Indian Institute of Management Kashipur

Strategic Sourcing Management MBA 21-23

End Term Project

On
Expanding frontiers of Lean and Digital Transformation into SCM

Guided By – Prof. Kunal Ganguly

Submitted By – Group No. 03

Name Roll Number

Aishwarya Anand MBA21073

Akash Behera MBA21075

Ankit Kumar MBA21081

Aravind Nagappan MBA21084

Kanchan Singh MBA21101

Sayan Mukherjee MBA21128

Table of Contents
Introduction..............................................................................................................................3

Supply Chain Flexibility in Digital Transformation Era.....................................................5

Primary Data collection and Analysis....................................................................................6

Tata Steel Case:........................................................................................................................8

Conclusion:.............................................................................................................................11

Reference.................................................................................................................................11

Introduction
In today's global marketplace businesses can employ digital transformation in supply chain
management to improve efficiency, increase quality and consistency, and better service their
consumers in order to gain a competitive edge. Greater productivity and profitability are the
primary goals of the digitization of the supply chain. Additionally, digital supply chain
transformation enables businesses to shift assets, personnel, and resources whenever and
wherever they are required, cutting costs by foreseeing and addressing manufacturing and
transportation hazards.

Supply Chain 4.0 will be faster, more adaptable, granular, accurate, and efficient as a result of
digitization. Modern digital waste must be eliminated, and new technologies must be used, as
a primary lever to improve supply chains' operating efficiency.

Supply Chain 4.0 unlocks potential in all domains of supply chain

Lean management is another concept that is growing in importance inside the supply chain. It
entails integrating lean principles into the fiercely competitive supply chain. At every stage of
the supply chain, from the manufacture of raw materials by suppliers through the delivery of
finished items to the end user, the relentless removal of non-value added time and subsequent
decrease of lead time are the main goals of lean supply chain management. The major
advantage of lean supply chain strategy is – lower inventory cost, elimination of waste,
improved quality, increased productivity and Flexibility.

Few prominent trends in Digital supply chain management are discussed below -

1. IoT Technologies - It allows for the identification and tracking of products in

warehouses and retail stores, the monitoring of delivery efficiency, and the control
and measurement of facility temperature and relative humidity. RFID and GPS, for
instance, are used to track and examine inventories, cargo, and vehicles.
 2. Blockchain - It's a useful tool for safely exchanging paper and digital documents, like
ledgers, collective bargaining agreements (CBAs) etc. A complete history of all
transactions can be traced back to a single point in time because each transaction
records its own block.
3. Robotics - It is used in the retail and logistics sectors to cut down on the amount of
time it takes to transport items from one location to another. Drones or driverless cars
may be used for deliveries. Additionally, there are customer care robots that may
assist customers and attend to their questions.
4. Cloud Framework - As more and more economic sectors adopt more effective
solution, spending on cloud computing is anticipated to hit a high peak. Supply chain
management uses supply chain solutions, cloud-based infrastructures, and cloud-
based systems.
5. Big Data & Advanced Analytics - Throughout the supply chain, from inventory
planning to manufacturing and sales, a plethora of insightful data is generated. The
majority of the time, the data acquired is used to guide decision-making. These
include operational efficiency, inventory management, and sales forecasting.

Different supply chain flexibility perspective

There are five major types of supply chain flexibility:

1. Product flexibility:

Product flexibility is the capacity to handle complex, unexpected orders, meet specific client
needs, and produce goods in a variety of features, options, sizes, and colours. A characteristic
that adds value to the product that the customer can immediately notice is flexibility.

2. Volume flexibility:

Volume flexibility is the ability to effectively increase or decrease aggregate production in

response to customer demand. It is the ability to effectively increase or decrease aggregate
production in response to customer demand.

3. Launch flexibility:

Launch flexibility is the ability to quickly introduce a significant number of new products and
product variants, which calls for the integration of numerous value-adding processes
throughout the whole supply chain. Due to the company's introduction of multiple varieties of
the new product, flexibility in the production of specific types of automobiles, for example,
may give consumers the impression that the specific company is technologically superior.

4. Access flexibility:

Access flexibility is the ability to provide large or intensive distribution coverage.

5. Responsiveness flexibility:

The ability of the company to generally adapt to the needs of its target markets is captured by
responsiveness flexibility.

