I believe that India has had a rebirth of sorts post the pandemic. Enough and more has been written about all the action that has happened in 2022, which lays the foundation of the next few years to come.
The G20 summit will hog India’s diplomatic calendar this year. The Summit will bring the spotlight on India and holds the key to India’s economic and geo-political policies in the global context.
As per World Economic Forum, India is expected to be world’s fastest growing economy in 2023, despite external challenges.
As per the Wheebox India Skills Report 2023, the Indian employable talent has grown from 46.2% to 50.3%. The survey indicates that candidates from Uttar Pradesh, Maharashtra and Delhi had the highest employability. The most preferred cities for work by graduates were Bangalore, Chennai and Delhi/NCR. The report also pointed out that India will be hiring most in the automotive, engineering and internet business.
The logistics sector too is going through a transformative change. With the policy framework launched in Sept 2022, the impact of these policy initiatives should start showing results this year. The sector will see greater use of technology leading to a decrease in the unorganised sector. All the progress will take place to make logistics faster, greener, and smarter. Our extensive Cover Story captures all the elements required for this.
This year is definitely promising for India. Let’s gear up for all the opportunities that the world and domestic economy is presenting to us.
Best wishes and Godspeed,
Charulata Bansal
Publisher
Charulata.bansal@celerityin.com www.supplychaintribe.com
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.
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COME 2023 and the country is all set to script an incredible growth story on the back of robust economy, technology prowess, government enabling policy, fast shaping up infrastructure and an astounding supply chain ecosystem. Taking a refreshing take on this buoyant trajectory, our cover story this time offers the supply chain fraternity the Roadmap to Success to assist them in strengthening the growth expanse through enablers such as – Technology, Automation, Talent, and Sustainability.
Aswini Thota, Analytics and AI leader, Bose Corporation, unravels the importance of DATA Analytics in supply chain and how should companies best leverage it to their competitive advantage.
16 | Fulfillment in Automation 2023 –Is it still the right strategy to invest in Automation?
Rupesh Narkar, Supply Chain Automation Expert, demystifies the defining trends that the automation & distribution segment is set to witness in the year 2023…
Our Panel on Talent Management highlighted the stance of these mighty supply chain professionals as to how they are ably transitioning from destruction to innovation and growth and are acing the supply chain game.
Sunil Bharadwaj, Experienced Supply Chain and Operations Management Professional, offers the changing landscape of supply chain that we will witness in the next few years.
Capt. Tapas Majumdar, Founder Director, The Sustainability Practitioners, makes his case on the Business and Environment impact of Sustainability.
Dr. Sundar Narsimhan, Sr. VP & Head, Supply Chain Management, Neuland Laboratories, highlights India’s leadership position in API Production both by volume and value.
This feature story captures the growing expanse of SCF and what lies ahead…
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“The continuously evolving sourcing needs and the global supply chain disruptions have highlighted an important requirement – need for a fully de-risked, functional source base across all raw material categories. To meet the demands of this environment with multiple moving parts, we remain vigilant and demanding with our supply partners, build strong relationships, ensure that we are trustworthy partners at all times, by extending unstinted support and keep a constant eye on the regulatory framework. This way we are able to marry both these seemingly opposing objectives and thereby remaining competitive and compliant,” highlights Dr. Sundar Narsimhan, Sr. VP & Head, Supply Chain Management, Neuland Laboratories, during this exclusive interview…
Regulatory Starting Materials (RSMs) are the key building blocks of the API/ Drug product. Their quality and impurity blueprint carries over to the drug product based on the process capability. Given their impactful role, it is incumbent upon the drug product manufacturer to ensure that the RSMs are manufactured according to the applicable GMP standards, we have a good oversight on the supplier’s facility and process and our supplier tests and certifies the material as per our test methods and specifications. This also helps us to understand a key causative factor governing the product quality and the impurity profile of the KSM apart from achieving a high level of incoming quality (FTR). Sourcing RSMs from reliable sources gives us manufacturing flexibility, achieving scale in-house, and control over incoming quality. Hence, we ensure sufficient management (SCM, QA, RA and R&D)
time and effort is spent in this process.
In today’s global business environment, it is essential to have a secure supply chain, which can provide consistent quality and prompt delivery without interruption. The pandemic has strained some aspects of the supply chain, emphasizing the importance of keeping a watchful eye on every aspect of the process. Where vendor qualification was once a task performed periodically, companies today must be constantly vigilant, paying close attention to their suppliers and ensuring they are ready to pivot instantly to address potential issues.
Increasingly complex drug compounds have led to complicated supply chain attributes. Cold chain logistics has become top-of-mind in the wake of the mRNA vaccines. But cold chain was already a critical aspect for the drug industry. Cold chain logistics may have become more necessary, but it also increases the risk of non-conformance in the supply chain. At Neuland, we’ve partnered with two logistics companies
Dr Sundar Narsimhan possesses over 33 years’ rich experience in Operations Management with an emphasis Global Sourcing, Procurement, Logistics and Manufacturing Operations. is a Mechanical Engineer, Master’s in Finance from IFMR, Chennai and a Ph.D. from GITAM University in the research area of ‘Negotiation as Social Exchange’. He has Certifications from Institute of Supply Mgt, USA and International Trade Council, UNCTAD Geneva. He is a Certified Theory of Constraints (TOC) Professional.
who are certified for Good Distribution Practices (GDP) and are considered among the best in the trade. In the past few years, we’ve avoided temperature outages in our commercial cold chain shipments and have had no products fall out of conformance.
How do you constantly juggle between meeting the stringent regulatory requirements and the changing sourcing needs alongside withstanding the external factors?
There has been a steady increase in the Regulatory oversight on Pharma manufacturing aimed at achieving highest patient health and safety while using approved drugs. Neuland has been supplying most of the drug products (APIs) into highly regulated markets such as Europe, USA, Canada, Japan and South America. Innovator customers, generics and medical authorities alike have increased vigilance on the Tier-II suppliers viz. Intermediate and KSM suppliers. As we speak, flurry of Indian Intermediate suppliers is facing USFDA audit for compliance to applicable GMP regulations and obtained certification.
Contrastingly, API producers are faced with both input cost pressures and decreasing finished good price pressure. Those of us that supply into regulated markets must follow stringent quality standards, world-class facilities, transparent and traceable documentation and above all a constant readiness to face medical authority audits. The quality and compliance ask of our sources limits our choice to be best ones from the trade.
A third dynamic is the need for two or more qualified suppliers at any time. Disruptions in the past years have been a hard reminder about this important need. Source qualification is a long-drawn process in the Regulatory space and must be planned well in advance.
Overall, the continuously evolving sourcing needs and the global supply chain disruptions have highlighted an important requirement – need for a fully de-risked, functional source base across all raw material categories. To meet the demands of this environment with multiple moving parts, we remain vigilant and demanding with our supply partners, build strong relationships, ensure that we are a trustworthy partner
at all times, by extending unstinted support and keep a constant eye on the regulatory framework. This way we are able to marry both these seemingly opposing objectives and thereby remaining competitive and compliant.
What challenges are still plaguing the pharma supply chains and how can the industry work towards resolving them?
Pharma supply chains are faced with two or three key challenges:
v Supply disruptions owing to closures or stoppages of supplier factories attributable to pandemic, war, and shortages.
v The cost position of some of the drug products have been severely impacted due to increase in mined inputs (Iodine), demand surge in other sectors (Lithium/Reduction reagents) and other related inputs (Piperazine and other amines).
v The industry has an uphill task to a) find alternatives to use of such reagents, b) work with Government to develop schemes aimed at increasing competitiveness in those specific products and c) find chemistry solutions to increase yields/efficiencies to reduce use of some of these now-costly inputs.
v Due diligence has always been an essential part of RSM procurement. If you’re looking to establish a longterm relationship with a supplier, you can’t afford to skimp on due diligence. Do a thorough due diligence on your
key potential partners, and you should be good to go with RSMs.
We would like to know from you the nuances of sourcing strategy of Neuland and how successful and impactful has it been in the tough times that we faced?
Flexibility and proactiveness are the biggest secret ingredients. For instance, at Neuland, our global sourcing strategy means we have a wider reach when it comes to ensuring the desired regulatory status and cost competitiveness for each client. Our regulatory affairs and other teams have a wealth of experience with RSM sourcing, which provides greater confidence to clients seeking to mitigate business risks. To give you an instance, we ensured full visibility all the way to the last tier supply partners of the end product demand that lay ahead of us. We arranged transportation, raw materials and/or columns wherever needed by them to enable uninterrupted production at their factories and incoming movement into our facilities. We built inventory of some of the key precursors needed by our suppliers to help contain costs and overcome shortages – this not only helped us keep costs down but helped build a strong relationship bridge and trust with some important partners. We engaged trucks on a full journey basis and ran milk runs from different factories to overcome transport constraints. We provided health, food, and safety requirements of drivers at our factory locations that gave them the assurance to
move into the facilities from outstation without hesitation. We explored/agreed on a reasonable meeting ground with the providers by having updated information so that our contracts/spot orders reflected the realistic cost situation impacting the suppliers – with a condition that when things get normal, we will re-negotiate the pricing. In our conversations, calls, and meetings we ensured we are seen as empathetic, helpful and trusting customers and were motivational and integrating in our approach.
Our business continuity planning, timely, cost-effective manufacturing, and supporting satisfaction of customers all depend on a reliable and resilient supply chain. Pandemics and geopolitical situations over the past few years have tested our supply chain. Incidentally, we started a supply chain de-risking plan with an emphasis on decreasing geographical dependencies and shortening the supply chain before the pandemic and other global concerns appeared. As a result, during the past three years, our expenditure on domestic suppliers has climbed by over 10%. We are developing a diversified vendor base to de-risk the challenges of working with a single vendor. It also provides us with the opportunity to engage with small and medium enterprises, assisting in the growth of the local economy and supply chain. Today, 30% of our procurement spending is on diversified vendors. 60% of our procurement has shifted to an e-procurement portal providing every vendor with an equal opportunity to access the opportunity of associating with NLL in a transparent manner.
