SUPPLYCHAINTRIBE.COM July - August 2019 Volume 3 Issue 4 For private circulation only
THE CLASSIC COLD PLAY Addressable cold chain market is expected to increase at a CAGR of 17%. Experts de-chill the current state of the value chain.
DIGITALLY DISRUPTED OR DIGITALLY EFFECTIVE? Read all about the current trends, how to draw up an effective digital strategy followed up by an equally effective implementation and more in this cover story
CONTENTS
July - August 2019 Volume 3 Issue 4
15
COVER STORY Finding the Perfect Algorithm There is no denying the fact that tech-enabled supply chains are here to stay, re-invent and disrupt. The digital transformation for the organization should happen in the right manner, with the right business objectives and strategy, backed by collaborative implementation.
11 Building a Roadmap for the next 5 years According to Sushant Hede, Associate Economist, CARE Ratings, the upcoming Budget address the structural challenges of the economy for long term growth.
INTERVIEW
24 FEATURE
6 Home Run with Furniture
For a Smarter Tomorrow
Pepperfry has derived efficiencies of scale through supply chain automation, 95%+ vehicle utilization, improved delivery success rates and staff productivity, highlights Vikas Sharma, AVP Supply Chain, Pepperfry.
Manufacturing sophistication at their state-of-the-art facility at Jhajjar, Haryana and adoption of global practices in supply chain have helped Panasonic create an unrivalled value chain.
32 Walk’ing the SCM Talk
12 PERSPECTIVE
In its quest to be a product driven brand rather than a discount driven brand, Swaminathan K, Head Supply Chain, Skechers South Asia Pvt Ltd, talks about imports, domestic supply chain management and their best practices.
The Classic Cold Play
OPINION
28 FOCUS
10
Tough road ahead for the Government
Anish Tripathi, Vice President – Strategy, NRB Bearings Ltd., shares his suggestions on how a balanced financial plan could be achieved in the Union Budget.
It is time to transform the traditional perishables business through integrated cold-chain solutions, modernization and the use of technology.
Efficacy of Cyber Security in Supply Chain In this part II on Cyber Security, Dharmesh B. Rathod, Independent IT & Cyber Security Strategist, Architect & Adviser, circles around Cyber Security within the Supply Chain domain.
Editor: Prerna Lodaya DISCLAIMER: This magazine is being published on the condition and understanding that the information, comments and views it contains are merely for guidance and reference and must not be taken as having the authority of, or being binding in any way on, the author, editors, publishers who do not take any responsibility whatsoever for any loss, damage or distress to any person on account of any action taken or not taken on the basis of this publication. Despite all the care taken, errors or omissions may have crept inadvertently into this publication. The publisher shall be obliged if any such error or omission is brought to her notice for possible correction in the next edition. The views expressed here are solely those of the author in his private/professional capacity and do not in any way represent the views of the publisher. All trademarks, products, pictures, copyrights, registered marks, patents, logos, holograms and names belong to the respective owners. The publication will entertain no claims on the above. No part of this publication can be reproduced or transmitted in any form or by any means, without prior permission of the publisher. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Mumbai only.
supplychaintribe.com
3
PUBLISHER’S NOTE
Technology and Growth Dear Readers, First half of the year is gone. Most of it was the noise that the 17th Lok Sabha elections created. And now India’s slowing economic growth is of serious concern for the new government. The weather too is deteriorating. India in many of its parts saw an extended summer with above normal heat wave conditions being experienced. How did Cold Chain logistics play up, what are still the shortcomings and what needs to be done… we compiled a short report. What is improving year-on-year however are the number of technology startups getting added and so also the funding. Logistics is one such area which is seeing phenomenal activity. Our Cover Story looks at how technology is changing the supply chain landscape. Pepperfry, the early mover furniture e-tailer is now moving towards an omni-channel footprint with a mix of online and offline experience for the consumers. On the other hand, a Japanese company in consumer electronics is backing its ambitious growth targets by increased local production. A state-of-the-art factory and strong supply chain practices gives it a good footing. Also read about how one of the latest entrants in the performance footwear industry has achieved success to take on the already established players. This issue is an eclectic mix of many things and hope you enjoy reading it.
Charulata Bansal Publisher Charulata.bansal@celerityin.com www.supplychaintribe.com www.supplychaintribe.com/40under40 www.30under30.in
Published by Charulata Bansal on behalf of Celerity India Marketing Services Edited by: Prerna Lodaya • e-mail: prerna.lodaya@celerityin.com Designed by: Lakshminarayanan G • e-mail: lakshdesign@gmail.com Printed by: Xposures, A 210, Byculla Service Industrial Estate, D K Cross Road, Byculla, Mumbai- 400027. Logistics Partner: Blue Dart Express Limited
4 CELERITY July - August 2019
INTERVIEW
Home run Furniture with
“When we started out in 2012, we used to rely on third party logistics for delivery, however, they lacked the brand ethos that Pepperfry stands for. Therefore, we built our own big-box distribution logistics model. Today, we have derived efficiencies of scale through supply chain automation, 95%+ vehicle utilization, improved delivery success rates and staff productivity,” highlights Vikas Sharma, AVP Supply Chain, Pepperfry, during an exclusive interview.
I
N a short span of 7 years, Pepperfry has been able to successfully entrench its position as a leader in the home and furniture segment with an online traffic market share of 60% plus. Growing at a CAGR of 83%, their mission is to be in 20 million homes by 2020. Since inception, the brand has meticulously worked towards strengthening various elements of the business that has not only helped them in attaining market leadership but also streamline the unorganized furniture sector in India to a great
6 CELERITY July - August 2019
extent. In an industry that largely depends on external service providers, Pepperfry is associated with 10,000 sellers and is able to impact more than 25,000+ livelihoods. Pepperfry constructed a proprietary hub & spoke large item distribution model that significantly reduced per unit shipping costs, increased scale and operating efficiencies and achieved unprecedented service levels at negligible damage rates. Currently, Pepperfry has three warehouses across the country, with the Mumbai warehouse being the largest at
285,000 square feet, and 21 distribution centres. Today Pepperfry has more than 6 Mn registered users and 58% plus of Pepperfry transactions come from repeat buyers. The marketplace gets 12 Mn monthly visits. Wherein the average ticket size for furniture is Rs. 17,00020,000 and the average ticket size for other home products is Rs. 4,000. Through its own last mile delivery of a network of 350+ delivery trucks and a team of 250+ carpenters, Pepperfry reaches 500+ cities. It aims to expand to the Tier III and IV cities, thereby doubling its footprint via its’ omnichannel model. Pepperfry’s omni-channel model is incomplete without “Studio Pepperfry”, a one of its kind concept store from Pepperfry that showcases a curated range of furniture from the online portfolio. At the Studio, one can experience the cutting edge design, various types of furniture with different
INTERVIEW
By focusing on developing in-house big-box logistics, Pepperfry has been able to bring down the delivery time from 25 days to almost 11 days now. In Mumbai, it can be done within 24 hours. wood finishes and get an idea of the overall quality of the furniture from Pepperfry. Here interior design consultants offer free in-store design consultancy on furniture products ensemble to furnish homes that that are aspirational while reflecting the latest and best in contemporary home design.
Its growing expanse In the last few years, the Studios have emerged as key touchpoints for consumer engagement and a great marketing channel. Hence, in 2017, Pepperfry rolled out the franchise model for our offline expansion and to promote new-age entrepreneurs across the country. Pepperfry’s franchise model is a truly unique business model that does not require partner to hold product inventory and is based on 100% price parity. This exceptional model has immense potential to scale thereby making it a gainful proposition for interested partners. The marketplace currently has 59 (owned and franchise) studios across 24 cities. Pepperfry was not just a pioneer of the omni-channel model but, also quickly recognized that every consumer has a distinct requirement in terms of need. The organization has more than 1 lakh plus items and operates in categories across furniture, décor, wall art, curios and showpieces, lamps & lightings, mattresses & bedding, carpets & furnishing, cookware & bakeware, kitchen, dining & bar, bath & laundry, housekeeping & organizers, hardware & electrical. In 2014, Pepperfry launched its house brands. Each house brand is differentiated by design ethos and every furniture piece has to fulfill specific design requirements and quality
supplychaintribe.com
standards. Today, Pepperfry has 10 distinct house brands that contribute to 50%+ of their overall business, these include Woodsworth, Mintwud, Casacraft, Amberville, Bohemiana, Mudramark , Mollycoddle, Clouddio , Primorati and Mangiamo. In December 2018, the company announced the launch of Pepperfry Bespoke – a one-stop-shop for end to end design solutions, through which the marketplace will expand into home interior projects. The services will include space design and planning, material selection, on-site execution,
hardware and electrical. To ensure that we deliver the finest quality product to our consumers we work with more than 200 furniture merchants and 10,000 merchants overall across various sourcing hubs. In order to manage this vast network and portfolio, Pepperfry built a proprietary large item distribution logistics model. We commenced the origin to hub shipment process through contracted trucking arrangements in April 2013 and since then, we have significantly reduced per unit costs with increasing scale and operating
delivery and project management. With interior design consultancy, vast product portfolio and execution expertise to help make Indian consumers’ dream homes a reality, Pepperfry Bespoke offers full stack home interior solutions. They have partnered with top brands like Faber, Bosch, Ebco, Hindware, JSW, Kaff, Kajaria, Merino, Picostone, Siemens, Kohler, among others across verticals, for these services. The service is replete with personal designers who provide tailored expert advice. With a view to get the supply chain enhancement that the company has achieved over a period of time, we got an opportunity to interact with Vikas Sharma, AVP Supply Chain, Pepperfry. Here are some interesting excerpts of the interview…
efficiencies. Today, we have built India's largest big box supply chain in the country. Pepperfry’s specialized large item delivery fleet of more than 350 vehicles operating from 19 hubs across India today serves customers in 500+ cities. Pepperfry also provides assembly and installation support to customers through a team of more than 250+ carpenters across major towns and cities.
Managing so many SKUs and merchants is quite a task. How do you manage the complexity it entails? Pepperfry offers a varied and distinctive portfolio of over 1 lakh products across segments like furniture, home décor, furnishings, lamps and lighting kitchen and dining, housekeeping, and
What are the unique aspects of the fulfillment centre? Pepperfry’s market leading position is a combination of innovation and rapid expansion of logistics infrastructure, packaging, fulfilment & transportation capabilities to meet the growing business demands. Currently, among the 3 warehouses the one in Mumbai is the largest at 285,000 square feet. The space is stacked with G+7 stacking for stocking furniture.
Why did you select Mumbai as the central location? What’s your strategy to serve all cities with least time to market? Mumbai is a leading demand centre,
7
INTERVIEW
contributing over 20-22% of our overall business. Since it is equidistant from both northern and southern hubs, the location has aided us in accruing tonnes of benefits of scale. We have also successfully enabled the reduction of delivery time from 25 days to almost 11 days now as a large percentage of our sellers are based in Mumbai.
What made you take that step and how profitable is it going to be for your growth? The logistics infrastructure in India for large item shipping is significantly under-developed. Shipping bulky but delicate items such as furniture is either prohibitively expensive or takes too much time. When we started out in 2012, we used to rely on third party logistics for delivery, however, they lacked the brand ethos that Pepperfry stands for. Therefore, we built our own big-box distribution logistics model. Launching our own independent logistics arm-Pepcart has allowed us to do away with the additional costs of integrating with a third party logistics entity. Today, we have derived efficiencies of scale through supply chain automation, 95%+ vehicle utilization, improved delivery success rates and staff productivity.
Kindly enlighten us about Pepcart. Pepperfry is as much a home and
8 CELERITY July - August 2019
furniture products’ company as it is a logistics expert. In an industry that largely depends on external service providers, we are the first online furniture marketplace to build our own logistics network - Pepcart, which has helped in not only rationalizing time and costs but also overcome sectoral challenges that existed erstwhile. This effort stemmed from our vision of changing the furniture landscape in India and making it accessible to consumers in a manner that was unheard of, quick and hassle-free.
What’s the forecasting model you rely on? Furniture as a business is different from the traditional FMCG, or FMCD ones in which 20% of the products derives 80% of the sales, however in furniture business, pareto’s 80-20 doesn’t fit well, as unique SKU which contributes towards sales lies in the range of 35%45%. Considering the uniqueness of our business problem, we have developed our own unique demand forecasting model which incorporates historic demand variations, sales trend (of weekdays, and weekends), and future marketing campaigns to help us ensure we have the right quantity available at the right time.
What kind of challenges do you face in moving bulky items?
