The curious case of Supply Chain Leadership

“Supply Chain as a career function may not sound like a great value preposition. At times, it appears as ‘thankless’ depending on many factors. After running commercial supply chain function for last 40 years, I can say with great pride, that supply chain is one (and probably the only function) that can impress and drive other functions in the organization like (Sales / Finance / Quality / EHS & Sustainability). If you look at the current environment, supply chain is at the forefront leading the way for their organization in convoluted economic environment,” shares Sanjay Desai, General Manager – Asia, Supply Technologies, during this exclusive interview…

You have been a part of this ever evolving highly dynamic supply chain domain for close to 35+ years. What have been some of the transformative moments over these years? Would you like to share with us some interesting insights / case studies that you have witnessed or were a part of during these years?

Since the last 3-4 decades, supply chain management industry has undergone significant transformation, driven by technology, globalization, natural disasters and changing consumer expectations. These are just a few. As we move forward, we can expect further advancements in technology and continued focus on sustainability, resilience, and conservation of resources. Let us look at a few transformative events that have forced supply chains to change their game.

1. Rise of Global trade along with China’s prominence: The period from year 1985-2000 was marked by a significant expansion of global trade, driven by various economic, financial, and technological factors. During this time, China invested in R&D, People skills and manufacturing technology which allowed them to assume a position of prominence. As China leveraged this advantage, it led to the further development of more complex and extended supply chains across the globe.
2. Financial crisis in 2008-09: The American meltdown during 2008 had a profound impact on global finance/ real estate/ banking and supply chains to the tune of 15 trillion USD leading to disruptions in capacities, liquidity, demand, and supply. The damage / aftermath of this event highlighted the need for supply chains to be more “risk averser” as well as the need to carry-out serious “due diligence”.
3. Rise of e-commerce: Since the last 20+ years, e-commerce proliferation of the global platform has forced the supply chains to creating efficiencies for faster, more flexible distribution and last mile delivery processes.
4. Natural disasters: A few natural disasters in Japan/ Thailand and Australian Fires highlighted an inherent lack of resilience and sustainability in the longer / extended global supply chains.
5. Technology as a game changer: Technology has been a game changer in supply chains in multiple ways. Technology helps to make processes simpler, helps businesses leaders and users to scale their operations at fast speed with 100% accuracy and allows them to interact with suppliers and customers at clock speed in a centralized manner. Organizations who are better able to leverage various technologies can gain a competitive edge and better adapt to the evolving demands of the marketplace.
   
6. Renewed focus on sustainability & conservation of resources: Currently the entire world is focused on sustainability/ conservation of resources and ESG across various sectors and regions including a strong execution focus over our supply chains. This focus is not only driven by ethical considerations but also by a belief that sustainable practices will lead to cost savings, enhanced brand reputation, and long-term business resilience.

You have handled supply chain function of various sectors be it FMCG, pharma, life sciences and Oil & Gas / Chemicals. What, according to you, were the peculiar differences and similarities in managing such crucial supply chains?

We all know that supply chain in its inherent form is a generic function. The principles, processes and applications don’t differ too much. They are transferable from one industry to another in a holistic manner. Said in another words, the concept of the supply chain is generic and applies broadly across industries. However, when it comes to the specifics of implementation and execution, then it will vary with the requirements of the industry. There are some peculiarities which differ by product / industry type. Let us look at few peculiarities for three types of industries - Pharma, FMCG and Oil & Gas -

PRODUCT SPECIFIC REQUIREMENTS

• Pharmaceutical: Highly regulated, requires batch (lot) management and serious expiry or near expiry management. Quite often needs cold chain management for storage and transportation.
• FMCG: Generally non-perishable, with a high focus on fast turnover and high volumes, low value high velocity.
• Oil & Gas: Products with varying levels of processing, requiring specialized transportation and storage facilities example - HAZARD classifications.

