Lakshya - A Beacon of Knowledge, September 2019 Edition

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EDITOR’S LETTER

“"With Evolution, Changes happen in every part of the world every day, every time."”

Welcome to the fourteenth edition of “LAKSHYA”, our monthly supplement designed for people who dare to think above the average and believe in connecting the dots. In an age where technology has taken over every sphere, information is abundant and data is omnipresent, we have planned to bring to you a collection of thoughtfully created and carefully crafted pieces of work by some bright aspiring minds of ICFAI Business School, Hyderabad on the current trends and receiving close review in the field of Operations Management and their relevance in different industries.

From the ninth edition, we created a new segment, „The Corporate Angle’ where article will be featured from prominent business leaders which will enlighten minds of young managers and business enthusiasts. IBS Hyderabad and Club Kaizen express a sign of gratitude to all corporate leaders for taking out time and scripting their thoughts for our magazine.

We look forward to providing you with some valuable insights and inculcate the passion for reading. We hope that you enjoy this issue and do let us know if there are any topics you‟d look forward to be covered in upcoming editions.

Please write to us and become a part of this discussion Email ID: kaizenclub.ibs@gmail.com An Initiative by:

MAHESH HIREMATH JOINT SECRETARY – KORE Kaizen – IBS Hyderabad Batch 2018-20 1|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

CONTENTS

From the Mentor’s Desk

03

The Corporate Angle: HR Decisions by AI will be hard to Implement!

04

Outcome of Augmentation for Café Coffee Day

06

Brexit : Exodus, Reckoning & Sacrifice

09

Trade War & its Effect on Global Supply Chain

11

Supply Chain Management – Procter & Gamble

15

Supply Chain Management & Recession

19

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From the Mentor’s Desk

In the era of competition, it is imperative for students to be prepared for the ever-changing business environment. Knowledge creation plays an important role to learn to tackle the dynamic nature of business.

I appreciate and congratulate the initiative of club KAIZEN for bridging the gap between corporate world and academia through LAKSHYA which is an excellent platform where industry practitioners, academicians and researchers can share their knowledge and experience, acting as a beacon guiding students to reach their goal.

My best wishes to club KAIZEN in their endeavour of knowledge creation through LAKSHYA.

Nishit Kumar Srivastava Mentor, Club Kaizen

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The Corporate Angle HR Decisions by AI will be hard to implement!

Mr. Abhijit Bhaduri Founder, Abhijit Bhaduri & Associates, Keynote Speaker, Author, Columnist

HR decisions by AI need data about you. Let's see where that could be. Your face is already in more databases than you would like. Your mobile number is being collected everywhere.

Restaurants ask for it routinely (I don't ever provide it). Security teams at offices and even at apartment complexes ask for it. Several offices jot down the details of your government id.

The moment you use your credit card, the details of your purchase are sold to several buyers that like to build an intimate profile about you. If your photos have been uploaded by your friends on social media then your efforts at staying off the grid are futile.

Your data is everywhere When you apply for a job, you submit enormous detail to the potential employer. Your social media posts are screened in organizations, before you enter. Once you join, varying degrees of data gathering are in progress every day.

Marking attendance by biometric, face recognition and geo-fencing are slowly becoming the norm. The employer any case has your performance data, records of all your phone calls and emails. Your comments, likes and posts on the intranet or even the courses that you took, or did not complete reveal much more about you than you imagine.

Facebook Like, can be used to automatically and accurately predict a range of highly sensitive personal attributes including: sexual orientation, ethnicity, religious and political views, personality traits, intelligence, happiness, use of addictive substances, parental separation, age, and gender. The analysis presented is based on a data set of over 58,000 volunteers who provided their Facebook Likes, detailed demographic profiles, and the results of several psychometric tests. Computer models only needed about 100 likes to outperform an average human judge in their sample.

HR decisions by AI HR teams in organizations are under pressure to start using AI in making decisions. This is a slippery slope. Human beings are biased. Imagine how many of our prejudices get triggered 4|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

off simply by looking at information on the resume. The name tells us the gender of the person and in many cases the place of origin and much more. Knowing the year of graduation gives us an approximation of the age. The name of the college and the list of employers all trigger our prejudice.

