Supply Chain 4.0 has become a hot topic with little understanding of the term as well as the challenges which lie ahead when an organization starts a digital transformation process. The recent Samiksha event, which is a corporate panel discussion, at NITIE, dwelled upon this. We would like to take a moment here to appreciate the students who are part of the Samiksha committee. We appreciate the professors Prof Ashok Pundir, Prof Hema Date, Prof Sachin Kamble for enabling the students to create such enriching forums and NITIE director Prof Manoj Tiwari, who took time out from his commitments and made a thought-provoking keynote address.
Here is what the panelists had to share on the topic…
Supply Chain 4.0 regime is very much here to stay
Investments in 4.0 will increase over the next decade. Recently, Pentagon awarded a $10 billion cloud computing deal to Microsoft in the US. These are going to percolate down to India also and India is at the cusp of it. So, one of the challenges is skill sets. Building skills in the areas of Machine Learning, Artificial Intelligence, Robotics, etc., is going to be rewarding. At Deloitte, we feel that skills need to be refreshed every year to be able to stay relevant. Business graduates stepping into the corporate world need to understand technology and will have to get their hands dirty in ML coding etc., if they want a 4.0 career. This is a huge challenge we face as campus recruiters. Freshers need to have skills that are complementary, both on technology and management.
A second challenge for senior management is to decide on how much to invest and where? Whether data should be put onto cloud first and then develop analytics or start work on pilot somewhere? As we get into the next couple of years, more clarity is emerging on this. Another is availability and interpretation of data, how is it structured and engineered? Interpretation of data should be multi-dimensional so that one can take experiential decisions. To replicate this into a machine learning program is not an easy task. The data itself should be multi-dimensional and able to talk to each other. Data engineering will become a very important skill. Another important thing is that when we talk about digital from a supply chain standpoint, we talk about a warehouse executive or a trucker or an operator. Most of them have basic schooling and so their interaction with digital needs to be made very simple. So, to make them adopt it, the user experience must be like child’s play.
The third important thing, and it is a moving goal post, are the technologies and the players. There are a variety of technologies out there with many players and deciding which technology and by whom has become a very complex decision to make.
Technology has become the key driver in Supply Chain transformation
Alibaba wants to predict what the customers want to buy while Amazon wants to deliver when the customer is thinking about the product. So, this is what is going to happen in Artificial Intelligence.
Are we prepared for 4.0? No, it is going to take more time as the technology penetration in Indian Supply Chain has just started gaining traction. Startup Technology solutions in India are extremely promising.
Skillsets are going to be really important in the days to come. I came across an interesting distinction between a Statistician, a Machine Learning expert and a Data Scientist – the Statistician will talk about data, Machine Learning expert will talk about algorithms and the Data Scientist would be the guy who would derive inspiration and tell stories from data.
Blockchain is futuristic. It is getting clear that Blockchain is not a disruptive but a foundation technology. AI with a combination of IoT has a lot of potential. Some of the heavy manufacturing industries are already using IoT, e.g. if some of the machines are idle, it triggers an alert. 3D printing has also caught up, especially in new product development and spare parts management.
With new technologies, new skill sets are required
Being a fast-fashion player, we need to be high on trend, we need to bring in new fashion to the stores much faster. We start our design process which includes sampling across multiple countries more than a year back. And if you are designing so far back for trends a year later, chances are that mistakes will be made. The idea is how to minimize those risks.
So, one of the projects that we embarked on was digitizing the whole process of sampling and bring that down to the number of samples that we were creating for each of these brands. How do we at least in the next three years bring that down by half? We introduced a technology called 3D Designing, which was much more collaborative across the whole value chain, across our suppliers, and across our own design organizations. One of the other challenges also was- designers always think from their own perspective. How do we ensure that whatever is designed is also saleable? There might be cases where it is far ahead of the time. So, how do you identify when you need to make and what? Therefore, you need to be much closer to the time when the product is actually getting launched. So how do you reduce that cycle of design, then sampling and getting it on the shop floor? And we are also now talking about creating different buckets of products. We are looking at how we can make products that could be designed and delivered at the stores in 60 days. We’ve reached that stage as well.
