How Can Sustainable Packaging Enable Cost Reduction During Covid19?
How Can Sustainable Packaging Enable Cost Reduction During Covid19?
The need for enterprises to be more efficient could have not been more relevant than it is today, thanks to the huge costs imposed by the COVID19 pandemic. One of the ways in which enterprises that manufacture consumer goods can reduce their costs is by reducing wastage in packaging. With intelligent innovation, it is possible for enterprises to combine economic efficiency with compliance with health and hygiene requirements in packaging to achieve the best of both the worlds. Packaging that entails the reduction of wastage and seeks to enable enterprises to do more with less creates new avenues for cost reduction while ensuring hygiene factors for contactless delivery. Some of the major ways in which packaging can enable such hygiene centric cost reduction are as follows:
Reimagine Packaging Design for E-Commerce and Contactless Deliveries
Give the need for social distancing in the wake of the COVID19 pandemic, a clear trend that is emerging in the consumer packaged goods industry is a shift of consumers away from supermarkets, malls, and grocery stores and towards e-commerce enterprises that offer contactless delivery of goods. As such, the paradigm on which packaging is designed has shifted from the locus standi of store shelves to that of e-commerce and online retail. This implies that manufacturers of consumer packaged goods need to pivot their packaging design for greater and clearer visibility on personal devices like smartphones and tablets rather than store shelves. Doing so can actually allow enterprises to reduce packaging costs by forgoing the packaging requirements of grocery stores and supermarkets.
Vendor Consolidation and Single-Window Approach to Procurement of Packaging
Given the evolving contours of quarantine and lockdown across diverse geographies and the decentralized regulatory environment governing these, it makes enormous good sense to suggest that enterprises shall do well to focus on a single-window approach for the procurement of packaging materials to reduce the risks and costs associated with disruptions and freezing of local logistics. An integrated platform for sourcing packaging materials from a single vendor with strong upstream partnerships with local MSMEs and logistics service providers can enabler manufacturers to reduce costs, TAT and respond swiftly to market demand in niche markets.
Digitization of Packaging Supply Chain to Enable Mapping of the Demand and Supply Gap
One of the major factors affecting the packaging supply chain is the manual workflow that impairs the optics of vendor KPIs for packaging. A switch to digital packaging supply chain platforms can enable enterprises to map supplier capacity, objectively assess the TTR (time to recover) from lockdowns, and consequently quantify the quality, cost, and delivery metrics. This shall further allow enterprises to make their packaging supply chains faster, safer and more de-risked during the COVID19 pandemic and beyond.
Differentiate the Necessary Costs from the Unnecessary Costs in Design
The best packaging designs that lead to cost reduction follow a 4D Methodology of ergonomics, cost, sustainability, and logistics. If you want to bring down costs without impacting performance, then you need to think about how you can curb costs on aesthetic aspects. You can do in-depth scrutiny of the below questions to enable the best possible cost optimization process within each carton:
- Can your printing cost be optimized to highlight essential information only?
- Do you need full-color printing? Are there any design tweaks that can give coverage to the blacks and whites?
- Does your product need an inner pack and an outside carton?
- Can your packaging material have more environment-friendly materials like jute, which can reduce your carbon footprint?
Use of Technology to Optimize Packaging Costs
Brands are increasingly using popular CAD systems like Solidworks, Siemens NX12, and ArtiosCAD to ensure the right size and strength needed to package a product. Such technologies will help your enterprise to figure out a lot of information like:
- Dimensions of the inner pack and outer cartons
- Use of right packaging design like blisters, clamshells, corrugated boxes, paper packaging, sacks, or boxboards
- Use of the right dunnage material and size for full protection of the product throughout its journey to the end customer
- How does the carton need to be stacked on a pallet to enable maximum cartons shipped per pallet and higher pallet density?
- Configuration for loading container that holds the pallets
With a focus on these factors in packaging, supply chain professionals can effectively protect the product during its shelf life and the integrity of the contents inside the package. As a result, enterprises gain from reduced cost benefits like no product re-work, lower returns and replacements, and higher savings due to lower occurrence of damaged goods or ‘written off stock’. Also, shipping costs reduce because enterprises can do away with dead weight and optimize volumetric weight and thus make their supply chain more efficient.