Also, how do you tackle return logistics challenges? Damages and reverse logistics are the biggest challenges for any business. To ensure we tackle this challenges in most optimum way, we have invested in our three important product touch points: Loading, Handling, and Packaging. We have developed in-house training modules on how to load/handle the material inside the container for dispatch of goods we have considered parameters such as product weight, and fragileness while defining the loading norms for the product. Additionally, we have also, developed our inhouse packaging team which investigates the damage/return rates of the products, and take appropriate action in defining the new packaging norm for the product. We use our in-house vehicles for doing the return pick ups from customers’ place. We optimize the routes of our vehicles in such a way that after completing regular deliveries, same vehicle can be utilized to do the return pick up as well.
What tools are helping you manage the entire task seamlessly? The furniture items are bulky and heavy, requiring specialized delivery mechanism. Pepperfry has established and deployed various innovative
INTERVIEW
The furniture items are bulky and heavy, requiring specialized delivery mechanism. Pepperfry has established and deployed various innovative techniques like introducing blanket deliveries that ensure zero damages and is environment friendly as these blankets can be re-used saving carbon footprints. Specialized product handling techniques are used like staircase trolleys for delivery of products to high-rise apartment, shoulder dolly’s to lift products easily and tool boxes to enable open packaging.
techniques like introducing blanket deliveries that ensure zero damages and is environment friendly as these blankets can be re-used saving carbon footprints. Specialized product handling techniques are used like staircase
The ISO 9001:2015 certifies the high emphasis on quality and operating efficiency of Pepperfry Fulfilment Centre. The ISO certification reiterates the company's passion and commitment
With an aim to spark a feeling called home across the nation, we plan to increase our omni-channel footprint with a key focus on tier 2 and tier 3 markets while also expanding our house brands portfolio. We also aim to provide
trolleys for delivery of products to highrise apartment, shoulder dolly’s to lift products easily and tool boxes to enable open packaging. We have replaced wooden crates with honeycomb boxes and corrugated boxes with higher specifications, which has helped to reduce delivery timelines, save cost and improve customer experience. At the same time, it has resulted into adopting the green environment movement in Pepperfry supply chain. In addition, Pepperfry has introduced angle board framing, styrene fitments for fragile glassware, and Pizza box packs for furnishings.
to deliver the best customer experience through rigorous focus on supply chain process efficiencies, prevention of environmental pollution and occupational accidents. The Pepperfry Fulfilment Centre at Padgha is one of the India's Largest Furniture Warehouses built with state-of-the-art automation and material handling capabilities including G+7 racking systems, battery operated trucks and multistory fetching reach trucks.
superior consumer experiences through investment in new age technology and automation. With this strong foundation in place, we are now all set to extend our brand into new growth opportunities in the home interiors and furniture space. We aim to touch a GMV (gross merchandise value) of USD 1 billion by 2021.
Tell us about your recent ISO certification We recently received the receipt of International Organization for Standardization (ISO) certification for our Mumbai Fulfilment Centre. This makes it the first warehouse to be ISO certified with three critical certifications in the country and the only one in the furniture and home segment in the country to attain this accreditation. The certification was bestowed upon us by Bureau Veritas, one of the best internationally acclaimed agency. The company’s Padgha [Bhiwandi] warehouse spanning across 2,85,000 sq. ft received certification for ISO 9001:2015 (QMS- Quality Management System), ISO 14001:2015 (EMSEnvironment Management System) and ISO 45001:2015 (OHSAS- Occupation Health Safety and Assessment Series).
supplychaintribe.com
What’s going to be your supply chain strategy going forward? Our robust supply chain management along with our best-in-class practices in the service ecosystem across logistics and post-sales support have ensured 50%+ repeat business, with one of the highest average order values in Indian ecommerce. We expect to double our logistics footprint from existing 500+ cities to establish robust delivery network in Tier III and Tier IV cities. By the end of the fiscal year, we have plans to increase our fulfillment and distribution centers across the country.
Where do you see Pepperfry growing from here on? Over the years, Pepperfry has been able to successfully establish its position as a leader in the home and furniture segment with an online traffic market share of 60% plus. We have been focused on strong unit economics and curating a business model that benefits from economies of scale.
Vikas is responsible for setting up the bigbox distribution for large item delivery from scratch across several cities in India. He has also played a pivotal role in executing inhouse logistics by procuring customized inhouse fleets, conceptualizing carpenter desk and setting up Pepperfry’s state-of-the-art fulfilment center of 3 lakh sq ft space in Mumbai with world-class technological solutions operational in a record time of one month. At Pepperfry, Vikas ensures seamless operations at the supply chain level and last mile customer delight. He brings on the table, over to ten years of experience in the field of supply chain, having worked with leading ecommerce and FMCG companies. Previously, he was associated with Supermax personal care. He has pursued the PGDIM course (MBA) in Supply Chain from NITIE and holds a Bachelor’s Degree in Engineering (Electronics) from R.A.I.T College (Dr. D.Y. Patil Group).
9
OPINION
Tough Road Ahead for the Government NDA II Government has a tough job to introduce a balanced financial plan for the year. Anish Tripathi, Vice President – Strategy, NRB Bearings Ltd., shares his suggestions as to what the first Union Budget for the newly elected government could include in order to achieve this. Views expressed here are personal. could be considered next year. s Start eliminating exemptions and announce a timeline for when they would be completely eliminated. s Remove the differential tax treatment given to Indian and Foreign companies – all rates should be uniformly applied.
Personal Income Tax
R
ECENT controversy around the GDP calculation methodology notwithstanding, the Indian economy really does not seem to be doing as well as some of the supporters of the present government believe, but neither is it doing as badly as its critics seem to be suggesting. The truth as usual is somewhere in the middle. The current global macro-economic environment is tricky and hence the government cannot afford to do anything overly aggressive. However, given that private investment remains stubbornly anemic, there is no option but for public investment to continue to drive economic growth. Additionally, with the massive mandate received by the present government, expectations are at an all-time high. Hence, irrespective of what the government does, it will leave people dissatisfied, and criticism will come thick and fast. Having said all of this, here are some suggestions that the government can consider, without really going for broke:
Corporate Tax s Increase the 25% corporate tax rate to all companies with a turnover of up to 1000 Crs, up from 250 Crs. Opening this up for all companies
10 CELERITY July - August 2019
Remove all exemptions from personal income tax except housing and education loans. Do not increase exemption threshold from 2.5 Lacs Revise tax rates as follows: 2.5 to 10.0 Lacs - 5% 10.0 to 20.0 Lacs - 10% 20.0 to 50.0 Lacs - 20% 50.0 to 100.0 Lacs - 25% Above 100 Lacs - 30% The above tax rates will give increase disposable income significantly, and give a phenomenal boost to consumption.
Disinvestment s Increase the disinvestment target to an aggressive 1.5 Lac Crs
Bands for Expenditure heads s Create guidance bands for all major expenditure heads, e.g. Education, Defence, Agriculture, Subsidies, etc. s These bands will guide all future Finance Ministers for how much of the budget should be allocated for which expenditure head, e.g. Education should be between 4% 6% of the total budget allocation. s FMs can vary within these bands depending upon contingencies, but a broad thrust will be maintained overall in the preferred direction.
Tax Administration s Combine the Direct Tax and Indirect Tax departments at the central and state level into one common ‘National Tax Administration’. s Given the convergence between GST and Direct Tax, and the contradictory stands being taken by the Direct & Indirect Tax departments, a combined tax administration will be able to provide much better and coherent service to the taxpayers and do a more efficient job of tax collection for the government. s This will require massive changes, but at least, a dialogue must start in this direction.
Infrastructure & Logistics s There is already an expectation of missive budget allocations for the infrastructure sector, which is most welcome. s Combine all budgetary allocations for transport-related sectors under one mega-Transport Ministry, which should include all Rail-, Road-, Airand Water-based transportation. This will allow for synergistic multi-modal projects like a Bullet Train type network (for both passenger and freight movement) to be built over the NSEW and Golden Quadrilateral Highways under the same Ministry, instead of the separate freight corridors being done today. s Although not linked to the Union Budget, differentiated and graduated GST rates for ICE, Hybrid and Electric vehicles need to be pursued in the GST Council if the recently announced EV targets are to be met.
OPINION
Building a Roadmap for the next 5 years The much-awaited Budget of the first year of NDA-II could indicate the prospective course of action for the next 5 years as the government has a strong and clear mandate, stresses Sushant Hede, Associate Economist, CARE Ratings. Views expressed here are personal.
T
HE first inning of the incumbent government had a mixture of repair and reform strategy with key reforms like Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC) showing a glimpse of positives amidst teething challenges.
for small and marginal farmers, which has now been extended to all farmers. Along with the income support scheme, policies to focus on agriculture marketing reforms, agriculture exports and irrigation to reinvigorate the sector could be expected. However, the focus
The NDA Government, in its second innings, has a clear lead on the political front, which would ensure continuity of policies but the trailing behind in the performance of key macroeconomic indicators is the challenge, which needs immediate resolution. With the government pursuing a path of fiscal consolidation and continuing to be at the edge of it, a fiscal stimulus to boost a slowdown in the economy remains restrained. Thus, only a marginal flexibility in the path of fiscal consolidation for the short run push and highlighting the need to tackle key challenges grappling the economy for better medium and long term growth could be the theme of the Budget. With revenues from GST still remaining below budgeted and higher expenditure on various welfare schemes restraining the fiscal space, the Budget 2019 could estimate fiscal deficit (as a % of GDP) to be marginally higher at 3.5% of GDP in FY20. As this is the first budget of the second inning, a few steps in the direction of improvement in the overall economic prospects looks likely.
on these three objectives should not be limited to short term adjustment in allocations but have a long term policy objective with a seed of the same sown in this Budget. Secondly, the continuing slowdown in consumption not only translates into subdued growth in investment activity but also lowers the indirect tax collection of the government leaving less space for expenditure. High unemployment, meagre pick-up in wages and higher GST rates on key items of consumption like automobiles and consumer durables have weighed on consumption growth. Therefore, addressing the issue of unemployment and clues of moving towards a more revenue neutral GST rate as against the current 5-tier GST structure is imperative in the Budget. Thirdly, there would certainly be a continuing thrust on spending on roads, highway development and construction. With the private sector investment being limited, higher capital expenditure by the government (excluding the offbudget borrowings) infrastructure-based sectors is expected. In addition to these sectors which are also labour intensive, a boost to the textile sector with export driven policies would not only aid in employment generation but also provide higher disposable income for improving consumption. Further policy implementation of the government’s flagship program of ‘Make in India’ will also bode well in revival of the private sector manufacturing activities. Along
3-pronged approach Firstly, the agriculture sector continues to face challenges with adverse terms of trade. Despite the announcement of MSP, the prices of agriculture produce have been low, not reaping benefits for the farmers. Moving towards an income support scheme, the interim Budget announced PM-Kisan scheme
supplychaintribe.com
with these sectors, higher allocation should be towards healthcare and education sector.
A ray of hope Moving on to the fourth pointer of direct taxation, it is unlikely to see any changes in the tax slabs for individuals and corporates. A roadmap of reducing the corporate tax rate to 25% for all corporates also looks unlikely and would see likely postponement until the mobilisation of indirect tax collection is more streamlined. Last is the financial sector which at the moment is marred in news of defaults. Though the NPA challenge has improved to some extent in the banking system, the issues of the housing finance companies (HFCs) and non-banking finance companies are concerns. As this problem is nonsystemic and concentrated among a few entities, it will be interesting to see the stance in the budget for the HFCs and NBFCs. However, a roadmap to reducing the government stake in public sector banks to below majority looks possible in this Budget. This Budget should accept the current slowdown in the domestic economy and address the structural challenges of the economy for long term growth.
11
PERSPECTIVE
The CLASSIC COLD PLAY Crisil Research has estimated that investment of Rs16,000-21,000 crore is being lined up in the cold chain sector between 2019 and 2023 for optimizing the domestic post-harvest value chain and to feed the downstream food processing industry. Subject matter experts assert that India needs to realize its true potential and it is time to transform the traditional perishables business through integrated cold-chain solutions, modernization and the use of technology. Team CELERITY spoke to the industry experts on what are the immediate challenges and their solutions…
C
OLD storage forms the most vital post-harvest horticultural value chain for the downstream food processing industry. The current cold storage capacity in India is pegged at 37-39 million tons (MT). According to official statistics, there are about 7,645 cold storages in the country with 68% of the capacity being used for potato, while 30% is multi-commodity
cold storage. As per Crisil research estimates, the cold storage industry is slated to grow at a CAGR of 13-15% over fiscals 2019-23, mainly driven by rising demand for processed food, fresh fruits & vegetables, seafood and biopharmaceuticals in exports markets. Looking at the growing demand & supply, it is expected that Rs21,000 crore will be invested in next 4-5 years
in setting up or upgrading cold storages to address the problem of stockpiling of perishable commodities. There has been an urgent need to upgrade existing cold storage plant and machinery, and technology. An under-developed food processing value chain is another issue that needs to be resolved.
