Time is money. Knowledge is Power. These simple truths remain constant – not recognising change in business conditions promptly can cost a business in many ways, and this is especially true for supply chain planning professionals. Hundreds of things can go wrong with a business plan as time passes; sitting on too much inventory costs money, but not having enough can dramatically impact customer service. Not being able to adjust rapidly to change can result in a multitude of problems for the manufacturing and logistics operations that take value-added steps in moving raw materials to finished goods. Supply chain collaboration and visibility are critical in reducing the latency in decision making associated with not knowing the what, where and how much associated with plan disruptions. This is especially true between business partners often operating in different geographies, time zones and using different systems and performance incentives. In a exclusive interview, Kamaldeep Singh, President- Food and FMCG Business at Future Group explains to Upamanyu Borah, why value chain leaders need to look at functional areas to better integrate their supply chains and efficiently ensure that critical product information is communicated so that products flow quickly through the value chain and ultimately to the consumer.
How has the COVID-19 crisis affected what you do and how you operate from a supply chain perspective?
COVID-19 impacted each and every aspect of operations. There were multiple risks— stores and factories shut and disruption of the entire supply chain. Lower demand across certain categories and higher input costs coupled with commodity inflation were some of the pertaining challenges.
On the production side, it was the inbound supply chain, as well as outward movement of goods across states, availability of assortment, etc. that were severely impacted due to lockdowns. On the demand side, sales across categories dealt a big blow.
Demand across health and hygiene segments— essentials and nutritional products improved, however, discretionary and other categories which generally see higher out-of-home consumption saw less off-take and remained impacted.
Norms on maintaining safety of food products across the value chain became an extremely important criterion for sustaining operations amid the pandemic. We implemented protocols to assure controlling of contaminants at a number of key junctures, including mandatory product inspection at critical control points.
Last-mile delivery also came to the fore as an ever-important aspect of the outbound supply chain. We ramped up our infrastructure for seamless home delivery from our stores in a way that meet safety.
Flexibility, Agility, Predictability, Traceability and Collaboration became the most important factors. We operated with speed by reducing the number of SKUs in assortment, moving case lots through our DCs.
How do the unique requirements of the Indian market affect Future Group’s demand forecasting and supply planning activities?
We were impacted on multiple fronts. There was shift in demand across categories— Hygiene, Cooking at Home, Sanitation — these categories saw a big jump in sales. Replenishment focussed on making a product available in place of SKUs.
Also, there was shift in demand with metro cities getting impacted much more than smaller towns. Neighborhood and convenience stores saw much higher traffic compared to destination and mall stores.
Infrastructure was constrained across the supply chain. Unavailability of manpower, lesser movement of goods across states, sporadic local supply stoppages— led to planning a much simplified and concentrated demand and supply with leaner assortment, full case replenishment, with dependence on local supply chain partners.
What were some of the fronts where the company is seeing advantages in the new normal?
Power of technology and digitisation was fully leveraged at a pace never seen before. Most of the physical stores doubled up as dark warehouses due to home delivery through omni-channel routes. Omni-channel helps in having a much higher share of wallet for customers.
As companies wrestled with the question of how to reach the next normal safely, new ways of working (systematic steps to reach a stable operating model) led to a much higher rigour on operating at lower costs and being more efficient across all steps of the FMCG value chain sector, making companies ready for a new era of competition.
Do you foresee consumer goods companies becoming more willing to pay a premium for the flawless delivery of their finished products in the new normal?
Yes, there will be a premium on agility, predictability and safety across the value chain. Service providers need to be flexible, responsive, and adaptable in different areas. These include technology, competition, changes in the market, and more. They must balance the need for stability and predictability with the increasing need for operational agility and velocity. Ensuring consistency in quality, quick response to market demands, judicious use of capacities and innovation will play a key role. The lockdown period has provided an ideal opportunity for firms to learn and enhance their product and technical knowledge.
Most importantly, service providers has to act as strategic partners to develop a customised approach to a company’s transportation and logistics needs that are aligned with their goals and plans for the future.
Looking more specifically at the current bottlenecks impacting the country’s overall logistics infrastructure, what would you underscore as the first priorities that stakeholders should focus on?
Food Parks (production places) and logistics hubs are not yet integrated. That should be on the books. Moving production closer to demand centres has to be another big priority.
Predictability of supply, collaboration with partners, and reducing lead times from placing an order to its fulfilment should be the key considerations in supply chain policies of companies to derive further benefits from business models.
The adoption of automation technology will give an opportunity to organisations to raise the capabilities of employees higher up in the value chain and move them towards more critical roles. As the industry gears up for rapid adoption of technology and automation, there will be a transition in skill requirements. Hence, one must quickly adapt a mindset of continuously evolving and learning new skills.
The focus of FMCG companies during the crisis was only on meeting lost sales, and not looking for downstream business value. What is the case post-COVID?
There will be a further contrast in consumer behaviour across categories. We will see many new launches, category creation, and customer acquisition drive in health and hygiene, nutrition and foods categories. Out-of-home and discretionary categories will continue to flourish under pressure. The mood across these categories will however be to recover lost sales.
Meanwhile, there is positivity with a sharp drop in active cases, allowing opening up of malls and stores. But, there is cautious optimism with expectation of uptick in demand.
As the economy tries to catch up with the growth pace, supported by government’s ambitious schemes that will play out in the near-term, companies remain watchful, commits themselves to safety, hygiene and discipline, while remaining flexible and agile.