“Agility is one key pillar of our 2020+ strategic priorities. In a highly volatile and dynamic business environment, increasing the agility of the organization will be a critical success factor for Henkel in the future. This will include energized and empowered teams, fastest time-to-market as well as smart and simplified processes,” remarks Sandeep Baxla, Head Supply Chain – India sub-continent, Henkel Adhesives Technologies, during an interaction.
The supply chain terminology was nonexistent at the time I graduated from XLRI in operations. The nearest relative terminology was distribution. If we trace the history, the supply chain concept evolved at the end of 1997. I have been in the industry for almost 23 years and the transformation has been phenomenal, and more so, in the recent years, the dynamics have metamorphosed drastically. Supply chain was never considered core of the organization earlier. To tell you honestly, our team also used to consist of people who were not suited for any other department be it sales or operations. People were forcibly given the task of managing logistics & planning and no one really was keen to take up job 20 years ago. Even the top management used to think that it’s just about moving products from point A to B.
As competition picked up and the country saw the wave of liberalization, companies started realizing the crucial importance of supply chain. Now-a-days, the entire supply chain is carved out as an independent vertical, which earlier used to be a part of sales with haphazard reporting structure. It has today become a focal point in enabling businesses to achieve their strategic goal. In true sense, supply chain has seen a tremendous transformation in the recent years. It is not looked as a cost centre but a value addition for the entire value chain. Without supply chain, I think many CEOs would be handicapped.
The global market value of the adhesives and sealants was estimated to be about $45.36 Billion in 2014 and is projected to reach $59.75 Billion by 2020, growing at a CAGR of 4.72% between 2015 and 2020. Driven by the requirement of superior performance characteristics, the adhesives market is slowly shifting from the traditional solvent based adhesives towards the use of high-performance products such as reactive hot melts and pressure sensitive hot melt adhesives.
Talking specifically about Henkel Adhesive Technologies in India, so far, we have mainly been in the B2B segment. We have 8 plants in the country and a state-of-the-art Innovation Center at Pune. The industry is really shaping up well in the country and with the much thrust coming from the government through ‘Make in India’ initiative, the possibilities are tremendous. Our growth depends on the growth of OEMs or core sectors such as automotive, white goods, etc. If they are on a growth spree, the ultimate beneficiaries will be allied industries such as ours.
The applications of adhesives & coatings are enormous and so are the complexities. For instance, Apple phones circuitry requires a special type of adhesive which is supplied by us. Sports shoes need a special type of glue which again demands certain special treatment. Likewise, the entire under body of the car is coated in order to prevent rusting. Whether it’s electronics, cars or steel plants, you will find wide applications of coatings & adhesives. Notably so, such adhesives would require special manufacturing processes and high quality raw materials. In order to achieve that, almost 60% of our raw materials is sourced from other parts of the globe and that’s where our competitive strength lies. We cater to the requirements of all types of industries. We serve the medical stream as well. In this entire business dynamics, supply chain needs to make sure that we have the right adhesives at the right place and right time to serve the requirements of each and every industry.
There are instances where just a drop of adhesive is required to run a particular machine for almost a month. That again creates complexity in ensuring the desired raw materials are procured at the right time, manufactured with utmost precision, and stored in the most apt environment because a lot of these products demand special arrangements when it comes to storage. Then comes the physical movement of goods in the most suited controlled temperature regardless of the weather conditions be it summer or winter.
The key complexity is the life span of a product. Some products have a shelf life of only three months and they get imported from overseas sometimes. We have to make sure that they reach the end consumer well ahead of time. Importing raw materials is also one of the complexities, as these are currently being sourced from almost 50- 60 countries. Moreover, ensuring that the inventory turns are not high requires lot of planning. Apart from this, all the OEMs demand 100% service levels whether it’s Maruti, Toyota, Hyundai. Every day we get a specified window to supply products at a particular time frame and we can’t divert from that time frame at all. If we miss that window, we are penalized. Such is the complexity that we have to manage on a daily basis.
