Global challenges that started from the pandemic to supply chain disruptions, such as the Suez Canal blockage and the more recent Ukraine war, have resulted in a severe shortage of critical parts and materials. One trend prevalent in discrete manufacturing to address this challenge is the shift to make-to-order business models. A finished good will be made only when there is a confirmed order from a customer for it. It is a shift from a forecast-based push model to a pull model.
This shift to make-to-order is not an easy change. Ford recently followed this approach to manage the shortage of semiconductor chips. The finished goods inventory will be minimal in this way. However, the lead time for delivery of vehicles to customers will be much longer. Enterprise resource planning (ERP) systems need to transform to adapt to this change. A standard bill-of-material is no longer used to make batches of products. Instead, each product has its own unique product configuration.
Along with this change to make-to-order, one efficient approach for bought-out parts is to standardize procurement processes and consolidate purchase orders.
Infosys has designed and implemented a standardized model and purchasing tool for a leading multinational elevator manufacturer and service provider. The new model standardized the requisitioning process across the countries where the firm operates and introduced e-catalogs. Using these techniques, manufacturers leverage consolidated volume requirements at pre-negotiated pricing, resulting in cost savings and faster delivery.
The new system provides spend visibility through which the purchasing manager can review non-catalog purchases for their reduction. Negotiated contracts regarding price points and lead times strengthen catalog offerings.
One approach to mitigate the risks associated with supply chain disruptions is transparency. A digital supply chain uses technologies to measure key parameters and share them with a central control tower. Another approach is that stakeholders not only gather relevant information, but also share it with partners.
Agricultural commodities change hands several times in their journey from a farm to a fork. The supply chain becomes complex, with broken information flow at several points. The shipment data resides in siloed systems of each player in the chain. A verifiable and integrated view across the ecosystem is a challenge.
In futuristic supply chains, it will not be sufficient to share shipment information only with upstream suppliers and downstream customers, but with other partners too. One example is the U.S. government's recently launched information sharing initiative for supply chains FLOW (Freight Logistics Optimization Works). As part of this initiative, ocean carriers, ports, trucks, and retailers will share key data related to cargo flow, to speed up goods movement and avoid any bottlenecks. We see such information-sharing initiatives scaling up and replicated in other regions across industries.
Digital Supply Chains are important for sustainability too. Carbon emission is broadly classified into Scope 1, 2 and 3, according to the Greenhouse Gas Protocol. Scope 1 emission is direct on-premise in a firm, from burning of fuels for power generation and transportation. Scope 2 emission is from running of equipment using energy bought from outside. Both are under an organization's control. But Scope 3 is the emission that happens upstream and downstream in the supply chain and beyond a firm's direct control. It constitutes more than 70% of the total emission, depending on the industry. Within Scope 3 emission, supply chain is a major contributor. Digital supply chains are important for organizations that are serious about Scope 3 emission reduction, to measure carbon emissions, and take initiatives for net-zero emission.
Infosys implemented a blockchain-based, industry agnostic distributed application for an agro supply chain. It has integration adapters to connect with diverse ERP applications, in addition to capturing data feed from internet of things (IoT) devices. A pilot was first implemented for a particular agri commodity in a specific geography. The implementation resulted in a unified, single source of truth for shipment data, optimized reconciliation efforts across stakeholders, reduction in certification costs through digital documents, and integration with existing applications to maintain status quo.