In over 15 years of my stint in this highly dynamic pharma industry, a sustained search of the supply base usually leads to the jackpot. Fine-tooth combing through high-quality databases like DWCP and
Row2Technologies can unearth excellent sourcing options for any given API and its intermediates. That being said, results can be hit or miss if NECs are involved, and commercial RSM options are limited. In that case, it may be up to the R&D team to develop a cost-effective manufacturing process for the starting material to facilitate commercial external manufacturing. Supplier Management starts with getting the basics right namely…
v Close & regular monitoring of vendor performance of key metrics such as cost competitiveness, timely supplies, quality
v Building trust & relationship by close collaboration helps to exercise a positive influence on the key supply partners
v Right segmentation of suppliers to cover the entire supply base with the available management time –Category Management or A, B, C Based or Process Criticality based.
What are the three most critical aspects that you feel will help pharma companies in managing their supply chains in tough times or otherwise?
In recent years, supply chains across industries, not just the pharmaceutical industry, have faced numerous challenges. Crisis management is possible through foresight, better preparedness, and swift adaptation to new circumstances.
1) Risk Management – Identify risks associated with suppliers, partners & other stakeholders and actively manage them (Geographical Derisking & Contingency planning)
2) Keep close track of the Cost Drivers i.e., have a close eye on the ball, learn what goods and services have the most influence on material costs. Always be on the lookout for new information that could affect your purchasing strategy.
3) Use Inventory and Contract Management efficiently. Inventory and forward contracts both operate as a safety net against unexpected events, buying the company time to assess the situation and devise a plan of action.
Agile practices and operating models enable organizations to solve specific problems quickly and efficiently. During the COVID-19 pandemic, we’ve proven our ability to face challenges with minimal impacts on operations. The agility and foresight of our Enterprise Risk Management (ERM) team enables us to initiate a prompt and adequate response to any unforeseen risk. The team closely monitors rapidly evolving consumer behaviours and demand patterns, anticipating potential reconfiguring of strategies, structure, processes, people, and/or technology.
Neuland actively works with alternate raw material suppliers, tracking re-opening schedules, clubbing shipments, monitoring outstanding receivables, truck transit and arrival closely and more to ensure efficient supply chain management. In some cases, it is important to consider stock accumulation risks and whether stocks should be built up for various geographies given the risks of supply chain recovery due to an unforeseen event.
Risk management aims to control future outcomes by proactively identifying the possibility of a risk occurring, determining what its potential impact could be, and developing strategies to mitigate or avoid those risks. Effective risk management gives Neuland the resilience as a preferred and reliable business partner to help our customers succeed in an unpredictable environment
What are the criteria based on which you select Logistics Service Providers? Cost, Transit Lead Time, Service Levels, Safety are the fundamental factors
Current Scenarios warrant professionals to manage a Supply Network rather than a supply Chain and handling multiple stakeholders across the value chain. It’s easy to get lost in the mess of things. They need to have clearly defined goals and deliverables and in-depth understanding of the value chain that they are handling, and they need to constantly expand their knowledge on the same.
for picking any LSPs. Product value, urgency of delivery, and other special requirements, which affect basic criteria are most important when choosing an LSP.
What are the need gaps that you feel should be worked upon by LSPs in order to service better?
I firmly believe that the intervention of right technology at the right time would not only help LSPs to service their customers better, but it will also help their clientele to up their service game to their customers, which ultimately results in greater brand equity and definitely more business for both the parties – LSPs and Users. With real-time updates and full insight into the shipment's whereabouts, improved tracking and tracing may benefit both parties in cutting down on administrative work. Currently, the market is quite disorganized. Greater industry consolidation that produces a small number of dominant players has the potential to significantly boost productivity. I would also like to give one very important advice to pharma companies that they shouldn’t overlook the critical upstream process because it can potentially impact downstream processes. That’s a key reason why you should always work with an API contract manufacturer that is familiar with RSMs, has well-established sourcing procedures and understands the chemistry. The benefits include better traceability from starting material to final drug substance, reduced time to commercial launch, lower development costs, improved
supply chain security, and more.
Your inputs on inventory management and the corresponding infrastructural landscape…
A company's inventory serves as a buffer to smooth out production and demand fluctuations, but it must be managed to provide the best service levels within the limits of available funds and existing infrastructure. Inventory optimization is considerably aided by more precise market forecasts, shortened supply chain, and seamless, real-time data sharing across all links in the supply chain. Third party warehousing has been trending up recently and industry is ripe with potential. Inventory management is a trade-off between market service level and servicing costs. Why I am saying this is because since unavailability related business loss is very high, manufacturing companies tend to focus on high availability goods at the retail counters. On the operational side, we see longer cycles; expiry related challenges and different regulatory requirements taking away any flexibility in inventory management. This is a classic double whammy for the generics that straddle the global markets, both regulated and less regulated combined. To top it all, the changed demand patterns due to the onset of Covid-19 has only accentuated this complexity.
What has been the most challenging day in managing supply chain? Kindly share with example…
The hardest day would be the one in
which we had to deal with a crisis or other unforeseen event. There is a lot at stake, and there are many variables to consider. We'd have to stop everything we're doing and have a teamwide brainstorming session, then quickly settle on a course of action and put it into effect.
After the Covid lockdown was announced so close to the end of the quarter, we had to rush all domestic and international shipments to fulfil the company's quarterly goals. Meanwhile, we had to make sure that enough raw materials were coming in to keep production going, all when our team started working remotely for the first time. We held multiple Team calls and pulled out all the stops to guarantee we had hit our targets at the end of the quarter.
What’s your take on technology adoption in supply chain? Has Neuland taken any innovative step in this regard? Pls highlight…
v Digitization is one of the strategic pillars on which our company longterm business strategy has been envisioned. Across the organisation all functions are at an advanced stage of implementing digitized processes.
v Supply Chain Management has automated the Procure to Pay cycle including a Vendor Portal that aspires to accord full visibility of company policies, transaction trails and supplier interactions
v A fully functional e-Logistics platform brings together all aspiring Logistics providers to participate in bids, contract awards till uploading of their invoices for verification and payment cycle.
What’s your take on sustainability in pharma supply chain? Are there any innovative measures taken by your company in this regard?
The focus of bolstering and sustaining supply chains continues to be on the areas identified in our de-risking strategy. Key starting materials (KSM), intermediates, and speciality materials are essential to our business. Suppliers in this category are identified as our critical suppliers and the focus of our sustainable supply chain efforts has started with this part of our supply chain. We are actively
looking to develop sustainable vendors and insisting existing Key Vendors to incorporate sustainability in their growth plans. We have strengthened our supplier assessment matrix to include items which de-risk our supply chain from delivery, quality and performance of environmental and social dimensions. Our supplier sustainable supplier assessment covers 80% of critical suppliers and 40% of total procurement. By 2025, we plan to cover 100% of our suppliers in the sustainable supplier assessment plan. As we started our sustainable supply chain program during the pandemic, we started with a desk-based assessment. Solvents are one of the important raw materials for us. Over years, Neuland has implemented solvent recovery measures reducing fresh solvent usage by more than 80%. We also conduct a leak detection and repair (LDAR) programme annually at all production units. Through this program we are able to reduce wastage of solvent and emission of VOCs. Through our other activities, we have reduced the use of Heptane and Ethyl Acetate by 50% in the manufacturing of Ezetimibe. Reducing the product washing from two to single wash has reduced carbon usage by 15%. While there is a limitation to reducing raw material use, we can adopt practices that minimize the environmental impact of raw material use. With this thought, we have adopted 10 of the 12 principles of Green Chemistry to minimise our environmental impact. Our growing focus on green chemistry is reflected in our process improvement and development (PID) program. As part of PID, a dedicated team is re-looking our existing processes, raw materials and chemical products for driving sustainable and safer operations. Alongside Our goal of eliminating waste
reaching land-fills is moving at incredible speeds. The percentage of waste reaching land-fills has reduced from 19% to 8%. 91% of waste is sent for co-processing and recycling. All these concerted and ongoing efforts have led Neuland Labs to receive the most coveted Silver Sustainability Rating by Eco Vadis, in the industry category – Manufacturing of basic pharmaceutical products and pharmaceutical preparation. Our efforts don’t just stop here… for us, this is the beginning of a new chapter, and we are all set to move in the right growth path, which will not only benefit us, but will ensure an all-encompassing sustainable growth of the industry.
What are the latest supply chain advancements that you are looking forward to imbibing?
We are witnessing increased adoption of innovative technology solutions faster than ever in the post pandemic world that demands speed and accuracy. There is an increased use of AI and automation in warehouses and the entire value chain, which enhances efficiency and precision in the process. There is also greater thrust on incorporating Data Analytics in the process as it adds value along the way to help pharmaceutical manufacturers extract meaningful insights from data to save costs, improve forecasts and prioritise patient health. Leading life sciences companies are fast integrating their systems and aggregating data with a view to gain real-time supply chain data to understand things like mix-level detail and material and capacity constraints to optimise production. IoT devices are facilitating companies in providing realtime visibility of operations throughout the value chain – from production to distribution – to gain transparency and
enhanced tracking of goods. Pharma companies are adopting hybrid cloud infrastructure to enhance operational efficiencies, reduce IT burden, drive costs down and improve data accessibility and analysis. All these factors put together are imparting greater resilience and in turn ensuring a structured risk management platform for companies. We are bullish about these technological trends and fast embracing them as we move ahead.
Where do you see Indian pharma and API industry shaping up from here on and supply chain’s able role to activate that growth...
India is inching towards the top in API Production both by volume and Value. Indian API Supply Chain should become more indigenous, technologically advanced and sustainable and the future looks quite promising in the near and far future. Companies need to invest the time necessary in supply chain management of RSMs upfront to minimize the likelihood of problems downstream – and across the drug lifecycle.
Ways to achieve cost optimization in pharmaceutical supply chain
v Use latest technologies such as flow chemistry, enzymatic chemistry and other ligands to improve yields and reaction efficiencies and thereby achieve reduction in higher cost inputs
v Digitize entire supply chain higher visibility across the supply chain to run with minimum inventories and expiry related wastages
v Use equal opportunity providing platforms to discover best prices from among the qualified supply/ service providers
COME 2023 and the country is all set to script an incredible growth story on the back of robust economy, technology prowess, government enabling policy, fast shaping up infrastructure and an astounding supply chain ecosystem. While there will be upheavals in this growth journey, owing to certain external factors, the growth matrices are definitely in India’s favour. Taking a refreshing take on this buoyant trajectory, our cover story this time offers the supply chain fraternity the Roadmap to Success to assist them in strengthening the growth expanse through the poised enablers – Technology, Automation, Sustainability and Talent.
