In today’s dynamic business environment, our old ways of managing logistics and supply chains are giving way to new strategies, practices and processes—all of which are designed to meet the requirements of our new digital economy. By launching “digital sprints” companies are pushing through the hype and getting their logistics and supply chain strategies to real, tangible outcomes. From cutting costs to reducing production errors and enhancing customer service, technology is providing a slate of supply chain benefits to companies across all industries. As the number of companies realising the benefits of SCM technology increases, several organisations continue to stand out as trendsetters and leaders in the arena, complemented by a healthy mix of sustainability aspirations and profitability. In a one-to-one conversation, Shaikh Asad Parwez, GM- Supply Chain and Head of Logistics at V-Guard Industries elaborates to Upamanyu Borah, how companies should make strides all along their supply chain, from sourcing, procurement to outbound partner network to retail outlets, by better understanding and actively managing it.
We got a clear idea of how global supply chains are being radically disrupted, but how are the subsequent demands of leadership shifting?
Global supply chains are now in a volatile state. Looking back at 2020 and even the present circumstances, there is no doubt that we live in a Volatile, Uncertain, Complex and Ambiguous (VUCA) world. Experiences, dogmas and paradigms have all come under scrutiny; it is no longer a case of finding the one way or the management tool: standards give way to individuality.
Chinese supplies being the major make-up of finished products for every global company, the container or the equipment shortage that happened in China last year led to a significant increase in freight rates. The cost of procuring raw material from the country still remains expensive—a fourfold increase than what it used to be.
As such, with global supply chains facing so much of disruption, and costs and factors like geopolitical conditions also coming into play, there is a temptation for countries to resort to nationalism, with a focus on sovereignty of supply. For instance, as Indian companies are now focussing more on indigenous production, they are looking at alternatives to source raw materials from suppliers within the country itself. This will also ensure the self-production mechanism for companies rather than contract manufacturing and be in control of product demand fluctuations.
Do you have a flexible supply chain that can adapt easily to unexpected changes and circumstances? How you believe companies should plan their supply chain strategy alongside business strategy to achieve sales goals during crises?
V-Guard’s supply chain is totally flexible. In general, a flexible approach is the best way to manage cash flow, without missing out on opportunities to grow the business. However, the pandemic has highlighted that no matter how flexible your company and its operating model is, changes are unexpected. Historical forecasts and past experiences are losing their relevance and are rarely applicable as a basis for predicting the shape of things to come.
Looking at the present circumstances, achieving supply chain flexibility not only depends on the individual company. Consider an industrial-vehicle manufacturer. There are many ancillary units it depends on for sophisticated components/spare parts or semi-finished goods. Now, if these units are in shortage of raw materials or facing some kind of restrictions on sourcing and labour strength, ultimately the vehicle manufacturer’s supplies gets limited and it will require a substantial time to manufacture those products with higher-than-expected demand. Lead times will then extend past those quoted to the customer.
For manufacturing industries, these problems are especially severe. While no forecast will ever be entirely accurate, companies can improve their predictions and achieve greater flexibility by following a strategic ‘segment, stock, and plan’ approach.
Simply put, for products which involve longer lead times, companies must ready and stock them. And those which involve lesser lead times, companies can slow down or delay their production.
What role has technology to play in strengthening your supply chain market dynamics?
We have long been investing in new capabilities and the technology that enables it, to achieve production and supply chain process optimisation. We are now moving towards Supply Chain 2.0, wherein we are automating the entire sales and operations planning (S&OP) module by digitalising entire demand planning and forecasting methods, while further integrating it with the material requirements planning (MRP) system that is linked to factories. This will, in turn, enable production planning as demand can be worked out through forecasting measures.
We are also on the verge of implementing Transport Management System (TMS) which will help us digitally manage and optimise inbound and outbound transportation—route planning, freight audit and payment, order visibility, carrier management, and other functionalities.
