Events of the past months have revealed how little we know about our supply chains. Manufacturers have been forced to evolve or perish when it comes to optimising the processes as well as navigating the new tools and best practices for supply chain management. Most have become acutely aware of the challenges and trade-offs that affect their increasingly complex, competitive and transparent supply chains. At any point in time, an optimised supply chain stays lean, manages costs and perhaps most critically, responds instantaneously to even minor fluctuations in demand, practically meeting the company’s desire to improve the bottom line. In order to effectively implement these drivers of success, executives at all points in the supply chain must engage in focussed planning and process implementation measures. Vidyut Kaul, Head- Personal Health – Indian subcontinent at Philips in an interview with Ritika Arora Bhola,discusses how they critically look at best-in-class management of their globally extended supply chain and what they do to improve volume flexibility and mitigate risk.
Amid current scenarios, are you having a hard time accurately forecasting demand for new products as the overall consumer sentiment continue to play out?
Lockdown in almost all the major cities has resulted in a change in the consumption patternof individuals. 2020 saw a fundamental shift in consumer behaviour, emergence of several new trends that is driving more experimentation in categories like personal grooming at home. Increased staying at home has re-defined the role of consumer durables in people’s lives. Consumers are identifying the needs and looking for products and solutions that can make their life easier and self-sufficient. This means having gadgets to style and groom at home, kitchen appliances to experiment with cooking, along with the concern and awareness around safety that is leading to increase in use of air purifiers, vacuum cleaners, etc. This growth is going to sustain because these are the needs which are only going to amplify. With the pent-up demand, the consumer behaviour is working in the favour of these specific product categories.
With restricted access to stores and focus on essentials, it’s getting tough to introduce new products in the market. E-commerce and digital avenues continue to be the channels that are leveraged and performed during the lockdown; they can be potential channels for exploring new launches. We anticipate that the easing of lockdown restrictions will lead to a better clarity on demand for new products in the market. Meanwhile, at Philips, we expect personal grooming; cooking, cleaning and purifying appliances to do well and we continue to upscale their production by innovating even faster in the space of DIY products.
What you do to improve collaboration between vendors/suppliers, retailers and logistics managers for demand data driven forecasting and inventory management?
The key parameter to maximise cost efficiency in any organisation is improving the order fulfilment rate (fill rate). In order to have a good order fulfilment, most of the organisations focus on understanding the cycle of forecast and mix accuracy to be able to work with vendors and suppliers for a clear plan. There are multiple options to look at maximising efficiency whilst managing costs:
- Warehouse location– centralised vs decentralised, regional vs state-level
- Choice of logistics providers based on their past performance and coverage
- Choice of end-to-end data and reporting system
While there is no single playbook to ensure success in product delivery and distribution in the fragmented domestic logistics market, what do you consider for reliable, efficient storage and handling?
First and foremost, a reliable and tech -savvy 3PL partner should be chosen to outsource supply chain operations—warehousing and transportation. 3PLs should have good experience in handling similar products of other organisations. They should also have a good market penetration in terms of its warehouse locations as per an organisation’s distribution points assessed beforehand.
In general, use of high density racks (HDR) delivers highest density solution for the movement and storage of materials in a standard configuration. Organised 3PLs often have this addressed. The deployment of trained manpower on floor results in faster, safer and error-free picking and packing, loading and unloading of material.
In addition, 100 per cent barcoding of materials and their location scanning process through a RFID device would ensure faster and error-free material accounting and picking from the rack.
How do you keep strengthening your connection with customers supported by consumer-centric product innovation keeping them loyal to your brand?
Philips has completed 90 years in India and a huge focus on innovation has helped us stay relevant in this dynamic Indian market. It is the factor that has helped us as a brand to not only survive but thrive in the country. We have continuously made efforts to remain connected with the consumer despite state-wise restrictions put in place. We have made use of digital platforms to come up with engaging content, to build deeper connections with the consumer and make them a part of our journey. We focus on listening to our consumer and innovate in real-time to deliver relevant products, such as our range of DIY products focussed on simplifying the consumer’s everyday life. Along with that, stringent delivery KPIs ensuring timely execution and delivery of our products and a strict monitoring of Net Promoter Score (NPS) to ensure satisfied customers have been in place.