Needless to say, these critical pillars have been a solid bedrock for growth till date and will certainly remain so in the future as well. While the fast-developing technological advancements are bringing new ways of managing supply chain efficiently and are making it more streamlined, transparent, and connected, the transformational landscape of automation in the entire value chain, be it warehousing or packaging, is ably supporting the big bang transition for companies. Never has ever sustainability received such a great thrust from all the quarters owing to the consumers’ increased awareness on creating a fine balance between consumption and environment. This concerted thrust is offering a new realm to companies in striking the right ecological equilibrium. Companies are fast realising that tracking supply chain footprints is one of the most critical aspects in ensuring sustainable expanse in the entire value chain. In order to bring the best of all these pillars, Talent has an empowering role to play. New age supply chain professionals are not just proving their mark in this highly dynamic field but are also giving it a whole new identity and are making it mainstream. With 3Cs –Connectivity, Circularity and Customization as the cornerstones for supply chain, these are fascinating times to be in this vibrant segment that cuts across each and every industry vertical and garners tangible gains for the organisations.
The individual expert articles, in this section, will offer nuanced insights into each and every enabler and will serve as a guide in companies’ next phase of growth in supply chain. Our Megatrends article in this section provides an all-encompassing projection for supply chain professionals for shape of things to unfold their way. A ready reckoner of sorts, this theme stakes its claim for supply chain to be the ultimate Roadmap to Success.
Aswini Thota is an Analytics and AI leader who solves organizational and business problems leveraging data. He always believed in the power of data and amazed what insights we can grasp from it. Over the course of his career, Aswini has developed a skill set in analyzing data and he hopes to use his experience and expertise in data science to help people discover the amazing career opportunities that lie ahead in the field of Data Science. He has effectively evolved from a machine learning researcher to an award-winning AI / Data science leader. Aswini holds two Master’s degrees in Electrical Engineering and Data Science.
The logistics industry represents 12% of the global GDP and is growing at a CAGR of 5% per year. Based on these estimates, global logistics spending will surge to more than $15 trillion by 2023. These estimates in conjunction with surging supply chain costs, created by the dynamics of the global pandemic, have increased the need for innovative technology to increase efficiency and lower supply chain costs. Data is now incorporated into every industry, and it is the new oil that’s powering the innovation engine. Data science can disclose hidden insights into a company’s daily operations, allowing it to develop more efficient and productive operating procedures, price risks, and predict market patterns, which is fast making inroads into every supply chain function as well. Aswini Thota, Analytics and AI leader, Bose Corporation, unravels the importance of DATA Analytics in supply chain and how can companies best leverage it to their competitive advantage…
WE live in a digital world. From ordering food, and buying groceries, to purchasing cars, we have digital options for everything. But what if I told you that the function responsible for shipping goods and delivering products is still largely paper-based? Yes, according to the Digital Container Shipping Association (DCSA), only 0.1% of bills of lading – just one of many paper-based trade documents – are issued electronically.
There are several obvious reasons businesses should digitize their supply chain operations. Some of them are:
w Delays in supply chain processes because of document errors
w Maintenance overhead
w Vulnerable to security threats
w Wastage of valuable natural resources
But the most significant opportunity lost by not digitizing service is the ability to gather data and make data-driven decisions. Most successful companies were always innovative. They constantly try to gauge what their customers want and develop solutions that strike the right chord with them. For a company to innovate using service, all the components of its offering should work like a well-oiled machine, and the supply chain function is at the heart of this innovation.
Organizations realized a long while ago that innovation is key to success, and Covid-19 has created an environment where industry leaders must think on
their feet and make fast decisions. The sudden shift in priorities caused by Covid-19 has exposed organizations that didn't have a foundational understanding of using modern technologies.
Perhaps a critical vulnerability that organizations realized after covid-19 was their lack of ability to make data-driven decisions. Enterprises that had a wellestablished data analytics practice were able to run what-if scenarios quickly and pivot to meet customer needs. Organizations that realized the value of timely information made data-driven decisions their top priority to correct these shortcomings.
Data is turning out to be a key enabler for businesses, big and small. This is specifically true for supply chain functions. Below are some ways big data, a byproduct of electronic services, is changing the supply chain landscape.
Transparency: Transparency and accountability have become essential for a good SCM function. Having transparency in SCM means leaders can precisely know the status of each step in the supply chain pipeline. A transparent supply chain function also assumes that the data retrieved is quality tested and is of the gold standard. A transparent and well-governed SCM function can help business leaders understand the pain
points at any given period and help them provide timely solutions.
Overseeing the entire SCM function and identifying the problems based on heuristics and observations is a gigantic task. Instead, digital solutions help organizations to store data corresponding to all of the interactions and events. Modern data techniques such as artificial intelligence are very good at analyzing historical data to identify abnormal trends. Anomaly or outlier detection uses AI algorithms to identify rare and unexpected events that are different from standard patterns. Anomalies in SCM function are common. For instance, large volumes of orders coming from the same IP, distribution times that don't follow the normal curve, item prices being significantly below the previous sales price, etc., are some situations that SCM handles regularly.
Modern businesses are built on customer satisfaction. By digitizing services, organizations can instantly understand the details of their supply chain pipeline. Unlike paper-based systems, digital tools allow organizations to collect and store digital touch points. The collected data can then be analyzed to generate critical insights such as traffic patterns, reasons for returns, service delays, etc.
Efficiency: Digital supply chains eliminate the need for manual data entry and customer follow-ups. With digital
Organizations can develop intelligent algorithms to gauge the market share, customer interest, and product demand for new products before they are even launched. When done right, demand forecasting can help supply chain leaders accurately forecast the number of units to manufacture in a specific time period along with the number of units to distribute to each store. At Bose, we are obsessed with meeting and exceeding our customer’s expectations. We seek to achieve this goal by improving how we forecast customer demand to ensure we can offer our customers the right product at the right time.
label scanners and process automation technologies, all parties involved in the supply chain pipeline can be updated about the outcome of each step and status. This process will, in turn, help organizations deploy their workforce more efficiently. Another area where digital supply chains can be very effective is communication. Having efficient and speedy communication is crucial to establish trust between suppliers and businesses. Having digital supply chains will help you swiftly order components and avoid any shortages.
Not only that, but you can also use the historical data captured by your supply chain systems to analyze where the shortcomings are historically and be proactive about it. For instance, you can study patterns in your data and answer key questions such as – are there any suppliers that are consistently slow at responding? What are some of the reasons for not receiving effective responses from the suppliers, etc.?
Forecasting: Forecasting may be the biggest opportunity your supply chain data can open up. Having a good forecast is critical for organizations on multiple levels. Forecasting helps organizations procure the right number of raw materials and parts to build the product, deliver the products to suitable warehouses on time, distribute the products to resellers, and finally meet the customers’ demand. None of this is possible without having good historical data. Forecasting is not just limited to existing products in the market by combining historical sales data with related organizational data such as media spending, promotions, customer segments, etc. There are several proven statistical techniques to generate demand forecasts; some of them are Simple Moving Average (SMA), Exponential Smoothing (SES), Autoregressive Integration Moving Average (ARIMA), etc. In recent years, organizations have been using neural network-based approaches such as Long short-term memory (LSTM), Gated recurrent units (GRUs), and Autoencoders.
Because of the global supply chain shortages and the increased demand for ICs, our ability to accurately demand customer demand had never been this important. If you over manufacture a
specific product, it will just be sitting on the shelves, and you wasted ICs that could have been used on other better-selling products. If you under forecast, you lose the opportunity to sell your products. At Bose, we are obsessed with meeting and exceeding our customer’s expectations. We seek to achieve this goal by improving how we forecast customer demand to ensure we can offer our customers the right product at the right time.
Organizations can develop intelligent algorithms to gauge the market share, customer interest, and product demand for new products before they are even launched. When done right, demand forecasting can help supply chain leaders accurately forecast the number of units to manufacture in a specific time period along with the number of units to distribute to each store.
Intelligent solutions: Every organization's supply chain deals with enormous amounts of procedural documentation. This can range from delivery orders, docking receipts, bills of landing, etc. The back-office team is expected to process and store this information. AI algorithms in computer vision and natural language processes can read through the document and translate the images to text, which can then be stored in a database for consumption. Another popular application of AI that's
penetrating every enterprise function is the chatbot. Chatbots can provide answers to the most commonly asked questions. Most consumer productcentric organizations have to answer questions about delivery requests, tracking, and order-related issues. Often, the questions your customers ask are repetitive and can be avoided by taking them on a guided search through your knowledge base that contains answers to frequently asked questions. We will continue to see technological innovations that can deliver a different level of personalization. Metaverse, digital twin, etc., are examples of taking personalization to the next level. AI technologies such as chatbots and voice assistants will be embedded into mainstream applications to promote the personalization of services.
Re-deploy talent: Using archaic nondigital practices not just waste your financial resources, they also hurt your employees. The services of your intelligent and enthusiastic workforce are being decimated by manually entering the data or by scanning and filing hundreds and thousands of bills. By digitizing your supply chain end-toend, you can divert your workforce from mundane and trivial tasks to more valueadded tasks.
Transparency and accountability have become essential for a good SCM function.
Having transparency in SCM means leaders can precisely know the status of each step in the supply chain pipeline. A transparent supply chain function also assumes that the data retrieved is quality tested and is of the gold standard. A transparent and wellgoverned SCM function can help business leaders understand the pain points at any given period and help them provide timely solutions.
Amid global economic uncertainties, it’s prudent to be prepared before things take a turn for the worst. This is even critical for warehouses and distribution centers that are already stretched thin by global supply chain headwinds. A confluence of technological innovation, global economic influence and rising labor challenge is driving the rapid growth of warehouse automation globally to meet the demands of a new pandemic-forged e-commerce and omnichannel retail model. Building resilience into fulfillment operations is the most surefire way to insulate it from economic turmoil. Through this article, supply chain automation expert Rupesh Narkar demystifies the defining trends that the automation & distribution segment is set to witness in the year 2023…
THE year 2022 was a year of turmoil for supply chain and fulfillment industry to say the least! As the hopeful post pandemic recovery kickstarted, it was anticipated that the already disturbed supply chains since 2019 would see an exponential recovery; and may even stabilize. But the attack on Ukraine, at the beginning of 2022, left the Western world crippled for energy, which significantly reduced the industrial output. The year 2019 through 2021 was Asia and now it was Europe. Highly sophisticated, tech heavy goods coming out of Europe, saw a drastic drop and wobbled the supply chains across the globe again, erasing the little recovery visible.