Ergonomic Pallet Redesign
Companies are also looking to reconfigure the labor aspect involved in the ‘per piece’ packaging with compact packaging. This technique of simplifying the packaging process needs less labor and brings down the amount of warehouse space needed for storage. Such innovation helps the brand redesign pallet configuration and ship more product volume per pallet. Take the case of an online home décor brand, Exclusive Lane. They used India Post for delivery services. But this service stipulated the wrapping and stitching of products in jute. This step not only took 2 to 3 hours but also an additional cost to execute. When they changed the delivery service, they were able to do away with this packaging cost overhead.
What is Good for Unit Economics Can Address Hygiene Factors Too
It is apparent that in the wake of the COVID19 pandemic enterprises across a wide spectrum of industry verticals will have to prioritize hygiene even as they continue to explore new ways to lessen the devastating impact of COVID19 on businesses. Even a 1-3% cost reduction assumes importance in this context and sustainable packaging has the potential to create new avenues of cost efficiency for enterprises. As enterprises stare at a new normal characterized by the need to be more efficient, safer, and faster in their supply chains, the shift will transform from a trend to a mainstream practice in the packaging domain. In doing so, they are also managing to bring down costs and improve toplines, as seen in the above examples.
Integrated MRO and Packaging Solutions
Integrated MRO and Packaging Solutions
Integrated MRO and Packaging Solutions
Simplify Your Packaging
Simplify Your Packaging
Simplify Your Packaging
Moglix Solutions uses a single-window approach to deliver relevant primary, secondary, and tertiary packaging solutions to businesses, helping in cost reduction and enhanced branding. We map packaging challenges and provide one-stop packaging solutions for various industries and segments, including packaging design R&D, branded packaging, integrated supply chain, and sustainable and compliant packaging.
Transform Your Indirect Procurement
Transform Your Indirect Procurement
Transform Your Indirect Procurement
Podcast E3: Now and Next in The Automobile Industry
Podcast E3: Now and Next in The Automobile Industry
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The Communicators’ Assembly Point
The Communicators’ Assembly Point
Date: May 2020
Theme: Communications in start-ups
About the event: The virtual event saw participation from some of the most eloquent speakers from the Indian-startup fraternity who expressed their views on navigating reputation in the post-COVID-19 era.
The Economic Times Supply Chain Management and Logistics Summit 2020
The Economic Times Supply Chain Management and Logistics Summit 2020
Date & Location: May 2020
Theme: Remodelling supply chain in turbulent times
About the Event: Dedicated to the OEM community the conference witnessed the coming together of supply chain leaders to discuss some of the most pressing challenges and solutions. Major issues discussed during the course of the event included emerging practices like digital transformation of MRO procurement and digital enablement of supply chains for OEMs to gain greater visibility into supply chain performance
COVID19: The Three Phases of Recovery in Manufacturing
COVID19: The Three Phases of Recovery in Manufacturing
How badly has the manufacturing sector been hit by the COVID19 pandemic? Is recovery from the current situation even possible? Given the huge costs imposed by the lockdown and the unpredictable contours of the spread of the contagion, what can manufacturers do to resume their business once the first signs of ‘Unlock 1.0’ are visible? If so, what trajectory will enterprises in manufacturing need to take to make up for the significant losses that have already occurred and the ones that are anticipated to emerge over a period of time?
The United Nations (UN) has projected that the global economy will shrink by 3-4% in the year 2020. As an outcome, manufacturing enterprises need to introspect on the steps that they need to take today, tomorrow, and over the course of time, leading into the future of a post-pandemic world. At Moglix, we believe that enterprises need to visualize the road to recovery by first rebuilding trust today, enabling businesses processes with technology for tomorrow, and building futuristic supply chains using advanced technology for the foreseeable future beyond COVID19.
What Manufacturers Need to Do Today?
