A sudden disruption in demand can be a killer for any firm. However, the resilient firm plans for disruptions and mobilizes teams and resources to mitigate the risk. Saurabh Lal, Director Supply Chain., India at Kellogg talks on how they managed to seize the day. And in the bargain find a silver lining in the form of rationalized inventory.
Kellogg supply chain has risen to the challenges of nation-wide lockdown and has remained committed to ensuring that food reaches consumers across the country. Let us know about the nature of disruption and how Kellogg went about making sense and responding to the immediate challenges posed by COVID 19? What have been important areas of intervention in the last few months of lockdown?
There were five main areas of disruption we faced immediately after the lockdown was imposed.
- Applying for and receiving permissions to operate our factories and supply chain (including warehouses) across the country. While we were able to secure permissions to re-start our factories relatively fast, re-starting CV&FA and distributor operations required a different approach. Each state and even each city had different contact points, and rules, we went in for what we call a hyper-local approach. We formed a ‘Krack’ empowered team, which set out a list of all permissions required for operations and diligently followed up, seeking help from Central, State and Local authorities, This helped us ramp up our supply chain to 50% within a few days.
- Providing measures for health, sanitation, and social distancing at our plants and distribution centers. We had the government guidelines and learning from other countries within the Kellogg world in place. In fact, many systems had already been put in place since February itself. This helped us fast track the work on keeping our people in operations safe.
- Availability of people – with multiple containment and red zones, we had to constantly modify our bus routes and arrange individual permissions to enable people to travel to the factories. We also ran multiple iterations with shift schedules to find one which allowed us to get the maximum number of people to work while remaining within approved manpower numbers.
- Truck availability and costs – the first few days saw multiple shipments stranded across India and <5% of trucks were on available for shipment. We worked with our transport providers going wider and reaching out to get trucks for primary movement. The initial costs were very high but with judicious management and roads opening up for transport, we could manage our shipments.
- We had been building RM and PM inventory (including imports) in advance which reduced any disruptions due to supplies. We worked with our partners to get them permissions to operate and restart supplies. Government policies were, of course, right on time enabling us to continue producing with minimum supply disruptions.
The initial costs were very high but with judicious management and roads opening up for transport, we could manage our shipments.
SMED to SMCP – single minute change of plans. When forecasting for the outer quarter becomes nearly impossible during a black swan event, how should demand and supply planners respond? What has been your experience at Kellogg? Do you think that the DDMRP approach to planning would help?
SMCP of Single Minute Exchange of Plans – is my new mantra. Similar to the SMED approach, for me this means flexible planning and manufacturing systems capable of superfast response to changing market conditions.
We had been working on an automated DDMRP solution based on TOC for the last 18 months. We closed out remaining gaps and deployed the solution in April 2020. This has helped us delink manufacturing and supply from demand and provided us with real time visibility to stock norms enabling accurate replenishment in a scenario where both manufacturing and transportation are constrained. In this respect one can say, Kellogg has been fortunate to not having to resort to manual interventions which would have caused further chaos. We moved to daily change of production plans while ensuring unnecessary changes (causing loss of capacity) were avoided. Again, our factories have been working on dynamic production planning which meant this change did not come as a surprise to the production teams.
A nugget out of the struggle is that a lot of slow moving inventory has also been depleted which provides us with an opportunity to build healthy stock in the system.
On demand planning, we have been working to use forecasting for capacity planning, financial planning and long lead-time RM planning. This will remain the cornerstone of our strategy for the future even while we focus on bring automation to forecasting so we can run multiple ‘what if’ scenarios as also to change forecasts frequently based on dynamic market conditions.
This does not mean the transition has been seamless. It has required significant efforts from the supply chain and manufacturing teams.
In order to maintain business continuity what kind of plans and mapping needs to be followed in terms of production planning, manufacturing planning and stabilizing supplier base? As the nation went into lockdown to combat COVID-19 pandemic, what has Kellogg done to restart manufacturing facilities after initial disruption?
For one the supplier base has to be diversified and at least two suppliers are being on boarded for critical procurements. Flexibility of manufacturing across plants and 3Ps has been work in progress and once again helped us de-risk our supplies.
Data should be democratized and made transparent – so the entire organization can focus behind a few key KPIs
Post the disruption we have built our focus on the top selling SKUs. This has helped reduce complexity across the chain. Most FMCG companies work with 25 to 30 days of FG stocks and have seen severe depletion across channels. They key now is how fast can be rebuild these stocks to avoid future sale loss. A nugget out of the struggle is that a lot of slow moving inventory has also been depleted which provides us with an opportunity to build healthy stock in the system.
What initiatives were taken in terms of optimizing work on production lines, everything to keep the plant operating safely and continuously with optimal supply of labor force?
Our associates in the plant
rose to the occasion and every employee across functions, lent a hand to enable
production. The true meaning of multi-skilling and multiple-
came to the fore, with people handling multiple work streams in parallel. This
has been the cornerstone of operating with 50% of work force. Like stated
earlier, we also deployed different shift patterns to provide sufficient rest
to our associates, ensure sanitation and social distancing as well as added
more options for nutritious food in our cafeterias.
What role can technology play in terms of dealing with such Pandemics? There are a number of software firms that are talking about end-to-end connected planning as a one-stop solution to such disruptions?
It will be important to deploy technology in planning and replenishment since most resources will continue to be constrained over the near future and possible into the long-term. However, it is important not to be swayed by technology and choose judiciously. Two criteria I would look at:
Cost management will be vital and wastages in any aspect of the supply chain will be disastrous – every supply chain person should go back and refresh on the 8 wastes in Lean Manufacturing.
- Solutions that provide justifiable value (human assisted algorithms would be my catchphrase). Take technology implementation in steps. Have a solid backbone ERP and build solutions on top of it instead of looking for on size fits all. There are enough options which can utilize the power of the core ERP. One can use core ERP, tack on a planning solution, and use tools like Alteryx or PowerBI for visualization (names are used as an example only not as a recommendation). Go for custom built solutions. Many off the shelf items can be adapted.
- Focus on reducing human effort and improving data analytics. Data should be democratized and made transparent – so the entire organization can focus behind a few key KPIs. Simplify the scoreboards and enable what is important.
What do you think will be long-term implications for overall supply chain planning as well as operations? Will scenario planning help guide organizations in creating a long-term strategy? What do you think about IBP? Can IBP be used to guide organizational planning?
I have always been in favor of delinking replenishment & production planning from forecasting. I believe IBP will become even more important from an organization point of view – to enable financial planning and scenario analysis. However, supply planning has to work on even shorter horizons and certainly the days of fixed plans are over.
Cost management will be vital and wastages in any aspect of the supply chain will be disastrous – every supply chain person should go back and refresh on the 8 wastes in Lean Manufacturing. I believe the next wave of TPM, Lean Manufacturing and TOC is on hand and it is time for companies to get back on the bus. Supply chain and manufacturing professionals should be strongly encouraged to relearn the basics of these techniques. ♦♦♦♦♦