Cold chain - opportunity Demand for cold chain is predominantly from bulk agri commodities, B2C industries and select B2B products, with B2C/ B2B segment being addressable market for organized LSPs
Cold chain demand in India
Farm gate storage
Food and agri commodities requiring bulk storage
• Potatoes • Apples • Chili
B2C segments
Consumer segments traditionally catered to by organised logistics providers
• • • • • • • •
Dairy Pharmaceuticals Frozen food Meat/ seafood Confectionery QSR Organised retail High value F&V
B2B segments
Segments that provide opportunistic potential for organised logistics providers
• • • • • •
Select chemicals Films Tonics Enzymes Reagents Hops
Segments traditionally catered to by organised logistics service providers (LSPs) A&M India| February 2019 Source: A&M analysis
12 CELERITY July - August 2019
1
PERSPECTIVE
Cold chain- size of opportunity - Outlook Addressable cold chain market is expected to increase to INR 62 Bn (USD ~1 Bn) by FY21 at CAGR of ~17% Inbound
FY18
11%
29%
Primary transport
INR 4.4 Bn
Warehousing + VAS
INR 11.5 Bn
35%
Secondary transport
INR 13.7 Bn
24%
100%
Total
INR 39.2 Bn
INR 9.5 Bn
0.6 Primary Depot
a
Raw material Import
Up to 20 km
Factory
a B2C
1,000 -1500 km
. . . Raw material Domestic
Small Outlets
Wholesaler
40 Feet (6-9 Ton)
a
Sub Stockist
Distributor
Up to 20 km
2.5-6T
300-400 km Secondary Depot
a 2.5-6T
Raw Material Imports
30-50 km
Modern Trade
a
150-200 kms
B2B – Small/ Unorganized companies
Industries
Temperature controlled FY21
Inbound
INR 6.9 Bn
11%
Primary transport
INR 18.9 Bn
General Trade
31%
Typically Ambient
34%
Warehousing + VAS
INR 21.1 Bn
USD Bn
Secondary transport
INR 15.1 Bn
a Typically Outsourced 24%
Total
100%
INR 62.0.Bn 0.95
Note: Confectionary value chain used for representation, value chains vary depending on the industry
A&M India| February 2019
12
Source: Industry discussions, company public disclosures, A&M analysis
Soumalya Mukherjee, Co-founder, Business Development, Tan90 Thermal Solutions Pvt Ltd. Small scale dealers who deal with perishables (or marginal farmers) are the worst hit during the peak summers. In horticulture, leafy vegetables like spinach, lettuce, broccoli become dehydrated, resulting in a decrease of 70% of its value. The situation worsens in tropical demographics, with the likes of Chennai and Ahmedabad, in which the users cannot even hold for 1-2 hours. Ice is not a viable option, given the low volume optimization. To meet this end, the present solution includes cutting/ processing of the produce at 6 a.m. in the morning and aim to sell them before 8 a.m. Low shipment size discourages the entry of reefer services to these areas, limiting the outreach of the dealers/farmers. Larger F2F (farm to fork) organizations have to optimize their supply chain to minimize their loss. One of the major challenges with cold transportation is the rapid increment of temperature caused by the opening of doors (curtains or air current are being employed to alleviate this) that limits the outreach of delivery services, working on eutectic back-ups. Compartments are often included, which lose out on volume optimization. We support our users with portable cold storage units that are robust and can be stacked on themselves, providing them with the freedom to leverage any logistics service, already in place in their supply chain. The storage units are designed with a view to minimize loss of volume and are comparable to presently used HDPE plastic crates. Being standalone devices, a single user can transport perishables having different temperature requirements simultaneously. Easy tagging of the storage units with real-time analysis of data points ensure safety during transportation. With our cold solution in place, users can extend their holding time to more than 12 hours during transportation, without any additional investment on logistics assets.
supplychaintribe.com
13
PERSPECTIVE Somnath Chatterjee, Head – Procurement & Logistics, ITC Ltd. (Foods Division) Refrigerated transport services are used by mainly two industries, Agriculture and Pharma. India is one of the largest agriculture-producing nations in the World and even a pharma powerhouse globally, especially on the consumption side. In spite of ripe market conditions, cold chain industry has been marred with challenges like unorganized market with numerous small-time operators, imbalance of demand of supply of reefer vehicles, multi-crore investment, and low return on investment as compared to ambient truck. Other side of the challenge is to keep temperature inside reefer trucks and storage during hot and humid weather. When outdoor temperatures soar, it has major impact on the interior temperature of the truck/cold store and condensation. If temperature drops a few degrees inside the truck or cold store, it will spoil the product or product becomes inedible. Most of the cases, the supplier loads the cargo with incorrect temperature which affect overall temperature of the truck during transportation as well as storage. Incorrect temperature affects temperature sensitive cargo like ice cream. When humidity levels are too high within a refrigerated trailer, condensation accumulates on the ceiling, walls and cargo. Once condensation forms, it remains either in liquid form, or freezes over. The additional moisture and ice crystals have the potential to cause food items to become inedible. In order to circumvent the above challenges in transportation as well as storage, the refrigeration units must be continuously operated, the interior temperature and humidity continuously monitored and adjust the same as per requirement. Most importantly, the cargo should be loaded, transported and stored at correct and consistent temperature throughout the supply chain.
Pawanexh Kohli, Chief Executive and Advisor, National Centre for Cold-chain Development (NCCD) Raised air temperatures directly impact on running efficiencies or the mechanical equipment, increases machine breakdown risk and can compromise rubber seals or even cause physical distortion in some structures. All cold-chain operators should evaluate the age of their mechanical equipment, insulation and review their periodic maintenance systems. Damaged insulation should be renewed or repaired, oil changes are advised in all mechanical engines (reefers, generators, compressors, etc.), rubber gaskets can be renewed ahead of normal cycle. In the hot season, expect more dust and hence it is prudent to keep extra air filters handy. Calibrate all temperature sensors, as well as high temperature cut-outs on equipment. Consult your engineering support teams for individual maintenance needs. Do not ignore breaches in your infrastructure envelope and immediately repair and seal off all insulation. Loading and unloading periods raise risk of temperature excursions, and hence the ante-room equipment should be given special attention and maintained in good order. In case of stored products that require frequent fresh air replenishment, re-evaluate your practices so as to conduct this activity at the lowest temperature point of a day. Where feasible, adjust to skip a refresh cycle in the peak temperature period. During hot spells, rodents and birds will also try to access cool spaces, and hence it is advised to keep pest prevention measures at peak. The summer season is the precursor to monsoons – now is also the time to check roofs, gutters and drains and ensure they are clear; replace the brake pads and wipers of your reefer trucks in advance of monsoons to avoid accidents.
Rajeev Bhanawat, Business Head – Milk, Parag Milk Foods Ltd An efficient and effective cold supply chain is increasingly key to success within the milk industry. Time, temperature, cost, distance, demand, forecasting, and packaging are all important considerations in developing a strong dairy supply chain with temperature becoming more important in hot and humid environment like in India. Added complexity of cold supply chain in milk industry is that it has to begin right after milk comes out of udder of an animal and has to be maintained till it is consumed. Another important aspect of supply chain is that maximum and rapid deterioration in quality happens when milk has still not reached to the processing plant. Therefore, the industry is focusing on developing the required refrigeration infrastructure nearer to milk production point in villages to ensure rapid cooling of milk and then transport to milk processing centers. Focus on raw milk quality improvement is helping the industry in providing the consumer a better product not in terms of shelf life but also in terms of freshness and taste. At distribution front, now things are becoming better with rapid growth of organized retailing along with increased penetration of refrigerators in traditional outlets as well.
14 CELERITY July - August 2019
COVER STORY
Finding the
Perfect Algorithm We are amid a digital revolution, a time when customers are exposed to digital convenience led by new-age businesses. Digital supply chain transformation is a radical approach that seeks to harness the power of digital technologies to achieve market leadership for the enterprise, with improved value to both bottom-line and topline. Our cover story attempts to unfurl the perfect algorithm for organizations to build a sustainable supply chain efficiently backed by technology‌
supplychaintribe.com
15
COVER STORY
O
VER the past few years, India has gone through major reforms like GST, Fuel price de-regulation, Demonetization, etc., which have fueled our economy in many ways. Large organized businesses are drawing massive growth plans and making investments to augment demand that is expected to generate not just from tier 1 and tier 2 cities but from tier 3, 4 & 5 as well as rural sector. Mass customization is becoming a norm. Companies no longer consider demand as a sales plan, they are trying to understand their customers, markets, competitors much better than before and as a result gathering vast amounts of consumer data to run analytics and find a way to use the same objectively.
Siddaraju H.V., Co-Founder & CEO, Caliper Business Solutions Pvt. Ltd., adds, “Thanks to the changing customer behaviour, India’s supply chain is leapfrogging forward. Unlike a decade back, today’s customer completes his research on the product before he purchases it. He is well informed about the product and features. Therefore, the buying decision is already made before he initiates transaction. Now the challenge is to ensure that the customer preferred product is available for sale. Thus, the data analytics is getting blended into supply chain to ensure right product at right place for the customer to purchase.” “Secondly, technology investments through start-ups in supply chain has given a great advantage to the manufacturing companies, as they need not invest time and money on the
the easy availability of product reviews and competitive comparisons, it is imperative for companies to deliver their products and services as per the customers’ needs within limited cost and time. This has resulted in a requirement for tech-enabled growth even in the supply chain. At Amway, we have subscribed to commodity forecasting techniques for some volatile commodities to deliver the best total value. Uberization: The new model of shared economy i.e. Uberization brings cost effectiveness. For example, dynamic warehousing is emerging as a viable way of purchasing warehousing services on demand—paying only for what is used instead of owning distribution centers or signing contracts with third-party logistics providers (3PLs). And like any other shared-economy services, the
Saurabh Daga, Director – Business Development, o9, shares, “Digital transformation is affecting our personal lives in a big way. For example, we use Google Search for every bit of information we want, and we have it on our fingertips. Facebook, Twitter and WhatsApp allow us to collaborate in real time. Google Maps gives us real time visibility into traffic conditions and prescriptive actionable insights, Amazon and Netflix learn from our shopping and content preferences and makes customized recommendations. Uber & Ola are the best examples of real-time demand and supply match, whereas Siri and Alexa are our digital assistants in the consumer world. But the reality in our enterprise world is completely opposite – we struggle to get insights from vast amounts of data within our enterprise, there are functional silos and hierarchies, visibility is often poor and delayed, thereby creating surprises. Knowledge is mostly tribal and comes with years of experience, and there is sub-optimal resource allocation leading to higher costs. Our organizations are living in thousands and thousands of spreadsheets, slides, and emails. The advent of digital transformation is challenging supply chain organizations and leaders in large companies to transform how they plan and respond to market demand changes and allocate resources near real time. These are some of the reasons why companies are looking for best of breed supply chain technology solutions.”
