Three Challenges Food Supply Chains Face
Saurabh Lal, Senior Director of Supply Chain Network, Customer Service, and Logistics at Kellogg Company, explores the unique challenges of food supply chains and how digitalization can help address them.
The Unique Challenges of Supply Chain in the Food Industry
In the food industry, freshness and maintaining quality and food safety are two critical factors that immediately come to mind, according to Lal. Supply chains in the food industry need to get the food to the shelf as fast as possible while ensuring the food is of the best quality and is safe to consume. Lal notes that ingredient sourcing is also a significant challenge, as not every country produces all the ingredients needed for food products. Supply chains in the food industry are spread out between different countries and even different continents, which brings logistics difficulties and managing suppliers in different places.
Three challenges that supply chains in the food industry face are:
When it comes to food, freshness is a critical factor. Supply chains need to get the food to the shelf as fast as possible while ensuring the food is of the best quality and is safe to consume.
Not every country produces all the ingredients needed for food products. Supply chains in the food industry are spread out between different countries and even different continents, which brings logistics difficulties and managing suppliers in different places.
Quality and Food Safety
Supply chains need to maintain the quality and food safety of their products. This covers the entire supply chain, including ingredient sourcing, transportation, and manufacturing.
"Our job is to get the food to the shelf as fast as possible. And ensuring that they reach the consumer in the safest possible manner."
Saurabh Lal -
Senior Director of Supply Chain Network, Customer Service,
and Logistics at Kellogg Company
The Need for Organizations to Embark on a Supply Chain Digitalization Journey
Lal stresses that digitalization is not unique to the food industry but is essential for any supply chain. He notes that supply chains need to respond to dynamic demand, variability in demand from customers, and the accuracy and reliability of supply chains are essential. Lal highlights the importance of planning, as many companies still use manual planning, which requires a significant amount of human effort and is prone to errors. Digitalization is critical to ensuring the accuracy and reliability of supply chains, especially as the volume of information flows throughout the supply chain, from suppliers to manufacturers to customers.
"Therefore, digitalization is something that is the need of the hour. Without it, the type of planning that you are required to do, you're not going to be able to support the business in the manner that you want."
Maximizing the Value and Benefits of Supply Chain Digitalization
Lal emphasizes that companies should not focus solely on people savings but be business-centric and solve real-world problems. He recommends that companies focus on bolt-on solutions rather than a full end-to-end transformation, which is likely to be costly and time-consuming. Lal advises companies to focus on solving real-world problems and think about how the technology solution will add value to their business.
"Don't be focused on people's savings, be business-centric, solve a real problem, and think about putting in bolt-on solutions rather than full end-to-end transformation."
Lal notes that digitalization is an imperative that companies need to start now. He advises companies to build their business cases and work out how they will get payback. Lal stresses the importance of finding sponsors, proponents, and allies within the organization who will support the digitalization journey, as it’s an organization-wide effort.
"Bring it all together. Build your allies. Start the journey now."
Digitalization is essential for any supply chain, not just the food industry. Companies should focus on solving real-world problems, be business-centric, and think about how the technology solution will add value to their business. By building their business cases and finding allies within the organization, companies can ensure a successful supply chain digitalization journey.
1.Supply chains are critical to businesses and have the capability to orchestrate change to become a source of strength.
2.Supply chains in the food industry require a focus on freshness, maintaining quality and food safety, and ingredient sourcing across different countries and continents.
3.Prerequisites for embarking on a supply chain digitalization journey include mindset, people, process, and technology in that specific order.
4.To maximize the value and benefits of supply chain digitalization, companies should focus on business-centric solutions that solve real problems rather than just KPI-specific goals and should consider bolt-on solutions rather than full end-to-end transformation
5.Supply chain digitalization is an imperative for the future and requires building business cases, finding sponsors and allies, and starting the journey now.
So let's get right into it. And if you can start first, please by introducing yourself and you can share what you do. Thanks for
having me here. It's absolutely an honor to be here, and I hope I'll be able to share some things with the wider supply chain community.
So my name is Saurabh Lal. I'm currently working as the senior director for for supply chain, network and customer service logistics for Kellogg Company for Asia-Pacific, Middle East and Africa. I have around 27 years of experience. I started off with Unilever, where I spent almost 18 years mostly in the manufacturing.