REGULATORY ENVIRONMENT

• Pharmaceutical: Strict regulations governance in manufacturing, distribution, and sale.
• FMCG: Regulations focus more on labeling, safety, and quality standards.
• Oil & Gas: Regulations primarily relate to environmental, safety standards and HAZARD during storage & transportation. Needs strong adherence to containment and recovery.

DISTRIBUTION NETWORKS

• Pharmaceutical: Distribution is often through specialized channels, like pharmacies, hospitals, clinics, and value-added resellers
• FMCG: Distribution is widespread, including supermarkets, convenience stores, and online retailers.
• Oil & Gas: Distribution is through a complex network of pipelines, tankers, and storage facilities, with retail distribution at gas/ petrol stations.

DEMAND PATTERNS

• Pharmaceutical: Demand is often stable but can be influenced by factors such as epidemics or regulatory like stringent manufacturing requirements due to Intellectual Property (IP).
• FMCG: Demand is driven by consumer preferences, marketing, and seasonal factors.
• Oil & Gas: Demand is influenced by economic factors, geopolitical events, and technological developments.

LEAD TIMES AND INVENTORY MANAGEMENT

• Pharmaceutical: Longer lead times due to regulatory approvals and manufacturing processes, requiring careful sorting, expiry and FiFO
• FMCG: Shorter lead times and higher inventory turnover, with a focus on minimizing stockouts.
• Oil & Gas: Lead times can vary depending on the source and mode of transportation, with inventory management influenced by price fluctuations or foreign exchange.

It is important for supply chain professionals to understand these differences in detail. These differences are crucial for designing effective supply chain strategies and ensuring the efficient delivery of products to customers. As a supplier or manufacturer, you need to know the “ecosystem” very well to play / shift your game from time to time.

In your 25+ years of experience in this highly dynamic field, what have been the crucial learnings achieved?

It has been a fantastic ride for the last 40 years of active learning at the same time deploying these learnings on the ground. I belong to the generation called “Baby Boomers” which basically means that I started to work even before I was 20 years due to the need of the hour. Finding a job even before completing under-grad studies was the sole purpose and pathway to success. I consider myself lucky, that I started my career with one of India’s greatest and best FMCG organizations as a warehouse worker. This organization was a great learning ground for me at the right time. After completing my graduation, I moved to a couple of roles within the same organization as the opportunities opened. I continued on the same trajectory and path for the next 40 years and moved into new organizations, different geographies, taking on new responsibilities. It allowed me to travel to multiple continents and learn new skills. I would like to share some of the learnings which helped me all these years!

• Work seriously to get better at managing people, be a good mentor, believe in reverse learning, develop an ability to be empathetic and show compassion to people’s needs.
• Get used to being uncomfortable, learn new skills, embrace change management head on.
• Have a vision & purpose, as they help to drive innovation, filter noise & focus on goals.
• Consistently “Do something today for tomorrow” to enhance long term implications of our actions and decisions we make today – they do come back tomorrow (sometimes a broken arrow!)
• Develop a resilient and sustainable approach towards achieving your goals. This helps our ability to adapt and be mindful of the implications of our actions on people & organization.

As you have spent your significant professional journey in pharma and allied segments such as health care & life sciences, what crucial role does supply chain play in enabling seamless business operations? Pls elucidate with some use cases.

Supply chains all over the globe have evolved not just in structure & execution but even more from a perceptive value to business into a real profit center value today. One of the leading industry segments that overcame these shifts is Pharmaceutical Supply Chain. The pharmaceutical industry was one of the early leaders that moved away from traditional manufacturing centric supply chains to a diversified & de-centralized multi-channel supply chain model.

