The next decade will experience increasing volatility and complexity in the business environment and specifically in the demand of consumer and industrial items. Structured and regimented supply chains will not be the best suited to deliver necessary service and costs in such an environment. The need for the times would be flexible and customizable supply chains which are still cost effective.

Supply Chain strategic design:
Supply chain network design analytics is crucial to determine the best possible supply chain for the mid to long term (3 to 5 years and beyond). This needs to be done on an annual basis. Various taxes, tax holidays, costs, constraints and social factors need to be considered in this design.

Demand management:
Corporates will need to hone skills in the overall demand management process including statistical forecasting and applying sales and market information to modify it through a well-structured multi-function consensus process. The process should drive the consensus numbers and not the figures dictated by an executive driving the whole process. Consensus figures should be recorded and evaluations held at regular intervals. Some processes like statistical forecasting, maintenance and cleansing of historical sales data may need to be outsourced, keeping the consensus process in-house.

Sales & Operations Planning – Executive cockpit:
Corporates will have to evolve and continuously improve the Sales & Operations Planning process to dovetail the overall demand volume with the manufactured/supply volume (Executive S&OP Plan). Then will appear the need for determining the optimal sourcing location based on overall profitability or total supply chain delivered costs, if there are multiple sources that can produce the product. Having determined that, the detailed production planning (Master Schedule) is done where demand and supply is matched at volume and mix level and thereafter the execution is supported by production scheduling (Detailed Scheduling) at the line/hour/sku level at each Plant. The trick lies in keeping the Executive S&OP, master schedule and the detailed schedule joined at the hip and synched up despite being at different levels. Changes at any stage should be transmitted and reflected on the other plans as dynamically as possible. Plants would need to be flexible enough to incorporate changes within the month and week based on feedback from the market and updates in the demand forecast. Smaller batch runs, higher efficient changeovers will be the need of the hour. Lean manufacturing practices, efficient run strategies, quick changeovers, automation, live tracking of key parameters and dash-boarding will rise in importance. Classification of customers and skus on a regular basis and focusing overall operations on key customers and skus will be essential. Strategic partnerships with key customers will enable better forecasting and fine tuning of production and supply to the customers and profitability of the company. Linkages to the key customers and analytics based on their sales can be a key driver in adjusting production quantity. Depending on the business and the supply chain, a mix of own and third party plants could be an ideal supply infrastructure but will depend of the specificity of each business. The analytical and technological capability to simulate the Executive S&OP plan to project the changes in volume and profitability from various plan scenarios, will significantly help management decision making. Linking the Executive S&OP plan with financials and creating the ability to simulate will be essential.

Procurement:
The procurement function will have to segregate the strategic buying from procurement operations. Strategic buying will involve sourcing strategies for key raw materials and indirect items, risk planning and supplier relationship management. Procurement operations will involve supplier development, contract management, purchase orders, supplier interactions and follow-up, material receipts etc. Focus will be there on technology enabled interactions with suppliers, high level of adherence to contracts, limited but supervised spot buys and minimizing maverick buys. Spend analytics and dashboards will help the procurement function to fine tune operations. The procurement function spans 50-70% of the total cost of goods for most businesses and is thus a very important function with significant potential to improve profits.

Inventory management:
Inventory management is a complex but vital process as it has a large bearing on business working capital. In today’s volatile environment, we need to take into consideration various parameters like forecast, forecast error, manufacturing plan adherence, production and transportation lead time and their variability, target customer service etc. before deciding on the ideal inventory norms. While some home grown analytics can help determine norms for small businesses, optimization applications are necessary to determine the inventory targets by each sku location for larger complex businesses.

Information systems, data mining:
Use of technology will leap frog. Use of relevant ERP systems backed up with demand forecasting, S&OP, network and inventory optimization, transportation and warehousing, customer service optimization systems etc. will proliferate. These need not necessary be the best of breed, smaller and medium size companies may opt for open source, locally developed systems which deliver 60-80% of the functionality of best in class systems. However, most companies will need to use systems which provide such functionality in each of these spaces to deal with the complex environment with speed and accuracy.

Collecting hard and soft data from multiple sources into a single database and placing necessary logic and technology to create dashboards of key parameters will be a necessity for top management. The ideal scenario is where such reporting is on-demand but companies need to get started with at least a monthly dashboard and progress to a weekly frequency.

Distribution:
The distribution network will have to be planned keeping in mind the size, utilization, location and functionality of warehouses and distribution centers. Whether they should be at or near the plants or closer to the customers, whether there should be hub and spoke (larger DCs feeding smaller ones) and whether some of the final product configuration and packing should be done at the warehouses (postponement) nearer to the actual demand occurrence, will depend on the overall supply chain network design and total supply chain cost. The capability to add customization at the warehouses will add to the company’s flexibility to service key customers better. Transportation modes, size and type of carriers, full truckloads and less than truckloads, milk runs, direct dispatch to customer etc. will need to be chosen based on costs and customer service considerations.

Customer Service:
Customers will demand higher levels of service and additional processes and communication channels will have to be set up by the business at the Plants and Distribution centers to cater to this. Failure will lead to penalties and loss of business. Segmenting operations and service to cater to key customers will be essential and to right-size inventory levels. Businesses will need to set up strategic alliances with key customers to design necessary modifications in the supply chain, improve forecasts, execute product launches etc.

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