1. Eliminating prejudice?

In my book Don't Hire the Best, I have shown that most organizations have never trained their interviewers. Nor do they ever test how accurately the interviewer has predicted performance of the candidates hired. Confidence and language proficiency is often seen as an indication of proficiency. It is not. Yet, interviews remain the basis of making most hiring decisions. When "blind" auditions have been used, more female musicians have been hired.

2. Being objective is not always right Once we define an objective criteria, eg. height, weight etc, the algorithm will clinically eliminate anyone who does not meet the standards. Imagine eliminating someone who misses the height requirement by a millimeter but more than makes up for it by sheer grit and resilience. AI does not care to go beyond the objective, universally acceptable standard that it has been told to look for.

What is optimal is not always fair There is the old joke about an algorithm analyzing the utilization of musicians in a symphony. Given that the trumpet and saxophone were played for less than 30 seconds in the entire composition, they should be laid off. The algorithm may be right about utilization, but may not meet a music director's vision. Imagine using the same algorithm to define elimination of some divisions of our Army because of their low utilization. What is optimal is not always right.

In hiring someone, the algorithm needs a human to define what the "correct answer" to look for. What should the ideal candidate be? What criteria should the machine look for, while comparing two candidates? While the machine may recommend a candidate who has a higher degree (eg a candidate with a Masters degree is preferred to a candidate with a Bachelors), it may eliminate a candidate who is a better team player because that is hard to define.

As HR is under pressure to eliminate human bias by using algorithms, the decision suggested by the algorithm may be objective and easy to defend, but may be hard to implement if it is seen to be "unfair". What is fair to me may be unfair to you. That seems to be the path HR is being goaded to adopt.

Be careful what you wish for, it may come true.

The author is a Talent Management practitioner with global experience across various sectors. He is the ex-Chief Learning Officer for Wipro, a role he worked at for seven years.

As an alumnus of Microsoft, PepsiCo, Colgate and Tata Steel he has been exposed to globally acknowledged best practices in leadership and culture building. Forbes described him as “one of the most interesting Globalists�. LinkedIn voted him as a must know writer.

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Outcome of Augmentation for Café Coffee Day

Nishu Kumari Kejriwal (MBA 2019-21)

July 31, face wrapped in blood, fists closed tightly, body fished out from the backwaters of Netravati River. Was this the destiny of the man behind Coffee revolution in a Tea-loving nation?

V.G. Siddhartha, Café Coffee Day founder, was the only child of a wealthy family of coffee planters with more than 300 acres of land from Chikmagalur in Karnataka. He established his own Stock Trading Company named Sivan Securities in Bengaluru and also managed his family coffee business simultaneously. Siddhartha knew the potential of coffee. He started liberalization on supply of coffee beans with the help of the then Prime Minister, Mr. Manmohan Singh in the international market and set up Amalgamated Bean Coffee (ABC) Trading Co. in 1993.

During his visits to Singapore, he got very inspired with the trend of coffee shops there and wanted to set up one of those in Bengaluru. Taking steps towards his dream, with the help of a friend he was successful in setting up his first cyber café in heart of Bengaluru. The main idea of his business was “to sell coffee but in a place where internet is freely accessible”.

Siddhartha structured this business into COCO Model- Company Owned Company Operated model and also put emphasis on Backward Integration so that they weren‟t dependent on any external parties. For this, the company grew their own coffee beans, roasted them, brewed them and served in their own coffee shops to their very own customers. For proper execution of all these processes, coffee beans that grew in over 10,000 acres of land were roasted and packed at Chikmagalur itself. This roasting was done at special equipped units with highly experienced personnel to maintain the quality standards. Now these coffee beans were transported to respective cafes through different distribution centers.