Rebuilding Trust: The Great Lockdown in 2020 has lent a major shock to public healthcare systems and has created an enormous trust deficit at both individual and institutional levels. In the manufacturing sector, trust erosion has emancipated in many forms, including withdrawal of labor from participation in production processes, opaqueness in supplier collaboration, and a lack of visibility into insights on key performance indicators of cost, quality, and expected timelines of delivery. As such decisions to deploy resources and engage them into manufacturing during ‘Unlock 1.0’ must be pivoted on addressing the trust deficit secularly first within enterprises and then scaling up across all enterprises constituting the supply chain in the manufacturing sector.
- Ensuring Health Protection: At the enterprise level, this calls for ensuring the availability of quality rated personal protective equipment (PPE) kits, and medical kits for all employees and the creation of fool-proof systems for implementation of standard operating procedures for regular sanitization of the physical environment at the workplace. The second imperative is to ensure transparency in sharing information on the deployment of such social distancing and contact tracing measures on a “need to know basis” among all stakeholders in the supply chain while staying within the ambit of data privacy.
- Fixing the Broken Fragments with Data: Reviewing supplier collaboration and manufacturing workflows today will play a huge role in creating an open and transparent dialog among OEMs, CMs, EPC enterprises, MSMEs, and suppliers across multiple tiers in the supply chain. A pilot project for mapping the supplier network can follow a template similar to the one used by bankers to conduct a stress test of debtors during the Great Meltdown of 2007 and focus on three Cs: character, capability, and credibility. One way to do this is by creating a similar stress test in manufacturing and encompassing the three Cs can be of paramount importance:
- What is the site location of the supplier including the city, region, and country? Do we have insights into the real-time status of COVID19 spread there?
- Is the supplier adhering to social distancing and contact tracing practices to steer clear of COVID19 risks?
- What are the parts procured from this site? What is the part number and description, part cost, annual volume for this part, rate of replenishment of inventory for this part, and the total spend (per year) from this site?
- What is the end product including the OEM’s end product(s) that uses this part? What is the profit margin for the end product(s)?
- What are the lead times from the supplier site to OEM sites in days?
- What is the Time to Recovery (TTR)? What time would it take for a site to be restored to full functionality if the supplier site is down, but the tooling is not damaged or if the tooling is lost?
- What is the cost of loss if expediting components from other locations is possible? If so, at what cost?
- Can additional resources (overtime, more shifts, alternate capacity) be organized to satisfy demand? If so, what is the cost?
- Does the supplier produce only from a single source? Could alternate vendors supply the part? Is the supplier financially stable? Is there variability in performance (lead time, fill rate, quality)?
- What are the mitigation strategies for this supplier-part combination? Who are the alternate suppliers? How to arrange excess inventory?
What Manufacturers Need to Do Tomorrow?
Enabling Business Processes with Technology: As enterprises in manufacturing and supply chain operations look to move beyond the immediate impact of the COVID19 pandemic over the next financial quarter, it shall make sense for them to scale up the best practices from the peak of the recessionary phase and integrate siloed data repositories for multiple functions into a compact source to pay (S2P) platform for a single-window approach to manage approvals and authorization for procurement decisions. This shall serve the purpose of augmenting enterprise-wide transparency and building greater efficiencies by facilitating multi-tenant models for collaboration spanning across the nerve center leadership, customer relationship, and supply chain teams to optimize costs. Small steps towards instituting a digital “cost control tower” to prioritize urgent and important payments and define clear reporting metrics for managers to track the liquidity status in real-time may over the period of the next financial quarter evolve into rolling forecasts to identify major areas of EBITDA risks and finally implement zero-based budgeting (ZBB) to achieve greater fiscal prudence for discretionary expenditures and indirect procurement. Authorization and access to such information systems may slowly be devolved amongst mid-level managers to move the enterprise forward along the lines of supply chain digitization and learning curve from a strategic to a tactical level
What Manufacturers Need to Do in the Future?
Build Futuristic Supply Chains using Advanced Tech: One of the major lessons coming out of the COVD19 pandemic for enterprises in manufacturing shall be gaining visibility into the next steps and future-proofing their supply chains. They will have learned the value of anticipating the next supply chain disruption in advance and adjusting their positions in the market while they still have time to do so.
