Reinventing Supply Chains to Benefit from Vocal for Local

September 30, 2020by Faber Infinite

With the pandemic hitting the economies across the world, people are trying to adjust to the new normal. Due to lockdown and closed country borders, businesses are still struggling the most with the supply chain disruption. The fact that the virus originated from China which is referred to as – Factory of the World, has only aggravated the damage from an economic point of view with a considerable percentage of supply chains stumbling in shock and deteriorating with each passing day.

As per a survey conducted by a global institute for supply chain management, 75% of the organisations reported supply chain issues in some of the other forms due to COVID-related transportation restrictions. Another learning from the survey shows that more than 50% of the organizations had no contingency plan in case of supply chain issues leading back to China. Over 50% of the organizations also mentioned about the delays in orders a problem because of the supply chain collapse from China.

While people are comparing this current situation to the Spanish flu situation of 1918, but there are several differences between the trade practices post World War I and the world that we live in today. To quote an example, when the SARS virus hit the world, China contributed only 4% of the world GDP and today it is 17-19% of the world GDP. The economic conditions and equations are completely different.

Supply Chain Management for Manufacturing

Manufacturing is a very complex process today. The components and sub-components that make a product are sourced from different parts of the world. The raw material required to make these components come from different countries and continents. The finished goods are then sent all over the world. This huge dependency on transport and logistics makes import and export very difficult with the current disturbance in the supply chains. 

For example, India imports more than half of the APIs from China. With the government policies and restrictions along with the logistic issues due to COVID-19, Indian pharma organizations are challenged to meet the export numbers. Also, India being the largest supplier of generic drugs across the world, this could cause a worldwide shortage.

With global integration, economies across the world are dependent on low-cost production geographies like China, Vietnam, Taiwan, and many more. With the pandemic originating from China and spreading to other countries across the world, the need for diversification has become more evident than ever.

After manufacturing and procurement, even distribution has its own set of challenges. With the lockdowns and the curfews, there are situations where there is a demand for essential products, big challenges in the luxury items segments thus affecting the retailers.

To overcome this struggle, many organisations came forward and started manufacturing and supplying the essential goods that used to be imported from other countries, to avoid any interruption in the supply chain. For example, India used to import all the PPE kits. But because it could not import any further and it falls under essential goods, India started to manufacture it on its own and now India exports the same!

Recently there has been a lot of focus on self-reliance and being ‘Vocal for Local’ for having extremely robust and responsive supply chains. To be self-reliant, responsive supply chains and operational excellence are two sides of the coin, and below are the 3As: Availability, Affordability, and Adaptability to build a robust ecosystem.

1. Availability

To become a self-reliant ecosystem, one needs to focus more on the availability of goods that have need and demand in the market. To make that happen, manufacturers will have to strengthen two parameters:

  • Research and Development (R&D)
  • Last Mile Reach

For building a self-reliant ecosystem, manufacturers should research about products that they want to offer as a substitute for foreign brands. Only thorough research and highlighting the key features will attract the customers to use the local brands more than foreign brands.

Along with R&D, organisations also need to make the products accessible even at remote places for the people to use the local brands across the country. If the availability of the products is not ensured until the last mile, customers will have no other option than to use foreign brands.

Hence, the supply chain needs to be strong enough to make this happen.

2. Affordability

The costs of the substitutes should be affordable and the total cost of ownership (TCO) should be not higher than the imported goods. If its higher, than the customer, is going to buy the imported ones. How can we optimise the cost to make it equivalent to the imported products?

Research says that the production cost in India is 10% to 12% higher as compared to South East Asia. Also, apart from that, the inefficiencies in the supply chain, losses such as productivity, damages, poor infrastructure, etc.  are added to the selling price. To avoid all these extra expenses, organisations need to incorporate operational excellence throughout the supply chain. This will help organisations cut unnecessary expenses and losses and thus deliver the goods at the right prices.

3. Adaptability

To become a self-reliant ecosystem, one needs to be agile and deliver goods and services at the expected quality levels.

Organizations need to gear up and adapt to the futuristic thought process to deliver goods on time as per the demand. Organizations need to start looking at the bigger picture if they want to become part of a self-reliant and competitive ecosystem and deliver the best quality products at the right time.

If these 3A’s are incorporated in the operations, there is nothing that can hold us back to become a successful self-reliant, and robust ecosystem. Let us all work together and make supply chains leaner and competitive by implementing the Operational Excellence framework by Faber Infinite and get set to become a world leader.

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by Faber Infinite

Faber Infinite is an International Business Management Consulting Organization offering consulting solutions and services for Increase Profitability in Business.

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