During the last 40 years, it evolved much bigger mainly driven by various factors such as technological advancements, regulatory changes, and shifting market dynamics. It opened new channels of generic manufacturing, slowly moving away from strong lobbies of IP controlled manufacturing models. This has enabled Healthcare & Life Sciences products to be available at clock speed and at affordable prices to mass scale population especially in Asia and African region. Let us look at a few examples…

• Cold Chain monitoring system: Cold chain monitoring systems use IoT sensors and AI enabled data analytics to monitor the temperature and humidity of pharmaceutical products during transportation and storage. These systems provide real-time visibility into the condition of the products, ensuring they remain within the required temperature range to maintain their efficacy. This technology helps reduce the risk of product spoilage and ensures the quality and safety and efficacy of the products. Cold Chain products are expected to grow 12-15% per annum for the next decade in the global economies.
• Clinical Trials: Clinical trials involve numerous stakeholders, including researchers, sponsors, regulatory bodies, and patients, which require finite planning and execution at every stage. An efficient supply chain can help streamline the clinical trial process and reduce the risk of delays or errors by ensuring the timely delivery of materials, maintaining proper inventory levels, and complying with regulatory requirements.

What have been the challenges in managing the supply chain? How can companies overcome the same? Any example that would like to share?

Supply chain as an independent function started to evolve around late 1970s in the Western world. In the beginning of 1990s, as the epicenter started to move slowly to Asia, China accelerated its R&D and manufacturing spend & capabilities. This helped the western world to move their manufacturing footprint into Asia, mainly driven by low cost and high agility. This was the beginning of a fragile / low cost supply chain era, which continued for more than two decades. During Covid-19 disaster, these fragile supply chains were disrupted globally with lessons learnt that we need to re-design our supply chains to build resiliency and robustness. Few of the critical challenges that a supply chain organization will continue to face in any era are…

• Talent management: Recruiting / training and developing supply chain professionals is a key challenge for supply chain professionals. We need to invest, to train/ re-train our workforce as there will be usual attrition due to growth in this industry for the next two decades.
• Glo-calisation (Global + Local): Organizations need to be mindful that they need to run their supply chains at local level execution but managed and designed at global level for visibility, sustainability, and higher integration usings standard technology.
• Developing TCO principle (Total cost of ownership): It is critical now more than ever before to adopt the broader principle of cost of total ownership. The TCO principle will help companies make better decisions in supplier selection, negotiation, product design, pricing, and customer retention, ultimately leading to improved profitability and competitiveness.
• Risk management: Supply chains are exposed to various risks, including natural disasters, geopolitical issues, and supplier disruptions. Managing these risks requires proactive planning and mitigation strategies which address many real-time (to be) scenario planning.
• Know your customers: Organizations who invest in understanding their customers are better positioned to succeed in the marketplace on all fronts. Knowing your customer is critical to stay competitive, meet customer expectations, comply with regulations, and manage risks effectively.

What has been one of the most challenging tasks that you have achieved in your professional journey so far?

I enjoy working, connecting with great minds, learning from different challenges & opportunities. Our human capital is either a great asset or an opportunity depending on how you view it. As a senior professional running end to end supply chain, you don’t need to know or have answers for everything, no not at all. But you need to know how much time / money to invest in engaging your key resources in managing priority tasks. You need to know your P&L calculations at the top of your head, so you do not slide down the path of “diminishing marginal value” on various initiatives that you invest your resources. At the same time, retaining the basics and Keep It Simple Sam (KISS) approach is a key to finding success. Our solution can not be more complex than the problem. Our ability to manage our RESOURCEs effectively is a key element to achieving results in a sustainable manner. I am very proud to say that during the last 40 years, I have mentored, promoted/ moved many talented professionals in international markets. It helped me to improve the performance of my team, leading to greater employee satisfaction within my organization.

You have also witnessed honing /creating a huge supply chain talent pool in your previous stint. What do you think are the skillsets that a new age supply chain professional must possess/ what are the qualities that they lack, and they must work upon?

Supply Chain as a career function may not sound like a great value preposition. At times, it appears as “thankless” depending on many factors. After running commercial supply chain function for last 40 years, I can say with great pride, that Supply Chain is one (and probably the only function) that has the ability to impress and drive other functions in the organization like (Sales / Finance / Quality / EHS & Sustainability). If you look at the current environment, supply chain is at the forefront leading the way for their organization in convoluted economic environment. To excel in this environment, supply chain leaders must have a diverse set of skills. Let us look at a few major ones.

