Transforming the FMCG supply chain with SAP Ganges – Supply Chain Visibility
I had presented a paper on tranforming the supply chain at The “Fourth Biennial Supply Chain Management Conference” jointly organized by the EADS-SMI Chair for Sourcing and Supply Management, Indian Institute of Management Bangalore and Supply Chain Management Centre, Indian Institute of Management Bangalore, in Dec 2014.
I have repproduced an extract from my papaer below
Establishing the need
The FMCG/retail sector in India is sized at $50B / year. This market consists of 12-15 main CPG companies and a host of regional and local players with 20K dedicated distributors and 80K wholesalers supplying a base of 8.3 M FMCG product retailers. Today the last mile retail stores in India have a highly inefficient, manual supply chain. Some of the insights we gained through the market analysis is given below
The CPG/FMCG companies have always faced a challenge in connecting to the last mile of their supply chain. “SAP Ganges” is a business network that connects this supply chain. The SAP Ganges solution endeavors to provide insights and information to all the stakeholders in this ecosystem.
Product definition & options considered
SAP Ganges is a business network that solves this problem through a disruptive innovation in the most comprehensive way. It is an intensive network that links millions of retailers, thousands of distributors and wholesalers, CPG companies, banks, and service providers
SAP through this project has designed and appliance for use by small and medium retail shops with capabilities such as GPRS connection, multi-function capability and modularized components for easy servicing and so on. These appliances will connect to an SAP Cloud solution for secure data storage, analytics and such other activities. These appliances will be sold and serviced by the Hardware Manufacturers who are eco system partners.
Along POS Solution for the last mile retailer, SAP also has cloud based offerings for the other stakeholders in the network like, CPG / FMCG Solution, Distributor Solution, Bank Solution.
The potential of such a connected supply chain network in retail is immeasurable to all the partners of ecosystem participating in this initiative.
- The CPG companies will have a clear visibility of the entire supply chain, with real time availability of critical data like inventory at retailers, enabling them to optimize their entire supply chain.
- The retailer will enable transparency and hence efficiently collaborate with CPG companies and in the process benefit from affordable credit to maximize his profit goal
- Banks have created a new credit product which will be offered to the retailers who become part of the network. This credit product will cater to working capital requirements of the retailer and will work in mode similar to a closed loop credit cards
- This network has the potential to effectively & efficiently deploy citizen welfare schemes such as financial inclusion using Aadhar framework, administration of subsidies like MGNREGA, Cooking Gas & Petroleum and administration of public distribution scheme and so on, benefiting the Banking industry in un-parallel ways.
- The contribution of telecom partners and appliance manufacturers will open up entirely new business avenues for a foreseeable future, perennially.
Development Strategy, Choice of technology
Design-thinking methodology: SAP Ganges started as an incubation project at SAP Labs India with the aim to create an ingenious solution for the specific needs of the very unique Indian market. The problem of last-mile-connectivity is a challenge that FMCGs have been grappling with for a long time due to the vast geographical spread of Indian market with no Internet which deters connectivity into remote areas and hence limits ways to track consumer sales. Given this situation it was essential that we adopt a ground-up approach to solving this problem and hence we reached out to the end-users of the prospective solution, talking to them, closely observing their day-to-day business to see how we can create a solution which they find useful and also easy-to-use with their semi-literate background. This approach is called ‘design-thinking’ and using this technique we interviewed about 200 personas (150 retailers, 30 distributors and 5 CPGs ) to create a specific mind-map and user-needs guideline. Through this process, the PoS software is designed based on numbers and iconography as most of the retailers were semi-literates and were uncomfortable with traditional PoS UI. It has a touch-based interface with minimal need for manual data entry to increase the user friendliness.
Affordable and value-for money device: Even though many Point of Sale devices exist in the market today, they are not suited for the needs of a mom-and-pop retailer because, first, these devices are. expensive and second, they are based on internet connectivity which exists rarely for these retailers Therefore, we carried ingenious innovation to design a device strictly according to their needs, a modular and value-for-money device which is at 1/4th to 1/5th of the price of other devices in the market, offers battery back-up (with no need for additional UPS) and is compact and rugged to sustain the environment of a retailer’s shop.
- SAP Ganges network runs on the power of SAP HANA which is a high-speed in-memory processing appliance by SAP à 4 products are based on cloud
- POS Device : Android 4.xx – Upgrade options possible
- Communication via GRPS between POS and SAP HANA Cloud Applicatio
- Insights – Running in Cloud
- POS designed to work off line and data sync with B/E when connection is resumed.