software but just use SaaS models. This encouraged the growth potential in the tech-enabled companies. Third factor is, supply chain models are changing. With the advent of e-commerce, retail shelf stocking is coming down. This challenged the traditional stocking and goods movement process, leading to tech-enabled supply chains to handle speed of execution and planning. Another important factor is significant improvement in transparency. The modern supply chain managers are drawn towards transparent exchange of information across stake-holders which can be done efficiently through technology,” he shares. On a similar vein, Rahul Gupta, Vice President – Procurement & Planning, Amway India, remarks, “Globalization with digitization is creating a need for organizations to re-examine the way they are organizing and deploying their supply chains.” Some of the key factors which are driving tech-enabled growth are: Information explosion: Quantity of data generated is rising exponentially. The 3Vs - Volume, Variety and Velocity of data generation makes it necessary for organizations to leverage such ubiquitous data to gain a competitive advantage and continuously exceed customer expectation. Rapid technology adoption & Digital convenience: It is estimated that by 2030, more than 60% of the world’s population will have access to the internet on their mobile devices. With
actual pay-per-use transaction occurs in an electronic marketplace. Sharing insights, Manav Verma, Chief Marketing Officer, DHL SmarTrucking India, says, “Even as India has been taking steps to accelerate reforms in the logistics sector, including the elimination of trade barriers, streamlining of procedures, and a revision of the cabotage policy for domestic freight, companies in the sector have been betting on ‘technology-enabled trucking’”. According to Pradeep Chaudhary, Domain Consultant, Tata Consultancy Services Ltd., “The last few years have seen tremendous growth in tech enabled services in India.” Today cloud based SaaS for ERPs is easily available at a price ranging from `3000/- to `5000/- per month for small & medium businesses. This represents a fraction of their monthly operating costs and therefore becomes very attractive for digitizing their operations.” ASR Prasad, VP and Head Centre of Excellence, Future Supply Chain Solutions, highlights that the new GST framework has ensured that decisions are now purely based on supply chain efficiencies. With customer experience being significantly affected by supply chain experience, there has been a considerable focus to optimize supply chain, which has resulted in the evolution of the Digital Supply Chain. Also, the growth of automation solutions, robotics, enhanced capabilities of sortation system, and digital
16 CELERITY July - August 2019
COVER STORY advancements around the globe are opening up newer areas for technology adoption. These help bring in higher efficiencies in operations, more reliability in the execution and complete transparency across the chain. Giving a holistic perspective, Manjunath SR, Senior Director, Industrial Supply Chain Consulting, JLL India, asserts that customer expectations are growing, the online trend has led to increasing service expectations combined with a much stronger granularization of orders. As e-commerce organizations continue raising the bar in delivery and service, customers increasingly expect realtime updates, quick delivery and impeccable performance. There is also a very definite trend towards further individualization and customization that drives the strong growth and constant changes in the SKU portfolio. The online-enabled transparency and easy access to a multitude of options regarding where to shop and what to buy drives the competition of supply chains. The pace is aggressive as organizations plan to incorporate new technologies. The top technologies to be implemented in the next one to two years include automation, realtime data and analytics, sensors and the Internet of Things. These have the potential to provide clear visibility in the supply chain, increase inventory accuracy, predict market shifts in consumer behaviour, and decrease cycle times. As early adopters prove cost and efficiency gains, more will get on board with technology implementations. To build on these trends and cope with the changed requirements, supply chains need to become much faster, more granular, and much more precise.
Challenges faced in implementing technology solutions Manjunath SR shares the many challenges that organizations face when introducing new technologies: Focusing on benefits versus costs: Organizations considering new technologies must be laser clear as to the benefit and let that drive the prioritization process versus weighing projects by cost or complexity. Need to define robust processes: Implementing technology also creates
supplychaintribe.com
momentum to converge processes, it forces an organization to identify what are their leading practices and doubling down on making those more precise and efficient. Pressure to run large corporations like a start-up: Technology introduces change and new practices into an organization that can cause resistance in upper and executive levels of management. Validating technology use cases: Companies no longer can afford to guess if their technology investment can make an impact, leading organizations now validate from the get-go to determine the impact and viability of proposed investments. User adoption challenges: Users will often resist change and adopting new systems particularly when they haven’t been consulted nor if their reporting organizations do not incentivize them to do so. Rahul Gupta remarks that implementing technology solution involves numerous layers of technology adoption and change management. This requires changes in the processes as well as operational practices. Some of the challenges that need to be addressed are: Digital transformation goal - Lack
of understanding of the usage and application of multiple technology offerings, i.e. IOT, analytics automation, or AI, leads to the inability of justifying the financial investment. Insufficient return on investment poses a barrier, as organizations struggle to assess the incremental benefit of adopting new technologies over existing processes. Technology integration (within & outside the organization): Integration of new technologies with an organization’s legacy system causes inherent technology challenges and delay in adoption. Using multiple data silos that are not unified, leads to process inefficiency and limits the value that can be derived from data. It is also crucial to assess whether business partners can adopt the technology platform to complete the information loop. At Amway, too, integration is one of the main challenges, since we have been using many legacy systems. Cultural challenge: Cultural change is more complicated than changing technology. The need is to build a digital culture proactively i.e. provide the expertise, experience, and motivation to people to use the technology being implemented effectively. Talent gap: It is imperative that organizations plan for talent transition.
17
COVER STORY Users must possess relevant experience in technology application and should be equipped to harness the potential of data science and advanced modeling capabilities to support business strategy. For this, hiring managers need to reevaluate the methodology of attracting potential talent and to reskill the existing workforce. According to Siddaraju H.V., the element of learning and future outlook is at its nascent stage. Digitization should form part of their strategic KRA. Organizations should look beyond cost reduction when they implement technology.” The encouraging fact is that most Supply Chain Heads and some CXOs are already taking this KRA on their own and started investing time on technology adoption. Quality of the operational ground level staff is something that we should focus
needs or they don’t receive adequate training and re-training, adoption will be low. This is a significant issue in many companies and needs to be addressed by both vendors and enduser companies. Talking about the implementation of technology by small players, Manav Verma states two major challenges that constrain the adoption of technology in Indian logistics, which include lack of awareness and limited access to technology. Since the Indian logistics industry is highly unorganized, with many small, local players, these bottlenecks have a great impact on the sector. Lack of awareness of the available technology applications, and about the adoption cost, inhibit smaller providers – they may perceive the cost involved to be huge, however low-cost solutions
ensure a smooth transition. For Bharat Ramanath, Director & Industry Principal, ShipX, there is a lot of ‘noise’ in the tech space. People hear new buzzwords every so often and hear that these buzzwords are the real answer to world hunger! This leads to problems at two ends of the scale; confusion, at one end, on what I need for my business or scepticism, at the other, that this is all so much noise and we have heard it all before. (In many ways, technologists and tech product vendors are responsible for causing this chaos). It is not uncommon for organizations to make sub-optimal technology choices, based merely on peer pressure or perceived benefits that someone else claims to have gotten from such technology. Even if there is clarity on the choice of technology and platform and on
to work upon while implementing technology. As one of the customers said, supply chain technology should be ‘illiterate proof’. We should not forget that this is the only function that has stakeholders’ right from Fleet Driver to CEO. There is no ‘one solution fits all in supply chain’. Within the same industry also, we find different standards. Customization of these variations would mean constant changes in the product. This necessitates shifting to new technologies faster, leading to shorter product/technology life cycles,” he reiterates. For Saurabh Daga, these challenges take the top seat: Long implementation cycles: Implementation of supply chain technology solutions has traditionally been long and difficult. The big-bang approach of developing a blueprint, configuring the system, data integration, testing, etc. took months or years to implement basic planning systems from legacy providers. Inflexibility: The business models are changing rapidly, which calls for flexibility in planning system to respond to business needs, but unfortunately due to technology limitations, the legacy systems cannot change so easily and rapidly unless the solution is further customized or re-implemented. Poor adoption: Change management is a big issue leading to poor adoption of supply chain solutions. Users are used to Excel, and if they are given a rigid tool without properly understanding their
such as the use of sensors with standard data networks can help them improve the quality of their service without breaking the bank. Smaller players also do not have expertise within the company, to implement and use these technologies. In the cold chain industry, for example, there is a lot of growth potential and need for efficiency, but inadequate technological adoption hampers the reliability and security that is required by businesses from their logistics partners. According to Pradeep Chaudhary, the challenges are more from change management, project management, commitment from senior executives in terms of time. Many a times, it is seen that the business requirements are not clearly articulated. Especially in cases where multiple business stakeholders are involved – each having a variant of the processes to be automated through IT. Some requirements get missed out during the early phase of the IT project and then during development or testing, new requirements come in. This creates speed-breakers in the IT program and results in delay and cost escalation. Sometimes and especially for software products, the customization is so heavy that it creates problems in the working of the software itself. It is to be understood that change management is an integral part of implementing any technology solution. Hence, the customer has to ensure that the right business and people change management processes are followed to
the specific problem(s) being solved, there is another broad issue that needs to be managed very carefully, that of implementation! Remember that supply chain is finally a people driven business. A tech platform is only one piece of the puzzle. If the surrounding processes and the associated people are not aligned through rigorous training on the platform, the solution is bound to fail. And very often, it is easy to attribute failure to the tech-platform alone. So, change management is a key part of a successful implementation and is often no given enough attention. Devadas Nair, Chief Supply Chain Officer, Shoppers Stop, enlists below some of the challenges: Lack of skilled resources in SCM operations, which is delaying the implementation, also prone to errors. Cost pressure resulting in trimming down support functions due to which companies compromise with best of technology tools / support functions. Very few organizations have adopted best of technologies, so having technological collaboration with all business partners is still far away. Legacy systems restrict flexibility of cutting edge, new age tools. Lack of industry specific common technology solution, which will help Trade Suppliers, Retailers, Logistic Partners to seamlessly exchange data with each other.
18 CELERITY July - August 2019
COVER STORY Success Formula to GO DIGITAL Many ‘Digital Transformation experts’ use the terms digitization, digitalization and digital transformation interchangeably. However, they have distinct meanings. They can be treated as steps in a process, starting with a literal conversion and ending with the creation of new digital capabilities, as highlighted by Kumar Singh, Senior Data Science Consultant, Supply Chain & Operations, Boston Consulting Group (BCG), below: Step 1: Digitization is the first stage where you convert your analog/manual processes into digital ones. This is where digital Supply Chain journey starts, with a basic switch. You could, for instance, incorporate automation by investing in Transportation Management software (TMS). This is often the most costly
so can your capabilities (technology, operations etc.). The same holds true for your vendors and customers too. Supply Chain is an inherently collaborative process.” Saurabh Daga also reiterates the fact and says that we first need to understand what digital transformation of supply chain is and how is it different than implementing a technology solution: - Digital Transformation of supply chain is all about connecting your customers, markets, suppliers, and internal processes and people with digital technologies that give organizations a whole new set of superpowers in operating their business Super Visibility - see risks and opportunities earlier Super Intelligence - knowledge-driven algorithms
supply chain. It is crucial to ensure that the transactions are safe and secure, customer privacy is maintained, regulatory and sovereignty requirements are adhered to, and partners (employees, customers, and suppliers) feel safe working with the organization.