CCD diversified its offerings by introducing different varieties of food items and beverages under its name. They never failed to customize according to the varying demands of their customers based on geographic or demographic factors. These elements contributed to the increasing supply chain to 450 vendors which included suppliers from domestic as well as 6|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

international market. The emphasis of their supplier base was strictly adhered to QCD metrics (Quality-Cost-Delivery). This means that quality, cost and on-time delivery was the utmost priority in the whole supply chain of CCD. CCD differed from its competitors in maintaining its outlet as a hospitable venue. Be it young couples meeting on their first date or an office discussion over a cup of coffee or any casual meetings. Their clean outlets and welcoming staff were always constant.

CCD succeeded in taking Coffee not only in metro cities but across the country. They maintained the same level of service throughout their outlets. The varieties of coffees which they provided were not only just any energizing brew but proved to be the Taste of the Youth.

The marketing vision of CCD was “a lot can happen over coffee”. Gradually with the opening of each outlet, it became the largest Indian company to export coffee. They own around 1750 cafes as of now in India across 198 cities with 60000 vending machines. They also placed their foot in Europe, Malaysia, Nepal and Egypt. Everything was going well. But, all days are not the same. Time changes for everyone. When you are at the top, the only place where you can go is down.

Setting up of each café required a lot of investment and the whole business idea on which CCD was running was debt-centric. This means money was borrowed from market to expand the business. Major costs included capital cost- land, building, electrical equipment etc. which could not be covered by the company‟s profits alone. Eventually they landed up in a debt of around 6600 crore as on March 2019. They generated revenue of Rs 4264 crore in the same financial year out of which Rs. 143 crore was profit. This amount was obviously not sufficient to cover the huge debts that the company had. The company was bleeding due to very high operational expenses of each outlet. The issue worsened because more number of short term loans were taken in order to repay the long term debts. As a result, debt was always constant in this business model.

Another loophole into this matter was that the outlets of these cafes were not evenly distributed and some popular areas like the Connaught Place in Delhi had around 10 CCD outlets, all concentrated into one geographical area. This resulted into uneven distribution of customers and irrelevant spending of the operational expenses for cafes which could not attract customers.

All of this came into media when a man in Singapore was found with Rs 1.2 crore by the Income Tax department who claimed that this money belonged to V.G. Siddhartha. 20 such raids followed in different outlets and an unaccounted income of Rs. 362 crore came into picture. People started losing interest in investing any further amount in this business. Income Tax department seized all the shares. Consequently, shareholders even tried to buy-back their shares. BSR Associates (main auditor of CCD) gave a statement admitting that they haven‟t conducted any audit of 40 subsidiaries that belonged to CCD. Coca Cola which was in exclusive talks to acquire a significant stake in CCD didn‟t take any further steps into the 7|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

deal. A valuation of around 10000 crore from Coca Cola was expected but unfortunately this could not happen.

“My intention was never to cheat or mislead anybody and I have failed as an entrepreneur” last words of Siddhartha written in a letter before taking his own life. 37 years of hard work, 25000 crore of net worth, brand valuation of 8000 crore, all gone into vain within a matter of seconds. Siddhartha blamed tax department and pressure from PE firms as the main factor behind this step.

This goes without saying that the whole operations of CCD got affected after this tragedy.

The company has delayed in debt servicing owing to high repayment obligations and low level of liquidity. Due to enhancement of the refinancing risk in the company, ICRA downgraded the long-term rating of CCD to “D” from the previous rating of “BB Plus”. The company is deleveraging its fixed assets in order to enhance their liquidity and partial payments of its debts. The Board of Directors have recently approved the sale of Global Village Technology Park in Bengaluru to Blackstone for Rs. 3000 crore.

We can never have V.G. Siddhartha back but there are certain questions which must be answered before they arise again. Was this really a suicide or just a repercussion of the extreme pressure that was on Siddhartha for repaying the debts? Is the credit facility available for entrepreneurs in the economy optimal? Isn‟t there a need for laws and policies that could govern the capital structure in businesses? Did the business model of Siddhartha fail or did he fail?