Product Development / Offerings
The scale of computing and analytics for the massive scale of retail point-of-sale data is made possible by HANA which provides real-time access to data and enables complex analytics on it. SAP Ganges is comprised of the following six offerings:
- SAP GANGES for CPG: This product enables reports and forecasting based on demand from retailers and allows the CPGs to reach the retailer POS network for marketing messages and promotions. It also provides analysis such as trend analysis, product-affinity analysis, promotion analysis etc.
- SAP GANGES for Distributor: This product enables the distributor, visibility into purchase and orders received from his retailers and plan fulfillment and allow him to receive payments digitally. It provides information to the distributor to better manage their inventory logistics by giving them access to sales pattern analysis, payment summary etc.
- Embedded POS Software: The PoS software allows the retailer to manage his daily tasks of billing, printing bills, searching for items, managing customer contacts and credit etc. Additionally, the retailer can also create purchase orders which become available to their distributor. The retailers can also avail credit from known banks which are a part of Ganges network, to grow their business.
- SAP GANGES for Banks: This offering enables retailer profiling through creditworthiness report and monitoring of retail customers.
- SAP GANGES Connect service: This product allows POS devices to connect to this network.
- SAP GANGES Network as a Channel: This allows various players to use the Ganges network to release promotions and product-related messages to consumers. The point-of-sale device will be a medium to flash these messages as well as value-added services to consumers in the remotest parts.
Field Pilot 2014
At present a pilot is in progress across Bangalore – Mumbai and soon to be launched in Delhi which mirrors the production level operations. Through this pilot, we plan to demonstrate the values of the network to the stakeholder s and also understand the considerations while operating such a vast network.
How Sap Ganges Revolutionize the Way FMCGs make business decisions
These companies suffer inefficiencies in their inventory management, procurement, marketing and promotions spend due to a lack of last mile visibility. Most FMCG companies rely on dated and extrapolated data while framing their strategy. SAP Ganges enables forecasting based on actual demand and allows the CPG to reach the retailer POS network for marketing messages and promotions.
Previous attempts at solving the problem of ‘last-mile-connectivity’
The problem of last mile connectivity is a complex one and requires an integration of the best technologies in software, hardware and design for a reliable resolution. SAP Ganges is not just one offering but a combination of different technologies and multiple partners coming together to provide a solution which is targeted to the end-user. There have been multiple attempts at solving the problem by many companies but have been unsuccessful due to many weaknesses, namely:
- A typical POS device is priced too high for a kirana owner. SAP Ganges POS device is priced at 1/4th to 1/5th of these devices
- Most players have focused on solving a part of the problem, and did not have a concerted approach.
- Some companies, due to their limited size have failed to bring enough strong partners on-board to solve problems such as connectivity, credit etc. This is a problem that SAP has been able to solve by making a strong partner eco-system
Technological transition achieved by SAP Ganges
Paradigm shift in approach to supply chain management
The integration achieved through a POS can help FMCG companies to tap into hidden opportunities that can open up new efficiencies in the supply chain:
Demand and Supply Chain Strategies
Through the POS device, companies are able to get the most real-time and actual data of their demand to uncover demand patterns and improve forecast. This forecast data based on actual rather than historical data can be used for achieving a sensitive and automatic replenishment plan, which creates synchronized and more accurate demand signals up through the entire supply chain. Using the market basket analysis , FMCGs can creates popular assortment, replenishment and promotional strategies across the entire supply chain through to the shelf to accurately assess the impact on sales, service and cost prior to executing those strategies.
Products & Consumer Preferences
Using the demand information sent from the POS, companies can localize assortments and profitably flow inventory to the shelf and capture more consumers, and grow market share, revenue and margins.
Point of Sale Analytics:
Greater understanding of the impacts of trade promotions, consumer marketing activities, seasonality, new products on demand and supply plans with near real-time analysis capabilities, enabled by Ganges, are must-have capabilities for the future of retail.
The SAP Ganges network can make supply-chain management and credit management system intuitive across the entire network whose final nodes are the retailers in far-flung regions of developing countries. This has the potential to transform the social landscape in these countries by empowering the weakest parts of the distribution hierarchy. Through this solution, SAP is truly touching the lives of millions of people.