and time-consuming part of digital procurement. This is also the most critical and will form the foundation of your Digital Journey. Step 2: Digitalization refers to the use of active digital supply chain processes with some human intervention. At this stage, you have made the switch to Digital and have started using it in your day to day operations, and it should be having an impact on operations. An example of digitalization is when your TMS system is taking data directly from a data lake in an automated way and populating the output in a dispatching template. Step 3: Digital transformation happens at the third stage and is a scenario where a company has invested heavily in digital technologies and there are minimal human intervention points. An example will be an end to end automated state where the flow of data from order management system to TMS and other planning systems is completely automated. Human role is to monitor the Supply Chain and intervene when required. Before implementing any technology solution, Bharat Ramanath asserts, “Understand where you are today and the limitations on business that your current state imposes. Just because a digital initiative worked for somebody else does not mean it is the ‘right’ solution for you. Be careful of others claims and make honest, independent assessments of meaningful solutions. Your business needs can keep evolving,
Super Processes - collaboration, decision making and execution Super Productivity - automation, digital assistants. - Companies need to be very clear on what the above means for their business and then select a partner that brings all of these in a single platform. The selection process needs to change from traditional RFP/RFQ to pilots and rollouts to enable quicker time to value. For Rahul Gupta, things to keep in mind while going for digital transformation in procurement are: Structured roadmap: Defining a structured roadmap with clear deliverables from technology adoption is the key. This involves having the right people, culture, processes and technology, and a unique way to deliver the desired goal for the enterprise. Procurement roles and capabilities: The organizations who are on their digital transformation journey require more data scientists and category managers with digital capabilities, along with building a culture of a digital organization with the recruitment of specialist profiles. Focus on Data Quality and Analytics: Quality of underlying data is crucial. If the supply chain of the future is built on a platform of digitally connected data, our analytics, insights, and success will be only as good as the foundation of data upon which they are built. Cybersecurity and compliance: Information security and cybersecurity become critical in a well-connected
be effective, the next-gen supply chain should be able to tackle challenges of time, distance and cost. While time and distance gaps can be met with innovative technologies, the cost part is where we need to effectively align technology with human functions. In that sense, it can be a great hybrid of technology and manpower.” The supply chain of the future must be more automated, more integrated, more intelligent and more efficient than what it is today. Technology has expanded exponentially, mandating the organizations to leverage these technologies to modernize and futureproof their supply chains for disruptive performance. Evolving to a datadriven digital supply chain to improve productivity will strengthen the bottom line as well as the top line. The nextgen manufacturing supply chain should primarily focus on the following, as shared by Rahul Gupta: Zero length supply chain: Zero length supply chain is powered by smart warehousing, predictive shipping, drones, self-driving trucks, and uberization. While the distribution is in process, the shipment can be rerouted to the right customer destination. Real-time re-planning based on real-time information: Data visibility is giving companies the insight needed to operate effectively and quicker than ever before. The waiting process until the end of the month to review the effectiveness of sales and operations planning will be eliminated. Advanced
supplychaintribe.com
Tech-enabled Supply Chain of Tomorrow The next gen supply chain is not a chain, but a smart, connected and open supply network, that gives companies the agility to respond quickly to evolving market demands and the ability to scale for business growth. There will be no more silos, and this network will combine information from a variety of physical and digital sources to improve operational performance and manage priorities. Manav Verma avows, “In order to
19
COVER STORY forecasting approaches will form the basis of such granular, faster and precise judgments. Forecasts will exactly replicate on-the-spot market situations without any lag, with fast moving products being forecasted daily & supply chain decisions being carried out basis live scenarios on the field. At Amway, we have a live dashboard system that publishes daily POS data to direct sellers and internal Amway teams. This helps us in capturing real-time on-ground information from both front end and back end, resulting in relevant on-thespot decisions. AI and Blockchain for contracting and bidding: Blockchain would verify and certify the existing documents, history of modifications, and versions that will allow procurement and legal departments to have what we call Secure Contracts. AI can aid in
aspects: Automated planning, IoT sensorbased movement tracking, robotic warehouse operations and autonomous delivery mechanisms form the core backbone of a futuristic Supply Chain environment. Advanced automation. Hands free scanners / Smart Glasses. Advanced systems with end to end supply chain collaborations (Data Driven) with all business partners including Trade Vendors, Retailers, Logistics players and Retail outlets. Which will result in absolute faster replenishment. Robotic last mile for order fulfilment for end customers in forms of technologies like Drones. RFID enabled product and services for absolute accurate and faster Transaction processing between all
optimization, Proactive quality sensing. Being truly optimistic and gearing up for growth, Siddaraju H.V., concludes, “Traditional Supply Chains are more developed based on experience. Modern supply chains are more structured, organized and developed to scale. The fact that Supply Chain is inducted as a core stream in many Management Schools signifies the impending change that people join Supply Chain Function with a structured knowledge of tools and applications, unlike classical approach that run through their experience. With the advent of investment into supply chain services sector, the expertise is getting attracted which will lead to core-competency development. Like in developed nations, Supply Chain as a function will be outsourced and managed by
e-bidding of tenders or relocating supply sources basis requirements and assigning purchase orders through a smart selection of suppliers from the global list. For Devadas Nair, the new age supply chain would have the following
SCM stakeholders. Driverless fast and economical Road Transportation, Dynamic and predictive routing to avoid delays. Advance Supplier Collaboration which includes, Analytical driven sourcing, Asset sharing, Cloud
professionals. Next Gen Supply Chains will be tech-enabled, organized and scalable.”
SCM MEGATRENDS Each day, it’s becoming more evident that business processes will soon be primarily technology driven and that technological trends will impact different sectors of manufacturing and supply chain management. A look at the defining megatrends that the supply chain industry will witness in the years to come… Manav Verma, Chief Marketing Officer, DHL SmarTrucking India Ltd. Technology can help the Indian trucking sector evolve in several ways – by improving efficiency through accurate deployment of truck resources, shortening transit times, ensuring safety of the goods and providing complete visibility into the whereabouts of the goods as they move. Key trends include Internet of Things (IoT), Big Data, cloud computing, blockchain and automation. For example, IoT is instrumental in connecting all components of a supply chain and communicating critical data in a timely manner.
20 CELERITY July - August 2019
Data analytics helps in efficient planning and forecasting, while blockchain can help bring reliability and security to the transport of temperature-sensitive cargo. Automation can help in speeding up the entire supply chain process, eliminating repetitive or hazardous work for humans and freeing them up for more complex tasks. True to its value of customer-centricity, DHL SmarTrucking leverages relevant technological trends, including IoT, Big Data and more, to provide a seamless and exceptional experience to its customers. We provide businesses with complete visibility into the transport process, offering better-than-industry-standards delivery and transit times, and continuous real-time shipment tracking.
COVER STORY Siddaraju H.V., Co-Founder & CEO, Caliper Business Solutions Pvt. Ltd. There are three megatrends, which will shape the future of supply chain in the country. Firstly, companies will move towards digitization and integrate endto-end transaction on a single thread.
Secondly, they would build IoT, Big Data analytics, ML & AI Capabilities. Thirdly, it’s all about implementing state-of-the-art interactive ‘Supply Chain Control Tower’ to balance the flow across the chain.
Rahul Gupta, Vice President – Procurement & Planning, Amway India There are several megatrends, which have a substantial influence on supply chain management. There is a continuing growth of rural areas worldwide with wealth shifting into regions that have not been served before. Online trend of the last years has led to improved service expectations. Some of the trends that the industry needs to follow are:
trends and knowing the right time to take risks and seize the opportunities. At Amway, our commodity forecasting process helps us to track the real-time scenarios with adequate extrapolation in the future for cognitive decision making.
Supplier partnership & continuous improvement: Strong relationship with a few strategic partners will be more likely to be an extension of the company’s manufacturing or product design and development processes. Virtual Supplier Room will serve as a virtual central gathering place for collaboration and information sharing.
Cognitive Analytics: The objective is to train the technology to mimic and replace human decisions leveraging the learnings from historical data and corresponding human decisions. Machine learning and artificial intelligence fall into this category of analytics. At Amway, we foresee that the future area of development will focus more on cognitive analytics and will provide considerable benefits to the business by reducing human touch points while keeping decisions as rational and close to human experiences.
Big Data: Big data will help in driving predictive analysis and forecasting. Procurement decisions will be taken based on data, whereas intelligent forecasting will be based on market
Connected Objects: Procurement and supply chain could benefit significantly from IOT-enabled devices to manage monitoring and re-ordering of stock. This can be achieved by leveraging available data instead of instinctive decisions for assembly line replenishment, distribution planning, etc.
Manjunath SR, Senior Director, Industrial Supply Chain Consulting, JLL India Following trends are evolving to meet customer expectations: Tech savvy customers: Millennials and Gen-Z consumers have radically higher expectations. The first generation to grow up with the Internet and cellular technology, these tech-savvy customers make full use of mobile and social media platforms to research, buy and critique the products they purchase. These new generations also expect greater control to personalize the goods and services they order, and to see those products delivered within diminishing timeframes. Micro-logistics: These networks support retailers Omnichannel efforts and involve setting up multiple, localized nodes (e.g., small regional distribution centres) that are geographically closer to various customer groups. This localization allows businesses to provide better service and customer experiences overall – via reduced costs and better inventory control.
supplychaintribe.com
Flexible strategies: Customers are increasingly demanding customized products. Because of this, manufacturers need to shift their focus from mass production to mass customization, without affecting the speed of delivery. Thus, manufacturing will become flexible and employ modern-day technologies like robotics, 3D printing and cognitive computing that includes self-learning systems such as pattern recognition, data mining and language processing. Robotics: Robotics will play an increasingly substantial role within manufacturing facilities in the near future. The usability and capabilities of robots and other autonomous guided vehicles continues to improve. Due to their increased and improved usability, approximately 80% of manufacturers in the next couple of years will reconsider if they want to use robots and automation technologies in their warehouses and manufacturing facilities. Being proactive is imperative to corporate survival and profitability as markets, technology and supply chains shift and how they adapt to each of these specific scenarios is interesting to watch. Smart companies are taking a holistic, total Value Optimization approach to assessing their end-toend supply chain.
21
COVER STORY ASR Prasad, VP and Head Centre of Excellence, Future Supply Chain Solutions Digitization and automation will offer significant opportunities. Digitization is a vast area and as processes move from offline to online, the ability to monitor and course correct would be a critical opportunity. Workflow digitization has tremendous untapped benefits as of now. Also, automation opportunities are triggered where volumes are significant. The trends to watch closely are AI and Machine Learning,
Blockchain, IoT and Big Data. Supply chain solutions will start integrating them as the processing speed increases and the data becomes uber fast. This will result in control towers, which are likely to help drive faster assimilation of data to give decision making templates for organizations to consume and act upon.
Saurabh Daga, Director, Business Development, o9 We do not anticipate much difference between an autonomous car and autonomous supply chain which will define the future of integrated planning and operations for large organizations. Digital Technologies are replacing old traditional legacy systems, leading companies are embracing these innovations while others are waiting and watching. The speed of change
is so fast that if companies do not start thinking and experimenting, they run a huge risk of being disrupted. Moreover, the user experience, finger-tip visibility, and AI powered apps that we are experiencing in our consumer lives is driving a lot of change how companies offer systems to the next generation workforce. Hence, the next gen supply chain would be digital – connected and a platform rather than modular systems running across various technologies and databases.
Bharat Ramanath, Director & Industry Principal, ShipX Collaborative platforms that provide a single-source of truth to all players in the supply-chain, are here to stay. Increasingly, a design-cornerstone for welldesigned platforms is also to build in enough execution capability to reduce the latency between actual on-field operations and the systemic data capture of the same. Thus, UX to encourage process-adoption by field staff,
is becoming important. (Design principles from self-install and self-learn B2C Apps are starting to make an appearance in B2B Apps also) ‘Learnability’ of systems is a trend that will see some strong use-cases emerge. (Here, we are adopting a cautious approach. Just because of the hype around AI, ML etc., we anticipate that there will be several sub-optimal use cases implemented, but we understand the innate potential of these technologies and we expect a few ‘robust’ solutions around these, to see the light of day.)
Devadas Nair, Chief Supply Chain Officer, Shoppers Stop Supply chain is going to witness many defining trends in the near future. Moreover, manufacturing, distribution, sourcing of materials, invoicing and returns have all been significantly impacted by the increased integration of a global customer and supplier base. Additionally, over a period of time, companies have realized that there can be significant economic benefits drawn from outsourcing all or part of their supply chain operation, but
22 CELERITY July - August 2019
only after the right systems, processes or organizational management structure are in place to mitigate the risk. Lastly, I believe there must be collaboration between stakeholders in the extended supply chain. The level of collaboration goes beyond linking information systems to fully integrating business processes and organization structures across companies that comprise the full value chain. The ultimate goal of collaboration should be to increase visibility throughout the value chain in an effort to make better management decisions and thereby decrease value chain costs.
ADVERTORIAL
Unlocking Value of
Digital Transformation Digital Transformation requires the whole organization to be in sync for bringing in change and in doing so, they must assess & address the inefficiencies in the system to drive ultimate benefits of digital transformation, asserts Amar Kalale, Founder & Director, ShipX.
I
N the context of supply chain execution, many organizations are starting to look inwards and also outwards in an attempt to understand what ‘Digital Transformation’ means to them. Applying a broad-brush-stroke definition, ‘Transformation’ is a change from the present state, and the need for
it becomes apparent very quickly that the choice of technology platforms is only 1/3rd of the story. The other 2/3rd is often the harder part – the associated Processes that need to be redrawn and implemented; and the People who need to be (re)trained to strictly adhere to these new processes!
basic KPIs such as on-time vehicle placement, on-time delivery, percentage of DEPS, etc.? How do you share this and further, do you use this data to differentiate yourself from competition, renegotiate contract rates, etc.? What is your revenue and your cost
this change arises only when one accepts that there are several inefficiencies inherent in the present state. As an Enterprise, when you attempt to seek areas where efficiencies can be enhanced, you should look at these aspects: Are departments within your Enterprise speaking to each other while referencing a common data store? (Single source of truth within the Enterprise) Are departmental metrics aligned towards meeting larger organizational objectives? (Departments not working at cross-purposes) Are people logging into multiple systems and duplicating data entry or manually copying data from multiple systems into an xls or other systems in order to build internal Business Intelligence? Are people in different departments spending inordinate amounts of time on phone-calls, email-trails, WhatsApp etc., in order to track shipments, handle irate customers, respond to RFQs, etc.? How do you share data with multiple vendors involved in logistics execution and how do they communicate with you? Is your Commercial department forever in conflict with vendors and suppliers trying to resolve disputed bills and invoices?
