Covid-19 has caused massive disruptions in global supply chains. Restrictions on mobility, port congestion and delayed shipments have been made worse by a worldwide shortage of shipping containers. On the other hand, consumer demand has grown exponentially, leading to acute inventory management challenges. As a result, companies have had to change their warehouse management models to incorporate resilience together with flexibility. This can involve anything from tweaking operational practices to entirely upending the business model. This paper offers insights from a few innovative examples from the Indian context.
Asian Paints eliminating the need for warehouses in Tier II and Tier III cities
Mahindra Logistics and its flexible approach
The rise of third-party services…
Digitisation will remain key…
…automation is the future for warehouse operations
For an illustration of flexibility and adaptability, the Asian Paints example stands out prominently. The shift to work-from-home prompted many people to spruce up their homes, causing the demand for paint, among other things, to surge. With many of its warehouses located in containment zones, Asian Paints quickly shifted to a new delivery model, directly supplying orders from its factory and virtually eliminating the need for warehouses. Shopkeepers started to receive shipments quicker and in larger volumes. According to Forbes, Asian Paint’s revenues jumped by 144% in April-June 2020, and by 36% in the subsequent quarter.
Most organisations will – at least for now – continue to rely on warehouses but many are streamlining their processes. The first big push in this direction came from the implementation of GST in 2017, which eliminated the taxation anomalies that necessitated separate warehouses in each state. As a result, companies began to merge their warehouses – or to turn to third-party solutions providers. Faced with surging demand during the pandemic’s first wave, one such service provider, Mahindra Logistics, began converting unused spaces into warehouses. Also known as pop-up warehouses, this simple change in warehouse space-management spurred a 36% increase in its top-line in the third quarter of FY21.
In early 2019, online furniture retailer Pepperfry revamped its warehouse management processes, creating four main hubs in Jodhpur, Delhi, Mumbai and Bengaluru. Each holds inventory for a defined region and ships products to small distribution centres in line with demand. This has helped the company to fulfil short-duration orders, making it one of India’s more profitable businesses since the pandemic hit. Recently, it went further, partnering with a third-party service provider, which will manage operations at its largest warehouses, helping it to fill omnichannel orders faster.
Back in 2017, beauty and personal care e-Retailer Nykaa digitised its entire supply chain, deploying software to streamline inventory, warehousing-management and omnichannel supply lines. Digitisation has strengthened the coordination between its multiple warehouses, allowing for quick and seamless order processing. In fact, ‘digital warehouses’ are fast becoming the norm, saving cost and reducing the dependence on labour. Britannia, too, is rapidly digitising its 50 warehouses to improve inventory optimisation and bring down operational costs.
According to the Warehousing Vision Study conducted by ZEBRA Technologies, out of 1403 participant companies, 61% plan on partially introducing automation for warehouse management while 27% plan to fully automate their warehouse management systems by 2024. The study highlights that 20% of the organisations are considering robotics for warehouse operations while 7% have already started using robotics for automation systems in 2021. Some companies, recognising the importance of automation, have been acquiring robotics companies.
In January 2022, Reliance Retail acquired a 54% stake in robotics firm Addverb Technologies, which provides warehouse and factory automation products powered by robotics, AI, machine learning and IoT. The strategic partnership will enable the company to set up a manufacturing facility which will have the capacity to produce 50,000 robots every year for clients like Reliance, Flipkart, HUL, Asian Paints and Coca-Cola.
Warehouses are the backbone of any supply chain process
To achieve true supply-chain resilience, each link of the chain must be agile enough to respond to shifting demand and supply conditions, and in short order. Warehousing is a particularly important link, functioning both as a storage space as well as a distribution centre. Companies are aiming to make warehouses responsive, resilient and reliable to accommodate the ever-growing e-commerce market. The future of supply chains will depend on real-time data exchanges and how well companies implement automation in their warehouse management systems. Companies which make early investments in these solutions will reap the benefits in the long term.
In a post-Covid world marked by a slowing global economy, rapid technological disruption and a volatile and complex business environment, enabling growth has become harder than ever. In turn, this makes the CFO’s role into that of a strategic business partner, capable of guiding the organisation to fully realise its growth plans. Ajay Aggarwal, Executive Director and Chief Financial Officer at Cyient, play a multi-faceted role – one that includes responsibility for driving business growth, improving business processes, mitigating risks, interacting with investors and grooming future talent.
For the CFO, the significance of day-to-day ‘Finance’ work is diminishing relative to new demands around business leadership. Apart from a basic technical/accounting background, the key skills and competencies today’s CFO must possess rest on four fundamental pillars: leadership, operations, controls and strategy. Sumendra Jain, CFO (India & Asia Pacific) at SMS India, believes that for Finance leaders to be effective business partners, they must have the necessary leadership and communication skills. Additionally, to be able to offer an independent perspective, they must possess a strong understanding of the company's business model and industry. CFOs should also be able to identify opportunities for top-line growth, manage downside risks and drive profit improvement, not just through the traditional methods of cost-control, but using new methods like product line/regional profitability analysis and benchmarking against industry players. Sumendra’s 25-year-long career offers insightful lessons and learning for executives in general and CFOs in specific.
India’s foreign policy choices have become significantly complicated with the Russian invasion of Ukraine. Apart from the immediate threat to world peace, the significance of China borrowing from the Russian template to fuel its own expansionist plans is lost on no one. For India, the choices are not easy, given its legacy of military dependence on Moscow, an ‘incomplete’ relationship with the US and the rise of an aggressive China at its doorstep. To seek a view on these issues, we hosted Jayadeva Ranade, former Member and Additional Secretary, National Security Advisory Board, and President of the Centre for China Analysis and Strategy, at a recent India CEO Forum session.
With growth opportunities abounding, companies are boldly looking at transformational deals to build scale and new capabilities. M&A activity in India is near an all-time high. Significantly, this wave is being led by first-time buyers, who accounted for over 80% of all deals closed in 2020 and 2021. However, there are continuing uncertainties around tax and regulatory issues arising from M&A. To optimise their M&A strategy, it is critical for CFOs to take stock of the evolving deal landscape and understand the tax and regulatory implications. At a recent session of the India CFO Forum, Pranav Sayta, Partner and National Leader of the International Tax and Transaction Services practice at EY India, presented an update on these issues.
In a break from the past, Indian politics is seeing continued stability at both the Central and the state level. The BJP won four out of five recent state elections, which has helped it consolidate its pole position in national politics. It has also set the course for the run-up to the next general elections in 2024 and will have implications for policymaking in both the immediate-term and the medium-term. At a recent session of the India CEO Forum, R Jagannathan, Editorial Director of Swarajya, an independent magazine, shared his outlook for Indian politics and policymaking in the long lead-up to 2024.
While there is little doubt that India’s GST regime has brought benefits, there are continuing challenges around implementation and compliance. These relate to e-invoicing, input tax credit, treatment of free samples and other such nitty-gritties. In the last five years, there have been some 830 modifications to the GST rules, and over 200 circulars have been issued. This makes it extremely challenging to keep track of changes. The government has proven responsive in terms of finding solutions and providing the necessary support to industry. However, a large number of legal/interpretational issues are unresolved, including the lack of a GST Appellate Tribunal, which makes it hard to resolve disputes without litigating. At a recent session of the India CFO Forum, Sandeep Chilana, Managing Partner at Chilana and Chilana Law Offices, reviewed the current GST regime and the top GST-related challenges facing CFOs today.