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Strategy for the Future – Building Agile Supply Chains

2nd April, 2020

Dr. Rakesh Sinha, CEO Reflexive Supply Chain Solutions speaks to Shanmukh Singh from ISCM on why agility & responsiveness are a must for successful Supply chains.

One of the biggest challenges firms face is the ability to anticipate demand and align their supply chains to deliver to that demand. Demand Sensing was the go to strategy. But when consumer preferences change overnight, or when frictional demand arises, firms need to change tack – from demand sensing to demand shaping. Dr. Rakesh Sinha speaks on the need for building agile supply chains.

GST has been a disruptor just as much as it has been a game changer. What changes have you seen post the introduction of GST in the way India goes about its logistics and supply chain functions?

GST has resulted in a complete revamp of the distribution structure. It is now based on pure customer service requirements rather than being influenced by State boundaries. GST has also led to a relook at the manufacturing footprint.

Can we have some examples of how Godrej has streamlined its distribution post GST?

Since State boundaries are irrelevant in the GST scenario, we have remapped all our distributors to the CFAs. For example, the southern part of Andhra Pradesh (like Nellore, Chittoor) are now served from Chennai instead of Vijayawada. Similarly, parts of Gujarat adjoining Maharashtra (like Vapi, Surat) are now catered to from Bhiwandi instead of Ahmedabad.

Manufacturing units located in fiscal benefit areas have lost some of the advantages of pre-GST era. P2P manufacturers are even more affected, making them less competitive. This has resulted in a relook at the loading of various plants.

Technology has been a major enabler of the logistics industry. Which technologies are going to play a major role in transforming the Indian logistics sector?

Network optimisation models and TMS are getting adopted by many companies now. Warehouse automation and Track-and-trace technologies are finding their way in the logistics industry. Some Industry 4.0 technologies are gaining traction like IOT, Robotics, Drones and Computer Vision. Blockchain holds the promise of coming in as a relevant technology and getting widely adopted in future.

India has a large non-urban market but it is plagued with poor last mile connectivity especially in rural areas. What supply chain strategies have you implemented to reach the rural markets of India?

Agility helps in reaching the rural markets. Lack of data and poor consumer insights make it difficult to estimate demand in advance, hence agility in terms of flexibility and fast response work particularly well in a rural scenario. Reaching small villages through a Super-stockist – Sub-stockist network has proved to be quite effective.

Is Inventory not a constraint when using sub-stockist network for distribution?

Our distribution network is optimised for agility. Serving the consumers and managing demand fluctuations is more important than a tight leash on inventory. If we need to increase inventory to serve deep rural areas, we should.

What is the relation between your supply chain planning and the logistics deployment?

We have an integrated planning cell, which plans all the supply chain actions, including procurement, manufacturing and distribution. Logistics is primarily responsible for executing the distribution plan. It also works on improving agility of the distribution system by making it more flexible and improving response time.

India is a difficult market when it comes to logistics. What are the major challenges that India is facing in the logistics sector?

Complex regulations governing movement of goods and manpower deployment come in the way of efficient logistics. Poor road conditions also impede the logistics sector performance.

Does Godrej use multimodal framework to transport goods across markets?

We do use some amount of rail transport, but not much. Most of our goods movement is on the roads.

Logistics policy is set to change. How will this affect the Indian supply chain industry?

A liberal logistics policy will definitely help the sector. Improvement in transport infrastructure will also help.

What do you think the liberal logistics policy should comprise?

Disintermediation in freight brokerage is gaining traction. Logistics policy should encourage new players to enter with a differentiated business model. The policy should bring down paperwork and streamline compliance requirements.

Most of India’s logistics is still operating in the informal market. How is this affecting the efficiency within the logistics industry as well as the user organisations?

Informal market is quite effective but it lacks the technological inputs. Organised players entering this field will bring better technology as well as better infrastructure.

India lacks skilled labour in the logistics sector. What are the short and long term implications of this?

Recently launched skilling initiatives are helping in this regard. Entry of new players is also bring in new technology, which improves the performance and helps in skilling people. Skill should not be an issue in development of the logistics sector going forward.

We have often heard about the big disruptive changes in the supply chain industry. What are these big changes and when will we see them coming through?

Logistics is getting a big chunk of start-ups. These companies are getting new technologies and new business models in this area. Many of these start-ups are quite promising and disrupting in real sense. We are already witnessing these changes.

3PLs haven’t yet caught up in a big way. Some of them are now devising new business models to service their customers. If they focus on good infrastructure, flexible operations and fast response, I am sure they would help a lot many companies who have embarked on the agility journey.

In the recent past, there has been much talk of making the FMCG logistics leaner and more efficient. Based on your experience, to what extent do you believe that lean and efficient is the way to go in FMCG logistics?

Lean principles always help. Future is pointing towards agility, which is a mix of flexibility and fast response.

What are the major impediments to making an organisation’s supply chain agile?

The first hurdle to cross is the mindset – believing that supply chains can be managed without forecast. Agility focuses on improving flexibility and speed of response across the extended supply chain. The three impediments cutting across all the supply chain actions are poor frequency, high lead time and large batch size.

What do you think about the role of forecasting and demand planning in the changing environment?

It really depends on how agile the organisation is. Forecasting is important for companies who are low on agility. Really agile companies depend more on reading demand signals and adopting flexibility and fast response as their way of working. DDMRP is catching up in a big way for companies who want to become more agile.

Demand shaping is getting much more prominence than the conventional demand planning. What are the newer skills that needs be emphasised to prepare the supply chain workforce of tomorrow? All the agility concepts will be the need of the hour in future. Knowledge of TOC, DDMRP and Industry 4.0 technologies will definitely help. ♦♦♦♦♦

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