As an organization considering such a Digital Transformation, several ‘hurdles’ now seem to come into focus: Have all your internal stakeholders feel the need for such a transformation? Are these teams willing to change their processes as a part of this initiative? How evolved and robust is your change management mechanism? Some of the logistics processes are managed by your vendors. How do you involve them in your digital transformation initiative? What are their incentives? Can these be aligned with yours? Do you need new tech platforms, or can current software and systems be tweaked to support this transformation initiative? How do you unlock the value from this initiative? What is the ROI in this transformation? Can you make a business case for this transformation? Clearly, before you get started, you must build consensus internally and Transformations have to be driven from the top with the complete buy-in of all the departments of the organization.
for every transport order you fulfill? What are the services / lanes that you make money in and where do you lose money? Can you slice your revenues, margins, cash flows, etc., by customer and have visibility to these and other simple financial markers as a realtime dashboard? If you are a Shipper of goods and you procure Logistics Services, Do you have a convenient mechanism to empanel your service providers like a digital reverse auction platform? Do you have information to rate your vendors based on the services they are offering? Do you have systems that streamline your vehicle procurement & placement process and manage processes like Load tendering? What is the logistics cost for each product that you sell? Can your customers see where their consignments are without needing to call you?
Is it for you? As Enterprises embark on this journey,
supplychaintribe.com
So, do you need a ‘Digital Transformation’? Here’s a very small yet simple quiz to help get you thinking! If you are a Logistics Service Provider, Do you have accurate information that you regularly share with your customers about some of the very
So, do you think you need Digital Transformation? We firmly believe that given the current state of Transportation and Logistics, Digital transformation is not an option. It is an imperative to remain competitive in business. If you have not already started this initiative, it is time to begin the journey!
23
FEATURE
For a Smarter Tomorrow Embodying the elegance and pursuit of perfection inherent in Japanese design philosophy, Panasonic consumer durables in India has made this possible by its exceptionally state-of-the-art manufacturing facility at Jhajjar, Haryana, which has just been upping its game of manufacturing sophistication. The recent visit to this facility at Jhajjar Model Economic Township (MET), Haryana, unraveled many facets of its value chain be it manufacturing, logistics or the overall supply chain…
T
HE progressive shift in the consumer demand for upgraded technologies, energy-efficiency and health & lifestyle value offerings have paved way for the stupendous growth of consumer durables products in the country. Coupled with this, the improvement in consumers’ discretionary income and rapid electrification have augured well for the massive growth figures of the industry and that’s what prompted Panasonic India to set up a state-ofthe-art facility in Jhajjar, Haryana. Started in 2012, Panasonic’s mega manufacturing factory produces air conditioners, refrigerators, welding machines and washing machines. The Japanese multinational electronics corporation has completed 100 years globally and in India offers consumer and B2B based products. Adopting the ‘Make in India’ vision, the company ensures that 80 – 100% of each product sold by it in the country, is produced in India. Set up with an investment of Rs115 crore for Refrigerators, Rs300 crore for Air conditioners and 100 crore for Washing Machines, the factory is spread across 76 acres and has a capacity of manufacturing 10,00,000 sets of ACs, 4,00,000 sets of washing machines, 25,000 sets of welding and cutting machines and 5,00,000 sets of Refrigerators. The USP of the plant lies in the fact that it operates on the
24 CELERITY July - August 2019
premise of 0% scrap, which means that the company does not produce any waste during manufacturing of various products. All kind of scrap is reused for producing some other component. Throwing light on the same, Saurabh Rawat, Factory Head, Technopark, Panasonic, Jhajjar, said, “This is one of the biggest large appliances facility in India. We produce refrigerators, air conditioners and washing machines here. Our television manufacturing unit is situated in Noida, UP, then there are other plants which are located in the middle and south of India. We are producing top-load washing machines, split air conditioners (1 ton to 2 ton) and Refrigerators (270 to 345 litres),” he said.
The plant exports Panasonic products to countries like South Asia – Bangladesh, Sri Lanka, Maldives, Nepal; Middle East – UAE, Oman, Qatar, Bahrain, Kuwait, Iraq; Africa – Nigeria, Ghana and Ivory Coast. Rawat explained that the large appliances segment has massive scope in India and Panasonic is working on new technologies every year. For Panasonic, India is the fastest growing market globally and the country is among its high priority markets. Besides, Panasonic Appliances is also pushing India to be a research & development (R&D) hub to serve its other global markets. R&D is the backbone of any manufacturing unit. Globally Panaosnic has many big R&D centres. For example, for air-
FEATURE conditioners, they have R&D centres in Malaysia, China and Japan. These R&D centres help in the areas like product customization based on the local market feedback, value engineering and innovation. The R&D centre in India has more than 50 people who work with the major centres, and together they keep on developing the products based on Indian requirement.
State-of-the-art innovation center Panasonic India currently exports to 16 countries and is aggressively foraying into local manufacturing and development of appliances. Transforming its business model to offer disruptive technologies in the field of IoT, Mobility, Artificial Intelligence (AI) etc., Panasonic India developed its first India Innovation Centre (IIC) in Bengaluru. The platform brings the best minds from the country together to develop transformative solutions on Panasonic’s five key focus areas – Connected/Community, Mobility, Energy, Industrial and Finance Solutions. The CoE is focused on open Innovation in the Consumer Electronic space and leverages the technology already available and create geography centric USPs to develop innovative solutions.
Locational advantages When asked about the strategic positioning of the factory, Rawat said, “From the logistics standpoint, we are strategically located in Jhajjar, Haryana, which connects the facility to the entire length and breadth of the country. As ours is a global organization, it gives us tremendous advantages in terms of sourcing components from our global
M. Ravindra, Head Logistics, Panasonic India Omni-channel retailing is fundamentally a fully-integrated approach to commerce that provides shoppers a unified experience across online and offline channels to extend a seamless shopping experience. “We are fully geared up to meeting the stringent service levels of the online retail sector. Logistics ensures that each order is executed at FC / DC and delivered within a specified time period to the online retailer. Many of these Omni-channel retailers need customization in terms of labelling as well as packaging, which is done at the warehouse and dispatched according to the delivery schedule requested by the retailer. suppliers. With the government’s emphasis on the development of supporting infrastructure such as
pace in this FY. We recommend the authorities to bring large appliances under 12% slab, keeping in mind the
highways and dry ports is further offering a fillip to the industry. With the positive changes taking shape, I am quite confident that sitting in the North, I will be able to cater to our target audience in the Southern part of the country at competitive price points. Post-GST, things have just worked in our favor by reducing significant lead times. “From a manufacturer's point of view, GST has helped to bring-in efficiency for us. While from a products’ perspective, all the large consumer appliances were under 28% GST slab at the time when it was implemented. It has impacted the market for last two years, but last year Refrigerators and Washing Machines were brought under 18% GST slab, which helped get some pace in the overall demand in the H2FY19 and will likely to bring more
need and energy efficiency the new technology brings-in,” Rawat said. M. Ravindra, Head Logistics, Panasonic India Pvt Ltd, adds, “Jhajjar has immense locational advantage as it is very near to NH -48. It is characterized by its geographical confluence with economic corridors (DMIC, AKIC, Eastern peripheral corridor), the eastern and the western freight corridors and several industrial corridors pass through the state. It has a well-connected quality network and transport infrastructure which offers multi-modal logistics infrastructure. It also has many ICD in close proximity and hence offers multiple options for the import of raw material and for the export of our products.
Managing quality & supply chain For Panasonic, quality is a strict no-compromise proposition. Rawat highlights, “We have a stringent supplier selection process which is done in due cognizance with the global support team. Our global team performs due diligence in terms of operational processes, parts quality, labor laws, financial muscle, etc., before finalizing a supplier. Once the supplier selection has happened, we make sure that they are equally involved in every decision making as far as supply chain in concerned so that they feel that they own the process rather than simply delegating the task. They are a true partner in our progress, so once they
supplychaintribe.com
25
FEATURE Mr. Saurabh Rawat, Jhajjar Factory Head, Panasonic India We have a stringent supplier selection process which is done in due cognizance with the global support team. Our global team performs due diligence in terms of operational processes, parts quality, labor laws, financial muscle, etc., before finalizing a particular supplier. Once the supplier selection has happened, we make sure that they are equally involved in each and every decision making as far as supply chain in concerned so that they feel that they own the process rather than simply delegating the task. They are a true partner in our progress, so once they are on-boarded, we make sure they are imparted with the best of knowledge and technology from our global team to deliver the desired result. We ask them to visit our overseas factories to benchmark best practices. This not only helps us gain the best quality products, but also helps us improvise on the standard operating processes.
are on-boarded, we make sure they are imparted with the best of knowledge and technology from our global team to deliver the desired result. We ask them to visit our overseas factories to benchmark best practices. This not only
The company globally establishes partnerships with suppliers to respond to production activities on a global scale and works to create the functions and values our customers demand based on relationships of mutual
adhered by the warehouse team. “We have an internal system in place to salespeople to manufacturing SCM, which is completely integrated into our value chain. We keep on meeting customers and take surveys on the
helps us gain the best quality products, but also helps us improvise on the standard operating processes.” Deliberating on the supply chain complexities, Ravindra says, “Logistical requirements for Panasonic are complex. Since there are different factories spread across multiple locations where we manufacture our products, it becomes extremely crucial that we ensure that products that are currently required for sales are available within the same month of purchase. The products are also imported from South East Asia, Japan and China, and are brought in and cleared at multiple ports. Here is where our logistics team ensures that the products are available for sale across different branches within a specified time limit.” He adds, “Our products are sold all over the country, which also includes fragile items as well. So, it is important for us to utilize the best supply chain practices. It is not a choice; it is a requirement for us. Some of the practices we follow are: Warehousing Order Execution Metric – KPI Customer Order Delivery On time in full accuracy – KPI Operational Efficiency Inventory Turns Prompt Reverse logistics
trust and through diligent studies and cooperation. Complying with laws and regulations, social norms, and corporate ethics, the Company promotes procurement activities together with suppliers that fulfill their social responsibilities, such as human rights, labor, safety and health, global environmental conservation, information security. In order to achieve product values expected by customers, the Company serves as the contact point for suppliers with respect to information, such as the market trends of materials and goods, new technologies, new materials, and new processes, and works to ensure and maintain the quality of purchased goods, realize competitive prices, and respond to market changes. With respect to logistics, each dealer has specific requirements in terms of delivery turnaround time, which is
changing consumer preferences and their behavior. Our strategy is based on our consumer and not on the competition,” explains Rawat. Ravindra remarks, “As an organization, we believe that sending regular communication with business updates and questionnaires or surveys is the best way to maintain transparency and trust with the dealers. It is important to make sure that we are giving our dealers the most effective tools to help sell and support the products. The relationship between a manufacturer and their dealers goes beyond the contract. The manufacturer relies on the dealer to take responsibility for their products, and the dealer depends on the manufacturer to create quality products that help to keep the trust of the customers intact. The constant improvement in communication with the dealer network
Clear SOPs for partners Panasonic has summarized its core thinking on procurement in a 3-item set of Procurement Policy.
26 CELERITY July - August 2019
FEATURE helps improve relationships across the stakeholder value chain.”
Ensuring critical products reach the last mile in the safest way It is essentially all about the management of the flow of things between the place of origin and place of delivery. Talking about the infrastructure loopholes in the country, Rawat comments, “Indian road conditions are extremely poor. Added to that, the transportation staff doesn’t have the know-how of handling such highquality expensive consumer electronic goods. We have developed in-house systems to ensure utmost safety until it reaches the end consumers. We design our product development cycle based on artificially generated scenarios that might hamper product safety while handling. Once the product passes the test, we work on the final standard of the packaging. We perform physical test such as sending our final product on rough terrains in rough handling conditions.” “We have an excellent network of FC/DC spread across the length and breadth of the country. Through these, we can ensure that the delivery of fragile products to the last mile is done in the most efficient and safest conditions and without compromising on the service levels,” remarks Ravindra.