Using Advanced technologies like contract management and predictive analytics that allow enterprises to stay informed on their supplier relationships, map the contributions of suppliers by value and volume, and assess their exposure to volatile business environments are likely to emerge as the enablers of de-risking supply chains. With AI, ML, and advanced analytics being able to capture deeper insights on the next steps in the supply chain right up to the end consumer, the direction of supply chain automation is likely to direct towards demand-driven planning and forecasting (DDPF).
While temptations to stay in denial of the challenges in a post COVID19 world and to retain the status quo may still be strong, enterprises shall do well not to risk a return to pre-COVID19 coordinates of workflow, collaboration, and distribution. Instances such as the Y2K, the subprime crisis of 2007, and climate change should serve an adequate warning to enterprises to steer clear of the lure of wishing away a rebound of challenges and then waking up to grave realities. A future that is driven by a high degree of technology enablement for information sharing, engaging in transparent dialogs to drive outcomes, and creating coordinated responses to a crisis may present us with a vertical upward shift in costs. Irrespective of how steep the shift in costs may be, it shall be prudent for enterprises to believe that they shall be able to pass on such incremental costs of technology enablement across the downstream of the supply chain right up to the end consumer.
How a National Supply Chain Network Can Enable India to be Self-Reliant: Looking Beyond COVID19
How a National Supply Chain Network Can Enable India to be Self-Reliant: Looking Beyond COVID19
The compelling need to go into lockdown and maintain social distancing to minimize the transmission of the COVID19 pandemic serves as a glaring case study for enterprises in India to analyze the challenges caused by global supply chain disruptions. Given the projected decline in the real GDP growth rate by at least 1% and a surge in unemployment to 23% due to the freezing of the economy into an abominable lull, it makes sense to: (1) critically examine manufacturing-led exports, (2) explore the scope of a national supply chain network to boost domestic manufacturing and investment, and (3) assess export promotion as a strategy to boost employment generation and economic growth through the multiplier effects thereof.
What Makes India a Strong Contender to Emerge as a Global Manufacturing Hub Beyond COVID19?
A new normal is set to emerge coming out of the COVID19 pandemic accompanied by a major restructuring of global supply chains. While the manufacturing sector has been affected by the global supply chain disruptions caused by the COVID19 pandemic, there is ample reason for enterprises in the manufacturing sector to be optimistic about the India growth story.
Diversification of Export Portfolio of Indian Manufacturing by Geography:
Prior to the COVID19 pandemic, the value of exports of manufactured goods from India, stood at USD 18 billion of which China accounted for USD 1.8 billion while, the United States, India’s top export market accounted for USD 4.2 billion. This is indicative of the highly diversified portfolio of manufacturing exports of India and in hindsight both an opportunity to grow as well as a major lever to de-risk the supply chain of the manufacturing sector in India.
The Resilience of Indian Manufacturing Exports to Sino-U.S Trade Wars:
India’s revenues from the export of manufactured goods had been registering consistent growth for some time before the outbreak of the COVID19 pandemic. In FY 2019 reached its highest ever at USD 330 billion, surpassing the previous peak performance of USD 314 billion in 2013-14. It was achieved despite the strong headwinds due to the reciprocal Sino-U.S imposition of tariff and non-tariff barriers that were projected to weaken growth in global trade by 1.70% for a number of Asian economies including China. The fact that India emerged as the only Asian economy to register 1.7% growth in the value of manufacturing exports proves its resilience to a weakened global economy.
Growth in Exports of Intermediate Goods and Technology Penetration in Manufacturing:
A significant progress in the performance of India’s exports of manufactured goods is the growth registered by various categories of intermediate goods in FY 2019. Major growth drivers in the category of intermediate goods include engineering goods (+6%, USD 83,704 million), petroleum products (+28%, USD 47, 954 million), chemicals (+22%, USD 22,573 million) and pharmaceuticals (+11%, USD 19, 188 million) respectively. Other verticals that registered growth include textiles, electronics, and plastics. The growth in the value of exports of such intermediate goods holds significance from the standpoint of how technology enablement in manufacturing can push Indian manufacturing enterprises up the global value chain in a post COVID19 world. The share of FVA in India’s exports stood at roughly 17% in 2018, with the share of IDA (domestic value-added) in its exports stood at 83%.