We have set up a Fashion Research Lab in India- an innovation lab with IBM and we’re working with them to create and co-create a lot of solutions. We’ve in fact just launched a product recently called Fabric.ai. The idea is- how do you get insights when the designer starts designing when he gets the inspiration? From the inspiration, how quickly can he figure out if it even makes sense to go with that inspiration? Or is there something that’s been in the past from our existing data? Then it could also come from some trend data which is already available in the industry. In the first phase we have gone live with internal data. This data will give us the capability to predict what is going to sell and if the designer feels that there is something that he can change and figure out the right pattern or shade that will make sense, will the saleability get impacted? So that’s how we are harnessing data to bring in speed from design to store.
I would also like to mention that with new technologies, new skill sets are required. So, this is my request for institutions to be able to churn out talent for newer technologies. For stable technologies like SAP, there may be an abundance of people, but we are going to create a differentiation with the new technologies. And for that differentiation, if we are totally dependent on an IBM or anyone else, it becomes too expensive- that’s not a model that we can sustain. We will have to create our own capabilities because it is not about one-time AI solutions, the solutions will have to change and adapt as per new business challenges.
Accept the challenge and digitally transform your organization
When the word Digitization is used, we need to make a clear distinction between what is Digitization, Digitalization and Digital Transformation. People use these words interchangeably, but each of these are different.
Simply put Digitization is converting analog information to the digital form e.g. Converting handwritten or typewritten text into digital form is an example of Digitization. For instance, in an organization that has 2,000 Vendor Partners, every time the Supply Chain Operations team wants to enroll a vendor partner into their ecosystem, the vendor is asked to provide a certificate of registration and other documents for verification purposes. There are lot of mechanisms like (EDI) Electronic Data Interchange to convert that paper information into digital. So, in essence, it’s the information you’re digitizing, not the processes.
Digitalization is about not just changing the technology, but also the processes from old to new. Use of digital technologies is done to change a business model and provide new revenue and value-producing opportunities. It would normally involve automation which means shifting of work roles or transforming processes.
Lastly, Digital Transformation is a series of digitalization projects, automating processes and re-training workers to use computers. Digital transformation is about the customer. It involves transforming the business model and organizations strategy.
Organizations tend to implement the latest technologies and one can do umpteen number of things using IoT, Data Analytics and AI. But if the clarity is missing on why an organization is doing this, it will not lead to a successful digital transformation. Many organizations lack the end goal clarity. I believe that this is a key challenge that needs to be overcome in Supply Chain Digitization. Organizations which are successful in digital transformation keep the customer in mind and use technology to serve the end customer.
If you look at how supply chains are being disrupted in every industry (Banking, Retail readily come to mind) whether an organization should digitally transform itself, is now no more a question. What the organizations should be focusing more is on the pace and speed of innovation to solve specific use case scenarios. IOT (Internet of things), Analytics and Artificial intelligence are drivers that are spawning new applications impacting the future of supply chain. There are several digital opportunities that are enabling transformations in every node (Develop, Plan, Source, Make, Deliver, Support) of the supply chain today.
For example, in case of development of a product, previously you used to stop a manufacturing line, to get a new product or sample done. You needed a minimum run. Now you have 3D printing, a process of building an object one thin layer at a time. It is fundamentally additive in nature. Many organizations have used crowd sourcing of ideas to develop a product. In planning: demand analytics, In Sourcing: smart scheduling, In Making: exoskeletons, in delivering: Big data / RFID, In Support: social media. There are many technologies which have come up now. The point is that there is no question that digital transformation should be a priority for Organizations. If they don’t do it, some other nimble company will do it, and one will be out of business.
New digital applications are enabling a truly integrated Supply Chain ecosystem. Traditional supply chain operated in Silos and every department had their own TATs (turn around times). That model is being transformed into a control tower, track and trace model, where irrespective of one being a customer, supplier, distributor or a manufacturer, one is always connected. All supply chain activities are now moving from linear to non-linear model. The oft repeated success story is that of Amazon. The fact that Amazon has been able to bring down delivery time from two days to two hours is remarkable. Now they are talking of a promise that if you are in an Amazon store, and if you as a customer are on your mobile, and have placed an order, within two minutes they will deliver the ordered item to you in that store – this is truly all about digital transformation.
