Large organizations with mass consumption products are heavily reliant on the effectiveness and efficiency of the supply chain for their profitability and growth. For achieving such efficiency and effectiveness, there needs to be massive digital transformation and redesigning of the supply chain of large organizations.
We interviewed one of the SCL mentors, Suman Bose, to understand his perspectives on the criticality of the supply chain in the product life-cycle, the innovation status of large organizations about the supply chain and what the future of business holds. Suman Bose is an executive advisor to boards and CEOs on strategy and digital transformation. He is the former MD and CEO of Siemens Industry Software – India and has over 20 years of experience in business development.
Here are the key takeaways from the interview.
One of the major difficulties in reimagining the supply change and digitally transforming is
“the direct impact it may have on thousands of jobs, often leading to severe backlash from employees and pressure from labor unions.”
Digital transformation of the supply chain enables organizations to thrive, rather than survive in the long run. So, it is key that big companies look at solutions from smaller startups and mid-sized partners to reimagine the way they carry out SC tasks while finding effective ways to address the challenges.
Suman Bose explained the implication of new automation-based business models with the example of truckers in India.
Suppose a truck driver has to deliver a package from Ludhiana to Chennai and the estimated cost of the delivery is Rs. 40,000. The truck drivers cannot approach banks to raise working capital loans to fund this delivery as they usually do not have the requisite documents. Additionally, small delivery orders do not fit into the asset criteria even if banks can fund certain working capital loans based on asset criteria. To get funds for making the delivery, the truck drivers end up approaching money lenders who charge exorbitant interest rates and only provide the sum after deducting the interest amount. So, the truck driver starts with a disadvantage. To add to his troubles, the clients always delay payments, putting them in a vicious circle of debts and working capital deficits.
“This problem is being solved by an automation-based business model wherein the software/ tech solution fills the gaps in the loan process. When a purchase order is received, it automatically gets the requisite forms filled, collects necessary documents and send it to the bank. The bank scans the documents and approves the loan at a micro-finance interest rate/SME business rate.”
Automation, therefore, expedites the process and makes it efficient.
The traditional models and supply chain processes are ridden with inefficiencies, hefty costs and bottlenecks that permeate from severe information silos, poor visibility and heavy leakages.
“Technological innovations from supply chain startups are revolutionizing even small aspects of the supply chain. They are enabling better integration of systems, seamless information flow (breaking silos and filling information gaps), creation of unique identification systems and end-to-end visibility which are, in turn, immensely impacting the quality and process efficiency.”
Suman Bose explained this with the help of the example of a supply chain startup in Punjab that solving the twin problems of the excessive use of subsidized fertilizers and pesticides and resulting losses to the government. Distributors get fertilizer subsidies on a per kg basis and so they sold excessive amounts to farmers by fudging the data. Farmers, in turn, excessively used these and caused soil quality degradation and water pollution. So, the startup engages in soil testing at a satellite level and ground level, estimating the quantity and quality of pesticides and fertilizers that are to be used on that particular piece of land. By linking this with the Government data, it helped prevent fudging of data (as one can fudge the ground level tests but cannot fudge the satellite level tests) and saving the Government from losses and leakages.
Frugality comes from greater visibility – tying up the loose ends of existing information while not losing business lucrativeness.
“In the near future, tech innovations will make it possible to integrate the 360-degree view of consumption data into the supply chain and thereby, into manufacturing and procurement of products. This is nothing but mass customization. And mass customization is what a frugal economy will be all about.”
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