Despite this new blow, the Warehousing, Distribution and Fulfillment sector kept rising. According to Allied Market Research report, the global warehousing & distribution logistics market was valued at US$12,019 billion in 2021 and is projected to touch US$25,788.7 billion by 2031, growing at a CAGR of 7.7% in the forecast period.
Needless to say, that even with these growth projections, the Warehousing, Distribution and Fulfillment will face significant challenges in 2023. These challenges are an outcome of the brewing trends since 2019 and will still continue to impact businesses worldwide. So what to expect in 2023?
#1. Continued
Rupesh Narkar is a seasoned professional with extensive experience in the field of fulfillment & intralogistics automation. He has a Master’s in Engineering Management (USA) with a Bachelor’s in Mechanical Engineering (India). His interests include designing, selling, and implementing logistics automation solutions throughout the Americas. He has authored articles and spoken at events for logistics automation industry in USA.
Influences and Disturbances: The
political tensions across the globe specially between United States, China, Taiwan, Russia, and Ukraine will keep affecting logistics and warehousing operations across various industries. Trade embargoes and sanctions on Russia have crippled the supplies of fuels, grains, heavy equipment, etc. China’s regional political disputes with Taiwan have significantly disrupted the semiconductor manufacturing sector. While the USA is ramping up their semiconductor manufacturing capacities, it is unlikely that any near-term solution is in the horizon. Furthermore, many businesses in Europe are feeling the brunt of a chronic power shortage across all industries. A recent Goldman Sachs report estimated that the Euro area economy will contract by 0.7% from 2022Q4 to 2023Q2.
#2
The acute labor shortage that all sectors are facing will continue well into 2023.The rising inflation (and the climbing interest rates to curb it) is still responsible for a super-hot labor market. Salaries across the fulfillment industries have risen 30%~35% YoY. On the brighter side, this is a blessing in disguise for the automation market. More businesses are exploring the possibility of deploying automation and many have already done so. Shifting to automation helps warehouses shield themselves from the fluctuating labor pool, while improving overall performance.
#3 Rising land and infrastructure costs: Needless to say, that the inflation has had a deeper impact on setting up and running new industrial enterprises. Cost of energy, cost of raw materials, labor to build, construction, etc., all have shot through the roof in 2022. Trend of “Doing More” in smaller setup, limited spaces, available infrastructure is making rounds and putting extreme emphasis on operational efficiency and cost-effective operations delaying the need to expand or newly construct. A point to note here that efficiency in the existing operations is only possible with deployment of technology… essentially digitalizing it! An interesting study had revealed that by utilizing floor to ceiling storage (vertical space is criminally underutilized
in warehouses), ASRS can save up to 85% of floor space.
#4 On Demand everything & Right Now: The world seems to be embracing the concept of “On demand everything & right now”. Order on the phone and get deliveries in two hours... Next day delivery... No need to wait… order and pick up… All this will continue if not become more prominent in 2023. All these trends are giving rise to Incity warehousing and we are seeing a greater traction on such infrastructural investments. In order to serve these heightened demands, many retailers are adapting and getting closer to the urban customers by investing in DCs in urban areas. Micro Fulfillment Centers (MFCs),
a highly popular e-commerce fulfillment strategy, is seeing a rising adoption.
Technology is a friend to adapt to a trend! It is no rocket science that the year 2023 will be the year to focus on operational efficiency, cost effectiveness & sustainability while meeting market demands of here and now. The promising solution to all these trends comes by adopting technology. Take an example of the Warehousing, Distribution and Fulfillment industry. A recent analysis of fulfillment operations by some large retailers and pharmaceutical suppliers revealed that shortages of goods due to
supply chain disruption was the lesser of a problem compared to the missing, lost, and misplaced goods in the warehouse. Thanks to their opaque and inefficient fulfillment operations, these goods were lying in a corner of their warehouses, untraceable, giving the impression that there was an acute shortage. Businesses lost a significant number of sales owing to the false shortages.
Now imagine that they had deployed automation solutions in their existing setup; not only would their the monotonous, error prone and laborintensive tasks be efficiently done 24x7, but it would have established visibility, traceability, and control over their warehousing operations, uncovering these misplaced, lost goods. Not to mention that their existing setup would have been operating at an elevated productivity levels in a cost-efficient way.
So, what should be done to stay ahead of the trend in 2023? The answer is Embrace technology. Speaking in the context of Warehousing, Distribution and Fulfillment industry, deploying technology will lead to digitization in addition to automating the tasks that are labor-intensive and need to be done efficiently in a cost-effective way. Interestingly, this technology adoption is happening in the industry.
An IDC study estimates that by 2023, 65% of warehouse operations will use robots and situational data analytics to aid in storage optimization, boosting warehouse capacity by over 20% and halving the time required to process work orders. By 2025, up to 50,000 robotic warehouses will potentially be
developed, while 8 million robots may be shipped to users by 2030. Distribution centers will continue to explore the use of order fulfillment robotics – such as robotic cube storage and autonomous mobile robots (AMRs) – in the warehouse in 2023.
The fundamentals for unlocking productivity and improving operations lies in the basic concept of gaining more visibility, improving tracking, and thus gaining control on processes. Only after you track, you can control. Only after you control, you can optimize. Digitization makes this possible. Per IDC study, by 2023, more than 60% of global manufacturers will invest in AI-enabled robotic process automation, increasing productivity and bridging the talent gap for supply chain skills.
Some more benefits of implementing technology include: w Resilient, reliable, and scalable operations to sustain any geopolitical influences and disturbances w Significant improvement in the service levels out of the existing setup to cater the “on demand everything & right now” trend
w Ability to do more in the existing setup, thus alleviating the inflation cost impact w Improvement in overall safety and ergonomics of operations thus stepping up operational excellence with policies like zero accidents w Opening up the doors for the Internet of Things. Introduction of IoT enabled devices that gather and report real-time feedback and
insights from the ground level.
w Establishment or stepping up of IT/ data security, which is increasingly becoming a threat to operations
w Significant improvement in the competitive advantage
Another major factor is Digitalization of processes, which is the cornerstone of the next generation of Supply Chain. Intelligent, reactive, data driven, and flexible solutions (or warehouse management system) form the backbone of digitalization. Automated receiving, accurate identification, easy tracking in the process, optimization, inventory control, assured order fulfillment and reliable operations are all made possible at a finger’s click using automation systems.
No matter which trend would be the most impactful in 2023, adopting technology will certainly prepare business to adapt to challenges. One may debate that it is a significant capital expense to deploy technology in a uncertain environment but, in the long run, bringing operations on the digital path by implementing technology will be a beneficial approach. As a result, business will become more competitive in 2023, ready for what the year has to bring!
Deploying technology will lead to digitization in addition to automating the tasks that are labor-intensive and need to be done efficiently in a cost-effective way. The fundamentals for unlocking productivity and improving operations lies in the basic concept of gaining more visibility, improving tracking, and thus gaining control on processes. Only after you track, you can control. Only after you control, you can optimize. Digitization makes this possible.
The pandemic is behind us; however, the uncertainties remain. The last three years have weighed heavily on our personal and professional lives. While at the same time, the supply chain and logistics professionals showed greater resilience in sustaining the business momentum. The story has just become better with the professionals not resting on their glories, rather they have already started working towards making their business processes even more future-proof, stronger and tech-enabled, which are able to withstand any eventualities going forward. Our Panel on Talent Management highlighted the stance of these mighty supply chain professionals as to how they are ably transitioning from destruction to innovation and growth and are acing the supply chain game. Excerpts…
Atul Barve, Vice President & Head – Supply Chain Operations (CDIT), Reliance Retail Ltd.
Gaurav Bhatia, General Manager – Supply Chain, Reliance Retail
Technology has been evolving and global best practices and processes are being adapted and adopted in India. Where would you put people and teams in this framework?
Atul Barve, Vice President & Head – Supply Chain Operations (CDIT), Reliance Retail Ltd.: India is a rising economic power. Indian market is the Growth Market for most of the global companies. Hence it is obvious that most of the best practices across the globe are implemented in India. Since India has comparatively difficult logistical ecosystem then other parts of the world, I could see that lot of enhancements are happening locally and eventually those are helping in increasing productivity. As a result, you could see many Indians have grown and leading technology or ERP platforms for companies globally. India has not only adopted the global best practices but also helped in enhancing them further. I could see a bright future for people working on technologies or working for manufacturing or operational excellence.
Ronit Verma, Heading National Logistics & Imports, Red Bull India Pvt. Ltd.: Technology remains a strategic imperative for supply chain. In a recent Gartner survey, 61% respondents highlighted technology as a source of competitive advantage. Many also identify several emerging technologies as critical investments areas, with 20% investing in robotics. To be a supply chain leader with competitive advantage, I knew that I would need to be familiar with the use of enterprise software applications like WMS, TMS, and ERP, not to mention analytical software, which is increasingly becoming a staple source of leadership decision support. There was a time when as supply chain leaders, we could rely on employees to do all the hands-on work with business
information systems and be content to receive reports and Excel spreadsheets containing key data for supporting the decision-making. Those days are vanishing now, however, today we are expected to find ways around the different levels of modules of our organisations’ ERP and Business Intelligence Applications on own, we would require making necessary decisions and get the required favorable outcome for the organisation. Furthermore, your need for technological understanding extends beyond hands-on use. Organisations have started bringing in new talent and training existing ones to help them to adopt changing technologies and faster decision making. The focus has always been and will continue to be building skills but now more importantly, building skills for automation, IoT, and datadriven decision-making to facilitate the transition to a technology-enabled supply chain. That’s why and how the people and teams are being evaluated and appointed a critical technical tasks/project. Going forward, these experiences will add many more advantages to a key person to excel in their career and at the same time, delivering more identical results for their organisations. It is always said a person or team having functional expertise will help in running the business, but on the other end, if they carry the required technical expertise, then they will be better placed to predict and deliver greater results for the business.
