The Day After Tomorrow

Supply chain trends to look out for in 2017

The new year always ushers in hope and optimism for all business functions. It’s like getting things right, once again. A new chance to begin new processes, remove bottlenecks and take a fresh look at new opportunities. In the case of supply chain, the more things change, the more they stay the same. We only get more alert, more agile and more focused in achieving optimum solutions. The mantra is to keep going, as swiftly and with as few errors or wastage as possible. The lines need to work smoothly today, but run much faster the day after tomorrow.

Here are some of my thoughts on the trends that will be the focus of 2017:

1. Immediate gratification

We are living in an ‘instant’ era, where choices are made at the snap of a finger and time is raced against almost every second. Consumers are getting impatient. They don’t want to wait in queues at stores or not see their preferred products on the shelves. Brand loyalties are diminishing in the FMCG sector, leading to further proliferation of product offerings. This requires supply chain teams to be ultra efficient in ensuring that all their SKUs are present on store shelves whenever consumers look for them.

2. Demand shaping

Scenario planning will become imperative to predict trends and changing preferences of consumers and use it for demand shaping. As French mathematician, theoretical physicist, engineer, and philosopher of science, Henri Poincaré, said, “it is far better to foresee even without certainty than not to foresee at all”. Building scenarios helps in thinking through potential vulnerabilities and working out requisite mitigation plans to counter them, by developing new capabilities well in advance. It also helps in converting emerging situations into opportunities by leveraging current capabilities. Take the case of the GST roll-out for example. While the timing of the GST roll-out is still uncertain, it is important for organisations to redesign their distribution network and test potential new facility locations for a post-GST scenario.

3. Freshness will be key

Volatility of consumer demand is the prime challenge that supply chain teams grapple with every day. Since forecasts are inherently inaccurate, running supply chains based on forecasts invariably leads to a mismatch of inventory; stock-outs in certain locations and excess inventory in others. Consumers, on the other hand, are getting more and more particular about picking only fresh products. It is fascinating to stand in an FMCG isle in a self-service store and observe consumers choose their brands. I have noticed about half of them turning the packs around to look at the date of manufacturing. In such a scenario, stale inventory is bound to result in a loss of consumers.

Keeping an eye on the freshness of products through daily replenishment routines and dynamic production schedules will gain importance. TOC is likely to make further inroads in FMCG companies. Faster routes, new lanes and reduction in replenishment lead time will be key actions required to compress delivery time and maintain freshness.

Improving product freshness means working with lower inventory in the entire chain, requiring flexibility in production systems and small batch sizes. Concepts like Lean and SMED will gain in importance to deliver this flexibility.

4. Sustainability

The emerging way of staying ahead of the turf in supply chain will be recyclability, post-use reprocessing and wastage reduction. Michael Porter’s pioneering work on ‘Shared Value’ will gain importance as it focuses on value creation for both the organisation as well as the society. Responsible companies will focus on reducing use of scarce resources like energy and water, increasing adoption of renewable energy, and minimising adverse impact of generating waste and Greenhouse Gases (GHG). Use of recyclable materials will also see an uptrend.

Rising consumer awareness and more stringent legislations will propel manufacturing organisations to work closely with government bodies in collection and recycling of their products after consumer use.

5. The next big break-through

There are several emerging technologies gaining maturity. Internet of Things (IOT) is finding new applications every day. RFID tracking is getting more affordable with drop in price of tags. Palletisation and vehicle tracking systems are getting widespread adoption. Start-ups are trying to create a market place for commercial vehicles.

It is important to allocate certain investments in terms of people and funds to pilot some of these technologies during the year. An early start gives enough room to experiment and go through multiple learning cycles to fine tune their adoption.

The going may get tough but that’s when the toughest get going.

I wish you all a wonderful 2017!