Food & Beverage News: Technology - <font face="Comic Sans MS" color = "#FF0000" size="2"> Feature </font></b><br>India: Managing food and beverage demand in an emerging market

As the world economy struggles to pull out of recession, India is one of the several major emerging economies that continue to show positive growth. Significant capital investment and a rapidly expanding domestic market have skyrocketed India to become the 12th largest economy in the world. As a result, India’s food and beverage companies in particular are benefiting from this explosive growth as the population’s discretionary income quickly increases and consumers are readily spending this newfound money.

Regardless of the positive outlook, many Indian companies continue to face a number of pressing challenges due to capital expenditures that are exceeding revenue growth and out-pacing demand and costs.

The Challenge: Shifting Focus from Execution to Planning
Despite the number of people hired to support and streamline business operations, managing companies in India has become an exhausting, day-to-day struggle with frequent expediting and negotiating. While manufacturing and logistics decisions must be made on an hourly basis to ensure that products are available, little time is spent on establishing clearly defined processes that are needed to efficiently and effectively scale product manufacturing.

The perspective of the business can also vary among stakeholders since demand signals and supply availability are not transparent across the supply chain. Without one synchronised view of demand and supply across the organisation, the result is excess inventory built into all areas of the supply chain. Consequently, during financial review periods, the finance team laments that working capital requirement is too high and the manufacturing team struggles with the need for more capacity.

In order to achieve long-term success, food and beverage companies in India must take control of their supply chains by shifting away from a purely transaction-based supply chain to one that’s more demand driven.

The Six Keys to Supply Chain Success
To accomplish this, Indian food and beverage companies should consider the following six areas for improvement:

Establish a demand-driven supply chain:
India is a vast country consisting of many regions and areas. Visibility of demand at the national level alone will not determine where inventory should be deployed and held to serve local demand. Companies need a solid demand-planning process and tool to create a demand plan that is transparent from the country, state, regional and area-specific level on a weekly or monthly basis for at least a 12-15-month horizon. This level of planning allows companies to anticipate demand changes in detailed accuracy and proactively adjust distribution and inventory plans.

In addition, companies need to be able to create and manage the demand plan at the right product hierarchy that makes sense for marketing, sales, production and financial purposes, whether it is at the category, brand or packaging level. Companies also need to segment their demand based on their channels, such as retail or food service, since the demand behaviour for each channel varies. Promotions, market events and new products should be incorporated into the demand plans at the appropriate levels.

Visibility into the demand plan at any of these levels and the critical ability to reconcile any gaps ensures that everyone shares a common view of demand to improve supply chain efficiency.

Adopt an integrated distribution and inventory planning process:
Once companies have a clear understanding of market demand, the next step is to effectively use this improved visibility to plan shipments and inventory positions ahead of that market demand. Food and beverage companies can achieve this by adopting an integrated distribution and inventory-planning process that calculates daily optimal inventory targets and shipments for a 12-15 month time horizon for each production facility, central distribution centre and local depot. The inventory and shipment plans across these locations must be connected and adjusted based on lead times, transportation modes, supply availability, production schedules and open/close calendars. Pipeline inventory coming from in-transits or production should be visible so that no false assumptions will be made, resulting in late deliveries or costly expediting charges.

With the ability to generate a time-phased integrated distribution and inventory plan, companies can improve inventory turns, reduce overall days of supply and prevent unnecessary transportation expenses from frequent expediting or shipping half-empty trucks.

Incorporate advanced production planning and scheduling:
Eventually, capital investment to add new production lines or manufacturing facilities will be limited. Using co-packers or other forms of third-party manufacturers will become too expensive, as well as increase the complexity of operations. Food and beverage companies need to evaluate processes and tools that can increase production without adding capital investment, such as more efficient ways to sequence production that consider idle time or step up costs for changing over a production line from making various sizes, ingredients or labels.

Determine where to make IT investments:
Rather than spending capital investment on the implementation of a costly new ERP system when a legacy system is running smoothly, food and beverage companies should look to complement and drive additional ROI from existing systems. Supply chain planning solutions can generate a quick and substantial ROI while integrating with the existing legacy or ERP systems. Choose low-risk solution providers that offer the people best practices and proven technology that are critical to success. But don’t overlook the need for robust services, support and change-management capabilities. Solid, local India-based support from a business process and technology standpoint can drastically impact the overall success of an implementation.

Set a goal to establish CPFR and S&OP:
With Collaboration, Planning, Forecasting and Replenishment (CPFR) solutions in place, suppliers and retailers have joint inventory visibility and management capabilities. As such, current and expectant inventory levels and requirements can be continually updated and merchandising, inventory, logistics and transportation needs are synchronized. For even greater efficiencies, Indian food and beverage companies should invest in sales and operations planning (S&OP) solutions to bring together traditionally disparate silos of operation under a single, comprehensive view of the business. The end result is a single view of overall capabilities and constraints that can then be reconciled with operational and financial goals.

Leverage insights and best practices:
There are a number of international food and beverage companies bringing both competition and best practices to the Indian market. In addition to having proven success in branding, marketing and supply chain best practices globally, many of these companies offer new ideas for product innovation that have the potential to significantly impact the market. However, it is vital to remember the importance of tailoring ideas and operations to the Indian culture. Buying habits, food choices and overall customer preferences are very culture-driven and companies that fail to consider this factor will limit their success.

The Future and Beyond
With so much untapped opportunity, there will also undoubtedly be more competition as new players — including private-label manufacturers — enter the Indian market. These factors make it even more critical for today’s food and beverage companies to take control of their supply chains. The most successful companies will be those that leverage the best-practice procedures and processes from around the globe and across the supply chain function.

Danny Halim is the vice president, industry strategy, JDA Software Group, Inc.
JDA Software is one such company with deep domain expertise in India as well as other emerging markets. Its broad solution set, including supply chain planning solutions powered by Manugistics, is specifically designed to address the pain points felt by growing Indian companies. By combining the above keys to success with a proven solution provider, Indian food and beverage companies can create a more agile and accurate supply chain. Visit www.jda.com for more information.