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Brexit – Exodus, Reckoning & Sacrifice Aanchal Verma (MBA 2019-21)

Brexit comprises of two words i.e. British + Exit. Brexit was a decision taken by the United Kingdom in a June 23, 2016 referendum to leave the European Union and around 51.9 % citizen voted and supported leaving Europe. It's a two year process which has been extended several times, now the current deadline is of 31st October 2019. This two year period of withdrawal negotiation economists says it is not a good move as it will reduce UK's per capita income.UK would also lose the benefits of free trade with neighbours .However Brexiters supports this idea , according to them leaving EU would save the cost as country would no longer contribute in EU's budget. Also according to them Britain had a large trade deficit with the EU and UK is one of the key financial centers in the world while EU's economy is shrinking and population is increasing. So as per the Brexiters feels tax payments to the EU, the level of bureaucracy, and the changing population of EU are all contributing to greater cost for the nation. So UK doesn't need EU. India is one of the most moneymaking markets for foreign investors, any major change across the globe – be it political or economic – is bound to have an impact on it. India enjoys economic, trade, political and cultural ties with the United Kingdom. So brexit will also have huge impact on India considering the export earnings and other inflows from the European Union and the UK. Other impacts on India can be:India is presently the second biggest source of FDI (Foreign Direct Investment) for UK, but its exit will not be as attractive destination for Indian FDI as before.

Sensex and Nifty will fall in the short run.

Pound rate might fall against the dollar and thus the rupee.

Indian pharmacy industry which has more exposure towards Europe will also be affected.

Foreign trade is a major source of our economy which primarily involves export and import, hence assuming the future's impact businesses are finding that it‟s necessary to stockpile goods and resources, just in case things don‟t go to plan as things look uncertain now.

Businesses and supply chain usually uses VAT MOSS database, if this comes to a stop , 9|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

Brexit won‟t just be an inconvenience for businesses who will need to change declaration measures but also other tax authorities who will lose use of a system already delivering effective and efficient tax collection. Blockchain could infinitely change the way that businesses transact and manage their supply chains, as well as the way that tax authorities supervises the businesses and collects tax in the future. Big Data analytics and AI can also help these companies to overcome economical uncertainties.

Supply chain management during this situation is very important to sustain in best possible speed. Shipping and delivery in fastest, cheapest and most sustainable routes is also one of the challenges.

Export in UK will increase to make more money.

Financial Stanley predicts that UK‟s economy will grow with this.

Institutions

like

Morgan

Our Indian businesses and operations might face the effect of rising cost.

Products and labour are all going to cost more and distributors will undoubtedly have to undertake cost reductions to offset these costs.

Retailers are already grappling with fluctuating exchange rates and their impact on global supply chains.

If you‟re a wholesale or distribution business and you want to continue to grow and succeed after Brexit, then there are some clear opportunities for you. Ramping up the export side of your business, making necessary cost reductions and improving business automation and export processes will all help turn Brexit to your advantage and ensure your business is still booming after 29th October 2019.

According to the new report it is said that other industries such as textile, Brexit could benefit. UK's textile and clothing exports are more competitive but many foreign suppliers say UK has become less profitable for them.

Major Impact of Brexit is not just in EU but many parts of UK will also be impacted, one of them is Greater Manchester. Greater Manchester is into many deals and trading contracts with EU but Brexit will restrict them which will majorly impact the Greater Manchester's economy. Great Manchester is very dependent on external funding sources after Brexit they will be solely dependent on central government which again a disadvantage as political funding in UK is not at all easy. It is also slowing down Manchester's city Centre construction boom.

However to deal with all these issues Greater Manchester has started working on their strategies to extend and deepen trading relationships with the other business hubs. They are working to raise their productivity and progress so that Greater Manchester's firms and labour market can easily deal with the rampant of Brexit and can also take advantage out of the possible opportunities.

