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Supply Chain Transformation

November, 2018

Supply Chain Transformation - Key to Creating a Digital India

C.P. Gurnani, Managing Director & CEO, Tech Mahindra

Q1. Over the next five to ten years, how do you see supply chain in India evolving, especially in light of the emerging disruptive technologies?

Supply chain has a cascading impact on almost all aspects of trade and retail. As India opens its economy further, financing the improvement of supply chain is vital for business growth. A modernized and efficient supply chain improves the ease of doing business, scales down the costs of manufacturing, and accelerates rural and urban consumption growth due to better market access.

Until recently, suppliers, manufacturers, and retailers had to factor in delays in the movement of goods between state borders due to complicated taxes and transport lines running over capacity, increasing overall costs. Predictive Analytics is identifying the patterns of such delays and warning stakeholders to make necessary adjustments or course corrections.

Artificial intelligence is getting embedded in mainstream supply chain activities starting from cognitive procurement advisory, to quality control to supplier evaluation. Blockchain is creating complete traceability and transparency across every layer of supply chain.

Digital technologies are set to revolutionize how businesses function in the next few years. Automation, connectivity, artificial intelligence, digital experience and real-time data would boost the industry to achieve greater operational efficiency and open up new revenue opportunities.

Interesting times with interesting developments, which brings in interesting problems to solve as well. Lack of enough National Highways, freight corridors, road network in non-urban areas add to the complexity and the last mile delivery keeps posing challenges to provide a complete solution. Supply chain transformation along with proper infrastructure development will be key to creating a Digital India.

Q2. What are the big challenges supply chains in India are facing and how can digitization address them?

Supply chain maturity in India is not quite where it is in other countries, and one of the biggest hurdles is the tax regime with origin taxes. With the introduction of GST, the complication of tracking the origin of the products, transportation delays at the state borders, the model of local manufacturing and local distribution centers close to the area of consumption have all changed.

Classic decisions of make/buy and localized/centralized manufacturing will be driven by the true operations considerations like material, labour and transport costs and sustainability rather than by tax optimization. This has led to the Companies in India moving towards adopting more efficient manufacturing and distribution models, redesigning their supply chain.

Actively driving this trend forward is technology. Dominated by big data, cloud and IoT, technology-enabled processes are providing manufacturers a bird’s eye view of the entire supply line that is at once far more comprehensive in its reach as well as far more detailed in its scope simply due to enhanced visibility.

Digitization is the future, today most organizations operate on hybrid supply chain models that combine paper-based and IT-supported processes. With the emergence of new technologies, and fast commoditization of solutions such as radio-frequency identification (RFID), other wireless technologies, GPS, sensors, automated material handling systems that have enabled organizations to transform into more flexible, open, agile, and collaborative digital models.

Q3. What are the top things an enterprise should consider while digitizing its supply chain?

Future proofing the digital supply chain is critical.

The goal of the digital supply chain is to fully integrate and make visible every aspect of the movement of goods across the chain.

  • Strategy is key. A new strategy not just based on the current business model and operations. But on the new possibilities and trends in the industry.

  • Next generation business model. Define boundaries, include partners, new business blueprint. Fully integrated supply chain cannot be built without collaborating with a wide network of suppliers, distributors, and customers.

  • Measure. Define new KPIs based on the new strategy and goals. Measure outcomes, learn, refine, redo.

  • Next generation organization. Prepare the organization to embrace the change and equip with right skills. Inclusive change management, with the entire organization participating from the ideation to experiment, to develop, to implement and to enhance. And Repeat.

  • Next generation technologies: Develop a technology blueprint that can be progressively enhanced. With emerging technologies no single technology provider can offer a truly end to end solution, need an anchoring partner who can bring together the best of the breeds and sustainable technology solution providers to integrate a truly digital solution. Some key technologies are the following.

