Retail and the FMCG industry has been witnessing rapid growth despite the pandemic.
According to the joint report by Assocham and MRRSIndia.com, “Indian retail industry reached US $950 billion in 2018 and is expected to reach $1.3 trillion by 2025. Online retail is projected to reach $60 billion in India.”
The last four years have been significant for the growth of retail in the rural markets and organizations have been working to gear up to meet the ever growing demand.
Pandemic has made it clear that at present, the Supply Chains are not robust enough to meet the rapidly growing and changing demand. With all the conversations about digitization of the supply chain, the key is addressing these concerns. Why is digitization so important? It is crucial to keep the core function of supply chain balanced. Any efforts towards digitization should work towards making this possible and more efficient.
How Can Digitization Improve the Supply Chain?
Upping the Service Quotient - Customer satisfaction is achieved by ensuring that their orders are delivered on time. Retailers can ensure their customers never see their desired products run out of stock by implementing AI powered dynamic planning which gives you accurate, granular forecasts that are constantly being updated to meet the volatile demand by using complex socio economic data and advanced scenario planning. Lost sales means customers will decide to switch to another brand. By improving service level to each customer, their revenue will increase.
Help Decrease Costs - With dynamic routing and network optimization, transportation and warehouse costs can reduce drastically. Automation is the key here. Supply chain functions like demand/ supply planning, S&OP process, production planning are done manually with time and money spent on achieving mediocre results. Automation can drastically speed up the processes with accurate results reducing costs for the organization. Accurate advanced forecasting also reduces the chances of safety stock turning into SLOB, saving companies millions of dollars in wastage and storage costs.
Free Up Working Capital - Reducing working capital without diminishing supply chain performance is a complex job that requires the expertise of advanced technology to ensure speed and accuracy. Reducing excess inventory in raw materials and finished goods is the #1 method to free up working capital. Implementing AI/ ML powered planning can reduce inventories and with the highest accuracies can even completely eliminate the need for safety stock.
Organizations are hesitant to digitize their supply chains because traditional methods make adoption a long and costly process. But, there are new technologies that have come to be known as ‘Last Mile Analytics’ that make adoption of technologies like AI fast, simple and efficient.
Let’s take a look at how digitization can transform the entire value chain by optimizing each stage of the supply chain to its full potential:
Demand Planning - Planning with AI makes targets more realistic with real time demand signals and other socio economic factors affecting demand and supply restrictions being taken into account to give a more accurate forecast. During peak COVID-19, the organizations that successfully navigated it used the technological prowess of AI and ML to forecast demand. With scenario planning, simulate various ‘what-if’ scenarios and accurately predict the inventory, network, supplier level data by simulating the various possible scenarios due to black swan events like COVID-19.
Inventory Planning - With automation, smart inventory allocation is possible to allocate inventory efficiently across all channels to maximize profits and reduce costs. Use inventory models to replenish stock, calculate optimal safety stock at the right time and right location to ensure no SLOB. Scenario planning also allows you to predict inventory for multiple scenarios.
Supply Planning - Optimized production planning takes input such as demand signals, lead time, plant capacity in real time to eliminate bottlenecks, reduce overtime with automated establishment of route of each item, part and assembly. Identify optimal levels of operations to improve budgeting and scaling while responding to changing conditions for optimised capacity planning.
Distribution Planning - Dynamic route allocation is done by digitizing all the operational variables and using advanced algorithms, you can come up with dynamic scheduling of orders and optimize the best routes for time effective route planning to ensure the order is delivered on time.
It is impossible to anticipate global crises such as the COVID-19 outbreak. However, companies must digitize their supply chains to be resilient enough to withstand such disruptions. Being able to forecast and react to real-time events is vital for both short and long term growth.