-opex tradeoffs, process streamlining, ensuring ethical sourcing, working capital improvement, cost optimization, and then build upon the more complex ones like digitization of supply chain, integrated planning and to the next steps in artificial intelligence for innovation launch, product changeovers and so on.
Supply chain, as the name itself, talks about chain of activities and consequences which are influenced by each other. All this while in last several years, supply chain has had multifold limitations being generated from different stages of finished goods forecasting to raw material sourcing & planning, to manufacturing to generating finished goods to logistics and transport and final retail. Every supply chain has faced impacts of inaccuracy, leading to under stocking of some goods that are actually desired, while over-building and stocking of some of those that do not end up selling leading to write-offs of both finished goods and raw materials. Innovative strategies are required for each phase so that the impacts of forecast vs actual variations, which are leading to business loss opportunity get plugged. With the current situation where majority of the companies have very little room to absorb losses, and sustenance is depending on revamping the supply chain with innovative strategies, be it by digitization and technology usage, or machine learning or IOT, or controlling raw materials or logistics, the key is creating optimization and removing multiple buffers.
Procurement is a critical aspect of supply chain, and so is inbound supply chain. Being the last leg of supply chain in terms of receiving forecast, and the first leg for supply to ensure that goods get manufactured, procurement professionals face multiple pressures, which include pressures from the marketing teams to deliver even if their forecasts were quite wrong, external global risks, changing customer preferences, pressures to bring cost productivity year on year, manage crisis, financial risks of the organization, leading to impacts on bargaining, etc. While all other forecasts impact the internal management in an organization, it is the procurement which has to communicate and rectify the impacts with external parties and which at times also has legal implications. According to Deloitte's survey, only one-third of procurement managers use advanced analytics and other modern technologies to guide their procurement and inventory management policies. This may possibly explain why inventory levels are still climbing. The truth is that the pace of business is such that few organizations can succeed if they persist with manual and legacy inventory optimization practices. However, procurement has now started gaining importance within the organizations and also gaining technological support.
Technology is the key impactor in the supply chain. Organizations, about 15-20 years back in India, were getting into SAP and the journey for technology adoption had started. The cultural change was critical at that stage because teams were used to mammoth manual workings. Last couple of years have seen remarkable developments in all the facets of supply chain, starting from demand planning to supply planning, manufacturing, and logistics. Data is now truly turning into information and to decision making tools. This is helping control wastages at different levels and increase responsiveness to the customer. In 1997, when world chess champion Garry Kasparov lost against IBM's Deep Blue Supercomputer, he spoke that the real challenge is not to determine who is superior — man or machine — but to achieve the right combination of man and machine. This insight also applies to supply chain operations. The fact is that people and their experience and sound judgment are necessary to make the right decisions, but at the same time, understanding how supply chain software can complement and extend human abilities, will improve performance and achieve maximum profitability. The right combination of technology and human brain power leads to the most informed decisions and best results.
Omni-channel markets have a common issue which is “Inventory- OVER OR UNDER”. There are two types of approaches different organizations are taking for it- always be ready with more than one backup plan, and the planning needs to be adverse consequential planning too. However, if unable to handle, for an unforeseen supply chain solution, the biggest tool is transparency, confession of the issue, intent to rectify, seeking help, and actions to supplement that the issue is fixed at the earliest in all honesty. Let’s face it, problems will come, however if one is honest with the stakeholders, generally support and time will be given to amend, and the situation will pass.
The “Data World” will merge with “Interpreting Technologies” leading to – in-your-home targeted & focused marketing, reduction of system waste, and adaptive distribution. All these will have an impact on the social thread, improving lifestyles and increasing work life cohesiveness. However, the skillset needs will be ever changing, which will need to be integrated with the education system, else it will start creating a bigger “intelligence obsolescence”!