• Empathetic leadership: Capability to develop, build and create a high performing team with empathy, passion, and genuine love for people’s growth.
• Comfortable with digital technologies: In the modern world, being comfortable with emerging technologies like (AI, Blockchain, DT) is becoming close to mandatory.
• Functional/ technical knowledge: In-dept understanding of the end-to-end supply chain functional / technical and dependent knowledge is given (must have)
• Project management techniques: Skills to create high level project planning, extract project data and create insightful analysis for complex decision making, keeping it simple.
• Sustainability and ethical integrity: Clear understanding of ethical / ESG practices including impacts of our industry on society, environment, people, and organization.

What are the tenets of Building & Sustaining Supply Chain Strategy of the Future? Would like to cite a success story that would motivate user companies to imbibe these lessons in their respective organizations?

Building a sustainable supply chain strategy for the future requires leadership wisdom, functional expertise, wider knowledge about the ecosystem, manufacturing and distribution technologies, customer integration and global trade and tariffs understanding. There are many more depending on the geographical location / the product and the industry type. Let us look at a few critical ones.

Keep customer in the center: Focus on understanding and meeting customer needs by delivering products and services efficiently and economically. Keep customers at the center whenever you intend to build any solution. If the process or solution is not helping the customer’s cause, you may need to go back and review its execution.

1. Leverage globalization & localization: Learn and develop strategies that consider the complexities of global supply chains, including trade regulations, cultural differences, and geopolitical risks. You need to balance your global outreach for regional/ local execution and benefits. While you do NOT need a 100% accurate cookie-cutter, you need horses for the courses design approach.
2. Develop and grow talent: You need to invest in the right talent, grow them in the organization so they can contribute to your goals. Optimize this pool of talent to develop a sustainable strategy and execute it with purpose and intent. Of course there are impediments, but having a great team to support is the mantra for success even in adverse situations. That is the power of your team.
3. Passion for continuous improvements: Encourage a culture of continuous improvement and innovation in your organization to drive redundancy, wastage cost and stay closer to the competition. Complacency and accepting status quo are the “bane” of modern supply chain.
4. Risk management and resilience: Develop a culture of risk assessment upfront in the organization not just as lip service or for paper exercise purpose. Strategic risk assessment builds the organization’s ability to be prepared for disasters, accidents, and supply chain disruptions in the marketplace.
5. Collaborate in the ecosystem: Collaborate with your suppliers’ and customers’ partners to foster a culture of sharing gains and leaning on each other to create value in your networks. As the competition grows, staying together and leveraging each other’s strengths is a key component for sustainable growth.

If you take a look across industries, two organizations who demonstrate these traits stand out in the crowd are 1) TATA group and 2) Reliance Hydro. Both the organizations are known for their sustainable supply chain practices – their investments in the People, their focus on innovation and passion for ethical sourcing and community development, their initiatives in renewable energy and water conservation. Both the groups set a great example for many to emulate them.

How do you foresee India’s emergence as global supply chain superpower in the years to come?

India presents itself as an appealing investment geography for investors globally, thanks to its strong macroeconomic fundamentals, positive demographic placement, improved ease of doing business and access to resources for expanding manufacturing facilities. This is the result of the local government and private /public partnership working together with domestic business to realize this potential.

Let us look at a few major parameters which make India one of the most favored destinations for economic growth over next decade.