Then I spent some time with a company called Avery Dennison, then with a retailer in India called Future Group, and then joined Kellogg way back in 2018. So my last role with Kellogg, prior to this was the supply chain director for India. That's broadly about me. Thank you, Saurabh, for sharing.
And still on the topic of your background and experience, what excites you about your current field. So I think the pandemic has clearly brought supply chain in the current focus for every business, right? I think what really, really excites me is the capability of supply chains to orchestrate change for the businesses. And to really become a source of strength, helping the businesses deliver on their goals.
So. Point is that supply chains work in the background. It's the sales and marketing, etc. , particularly in the FMCG industries that we see that seem to get all the credit. But very happy to see that, you know, the supply chains are coming into their own.
The second big thing for me, honestly, is around the work, around digitisation, connected planning, etc. , which is happening around supply chain. Again, IBP is coming to the forefront. Those are two or three things that I think are very exciting. And this is what I think that the younger people and the newer people who want to join supply chain could be looking forward to beyond what we did in the past of managing crisis.
How do we plan better for the future. Thank you for sharing, Saurabh, Very interesting. So maybe for today, let's spend a bit more time to discuss supply chains and digital transformation. And let's begin first by
talking about supply chains in the food industry given your background.
So maybe to start, Saraubh, can you help provide us with an overview of the end to end supply chain of a company in the food industry? And then maybe you can share how is it different from other companies in other industries and maybe what are its unique challenges? Let me put down the two or three things which I think are of extremely critical or maybe slightly different than other industries within the FMCG domain. In food, there are two or three things which immediately come to mind.
Number one among them is freshness. When you go or when a customer goes to the market, they look for freshness. Whether it is fruits and vegetables or whether it is, processed foods. They look at when was it manufactured and what is the date by which it is going to expire.
They want to get the freshest food and therefore for the supply chains, whether they are in manufacturing or sourcing or distribution, our job is to get the food to the shelf as fast as possible. And the second big thing for us is maintaining the quality and food safety. So this covers the entire supply chain. So whether you talk about ingredients or see all your suppliers following all the quality and food safety mobility of set forth?
Os your transportation system capable of monitoring it? Is your manufacturing system capable of doing it. Up to the end where the consumer actually consumes the food they need, You need to ensure that they get the best quality and the safest piece possible, particularly if you are in a ready to eat type of food business. Right.
So therefore, this supply chain is mostly about sourcing fresh, good quality, food safe ingredients, ensuring that they transport to the chain as efficiently as possible and ensuring that they reach the consumer in the safest possible manner. That's what I would say is slightly different than other aspects. It doesn't mean that the other FMCG like personal care, would not require the same thing, but they have a longer shelf life. So a personal care product would have a 24 months of shelf life, a food item may have only 12 months, but a consumer may refuse to pick up even if 3 to 4 months have passed by the time it was manufactured.
So that's the peculiar quality of food businesses. Second big thing is ingredient sourcing, in my opinion, and when I say ingredient sourcing, it's because not every country would be producing all the ingredients which go into your type of food, right? So you do end up importing a number of ingredients. Right.
And therefore, your supply chain most likely would be spread out between different countries and maybe even different continents. Which brings another piece to it, because logistics difficulties, managing the suppliers in different places becomes another set of challenges. And the last bit, like I said earlier, is the transportation. How do you get reliable, safe transportation, but you also keep food security in mind, prevent tampering and prevent damages, which can actually Spoil the food along the way.
Thank you for sharing, Saraubh. That's a good insight about companies in the food industry. Now, one recent development in our market is the recent supply chain disruptions. Companies in food industry are no exceptions in terms of its impact.
We are now seeing
companies with more focus on supply chain digitalization to address this supply chain disruptions. And so maybe from your point of view, why is there a need for organizations in the food industry to also embark on a supply chain digitalization journey And what challenges does it help address? Let me start off by saying that digitalization is neither unique nor a requirement only for the food industry. Any supply chain needs to be on this journey starting yesterday.
If there are not this time, you need to play catch up. But this is extremely important for any supply chain. And I'll share my perspective here. Now, whether you have one source, or have multiple sources, multiple customers, you have to respond to dynamic demand.
