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Impact of COVID-19 on Supply Chains

None of the industries across the globe have been spared from the devastating impact of COVID-19. The entire world is experiencing lockdown with schools, offices, shopping malls, and manufacturing units, among others getting shut down. This event has deeply affected our daily lives and supply chains that were helping companies to ensure timely deliveries of both essential and non-essential items. While the global leaders struggle to make decisions regarding the containment of the COVID-19, supply chain leaders need to assess the impact such disruptions can have on the global supply chains. 

With the pandemic creating havoc across the globe, more and more companies have been forced to throttle down or temporarily shut manufacturing and assembly unit. In order to reduce Supply chain costs, companies are having to pursue strategies such as lean manufacturing, offshoring, and outsourcing. With further globalization and integration of Supply Chains, risks such as this have far-reaching consequences. There needs to be a shift in the mindset to take into account risk management and ensuring business continuity. Companies need to be able to monitor all aspects of their Supply chain right from manufacturing until the product reaches the hands of a consumer, this would help them get the complete picture. In times of crisis, they are able to prioritize efforts to tackle the challenges, assessing customer needs, inventory availability within the reach of logistical hubs among few.

Amid the COVID-19 pandemic, a business opportunity for predatory criminals looking for fast cash has spiked up. With the high demand for personal protection and hygienic product across the world these criminals have started producing counterfeit products which play with the lives of people in these trying times. Authorities around the world seized nearly thousands of counterfeit surgical masks, sub-standard hand sanitizers, unauthorized antiviral medication making them the most commonly sold medical product online. On one hand, consumers are becoming victims of this racket because there is no provision to validate the purchase on the other hand Companies with low visibility of their product movement across the supply chain do not have 360-degree control over their chain. At this time, when governments across the globe are advising people to use sanitizers to avoid contamination. Many cases of selling fake sanitizers have come up and we need to be worried about it. We cannot be sure if the food items that we are purchasing are even original, which has its own repercussions.
The current outbreak offers valuable lessons for companies worldwide, and particularly Indian companies that focus on short term profits with lean supply chain strategies, contributing to supply chain vulnerability. The whole COVID-19 situation would be an eye-opener for decision-makers to reconsider the existing supply chain structure and design them based on new performance measures such as resilience, receptiveness, and reconfigurability. Experts suggest an ideal way to tackle the current situation and avoid future business disruptions is Digital Transformation. Not only corporates, even companies that belong to the machinery field such as metallurgy, mining, oil and gas need to consider converting their existing traditional approach into tech-enabled processes.

Top Warehouse Management Problems

Warehouse management is the backbone of the supply chain which in turn is the backbone of any business. Efficient warehouse management ensures that the product flow is regulated and under control across the system. Warehouse management ensures that there are no shortages and the movement of goods as well as raw materials is smooth.

While appearing seemingly simple from outside, warehouse management is a complicated process. Across industries, warehouse management is the key that keeps the production running and ensures timely delivery of the products to the end consumer. Inefficient warehouse management can result in uncertain conditions for various stakeholders within the organization. Poor management could lead to external stakeholders such as distributors or consumers losing faith in the organization. So, what are the key processes of warehouse management, and what are the top problems that need to be identified?

Processes Involved in Warehouse Management

Before discussing details, let’s understand the basic processes performed at a warehouse level.
Receiving step: This is the first step when the goods reach the warehouse. It is important for the warehouse to ensure that the products delivered are the right ones before accepting them. This could be verified by the information received in advance from previous stakeholders in the supply chain.
Put-away: When the goods are received at the warehouse, the next step is to allocate an optimal location. This location needs to be selected in such a way that it does not use a lot of space and does not damage the existing goods. Apart from this, an accessible location for the employees to handle the goods quickly needs to be considered.
Storage: The goods need to be stored only after considering the nature of the goods. The step should be implemented, ensuring that the available space in the warehouse is optimally utilized. It should ensure labor efficiency and make things quicker for the workforce.
Picking: This is the step when the goods are selected to be shipped, and hence accuracy in this step is absolutely essential. One wrong delivery could hamper the reputation of the organization.
Packaging: The main aim of packaging is to keep the product safe when it leaves the warehouse and ensure that the products are delivered in their original state without any damage. The packaging also needs to be light so as to ensure that the overall weight of the goods does not increase much.
Shipping: Dispatching the consignment to the right customer and verifying the barcode/QR code attached is the final stage before the products leave the warehouse. Delivering to the right customer and on time is important to gain customer loyalty.