Gaurav Bhatia, General Manager –Supply Chain, Reliance Retail: It is very rightly said that technology and processes have been significantly accelerating and I think we all agree especially in supply chain, it's all about data and processes if you want to scale up. When I see the framework, it's about very simple Venn diagram where the technology, the process and the people are the three key pillars in the entire piece and when technology and people meet, it leads to
the understanding and the simplification part and when process and the people meet, it leads to scalability in supply chain be, it in terms of logistics, be it in terms of supply planning or in terms of operations. I think real magic happens when all three of these pillars collaborate. Believe me people are at the center of this because we can have the best of the technologies, we can have the best predictive analytics, blockchains, AIs, but if we do not have the right people with the right skills to drive these, there is going to be a challenge. Fortunately, all over the globe and especially in India, the way we see the talent growing, and the transition has been impressive. Earlier supply chain, as a function, never used to get its due credit, but now the scenario has been fast changing. Today it has become a key enabler and key driver of the business, which is a positive sign. These transformative scenarios will only help the segment to attract the right talent or best in class talent that we have in the industry.
What are the key enablers for supply chain function to deliver and for people in supply chain to prosper?
Atul Barve: Supply chain is all about technology and thanks to last three years of pandemic, the technologies discipline in supply chain has witnessed huge transformation. If someone wants to build a successful career in the supply chain, technology savviness is one of the most important enablers to prosper. Supply chain is all about Speed, Agility and most importantly, Customer Centricity, so the attitude and the approach towards customer centricity is another important aspect that needs to be imbibed by young professionals. The third and the most important one is being Innovative. I think innovation is another enabler, which any successful supply chain professional needs to have.
The most innovative people are not likely to be innovative in an environment that does not adequately encourage innovation. As an active leader, we are very accountable to assemble teams and lead them to optimal performance outcomes.
These are the three key attitudes and enablers, which I could see coming up as prominent ones.
Ronit Verma: One of the biggest enablers I have been hearing from all fronts is having the right support from top management. Top management support doesn't mean that whatever a supply chain professional does will get the management buy-in, it also implies getting the right training, encouragement on the performance, enabling an environment for open communication, so on and so forth. Another aspect that I would like to bring into focus is the internal and external behavioral and relational changes, which necessitates aligning the customer as well as the organizational demand. This is one key enabler, which actually helps supply chain function to prosper as well as people to learn through doing the things and learning on the job as well.
What are the challenges you face when you're looking for talent and what are the skill sets which are missing from today's Talent?
Atul Barve: One of the biggest challenges that we have today is talent acquisition. We have lot of management institutes for imparting quality marketing and finance education but very few for supply chain operations. In fact, you can count them on your fingertips. There is a huge requirement for developing reputable supply chain institutes across the country. Apart from fresh talents, hiring middle and maybe a bit of middle and senior level management poses a challenge due to lack of adaptability.
Ronit Verma: There is a huge and rising demand for people with the right supply chain skills, and supply for these professionals isn’t keeping pace. But like any intractable challenge, it’s more complicated than that. While we are looking for talent, and if you want to become a top talent within the supply chain, there are many fundamental supply chain skills you must focus on, which are both Technical and Soft Skills. The days of digitization have not left the supply chain untouched, and this has now become a valuable skill set than it used
to be earlier. Now companies are seeking individuals with skills in automation, robotics, IoT, machine learning and other emerging technologies to help transform supply chain function for the next 5-10 years, these skills are very hard to find but possible. We have often heard soft skills are becoming more important than ever before. Soft skills are key differentiators for supply Chain professionals which facilitate them making a greater impact for their respective organisations. We will find a professional with functional expertise, but it adds a cherry on cake when we get a talent with required functional as well as key technical experience. From the functional skill front, organisation values a talent for their grasp on economics and market dynamics. As a supply chain key resource or talent, you will need to have focus on what lies ahead and, to some extent, predict it and this is only possible when you have a thorough understanding of the market dynamics relating to your industry or your company. Another key aspect from the functional skills is their understanding of Cost-to-Serve, as a supply chain individual, you play a very active role in the profitability of the organisation. If you are running a supply chain operation, your decisions impact the costs involved in delivering to your customers. You will always have an advantage and you will shine if you can easily quantify how your supply chain leadership decisions affect your bottom line. In short, the main skills must revolve around Soft Skills, Market Dynamics and how you can better manage Cost to Serve for your organisation’s overall bottom line.
Gaurav Bhatia: In India, we have roughly around an unemployment rate of 27% on one hand and at the other, we are looking at a talent pool, which we want in each and every organisation and I am sure everybody would agree that we want ready managers or people who are ready with the desired skill sets that we look for. When we talk of supply chain data analytics, it's more understanding end-toend supply chain, which is also known as Integrated Business Planning (IBP). A lot of these skills are not readily trained, or I would say trained at the institutes. There are a lot of courses, which are specific to
supply chain or certifications which are related to supply chain, and we all want people who are specialized in some or the other domains at the same time. In a nutshell, we look for people who have in-depth knowledge of one core domain and possess a generalized understanding of other operations. In terms of talent acquisition, we all are witness to the fast transformational landscape of supply chain, the way its relevance is increasing, especially in retail I have seen, there is a dearth of talent, and it is not so easy at all to find good talent who are just ready to be picked up and start contributing towards the organizational goals from day one. There is so much room for all of us to learn and grow in the supply chain and prosper. These are positive signs of development. I think, besides the skill set, there must be a match of the attitude as well. There's a very famous book, which says, “Stay Hungry, Stay Foolish” and I think that's really what we look in terms of attitude, even at mid-level and senior levels, which sometimes while the person is highly qualified and highly skilled, but that attitude or that hunger is missing.
In today's day, age is actually only a number and young talented individuals are rising very quickly up the lines, what should be done at our industry level to encourage more and more professionals to come up as leaders?
Atul Barve: With the kind of growth, we are witnessing in India, I am sure there is enough and more for every individual. We are seeing an exponential rise of young and talented leaders and at the same time, the experienced ones are scaling newer heights by leveraging their experience at global level or even by trying their hands at entrepreneurship. Many great companies are a result of this. Most of the growing companies are giving platform to aspirational leaders to thrive and I believe that’s the need of the hour to create good pool of talented leaders.
Ronit Verma: Encouraging skill development and aligning it with the interest level would be the topmost feedback to the leaders to encourage more and more professionals to climb
up the ladder. I believe in assigning the critical task to the team so that it also develops a keen interest in them and at the end, they are also getting into the groove of managing critical tasks in a time-bound manner. We all know the 70:20:10 model, which was developed in 1980s where 70% stands for onthe-job learning, 20% is all about peer collaborations and learning through cross-functional teams and 10% is the academic acumen. Focusing on the skill sets and providing those opportunities is one aspect, we need to push the envelope further and provide the challenging status quo opportunities to the team so that they can excel and survive in tough times as well. For instance, someone joining my team with just about two years of experience will also be given the right platform to perform where I will be mentoring them closely. I will be providing them with those opportunities, which will actually help them to utilize their skill sets and also deliver some status quo challenges for the organisation. Once those achievements are accomplished, they realize that they have achieved a certain milestone and that needs to be celebrated. Secondly, it's not just about skills or interest, the change management needs to be driven through the HR department. An allencompassing support will only enable a person to deliver beyond his caliber, which will eventually reap great results for the organisation.
What would you do to ensure that your team thrives towards innovation and growth?
Atul Barve: I truly believe that giving the young talent or pedigree a space to thrive makes all the difference. We must offer an open platform to our employees to innovate, and it doesn't matter if they fail. Obviously, as managers, we keep a tab on the progress of those projects, but we give them enough freedom to innovate and try out new things because many-a-times, we have seen that great breakthroughs have always been the results of such opportunities. We also give them a certain sense of responsibility so that they get empowered to own the success or the failure of that particular project. We believe that these aspects go a
long way in cultivating the right attitude and aptitude among the employees and leave a lasting trail on their sustenance and success in the corporate world.
Ronit Verma: The most innovative people are not likely to be innovative in an environment that does not adequately encourage innovation. As an active leader, we are very accountable to assemble teams and lead them to optimal performance outcomes. I have always tried my best to recognise the importance of embracing differences in my team members and finding out how to connect the dots amongst those differences to get the best outcome for the team and for the organisation. This is what cultivates the workplace environment of continuous improvement, innovation, initiatives and more importantly for their growth. In my journey of coaching my team, I ensure in making necessary changes and implying the innovation process by identifying: how team member wants to lead and be led, the required tool to adapt to change in positive and meaningful ways and the function they can best serve to addvalue. It is right to say that innovation and workplace environment are two sides of the same coin. There are many things I have tried and succeeded in to foster an environment of innovation and initiatives. This applies in both cases whether you are forming a new team or revamping an existing one. The top 3-4 which are really close, and I liked the most are: 1) Being A Change Agent – I have often challenged each team member to think more critically and see through the lens of improvement. One who takes charge and embraces the role of a change agent in support of constructive disruption that ultimately makes things operate better with better performance. As a leader, we are required to act as Change Leader, as such, our team members must equally be charged to do the same. Change leader also means taking on an entrepreneurial attitude, embracing risks as the new normal, a beginning to see opportunity in everything. 2) Communication to Learning – To help the team finding their rhythm and build trust and collaborate then you need a strong communication. I always have kept team engaged with each other, encouraging them to have a group
discussion within them, like a group of innovation lab, during their connect I always emphasize more on listening to each other, challenging each other to learn from each other’s ideas and ideals and in a way planting a seed for future innovations. 3) Self Trust & Build Trust – I have kept the equal treatment when it comes to team members, by treating people fairly and acknowledging their perspectives and preferences, you can help people to feel good about working with you and to have more loyalty towards you and to care about innovating for the organisation. I ensure to provide a conducive environment where each member of the team becomes more transparent than ever before. As such, each member of the team must trust themselves enough to trust each other. When you achieve this trust, you become more patient, a better listener and over time more grateful for the new experiences and relationships that are being formed.
Gaurav Bhatia: Just go ahead and grab any opportunity that comes your way. If you start being selective right from the start and wait for a big bang opportunity, you will miss the bus. To give you an instance, I also got a very small opportunity from my Global Supply Chain head, which at that moment, seemed very small to be picked up or to be taken, but I think the visibility that project offered me in the entire system is immense and the learning curve was exponential, which will stay with me forever. I was taking care of the demand planning of the supply side and I was given the task of just clear the nonmoving inventory. On the face of it, the work didn’t enthuse me, but the moment I immersed myself into it, I realised that it requires a lot of intelligence to even perform such a task. Take any given opportunity that is thrown at you. Secondly, young supply chain managers need to keep looking at various avenues to grow and keep yourself updated with the new age supply chain practices either through journals or forums where there are higher chances of networking and knowledge sharing.