Additionally, we have the ‘V-Guard Vendor Portal’ via which we manage all vendors, be it Raw Material (RM) or even Finished Goods (FM) vendors. We connect to all our vendors across 12 product categories with 5,000 SKUs through the vendor portal. It provides both vendor and merchant with a single, shared view of automated data {account information, history of open and closed quotations, purchase orders (POs), invoices, statements, reminders, delivery dates and other updates} that is directly integrated with our company ERP. It allows us to track events on raised POs which add an extra layer of tracking to check the supplier’s progress in fulfiling the PO. This way, we know how and what action has been taken during every step of the purchase procurement process.
How can companies overcome the structural and practical challenges of establishing supply chain operations in less developed markets?
The mobility, flexibility and convenience of digitalisation mean supply chain managers can coordinate processes at every link in the chain, regardless of their physical location. In addition, employees, vendors and other supply chain partners can play active roles in ensuring efficiency—for example; truck drivers can use GPS-equipped devices to immediately report transportation snags that may disrupt processes further along the supply chain.
Emerging markets are complex environments. Developing the right supply chain requires very cost-conscious, locally-driven organisational teams that can still leverage the global state-of-the-art tech-driven strategies pioneered in developed markets by the same organisations.
How sustainable are both the factors of lower commodity prices as well as the benefits of the supply chain? Is there scope for further margin expansion?
Sustainability in today’s business world is not just about protecting the environment but driving a leaner and more efficient business model that uses fewer resources to produce more profit. A focus on green initiatives can drive efficiency and improve use of resources, allowing a company to explore new by-products and opportunities to recycle their waste. As well as translating into a positive impact on the environment, businesses can also enjoy the economic impact of running their businesses more efficiently. For instance, companies can certainly benefit from a more efficient and cost-effective use of raw materials—especially as prices rise. All of these will positively impact the business as cost savings drop to the bottom-line profit.
What’s your position on how best a FMEG or consumer goods company should structure its supply chain initiatives and programs?
Now it is clear to companies that achieving digitalisation and end-to-end process automation is the way forward. Whether it is done in a piecemeal manner or fully, there is no question now that building digital capabilities will be the key to unlocking resilient growth. True digital transformation is about leveraging all the digital tools at disposal—including automation and data analytics capabilities—to fundamentally transform how a business operates and makes decisions.
In case, the company is a start-up or a small-sized one, it can use its budget as a reality check to see how much the company can handle when building its digital transformation strategy. Achieving digital transformation is not a race. Companies must develop a plan that involves several phases over several years, if that’s what is required. Companies can start with investing into that part of the process which it considers weak or laid behind when comparing with systems and procedures within its operations. In case of strengthening the supply chain, this may be in regard to a company’s forecasting methods where it needs to upgrade or implement advanced tools and techniques. So, the company has to start evaluating on the investments required and also find the right type of integrative technology solution.
What you believe is setting the course for today’s supply chain managers to plan the future of FMEG or consumer goods supply chains?
Developing, manufacturing and selling a product can challenge the best organisations in the best of times. As a company’s business drivers change, business processes, technology investment, sales channels and the overall approach to supply chain management has to change and keep pace.
With the rise of e-commerce driving consumer expectations for quick, easy and reliable access to products, gaining end-to-end visibility and achieving the omnichannel expertise ensures a more agile and customer-centric supply chain. Intelligent workflows are a key trend in the industry that is empowering responsiveness in the supply chain—thought visibility across several key areas like track and trace, inventory, operational performance, and business analytics.
Interestingly, few supply chain reports incorporate the notion of in store shelf availability. Indicators often stop at platform availability and on-time delivery to the store. If it’s the role of the supply chain to deliver the right product at the right time to the right place, the performance indicators should focus on the one place where the products are really needed: the shelf. Here, the role of supply chain managers has to amplify to ensure efficiency across shelf availability.
Due to the hard-hit pandemic crisis, supply chain managers have to reflect on their response to the outbreak and what they could have done differently. All of the aforementioned factors are ultimately leading to a deeper dive into all stages of their procurement and supply chain processes, up till last-mile delivery.