National Supply Chain Network Can Enable India to Grab a Greater Share of the Global Value Chain
A National Supply Chain Network can connect Indian manufacturers in the hinterlands to new opportunities in the global supply chain and enable them to earn a greater share of the GVC. This calls for exploring avenues to strengthen domestic manufacturing and attract foreign direct investment to make a greater proportion of the global manufacturing output, locally in India and embrace export promotion. It calls for an integration of initiatives to create fixed assets for infrastructure, improve logistics connectivity, and drive the technology enablement of supply chains through digital connectivity to de-risk global supply chains from the unprecedented shocks experienced during the COVID19 pandemic.
Improving Infrastructure is the Key to Building the National Supply Chain Network
The creation of world-class infrastructure is at the heart of the idea of a National Supply Chain Network and remains a strong impediment to India’s performance in manufacturing. Infrastructure in India has a strong investment-to-GDP multiplier effect of 2X. This means that a 1% increase in investment in infrastructure can create 1,360,000 jobs. The National Infrastructure Pipeline that has been envisaged at the cost of INR 100 lakh crore over the next five years can be leveraged to improve logistics connectivity. The creation of fixed assets like 9000 KM of the economic corridor, 2500 KM of controlled highways and 5000 KM of highways before 2024 in 12 bundles if designed from the ground up to provide greater connectivity beyond terminal gates ports and airports to the hinterland in rural areas can significantly raise the attractiveness quotient of foreign direct investments for global corporations in core industry verticals mentioned above to make in India. The recent announcement on the creation of a land bank to promote investments in the 3376 industrial parks and SEZs spanning across 5 lakh hectares is a step forward in the right direction in this regard. A single-window approach to clearance and approval of land acquisition drives based on the adoption of a scientific and weighted average indexing of economic, technical and environmental feasibility can expedite land acquisition while ensuring that questions on livelihoods of people and the sustainability of the planet are duly addressed. To make economic growth truly inclusive, the scope of land acquisition may be extended to include public healthcare, affordable housing, safe drinking water, irrigation, and warehousing.
Leverage Technology Integration in Manufacturing to Create a Transparent National Supply Chain Network
The lack of visibility into data and limited information sharing has great repercussions for OEMs, CMs, suppliers, and end customers in the manufacturing supply chain because it operates on a foundation built by land, natural resources, and fixed assets all of which have a high gestation period, entail high fixed costs and involve making decisions for the long run. One of the major takeaways for Indian enterprises from the COVID19 pandemic has been the massive trust erosion in supplier relationships and collaborations with major OEMs based out of the epicenter of the supply shock invoking force majeure to seek effective insulation from the loss offsets mandated for dishonoring supplier contracts. Technology integration can significantly improve technical and economic efficiency, reduce project overrun costs, and provide visibility into outlay on direct procurement and enable compliance with contractual obligations and transactional behavior. A focused approach to improving transparency into the mapping of multi-tiered supplier networks is essential to the vision for a National Supply Chain Network. Advance information on possible digression from supplier contracts, supply chain automation to explore repetitive patterns in supplier behavior through tracking of key performance indicators of cost, quality, and on-time delivery can enable Indian enterprises to work with a better sense of anticipation and likelihood into the next steps in the supply chain journey and thus adjust their positions in the market to hedge against supply chain disruptions.