Top Warehouse Management Problems

1. No inventory accuracy in the warehouse

When goods are brought in the warehouse, they cannot be seen or counted manually because of its packaging unless relevant printed information is marked on the stock. Once accepted, the responsibility of handling the goods is transferred to the warehouse and hence, while receiving the delivery damaged goods need to be filtered out and returned to the supplier. A failure to build a computerized network to track the inflow and outflow of stocks may create gaps either for delivery or production. This further adds up to the unbalanced ratio of demand and supply.

2. Inventory location and layout

A convenient and accessible inventory location increases the overall efficiency. Hence, compromising on this and structuring unorganized inventory without any systematic layout may result in difficulties for the workers which, in turn, may increase the loading time and delay the delivery process. Imperfectly configured layout compromises with the total usage potential of the available space and leads to shrinking profits as latent space becomes unused.

3. Utilization of space

Failing to utilize every corner of the warehouse effectively limits the storage capacity and thus increases the cost. Developing faulty design patterns to store the products and inexplicit parking facility of the vehicles does nothing but escalate work and labor efforts. Inadequacy in mapping the utilization of space whether floor or vertical may restrict warehouse management from utilizing it to its full potential. Inaccessibility for the labor to reach the stock or wastage of space considering the vertical parameters needs to be avoided.

4. Faulty picking process

The paper-based or manual mode of entering each data could lead to human errors. Handling the entire process of picking the product until it is loaded is a tedious task. It involves a lot of information about the consignment and the consignee being transferred. Errors in this step lead to wrong shipment being delivered which increases the cost of re-processing the shipment. Exceptions may occur at times for a wrong order being delivered or for a substitute to be shipped. Keeping track of such intricate information manually often results in human error.

5. Fluctuations due to seasonality

As the demand does not remain constant throughout the year, re-arranging the stock according to the need is essential. Administering seasonality of demand requires an updated and precise flow of information. Imprecision in demand forecasting is one of the major reasons for inefficiency in handling the goods. Negligence or wrong entry in regards to the arrangement of goods leads to mismanagement of the entire stock resulting in loss of goods, the burden of which is again borne by the organization.

Warehouse management assists the firms in meeting the productivity goals by providing efficiency in the flow of goods required in the manufacturing or the production process as well as in the delivery of finished products to the right consumer. Effectiveness and efficiency in this chain fuel the overall functioning of the organization. By providing the right stock at the right time, warehouse management brings value to the entire logistics system and helps in achieving the organization’s goals. With technology changing the expectations of the end-user and the functioning of warehouse management, organizations need to adopt newer technologies to remain efficient and stay at the top of the game.

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Tech-Based Anti-Counterfeiting Solutions for Liquor Industry

Liquor or alcohol is considered as a sunrise product with its demand and production rising at substantial rates. It is estimated that the consumption of alcohol has increased by 70% between 1990 to 2017. People across the globe consumed 35,676 million litres of liquor per year in 2017, a number which was only 20,999 million litres per year in 1990. As per a recent study conducted to analyze the trends in alcohol consumption in 189 countries, it is estimated that the consumption of alcohol will continue to rise in the next 5–10 years.
One of the surprising revelations of the study threw light on the fact that consumption of liquor was reducing across Eastern Europe, but has been increasing in middle-income countries such as India, China, and Vietnam, among others. The per capita alcohol consumption reduced in Europe from 11.2 litres to 9.8 litres between 2010 to 2017, while during the same period it grew from 3.5 litres to 4.7 litres across Southeast Asia.
The story in India has not been any different with 8.9% annual increase in the consumption of liquor in the last six years. India is the third-largest liquor market with an estimated worth of 1.46 Trillion Rupees. The growth in social drinking and expanding middle class are a few of the top reason for the increase in consumption of liquor in India. However, with the rise of liquor consumption, there has been a significant increase in the production and sale of counterfeit liquor.

Counterfeiting in the liquor industry

The fraud in the liquor industry can vary vastly in the severity ranging from dilution of premium gin, vodka, or tequila with water to substituting the original product with cheaper alternatives including dangerous substitutes such as methanol or rubbing alcohol. The liquor industry’s problems with counterfeiting do not stop at a financial or brand-equity loss but can result in severe repercussion leading to loss of lives.
Some of the major fake liquor tragedies of recent times were loss of 32 lives in 2015, 40 in 2013, and hundreds of victims in 2011 in West Bengal. The loss of life can lead to a massive impact on the brands too, as was seen in 2018. Vat 69 and Smirnoff were banned from selling in the National Capital for two years due to the company’s alleged usage of duplicate barcodes which could be misused.
The existing liquor taxes and ‘sin taxes’ imposed on liquor lead to a rise in price and are considered motivation for counterfeiting. High prices are also considered motivation for the buyers to purchase cheaper substitutes knowing that it could be dangerous for their health. However, against the common belief, most buyers are not aware that they are purchasing counterfeit alcohol.

