The Consumer Packaged Goods (CPG) Industry is one of the largest industries on the planet. From food and beverage to clothes to stationary, it is impossible to think of a moment in our lives without being touched or influenced by this sector. If there is one paradigm around which the industry revolves, regardless of the sub-sector or the geography, it is the fear of stock outs. Studies indicate that when a customer finds a product unavailable, 31% are likely to switch over to a competitor when it happens for the first time. It becomes 50% when this occurs for a second time and rises to 70% when this happens for a third time.
Historically, the panacea for this problem has been to overstock. While this reduced the risk of stock outs to a great extent, it induced a high cost for holding the inventory and increased risk of obsolescence. It also created a shortage of working capital since a part of it is always locked away in holding excess inventory. This additional cost is often passed on to the end customer. Over time, an integrated planning solution which could predict demand, supply and inventory positions became a key differentiator in the CPG industry since it helped rein in costs and become competitive in an industry which is extremely price sensitive.
Although theoretically, a planning solution should have been able to solve the inventory puzzle, practically, a lot of challenges kept limiting its efficacy. Conventional planning solutions have been built based on local planning practices. Such planning solutions have had challenges negotiating the complex demand patterns of the customers which are influenced by general consumer behaviour and also seasonal trends in the global market. As a result the excess inventory problem stays, which gets exacerbated at times due to bullwhip effect.
This is where the importance of a global integrated Production Sales Inventory (PSI) solutions comes in. But usually, this is easier said than done. Large organizations face multiple practical challenges when they attempt to implement this. Following are the typical challenges that large organizations face
Infrastructural Limitations Using conventional systems of Business Intelligence of Planning systems would require very heavy investment in infrastructure and systems. Also the results may not be proportionate to the investments made.
PSI requires data from different departments including sales, production, and procurement/sourcing. Even if the organization has a common ERP, the processes and practices in each department might make it difficult to combine data and get insights.
Another significant hurdle is the fact that larger organizations usually tend to have multiple ERPs for handling local transactions aligned to geographical markets. Each ERP or data source which does not talk to other systems becomes siloed. The complexities increase when the data formats and tables are incompatible, especially, when the ERPs are from different vendors.
Harmonizing the data from multiple systems and making them coherent involves a huge manual effort in designing, building, testing and deployment if we follow conventional mode. The prohibitive costs involved, not to mention the human effort involved is a huge challenge for most organizations.
Relevance Lab has helped multiple customers tide over the above challenges and get a faster return on their investments.
Here are the steps we follow to achieve a responsive global supply chain
Gather Data: Collate data from all relevant systems
Leveraging data from as many relevant sources (both internal and external) as possible is one of the most important steps in ensuring a responsive global supply chain. The challenge of handling the huge data volume is addressed through the use of big data technologies.
The data gathered is then cleansed and harmonized using SPECTRA, Relevancelab big data/analytics platform. SPECTRA can then combine the relevant data from multiple sources, and refresh the results at specified periodic intervals.
One point of note here is that Master Data harmonization, that usually consumes months of effort can be significantly accelerated with the SPECTRA’s machine learning and NLP capabilities.
Gain Insights: Know the as-is states from intuitive visualizations
The data pulled in from various sources can be combined to see the snapshot of inventory levels across the supply chain. SPECTRA’s built-in data models and quasi plug and play visualizations ensure that users get a quick and accurate picture of their supply chain. Starting with a bird’s eye view of the current inventory levels across various types of stocking locations and across each inventory type, the visualization capabilities of SPECTRA can be leveraged to have a granular view of the current inventory positions or backlog orders or compare sales with the forecasts. This a critical step in the overall process as this helps organizations to clearly define their problems and identify likely end states. For example, the organization could go for a deeper analysis to identify slow moving and obsolete inventory or fine tune their planning parameters.
Predict: Use big data to predict inventory levels
The data from various systems can be used to predict the likely inventory levels based on service level targets, demand predictions, production and procurement information. Time series analysis is used to predict the lead time for production and procurement.
Projected inventory level calculations for future days/weeks, thus calculated, is more likely to reflect the actual inventory levels since the uncertainties, both external and internal, have been well accounted for.
Act: Measurement and Continuous Improvement
Inventory management is a continuous process. The above steps would provide a framework for measuring and tracking the performance of the inventory management solution and make necessary course corrections based on real time feedback.
Successful inventory management is one of the basic requirements for financial success for companies in the Consumer Packaged Goods Sector. There is no perfect solution to achieve this as the customer needs and environment are dynamic and the optimal solution could only be reached iteratively. Relevancelab framework to address inventory management combining deep domain experience with SPECTRA’s capabilities like NLP for faster master data management & harmonization, pre-built data models, quasi plug and play visualizations and custom algorithms offer a faster turn-around and quicker Return-on-Investment. Additionally, the comprehensive process ensures that the data is massaged and prepped for both broader and deeper analysis of the supply chain and risk in the future.
