“In today’s VUCA world, adaptive agile response ability is critical. Nothing is cast in stone except the concept of ‘Consumer first’. Hence supply chain models need to be flexible yet efficient, bimodal supply chain response is now a necessity,” asserts Arjun Varma, Supply Chain Director, Nivea India, in an exclusive interview…
FMCG space is generally a reflection of a country’s economic health. The Indian FMCG space continues to be an exciting place to be in, as for both global and Indian MNCs, it is one of the relatively high growth markets in the world. With the ever-increasing number of players in the market, brand strength and product quality & efficacy are playing an increasing role in breaking through the clutter and getting into and remaining in the choice basket of the consumer. New players will come in, but strong brands and products will continue to have loyal consumers.
From a supply chain perspective,consumers are accessing the product through multiple channels, hence ensuring availability and access in all the relevant channels is a critical enabler. Response agility & resilience in the supply chain has never been more important. Innovation relevance, differentiation, quality & execution speed is another way in which supply chain acts as a business enabler vis- à-vis competitive forces. Ensuring a sustainable and environment friendly supply chain is also fast becoming an essential element rather than good to have, government is also legislating quickly towards ensuring same.
In today’s times, compliance to fast evolving regulations and agile response to macro-economic environment changes like demonetization, GST implementation, etc., has become critical to business continuance and success. Additionally, in today’s VUCA world, adaptive agile response ability is critical. Nothing is cast in stone except the concept of ‘Consumer first’. Hence supply chain models need to be flexible yet efficient, bimodal supply chain response is now a necessity. Digitalization is a big enabler, however in the short term it lends itself to a lot of uncertainty as technologies are fast evolving and one needs to take a punt on the right technologies to power supply chain. Developing people capabilities and infusing new capabilities to adapt to digital first ways of working is another area needing constant high focus.
Nivea products stand for the highest quality and cutting-edge product technology and efficacy. To maintain this, our glocal supply chain model ensures response agility while ensuring core product ingredients quality and efficacy are never compromised. We also have one of the faster innovation models in the personal care space vs competition delivering local market relevant innovations. Our innovation success rate is also one of the highest in the industry. We also have some of the best service levels in India amongst all FMCG players basis reports from our organized trade customers.
Specific to our India supply chain, buoyed by the ‘Make in India’ program of the government, we have localized majority of our production into India with the commencement of our production centre in India couple of years back supplemented by contract manufacturing units. This gives us some level of cost competitiveness and more importantly response agility to India market requirements. We have a robust operating S&OP process delivering some of the highest forecast accuracies in the industry. We have also seen working capital optimization by more than 80% from 2013 levels reflecting a more optimized supply chain model. Our warehouse distribution model was sufficiently optimized for the India environment and GST now enables further consolidation. Last but definitely one of the most important ones, we have a very strong aligned view in the organization in ensuring consumer facing quality and regulatory compliance and this is one of the strongest enablers, which supply chain brings to the table.
Nivea India supply chain has undergone transformation journey in 2013—14 towards becoming an enabler for the business through a combination of supply chain re-organization and capability introduction & sustained development, evolution of its operating processes and technology enablement of the entire supply chain. Today, India supply chain is recognized as one of the better supply chains worldwide within the organization and also from a service level standpoint by our Modern Trade customers. Nivea India has become one of the fastest growing FMCG organizations in the country having grown nearly 4 times in last 5 years, it felt like changing the tires of a fast running car. However, the team really rose to the occasion and today we have an outstanding supply chain team of passionate people who are powering ahead every year.
Value chain agility has many facets, what is relevant is how are we listening to and responsive to customer needs. While we have linear working operating models, what is also important today is to listen to formal and informal feedback loops and also use technology to provide timely demand visibility and drive supply chain response acceleration. As an example, about a year back, we have implemented a replenishmentbased response model linking inventory at the depots to production plans at our production centres, both in India and globally.
Packaging is a critical differentiator for the customer in all the so called three moments of truth. Nivea has globally been always recognized for its differentiated packaging. To take one example, the iconic Nivea blue tin has been a timeless example of packaging excellence & quality and is recognized and cherished the world over by our consumers for its simplicity, elegance and functionality.
Globally, Beiersdorf, our parent company has taken many steps towards ensuring a sustainable and circular supply chain. In India too, we have taken many steps, one example being we are, for the past few years, already zero waste to landfill and our production & distribution waste are all completely recycled or converted to energy.
The Indian market is quite different vs many other developed countries. While we have a larger number of consumers, they are spread out and individual purchasing power is low. Consequently, there is retail fragmentation vs consolidated large retail outside in many places. Hence supply chains have to handle more complexity, for eg. our warehouse architecture of tens of warehouses is in stark contrast to countries outside which have a couple of large warehouses servicing the entire country. Likewise, there are many other differences. There are multiple positives too, one key e.g. at the officer and managerial level, there is a good measure of high quality supply chain talent available in the country at reasonable cost vs outside.
There is more understanding and respect of what supply chain brings to the table today. Supply chain today has a seat at the management table in most evolved organizations including Nivea and this is growing. This, to my mind, is fundamental to the evolution of the function and sophistication as it will lead to more talent wanting to make a career in this area. Supply chain technology is also finally maturing, whether in factories through IOTs or in customer service, logistics & procurement space, in this age of digitalization, supply chain is slowly but surely getting recognized as a powerful competitive force for the organization.
Supply chain and technology go hand in hand. Technology is what provides supply chain with the life force to deliver continuous improvements and efficiencies. The good part is we are undergoing the advent of the new machine age with the maturation of next gen communication, energy and mobility technologies. All of these three lend themselves to transformative supply chain improvements in visibility, efficiency and sustainability. It will take relatively more time in India, but it is all happening and the pace of change in the world is mind boggling to say the least. The timely adoption of the right technologies will become a key competitive differentiator.
I see a lot of positive changes already underway in the supply chain sector. With GST becoming a reality, it is a game changer for the industry. A lot of professional players are entering into the warehousing land space, multiple global 3PLs are investing in a big way in scale warehousing hubs, transportation is seeing innovative models like relay model pioneered by Rivigo becoming a reality, IOTs and robotics starting to be used in an extensive way in manufacturing, etc. A lot of visions and hopes of supply chain professionals will now see the light of the day in coming years. However, supply chain structures within organizations will also evolve and supply chains of tomorrow will be structured around a core within the organization and rest through strong interlinked partner and freelance ecosystems enabled by platforms of choice. We will need to learn to work in such a structure.
The combination of functional excellence, passion, perseverance, adaptability and curiosity through the years will hold fresh graduates as well as supply chain managers in good stead towards delivering excellence. They will now also need to combine this with digital literacy to take sufficient advantage of technology, which will be essential and second nature in coming years. Gaining experience across supply chain functions along with having a strong hip pocket skill, people agility & leadership will continue to be important to grow into higher roles. They should continue to invest into the same for continued success.