Supply chains will benefit the most with implementation of SCM 4.0 practices

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In the context of SCM 4.0, supply chains are characterised by a high degree of cyber-physical interconnection, enabled by sensors that collect big data for large-scale, real-time decisions to optimise supply chain performance. The large-scale deployment of IoT sensors together with artificial intelligence (AI) enables automated inventory management, thus diminishing human error, input shortages, and the high cost of unnecessary inventory carrying. Likewise, the implementation of IoT, big data and AI in transport operations and infrastructure management allows for real-time route and asset optimisation, hence improving reliability and efficiency in logistics processes. Moreover, the deployment of advanced robotics and AI allows for decisions and supply chain processes to be highly automated, while the length of supply chains is shortened through 3D printing. Om Vijayvargiya, Head- SCM & Logistics, Schaeffler India explains how the search for greater efficiency in production processes has led businesses to employ various supply chain management strategies driven by the combined undertakings of many stakeholders, and this is only increasing. Excerpts from his interaction with Upamanyu Borah.

What makes this crisis so special for automotive suppliers?

The pandemic has taught a lot of lessons on all fronts of business—starting from planning, procurement, supply chain, production and delivery. Businesses with agility built into their strategy surely came out on top. Personally, for me, there were two outcomes of this crisis.

Risk Profile and approach to Risk Management for automotive suppliers: Although everyone was doing risk management exercises during pre-COVID period nobody could model the kind of disruption witnessed. So, the profile of risks has changed and with that our approach to managing risks also changed.

Managing the supply chain during volatility of demand pattern: Around Jan-Feb’20 when this was an ‘only China crisis’, we struggled to protect our supplies from China, and then suddenly India was in lockdown for 2 months and supply chains were completely disrupted. During H2 of 2020, the automotive industries worked in an overdrive mode to meet consumer needs and demand reached its peak. Managing this kind of quick variation in requirement became special during the crisis.

Therefore, as much as we hate a crisis, it is a great teacher and moving ahead, agility will play a key part in organisational strategies.

How is the Indian auto components sector doing post-COVID and what is your outlook on India?

The Indian economy has shown a very fast recovery post-COVID and demands have now reached pre-COVID levels. Sentiments of the Indian consumers are also on a high and we see a good level of buying in the passenger cars segment. Even tractor and off-road vehicle demands have gone up. We anticipate the demand to stay strong through 2021. I assume, it should reach the level of 2018 which notably was the best year for automotive since decades.

Today, in a world where even the biggest and best-organised corporations are scrambling to survive, the focus is squarely on the supply chain. Do you agree? What are emerging areas of specific focus within SCM?

We have seen the biggest disruption in the supply chain during this crisis and it is continuing. Timely availability of components is the biggest challenge with all-time high freight prices. So, SCM is under great pressure and managers are constantly focussing to minimise the impact on the organisation’s bottom line.

This crisis has created a special focus on Agility, Transparency, and Sustainability with the   addition of Digitalisation playing a key role in facilitating effectively each of these responses.

Last year, what we significantly observed was that SCM quickly adapts to the changing environment and shows resilience to the volatile demands of the automotive market. Markets will be more volatile in the future than in the past— agile and flexible supply chains will be decisive factors here. It will be all about de-risking business models without compromising on quality and service levels.

How can companies in the auto spare parts industry better plan for future pandemic crises?

Adding agility in the supply chain and faster response to customer need is part of the current trend post-crisis. Digitalisation and real-time information is playing a big role in complementing agility. Industries need to collect data that is already available in the system and make it more usable, up to its fullest potential. It is also very important to apply AI and simplify the supply chain processes which are currently manual, tedious and error-prone. We are already seeing these kinds of changes and this will continue in the future.

With the current uncertainties around the COVID-19 pandemic and other global issues, where do you see 3D printing stepping up and having an impact for industries and supply chains?

3D printing or Adaptive Manufacturing is a new trend now— as this technology becomes easier and cheaper. It not only reduces the time to manufacturing but also eliminates the waste. 3D printing is going to benefit operations and supply chain across industries, including automotive companies. In India, the use of 3D printing is at a nascent stage within mainstream manufacturing, but it’s just a matter of time we see significant use of it.

Supply chains will benefit the most after 3D printing gains prominence in mass production—with implementation of SCM 4.0 practices. There will be multiple benefits—components can be produced in the home country instead of being imported, production will be as per requirement reducing the inventories and improving time-to-market, number of SKUs will go down, in turn, improving warehouse activities, and so on and so forth.

As vehicles incorporate more new technologies and highly sophisticated components, it has become increasingly complicated and expensive to ship these parts. Consequently, the risks for OEM shipments have increased proportionately. Could you elaborate a bit more on this?

This is correct! OEM parts are becoming more and more sophisticated with time and handling those are becoming more challenging. But I believe that can be managed well if stakeholders across the value chain improve their service levels. Now how can that be? For instance, tier I and II suppliers have to work on proper packaging technology, service providers must ensure availability of the right MHEs to handle consignments at all locations while 3PL should hire skilled manpower.

However, even if that happens, we see in India that logistics hubs are not fully equipped, and consignment handling is not as per product requirement. A mass transformation in terms of upgrading and upskilling is needed in this area.

What do you expect the future of the auto supply chain industry to look like in India?

I expect to have two big changes in the auto supply chain industry in the coming years. The first being full-scale digitalisation, and second, track and trace of automotive consignments similar to e-commerce. E-commerce companies have created the benchmark in digitalisation and track and trace, but the kind of tracking and tracing is still not available in case of automotive/industrial goods movement. Any kind of track and trace should be one click away. This will make the life of a logistic manager much easier.

Logistics processes generate a lot of data every day. But there is no utilisation of this data to further improvise or simplify processes. AI is another trend to utilise this data and improve processes.

Our manufacturing sites are already adopting the Industry 4.0 action plans. More and more digitalisation is taking place in the plant. In this situation, the role of SCM 4.0 becomes more important and must go along with Industry 4.0. Soon, we will see the implementation of our various actions in unison of SCM 4.0 over the next 4-5 years.

Demands from buyers for the latest vehicle technology and custom options are having a significant impact on automotive manufacturers and their partners. How do you view this in a growing EV market like India? Could you point out the implications felt in the spare parts sector?

We expect a double-digit growth of the automotive market in 2021 including EVs. EV sales are increasing gradually and government is also focussing on the development of required infrastructure to support EVs. Having said that, I also want to state that Internal Combustion Engine (ICE) technology will be around for the foreseeable future but automotive companies are cognizant of this change and accordingly developing products which are either EV or hybrid technology. No doubt, the spare parts market will also see the change and we will find more sophisticated spare parts in the market that cater to the needs of these vehicles. This brings us to an important point in the packaging and handling of these parts. Use of technology, and again, skill upgradation will have to play an important part in this journey.

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