“The biggest uncertainty is that we don’t know what the challenges are going to be.” Daniel Rubin, Dune founder and executive chairman 10|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

Trade War and its Effect on Global Supply Chain Sanjana Bhardwaj (MBA 2019-21)

Uncertainties such as Geopolitical and macro-economic highlighted by Brexit and the simmering trade war between the U.S. and China have major implications for global companies. These sudden implications in tariff barriers, trade rules and the economic outlook have the potential to damage supply chains by remarkably boosting costs and significantly increasing risks for companies. No one can predict the occurrence of such an uncertainty therefore, the corporate treasurers should be prompt to focus on building optionality into everything they do so as to increase the flexibility of their treasury and operating models.

Under supply chain, companies need to reconsider their sourcing locations and how are they going to move physical goods across the organisation right from manufacturing to sales.

Supply chain also gets affected at multiple points due to potential imposition of customs barriers. In order to obtain flexibility, corporates need to reassess their supplier base and avoid overconcentration. Otherwise, there may be a need to shorten supply chains by shoring or regionalizing the supplier base.

Rising Supply chain risk in Evolving Economies Taking a closer look into the issue we can see that many US manufacturers are shifting production to countries outside of China as trade tensions keep on stretching. Companies such as Crocs, Yeti beer coolers, Roomba vacuums and GoPro cameras have started producing goods in other countries to avoid US tariffs of about 25% that sums up to some $250 billion of imports from China. Apple Inc. is also planning to shift the final assembly of some of its devices out of China to avoid US tariffs. In August 23 Apple got entrapped in the trade war badly when its shared plunged by 4.6% due to intensifying trade war. Like many other companies Apply has its final assembling unit in China for iPhone and iPad. Lovesac Co. a leading furniture making company has reduced its production by 15% in China and subsequently shifted production units to Vietnam. Similarly, Stamford, Conn. Company had planned to shut down its production in China by the end of the year.

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The moves by U.S. companies add up to a reordering of global manufacturing supply chains as they prepare themselves for another period of uneven trade relations. When the tariffs shoot from 10% to 25%, companies admitted that they expect to keep the operations moving outside China that way, because of the time and money invested in setting up new facilities and shifting shipping arrangements. Yeti Holdings Inc. that produces soft-sided coolers plans to move most of its production out of China. iRobot Corp expects to make less than 10% of US- bound products in China by next year as against 30% previously. And diesel engine maker, Cummins Inc. said it has avoided $50 billion of tariff expenses by moving some production to India and other countries.

Impact on Global Supply chain A New survey shows 70% of US manufacturing firms doing business in China are considering moving all or part of their production out of the country long- term. Same is the case when it comes to the US. Some 72% out of 219 firms polled said they were considering moving supply chain sourcing outside China, while 77% said they were willing to move out of the US. Till now both these two world‟s largest economies have already imposed tariffs on $34 billion worth of each other‟s imports. Recently, several US companies have come up with their comments upon the ongoing unrest. Fitbit Inc, that used to utilize China-based contract manufacturers, said the latest US tariffs would weigh on the company‟s material costs.

Caterpillar Inc said U.S. tariffs on Chinese imports are expected to increase its material costs

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by $100 - $200 million. U.S. industrial conglomerate Honeywell International Inc. is planning to increase the use of supply chain sources from non-China countries to counter growing costs.

Talking about the biggest losers of this trade war, S&P Global Market Intelligence has stated in its report that US Financials and Energy companies are among the biggest losers. This is because many US manufacturers rely on imported spare parts such as resistors, capacitors and printed circuit boards. These are the companies that are actively seeking alternatives for tariffed or space devices. So in a nutshell, tariffs have affected procurement costs, product design, and production timing. With the latest 25% tariffs levied on around $250 billion worth of Chinese goods, OEMs may have consider redesigning their products and probably this could be the new normal. There's a high chance that the tariffs may never go away. So the upside in this scenario is for the industries that have worked hard in 2018 to forge new supply networks. On the other hand, downside here are irreversible. Procurement costs, partnerships and therefore companies have been forced to relocate manufacturing. One U.S. component maker downsized by rising expenses and split with its Chinese counterparts is now outsourcing in Japan. China‟s role in the electronics supply chain can‟t be understated.