In terms of challenges, one can look at it from the Organization, People, Process and Technology prism. One of the biggest challenges I think is getting funding in an organization for these projects. There are many departments within an Organization vying for funds and SCM needs to build a robust alliance of end using departments to get the funds or ally with other transformation projects. Benefits related to risk mitigation of these projects cannot be ignored and can be used to overcome challenges in funding.
Organizations sometimes tend to have a very myopic view and they want results quickly. So, breaking the digital transformation project into phases and prioritizing low hanging fruits / smaller projects first thereby delivering immediate results might be the smarter way to go about the exercise.
Another practical challenge that needs to be overcome is legacy. if you are an organization, which is a hundred years old, you have different legacy systems for transactions. The question is, ‘How do you make them interconnected?’ One cannot suddenly throw out all the old systems and bring
in a new one.
Organization structure is another challenge that needs to be overcome. Sometimes the SCM departments do not pay attention to their own internal organization structure. They are so focused in looking at other departments, that they ignore their own. This is easier said than done. When a department has functioned in a particular way for the last ten years, it becomes difficult to change. The old structure of having for example a country sourcing, regional sourcing or a global sourcing model may need to be re-looked. Human beings by nature are creatures who love comfort and habits. For example, we love to sit at the same desk every day. The world is moving to a flexi-desk or hotelling concept. So, a robust change management becomes important.
Choosing the technology or the tool or the implementation partner, I believe is a simpler problem to resolve. What is critical though is being clear on the problem we are trying to solve. If at the end of all this digital transformation, you are improving the customer experience, then I think the effort and pain to go through this exercise is worth it. “Customer is King” an old saying holds true today more than ever. It is the customer who is driving the change. Availability of information has increased and cost of processors have decreased.
India as a nation is poised for making disruptions. According to a NASSCOM study, we are slowly but steadily moving up and are now in third position in the number of technology-based start-ups worldwide. India is also the youngest start-up nation in the world and 72% of the founders are under 35 years old.
The availability of digital applications combined with customer expectations are making disruptions in every industry a reality. So, watch out, a 21-year-old founder of a startup might be disrupting your industry as we speak. Accept the challenge and digitally transform your organization.
Change management is the most challenging problem we face in today’s organization
Digital transformation starts from data. 1. Organisations get the customer data from the from the Amazons and Flipkarts. 2. Then supply chain operation generates a lot of data- from suppliers, suppliers’ suppliers, logistics partners, external manufacturing partners etc. 3. The data generated by the Employees through the information systems of your own organization- your ERP systems, legacy systems- you transact millions of records in a day. 4. Data generated by IoT manufacturing lines, trucks, RFID, etc. Can we capture all of the data and use it for the betterment of the organization? All this data needs to be put to intelligent use. I have a simple analogy; we can eat simple bread or choose from the 150 odd varieties in a Sandwich shop. Your own bread is your own enterprise data, but it is not going to give you that much of value. A lot of companies in India are trying to do this but doing it globally makes much more sense. That is the kind of digital ecosystem especially in supply chain. The moment you build that data intelligence asset, you can do anything on it- planning, optimization, analytics platform, etc.
Now, what are the challenges? I will tell you two stories and cover the aspects:
- The first story is the Shark Syndrome. It is an experiment done by scientists where they kept a shark in a tank with many small fish. We all know that the shark eats the fish in no time. As the next step, they put a very strong and transparent barricade, splitting the shark and the small fish. What the shark does is it keeps hitting the strong barricade. It keeps thinking it can reach the fish but fails multiple times. After months, they take out the barrier and put in a barrier made up of thin transparent film. But by this time, the shark thinks it cannot go through the barrier and never attempts to. The same way organizational barriers are man-made. There is little collaboration between departments because of the organizational barriers and this is a big challenge I face every day. This makes such programs very expensive. This is a big gap when you are getting into any big digital transformation project. Proving ROI of this sort of investment is also very difficult.
- This is a story about Guruji who teaches his students in a Gurukul. One day, when he came to the class, he found a cat playing around which was really distracting. He asked a student to tie the cat to a pole. The student obliged. This happened every day for years together. One day, the Guruji passed away and his follower took his place. The cat also passed away. The follower started the class and said, “I can’t start this class without having a cat tied to this pole. Can you go get a cat from outside somewhere?” How do we make people realize that a certain thing is done for a specific purpose? Change management is the most challenging problem we face in today’s organization, especially to a global audience.