We have dedicated industrial segments to streamline our supply chain processes. Most of our products are unique to each of these segments. For instance, I can’t use an adhesive which is being used for electronics for automotive. We have dedicated planners for each industry vertical. They clearly know the requirements of their respective industries, their demand patterns, variabilities in terms of demand and supply. If there is a seasonality in a particular business, they understand that and accordingly plan out the demand along with the sales team. We have a collaborative approach of planning. Having said that, our distribution remains common for all the segments. The product can get directly dispatched from the plant to the consumer or it moves to 3PL warehouses. We have 14 built-to-suit warehouses to cater to our customers’demands. As some of the products are hazardous in nature, we have predefined specifications for these warehouses. We are extremely particular about safety and we strongly advocate the usage of personal protective equipment (PPE). In order to conform to the safety standards, we have defined product safety data sheets for workers’ reference.
Our people are our USPs. We focus on developing people’s skills, as it is they who deliver the desired results. Even if you have the best systems and processes in place, but if you don’t have right people with proper skill sets, you will not be able to achieve your objective. Our people are well tuned to our products’requirements. The journey has been experiential and is still evolving. We follow a collaborative approach for working with a spectrum of businesses (sales and different functions), as we believe that supply chain functions can’t work in silos. We work in a very transparent environment and are working closely with our trading partners. We are linked through EDI to our key customers, which offers us visibility into the entire system.
The Slated GST Impact
GST is going to be a game changer for everyone. I believe we are on track for GST to be implemented. All of us have been waiting for this decision to come through for almost 10 years now. It will bring about transparency in the transactions happening. Everything would be visible: what you purchase and what you sell. It will help in bringing down the overall cost. Lead times would reduce dramatically. Abolishing tolls, check posts, road permits, etc., would aid in faster turnaround time of vehicles. This would ultimately result in the reduction of the overall inventory. Today, we have to operate warehouses in many states and cities. After GST, there will be no tax barrier and we will be in a position to consolidate our warehouses. We will be able to optimize networks. In short, it will bring about transparency in the process, reduce lead times, and aid in achieving network optimization.
We have been running robust sales and operations planning process. As part of that program, first week of every month we start reviewing our processes where our demand planners review demand with sales people and respective business heads for the next 6-8 months. They analyze the demand trends. Once the demand is frozen for the next six months, the data is sent to the supply planners. The following week we have supply review. These people then work with the production and procurement teams to ensure that all the resources are available, the capacities are in place, and the desired raw materials are available for the next 6 months. This gives us a head-start to meet the demand. Third week of the month we have executive sales and operations planning process, in which the leadership team of sales, finance, supply chain and manufacturing discuss the entire plan and decide on the macroeconomic issues impacting the entire process. This cycle gets repeated each month, and this has really helped in enabling the entire supply chain within our organization. This entire process has brought in a lot of visibility into the system for every stakeholder.
Five years back when I joined Henkel, I had set myself a challenging goal of upgrading our distribution network in line without our global operating standard with best-in-class safety and product integrity. Today, all our warehouses are state-of-the-art, which meet our global standards and staffed with trained manpower. This transformation took us almost 5 years to achieve the desired results. Earlier we had 30 warehouses across the country, which have been reduced to 13 today. All of these changes had to be done in conjunction with the business. Even if the warehouses were getting closed, we had to ensure that it doesn’t impact our sales.
The other challenge was to restructure the supply chain organization. It was all about reorganizing the entire supply chain. We had supply chain heads based at all of our sites. Now all the SCM people have been moved to head office in Mumbai. This was a big shift as people had to move from other cities. It was a big project in terms of scalability and harmonized processes. It took us two years to rejig this entire operation and integrate them well with all other business operations.
Sustainability is part of our global strategic agenda. In India also, we have a major push towards sustainability. Owing to our concerted efforts in this field, we have even been bestowed with Frost & Sullivan Sustainability awards. The key impressive points which helped the company receive this award are: Henkel India’s operational efficiency with respect to energy, water and waste management has seen year-on-year improvements. The robust risk identification and mitigation system implemented by Henkel India is noteworthy. Henkel’s Innovation Center in Pune is available to its value chain partners for analyzing their products and getting the best performance out of them.