A Global Phenomenon

Counterfeiting in the liquor industry is not just an Indian problem, but a global catastrophe. As per a study published by the International Alliance for Responsible Drinking, 28% of total liquor in Brazil, 34% in Mexico, and 66% in Mozambique was counterfeit. In 2013, Russia sold 9.9 million more bottles of Whiskey than officially imported. It is also estimated that 30%-50% of total alcohol sales in Russia is that of illicit vodka.
Fake bottles have also been found to be manufactured and used in many parts of the world, indicating that counterfeiters may even have industrial-scale capabilities. The problem of fake wine has been rampant in China, with estimates hinting that close to 2 million fake bottles were being manufactured annually in China. In the UK, 50 million litres of counterfeit alcohol have been seized in a single year by HM Revenue and Customs (HMRC). Financial losses in the UK are estimated at around £218 million a year due to the sale of fake liquors.
Counterfeiting of liquor has also claimed many lives on a global scale. A simple search of ‘death from counterfeit alcohol’ throws up several reports with an alarming number of fatalities. Fake alcohol has claimed 140 lives in Indonesia, 72 in Siberia, 100 in Libya, 60 in Iran, and across most countries in the world. With such a massive problem, stakeholders across the world are working on and trying to find a solution to combating this menace.

Next-Gen Solutions

With counterfeiters becoming tech-savvy and even setting up manufacturing plants as we saw in the case of Russia, it is time for organisations to look towards upcoming technologies to solve one of the oldest and dreaded problems of the liquor industry. Tech-based solutions certainly have the potential to become the saviour the industry needs!
The first step should be to secure the supply chain by serializing every liquor bottle that leave the factory. This can be done by simply embedding a QR code containing multiple sets of information on the product packaging which can then be used to track the product during its entire journey in the supply chain. This QR codes can then also be utilised by the end consumers to authenticate their purchase.
The QR code allows your organization to closely track the inventory. Thus, enabling you to optimize it to maintain optimum stocks across distributors and retailers. This information will also empower your organization to garner a greater understanding of its distribution network. Using these QR codes is simple and scalable with minimal addition to costs. The costs are negligible compared to the revenue losses due to the sale of counterfeits.
The same solutions that are used for preventing the sale of counterfeit liquor and securing your organization’s supply chain can also be used to create an ecosystem beyond the bottles. These can be used by the marketing function of your organization to turn your products into platforms and interact with your customers like never before. This opens new opportunities for customer engagement and delivering a better consumer experience.

Conclusion

The problem of counterfeiting in the liquor industry is equally alarming as in any industry. Repercussions being beyond just usual loss in revenues. Fake liquor reaching the end-user will not only put the consumers’ lives in jeopardy but will also have an irreparable impact on the brand. The solution lies in a 360-degree approach with all the stakeholders including the government and the consumers working together to fight counterfeiting. Using next-gen technological solutions and ensuring consumer awareness are the fundamental steps that can address the grave issue of counterfeiting in the liquor industry.

How Companies Benefit from Blockchain

The supply chain today comprises a series of decision-making processes that are largely taken in discrete siloes within different departments such as marketing, product development, manufacturing, and distribution, and finally into the hands of the customer. Digitization has the potential to bring down these walls, thus helping the chain to become one completely integrated ecosystem transparent to all the players involved.
Companies have started to realize the core business value of traceability and Supply Chain visibility, which in turn would help them increase efficiency and cost savings targets. However, first they need to overcome the mistrust which are generally associated with product identity and traceability. Blockchain, which is a type of distributed ledger technology, has increasingly gained market traction in supply chains for several isolated used cases such as product provenance and track ad trace of products across the supply chain. When implemented effectively, blockchain can connect and enable increased business efficiency, higher transparency, and enforce accountability among the participating nodes. With better and more reliable data business decisions can be optimized. Across industries, there has been a growing number of pilot projects where use of blockchain technology has successfully helped in streamlining supply chain transactions through the provision of visibility and reliability of transaction information.
It is the transactional transparency, tamper- evidence, along with trust which blockchain provides which can help take the entire supply chain management a step further.
Companies are faced with significant challenges while digitizing their supply chains such as:
  • Coordination of the process with digital transformation across multiple and often disconnected supply chain partners

  • Lack of connectivity

  • Data reconciliation processes is heavy on Cost Incurred

  • Ineffective solutions for handling large amounts of inconsistent data.