In today’s enterprise business, customers need to leverage latest technology strategy to modernize their current state of applications and expand into new geographies/markets.This will help them to expand their business across globe and provide great experience to their customers.
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In our increasingly digitized world, companies across industries are embarking on digital transformation journeys to transform their infrastructure, application architecture and footprint to a more modern technology stack, one that allows them to be nimble and agile when it comes to maintainability, scalability, easier deployment (smaller units can be deployed frequently).
Old infrastructure and the traditional ways of building applications are inhibiting growth for large enterprises, mid-sized and small businesses. Rapid innovation is needed to rollout new business models, optimize business processes, and respond to new regulations.
Business leaders and employees understand the need for this agility – everyone wants to be able to connect to their Line of Business (LOB) systems through mobile devices or remotely in a secure and efficient manner, no matter how old or new these systems are, and this is where Application Modernization comes in to picture.
A very interesting use case was shared with us by our large Financial Asset management customer. They had a legacy application, which was 15+ years old and having challenges like tightly coupled business modules, code base/solution maintainability, complexity in implementing lighter version of workflow, modular way of deploying key features, legacy technology stack based application, etc. To solve this problem we had a solid envisioning phase for future state application by considering the next generation solution architecture approach, latest technology stack, value add for the business – lighter version of workflow engine, responsive design & End–to–End (E2E) DevOps solution.
Legacy Application Modernizations/Platform Re-Engineering
Legacy application modernization projects intend to create new business value from existing, aging applications by updating or replacing them with modern technologies, features and capabilities. By migrating the legacy applications, business can include the latest functionalities that better align with where business needs transformation & success.
These initiatives are typically designed and executed with phased rollouts that will replace certain functional feature sets of the legacy application with each successive rollout, eventually evolving into a complete, new, agile, modern application that is feature-rich, flexible, configurable, scalable and maintainable in future.
Monolithic Architecture Vs Microservices Architecture – The Big Picture
Traditional way of building applications
An application is built as one large system and is usually one codebase
Application is tightly coupled and gets entangled as the application evolves
Difficult to isolate services for purposes such as independent scaling or code maintainability
Usually deployed on a set of identical servers behind a load balancer
Difficult to scale parts of the application selectively
Usually have one large code base and lack modularity. If developers community wants to update or change something, they access the same code base. So, they make changes in the whole stack at once
The following diagram depicts an application built using Monolithic Architecture
Modern way of building applications
A microservice application typically consists of many services
Each service has multiple runtime instances
Each service instance needs to be configured, deployed, scaled, and monitored
Microservices Architecture – Tenets
The Microservices Architecture breaks the Monolithic application into a collection of smaller, independent units. Some of the salient features of Microservices are
Highly maintainable and testable
Autonomous and Loosely coupled
Organized around domain or business capabilities (context boundaries)
Owned by a small team
Owning their related domain data model and domain logic (sovereignty and decentralized data management) and could be based on different data storage technologies (SQL, NoSQL) and different programming languages
The following diagram depicts an enterprise application built using Microservices Architecture by leveraging Microsoft technology stack.
Benefits of Microservices Architecture
Easier Development & Deployment – Enables frequent deployment of smaller units. The microservices architecture enables the rapid, frequent, and reliable delivery of large, complex applications
Technology adoption/evolution – Enables an organization to evolve its technology stack
Process Isolation/Fault tolerance – Each service runs in its own process and communicates with other processes using standard protocols such as HTTP/HTTPS, Web Sockets, AMQP (Advanced Message Queuing Protocol)
Today the Enterprise customers across the globe like eBay, GE Healthcare, Samsung, BMW, Boeing, etc. has been adopted Microsoft Azure platform for developing their Digital solutions. We at Relevance Lab also delivered numerous Digital transformational initiatives to our global customers by leveraging Azure platform and Agile scrum delivery methodology.
The following diagram depicts an enterprise solution development life cycle leveraging Azure platform and it’s various components, which enables Agile scrum methodology for the E2E solution delivery
Monolithic Architecture does have its strengths like development and deployment simplicity, easier debugging and testing and fewer cross-cutting concerns and can be a good choice for certain situations, typically for smaller applications.However, for larger, business critical applications, the monolithic approach can bring up challenges like technological barriers, scalability, tight coupling (rigidity) and hence makes it difficult to make changes, and development teams find them difficult to understand.
By adopting Microservices architecture and Microsoft Azure Platform based solutions business could leverage below benefits
Easier, rapid development of enterprise solutions
Global team could be distributed to focus certain services development of the system
Organized around business capabilities, rapid infrastructure provisioning & application development – Technology team will be focused not just on technologies but also acquires business domain knowledge, organized around business capabilities and cloud infrastructure provisioning/ capacity planning knowledge
Offers modularizations for large enterprise applications, increases productivity and helps distributed team to focus on their specific modules and deliver them in speed and scale them based on the business growth
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