Supply Chain Agility in the Volatile World

12th June 2014

CII Conference of Next Generation Supply Chain

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SCM Role

Business Focus shifts to Customer Experience

Manufacturing is commoditized with excess automation Competition is fierce in digital age Value Creation possibilities exist at various points of supply

chain and need to be taken advantage of to improve Economic Value add and maximize functional benefits

Customer Experience is a factor of Economic Value Add + Functional Value + Psychological Value

Its linkage to a company is only in terms of TRUST & BRAND

Customer Experience demands Customization

SCM & Brand

• SCM role will evolve into “Delivery of Brand Promise” at maximum efficiency using– Global Sourcing of parts or services ( ITES)– Assembling close to consumption to handle customization

complexity– It will straddle Operations + Logistics + Procurement – It will dictate non-negotiables for Sales – It will dictate the “realistic boundaries” of marketing

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1. Customized requests

2. Customized supply chain – Point of manufacturing should be closer to customer. Hub and spoke model of distribution and replenishment based on customer pull is the need of the hour.

3. Information Warehouse- Supply chain needs to optimally capture market information and back-end integrated data linked to the customer for future planning.

4. Global competitiveness

5. Cost efficiency- Due to margins under pressure in a subdued market, the ability to service at optimum costs/ delivery timelines is critical

6. Delivery vehicle of the brand- The supply chain implements the brand promise of the company as customers’ experience is dependent on flawless delivery of promise of the company.

From Logistics handler to SCM Management has been a Long journey

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Key Factors to combat Market Volatility

High Performers

to have

Stakeholder

confidence

Operational Agility

Customer Reach

Cost Competitiv

eness

Flexible Supply Chain

Strategic Cost Reduction

Prioritize and Focus Market

Identify and explain risk

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Agile Supply Chain Strategy

Long lead time

Short lead time

Supply characteristics

Demand characteristicsPredictable

MarketUnpredictabl

e markets

Plan and control

JIT: Pull scheduling/ Replenish

React and execute: agile

capabilities

Hold inventory: hedge and deploy

Information System Challenge

• Variability management requires two – pronged approach– A Great IT System with inbuilt business insights to ensure

efficiency– An insightful and creative Management team to ensure

Effectiveness in meeting customer needs and shift orbits for the organization dynamically

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Both are needed and need to balance each other Too much of IT can lead to excessive Abstraction of business and

obliteration of Horse Sense – resulting in catastrophic errors Too much manual management will lead to co-ordination failures and

lack of responsiveness

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Distinguishing Characteristics of Agile Supply Chain Supply Chain is capable of reading and responding to real

demand.

Adapt to demand and seasonal trend

Postponing allocation to a later date thereby improving accuracy in supplies vis-à-vis demand

Listen to system’s early-warning signals and alert customers of potential delays so that they have the time to take alternate actions

Avoid lost sales by stocking products which the customers require. This can be based on historical sales data.

Lock down repeat customers who depend on accurate delivery dates and availability

Use dynamic allocation to reach customers in wider regions and volatile emerging markets

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Seven Success Factors for Agile Supply Chain

1. Engage sales and marketing and understand customers needs

2. Link the financial plan to the operational plan

3. Ensure a cross-functional collaborative process

4. Continuously align strategy with operations

5. Ensure process agility and flexibility through technology

6. Capture metrics for performance management as part of the process

7. Optimize demand-supply-finance balancing

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Thanks