Supply chains are changing, and how
Supply chains are getting extremely advanced. It is helping managers to move from cutting costs to enabling new processes and making corporations more connected
Supply chains are shrinking. Imagine being able to purchase a product online for $2 and paying a few cents for delivery. Moreover, one has no idea where the product has been shipped from. It is often said that the beauty of supply chain management (SCM) is that there are few aspects of business that it doesn’t touch. While some find this overwhelming, many agree that the sheer amount of opportunities in this field make it an exciting and prosperous venture.
Just as technology emerges for a host of other things, SCM too has seen many advancements and disruptive ones at that. R Shankar, CEO, TVS SCS-India, says, “That is the charm in supply chain. It is dynamic and evolves over time. In the recent past in India, there has been a paramount shift in supply chain predominantly because many organisations have leapfrogged in their logistics outsourcing activity. Now many organisations have started outsourcing their entire logistics requirements to 3PLs and moved away from activity-based outsourcing. This has enabled the 3PLs to increase the supply chain efficiency by providing tailor made end to end solutions.”
Logistics outsourcing would involve sub-contracting industrial functions like cross-docking, inventory keeping, warehousing and transportation to a third party or supply chain management provider. Third party logistics providers include raw material suppliers, distributors and other value-added service providers. These services are generally integrated and used together to provide end-user convenience. The decision for outsourcing logistics by a parent company is generally dependent on company size, complication of logistics and relative economic benefits of outsourcing.
Post GST because of reduced roadblocks and check posts, the truck turnaround time has come down and this has led to the reduction of wastage in the system. “Another transformation that is happening is the digitisation of supply chains. With the developments in automatic data capture, low cost automations and IoTs, supply chain has become more transparent, efficient and agile. Digitisation is enabling data driven decision making and better visibility across the chain,” adds Shankar.
A complex equation
With manufacturing processes having become more complex, the supply chain invariably becomes extremely convoluted. In fact, if you really think about it, the supply chain management system, as we know it, even more complex that what it appears. For instance, some time ago there was much excitement surrounding blockchain. But now supply chain heads don’t seem excited about it anymore. Dr Rakesh Sinha, head, global supply chain, manufacturing and information technology, Godrej Consumer Products Limited (GCPL), says, “Blockchain technology is particularly suited to situations where multiple parties are involved, there is enough trust between all the parties and speed of execution results in clear economic benefits. Initial pilots were carried out on ocean shipping transactions involving the seller, buyer, shipping company, port authorities, customs authorities, banks, insurance company, C&F agents and the surveyors. Wide adoption of Blockchain is seen in areas involving some government agencies. Bringing them onboard will definitely help with the deployment of this technology.”
Umesh Madhyan, associate VP, logistics, Hindustan Coca-Cola Beverages, says, “Blockchain is an exciting technology. Much of the industry is still exploring the various possibilities that leverage this technology. So far, we have seen the application of this technology in product quality to keep raw materials traceable throughout the chain/life of the product.”
Two things here: In addition to focusing on the broad picture, supply chain heads must simultaneously hone in on one of its core values which is people. Talent must focus on competency, and capacity and to understand the supply chain and how it can be a growth enabler. Secondly, manufacturers are beginning to see the many benefits of having fully connected operations that include the supply chain, and the factory of the future needs end-to-end supply chain visibility on the plant floor to improve productivity and increase quality, which is precisely what IIoT delivers.
Deep Agarwal, regional sales director India and sub-continent, Zebra Technologies, says, “According to Zebra’s APAC Manufacturing Vision Study, manufacturers in both India and around the world are embracing Industry 4.0 and the smart factory whereby workers use a combination of RFID, wearables, automated systems and other emerging technologies to monitor the physical processes of the plant and enable companies to make decentralised decisions. In the factory and across the supply chain, firms are capitalising on the Industrial Internet of Things (IIoT) to achieve real-time visibility into their goods, assets, processes and places. In fact, the number of companies supporting a fully connected factory is expected to triple by 2022 with close to half of those surveyed anticipate having this capability. Therefore, technologies like Zebra’s solutions that connect assets, inventory and equipment have become essential pieces of the IIoT puzzle.”
