How SAP is Feeding Asean with Eco-Friendly Supply Chains

By Avanti Kumar

According to a recent industry roundtable on the theme of food supply chains in Asean, priorities to carve a more reliable pipeline must include agility, as well as resilience and sustainability.

In her opening remarks, SAP president and managing director (Southeast Asia) Verena Siow started with the basics, pointing out that “although Asean is diverse and made up of many different countries, culture and languages, I’m sure we can all relate to the humble bowl of rice – a common staple that is prevalent across our region, and is also an embodiment of history, and development in this region”.

Today, Southeast Asia is among the world’s most productive agriculture regions. And the overall food and beverage industry, which includes agriculture, contributes about 17 percent of Asean’s gross domestic product (GDP) and accounts for about 116 million jobs, or about 35% of the region’s total labour force, she said.

“Southeast Asia’s fast-growing population and increasing food demand, coupled with escalating adverse weather and supply chain events, poses a serious challenge to our future food security and its sustainable growth ambitions.”

Covid-19 has also forced increased focus on the fundamental challenges of maintaining a sustainable flow of essential supplies for growing populations. With Asean’s population surpassing 661 million people in 2020, the path to resilient supply chains has quickened digital adoption.

In addition to ensuring a structured environment that engenders a seamless flow of logistics, the region’s 10 states need to take longer term measures such as building digital infrastructures to optimise production, inventories, and operating costs.

A broad example is the World Trade Organisation’s (WTO) adoption of the Trade Facilitation Agreement in 2017, which is aimed at reducing the amount of red tape when moving goods across borders.

Digital Cure-all

“Feeding our population is one of the biggest challenges of our time, considering the perishable nature of food and sheer logistical arrangements required to ensure that the produce gets to the right people at the right time, in a fresh and consumable state, with a maximum shelf life,” Siow said.

About a third of all food produced – or 1.3 billion tonnes – is lost or wasted every year, according to the Food and Agriculture Organisation of the United Nations (FAO). Additionally, this also generates 8 – 10 percent of global greenhouse gas emissions.

“This is the key challenge we face today – how do we better process, deliver, store and utilise the food we produce to minimise wastage?”

Technology can have valuable impact on the end to end food ‘value chain’ – from farm to table, from food production (agriculture), processing and transportation to distribution/retail. The use of digital measures can help to reduce costs and disruptions for countries in the region, confirms a supply chains report from the Asian Development Bank (ADB).

These digital technologies include artificial intelligence (AI), the internet of things (IoT), block chain, cognitive computing, augmented and virtual reality (AR/VR), and robotics, among others.

“Data is central to these concepts. For farmers, using the Internet of Things and cloud-enabled sensors to measure soil and plant welfare, biometrics for livestock, and weather will result in an extremely large amount of insights to optimise how they create food,” Siow said.

Ending hunger and minimising food waste is a complex challenge and in addition to digital technologies, international agreements that enable fluid and transparent supply chains, investment in skills and people are additional fundamentals.

Customer-focused Supply

Consumers can also benefit from knowing where their food comes from, in line with the growing trend of the ‘conscious consumer’ where ethical production and sustainability are becoming top-of-mind and a key influencing factor in their buying decisions.

Four in five Asean consumers value environmental sustainability and are making eco-friendly lifestyle changes, according to the World Economic Forum. This poses another opportunity for businesses viewing ways to cut food waste via optimised supply chains.

SAP Malaysia managing director Hong Kok Cheong echoed these insights and expanded on Siow’s remarks when speaking later to local media on Malaysian perspectives. He remarked that SAP’s near 50 years’ of experience in enterprise resource planning – with more than 77% of the world’s transactions touching an SAP system, and SAP customers generating 87% of total global commerce, SAP is well-positioned to help organisations become more sustainable. Equipped with its solutions and industry expertise, the company is committed to helping to reduce food waste, increase traceability and digitize processes.

Hong outlined the “importance and tremendous opportunity of visibility and transparency through the value chain, especially in the light of the growing trend of ‘conscious consumerism’. Also in the session, two local industry icons shared further insights into Malaysia’s food supply chain strengths and challenges.

Mydin Mohamed Holdings Bhd IT director Malik Murad Ali agreed that Malaysians are gradually seeing value in sustainability and quality of food.

From 1957, homegrown Halal hypermarket and retail chain Mydin has grown from its Kelantan roots into a nationwide network of more than 50 stores, presence in seven major malls, multiple retail outlets, and its eCommerce operation.

Mydin’s digital adoption today touches every aspect its operations – from buying and selling, displaying and managing produce, and so forth.

“We are conscious that there is much more we can do. So far, to give some examples, we have digitalised the whole demand process. Initially needing 120 people, we now find that 99% of our invoices do not require a human touch; we can utilise our staff for higher value work. End of day processes are also digitised. The placement for sale of between 12,000 to 15,000 products are digitised. As a local retailer, we are still moving forward and have some way to go. We are now looking at ramping up cloud usage.” 

Another local business leader, Datuk Jeffrey Ng Choon Ngee, advisor and former president of the Federation of Livestock Farmers’ Associations of Malaysia and general manager of Chop Cheong Bee Sdn Bhd, outlined how technology has boosted more efficient management of his chicken business spanning 14 farms and supplying 1.5 million birds per month to the local market.

Ng talked through the company’s adoption of technologies, starting from using an electronic system a decade ago, and moving to tapping IoT about four or five years ago. He pointed out that farming does not have off the shelf products and he had to commissioned startup companies to write code at the outset.

“We are pretty connected with IoT (internet-of-things): we can check everything – chicken weight by the minute, monitor growth, control appetite, and so forth. These moves was to make our production more efficient and sustainable. Then in 2019, we selected SAP as our ERP [enterprise resource planning] other technology supplier.”

Looking ahead, he said that better forecasting of demand through machine learning, artificial intelligence and big data can help deliver products even more efficiently.

“This also gives us better visibility and traceability across the logistics pipeline, to allow better flow and delivery of produce to prevent stockpiling, shortages and food waste. We aim to become more efficient in our operations across our blocks. Our adoption in technology is still growing.”

All speakers agreed that to move forward, improving supply chain fragmentation would remain a challenge. After almost two years of lockdowns, the market opened and all sectors had to rise to the challenge of meeting fresh demands, they said.

Responding to the question on how eco-friendly are these digitalised supply chains, Hong, Ng and Ali agreed that sustainability is becoming recognised by Malaysians as “good for Mother Nature and for the bottom line”.

Hong concluded that Malaysia has committed to playing its part to the global intention. “Sustainability is not just about the business. The world we live in is our home, it is up to us to manage it better for future generations.”