Sunil Bharadwaj is a passionate supply chain and operations professional with over 20 years of experience in diverse industries. He has handled supply chain strategy, planning, logistics and distribution, operations excellence, and automation projects during his stints with L&T, Wipro, Nitco, Pidilite, Abunayyan Holding, Raymond, Future Consumer and most recently, Qwixpert Consulting. He is an APICS CSCP (Certified Supply Chain Professional) and CLTD (Certified in Logistics, Transportation and Distribution).
When the whole world came to a grinding halt, supply chain proved its mettle and became the talking point across the corporates’ boardrooms. What used to be at back burner for decades took the front seat in tough times. On the back of technology, automation, talent and most importantly resilience, supply chains around the globe worked exceptionally well and kept the economic wheels going. As the aftereffects of pandemic are still lingering, it’s time now to make the supply chain stronger and even more futureproof. Sunil Bharadwaj, Experienced Supply Chain and Operations Management Professional, through this opinion piece, offers the changing landscape of supply chain that we will witness in the next few years…
WE owe it to the Covid-19 pandemic that struck a couple of years ago and brought the world to its feet. The supply chain management function has gained centrestage since then. Logistics and supply chain professionals came to the fore and used all their experience, innovative spirit and situational awareness to ensure that essential items such as groceries, masks,
sanitizers, cleaning products, medicines, etc., reached every nook and corner of the country.
The term ‘Supply Chain’ was increasingly being mentioned everywhere. More and more people wanted to understand what we did for a living and began to appreciate the nuances around making the right product available to the end consumer/ customer at the right time in the most
cost-effective manner. We saw images of empty store shelves that ran out of tissue paper, drinking water, etc., bringing to light the hitherto ‘taken for granted’ role of supply chain operations professionals globally.
When we talk of an evolving landscape, it means that our function and different industries at large, are in a constant
state of change and flux. Modern supply chain management is as much an art as it is a science. Key global trends and developments such as inflation, recession, rising input costs, currency depreciation, climate change, weather events, geopolitical tensions (The Ukraine war), trade disputes (USAChina), food and energy crisis, etc., have made sure that supply chains are in a constant state of vigil and that they need to continuously evolve in the light of local and global developments that shape our industry. The term, VUCA, would become the norm rather than the exception going forward. I really don’t think we could ever witness a pre-Covid era that was fairly stable and predictable.
Now that I have set the context, it would be relevant and worthwhile to provide an overview on the major trends and developments influencing our practice…
De-globalization: The jury is still out in this. All these decades, supply chain networks were designed to take advantage of lower operating costs and therefore tended to get more diversified and global. Materials travelled long
distances through different geographies along their journey till they reached the final customer/consumer. However, we have began to notice the potential risks with respect to this approach.
In certain industries, such as semiconductor chips, fertilizers, minerals and metals, edible oils etc., supply shortages have wreaked havoc on production and delivery schedules. Terms such as near-shoring, re-shoring, and friend-shoring have become common place. Companies in various sectors have been moving manufacturing and sourcing out of China to countries such as India, Vietnam, Bangladesh, Malaysia, and Indonesia. However, this is easier said than done and would take considerable amount of time and investments. Developing regional and local value networks would not be easy. But we are on that journey – thanks to enabling policies such as Production Linked Incentive schemes (PLI), the National Logistics Policy (NLP), ‘Make in India’, and the GatiShakti National Master Plan in addition to ‘Bharatmala’ and ‘Sagarmala’ projects.
Flexibility and Resilience: Another supply chain strategy that is gaining traction is ‘Flexibility’ within the supply chain system. Building redundancies
aids in superior capacity management. The need to react and respond nimbly to changing market dynamics and customer expectations is of paramount importance and would provide competitive advantages to businesses competing in the same sector or industry. This would require supporting strategies and initiatives that result in shorter reaction times without compromising on product/ service quality and customer service.
The resilience of supply chain and logistics networks has been tested severely in the last decade or so given the scale and frequency of global weather events and other disasters across the globe. Supply chains today are constantly looking at ways and means to become more resilient – in terms of their ability to bounce back and restore operations as quickly as possible.
Risk Management: Supply chain vulnerability has never been higher than it is now. Therefore, there is a need to devise and deploy suitable people practices, policies, processes, procedures, tools, and systems to enable supply chains to predict, manage and mitigate various risks that emanate from the upstream side all the way to the last mile journey. In this context, the seminal work done by leading supply chain and operations
The new age business models entail significant investments in the forward as well as reverse supply chain networks and related infrastructure. The birth of ‘Dark Warehouses’ that were created by quick commerce food and grocery players has modified the customer service paradigm. However, not all businesses have been successful, and some service providers have had to relook at their dark warehouse network from a profitability standpoint. The growth of e-commerce and quick commerce has also led to a manifold increase in warehousing and transportation infrastructure. Several technology-enabled logistics startups are collaborating with D2C, B2B, C2C, B2C and B2B2C brands to ensure timely availability of products through intelligent and efficient last mile delivery networks.
management thinker, Professor David Simchi-Levi (MIT) is worth mentioning. He has developed a supply chain stress test (akin to the financial stress test that was developed for assessment of the liquidity levels at banks and other financial institutions in the aftermath of the 2008 global financial crisis) using certain metrics.
He has devised the following metrics: Time to Survive (TTS): The time taken by a node in the supply chain to return to full functionality after a disruption has occurred (measured in days/weeks).
Time to Recover (TTR): The maximum duration of time that a supply chain network can match supply with demand after a disruption at a particular node (measured in days/weeks).
Performance Impact: The potential loss or impact on sales revenues and operating profits caused by a disruption (measured in terms of monetary value).
E-Commerce and Quick Commerce: The advent of e-commerce and quick commerce has resulted in heightened customer expectations with delivery windows ranging from 2-3 days to same day, to 30-60 minutes. A host of technology enabled startups and service providers in this space have given consumers and customers a wide range of options in addition to flexibility and convenience. This has shifted the lens towards reverse logistics and supply chain considering the enormous cost implications emanating from free returns and replacements.
The new age business models entail significant investments in the forward as well as reverse supply chain networks and related infrastructure. The birth of ‘Dark Warehouses’ that were created by quick commerce food and grocery players has modified the customer service paradigm. However, not all businesses have been successful, and some service providers have had to relook at their dark warehouse network from a profitability standpoint. The growth of e-commerce and quick commerce has also led to a manifold increase in warehousing and transportation infrastructure. Several technology-enabled logistics startups
are collaborating with D2C, B2B, C2C, B2C and B2B2C brands to ensure timely availability of products through intelligent and efficient last mile delivery networks. Thanks to this burgeoning growth, the e-commerce logistics industry is expected to grow to US$9 billion in the next 8-10 years.
Sustainability and Circularity: Sustainable, green, and circular supply chains are no longer buzzwords confined to textbooks and theory. Over the last 5-7 years, significant initiatives have been taken by corporates of various sizes and scales across sectors with respect to their people practices, product and process design and logistics footprints. Annual reports of corporates have a separate section related to sustainability initiatives related to the business and have clearly laid down policies with respect to stakeholder management, reporting, energy consumption, waste management, resource management, carbon footprint, triple bottom line (Economic-Social-Environmental impact; People-Profit-Planet impact).
The progress on the relevant goals from the list of 17 SDGs or Sustainable Development Goals are measured, tracked, and reported. The logistics industry and related operations contribute to around 3% of global carbon emissions and steps are being taken to reduce the carbon footprint through the use of alternative fuels, green energy sources, electric mobility, etc.
Certain industries such as plastics, packaging, consumer electronics, consumer packaged goods, fast moving consumer goods, pharmaceuticals, textiles, and apparel have started adopting and deploying steps related to material returns, segregation, re-usage, recycling, and refurbishing. In this regard, the role of ESG financing and green financing is beginning to gather pace, although there are challenges with regard to the efficacy and effectiveness of these models on the ground. It is also necessary to be vigilant and guard against ‘Greenwashing’.
Ethics & Diversity, Equity, Inclusion (DEI): Responsible and ethical supply chains are no longer an exception. To build lasting customer and consumer goodwill, it is essential to adopt and
demonstrate behaviours that build trust in the brand, product or service. In the light of the 17 UN SDGs mentioned in the previous section, it is incumbent on supply chain and logistics professionals to ensure adherence to fair business practices, labour laws and dignity of work.
The workforce deployed at the various operating sites such as manufacturing units, warehouses, distribution centers, fulfilment centers, dark warehouses, wholesale outlets, retail outlets, etc., need to be provided proper and safe working conditions. Any malpractice or fraud needs to be brought to light and thoroughly investigated. Yes, I do agree that this is easier said than done. However, any supply chain organization that demonstrates honest and ethical behaviour through their interactions with suppliers, customers, dealers and other logistics service providers, would sustain in the marketplace and as a result, garner financial benefits.
The other aspect in supply chain organizations is the increasing impact of diversity, equity and inclusion. There is a conscious effort being made to make the hiring, on-boarding, career planning and retention processes as diverse and inclusive as possible. In my opinion, this trend and positive development will gain more traction in the coming years and would only contribute to the quality of work, productivity, output and richness of discussions and debates within and outside organizations.
Digitalization and Technology: The critical role of digitalization, technology and automation tools in the logistics and supply chain function and industry as a whole can neither be ignored nor undermined. It is pertinent to note that the government’s draft ‘Digital Personal Data Protection Bill, 2022’ being reviewed, discussed, and debated, would go a long way in ensuring that consumer data is safe, protected and used for legitimate purposes with the consent of the end user. The plethora of online applications and related software bring with them issues related to data privacy, safety, and security.
Post GST implementation, supply chain and logistics systems have become more agile and responsive. It would
have ramifications for network design with respect to facility location, sizing, inventory placement, customer service levels, etc. This has led to the development and finetuning of optimization tools, network modelling, simulation tools, decision support systems, data flows and system integration.
Moving forward, the following ten elements or building blocks would act as growth drivers and enablers:
Human Capital: Just as any other function, our domain too needs skilled manpower across upstream and downstream functions. Re-skilling and up-skilling of logistics and supply chain professionals is an ongoing process. Both online as well as offline modes could be used.
Start-up Ecosystem: Start-ups have been playing a crucial role in the logistics and supply chain space in the last 8-10 years. A case in point is the role of LSPs, particularly logistics technology firms that provide their clients with last mile delivery, track and trace, performance monitoring and other smart solutions spanning inbound and outbound logistics.