Supply chain leaders want to make the right business decisions and invest in the right technology to prepare their organisation for the future. However, there are so many factors to consider and so many unknown variables that “getting it right” seems almost impossible. Each one has to choose the path they want. For instance, GCPL’s Sinha says that their supply chain is focused on serving the consumers better with enhanced on-shelf availability and freshness of products. Implementation of TOC (Theory of Constraints) and Replenishment have helped in improving both these metrics simultaneously with a positive impact on revenue, profits and working capital. “We are now looking at deploying some of the emerging technologies to take our customer service to the next level. We have already implemented case level bar coding on all our products in India, which has resulted in better traceability and much lower levels of obsolescence. Implementation of IoT in our manufacturing units has resulted in capacity unlocking and energy savings. Deployment of computer vision technology has resulted in better online quality assurance,” he adds. Robotics and drones are the other technologies the company is working on to make its supply chain future ready.
Madhyan say that given the robust product range and SKUs that it manufactures, their strategy is aligned to market requirements. “Our strategies include flexibility to scale and stay nimble as per the need of the hour. We continue to build on these capabilities by optimally utilising technology and staying ahead of the curve,” he adds.
The industry and, in specific, supply chains have been evolving at a quicker pace in the last 2-3 years. Being agile is an imperative for the sector and can be attributed to two factors, one, the end consumer is more aware which has opened more opportunities for supply chain, two, there is potential to tap in the rural market. Madhyan says, “It also means learning, testing and adapting new technologies like we have implemented such as automatic loading solutions, IoT (yard management solutions), exploring machine learning/deep learning and artificial intelligence in manufacturing. There have also been regulatory changes such as GST, E-Way Bills, Load Utilisation Increase and Infrastructure enhancements – which also support this evolution,” he adds.
HCCB has also put in place processes to keep a check on the tail of SKUs and they try to keep it under control. It’s working on a single touch logistics leveraging GST changes. So now, a significant portion of its business is served straight from its manufacturing locations to the first channel of customers. This gives them better flexibility, improved quality as well as responsiveness to sudden demand changes.
Speaking of costs, Shankar says, “The main reason for high logistics cost as a percentage of GDP in India is the lack of proper demand and supply planning across the chain. This has to change. More organisations should start looking at supply chain as strategic enablers of business, rather than an outsourcing task. Consumption based planning across the chain to cater the customer demands effectively with least inventory and wastages in the system is achievable through digital methods. We have many such success stories with companies in reducing their logistics cost and providing visibility across the supply chain when the entire end-to-end requirements were outsourced to us.”
In order to meet the requirements of evolving supply chain and reduce wastage, automation is helpful. For example, post GST, warehouses are getting consolidated and larger warehouses are being set up, here low-cost automations along with other technologies help in managing high throughput and increase efficiency. As India has abundance workforce, automation is mostly necessary where there is a need to meet the high precision, high throughput requirements.
Automation requires strict orientation to the standardised processes and removes the flexibility in the system, hence there are challenges during the initial days to bring in a cultural change among the work force to adapt to this requirement. Other challenges are, automation requires high capital cost and takes several years to achieve a financial payback.
Sinha says, “Manufacturing flexibility is the key to improve supply chain agility. We have, over a period of time, moved out of the concept of frozen schedules (in the short term) and large batches for cost efficiency. Our production schedule changes every day based on market signals. The entire supply chain from vendors to customers is designed to respond to changes in demand signals within 24 hours.”
In recent times organisations are moving to cloud-based technology - it reduces cost and set up time and enables scalability and flexibility. IoTs, sensors, RFIDs and other such technologies are being inter-woven for a connected supply chain and addressing the pain points.