Omni-channel retailing and the company’s readiness Omni-channel retailing is fundamentally a fully integrated approach to commerce that provides shoppers a unified experience across online and offline channels to extend a seamless shopping experience. “We are fully geared up to meeting the stringent service levels of the online retail sector. Logistics ensures that each order is executed at FC /DC and delivered within a specified
Set up with an investment of Rs115 crore for Refrigerators, Rs300 crore for Air conditioners and 100 crore for Washing Machines, the Panasonic factory at Jhajjar Model Economic Township (MET) is spread across 76 acres and has a capacity of manufacturing 10,00,000 sets of ACs, 4,00,000 sets of washing machines, 25,000 sets of welding and cutting machines and 5,00,000 sets of Refrigerators. The USP of the plant lies in the fact that it operates on the premise of 0% scrap, which means that the company does not produce any waste during manufacturing of various products. All kind of scrap is reused for producing some other component. time period to the online retailer. Many of these Omni-channel retailers need customization in terms of labelling as well as packaging, which is done at the warehouse and dispatched according to the delivery schedule requested by the
milestones, it has a clear strategy in place to grab a major consumer durables market share in India. As Rawat says, “Large appliances have a huge scope of expansion in India and we are working on new technologies and
retailer,” asserts Ravindra.
advanced models every year. We intend to increase the plant’s manufacturing capacity and exports in future. There is a scope of scalability within the plant, for the next two to three years, the unit will be working on the same model. After that, we can accommodate certain B2C or B2B products too.” “We are at par with the rest of the world and even hold a significant position in the global scheme of things. We also have a state-of-the-art R&D center. In tune with changing times, we are aggressively launching a newer line of products with enhanced features to serve our consumers’ fast changing requirements. I am quite bullish about the manufacturing growth in India. The government has also been supportive of newer investments as well as offering necessary fillip to support growth,” he adds. With an exciting additional responsibility of developing and heading business operations in South Asia, Middle East and Africa, which are emerging markets for Panasonic, the brand will continue with its philosophy of empowering the local management to bring the best of products & services for its tech savvy consumers and focus on India as well as new growth areas. With the tagline, ‘A Better Life, A Better World’, Panasonic is fast becoming consumers’ favored brand with its sophisticated and life enhancing features making their lives better and ultimately leading to a better world.
After sales service and reverse logistics After sales is one of the most critical aspects in the entire product cycle. “We ensure that not only the products are manufactured, delivered but also an end-to-end solution is provided with respect to achieving the highest level of customer satisfaction. We are constantly improving the after sales service and innovating to serve customers efficiently,” says Ravindra. Reverse supply chain is a challenge considering the vast geography of India. Moreover, with companies targeting Tier II & III cities, it is a high cost proposition to collect back a single unit from such locations. This still remains a very unorganized segment where we do not have any 3PL service provider offering services at an economical freight with a short TAT.”
Mammoth task at hand While the company has achieved many
Global supply chain practices being adopted in India The best-run organizations are those who have fully developed supply chain function, extending from their customers’ customers to their suppliers’ suppliers, and all the points in between. We at Panasonic India follow the global supply chain practices namely: Global Freight Negotiation for Imports Control Tower for ex-Factory distribution Risk Mitigation with appropriate process & control. Centralized contract management
supplychaintribe.com
27
FOCUS
Efficacy of CYBER SECURITY in Supply Chain
28 CELERITY July - August 2019
FOCUS In part II of the series of articles on Cyber Security, Dharmesh B. Rathod, Independent IT & Cyber Security Strategist, Architect & Adviser, circles around Cyber Security within the Supply Chain domain and gradually gains a comprehensive big picture through various impending aspects such as the risk around the partner ecosystems, how the industry had seen cyberattacks & its impact in supply chain. The article also aims to make readers understand the business impacts over organizations related to these cyberattacks and the offers ways to mitigate these cyber risks in supply chain. As the author professes, right thought of plugging Cyber Security treatment right from day 1 will ensure that the Supply Chain ecosystem executes functionally in a secured manner end to end.
“Digitalization of businesses” globally has been evidently growing stronger
logistics partners, go to market partners and of course project and operations
year on year since I presume it all started three decades ago. While the quantum and complexity may differ from time to time, the spread has increased from one secluded corner of the organization to its various partners that traverse across the supply chain. The West may have been the early adopter, however since the past decade, the “BRICS” and similar regimes have spearheaded digitalization much quicker. This apparently has also resulted into an amalgamated world of more integrated cross-networks of several enterprises and their partners. And eventually since Digitalization primarily has enforced acceptance of Information Technology and its various services, we now find almost every business far more and largely, I must say, being completely driven by IT. With all the goodies that digitalization brings to any organization through IT initiatives, we also inherit its aftermath if IT is not secured. Effectively, Cyber Security finds itself to be a vital and critical component when IT drives digitalization for all of these business and their partners, thus end to end what we call across the supply chain. Every company/partners/ service provider, etc., contribute to Cyber Security in the supply chain, the magnitude of level of compliances and adequacy may and do differ across them though. An organization say for e.g. manufacturing company deals with its suppliers of raw materials, transport and
partners sum up to the supply chain of the manufacturing product lifecycle. All of these partners involved may not necessarily have equally healthy Cyber Security posture of themselves as well as the way they should be protecting their clients/customers.
supplychaintribe.com
Supply chain ecosystem at large with Cyber risks & threats As emphasized earlier, most of the organization integrates itself with varied partners and any loose end related to Cyber Security within the end to end chain may result into a cascading effect and impact across. I have come across several Cyber Security incidents that have erupted in the past decade having no relation to the parent organization, however some weak links within the partner ecosystem resulted into a cybersecurity incident causing substantial damage to the organization. Target breach was a result of lax security at an HVAC vendor, causing one of the major cyber security exploits in the history of cyber security. The attackers infiltrated the 3rd party access of HAVC systems and it eventually resulted into a fraud that impacted the credit cards and debit cards of 40 million customers. Equifax blamed vulnerable 3rd party application within its IT landscape for the giant breach. The attackers exploited the vulnerability in a web application and accessed personal
information of up to 143 million individuals, including Social Security numbers, personal names and addresses, and in some cases driver’s license numbers. Ukraine Power plant hack that happened in December 2015 was considered to be one of the 1st known successful cyberattacks on a critical infrastructure (power plant). Though the end impact brought the Power Plant to its knees, the entire kill chain was its partner was also involved, infact it all started with one of its partners wherein the exploit worm was infected through a compromised USB and it propagated further to result into the effect it was meant for. Recently adware named “Superfish” was found to be installed in Lenovo notebooks. Since by default installed, it was “Trusted” and thus Superfish software would tend to install a self-signed root HTTPS certificate that can intercept encrypted traffic for every website a user visits. An organization in the pharmaceutical sector was attacked by a Cyber Espionage group called Dragonfly by setting up trojans in legitimate software. Eventually the Dragonfly group replaced legitimate files with malicious files in the software. This malicious software in result, when downloaded from the supplier’s website, provided remote access functionalities that could be used to take complete control over the system where the software was installed, or it could have been used
29
FOCUS
Many suppliers/contractors would not want to readily adopt regulations joining the supply chain, as this could hinder the process and deter potential partners and/or leads. The best way is to plug expectations right from the design & contractual phase. Necessary binding has to exist from day-1 between both sides and there are several standards to ensure uniformity of Cyber Security safe guards across both ends. It’s important for the organization to first build the mindset for protecting supply chain from Cyber threats, and this mindset has to be at the same level of understanding among all the partners/suppliers. to make the remote system act like a bot. Such a situation directly impacted the organization’s brand value, revenue loss & for certain legal non-compliances. Shylock banking Trojans is another great example. Attackers used the website builders to compromise legitimate websites by redirecting their requests to a malicious domain. Attackers targeted the website builder used by many companies, thereby infecting at a large magnitude. Most of the governments across the world, though they have their units like Pentagon, NSA etc., none I presume would be functional without their hired contractors. Likewise, within the manufacturing industry segment, it’s a well elongated series of partners that form the end to end supply chain. In my past experiences, through my role of CISO, I had managed business houses that spread across multiple lines of businesses such as oil & gas refinery, steel industry, ports & logistics, coal mining, EPC and agro business. Each
30 CELERITY July - August 2019
of these businesses have exposure to several partner ecosystems and thus have direct exposure to their (partner’s) weaknesses & strengths.
Lacunae of Cyber security in Supply chain Let’s see various Cyber Security risks we encounter to when dealing multiple partner ecosystem, though not limited to below list: Compromised hardware/ infrastructure – Any contaminated IT infrastructure/application poses direct threat of propagating Cyber Security threats. During WannaCry outbreak, many organizations were infected due to compromised partner IT systems. Poorly managed IT Risk posture: Not all partners would be mature enough to maintain and sustain a minimal risk based Cyber Security posture of their IT landscape. Lack of security policies resulting into noncompliance towards Cyber Security best practices and thereby escalating IT risk situations beyond controls
would not be a healthy situation to deal with when interfacing with any partner having such fate of their IT landscape. Vulnerable applications: We deal with heaps and loads of application integration and day by day the ecosystem gets more and more complex. With the invention of Cloud ecosystems since past few years, the realization and turnaround time is getting minimized, thereby leading to a high level of acceptability. In such exciting times, application developers have been observed to be the least concerned about the cyber security safe guards/ control & measures by and large. This results into a direct infiltration of vulnerable partner applications within the organization and have, at most of the times, no control over the aftermath. Compliance shortcomings: Any deficits of adhering to compliances by the partner will have direct effect to the organization that utilized such a partner’s services. Below are a few statistics from NIST (as shared during RSA 2016) that explains Cyber Security’s impact onto Supply Chain: 80% of all information breaches originate in the supply chain 45% of all cyber breaches were attributed to past partners 72% of companies do not have full visibility into their supply chains 59% of companies do not have a process for assessing cybersecurity of their party providers with which they share data or networks 40% of attack campaigns targeted manufacturing and service sectors.
FOCUS These attacks are getting more prevalent and dangerous, according to the latest quarterly Global incident response threat report from cyber security firm Carbon Black. The industries most targeted by island hopping, the report said, are financial (47%), manufacturing (42%) and retail (32%). The above statistics are alarming and have been escalating year by year, more because of prevalent increase in registering the incidents/outbreaks. What finally impacts the organization that may fall prey to any of the Cyber Security incidents in Supply Chain: May face direct negative impact to the brand value – Target, Equifax all have gone through this ordeal. Loss of intellectual property as a resultant: Pharmaceutical companies are the ones getting largely affected, resulting in the business being brought to a standstill most of the time. May land into legal turmoil and obligations: With PII data being taken up much more seriously in the western world, many threats affected organization have faced legal litigations against the breaches that they have been faced with. Impacting revenues: Cyber security incidents and outbreaks have also caused loss of operating revenues as a result of loss of availability of the IT systems post the incident.
How can we mitigate cyberattacks in supply chain? It appears to be a scary perspective so far, however we have seen reasonable maturity in terms of dealing with cyberattacks in supply chain through a comprehensive risk management & various technical & process based mitigation controls & overall best suited approach and methodology. Several precautionary measures, wherein such dire situations can be avoided, have been adopted by organizations within the supply chain as day by day we get a clearer picture about the weak links and various mitigations around them. Reactive or proactive, one must embed “Defense by Depth”, i.e., induce Cyber Security best practices right from the embryonic states of any IT initiative & projects. Listed below are a few vital questions that should be pondered upon by the organization when dealing with
supplychaintribe.com
preparatory position for Cyber Security threats in the supply chain: How well do we know the IT landscape of the partners/suppliers? What are the interfaces that are being interconnected with them? What level of technical details are being known and adjudged by both sides? Level of agreement towards the data flow across both ends? How would partners handle the data in terms of security safe guards? Gap analysis, assessments of IT systems, processes around them and their risk posture Once integrated, is there a healthy engagement? How should the assurance methodology be by the partners/ suppliers? What level of compliance/
safe guards across both ends. ISO27001 has a very detailed 3rd party related safe guard/controls guidelines. Similarly, NIST also has such in a very elaborated fashion. It’s important for the organization to first build the mindset for protecting supply chain from Cyber threats, and this mindset has to be at the same level of understanding among all the partners/suppliers. With the advent of Cloud (Public, Private, Hybrid) and its related models like IaaS, PaaS & SaaS, the integrations, these days, have been much swifter and without major complexities like it has been during their legacy. As the boundaries expand, with no restrictions on geographies, organizations integrated more and more, outsource non-vital components to partners, and thus end up into a supply chain environment that fuels their business goals and
certifications should prevail that can assure expected level of security controls and that should result into acceptable Cyber Security risk posture of the partners in the supply chain? What are the technical capabilities and process level controls that the partners have to achieve a reasonable secured technical integration with the partners? Monitoring & surveillance should ensure a steady and controlled sustenance of the IT integration – how well the organization and the partners make this acceptable? Cyber Security risk management and related security controls have, now a days, seen considerable amount of maturity and there are various niche Cyber Security firms that are proficient in this domain. An organization can avail such assistance from such consulting firms and make sure no stone is left unturned when dealing with Cyber Security in supply chain.
provides agility as the business expands. Evidently, a right thought of plugging Cyber Security treatment right from day 1 will ensure that the Supply Chain ecosystem executes functionally in a secured manner end to end. My personal opinion to organizations is to have a thorough and deep knowledge and the nature of integration one is looking at with the partners / suppliers and have a detailed risk assessment done in the prior planning & design stage. This will yield a clear picture and road map upon the risks that have to be mitigated and thus, as a result, prevail controls and secure third party integrations.
