Commencing its journey in 1974, getting listed on the Bombay Stock Exchange, and entering the consumer division in 2012 with the brand Oleev, Modi Naturals Ltd. has come a long way. Over the years, the organisation has been adding new product portfolios to its lineage that have now become household names. At a time when the market is faced with an unprecedented spike in the demand for different categories of products, especially FMCG products, we reached out to Vinay Kumar, Head of Supply Chain, Modi Naturals Ltd. to understand the reasons behind the spike in demand, the way to strike the right balance between demand and supply, the importance of sustainable sourcing, day-to-day challenges and much more.
Despite inflation, India is currently facing a huge demand surge in kitchen essentials leading to supply gaps across grocery stores and e-commerce platforms. What do you see as the reason behind the demand spike?
Work from home has ended – working professionals are back to their bases, starting life in that city afresh – thus an increase in demand for kitchen supplies. There are a lot of chip shortages in the current market which is one of the big reasons for the demand and supply gap.
The pandemic granted time – hence people started making healthy choices over junk or packaged ones leading to a demand push for kitchen supplies.
Demand forecasting must be a critical area for you given your diverse product portfolio. How do you aim to strike the right balance between demand and supply and keep your inventory cost minimum?
By keeping a robust eye on demand-supply variation. By doing proactive demand sensing over-reactive demand planning. By regulating the forecasts, and thus the production process twice a week (depending on the flexibility of the production process). By achieving a better On-Time-In-Full (OTIF).
By making available the right product, in the right quantity, at the right place, at right time one can strike the right balance between demand and supply. Moreover, timely checks on MAPE lead to the least variation between demand and supply. Timely S&OP meets across multifunctional teams to help sense demand. Well-researched NPD (New product development) which includes qualitative as well as statistical analysis. Inclusion of technology in demand planning and forecasting e.g. SAP APO, Kinaxis Rapid response, etc. Timely checks on SLOB helps minimize storage cost and ultimately reduce turnaround time. And, supplier engagement programs help improve supplier-vendor relationships.
How important has sustainable sourcing become for companies today? How does it impact their procurement costs?
It depends from industry to industry. Industries that have been essentially known for using non-eco-friendly raw materials are now switching to sustainable sources, to portray themselves as a champion in caring for the planet. For example, organic farming. It does come with a cost, for the sourcing of sustainable raw materials is always costlier, but the premium charger over it does compensate for the fact that it’ll give a breather to the planet earth.
Packaging plays a pivotal role in making an organization sustainable with a small hole in their P&L. For example, switching to paper packaging instead of plastic. Switching to green logistics does a small bit in saving the planet but infrastructural developments need to be done before this.
Currently, we have some 3PL organizations serving green logistics but with a significant cost difference from the traditional means.
Heading the supply chain of a well known brand, what are some of the day-to-day challenges that you come across?
I have summed up a few of the day-to-day challenges below:
• Managing pilferage, managing declining shelf life of products, managing the same line of products both for GT and MT, and making it available for both channels. Most importantly, managing the leftover inventory from MT demand inadvertently gets carried away to GT inventory (sometimes GT might not have a demand for that specific product).
• Minimizing warehousing and storage costs as we outsourced warehousing sometimes it comes as a challenge to us. Demand planning and forecasting play a significant role while allocating sufficient stock to respective depots with minimum inventory cost.
• Safety stock- dealing with more than 200 SKUs and three channels (GT, MT, and E-commerce) demand different days of inventory in hand for each SKU line and channel.
This is an abridged version of the interview published in the February edition of Logistics Insider’s magazine. To read the full interview click here.