The ability to adjust to changing circumstances or unstable environmental conditions is often

viewed as a key component of flexibility in business. Compared to traditional supply chain
management, supply chain flexibility, or the ability to quickly modify production levels, raw
material sourcing, and transit capacity, has many advantages. Traditional supply chain
management methods are rigid, making it difficult to make quick adjustments when they are
required. When demand fluctuates, whether it be up or down, or when there is a holdup, it is
well recognized that the entire supply chain will encounter interruptions. The supply chain's
adaptability makes it possible for it to control daily cyclical changes.

When businesses have the technology to enable supply chain flexibility, boosting efficiency
and enabling quick responses, supply chain interruptions may be anticipated and planned for.
Even while utilizing spreadsheet-based forecasting makes it harder to be flexible, platforms
that employ artificial intelligence make it simple to include flexibility in the supply chain. It
is based on artificial intelligence, and the platform's algorithms support a variety of platform
operations, such as demand forecasting, task automation, forecast method selection, and
scenario modelling. Your supply chain planning will be more resilient, surpassing the unusual
and the unexpected, if you use a flexible planning strategy based on intelligence.

Supply Chain Flexibility in Digital Transformation Era

Integration of information technologies with supply chain stakeholders will be critical for
anticipating disruptions and becoming more agile in adapting to changing scenarios.
Information technology and digital technology should not be viewed with same lens. IT assist
in computerization, giving software products and hardware products and exchange of
information but digital transformation is one step forward in this direction.

Supply chain digital transformation would be assisted with minimum 5 technologies: Cloud
Computing, Big Data, AI, Blockchain Technology and IoT. Such technologies provide a new
perspective into the field of supply chains since they allow an authentic flow of information
and the huge amount of data that can be analysed to increase prediction capacity.

New age technologies like CoBots (Collaborative Robots), AR (Augmented Reality), 3D

printing, VR (Virtual Reality) in collaboration with the base and traditional technologies are
also becoming a deciding factor in realizing flexibility.

Primary Data collection and Analysis

For analysis, we surveyed a few employees across various industries with a set of questions.
The questionnaire total consisted of 36 questions. These questions were categorised into
different sets in order to assess different frontiers and all together help us asses the frontiers
of lean and digital transformation scenario of the supply chain.

We collected data from 9 different sources via Google Form in form of a Likert scale ratings.
Post collection, we analysed each set (9 sets consisting of 36 questions) by doing Reliability
Testing. This test was done to check whether the questions which are assumed to be
representing a set (for assessing a frontier) are cohesive or not and based upon that we drew
insights. Finally, we also did Factor Analysis of all questions, followed by reliability testing
which gave us two leading factors and we calculated the correlation between the factors. The
tool for analysis is PSPP.

The questionnaire is as follows

Question Set Question Question No

Questionnaire to We aim to digitalize everything possible in the supply chain 1

assess Digital We aim to collect large amounts of data from different sources in the

Transformation supply chain 2

Strategy 3
We aim to create a stronger communication network between different
 sectors of the supply chain with digital technologies
We aim to improve the interface with customers with digitization
efficiently 4
We use robotics in our company processes and in the supply chain 5
Questionnaire to
We use computer simulation in supply chain processes 6
assess Front End
We use augmented reality in supply chain processes 7
Technologies
We use 3D printing in supply chain processes 8
We use Internet of Things in our supply chain processes 9
We use Cloud Computing in our supply chain processes 10
Questionnaire to
We use Big Data Analytics in our company processes and in the supply
assess Base
chain 11
Technologies
We use Artificial Intelligence in supply chain processes 12
We use Blockchain in the supply chain processes 13
Our company can quickly identify a new supplier when needed 14
Our company can easily add and remove suppliers when needed 15
Questionnaire to Our company is able to make contractual adjustments in the
assess Sourcing relationship with suppliers with ease 16
Flexibility Our company makes decisions together with the main suppliers (in
relation to design/product modifications, project/process modifications,
etc 17
Our customers' preferences change frequently 18
Questionnaire to Our company's new customers have different needs. than current
assess SC customers 19
uncertainity Our company frequently receives demand for products and services
from new customers 20
The price of raw materials and components that our company buys
changes frequently 21
Our company is highly dependent on suppliers to acquire the materials
Supplier uncertainity
needed for production 22
Our company must deal with supplier delays in material deliveries
frequently 23
To assess Our company has improved the delivery reliability of customer orders
Operational over the past two years 24
Performance Our company has improved the lead time for delivering customer
orders over the past two years 25
Our company has improved the delivery reliability of customer orders 26
 over the past two years
Our company has improved the lead time for delivering customer
orders over the past two years 27