The variability in demand from the customer is going to be huge. The number of products that you offer brings another set of complexity to it. Therefore, accuracy and reliability of your supply chain is going to be extremely important. You know a lot of people and I'll cover a specific aspect of it.
which is planning. Many companies are into manual planning Right. So you've got Excel sheets, you've got a whole set of planners who work there. And then their job is to get the demand plan converted into a supply plan, look at a production plan, and then keep taking it forward from there.
This requires a humongous amount of human effort. But even with this amount of human effort, they cannot cover every single aspect of the supply chain and every single change which happens. You're doing a Demand Planning on a three month, six month, 12 month, one month horizon. You're doing the supply planning on a daily basis.
It is just not possible for a human to keep up, right? Yeah. However good they may be on an Excel and I've met some real good people. Therefore, there is a lot of errors which creep in.
There are a lot of things we just left by the side because then you said this is only like out of the 100 pieces that I'm supposed to do. The only 20 that I can do in a given day and by the time we get into tomorrow, it gets changed. The quantum of information which flows - Where is your product? Has the supplier shipped it?
What's the manufacturing date? What's the batch number? What is the demand plan for that? What's the production plan for it?
The amount of information floating around. It is just not possible for a few people to absorb it and make sense of it. And then there obviously, like, is the different linkages between a supply plan, demand plan, your MRP, all that needs to come together. Therefore, digitalization is something that is the need of the hour, right?
Without it, without the type of planning that you are required to do, you're not going to be able to support the business in the manner that you want. Right. So digitalisation. Now, the question is, are you looking at an end to end digitalisation or you're looking at specific benefits for yourself?
Those are things that we can cover in a separate question. But for me, I think this is the most important thing. And I'll tell you something that I keep repeating. During the height of the pandemic, I was in India in a webinar with a set of people, and they said that we have lost our ability to respond because that information sources have dried up, Right?
And we have now gone back to Instinct and WhatsApp and those type of things whe people on the ground trying to manage. People those whose information sources were reliable, those who had built up a digital platform were the ones that were able to recover the fastest . And therefore, I think this pandemic has set out that a robust supply chain needs to have information flowing securely, reliably, Right. And continuous.
Thanks. I think now we understand why it's important to embark on a supply chain digitalisation journey, right? Now still on this topic. If companies
would want to embark on this journey, what are the prerequisites for them to do so ?
That's a extremely interesting question, And I was actually talking to an author of a book called A.I. Enabled Analytics for Business some time back. And it's a very powerful book, if you've not read. It's by Robert Zwerling. And I suggest that any supply chain person who wants to go for digitalization should read it.
And it resonated very well with the four factors that I think are extremely critical for you to start to know as a prerequisite. These four factors are mindset, people, process, technology. In that specific order. I've obviously have taken a lot from the book and some of these are my own ideas.
Mindset is the commitment of and understanding of the top management to what digitalization is actually. What does digitalization and what benefit it is going to give. If you do not have your top management commitment, if they do not understand what you are trying to achieve, the digitalization effort is going to fail. So it's always going to be a mindset change from the top, your own, and then going down with the people who are actually going to execute it.
Extremely important, right? The second big one is people, the people who are going to work on it, right. So you need to get people to understand that the way that we worked ten years, two years in the past is not going to support us in the future. Right.
It's a digital mindset. It's a digital readiness. So are you investing in getting people ready for the digital future? That's the second bit.
The third big piece is you need to have robust processes. So you can say that I'm going to bring you the best IBP solution, which is there. It would work if your IBP or S&OP journey within your organization is not hard coded and disciplined. So if you have a disciplined process, then only you can get into a good period.
And then and only then the final pre-requisite is what technology solution are you choosing, right? So do you want to go for end to end? Do you want to go piecemeal? Do you want to tackle your biggest area ?
Technology has to come in last. I have seen many, many times that people put technology first- I've seen That company has done x, y, z solution, we should bring it. Why do you want to bring it? If your first three prerequisites are not met, you are going to be bound to failure.
Right? And I can tell you a lot of people execute parts of a digital process, right? But if the other three don't flow. As soon as people change or circumstances change.
