30 Minute Interview

‘India holds a very strategic place in our global plans’

Danny Halim, VP-Industry Strategies Supply Chain, JDA Software spoke to Nivedan Prakash about the supply chain strategies being adopted by Indian companies in the CPG segment and his organization’s plans for the Indian market

Danny Halim

What are your views on the supply chain strategies that are adopted by the leading Indian companies from the CPG segment? How do you rate them on the basis of efficiency and agility?

Leading Indian companies are beginning to realize that there are significant opportunities from better planning and optimization of their supply chains.

These companies are experiencing fast growth (some are double-digit) in volume and product mix, there are strategic questions to be concerned about whether they will be able to scale up their supply chain management during the growth period without significantly increasing fixed and variable costs, can they weather/buffer any market pull-back should there be factors outside their control slowing down the growth, and are their operations from sales/marketing to logistics aligned to achieve and sustain profitability targets?

Though some leading Indian companies have begun standardizing their supply chain executions and visibility, there are still plenty of opportunities to elevate the role of supply chain management to drive the answers to the strategic questions above.

Do you see a lot of potential for IT automation in the supply chain arena as far as Indian companies are concerned? (Our research tell us that not too many Indian companies rely heavily on IT automation related to the supply chain)

Many Indian companies do not see the value of replacing home-grown or legacy supply chain transaction systems. The costs to replace transaction systems are enormous from both systems and training perspectives, and yet the ROI from replacing what’s currently working is not easy to justify.

However, supply chain planning is a different field. Companies need to invest in supply chain planning solutions. As volume and product mix increases, new markets are penetrated, and competition is tighter, companies need to be able to plan ahead of their market demand. Relying on transaction systems alone will cause companies to nervously react on resolving various short-term issues in ways that may result in a negative long-term outlook. Besides, just increasing the number of people may not support 20-30% annual growth; they need to be aligned through a common and integrated supply chain plan.

Look at the example of global companies like Kraft Foods, Sara Lee, Avon, Amway, Church & Dwight to name a few; these companies don’t just run on transaction systems and spreadsheets.

Is the Indian market a strategic one for your company?

India holds a very strategic place in our global plans. It is definitely growing as a market for us at over 20-30% per annum. We plan to continue to share and leverage our best practices and technology that have been proven to deliver results for companies in both developed and emerging regions, particularly consumer product companies in food, beverage, personal care, pharmaceutical, and household products industries. Seminars such as the one we sponsored in Mumbai on October 29, 2009 are examples of how companies were interested to listen to our industry-leading views and experiences.

We will focus on offering and delivering supply chain planning solutions that are proven, fast and low risk to implement, low cost to maintain, and most importantly, delivering return on investment within the year of implementation. JDA has proven methodology and templates to implement our demand and supply planning solutions in terms of weeks instead of months or years!

JDA’s Center of Excellence (CoE) plays a critical role in our vision to provide customers with quality solutions and services in a timely and cost-effective manner. As part of the JDA Services global team, resources from the CoE contribute to customer satisfaction and success through cost-effective implementations, upgrades, and consulting services engagements. The CoE provides our consulting team with a global resource pool that can be deployed to any project anywhere in the world. There is increased bandwidth and the ability to flex resource numbers up and down very quickly without our customers incurring additional project overhead such as travel time and expense.

Innovation is a rather loosely used term and people often talk about all kinds of supply chain innovations but most of it really superfluous. Can you give us a couple of instances of innovations on the supply chain side?

Let’s be practical and not be superfluous. There are several phases that companies need to improve their supply chain management:

• Improve their consumer centricity: You need to understand not only the volume growth at the national level but understand where and when consumers will buy your products, what drives their buying behavior, and how does their buying behavior change? We are talking about improving demand visibility down to the region or area level so that we can position the right level of inventory, current and future inventory, so we don’t miss out on those instances of demand and we don’t overstock ourselves for that causes significant write-offs or handling penalties. Coca Cola Bottling Consolidated Company (the second largest Coke bottler in the USA) is a prime example of companies that have grown their product mix by more than 300% while slashing their days of inventory by 50%, and achieved a Sam’s Club Supplier Award in the process of doing it.
• Sense and respond to market demand: You need to balance supply to match demand, current demand and future demand. This includes sensing if the forecast needs and the inventory, distribution, and production plans need to change accordingly. Leading global companies have been able to shift from a weekly planning mode to daily planning mode, which improves their responsiveness to market dynamics.

We have a company like Black & Decker that has connected its manufacturing and distribution operations in China, Mexico and USA all the way to manage inventory for its customers. This gives it a first-hand understanding of its end-consumer demand so that it can plan ahead, respond faster, and improve efficiency to keep working capital minimal.

It’s all about improving the ways in which inventory policies are set and revised as the market assumptions change. Heinz in North America was able to rationalize its inventory policies across their network and significantly reduced about $7.5 million in inventory for just a couple of brands in the first phase, in less than six months.

As far as products are concerned, have there been any innovations at JDA?

There are many but I will highlight one that is worth mentioning. Together with our customers and in partnership with Oliver Wight, we developed an Executive Sales & Operations Planning (S&OP) Workbench that is intended to be the tool to be used by senior management (CEO or GM) of the business to run the business. It is a solution that takes S&OP to the next level as it integrates the inputs from Product Management, Sales, Marketing, Manufacturing, Logistics, Supply Chain, and most importantly, Finance to make sure there is alignment between all operational plans to achieve corporate financial goals.

One of the key differentiators of this new solution is that it allows business stakeholders to not only plan numbers, but to also plan and document the Assumptions, Risks, and Opportunities associated with the numbers – while providing simulation and analytical capabilities that are intuitive for executive management to make sound strategic decisions.