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ENCRYPTING THE FLOW

INTRODUCTION:

On a fine evening of October 2021 Mr. Iyer was taking a stroll in his garden immersed in deep thoughts
of the events that occurred in the first half of the day.

Mr. Iyer is Executive Director Supply Chain in a leading MNC Consultancy firm. Morning 10 a.m. he
was sitting in the board room headed by the CEO and fellow department leads. There was absolute
silence in the room for the first 10 minutes. Net profit was all time low.

With the advent of digitisation and changes in consumption patterns, it was getting difficult to keep
up with the pace of their leading FMCG client’s 10 year’s growth trajectories. Customising IT solutions
basis client’s needs was nowhere close as the vision itself was not so clear by the clients. Existing IT
and Service solutions were of no help as well.

It was an uncomfortable conversation with the CEO which ended up with Mr. Iyer getting not more
than a week’s time to come up with out of the box realistic proposals to make things work.

Over the last two years, Mr. Iyer had pulled all the plugs to improve their service levels including
reaching out to fellow consultancy firms and leveraging their best practices…

Suddenly he was pulled out of these thoughts, as his little son came running to him asking to make a
paper boat. As simple as it sounds, Mr. Iyer was suddenly enlightened! The mere thought itself that
his son was having an electric boat but still found pleasure in a paper boat was enough for Mr. Iyer to
get all his energy back, to the levels he had when he was just 1 year old in his firm. He was there for
the last 18 years and had seen the company grow leaps and bounds. But now, he was sure that any
disruptive solution required him to go back to the basics…

And that started his journey of revisiting the history of supply chain pillars:

Money, Material, Information!

DECODING THE HISTORY OF MINTING:

Let us start understanding the first pillar of the Flow, named Cash, or more commonly called as Money.
Money as we know, is a medium of exchange; it allows people to obtain what they need to live as per
their realistic or expected standard of living.

The first known mode of money was called Barter. It was an act of exchanging goods and services
between two or more parties based on an agreed deal. The history of bartering dates all the way back
to 6000 BC. Introduced by Mesopotamia tribes, bartering was adopted by Phoenicians. Phoenicians
bartered goods to those located in various other cities across oceans. Bartering usually was done
through exchange of cattle stocks.

While this process was clean and the objects exchanged had certain values of their own, it was
practically impossible to carry those goods if someone had to travel overseas. That’s when China had
come up with the coins made of base metals or Cowrie shells (usually found in the shallow waters of
Pacific and Indian oceans). Cowrie can be assumed to be most widely and longest used currency in
history.

This case has been written by Ms. Swarna Murthy, NITIE Mumbai (Batch of 2012), Senior Manager Distribution Planning, Hindustan Unilever Ltd, India. and Global Mentor of ISCEA. No
part of this text may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in
writing from the author except for reading and browsing via the World Wide Web.
Copyright © 2022 Swarna Murthy. All rights reserved.
 www.iscea.org/india | india@scnext.org

Slowly started the process of what we call as minting, where base coins, premium coins, leather money
and finally paper money came into existence. While these came with an improved ease of
transportation, it brought along with it the depreciation risk. The easier it became to produce money;
more difficult it became to ensure that its value was retained. This was all before there was a Central
Governing Body to maintain the money in circulation in the economy.

CENTRALISATION OF MONEY:

The gold standard first came into existence in 1821. Between 1821 to 1971, there were several rules
crafted with respect to silver, gold, bimetallic regime of silver/ gold and monometallic gold. The rule
simply entailed to standardise the rate and medium of exchange across geographies. Rules went
through several changes whenever there was plentiful of gold. In the full gold standard that prevailed
till 1914, gold could be bought or sold in unlimited quantities at a fixed rate in exchange of paper
money per unit weight of the metal. 1913, federal reserve system US (gold standards) was established.
The gold standard describes a system in which currency is connected to a specific amount of gold. In
1933, the US discontinued the gold standard to avoid depletion of national gold supply.

Federal Government then became the official banker of the monetary system, thus leading to first
Centralisation policy.

Centralisation and improved socio-economic-political policies led to the opening of private and public
banks across the globe leading to another wave of payment methods. Banks came up with the
business of deposit – loan model and in turn activated better money circulation through offline mode
of payment which included: Cash, Cheques and Demand Drafts. With the advent of internet facilities,
digital modes started pouring in like for large payments like RTGS and NEFT. Merchants how moved
along with the digitisation wave had prepared themselves with PoS machine enabling high usage of
Debit and Credit Cards. Between 1990s to 2000s India had seen a significant progress in payment
systems but a lot more was yet to come.

