With more than a decade of experience in Sourcing, Logistics, Supply Chain, Operation and Project Management, Vickram is a management graduate in Logistics and Supply Chain.
Supply Chain Management (SCM) is a traditional business function that ended up in the limelight during the Covid pandemic. SCM has matured over time highlighting the importance of logistics and distribution, planning and inventory control, and end-to-end integrated business planning. There have been advances spanning over a decade, in forecasting sales and distribution requirements and this has led to upstream collaboration with the vendors. During the Covid pandemic, markets all over the world experienced shortages of goods. This event has changed the perception of the SCM function.
Today, SCM is not a support function but a business enabler. SCM has the capacity to not only improve the bottom line but is capable of improving the top line. Today there is a clear understanding that SCM means more than the logistics function, trucking, shipping, airfreight, or vendor management. SCM signifies the use of complex forecasting models, the inclusion of complex micro and macro global factors, demand analysis, and short, and long-range planning. SCM is well-positioned today to drive business value going forward. There is renewed attention to SCM and the focus is on building sustainable business models around new supply chain initiatives.
Customer satisfaction and delight is a key driver of business success, andthe supply chain plays a very important role in ensuring that. It is a lost sale if a product that a customer is seeking is not available on the store shelf. Customers are not always willing to come back or wait to get the product of their choice. SCM helps in avoiding such situations. When an organization has thousands of stores across several states, it is critically important to sense the demand for each product across geographies and ensure the manufacture and on-time delivery of these products. SCM has matured into a function that can handle such complexity.
Ecommerce has seen explosive growth, particularly during the pandemic period. Customer expectations have risen dramatically and demand for different products is dynamic. In this scenario, an out-of-stock product means a loss in revenue to the business. On the manufacturing front, we see smart factories in line with the principles of industry 4.0. SCM sits in the information cockpit
and will play a significant role in connecting market demand, and production of the right product. Availability and procurement of raw materials and management of inventory are also going to be critical. We are living in a VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) world, and the demand for products is dynamic and can change very quickly. A lean supply chain is critical to market success. A well-managed supply chain sits at the center and sends the right signal to sales and marketing about product availability, to finance about inventory and raw material availability, and to manufacturing about production plans. SCM can provide the right information to ensure that the right decisions are taken at the right time.
SCM Embraces Technology
Technology has embedded itself into SCM today. Technological advancements such as Cloud, AI (Artificial Intelligence), ML (Machine Learning), and Automation have changed how businesses operate today. Cloud allows access to data in multiple locations and negates the need for local servers. This not only results in cost savings but, allows a complex global supply chain to function effectively. While products are manufactured in China, businesses sitting across the world can see what is being manufactured, what is under transit, what is in distribution, and what quantities are in the warehouse. Cloud technology has improved the connectivity and flow of information, and also made it quicker, and cheaper to communicate.
That being said, Cloud technology is the tip of the iceberg. SCM has benefited from new technologies such as blockchain, AI, and ML. AI and ML are playing a major role in improving demand forecasting. Today demand forecasting models are very complex algorithms and learning systems that take into account varied micro and macro variables such as climate change, and geopolitical factors. This has improved both shortterm and long-term demand forecasts. In operationintensive industries such as automotive or pharma, sensing demand is a challenge and affects the ability for capacity utilization and vendor demand management. Any improvement in demand forecasts helps in improved capacity utilization and cost control. Advanced planning optimization tools have also helped in improving capacity utilization.
Blockchain technology has enhanced the speed at which businesses operate. Blockchain has allowed a seamless exchange of shipping documents and other information with logistics service providers and other business partners. Digital transformation is not just good to have but a must-have for businesses to operate effectively. The supply chain is here to stay and will enable businesses to become faster, leaner, and more efficient. Business Process Reengineering (BPR) has taken on an added importance in the post-pandemic world. Today, SCM is at the center of business continuity plans.
SCM signifies the use of complex forecasting models, the inclusion of complex micro and macro global factors, demand analysis, and short, and long-range planning
Geopolitical war and export bans on various traded goods by several countries have highlighted the critical importance of an efficient global supply chain. SCM is going to help in proactive crisis management. Going forward, the focus will be on building sustainable models of supply chain. Another key factor that will influence SCM is the availability of talent. Robotics, automation, and other technologies are revolutionizing all aspects of the supply chain. About five years from now, the industry will need talent skilled in the use of modern technologies. It is important to invest in people today and make them future-ready.