AUTOMOTIVE SOURCING AND SUPPLY CHAIN IN POST COVID WORLD

“Even in the pre-COVID era, digitization was considered as the best way to transform businesses, now more than ever, companies are leveraging technology in sourcing and supply chain to manage unpredictability of demand”“Even in the pre-COVID era, digitization was considered as the best way to transform businesses, now more than ever, companies are leveraging technology in sourcing and supply chain to manage unpredictability of demand”

On 16th July 2020, Commercial Vehicle Forum (CVF) team conducted a live panel discussion on “Automotive Sourcing and Supply chain in the post COVID world” from 1630hrs – 1730 hrs. The session witnessed a total registration of around 1,000 attendees with a comprehensive mix of individuals from sourcing and supply chain functions across OEMs, Tier 1 Suppliers, MSMEs and consultants.

This session was made possible by the support of Eberspaecher Sharda Exhaust Technology and the Belmaks Group. It included noted speakers such as Mr. Vivek Agarwal – VP and Head of Sourcing and Supply Chain, Ashok Leyland; Mr Pradeep Mishra – SVP Purchasing & Supply Chain, VECV; Mr. Pritiman Panigrahi – GM Purchase at CNH Industrial; Mr. LP Sharma – Sourcing and Supply Chain Expert and Mr. Sanjay Shridhar – Director Sourcing, Yantralive.

Moderating the discussion, Mr. Vinay Piparsania – Consulting Director at Counterpoint Research, touched upon the unprecedented times CV industry is facing owing to the global pandemic and how each leader in their respective fields are realigning their communication, leadership and management style. Speakers also mentioned with positive frame of mind that this time is also an opportunity to redesign and re-align thought process. Speakers were in agreement that entire gamut of the supply chain segment is going to be deconstructed and rebuilt again.

Commenting upon the current situation, Mr. Mishra shared that supply chain is going through massive transformation. With recent disruptions in CV industry in the form of BSVI norms, GVW norms, NBFC crisis and then eventually COVID, industry is facing tough times. The entire market went down by 40% in past years and now assessing and identifying right level of demand has become a challenge but is imperative for purchase function. VECV was ready with new products from 1st April with gradual ramp up of product lines, however that had to be postponed owing to COVID. It has been struggling times since then for any supply chain professional as they need to adjust to new norms of working on a real times basis. For demand planning new concepts are emerging such as adaptive planning – where planning is done on the basis of prediction of anticipated demand from a particular zone like in e-commerce space. Such ways of working shall re-tool the supply chain professionals in the coming time.

He further added that, gone are the days of 2 – 3 months of planning. Supply chain now has to be agile. Supply chain needs to be in sync with real time demand basis prediction within the narrow window. Also, customer differences shall become more granular in nature and  players shall have to transform to online sales wherein everything can be customised and chosen by customers. Customers have also become more modern and educated on this front. In his opinion, this time is an opportunity, as it brings forth newer systems and processes and everyone has to think beyond the box.

Mr. Panigrahi shared that after COVID people are wanting to come back to normal. With auto contributing ~7% of the GDP, green shoots have already started to emerge. Tractors are doing higher numbers which are up by 20% when compared to June, 2019. Moreover, monsoon forecast is positive and government impetus is there for the rural economy. All these factors shall contribute positively to demand.

Further he shared, that on supply side there are some challenges, labour has gone back home, micro level lockdowns are also creating a problem for auto component suppliers. In such a scenario focus must be on communicating appropriately with suppliers. OEMs should take the responsibility to communicate the demand clearly to enable the component players to structure their operations appropriately within the supply chain.

Mr. Shridhar mentioned that technology and communication has been a major change in the last few months. These two factors are being explored in greater detail by all the OEMs. He added that traction is coming from rural demand side, however it needs to flow Pan India.  Thought of OEMs so far has always been focused on product positioning, customer acquisition etc. With COIVD, this has to be inward looking in the form of focusing on internal processes. On the MSME side, he added that the challenges MSME faced in the beginning of COVID era still persist despite government package. He mentioned predictive demand is going to be very important going forward for all MSMEs, OEMs and their business partners. He further added that within these three partners if communication is not leveraged, then OEMs will have to adjust their aspirations and for communication, technology is going to play  an important role.

Dr. LP Sharma shared his thoughts on the impact of supply chain dependence on China. He mentioned that not procuring from China may not happen in the near future as they have huge capacities. Also, it shall take time to build similar capacities and capabilities in India. Moreover, it will require immense government support and willingness of OEMs to absorb higher cost in the short term. He also mentioned that long term alternative options to China can be developed, however, within a time frame of 1 to 3 years.

On the China question, Mr. Agarwal stated that we need to analyse the parts and the value that are being sourced from China. His assessment is that parts which are being imported from China directly or are coming to Tier 1/2 component players, value wise it would not be more than 10%. To meet BSVI norms everyone is importing from other countries as well. He mentioned that if we evaluate the scenario 10 years back, commodity driven parts were being imported from China and over the last few years India has also built its own capacities which are underutilised in COVID times. So in the near term there are enough capacities. China has got the scale due to domestic consumption and global demand, to enable Indian manufactures to build such capacities demand has to be there and a support from government is important as Chinese auto part makers also got an unprecedented support from its government.

Attendees of the live webinar also shared their point of view enthusiastically through multiple online polls. The poll questions shed light on level of sourcing shift from China and the time the industry would take to get back to normal. Participants were optimistic for the future and  felt that the timeframe of 6-12 months will see a return to normalcy and also felt that sourcing from China shall reduce from 80% at a global level to 50-70% in the near future.

The session was unanimously hailed as a masterclass by the attendees. In fact, some of the participants called the speaker group “a 5-star rated faculty on sourcing and supply chain”.

In case you missed the live session, you can view a recording of the session by clicking here. And to view our post webinar report you can click here. If you want to be a part of our next session, please feel free to get in touch with Mr. Raghav Shankar on +91 9599881027 or email him on [email protected]