Government Policies: The role of our central as well as state governments cannot be overlooked. A considerable amount of work is being done in this direction. The NLP, PM GatiShakti NMP, industrial and trade policies are prime examples of enabling initiatives to ease operational bottlenecks, bring about greater collaboration among project implementation ministries and partners, reduce operating costs and enhance customer service.
Compliance Mechanisms: For certain industries such as Pharmaceuticals, Food and Beverages, Agricultural, Commodities, etc., compliance with local and international laws is necessary. For other sectors, the scope of compliance needs to be extended to sector specific internal and external rules, processes, SOPs, and policies.
Infrastructure Investments (Both Public and Private): From a macroeconomic perspective, credit growth has outpaced deposit growth with bank lending witnessing steady growth in the last few quarters. This augers well for our economy, which shall see increased capital spending in the coming financial year – be it in manufacturing, integrated logistics parks, transportation, roads, highways, ports, dedicated freight corridors, container terminals, container freight stations etc. A highly positive development is the ‘Industry’ status accorded to the warehousing sector.
Environment, Health, and Safety: EHS has seen renewed thrust in the last two years after Covid-19 struck the globe in 2020. We have been seeing an increasing level of awareness, deployment, and adoption across the end-to-end supply chain spectrum within companies from all sectors including products and services.
Logistics on Demand (Logistics-as-aService): In my opinion, this is an area that would evolve going forward. LSPs could provide logistics services to clients and customers based on a pay-per-use or subscription model with cost structures devised accordingly. Also, there could be scenarios where transporters and warehouses could share infrastructure to reduce dead hauls and optimize truck loads and warehouse space utilization. This is easier said than done and would entail trust among partners in addition to the deployment of appropriate smart technologies.
Resource Sharing and Collaboration Models: This is a focus area connected with the point above. Resource sharing could extend to all the logistics and supply chain resources and assets. The concept could be extended to areas such as Production-as-a-Service, Warehousingas-a-Service, Transportation-as-aService.
5G Connectivity: The future of connected & smart warehousing and transportation cannot be envisaged without quick and efficient system connectivity and network infrastructure. Here, the 5G enablement policies and initiatives
being undertaken by the government as well as telecom service providers and gear manufacturers would prove to be a gamechanger in the next 3-4 years.
Sectoral Focus: Finally, specific sectors need specific initiatives and ongoing improvement projects with respect to logistics and supply chain initiatives. Although the underlying principles would not change, the complexity and the degree of change we would witness in the next 3-5 years would vary. All in all, there has never been a better time to be a part of our growing and evolving domain.
Finally, the National Logistics Policy (NLP) in conjunction with the PM GatiShakti National Master Plan and the ongoing Sagarmala (ports and inland waterways infrastructure modernization and connectivity) projects, Bharatmala projects (Roads and highways connectivity), multi-modal logistics parks (MMLP) projects and the dedicated freight corridors (DFC) networks would pave the way for our country to reduce our logistics costs from 14% of GDP to less than 10% of GDP and to improve our global ranking in the Logistics Performance Index (LPI). These initiatives that aim to seamlessly connect and bring the various project planning and execution bodies together would further strengthen India’s competitiveness in the manufacturing and exports sectors in the next 10-15 years.
Our journey has only just begun. We have come a long way and have a long and arduous journey ahead. However, the intent and direction are very clear, and the benefits would follow in the years to come. All in all, this is the best time to be a logistics and supply chain professional and be a part of this evolutionary and exciting journey.
Corporate Sustainability in India is not sustainable, especially in its current state of awareness with the key decision makers in the higher echelons of the corporate world. Contrary to the general belief that corporates choose to merely comply, we are witnessing increasing number of corporates resolving to incorporate sustainability in their business. This growing intent is not adequately supported by the conviction that Sustainability can make a material impact on both the Business financial results and on the environment. Through this article, Capt. Tapas Majumdar, Founder Director, The Sustainability Practitioners makes his case on the Business and Environment impact of Sustainability.
GROWTH of Sustainability this far is largely driven by investors and regulators. This is especially true for those doing business with EU, who are currently leading the change. There is a definitive shift; if the
CEO of BlackRock, Larry Fink, annual letter to CEOs is anything to go by. Larry acknowledges that the events of 2020 and the need for companies to transition to a net-zero economy and that throughout 2020, investors invested 96% more in
Up and Business Closure.
sustainable assets, over 2019. The stellar rise in the number of ESG funds in India and globally, is another strong indicator of the definitive shift of investments and regulations towards ‘Sustainable Businesses’.
There are a growing number of countries outside the EU who are picking up the clue and have put in place their own Sustainability agenda and frameworks, like, China, Singapore, South Africa, UAE, Australia and New Zealand and India, to name a few. Sustainability has decisively moved from ‘Nice to Do’ to a ‘Must Do’, we now need to move towards a more purposeful and impactful oriented sustainability agenda. It is now that companies can lead the change rather than trailing the change and stay ahead of the curve because we are already seeing sustainability impacting business.
Material Impact Point 1: “Sustainability is impacting business already. It is not about your product or service being Environment friendly, it is about the way you manufacture and / or deliver your services.”
Tesla was removed from S&P 500’s ESG index in May 2022. The regulator explained that Tesla’s “lack of a low-
carbon strategy” and “codes of business conduct,” along with racism and poor working conditions reported at Tesla’s factory in Fremont, California, affected the score. Tesla shares fell 6% and it looks like they will close year 2022, 30% lower. ExxonMobil, in the same period, was preferred due to its improved performance on Sustainability parameters.
Material Impact Point 2: “The quality of your sustainability report is assessed by the impact of your sustainability practice and the data points are collected not just from within the company, but external sources as well”.
Speaking of Business impact, sustainability practice was always understood to be practiced by your company. While this still stays relevant, those whom with you do business with are also increasingly getting roped in defining your sustainability practice, and it is impacting your business. The point in case is Adani Ports and Special Economic Zone Ltd. The company had a commercial contract with the Government of Myanmar for developing some of their commercial ports. With the military takeover, regulators in various
geography discouraged business with Myanmar due to reports of human rights violation. Many companies, including Adani Ports and Special Economic Zone Ltd., were impacted. Adani Ports and Special Economic Zone Ltd., was removed from the ESG listing by the regulator. Adani Ports and Special Economic Zone Ltd. experienced an exodus of investors in the run up to the expulsion, and they saw a dip of 7% in their share that took nearly a quarter to recover. Additionally, they had to exit the investment and had to write down of appx. US$127 million.
Material Impact Point 3:
“Sustainability has decisively moved towards inclusion of those whom you do business with. The quality of your Sustainability practice will allow you a premium with regulators, investors, suppliers and customers. Leading the change will make your business more resilient.”
All Birds, a company listed in the USA, that manufactures shoes, adopted ‘Sustainable Manufacturing’. They choose to manufacture their shoes using marina wool that used renewable and natural sources for manufacturing. While lifestyle revolution was focusing on
clothing, shoes however was not keeping up, which was their opportunity. All Birds, through inclusion of sustainability in their business strategy, not only got the focus back on shoes, they also created a niche segment of high end “Sustainable” shoes. Since listing in 2019, All Birds had lost 75% of its market cap, and had never made a profit since its inception in 2015 till early 2022. However, through all its turns, All Birds never saw a slump in demand on either side of the Atlantic, including in Australia and New Zealand and has already gone through five rounds of funding till date. It continues to remain investors preferred stock.
“Sustainability is a Strategic Function and influences strategic outcomes that relate to profitability, continuity and decisively announces the responsible credentials of your business with respect to the environment.”
While investors and regulations are the key drivers of the sustainability efforts globally, the main beneficiary is your business itself. The main reason why you should engage in Sustainability Practices is for your own business growth. The compliance and branding necessarily needs to be a subset of this. Heineken sets the right example of how a company can benefit from sustainability and they achieved this much earlier in 2015. From responsible sourcing from local farmers in Africa to reduced energy consumption and increased use of renewable energy and inclusion of circular economy in waste disposal is a good example of a company integrating sustainability in deriving profitable, equitable, inclusive and responsible growth.
Material Impact Point 5: “A going concern already has an ESG footprint. The key is to align it with the profit motive in an environmentally responsible manner. It is not the big thing that matter, it is the smaller things that are the gamechanger.”
Sustainability needs to be aligned to business. This starts with a serious introspection of the risks and opportunities (and I emphasize opportunities) the business faces currently and in the foreseeable future. This is done through a material mapping activity. All aspects of risks and opportunities to the business must be identified and then plugged into E, S and G categories, for further consideration of risk mitigation and opportunity maximization. Your business is a going concern, so it has been dealing with risks and opportunities in its normal course. One of the earliest published material map that gave a clear linkage to business was that of Nestle1. Though not mandatory to publish, the company did publish the material map. This brought to light the clear thinking within the company and the linkages to business.
Improving ESG performance can also help lower operating costs. There are a number of ways ESG can help lower operating expenses. ESG often focuses on reducing energy consumption, which can help companies save money on utilities.
Gazeley is a leading developer, investor and manager of European logistics warehouses and distribution parks with a 17 million sqft portfolio concentrated in the strategic logistics markets of the UK,
Germany, France and the Netherlands, in addition to its operating portfolio, which is 98% leased to blue chip customers such as Amazon, UPS and Volkswagen. The design integrates ESG factors in construction of the logistics warehouse.
In 2020, GLP, investor and developer of logistics warehouses and distribution parks, announced the delivery of the first net zero carbon development to be officially verified as Net Zero carbon for construction in line with the UKGBC Net Zero Carbon Buildings Framework Definition. Overall, the design has resulted in a 25.8% reduction in embodied carbon compared to a standard logistics building. They achieved this through a combination of initiatives that included roof top solar power generation and ergonomically designed workplaces. These, in turn, reduced the energy bills, reduced waste, and improved productivity. The occupants enjoyed the benefits of a reduced operating cost at greater productivity.
With the right and well planned ESG implementation strategy, the impact on cost of operations can even exceed 25% and that is significant. In addition, ESG emphasizes strategies to reduce water and raw material usage. As these resources become more expensive, ESG can help companies save money by eliminating waste and improving resource efficiency. ESG is GOOD for Business. Early adoption of ESG, especially for startups can be the difference between surviving and thriving.
In conclusion, I would say that to be in control of your sustainability agenda, is the best way to maximise from it. To maximise, it necessarily needs to purposeful. Sustainability strategy is made at the corporate level, however the success of it is measured at the impact level. Sustainability practice of your company must align to business and environment goals and ensure a transparent and verifiable method for stakeholders to validate. The marketability of such document then becomes incidental and not core, paving the way for business continuity and greater acceptance as an environmentally friendly company.