Component manufacturers have opened factories or outsourced production there. The supply chain discussion in fact entered into an entirely new dimension after Trump declared to blacklist Huawei. The world had now moved into supply chain war version to Tech supply chain war version.

The Road Ahead The present global economic scenario is tumultuous. The pond has fallen amidst growing Brexit uncertainty. This has impacted many British businesses majorly the automotive sector.

In addition to this the on-going Trade wars- whether the rumoured UK and US Brexit trade deal, the duelling tariffs between US and China, or other greater uncertainties is keeping companies strive hard to minimize losses. Increased costs of goods sold from upstream suppliers are squeezing margins and compelling global supply chains to adapt and react midstream. The existing trade war is increasing prices and making raw materials difficult to obtain. Let us understand the existing scenario with the help of an example. Let‟s assume an Automaker may have its engine manufactured in Germany, its transmission in Mexico, and its GPS from South Korea and finally assembling them in the US. When heavy tariff is imposed automakers tend to move their production to a different location, reducing economies of scale and increasing prices for end consumer. In Spite of such difficulties digital technologies such as Predictive analytics, machine learning, and artificial intelligence (AI), provide companies with the resources and insights to manage risk and anticipate events.

Today‟s supply chains run on data. Digital technologies help in monitoring for risk and opportunity, and combine human and digital strategies to form a decision. Companies are looking towards cognitive supply chain that is interconnected, self-learning, predictive, adaptive and intelligent. So, there are many approaches that businesses can implement to help anticipate, prepare and manage disruptions to supply chain.

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1. By deploying digital twin. Digital twin is a model of the Supply chain. Its foundation is a transparent supply chain strategy but a digital twin harnesses the multiple-tier supply chain data to rely upon predictive outcomes and sensory response.

Uncertainties can be run through „what if‟ scenarios to know about the service, cost and risk implications of changes, decisions and unexpected market conditions. For example to know about the correct level of holiday inventory investment that should be imported into the United States from China, given the potential tariff increased in the coming months? Which alternatives provide lower risk? And many more.

2. Leveraging data insights. Data is the centre of any supply chain activities and help make decisions. For example, How does the planned production schedule of one supplier affect another companies‟ market position? Data availability allows supply chains to breathe life into other departments and external relationships. Digital technologies provides: a. Digital Linkage- integrated sales, production and delivery processes that have a seamless flow of information. b. Control tower- visibility of all processes across the internal and external supply chain c. Centralized collaborative e-hub- an interconnected environment where all partners interact seamlessly with an improved flow of information d. Integrated lean Logistics- applying lean principles to reduce waste, errors and defects, minimize lead time, and materials impacted by tariffs e. Virtual Logistics- with new logistics models enable on-the-fly deployment decisions.

3. Implementing results that are outcome based. Many organisations have now found relief from continuous investment into technology for managing services of their supply chains. This step has enabled companies to focus on their core competencies of products and services.

Having a cognitive supply chain in scenarios when economies disruptions never seem to settle is of utmost importance. These measures help an organisation to be better prepared in these unpredictable situations.

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Supply Chain Management – Procter & Gamble Lavanya Peri (MBA 2019-21)

How many of us notice that the products we use daily from the time we wake up till we sleep are mostly from one brand "PROCTER & GAMBLE"?

Yes, most of the products we use daily are of P&G. It became a part of our daily life.

The leader in supply chain management sells a variety of products with brands covering beauty, health, home. Some of its famous brands are Ariel, Olay, Oral B, Vicks, Tide, Head & Shoulders, Pantene, Pampers, Gillette, Whisper, etc., It serves nearly 5 billion people around the globe with its 80+ brands. With roughly 118,000 employees, P&G sells products in over 180 countries worldwide.

Manufacturing Operations Other than India are based in:  United States, Canada, Philippines, Mexico, Latin America, Europe, China, Africa, Australia, and other parts of Asia

Figure showing different range of P&G products How do they do it?