Our company has reduced customer order time over the past two years 28
Our company's sales have grown in the last two years 29
To assess Financial
Profit on sales has increased in the last two years 30
Performance
Market share has grown over the past two years 31
Our company is able to operate with various production volumes
and/or with different service levels 32
Our company can change production volumes and/or services
To assess efficiently 33
Manufacturing Our company is able to produce various combinations of products 34
Flexibility Our company manages to develop new products and/or services every
year 35
Our company has the ability to change the mix of products and/or
services efficiently 36

For Digital Transformation Strategy as a factor, Cronbach’s Alpha is 0.80. However, Q1

shows less cohesiveness with other 3. Removing Q1, gives the value as 0.83. Thus, from the
predictive analysis of the data available, it can be concluded that, digitalization of everything
possible in the supply chain is not appreciated. Stronger communication and improvement of
customer interface are focusing areas of digitalization.

For Front End Technologies, Cronbach’s Alpha changes from 0.83 to 0.85, once Q8 is
removed. This suggests that 3D printing is again not much focused in digital transformation
technologies. Robotics, simulations and AR are being used extensively.

For Base Technologies, Cronbach’s Alpha changes from 0.89 to 0.94, once Q13 is removed.
This suggests that Blockchain usage as a base technology is still not prevalent across
industries unlike that of IoT, cloud computing, big data and AI.

For the factor of Sourcing Flexibility, Cronbach’s Alpha changes from 0.84 to 0.98, once
Q17 is removed, as it is showing less cohesiveness. This suggests that in sourcing, still
companies are not making decisions together with main suppliers. Companies are quick in
selecting new suppliers, add or remove them and make changes in the contracts.
For Supply Chain Uncertainty, Cronbach’s Alpha is 0.92 and all the questions are cohesive.
This suggest that, across all the industries, customers’ preferences change frequently making
things more uncertain.

For supplier uncertainty factor, Cronbach’s Alpha improves from 0.89 to 0.92, once Q22 is
removed. This suggests that most of the firms are not highly dependent on their suppliers.
However, most of them agreed upon the fact of price fluctuations of raw materials and feel
that supplier delays must be dealt properly.

For Operational Performance question set, alpha is 0.89 and all the questions are cohesive.
Thus, it can be concluded that, companies have improved their delivery reliability to their
customers and lead time in last 2 years and also the order time.

For Financial Performance factor, alpha improved from 0.90 to 0.97 once Q29 is removed
from that set. This suggests that not all companies’ sales have grown from past 2 years,
however their profit on sales and market share have increased due to digital transformation,
however other factors tend to have affected the positive growth apart from this
transformation.

Lastly for Manufacturing Flexibility factor, alpha improved slightly from 0.90 to 0.91 once
Q32 is removed from that set. This suggests that many companies are not that flexible to
operate at various SLAs and production volumes although they are capable of doing the
same. They manage to produce newer products or combination of products and even change
the product mix.

Apart from all 9 factors, we tried to do Factor Analysis of all the questions and thereafter did
Reliability testing of all the factors. We managed to get 3 factors after removing the
redundant ones (we checked Total Variance Explanation (should be more than 50%),
followed by allotting the questions into one factor by checking Rotated Component Matrix
table and further removing more questions via reliability test). We kept the acceptable limit
of factors as Cronbach Alpha 0.6 or above. However, 1 factor had only 1 question, we
dumped that too, So, finally we ended up with two factors.

For both factors, we calculated the mean of all the questions (of each respondent) that it
constitutes. Now with means of both factors we calculated the correlation between the factors
and its value is –0.062.
A negative correlation is a relationship between two factors suggests that as the value of one
factor increases, the other decreases. However, the correlation is weak to derive any
conclusion from it.

Tata Steel Case

An Interview was carried out with Hemraj Bairwa, alum of IIM Kashipur and working as
Manager of Dispatch Planning and Outbound Logistics at Tata Steel. He guided us with his
rich experience in digitization of supply chain management and the below derived insights
are from his interview.

Sourcing and Procurement at Tata Steel:

In Earlier days, Tata Steel was using SEP Professionals for doing procurement activities. This
tool can be used only by the technically sound professionals. With SEP tool every Purchase
Request (PR), Purchase Order (PO) everything was done manually. Later to change the
difficulty of the sourcing team they migrated it e.Procurement tool for the sourcing where
both the supplier and Tata Steel are integrated together which minimized the manual work in
procurement activity. e.Procurement made everyone in the sourcing and procurement team to
use it because of its easy interface.