At Henkel, sustainability is one of our core values and we are strongly committed to achieving more with less. There is a clearly defined corporate roadmap to become 3X (three times) more efficient by 2030 as compared to the 2010 levels. We have been discussing with our 3PL partners to become sustainable and encourage them to consume less energy. We also ensure that all our trucks are in full load condition to reduce environmental impact. In the warehouses, earlier we used to employ forklifts running on diesel or petrol but we are now moving towards silent battery operated forklifts.
Giving you one of the many instances of sustainability, the packaging for our consumer products fulfills many different functions: It ensures the hygiene and intactness of the products, protects them from external influences, provides space for necessary consumer information and often plays an important role in the purchasing decision through attractive packaging design and shelf appeal. In order to minimize the volume of waste, our packaging developers work constantly to design smart packaging that uses the least amount of material possible, and incorporates materials that can be recycled in public recycling systems.
Agility is one key pillars of our 2020+ strategic priorities. In a highly volatile and dynamic business environment, increasing the agility of the organization will be a critical success factor for Henkel in the future. This will include energized and empowered teams, fastest time-to-market as well as smart and simplified processes. In order to create a more agile organization with energized and empowered teams, Henkel will foster the entrepreneurial spirit of its employees, promote openness to change, encourage adaptability and enlarge employees’decision-making power. This will be supported by the strong performance culture at Henkel, with open feedback as well as rewards and recognition for excellent results. As far as supply chain is concerned, we will focus on making it very agile and responsive to support businesses. It encompasses digitization, managing volatility, ironing out complexities arising out of volatile times.
As part of its ‘fastest time-to-market’initiative, Henkel aims to reduce innovation lead-times through better anticipation of customer and consumer needs. In addition, Henkel aims to accelerate market entries and penetration into new markets. Henkel will also leverage a ‘smart simplicity’approach to become more agile through flexible business models that are adapted to dynamic markets, as well as through the optimization of workflows and processes.
We need to strictly adhere to our policy guidelines charted out globally. As you are aware, German companies are stringent on adhering to these compliances. As far as supply chain is concerned, the planning tools are standardized across the globe. In India, we don’t have organized transportation players. For instance, if I have to move a product from Mumbai to Delhi, it takes up to 5 days. While in Germany, it just takes 24 hours or less. The condition of vehicles is not up to the expected standards. In Germany, all of the vehicles are containerized. Custom clearance is also a major worry for us. Yes, it has improved over the years and the present government has been taking the right measures to eradicate challenges, but it’s still not at par with global standards. This hampers our supply chain’s efficiency. If you go to the US, all the deliveries happen through pallets. But in India, there is no facility to unload goods from the pallets. In short, one has to adapt to suit the local environment.
I am happy to say that one of the major roadblocks has been cleared by the government by passing the GST bill. The next and the most important aspect is that India should not miss out on the technological developments that are happening in supply chains globally—be it Internet of Things (IoT), cloud-based technology, etc. There is a lot that supply chains can leverage. The entire digitization of supply chain is extremely crucial, and will prove to be revolutionary in times to come. The Government’s focus on ease of doing business has also helped. For instance, at Nhava Sheva port, they have offered a single window clearance process, which used to be quite a task earlier for EXIM. There are several other initiatives by the government such as direct port delivery. That means the moment your consignment reaches the port, it can directly go to your plant. Earlier it used to go to a container freight station (CFS). All these initiatives have the potential of creating world-class supply chain in the country.
India is a growing country and has carved a special place in the Henkel global business strategy. We are investing heavily in India. We are coming up with India’s biggest adhesive plant in Kurkumbh. We envision to grow our revenue three-fold in the next 3-4 years. To achieve this ambition, we would require a robust supply chain. We are all set to offer that edge by building an unparalleled supply chain network in the country.