EMERGENCE OF DIGITISATION:

Digitisation had already stepped foot in the form of RTGS and card transactions in early 2000s in India.
As per Reserve bank of India, Department of Payment and Settlement Systems’ s report, between
2010 – 2020 Indian payment systems saw a big leap of improvement in terms of new modes as well
as usage patterns. As per the report:

“The advent of innovative electronic payment systems that leverage on technology which can be used
through internet and mobile, has led to electronic payment systems dominating the retail payment
space with around 61% share in terms of volume and 75% share in terms of value during the FY 2019-
20. Increased mobile and internet penetration in the country has resulted in significant shift towards
use of mobile / internet-based payment systems for effecting payments for purchase of goods and
services. Introduction of lightweight acceptance infrastructure (QR codes) has further facilitated the
This case has been written by Ms. Swarna Murthy, NITIE Mumbai (Batch of 2012), Senior Manager Distribution Planning, Hindustan Unilever Ltd, India. and Global Mentor of ISCEA. No
part of this text may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in
writing from the author except for reading and browsing via the World Wide Web.
Copyright © 2022 Swarna Murthy. All rights reserved.
 www.iscea.org/india | india@scnext.org

use of mobile based payments across the country. Data shows that low value payments dominate the
volume / turnover, and products that afford real time, instantaneous transfers are the most preferred
modes of payment.”

DECENTRALISATION AND ENCRYPTING FOR FUTURE:

While all the countries globally were establishing the Centralised Financial System, like India through
Reserve Bank of India; there was another technique already making way into our eco system to reverse
the entire chain if we intend to look at it that way, “Block Chain” was the term!

Block Chain was first proposed as a research project in 1991 and the blockchain concept predated its
first widespread application in use: Bitcoin, in 2009. As the name suggests, it is a sequence of blocks
connected to form a chain. It intends to connect various blocks into a chain with a shared database
through a decentralised mechanism where anyone can enter the chain with a series of encrypted
security keys. It differs from a typical database in the way that it stores information; blockchains on
the other hand store data in blocks that are then linked together via cryptography.

The first practical application Bitcoin forms the basis of our Supply Chain pillar “Money”. There is a
fixed amount of money or bitcoins available. Bitcoin is a sequence of digitally signed transactions
which passes on from owner to the receiver. Each transaction is encrypted through a series of hash
functions to authenticate the chain of ownership. Bitcoin uses a proof of network system, called as
Bitcoin Minting.

It is available to be minted by an individual, provided surplus amount of electricity is available to carry

out the coding transactions. Globally, countries are yet to specify and standardise tax regulations to
legalise and increase usage of digital currency.

DECODING THE HISTORY OF MATERIAL:

Source – Make - Deliver forms the essence of the Material Flow. It starts from the Vendor and ends at
the Customer. At the heart of material remains Inventory. All the improvements over time have been
done to optimise the RIGHT inventory at the RIGHT nodes, processes have changed over time:

Then: One localised vendor with high lead time; Now: Multiple vendors (locally and globally)

Then: Mass manufacturing with lower changeovers; Now: Lean manufacturing with smaller batch sizes
and quicker changeovers

This case has been written by Ms. Swarna Murthy, NITIE Mumbai (Batch of 2012), Senior Manager Distribution Planning, Hindustan Unilever Ltd, India. and Global Mentor of ISCEA. No
part of this text may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in
writing from the author except for reading and browsing via the World Wide Web.
Copyright © 2022 Swarna Murthy. All rights reserved.
 www.iscea.org/india | india@scnext.org

Then: Higher transit times, lower truck options; Now: Lower transit time, affordable options

Impact: Lower inventory with higher replenishment capability

Below picture represents the journey of material flow in a typical goods supply chain.

All these improvements have happened based on a single principle of staying relevant to increase
customer satisfaction while maintaining the trade-off between High Service and Low Cost. We have
been able to reach Global Sourcing, Lean Manufacturing and Electric Vehicles in the Last Mile delivery
because of the affordability and reliability to support AGILITY. While there are improved ways of
making fresh and updated stocks available to the consumer, business fit will play a bigger role in
leveraging these to sustain and stay relevant in the longer run.

DECODING THE HISTORY OF INFORMATION:

Information is an intelligent form of data and plays an important aspect in Supply Chain. The basic
question to ask is “How quickly and accurately the most granular sales data can be sent to the first
node of the supply chain which can then get converted into a product to be sent downstream?”. The
closer we are to sales, better are our levels of response.