Taking partners along the process Many suppliers/contractors would not want to readily adopt regulations joining the supply chain, as this could hinder the process and deter potential partners and/or leads. The best way is to plug expectations right from the design & contractual phase. Necessary binding has to exist from day-1 between both sides and there are several standards to ensure uniformity of Cyber Security
Dharmesh is a Senior IT & Cyber Security leader having 22+ years of experience in the Information Technology & Cyber Security domain. He has served as Group CISO for India’s top 2 major conglomerates with diversified industry segment experience in ports & logistics, power plants, renewable energy business, coal & mining, steel manufacturing, oil & gas refineries, CGD business as well as country’s leading Demat Depository. He possesses wide experience across niche domains such as cyber security architecture, regulatory compliance, IT & OT/ICS/DCS/IOT/Critical infrastructure, artificial intelligence/machine learning / IOT cyber security, strategic partnerships, information security awareness campaign, risk assessment & management, infrastructure/applications & security architecture & integration.
31
INTERVIEW
Walk’ing The Scm Talk Walking has been the secret sauce in Skechers’ impressive growth in India, since the company’s launch in 2012. Though Skechers has been a relatively recent entrant in the Indian footwear story but in just six years of being in India, it has become a brand worth Rs.3.4-billion. India makes for 1.2% of its global revenue and the company is hungry for more. During an exclusive interview with Swaminathan K, Head Supply Chain, Skechers South Asia Pvt Ltd, he asserts, “We want to be a product driven brand rather than a discount driven brand.”
O
NCE upon a time, a shoe was just a shoe. Now, the consumer is inundated with choicest of varieties based on the usage, age and type of feet. Today ‘performance’ and ‘lifestyle’ have become the key to reach out to the more-conscious buyer and that’s where Skechers has made its mark since the time it stepped into the Indian territory. Taking a leaf out of its global strategy template — a distinct positioning around comfort, a range for all age groups and a wide collection of styles in many color combinations across gender, Skechers has been outperforming its counterparts in gaining market share. Operating under the license agreement with the Future Group from 2012 till the end of 2018, Skechers U.S.A., Inc., a global leader in the footwear industry, in January 2019, purchased the minority share of its joint venture in India, transitioning the business to a new wholly-owned subsidiary of Skechers U.S.A, Inc. The company believes that combining the experienced team and Skechers’ proven sales and marketing capabilities will allow it to grow the brand and its presence in a faster, more efficient manner, ultimately meeting its fullest potential. Skechers has a substantial existing retail network of
32 CELERITY July - August 2019
over 200 stores, a strong wholesale business and a recently launched e-commerce site that can be built upon. Testifying the growing strength of the company, Rahul Vira, CEO, Skechers South Asia Pvt Ltd, stated, “Skechers in India has achieved great success over the past few years. As we look into the future, we are delighted to be a wholly-owned subsidiary of Skechers. This development will enable us to amplify our growth plans, accelerate the expansion of our operations and build a stronger network to further gain market share in India.” This strengthening presence of Skechers inspired us to track their supply chain. To understand the nuances, we got a rather rare opportunity to interact with one of the most dynamic supply chain professionals – Swaminathan K, SCM Head, Skechers, at their swanky headquarter in Mumbai. Here’s the excerpt…
How do you see the sports category growing in India? During 1990s, we would hardly see people having the habit of walking or running, leave aside buying a pair of running shoes. Rising sports activity has significantly increased the sportswear market size globally. The surge in health and fitness also drove the growth of
the demand. Consumers are wearing sports-inspired footwear in their daily lives. These trends propel the growth of the footwear market globally. According to market research of Strategy, the footwear market is projected to reach $371.8 billion in 2020. Europe would become the largest market, and Asia Pacific would be the fastest growing market. There is an increase in demand for high performance footwear, and this is what made brand Skechers enter India. With the changing lifestyle, the trend has caught up in India. It is more important for us to cater to such a growing demand. We realized that India loves to walk, so we revolutionized ‘WALKING’ in India by bringing in a range of walking shoes catering to the country’s need. Understanding the trend and consumer behavior, we launched slip-ons as a shoe category. People in India still have to remove shoes at
INTERVIEW certain places as a mark of respect and tying laces was proving to be a tedious activity. Comfort of our product along with the culture of our country has given rise to the most popular category of shoes for Skechers. It is an exciting space to be in. The shoes industry itself is growing at a CAGR of 15%. We are working on casual and lifestyle footwear and we will also grow accordingly. Our growth has been phenomenal so far. Visibility and awareness is something that we are chasing and working on with that objective to enhance our base.
What has been your USP? One of our biggest USPs is the range of products we have. We have shoes for all age groups, across gender and need. Our range comprises of wide variety of performance shoes across Running, Walking, training, Golf, followed by a vibrant range of lifestyle and fashion footwear and a prominent range of kid’s footwear. So, we decided to take our products to the consumer for them to experience, because we have seen that anyone who tries a pair of Skechers, buys a pair of Skechers.
We would like to understand from you the import equation that you have to manage with… Our imports mainly take place from far East – China and Vietnam, which are also the global manufacturing hubs for Skechers. Vietnam ports are not as advanced as Chinese ports because of which goods don’t come directly to the destination countries. They
supplychaintribe.com
We have shifted our port to JNPT, which is a well-organized port in the country and not much congestion has been witnessed over the past few years. To streamline goods transport, we always file an advance bill of entry and our goods get cleared from the port within 1-2 days. Initially we faced lot of clearance issues, but now things have simplified. Additionally, duty payment online has also helped us. are routed through Singapore, which greatly increases our lead times, which need to factor into during our demand mapping process. Despite all these complexities, we have kept lead time of 150 days. We have kept maximum 3 months inventory at our DCs. We have
from where we earlier used to move our products to the Indian market. But now we have shifted our port to JNPT, which is a well-organized port in the country and not much congestion has been witnessed over the past few years. To streamline goods transport,
a globally appointed forwarder who helps us push the product transition from Vietnam to India with least hassle. Additionally, in Far East, we also have an issue with the Chinese New Year where goods get stuck at the port level if we don’t do advance shipping. We do last minute cut-off sailing of the vessels that we have, and they hand it to the forwarder at the load port so that we are able to ship it out just in time before the festival starts. Earlier we used to have less than container load eating up cost and speed, now we started consolidating, which helped us in shifting from LCL to FCL. Coming to the domestic conditions, initially there were certain restrictions at the port level itself at Chennai port
we always file an advance bill of entry and our goods get cleared from the port within 1-2 days. Initially we faced lot of clearance issues, but now things have simplified. Additionally, duty payment online has also helped us. Now coming to our warehouse, we have a single DC in Bhiwandi, which distributes products pan-India. Though there is a challenge of single DC catering to the entire length and breadth of the country with lot of FTL and LTL challenges to cope up with, coupled with the import related challenges, we have never faced stockout situations at any of our stores. The idea here is not to keep on increasing the number of warehouses for the sake of satisfying customers’ requirements, we believe in increasing the speed and offering them the convenience of buying in-store, online or click and collect. We have even tied up with some of the best courier partners in the country who can reach out to every nook & corner of the country in the shortest timespan to make this happen. During a collection launch, there is a push of the new collection to enhance visibility and later, it’s all about replenishments and striking the demand supply match. Any disruption in the import chain will lead to front-end issue. Again, as I mentioned early, we have got only one DC, which makes things more complicated. The most difficult part is doing a scalability exercise. Planning scalability with this complexity is even tougher. We have mapped out our plan
33
INTERVIEW
One of the challenging parts has been the scalability. Growing at an exponential rate with the added complexity of only imports has been extremely challenging because there is a huge rush. But we love the pace of the business and are always ready to take on challenges and push the boundaries ahead. for the next 5 years and created space basis that mapping. We have done EDI with the warehouse at our ERP system, which has increased efficiency. Various permutations have been carried out with our courier partners based on their stronghold and service capability in a region. For the last 4 years, we have been growing exponentially. To handle
on the same has been a business strategy for us, since they follow discounting model. We have recently launched our website for India www. skechers.in, which will have almost all products available throughout retail channels of Skechers. We are working towards also implementing in-store devices to further enhance the shopping
such a growing volume, we have built a very skilled team at the inbound and outbound channels to streamline goods movement from the DC. Our partners have created a cross-functional team, which can handle both to reduce any inconvenience. It has been made scalable with a view to expand capacity. We are looking at the modular way of business to cater to huge demands we are witnessing over the past few years. One of the challenging parts has been the scalability. Growing at an exponential rate with the added complexity of only imports has been extremely challenging because there is a huge rush. But we love the pace of the business and are always ready to take on challenges and push the boundaries ahead.
experience.
How does the forecasting happen? The process is fairly pre-defined. We study our historical sales data to develop an estimate of the expected forecast of consumer demand, accounting for the projected range and retail growth of the company. The order lead time are as per industrial standards followed by right strategy and planning of the supply chain management every season.
What’s your perception and strategy on omni-channel retailing? We are present across major online portals in India. Not being aggressive
34 CELERITY July - August 2019
How do you select a 3PL? When we select a 3PL, it’s basis their prior experience in managing clients in the same space we are operate as this gives us an added advantage of knowing the complexities of handling the merchandise, have modularity in space and are well equipped to handle local manpower issues. Added boost can be if they can provide us with the courier service – warehousing & distribution put together.
You have experience in managing both the ends of the spectrum – be it 3PL or the user side. How do you weigh one over the other? I would like to state that grass is always greener on the other side. This experience has helped me tremendously in understanding the key challenges a 3PL faces in managing demand. Being on the other side, you understand what the customers want because you are actually the face of the brand and interact with them directly on a regular basis. Depending on that, you provide a solution, which is scalable. On the user side, you understand the constraints and their specialties in managing a particular task. How you can push service providers to get a job done. In the end, it’s always about collaboration between client and service provider. I also believe in outsourcing because we are in retail and this helps to strategize our core
QUICK FACTS A $4.64 billion global leader in the performance and lifestyle footwear industry, Skechers USA, Inc. designs, develops and markets more than 3,000 styles for men, women and children. Skechers' success stems from its employees, high-quality, varied product offering, diversified domestic and international distribution channels, and targeted multi-channel marketing. The Company offers two distinct footwear categories: a lifestyle division and performance footwear. Through licensing agreements, the company also offers branded apparel, accessories, eyewear, scrubs and more.
competence while giving the supply chain expertise to the experts. I believe it’s the logistics service providers’ duty to advise the user industry and not the other way around.
How complex is the category you manage to do business with? Well, the shoe industry is cyclical in nature. While consumer confidence is at a high encouraging sale with several new product lines coming out, footfalls in stores has been soft. International growth is strong. However, this poses its own set of risks such as increased border taxes and weak economic growth. In the shoe industry, climate and culture is another important consideration.
How do you plan to gear up for the competition? We want to see Skechers on maximum feet in India and presence at all potential markets. We plan on reaching the retail footprint of 500 stores across all potential cities, markets and Malls in India. K Swaminathan is currently heading Supply Chain for Skechers South Asia Pvt. Ltd. With over two decades in the industry, his expertise lies in warehousing, distribution, logistics solutioning, supply planning and network optimization. He has got extensive experience of working in varied geographies such as India, Gulf and Africa.
TOP OF THE CLASS TECHNOLOGY ENABLED WAREHOUSING SOLUTIONS With over a decade’s experience in offering integrated supply chain solutions, Future Supply Chain offers state-of-the-art, technology enabled distribution centres to optimize performance and efficiency for leading companies in India.
ON
I AT
Y NO LO G TE CH T
INTERNET OF THINGS (IoT)
B
PU
TTO -
LI
IN
GH
D
N OU
M TO U A
AU
TO M AT
IO
N
WAREHOUSE MANAGEMENT SYSTEM (WMS)
CR
N
D
OS
TB OU
S
LT
OU GY
TRANSPORT MANAGEMENT SYSTEM (TMS)
O OL
N
SO
RT AT
IO
T
N OV AB SY LE ST RA EM CK I M
VEHICLE TRACKING SYSTEM (VTS)
N
SY ST
EM
G
CE
I VO
CK
PI
H EC
BE
Future Supply Chain Solutions Limited solutions@futuresupplychains.com | www.futuresupplychains.com | 1800-419-3300