Make in India and the National Supply Chain Network Critical to Job Creation and Growth
Amidst the emerging realities of the COVID19 pandemic and the negative economic shocks, a dialog on making India self-reliant needs to focus on integrating policy narratives and corporate initiatives to boost employment generation and get a greater share of the gross value addition to manufactured goods done locally in India. The manufacturing sector that currently contributes 16-17% of the GDP, 12% of employment generation in India, and 57% of India’s exports, assumes critical importance in this regard. The MSME sector, on the other hand, has been the enabler of the last resort in these challenging times of COVID19 to diverse communities of people in the country. Stand-alone shops, grocery stores, food marts and markets, and ancillary units have demonstrated their capabilities to provide hyperlocal services, deep market penetration, low-cost innovation, and last-mile delivery of goods and services. With a strategic integration of the National Supply Chain Network with the mission to make in India, the share of manufacturing in India’s real GDP may rise to 25%, create new business opportunities for the MSME sector and create the 100 million jobs targeted under the aegis of the “Make in India” campaign. Data suggests an indirect multiplier effect between manufacturing and services in India with one manufacturing job creating three jobs in the service sector. For a labor surplus economy like India, the ability to generate employment and affect a rebound in real GDP growth rates to pre-COVID19 levels should suffice to conclude a dialog on the importance of the National Supply Chain Network and the “Make in India” label.
Getting Indian Businesses Prepared for Restarting the Supply Chain During Lockdown 4.0
Getting Indian Businesses Prepared for Restarting the Supply Chain During Lockdown 4.0
The latest MHA guidelines for enterprises to resume commercial activities during the ensuing period of lockdown 4.0 reflect the solutions required to resolve the local challenges posed by the Covid19 pandemic to India following “mass customization”. The roadmap to be adopted by enterprises for “walking off the seatbelt” must address the twin challenges of scale and diversity that are representative of the economic and geographic environments of India. Given the diversity in the rates of morbidity, mortality, and recovery across regions in the country it is evident that the opening up of the economy while being staggered shall also be localized and follow different timelines across regions and industry verticals in the economy. It is in view of these emerging realities that enterprises need to decode the revised MHA guidelines for resuming activity during the nationwide lockdown.
National Directives for Covid19 Management and Standard Operating Procedures: MHA Guidelines
The latest order for lockdown 4.0 retains the status quo of preceding orders during the last 60 days of the lockdown while devolving regulatory functions of the business to local authorities to assess health risks and resilience of the apparatus for civil administration. It mandates that disinfectants be used for regularly sanitizing: entrance gate of building and office, cafeteria and canteens, meeting room, conference halls, open areas, verandah, the entrance gate of sites, bunkers, portacabins, buildings, equipment and lifts, washrooms, toilets, sinks, water points, walls, and other surfaces. Further, it deems the sanitization of all vehicles, machinery entering the premises, and thermal screening for everyone entering and exiting the workplace as mandatory. The National Directives for Covid19 management mandates compliance with the following workplace safety measures:
- It recommends that the practice of work from home be followed as much as possible.
- It requires enterprises to ensure on the best effort basis that employees install the Aarogya Setu app on their personal devices for safety in the workplace.
- It deems the wearing of masks as compulsory for people in public places and workplaces.
- It deems the making of adequate arrangements for temperature screening and hand sanitizers for people as compulsory.
- It deems as compulsory for organizations to sanitize workplaces between shifts.
- It deems as compulsory for organizations in manufacturing units to ensure frequent cleaning of common surfaces and makes handwashing mandatory.
Reimagining the Solutions for Lockdown 4.0 from a Local Perspective
One of the major highlights of the extended period of lockdown 4.0 from the standpoint of supply chains is the approach to localization of challenges and solutions thereof. The latest order from the MHA for lockdown 4.0 clearly suggests that the delineation of red, green, and orange zones will now be decided by the respective state and UT governments. It also devolves decision-making powers for demarcation of buffer and containment zones to district-level authorities, while requiring them to operate within the guidelines of MoHFW. Enterprises that are looking to resume economic activity in the ensuing period are now required to take cognizance of the decentralization of the business regulatory framework and must look to engage with local authorities, local suppliers, and local communities of people.
Implications for Supply Chains and Workplaces of Enterprises Due to the Localized Approach
The new approach enshrined in the MHA order for lockdown 4.0 brings into focus the aspects of localization of supply chain practices and engagement with business and civil regulatory institutions at the district, state, and UT levels.