The challenge at hand for the firms have been just two:

1. Collection and Storage of Data (Required Database Management System)

This case has been written by Ms. Swarna Murthy, NITIE Mumbai (Batch of 2012), Senior Manager Distribution Planning, Hindustan Unilever Ltd, India. and Global Mentor of ISCEA. No
part of this text may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in
writing from the author except for reading and browsing via the World Wide Web.
Copyright © 2022 Swarna Murthy. All rights reserved.
 www.iscea.org/india | india@scnext.org

2. Conversion into a plan (MRP, ERP1, ERP2, SCM, DDMRP) for activating Source – Make – Deliver

It started with Material requirements planning (MRP) which is a production planning, scheduling, and
inventory control system to manage manufacturing processes. Most MRP systems are software-
based, but it is possible to conduct MRP by hand as well. A MRP system is intended to simultaneously
meet three objectives:

• Ensure raw materials are available for production and products are available for delivery to
customers.
• Maintain the lowest possible material and product levels in store
• Plan manufacturing activities, delivery schedules and purchasing activities.

As the systems progressed, there came a need to plan and automate a variety of back-office business
functions through ERP, as MRP systems focussed only on material management. ERP directly controls
accounting, manufacturing, supply chain, customer management and quality processes and planning.
SAP ECC is an ERP solution provided by SAP.

With the advent of automation, now all the planning functions: demand, planning, logistics are linked
to such solutions and moving towards machine learning and Artificial Intelligence.

BLOCKCHAIN AND SUPPLY CHAIN:

As mentioned briefly in the minting section, using blockchain will help improve supply chain security,
traceability, and efficiency. Blockchain technology can also increase customers' trust because it
provides traceability of products at all supply chain stages.

QUESTIONS:

Having gone through the basics, Mr. Iyer is now planning to design proposal for an Ideal Supply Chain
for three different types of firms:

Type A: 2021 Annual Turnover between INR 1,000 Cr to 10,000 Cr, Targeted Net Profit Margin 15%

Type B: 2021 Annual Turnover between INR 10,001 cr to 40,000 Cr, Targeted Net Profit Margin 25%

Type C: 2021 Annual Turnover greater than INR 40,001 Cr, Targeted Net Profit Margin 30%

He is planning to create a 10-year process improvement plan implementable and relevant for 2022
– 2032 for each of the Supply Chain Pillars which in turn should get converged at a single point.
While material, information and money has had different timelines of history, all of them were
impacting each other’s development journey very strongly. Hence, the final solution also should be
tied up to each of the pillar’s individual solution. Clients should be able to either pick one pillar or a
combination of them.

Q.1. Please help Mr. Iyer in creating the 3 proposals and detail out the solutions which would align
with the business’s size and profit targets.

Q.2. We took a long time in moving from Decentralisation to Centralisation to combat the challenges
posed by former ways of working. With the advent of Blockchain, are we moving in the right direction?
If yes, why? If no, why? What do you think can be the probable applications of Blockchain in an Ideal
Supply Chain?
This case has been written by Ms. Swarna Murthy, NITIE Mumbai (Batch of 2012), Senior Manager Distribution Planning, Hindustan Unilever Ltd, India. and Global Mentor of ISCEA. No
part of this text may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in
writing from the author except for reading and browsing via the World Wide Web.
Copyright © 2022 Swarna Murthy. All rights reserved.
 www.iscea.org/india | india@scnext.org

WEB REFERENCES:
https://www.pbs.org/wgbh/nova/article/history-money/

https://en.wikipedia.org/wiki/Bitcoin_network

https://www.cardknox.com/white-papers/payment-methods-history-and-future/

https://m.rbi.org.in/Scripts/AnnualReportPublications.aspx?Id=1322

https://www.britannica.com/topic/gold-standard

https://squareup.com/us/en/townsquare/a-history-of-the-trade-and-barter-system

https://www.investopedia.com/terms/b/blockchain.asp

https://en.wikipedia.org/wiki/Blockchain

https://www.worktruckonline.com/10140905/history-of-the-first-truck-1896

https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/PSSBOOKLET93D3AEFDEAF14044BC1BB36662C41A8C.PDF

https://www.logmore.com/post/history-of-supply-chain-
management#:~:text=In%20the%20late%201920s%2C%20the,trade%20and%20supply%20chains%20irreversibly.

https://www.youtube.com/watch?v=bCQe77qphh8

https://www.quickbase.com/articles/timeline-of-database-history

This case has been written by Ms. Swarna Murthy, NITIE Mumbai (Batch of 2012), Senior Manager Distribution Planning, Hindustan Unilever Ltd, India. and Global Mentor of ISCEA. No
part of this text may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in
writing from the author except for reading and browsing via the World Wide Web.
Copyright © 2022 Swarna Murthy. All rights reserved.