While other technological options are there which help manage supply chains, with blockchain, different parties that necessarily do not have a trusted relationships with each other can communicate on the same platform. What blockchain does is that it stores every transaction or exchange of data that occurs in the network, this potentially reduces the need for third parties as all parties in the network now can access and share same data, in a chronological order. Blockchain helps eliminate a costly and complex effort towards data reconciliation which is a prerequisite for most systems today.
Blockchain alone does not solve the human challenges or the need for digital transformation, however when implemented effectively it can act as a powerful tool to encourage new ways of working, increasing accountability and trust. Additionally blockchain has a few more value additions to the existing system, which may include:

1. Substantial gains in efficiency and a reduction in manual processes which are needed for cross- party data reconciliation.

2. Increase in product provenance and consumer confidence for quality, societal, and environmental impacts.
3. Deeper market penetration and easier new product/markets development.
4. Reduced risk of the proliferation of counterfeit products and risk mitigation from lower-quality components.
5. By Leveraging innovation Brands can increase efficiency and eventually work towards change management
When considering the feasibility of blockchain for a specified use case, various costs and trade-offs should be considered. Further, supply chains in different stages might be more suitable and feasible for leveraging blockchain than others.

How Hazardous can Counterfeiting be in the Automotive Industry?

When was the last time you were allured to buy an expensive watch of Rado available at a lower price? Did you give a second thought as to why the said brand is offering something at such a low price, or you simply gave into your desire of owning a Rado irrespective of whether it is a genuine product or a counterfeit one? Well, the problem of counterfeit products goes far beyond everyday FMCG goods. It even impacts crucial industries such as pharmaceutical and automotive, where fake products can have fatal ramifications.

The Counterfeit Menace

Counterfeits can be defined as products that are fraudulently imitated to take advantage of the superior value of the original product. Counterfeiting in lay man’s term is known as ‘fake products’ or unauthorized replicas of the real product. Counterfeiters manufacture and distribute substandard products under the original brand’s name. It is illegal and by purchasing these goods, consumers in a way support these activities.
In India, the counterfeit market alone causes massive tax losses of INR 40,000 crore and the entire market is estimated to be valued at INR 1 lakh crore. Counterfeiting is so rampant in India that in Kerala these goods are sold as ‘gulf imports.’ Counterfeiting exists due to consumer demand for cheaper alternatives and huge discounts.
In terms of looks, these fake products closely resemble the original ones. The only differentiating factor between them is the price. These goods are priced quite low which compel consumers to fall prey to such products. Counterfeiters thrive on the aspiration of a consumer wanting to own a high-end brand.
Counterfeiting is also vastly seen in the pharmaceutical industry, wherein the counterfeit medicines with the same brand name and packaging but not manufactured by the original manufacturer are sold as real products. This could prove fatal for the patient if they consume these drugs which may not yield desired results. The same disastrous effects of counterfeiting are also witnessed in the automobile industry.

Problems in the Automobile Industry

The automobile industry in India is one of the fastest-growing sectors. In fact, it is often known as the indicator of economic growth and development. As more middle-income consumers aspire to buy vehicles, the automobile sales and the auto parts after-market segment have seen overwhelming growth until recently.
The automotive industry in India has been a major victim of counterfeiting. According to sources, the counterfeit auto parts industry is valued at a whopping INR 22,000 crore. Such a massive scale of counterfeiting has a direct and severe impact on the Original Equipment Manufacturers (OEMs). Counterfeiting is dangerous in the automotive industry as it risks the lives of the passengers.
According to a FICCI-Cascade report, nearly 20% of the road accidents occur due to the presence of these poor-quality spurious spare parts in the vehicle. Let us look at some of the most commonly found counterfeit products in the vehicles:
  • Brake Pads - Fake brake pads made out of compressed grass and sawdust have been detected. This reduces the braking ability as these fake ones disintegrate under pressure.

  • Airbags - Airbags that are meant to save the lives of the passengers in the vehicle during a collision have been found to be counterfeited. The fakes ones, unlike the original ones, do not meet the required specifications and are not appropriate to save lives.

  • Engine - Counterfeit engines do not deliver optimum performance and also pose a fire hazard. Fake filters also lead to excessive pollution.