Everything is left to the side. And then your back to ground zero right. So it's very easy to go back into your old ways of working. It's very difficult to stay within the digital world.
I hope that makes sense, Richie. Yes, thanks, Saurabh. And that was very insightful. Now, I think embarking on this supply chain digitalization journey for companies is an investment right.
And as in every investment, companies are looking to maximize the value and benefits brought about by the investment in money, people and systems or technology. And so how can companies maximize the value or benefits of their supply chain digitalization? Well sure, and you know, let me try to distill it further to say that when you talk benefits, people will look at what's my payback, what's my return on investment, Right? And that will be ways to look at it.
A lot of companies try to say that digital will save human effort, and therefore I will eliminate a couple of people. That should never be your goal for two reasons. Number one, you're never going to get enough payback by eliminating a few roles. Number two, those same people are the ones who have to run your systems, right?
And people talk a lot about AI and ML and saying that we are going down the journey. The journey is not the small journey. It's a longer journey. You will need people who understand your system.
It all starts with human assisted algorithms right now before you even get to the AI and ML. And then you will require a different kind of people. Probably people who understand your business will understand your process, who understand digital. Why would you let your current people go ?
So for me, those are two very, very strong ingredients. Don't ever be just people savings because you have to be business centric, which means what value is this going to add to my business? If I do a digital planning solution, will it help improve my customer service ? If it helps improve my customer service, will it help improve my sales?
If it's going to help improve my sales, then top line is going up, my bottom line is going up. That is where your payback should come from, right? So be business specific. Do not be KPI specific.
This will help improve supply chain KPIs - that should never be your goal and it will be easier to sell when you go to the CEO or the M.D. and say this is what it's going to bring value for the business. Right? Next one is solve a real problem rather than, like I said earlier. It's a good to do because the others are doing too.
Don't follow others. Every company will have a unique way of or a unique set of issues that they need to work on. Right. So don't follow others.
Go into what's really your problem that you're trying to solve. It could be a small problem. It could be a big one. We could in conjunction decide how you want to do it, but be focused on what's the real problem for you.
And you can also finally think of, instead of doing a complete transformation into it, which is likely going to cost you a huge amount of money, a huge amount of work, and a huge amount of time, better to go in for bolt on solutions. So, you have your core ERP, which is running, can you bolt on solution and do that for Demand Planning, for your supply planning, and then look at ways of combining them. They're two ways of doing it right, and there'll be different schools of thought. One way is do it full end-to-end planning solution, right, so you have demand planning, supply planning, but that requires a huge amount of input.
Built-in solutions, and this is the beauty of the solution which are on offer today. If you look at it, they are able to talk to each other, right? So you can interconnect them over a period of time. You don't need to do a full end to end solution.
So to maximize value, like I said, don't be focused on people savings, be business centric, solve a real problem and think about putting in bolt on solution rather than full end to end transformation. That's how I would put it. Thank you, Saurabh. Very good insights and definitely enjoying our discussion so far.
But maybe before we end right, just to recap the days we learned about supply chain from a food industry perspective, we also learned about supply chain digitalization. Why is it important? What are the benefits? How do we maximize the benefits and the value right.
Now as we close Right? As a key takeaway for our members today. What advice would you
give to supply chain leaders embarking on their own supply chain digitalization journey? Number one.
And the only thing it is an imperative need if you have not started on it yet. If your organization is not focused on it, get on the horn. Start the journey now. That's the most important thing.
Understand that this is what is required for the future. What happens in supply chain? We are so crisis focused, right? We are so day to day focus.
We are so focused on what's the red hot item on my plate today that we get distracted, that we are not solving why we did it. You know that it should not occur in the future and maybe through a manual solution, but through different means. So. You have to build your business cases now, right?
You have to understand what pain area you are going to solve now. You have to work out how are you going to get payback from that now? And equally important, you have to find your sponsors, you have to find a proponent and you have to find your allies into the organization who are going to help you into that journey. You are not going to be able to do it alone.
Right? So you need the finance guy to support it. You need the IT guy to support it. You need the HR person to support it.
It is an organization wide input, even though it may still be solving only a supply chain issue. But bring it all together, build your allies. Start the journey. That's my simple advice to everybody.
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