Artificial intelligence (AI)

AI carries great potential to revolutionize supply chain processes. The ability to apply AI to enhance, and even automate, decision making, reinvent business models and ecosystems, and remake the customer experience could make many other emerging technology trends redundant.

Advanced analytics

Advanced analytics enable companies to proactively take advantage of future opportunities and mitigate future adverse events. Prescriptive analytics can improve decision making in functional areas like supply chain planning, sourcing, and logistics and transportation, and can be deployed to improve end-to-end supply chain performance.

Internet of Things (IoT)

Adoption of the IoT is growing in select supply chain domains, but rarely as part of a complete end-to-end supply chain process. One exception is the air and defence industry, where airplanes have thousands of sensors and data is leveraged in the extended supply chain.

Conversational systems

Conversational systems — most recognizably implemented today in virtual personal assistants (VPAs) and chatbots — are taking interaction to the next level with the addition of conversational commerce. Not only can they handle discovery questions and offer solutions without any human agent involvement, conversational systems can enable transactions, handle payments, ensure delivery and provide customer service.

Robotic process automation

Robotic process automation (RPA) allows supply chain leaders to cut costs, eliminate keying errors, speed up processes and link applications. For example, an organization may want to work with structured data to automate an existing manual task or process with minimal process re-engineering or to avoid major system integration projects or specific new major application deployments.

Immersive technologies

Immersive technologies such as virtual reality (VR) and augmented reality (AR) allow supply chain businesses to enhance employee and customer digital experiences. Gartner estimates VR will reach mainstream adoption in the next two to five years, with AR going mainstream in the next five to 10 years, but these technologies are already in use in a variety of industries. These include enhanced repair and maintenance capabilities in manufacturing, logistics and warehousing and better purchasing choices for customers leveraging product visualization or store layout and planning.

Blockchain

Certain highly decentralized supply chain management functions such as smart contracts or traceability and authentication are prime candidates for blockchain. Multiple business use cases are yet to be proven, but some early pilot projects have emerged that are experimenting with the potential of blockchain for supply chain. For example, blockchain is being used to track the movement of diamonds from mining to retail stores by developing a digital record that includes the unique attributes, including color, carat and certificate number that can be inscribed by laser into the stone.

Q4. Digitization of supply chain requires significant financial investments? How can both, Chief Technology Officer and Chief Financial Officer, derive value from it?

Effective supply chain leads to faster time to market, prevents holding cost on inventory, and lost opportunity. Operational efficiency achieved due to effective Supply Chain Management will have direct impact on both topline and bottom-line. Hence, it is of immense importance for a CFO of an organization.

CTO’s primary job is to help the organization leverage cutting edge technology to take the digital leap. Adoption of AI, Blockchain, IoT, RPA in supply chain processes will help enable precisely that. Clearly, it’s a value driver for both.

Q5. What according to you is a truly digitized supply chain?

An effective transformation depends on a creative, forward-looking concept for the future supply chain. This means thinking about the outlook for the company, amid the pressures and trends that influence its competitive situation, as well as the changing expectations of its customers. Ultimately, the supply-chain vision should be aligned with the company’s strategic goals.

Better decision making - Machine-learning systems can provide supply-chain managers with recommendations for how to deal with particular situations, such as changing material planning and scheduling in response to new customer orders.

Automation - Automated operations can streamline the work of supply-chain professionals and allow them to focus on more valuable tasks. For example, digital solutions can be configured to process real-time information automatically (for example, automated workflow management), thus eliminating the manual effort of gathering, scrubbing, and entering data.

End-to-end customer engagement - Digital technology can make customer experiences better by giving supply-chain managers more control and providing customers with unprecedented transparency. For example, track-and-trace systems that send detailed updates about orders throughout the lead time.

Innovation - A digital supply chain can help a company strengthen its business model (for example, by expanding into new market segments) and collaborate more effectively with both customers and suppliers.

Last but not the least, tying this all together to measure and monitor performance across the supply and demand value chain.

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