Enterprises that are preparing to restart their supply chains thus need to be more aware of the evolving on-ground situation in states and UTs to understand the regulations on the mobility of people, materials, and multimodal logistics and thereafter map their availability for work across multiple locations in their supply chain.
For enterprises that are multi plant operators, this requires them to adopt a new decentralized and bottom-up approach to planning, implementing, and monitoring supply chain operations in different locations across states and UTs in India.
By implicit rationale, it also calls for enterprises in the manufacturing sector to take a fresh look at the upstream and downstream activities of their supply chain. Given the wide diversity in the rates of spread of the COVID19 pandemic across locations, it is prudent for enterprises to keep track of operations across every plant location separately.
The localized approach to lockdown 4.0 calls for a fresh mapping of suppliers against procurement requirements for each plant location. This shall, in turn, set the tone for mapping the available modes of hyperlocal transport, engaging with logistics service providers, planning the logistics routes and number of sorties required for each vehicle, and conducting a gap analysis of headcount of people for covering each touchpoint in the supply chain from the point of manufacturing to the points of distribution.
Social distancing norms for as long as they apply shall compel enterprises to operate at sub-optimal production levels thereby drastically cutting down gross value addition at multiple levels in the supply chain and a search for new models of costs. Owing to the different timelines of the opening up of regions across the country, a restructuring of the supply chain is bound to happen. Enterprises located in regions that are first to open up shall have the first-mover advantage, albeit in the short term. The resumption of economic activities in the regions that lead the race to reopen shall create a local demand for industrial supplies and local suppliers located in proximity to these enterprises shall be the first in line to secure these orders for raw materials, intermediate goods and class C items like packaging and MRO. In the short term, as long as all the regions in the country do not open up for the economic activity to resume, local supply chain ecosystems resembling the raisin-pudding model envisaged by the scientist JJ Thomson shall emerge. As long as logistics across adjacent states shall remain cut off, such local supply chain ecosystems may also increasingly witness opportunities for arbitrage and speculation, thereby affecting new pricing and revenue enablement models in the newly reopened regions.
Building Supply Chain Capabilities for the Short Term and the Long Term
Given the new realities of supply chain restructuring that are about to emerge during lockdown 4.0 and beyond, enterprises need to start building capabilities now and look to scale best practices through a repetitive model to arrive at a new normal in the long term. Creating local supplier networks and investing in collaborative supplier relationships in local geographies shall be integral to restarting economic activity in the short term. Partnering with these new suppliers in the short term and moving towards strategic supplier relationships shall require new supply chain models driven by collation and analysis of data on key performance indicators of supplier performance. Agile collaboration with suppliers shall require switching to a digital workflow to fast track the PR-to-PO process. Most importantly it shall be necessary for enterprises to leverage cloud platforms to store such data and then apply sensing, processing, and learning capabilities of artificial intelligence to drill down their supplier networks to understand their supplier risk exposure better to stay insulated from supply shocks in future. A new normal shall eventually emerge from these altered ground realities.
The New Normal: Supply Chain Touchpoints Separated by Distance and Connected by Technology
The revised MHA guidelines for business enterprises while being effective for the ensuing period of the lockdown 4.0 are integral to the strategic evolution of the economic, geographical, and regulatory environments for business in India towards a more federal and localized supply chain design. There is a likelihood that enterprises may now have to work with a unique supply chain design composed of pools of resources, materials, and people within local jurisdictions and geographical footprints while being connected to each other in India and across the globe through high-end supply chain technology platforms and digital systems.
The takeaways from the localized approach to the lockdown shall in the long term lead towards a trajectory whereby all functions of business shall pivot on gaining visibility into the next steps in the local supply chain, making their supply chains more granular and agile to respond to opportunities and risks in the local environment, designing low-touch processes to stay operational from remote locations and building capabilities to align local resources towards the next opportunities in the shortest turnaround time. The Covid19 pandemic has caught business enterprises unawares amidst a massive supply chain disruptions. The supply chains of the future shall be much more localized and technology-enabled to enable enterprises to insulate themselves from the risks posed by opaque supplier relationships, failures of long-distance logistics, and look to move closer to the point of consumption.
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