Need of Digital Transformation:

Every Supply chain is customer oriented and hence every customer has the right to know
their products transit, current location, dispatch date and delivery date. Before the digital
transformation at Tata Steel, customers used to contact the Tata Steel customer service to
enquiry their product which is a non-value-added activity for Tata Steel. Hence to overcome
this one such digital transformation is the introduction of Compass application where
customers can use it to their products location, transit place, delivery date etc. This helped
Tata Steel to eliminate its non-value-added activities. Tata Steel is also planning to
collaborate with EY (Ernst & Young) for the upgradation of existing Transport Management
Systems (TMS).

Artificial Intelligence at Tata Steel:

AI models are used for Decision Modelling activities at Tata Steel. For example, the idle
capacity of the truck is predicted using AI models and hence instead of leaving it empty
space, Tata Steel tries to load other materials which must be sent a place which is present on
its way to destination. In this way AI helps in improving the logistics decision for Tata Steel.
It is also used in Capacity Planning for the quarter based on the historical data and past
trends. One step advance instead of issuing truck receipts manually, AI has been
implemented to capture the truck images and issue the truck receipts to the driver with the
help of image processing technique.

Big Data and Augmented Reality (AR) at Tata Steel:

Big Data basically helps in Vendor selection for Tata Steel for their leverage items. As value
will be high and risk is low it is better to have multiple vendors for it. Hence, Big Data helps
in identify the right vendors at right time for leverage items. For Augmented Reality, as of
now Tata Steel has not implemented yet because AR is mostly used when an organization is
dealt with its end users. But Tata Steel is making job for the builders by offering solution like
recommended doors design for a room, hall or entrance by knowing its design and
dimensions in which computer modelling is heavily used.

Is Digital Transformation required everywhere:

Digital Transformation is not required everywhere in supply chain but can be transformed as
much as possible. The reason is high investments in digital transformation sometimes will not
yield maximum results when compared with semi-manual work. But digitization helps in
resolving with customer pain points by identifying them with their feedback at Tata Steel.

3D Printing at Tata Steel:

Currently, Tata Steel do not use 3D printing in any of its products but in near future it may
use it for machine maintenance. As steel is not a complex and innovative process to
manufacture, 3D printing is not required in steel industry.

Blockchain at Tata Steel:

Blockchain generally helps in traceability of any product from end to end like from
manufacturer to end user. So, it helps in identifying the counterfeit products easily with the
help of blockchain. Tata Steel has collaborated with NITIE Mumbai to work on blockchain
technology along its supply chain.

Effects of Digitization and its impact at Tata Steel:

Before 4 years when the digitization was in its budding stage, Tata Steel had huge cost
leakage in its supply chain like they used to pay debris penalty of ₹50 Crore to Indian
Railways, ₹150 Crore of idle freight and ₹20 Crore of sub optimal cost. These costs are now
reduced to ₹15 Crore of debris penalty, ₹52 Crore of idle freight and ₹4 Crore of sub
optimal cost. Hence, it is very much evident that digitization started reaping its benefits for
Tata Steel.

Conclusion
From this research it is observed that digital transformation in Supply chain management may
cause businesses to reevaluate how they will structure the adoption of digital base and front-
end technologies in accordance with their digital strategy and how they will alter their supply
chain operations to become more flexible, with a particular emphasis on supply flexibility,
distribution flexibility, and sourcing flexibility. The company needs to evaluate the
uncertainties of both customers and suppliers for this shift from supply chain flexibility using
digital technologies. From the Tata Steel case also, it is observed that digitization has started
reaping benefits for them in terms of reduced debris penalty, sub optimal cost and idle
freight. Also, from the Google form responses of 10 supply chain professionals it is observed
that everyone is upvoting for digitization at their organization in the form IoT, 3D printing,
Blockchain, Artificial Intelligence etc.

Reference

Recorded interview with Tata Steel Manager link -

https://drive.google.com/drive/folders/1RA-txTCkYBPo7hVjSypsnF5ZM-m-haoB?
usp=share_link

Responses from Managers - Responses.xlsx

Factor Analysis of all 36 Questions.pdf

Reliability Tests of 9 Factors.pdf