The need to be agile and flexible is important to keep up with the changing demands and trends. We will continue to deliver on our promise of innovation that will make a positive impact in the lives of the consumers in India.
How is your company digitalising its logistics and supply chain processes? Kindly share with us advanced technologies being used for monitoring and improving efficiency?
There are multiple initiatives Philips is taking to digitalise its supply chain management processes. Common software for end-to-end forecasting and analysis of demand and supply allows our planning and sales teams to work in harmony. It enables the organisational teams to do the following:
- Have a visibility of what is available for sales and by when new stocks will arrive
- What has been sold to the customers including delivery dates
- How much and which stock is left in the warehouse and for how long it will augur
- Balancing of stock between– regions/state/districts
How is Philips stepping up to create a responsive supply chain that is equipped to support its retail projects, despite ongoing uncertainties and supply chain challenges continue to exert a stranglehold?
Considering a frantic situation outside which is having an impact on market assessment, we are trying to ensure that any demand captured is vetted out and refined via proper supply alignment. That means a robust Sales and Operations Planning (S&OP) approach resulting into demand forecasting with high level accuracy.
We are continuously focussed on strategy alignment with the global supply chain to ramp up production of material to meet up the demands in India. Additionally, optimal safety stocks of all the A and B class articles help to mitigate the hike in the demand.
India being a vast country with multiple distribution points for Philips, we are maintaining timely arrival of shipments in the ports. Our close cooperation with global service providers is ensuring supplies reach ports on time. This ensures timely warehouse to warehouse movements, ultimately ensuring that the product reach the end consumer on time.
As you look to improve supply chain management and process, what parameters are you particularly focussed on for development of supply chain dynamics?
As an organisation, we have focussed on our planning process—as is the case with most of the organisations. They say ‘well begun is half done’— it is the same approach in sales planning, a good plan is half the job, the other half is ensuring timely availability of stock and at the right location. We have stepped our effort in optimising our S&OP process that allows our teams to deliver on the market needs. This is achieved through:
- Monitoring past data as a reference for trends and patterns.
- Refining the plan together with end-to-end teams to reflect current plans and market reality
- Sharing the plan with the factories and suppliers via an end-to-end planning tool
- Giving data to the sales team on availability of stock for sales
- Sharing tracking reports for visibility and transparency
How are you leveraging technology tools, automated processes and inventory management best practices to deal with higher customer expectations for faster deliveries through traditional and e-commerce channels?
Data analytics is one of the key areas of focus, with the amalgamation of end-to-end planning to cater to our customers. Once we are clear with the objectives and the audience we wish target, niche platforms helps to yield better results.
We did realise that the consumer was moving to and spending more time on the digital mediums, which is why we diverted more of our spends towards the same. Taking into consideration KPIs and NPS for our digital journey and social media marketing became equally important.
How best a consumer durables company can structure its assets, technology, processes, and people to design strategic supply chain initiatives and programs?
We believe that a satisfied customer is one of the essential factors for any organisation to stay relevant and succeed over a long-term. Supply chain is the backbone of any organisation and thus its role becomes more challenging when there are factors which can severely impact both demand and supply. It is important to collaborate with customers to understand short- and long-term demand and supply projection scenarios, have a strong end-to-end supply chain, and align with suppliers across regions—enabling a continuous improvement cycle.
Moreover, I believe that good forecasting leads to better accuracy in terms of maximising efficiency of the supply chain structure, which in turn, ensures better fulfilment and customer satisfaction. Additionally, warehouse network optimisation is essential, wherein moving warehouses to locations around consumer hubs ensures low cost spends for last-mile deliveries.