• Largest skilled workforce: India has a large and growing pool of young skilled workers, particularly in technology and engineering fields. This workforce can support advanced manufacturing and innovative solutions, making India an attractive destination for companies looking to diversify their supply chains.
• Huge domestic market plus export: India is one of the world’s largest consumer markets, offering significant opportunities for companies to establish manufacturing and supply chain operations to serve the domestic market as well as for export market which is growing rapidly year over year.
• Technology adoption: India is increasingly adopting advanced technologies such as artificial intelligence, robotics, and automation in manufacturing. These technologies can improve productivity and competitiveness. Further as India accelerates its adoption of advanced technology, the cost of acquiring technologies decelerates in the same vein.
• Government investments: Indian Government has launched several initiatives to boost manufacturing and improve the ease of doing business, such as the “Make in India” campaign or “(PLI) Production Linked Incentives and various regulatory reforms. These efforts aim to attract domestic and foreign investments in the manufacturing sector.
• Cross-border trade developments: India’s trade and tariff policies are shaped by a combination of geopolitical considerations, economic objectives, and domestic priorities. India Govt implemented major initiatives like Export Promotion Capital Goods (EPCG) and Merchandise Exports from India Scheme (MEIS). These initiatives focus predominantly on cross-border trade.

How can companies achieve supply chain network optimization? Is there any step-by-step approach? Any interesting anecdotes that you would like to share with us from your experience…

Supply chain is a scientific function which has the ability to design / develop physical infrastructure, technology footprint by analyzing current data and future strategy. One of them is Network Optimization.  Simply explained, this is a process of analyzing and improving the flow of goods, information, and money between suppliers, manufacturers, distributors, retailers, and customers. It also involves selecting the appropriate locations for our warehouses/ distribution centers taking into consideration the shortest available transportation routings. It takes into consideration future inventory and stocking levels aligned to expected selling and sell-thru. Network optimization can be a long drawn 10-step process.

For now, let us look at top 5 processes…

1. Collect & analyze data (As Is): This includes understanding the structure of the network, number of various players involved, their geographical locations, their roles in the system, as well as collecting data on performance metrics such as cost per unit shipped or inventory levels, average distance covered, velocity/ heat map of your customers. This data should be collected from all relevant sources such as supplier contracts, WMS records, freight contracts, Purchase orders received, shipment to customers.
2. Look for signs that tell you it is time to optimize your network: There are two ways to look at the data. You can look at performance indicators and the inefficiencies within (Inside) the organization. Alternatively, you can look at external factors to see their impact on your business from outside and the need to address these efficiently.
3. Develop “to be” structure (optimization plan): This plan should be tailored to your specific needs and goals. Ideally it will show how the success looks like. It will include a timeline for implementation, including a high-level budget for the project. It is also important to create a team to lead the effort and secure necessary resources and approvals prior to beginning “blue printing” phase of the project.
4. Implement optimization plan: This is where the rubber meets the road. Be sure that you have trained all employees who are part of the optimization project. It is beneficial to provide additional training to concerned employees on any new technologies or application software that you are using.
5. Measure, monitor and control: Once the plan is implemented, evaluate the results, monitor them, and adjust as required to process new data. Remember that the changes you make to the processes must have a positive impact on the results, or else you need to re-adjust. You need to built-in as many “to be” scenarios using the data available till you find the right combination where freight costs, inventory holding costs and customer satisfaction scores are optimized.

A classic case study, executed in year 2015, is associated with an organization who is the leader in “Serving Medical Science” to customers globally. It grows 90-95% due to acquisition and 8-10% due to organic growth. It markets over 100 brands globally via their footprint in 65 international markets. It has a large number of multiple suppliers, manufacturing sites, distribution channels and service centers. To optimize their supply chain network, they implemented a comprehensive network optimization strategy. This involved using advanced analytics and modeling tools to analyze its supply chain network and identify opportunities for improvement.

Couple of critical parameters were consolidation of its distribution centers to optimize inventory levels, increase their outreach to customers (within half a day delivery) at the same time, reduce freight costs and enhance overall supply chain efficiency. Over a period of two years, they were able to optimize their warehousing footprint in Asia from over 75 warehouses to less than 30. The optimization allowed them to improve their customer delivery efficiency, reduce inventory holding costs, and enhance customer service using “milk run” concepts.