The opportunity for getting a head start is NOW.
Though Supply Chain Finance (SCF), as a concept, has existed since the 1990s, it is finding greater relevance in today’s market. SCF continues to gain pace, with global volumes growing by nearly 50% from the pre-pandemic level and significant increase in utilization, as per some research reports. It is expanding faster than ever for new as well as existing businesses. This feature story captures the growing expanse of SCF and what lies ahead…
GROWTH in supply chain finance has been ongoing for over a decade with the pace accelerating in the past two years and showing no sign of slowing down. According to Allied Market Research, a strong surge has been witnessed in the acceptance of supply chain finance in emerging economies to drive the growth of the global supply chain finance market. The COVID-19 pandemic substantially enhanced the demand for new technologies including electronic invoicing, artificial intelligence, smartphone, and mobile internet access, and blockchain in business transactions, which propelled the growth of the global market. The global supply chain finance market generated $6 billion in 2021, and is projected to reach $13.4 billion by 2031, growing at a CAGR of 8.8% from 2022 to 2031.
According to FCI, the global representative body for factoring and financing of open account domestic and international trade receivables, 2021 world factoring statistics report, the factoring and receivables finance industry volume witnessed a significant growth of +12.6% in 2021. This increase comes after the devastating impact of Covid-19 in 2020, which caused a
staggering decline of -6.5% in volume, the single worst year reported by FCI since it began reporting the global statistics in the late 1970s. Compared with the previous year’s €2,724 billion, the 2021 estimated volume of €3,069 billion represents the first double-digit increase reported in over two decades. Each region was affected slightly differently and the gradual ‘return to normal’ has been different, with some showing more progress than others.
The Asia Pacific region represents approximately 24% of global volume with €726 billion, which experienced an increase of +4.2% over 2020. In 2021, the volume of €538 billion relates to the Greater China region, including Mainland China (+2.7%), Hong Kong (-3.8%), and Taiwan (+15.3%). Japan displayed a growth rate of +14.5% reaching €59 billion. India experienced the most explosive growth rate of +141% with €8.6 billion.
A research paper by Asian Development Bank (ADB) stated that banks and traditional financiers have struggled to meet the rising demand for supply chain finance (SCF), including the payables
finance variation. A fundamental issue many financiers face is the lack of costeffective infrastructure, which presents a critical barrier to carrying out SCF at scale.
The 2020 Global Survey on Trade Finance by the International Chamber of Commerce identified the lack of a dedicated SCF platform as the major challenge banks face in delivering SCF, with 39% of banks reporting this as a primary area of concern. The survey found that 64% of global banks currently offer SCF and the majority that do (65%) have developed a proprietary system to service their SCF offering.
In recent years, a cohort of financial technology (fintech) providers focusing on SCF have emerged. They are incorporating technology to help bridge the financing gap by creating platforms, which can effectively service suppliers and buyers on a global scale. There are currently around 255 fintechs, which have developed a dedicated SCF offering, often linking their SCF offering into a broader trade digitisation platform. These companies have attracted $5.6 billion in cumulative equity financing since 2000, and they continue to grow. However, these fintechs often don’t have the wherewithal to act as lenders.
In such situations, they often partner with financiers, associating with multiple financiers, to reduce risk and dependency on a single source of funding.
New age technological developments provide better ways of managing finances and minimising the financial risk taken on by different entities involved in these supply chain financing agreements. An increasing number of trade finance companies are utilising the expertise of financial technology companies to track changes in the market and manage the complicated logistics involved in international supply agreements.
Technological developments such as Machine Learning, Artificial Intelligence, Blockchain, Internet of Things can prove to be beneficial for the SCF industry going ahead. For instance, the Internet of Things (IoT) can be implemented at various stages of supply chain financing to make the entire process more transparent, efficient, responsive, and reactive. Additionally, supply chain financing can deploy AI to improve working capital and empower greater access to the suppliers.
Data analytics and big data are being used by companies to spot gaps in international trade markets, which could lead to new products or improved methods of resource distributing from suppliers globally. Data analytics is also finding increasing acceptance in tracking shipments, analysing the creditworthiness of buyers, creating risk-free money lending agreements, analysing the efficiency of supply chain trade, and so on.
Banks and other lenders also have potent opportunities by utilising the data available to them. Data analytics can help companies in analysing the behavior of companies when it comes to funding their suppliers as well as their payments and receivables pattern. Based on that, companies are in a better position to rework their methods of doing business to eradicate any possibilities where there are chances of a potential money loss.
Financing firms are deploying data analytics solutions to gauge the financial muscle of companies, which facilitates them to create an effective financial agreement with their suppliers. Analysing
a complex set of financial information via computer has the potential to generate different solutions for working with potential risks.
Technologies such as artificial intelligence would further advance in the world of supply chain finance. These technological learning systems could assess data on a global level to provide insight into the bigger picture of global trade, as well as individually discover ways in which companies can benefit from a particular financing method.
McKinsey estimates that an improved global trade finance ecosystem could help to create a significant proportion of the 600 million new jobs needed by 2030 to absorb the growing global workforce, especially in the face of increasing automation, which is removing many low-skilled jobs within sectors such as retail, distribution, and manufacturing. Recently, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) with a view to enhance the transparency about the use of supplier finance programs for investors and other allocators of capital.
The ASU affects buyer companies that use supplier finance programs in connection with buying goods or services. By
entering into supplier finance programs with finance providers, suppliers have the option to be paid by a third party in advance of an invoice due date, based on invoices that the buyer has confirmed as valid. These arrangements are also commonly known as reverse factoring, payables finance, or structured payables arrangements. “The FASB’s new ASU responds to requests from investors for greater transparency around a buyer’s use of supplier finance programs,” stated FASB Chair Richard R. Jones. “It enhances transparency by requiring new disclosures intended to help them better consider the effect of these programs on a company’s working capital, liquidity, and cash flows over time.”
Under the new ASU, a company that uses a supplier finance program in connection with the purchase of goods or services will be required to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.
According to experts reacting to this announcement, “While greater disclosure might be the ‘Gold Standard’ for analysing behavior and transparency in payment terms, supply chain financing is still at its infancy and hasn’t reached that level of maturity. For this to happen, the
The global trade financing gap—the difference between companies’ demand for financing to support their import and/or export activities and the sum available from lenders—grew to $1.7 trillion in 2020 from $1.5 trillion in 2018. This estimate for the global gap likely increased to at least $2 trillion in the following years due to heightened economic and financial uncertainties. This is felt most acutely by SME suppliers, which represent the bulk of financing rejections. Compared to larger corporates, SMEs face considerably more challenges to accessing financing because of a lack of demonstrable creditworthiness, an inability to offer collateral, and low financial and technological literacy, among other reasons. Research shows that women-led SMEs are hit particularly hard by these funding issues. Moreover, compliance requirements, including anti-money laundering (AML) and know-your-customer (KYC) regulations, are becoming important considerations for financiers as they introduce complex resource-intensive and expensive administrative workflows, which may discourage regulated lenders from working with smaller companies because of the low value of the transactions; and this gets worsened if the volumes of the transactions are very high.
Source: ADB
industry should first establish a marketdriven and data-signaling infrastructure that provides the framework to develop acceptable payment terms and working capital efficiency for all stakeholders involved.”
The next step in this evolutionary journey, according to Bank of America, is going to be ‘Supply chain as a Service’. This exciting blend of multiproduct platforms, cloud-based app technologies and AI can help you create a custom ecosystem based on customers’ unique needs, enabling them to embed financing solutions directly into their ERP system.
Significant developments are at play when it comes to supply chain financing in India as well. Recently private sector bank IndusInd Bank announced its partnership with Asian Development Bank (ADB) to create a partial guarantee programme to promote supply chain finance solutions in India. The initiative will have an initial outlay of $70 million (Rs560 crore). IndusInd already has a few product structures for SCF, and a digital portal called ‘earlyCredit’ to enable supply chain financing for corporates, suppliers and dealers.
Axis Bank has also signed an agreement with ADB to enable it to provide more supply chain finance to small and medium-sized enterprises, with a focus on ESG and priority sectors. The deal, which takes the form of a partial guarantee facility agreement under the ADB’s Trade and Supply Chain Finance Programme (TSCFP), will see the
Experts are mulling over the scope of non-fungible token (NFT) in supply chain financing. NFTs are digital tokens that can represent ownership of unique items and can only have one owner at a time. If applied to common trade finance instruments like a promissory note or a bill of exchange, these technological traits can lay the necessary groundwork for process digitalisation. The metaverse also has implications for trade beyond just transactional efficiency. Over the years, fast-paced technological advancements, be it the telegraph or the internet, have only strengthened cross-border commerce and made trade more efficient. Going by the fast shaping up trend, the metaverse might just be the next development in line.
ADB provide guarantees to the lending done by Axis Bank to support supply chain financing for impact sectors. The agreement is scalable, with an initial foundational ramp up of nearly US$150mn.
Deutsche Bank is also looking at supply chain financing as an emerging asset class. According to company officials, “It has much lower volatility or lower correlation compared to other types of assets. Its performance is also much more stable. That’s why distribution has become an important area in order to further grow the supply chain finance business.” There is a greater traction of new investors showing strong interest in trading such assets. Deutsche Bank has been actively investing in enhancing such capability. The bank has set up its own digital supply chain finance platform and launched a new supplier portal
Source: Trade Finance Global with a self-onboarding feature. It has also come up with a user-friendly data analytics dashboard that gives clients a clearer overview of their payables and receivables.
Together with more than 200 banks and corporate sustainability leaders, the International Chamber of Commerce (ICC) is currently developing the first industry taxonomy to define what constitutes a sustainable trade finance transaction – filling a major gap in existing practice. According to John W. H. Denton, Secretary General, International Chamber of Commerce (ICC), “We see a remarkable opportunity to align the trade finance market – currently valued at US$5trn annually – with the Paris goals and sustainability objectives. To deliver on these, we need the collective cooperation of the private sector and financial institutions with governments to mobilise much needed climate finance and to scale-up efforts to mitigate and adapt to climate change.”
Times are rife for a great change and for that, all the stakeholders – regulatory bodies, financing firms, technology players and corporates – need to play their part and ensure that supply chain financing is a secure, transparent, and hassle-free affair.