Wheels, steering, electrical components, and even body parts are counterfeited to be sold at cheaper prices compromising the safety of the passengers. Using counterfeited auto parts can drastically impact the performance of the vehicle. There is a drop in the engine power, especially when accelerating heavily which heats the plugs and cause them to melt leading to engine damage. These counterfeit parts are neither approved by safety authorities nor are tested for safety making them a huge safety hazard.
The source of these counterfeit auto parts exists not only in India but also in China which is a major manufacturer of these spurious products. So, while OEMs produce the auto parts using state of the art technology and premium quality raw materials to ensure safety, counterfeit products are made with the sole intention to make more money. Poor checking, lax regulatory frameworks, and inadequate intellectual property protection add to the misery.
Counterfeit products not only impact the consumer or the company in terms of finances, but it also tarnishes the brand image of the original manufacturers. The customer who purchases a product assuming it to be an original product is bound to be left dissatisfied with the performance of the counterfeit products. Automobile brands end up losing the brand equity that is built over the decades.

Problems in the Automobile Industry

Counterfeiting can be prevented only with collective action by car manufacturers, government agencies, and consumers. The concerned government agencies also need to devise strict laws that punish those involved in counterfeiting. A more vigilant agency dedicated to preventing counterfeiting and better coordination between agencies will be essential. Additionally, consumer awareness will also play a key role in ensuring that the end-user in the supply chain detects and avoid counterfeit purchases.
Car manufacturers who already conduct raids should increase the frequency of such raids to detect fake products stocked by the wholesalers and traders. The industry needs to work collectively and not make this about protecting their own brand image. Additionally, companies should consider using advanced technologies that allow them to monitor their products across the entire supply chain.
At O4S, our product tracking solutions will help you secure the entire supply chain from your manufacturing plant right up to the retailers. Your consumers can also scan the QR code on the product to ascertain the authenticity of the product. Reach out to us to know more about customized solutions available for your brand.

Global Pharmaceutical Compliance Landscape

While Indian pharma exports were regulated years ago, the time has come to start a new era for anti-counterfeiting domestic regulation. In 2011, the Government of India had stressed on the fact that there is a need to protect the reputation of Indian Pharma exports and of the industry overall. This resolution resulted in the implementation of a scientific method of segregation for all export drugs. This ensures that the firsts step towards protecting patients around the world are taken care of, however when we look at the domestic market, lack of any such compliance method makes the 1.33 Billion population at risk from unlicensed and spurious drugs. In 2018, the Drugs Technical Advisory Board (DTAB) passed a recommendation that the top 300 pharma brands in India should come with an anti-counterfeiting solution. What was meant by this solution was namely an application which would of a unique code to each consumer-level pack. This would be supplemented with a SMS-based authentication for that code. However, unlike the case for products made for exports, this was a voluntary effort, which let to very low adoption.
Though there have been several concerns raised by the Pharma companies regarding the adoption, however all the stakeholders, namely, the regulators, pharma companies, solution providers and consumers, have to come together on a single platform to stop the spread of the spurious and sub-standard medicines.
When one looks at the global standard landscape from a Digital perceptive serialization as a new GS1 regulation has slowly emerged as a single global standard across the pharmaceutical industry. There exists a wide variety of technologies to physically differentiate one unit product from another, such as tamper-evident, tamper-proof, overt and covert features. All these options and more are readily available however there is a need for the industry and the government of working together. The government can help by incentivizing the adoption, this would intern inspire in R&D bringing in new-generation solutions. A healthy overall collaboration is the key for the adoption, as this would mean companies can strike a balance between quality and affordability.
The first initiative of the voluntary anti-counterfeiting solution came in 2018, it is the need of the hour to have a mandatory solution. As with every major technological leap, there are bound to be some challenges — of complexity, affordability, the technical environment being ready, but these can be overcome. For example, if there arises a situation where there is a technical challenge, such as the server does not perform at the optimal level, the companies can be allowed for an extension if needed. Steps like these and more can lead to a robust model which would focus on patient safety and the quality of medicine.
In 2009, there were no such global effort towards addressing the counterfeiting problem. It was way back in 2011, when the Directorate General of Foreign Trade (DGFT) had issued a notice announcing the implementation of the track and trace system using the barcode technology as per GS1 standards, a move which even predated USA which came out with its legislation in 2013. It is time that India again take the first step and get all the stakeholders in the supply chain to participate in a single product verification system. This would ensure patients would receive only genuine pharmaceutical products. Another pressing concern for the companies is the lack of visibility of product movement across their supply chains, which in turn compounds the chances of large quantities of inferior-quality medicines from reaching the retailer’s shelves.
In such a scenario, the solution adopted needs to cater to both the physical and digital solutions, together. The physical aspect caters to the tangible front which gives individuals an option of physically verifying the purchase. While, the digital solution provides a combination of security, connectivity and data. A combination of both can help both companies and government with targeted data, which can be used for public health purposes.

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