P&G incorporates its supply chain software with suppliers, distributors, and retailers. This safe guards tracking of the product throughout the supply chain to make it clear to partners and increase collaboration. Kevin Smyth, Director at CHEP, said, “An effective supply chain operation can significantly impact both the revenues and the margins of any business. We don‟t see enough companies innovating and developing their supply chains to deliver better 15|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

efficiencies and lower costs. P&G has constantly proved year-on-year that there‟s more that can be done to raise the bar.”

P&G always adopt new technologies to maintain its competitive supply chain and optimize their cost. It also uses demand-sensing and demand driven-replenishments to forecast the demand for each of their product lines. This helps P&G to reduce its cost of storage and production of excess inventory.

TYPICAL DISTRIBUTION OF P&G PRODUCTS Manufacturers

Marketing Agents - State wise

Wholesalers/Distributors

Chemists Shops, Provision Stores, Retail Outlets, Big Markets etc.

Customer

END-TO-END SUPPLY CHAIN-FROM FACTORY TO SHELF P&G is leading the global supply chain and maintaining its competitive edge with its end-toend model.

P&G supported large scale applications of advanced analytics and digital technology to be a competitor and to manage the global supply chain with more than 130 manufacturing sites around the globe.

Its logistics capability called "Distributor Connect" connects with the distributors. Its digitally enabled operations allow all the transportation of raw materials from its suppliers, finished goods to its retailers all in one source of data which is accessible through a laptop or their mobile phone to track the status of delivery. With this Distributor Connect the excess production and also the inventory can be reduced across the ecosystem and optimum production can be done.

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It also has a "GDSN" Global Data Synchronization Network with the operation with retailers.

It is 100% automated commerce with zero human intervention. This reduces the human error between retailers and the company and also helps in cost optimization.

This end-to-end approach helps P&G in the fast delivery of its products to the market.

Yannis Skoufalos, P&G‟s global supply chain officer said, “Some customers track on time delivery and some measure us on EDI data transmissions. As soon as you understand what measurements are important to them, it opens up an array of ideas about what service excellence is all about.”

Supply Chain Network of P&G

CHALLENGES Even though P&G is leading the supply chain, a few challenges being faced by it:  Distributor-location problem  Transportation costs  Uncertainty in demand/supply  Changes in consumer buying behaviour  Decreasing product life cycles  Price wars, Recession, etc.

INITIATIVES P&G has made products more affordable to markets in less developed countries where there is no large-scale supply chain as in developed countries. For example, “Reach, Distribution, and Livelihood Program” a job creation scheme was conducted by P&G in the Philippines for the people who are not able to buy their products. The aim of the scheme is “the delivery of products to people living in remote areas or whose local stores are too small or inaccessible to receive stock”. With this scheme within 5 months, 580 jobs were created and more than 28000 stores started to sell P&G products with a local distribution margin of 1%.

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In Brazil, P&G teamed up with local food industry leaders Sadia and implemented a program called "Living It" in which the staff would stay in the Brazilian homes for two weeks to get a better understanding of consumer behaviour and to expand their distribution channels. This shows that its supply chain is more customer centric. P&G adopted a new system that helps it to manage huge data received mainly from its Microsoft SQL Azure and SQL Server databases.

Caradonna concluded in his presentation: “We started out with a simple goal to deliver an online planning tool, but we ended up with so much more. Our „big wow‟ moment came when we realized that we delivered a full end-to-end collaboration platform that not only met GDM‟s complex requirements, but also gave unprecedented visibility and provided best-inclass corporate P&G planning capabilities at the distributor level.” Thus, this makes P&G differentiate itself from others in being the supply chain leader.

ROAD AHEAD P&G is developing a responsive supply chain as it is very important to face the challenges.

Firms need to react instantly for the change in demand and always has to keep an eye on the consumer buying behaviour. It is to setup new distribution locations. From July 2019 it‟s simpler corporate structure with six business units came into effect. In the next implementation, P&G is planning to expand the system out to 5 more distributors in the French Overseas Territories, Tunisia, Cyprus, and Malta. For the suppliers to respond faster, P&G is asking its suppliers to create a "Supplier Villages" next to its plant similar to the Justin-time model. “Having the ability to take an uninterrupted thread from POS data to the supplier base and on through the distribution network is what we are trying to address,” says Skoufalos. “This is the future of supply chain management at P&G.”

