Supply Chain Fundamental Rethinking

An unprecedented inflation in commodities has created an equally unprecedented situation for enterprises. In India, the WPI has consistently been in double digits over past 15 months or so & CPI has been in single digits, indicates that the enterprises have absorbed larger part of input cost inflation. Supply Chain teams, particularly the Sourcing / Procurement teams have experienced a phenomenon that most of the practitioners have never experienced within their working life - a pandemic followed by sudden spurt in demand followed by trade barriers followed by geopolitical conflicts and in all that an unforeseen material inflation. Post the first few months of pandemic, commodity prices have shot out of the roof, post the Ukraine - Russia conflict even Oil is up 60% or so, agricultural commodities in some case have doubled. During these challenging periods enterprises ability to pass on the input cost to its end consumer has been limited due a post pandemic recovery period. Now wit...

Supply Chains have always been focused rather obsessed with customer order fulfillment. Focus of Supply Chain Network design has predominantly been around the "last mile" delivery. Adding nodes to the network, latest technology adoption and many other initiatives have been about improving last mile delivery.  Is it time to also re-focus & offer consideration for "First mile delivery"? Particularly in industries where the first mile may have the highest delta impact on the customer. e.g. In Healthcare, the first mile is the most crucial one for the customer,who in this case is a Patient (particularly in emergency cases). From the time the patient has a health issue which needs attention till the time medical care is made available is the first mile in this case. For example they say first hour is the "Golden Hour" for a person who has an health emergency. In that case even if the last mile delivery, which in this case may be a well equipped hospital, is...

A fractured Supply Chain has left many of us revisit the assumptions on which the Supply Chains were built over the past 2-3 decades. As I also mentioned in my previous article, post WWII and more recently with formation of WTO led to an opportunity which was leveraged by Supply Chains to spread globally. Efficient Supply Chains which were able to deliver the cost arbitrage were preferred over non cost arbitrage Supply Chains. Come 2020, Covid 19 and the natural tendency central to human evolution emerged as a central theme - "One cares first for oneself before one cares for the other". At a nation level this held true. Probably was the first trigger for the Supply Chains to reassess its assumption. But as it happens in humans so it happened with Supply Chains. One tried to do the same of what worked in the past thinking that the current situation is just an outlier and will normalize soon.It took almost couple of years to realize that Supply Chain which are global & cost...

For a decade or more the world of Business and Supply Chain has been acclimatizing itself with the VUCA world. VUCA being an acronym for Volatile, Uncertain, Complex & Ambiguous. Supply Chain strategies & operations have always been anchored around VUCA. As has been abundantly proven since the onset of 2016 Trade war between US & China followed by the Pandemic and more recently the military operation of Russia in Ukraine, the world is not a VUCA world anymore. Rather is has passed that stage of VUCA to represent a new world reality of future. I think FICA   is the way to perceive & act on the future order of Supply Chain. FICA for me is Fragile, Intricate, Chaotic & Anxious F - Fragile - It is more than abundantly proven in the recent past that Supply Chains have been found to be Fragile. I shall explain this in a minute with an example. In late 70s and early 80s the world found (due to organizations like WTO) that there can be an opportunity for a global Suppl...

A resurgent Indian Supply Chain post Covid-19 has been constrained due to Supply bottlenecks. Be it semiconductor shortage, increased reliance on few suppliers or moderately high input price inflation. The supply constrained Indian Supply Chain may have got itself further constrained with pressures due to the recent geopolitical events. History of such events is not a welcome news in the short to medium term. While I study the ever evolving scenario from an Indian Supply Chain worldview, I have at-least reached a few areas of my own understanding about the medium term impact of current geopolitical scenario, with outcomes of the events still not known. a. While the world focuses on supply constraints from Russia, Indian Supply Chains should also focus on supply originating from Ukraine. "Sunflower" , e.g., is where Ukraine holds 80% of world supply share. Sunflower oil is a large consumption item for Indians. Input price pressures shall dramatically increase for Indian Suppl...

"Elephants don't change directions very often, but when they do, it takes a lot to make them turn back again". Commodities have a lot in parallel to that. History exhibits that commodity cycles don't change very fast but when they change the direction its a multi year phenomenon with probably some hiccups on the way. Supply Chains from various industrial sectors will need to align themselves differently. The alignment & much needed adjustment with the commodity super-cycle is a function of multiple things. a. Commodity cost contribution to the overall Supply Chain cost - While many believe that Steel price increases would hurt badly, its not true for all equally. e.g. A Supply Chain analyst may believe that in case of Ship building industry the steep increases in steel prices would hurt. I was listening to the CMD of Garden Reach Ship Builders & Engineers, where he said that steel co...

Customer needs drive Supply Chain to design its Products & Services. Over the years, customer quality needs have become tighter and tighter. Supply Chain, particularly the Supply side of Supply Chain, has initiated control measures to meet the new standards of performance.(e.g. from "Percentage" to "Parts Per Million" was a dramatic shift) Consistency of Quality is an extremely important measurement. Consistency in outcome is predominantly a function of "Processes & Systems". In Indian organizations, particularly the SME sector, the customer organizations demand of consistent high quality it often met with Supply side being stressed to meet those expectations. An example which I bumped into the other day offered a point to reflect on this phenomenon. A few years ago, when a customer bought an agri product, e.g. Watermelon, customer expectation of the product quality predominantly hinged on the "Appearance" (Red in colour) and Taste (sweet...

Demand is the trigger for the Supply side of the Supply Chain. Supply side Strategies, Tactical plans & Operational execution activities are predominantly a function of the Demand side of the Supply Chain. The sanctity of the demand figure goes a long way in determining the performance of the Supply side. When it comes to accountability though, in many instances the Demand subordinates itself to the dynamics (or chaos!!) of the market place while Supply side is always the one which bears the brunt of not being able to meet the demand. More often than not, Supply side of the organization has experiences similar to what the Indian Healthcare system is experiencing at this very moment. I see a lot of analogies which can be leveraged to improve enterprise Supply Chains holistically. a. Demand is random but Supply is a Structure - Demand arises randomly, particularly if its a New Product. Responding to such cases the Supply side very efficiently develops new sources of supply, creates...

From a low of 20,000 in mid- February 2021 to 3,50,000 by April week 3.  Demand surge of Covid+ new cases is what Indian Healthcare Supply Chain is coping up with to keep its Patients get what they need. Demand Planning which is the trigger for the entire Supply side of the Supply Chain to organize itself to meet the market within its SLA's again has been found wanting in its (in)accuracy! And as it stands today in India, the Demand Planning accuracy seems to have been much lower than desired. A few key insights from the current stage of Covid-19 viewed from the lenses of Demand Planning, a. Never underestimate the importance of History - "This time its different" is a misnomer. Human history is of similar behaviours exhibited over multiple instances spread over different time periods. Historical data is a goldmine for Demand Planning. e.g. Relating this to Covid-19 - No time in the history of past 400 years of Pandemics (just 400 years as I did only study those 400 yea...