Leadership Matters

Perspectives on the key issues impacting senior leaders and their organizations
May 11, 2020

The Three Ps of India's Supply Chain Strategy Amid COVID-19

By Ritesh Bijlani, Vishal Seth, Kushendra Singh

COVID-19 has significantly impacted value chains across businesses. As the lockdown starts to ease, organizations face an urgent need to effect changes to their operating models to deal with fast-shifting dynamics and regulatory changes, as well as managing the safety, well-being, and productivity of their staff. Talent strategy will need to change too. 

Our team in India spoke with supply chain leaders from both essential and non-essential goods and services corporations to reflect on their experiences so far and share thoughts on the short- to medium-term supply chain strategies in the wake of the ongoing pandemic. We summarize the key findings as 3Ps: processes and systems; policy and regulatory challenges; and people.

1. Processes and systems: innovation in operating models
As factories and warehouses have optimized inventory carrying capacity, there is limited raw material and packaging material to address the increase in demand for essential goods. On the other hand, non-essential manufacturers have seen a rapid decline in demand, resulting in a surplus of finished goods inventory and a need for a plan to offload the excess inventory once the lock-down is lifted. In response, supply chain leaders are reviewing their operations in the following areas: 

Shorter and more agile demand planning. To plan for a rise in demand, supply chain leaders have adopted dynamic planning strategies that result in reduced cycle times. They are speaking frequently to customers, ascertaining the accuracy of information about demand firsthand and recalibrating inventory levels.
Fast tracking technology programs. Business continuity plans are being pressure-tested and continuously monitored. In addition, there is a push toward organization-wide programs that promote people-light organizations that impact real estate requirements, robotic process automation and faster adoption of Industry 4.0 standards at factories.
Revisiting sourcing strategies. Sources are now being evaluated not only for vendor performance, but also on factors related to geopolitical and social risks. In addition, several Indian manufacturing organizations are being considered as viable alternatives to Chinese counterparts and these organizations are working on building their supply chain capability to address a potential surge in global demand.  
Emergence of 4PL services. Select organizations have begun strategic procurement initiatives by engaging 4PL (fourth-party logistics) service providers and have seen early benefits in key metrics such as availability, quality and reliability for these services. In transportation and logistics, there is a sense of dependability on service providers that own their fleets as compared to new age, asset-light transportation service providers.
2. Policy and regulatory challenges: closer collaboration in the ecosystem 
While India’s government is allowing for the supply of essential goods and services, there continues to be on-the-ground execution and regulatory challenges in relation to raw material supply, availability of transportation and labor, police e-passes and local permissions for operating factories and warehouses in districts that are worst affected. These include: 
Conflicting messages from the center and state. While essential goods and services have been allowed to operate as per the mandate from the central government, states and districts have overriding powers when it comes to movement of labor and decisions related to operating factories in afflicted zones. This continues to be a challenge for supply chain leaders and area/district managers continue to lobby and have dialogue with district magistrates and local political party workers.  
Industry associations and their influence. Industries like pharmaceuticals that fall under essential products have been working with industry associations like IPA and OPPI to help educate policy makers around key roadblocks in the supply chain that prevent regular supply in the market. Efforts are underway to begin port operations, e-approvals for clearances, faster processing of authorized passes, and mobilizing workforce inter- and intra-state.
3. People: a changed model for people and talent strategy
Availability of specialized workforce in India has always been a challenge, and that, coupled with limited mobility across districts due to isolation protocols, is proving to be a significant area of distress for supply chain organizations. Warehouse hubs like Bhiwandi in Western India have entered a “red zone” as per isolation protocols, which is affecting the supply of essential products to both urban and rural markets. Organizations have embraced the following tactics in response: 
Modeling factory operations after social distancing norms. Training for managers with audits on process flows that use videos, regular screening of trucks and drivers, temperature scanning at points of entry, maintaining appropriate distance between workstations are some of the practices being followed.
Services and incentives to workforce. Organizations producing and delivering essential goods are incentivizing their workforce by providing monetary benefits such as hardship allowances. Several companies are creating a safe workplace environment by providing increased bus transport, guest-house facilities, usage of the government “Aarogya Setu” app for tracking and traceability, round-the-clock canteen facilities, take-away meals and regular vital checkups with hospital collaborations. 
Building a talent pipeline. Well-capitalized organizations have started building talent bench strength and are recruiting across levels to take advantage of increased market demand when the lockdown ends and the economic recovery starts.
It was clear from these conversations that innovation is at the forefront in looking ahead, both to deal with the ongoing challenges and to embrace opportunity, whether this is making changes to operating models, navigating the regulatory landscape, nurturing collaboration in the ecosystem, or managing the well-being and effectiveness of the workforce. The impact of the COVID-19 crisis is still unfolding, but smart leaders are also looking at the longer-term horizon, effecting changes in a changed world.  

We extend our gratitude to the leaders who have shared their perspectives with us as they, along with their teams and colleagues, are navigating an extremely challenging situation.