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Supply Chain Management & Recession Aayush Jain (MBA 2019-21)

Today is a period when country is having a total stagnation and decline of both economic and social activities, aggregate demand, GDP, disposable income and the overall industrial production. Local and international trade tends to decline because of the decline of aggregate demand for goods and services in the market which also affects the supply chain of commodities which are locally and globally outsourced. This ends up breaking down various supply chain of different essential products and services which are very crucial to human survival.

Most of the global supply chain management affects the supply, but financial crisis affects both demand and supply. Taking the example of 2008 crisis – about 18% declined globally and in some subsectors the fall in demand fell till 50%. The export further declined by 12%.

These were caused by change in demand in the market, the order cancellation rate increased due to which supplier decreased their production level. On the other hand Banks curtailed lending to international business which hampered the global supply chain.

The impact on trade has been enduring. "Nine years after the financial crisis, global trade is barely growing," the Wall Street Journal reported in March 2017, "and cross-border bank lending is down sharply."9 Keep in mind that the supply chain – more specifically, the raw materials, parts, and business services that go into the production of a final product – accounts for almost two thirds of total global trade, according to BIS. Supply Chain Management actions in difficult times are well known and are in line with turnaround approaches. These actions include steps towards cost reduction (including overhead costs), calling for zero-based budgets, establishing war rooms, and redefining footprints and networks. However, it is also crucial to understand the trade-offs between myopic and sustainable actions. In addition, it is key to plan for the uncertainties and prepare the supply chain to deal at difficult times.

For example, when a mid-sized third tier automotive supplier in Southern Germany was asked for significant demand reductions in his product, the company reacted instantly. The supplier closed one production site and shifted production volumes to low-cost countries, and 19|K A I Z E N ’ S O P E R A T I O N S & R E S E A R C H E N T I T Y

furloughed employees to adjust to the decrease in volume. But, the knowledge which was required to establish the new production lines was not transferred to the new site.

For protecting Supply Chain from the repercussions of recession officials needs to convert supply chain into an agile one, as agile supply chain are better in adapting the change in demand whether its decreasing or increasing. The wrong step a company can take is late reaction to the obvious future situation. Companies that can spin their integrated business planning (IBP) process more quickly will be better positioned to deal with a downturn The US – China trade war is an example how global supply chain get disrupt and which opens the opportunities for other countries like: Vietnam, India to open there gates as manufacturing hub and develop a new supply chain. A war which started on July 6, 2016 and going till now has brought a potential burden of economic recession.

Talking about India specifically, the biggest challenge in front of companies is to learn how to serve the customers. The government has started to invest heavily in areas such as transportation, infrastructure and regulatory reform, and these future improvements will result in an efficient supply chain in India.

India has a labor intensive economy so the biggest impact of such economic recession will be on the job and prospective job opportunities. The unemployment rate is already high and one of the biggest political issue. The current government has a vision of $5 Trillion economy by 2025 but if the recession hits it will become impossible to achieve which is already hard in current scenario.

IMF has recently made a comment on Indian economy, that the economy is weaker much more than expected and at that pace recession can hit India by next year. To curb slow growth and as a preventive measure government has injected about seventy thousand crores in the economy and looking to inject more if needed. But such steps will have short term effect, they are not the ultimate weapon against recession. India slow growth is due to higher NPA‟s As per Supply Chain experts the firm should concentrate on retaining existing clients and these clients should meet their credit obligations. At the time of economic recession there will be cash crunch in the market but firm can negotiate payment terms and offer exciting deals so that the chain doesn‟t face any obstruction. It‟s necessary to understand the true demand and identify reliable demand information by regularly communicating with customers and making different multiple demand scenarios.

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Annual % change

Note: GDP is measured at market exchange rates. Data for 2019 and 2020 are projections.

Source: WTO and UNCTAD for trade, consensus estimates for GDP

World merchandise trade volume and real GDP growth, 2011-2020

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