Covid19 and its disruption on Supply chain

Covid19 has changed the top selling SKU's for the market.

It was early December and I got a call from a client in Australia asking if N95 masks were available in India. This was the first time I heard of this variant of mask even though my company OfficeSmart has sold everything from paper fans to foosball table. OfficeSmart a end to end sourcing management company and expect for the exception of the following products : alcohol, prescription drugs (we sell OTC drugs), 20litre water can (we do other bottled water), manpower and packet milk (we sell UHT milk instead). As I researched on this particular mask variant I realised in India there are only two company's that manufacture it. One being Venus and another called magnus. (the former has better packaging and a fancier website). Apart from these two companies 3M used to import and sell their N95 variant in India. I called up a 3M stockist and enquired with him and he said he was due for a consignment of 40k N95 masks and it might take ten days more. The same was confirmed by the 3M representative. I dropped the enquiry with a negative reply and fortunately for Australia the bush fires subsided.

Mid Jan I get another enquiry from a client who have office all over South East Asia asking for the same mask. Again I dialled the 3M stockist and got a reply he's three to four days away from receiving the stock and wasn't sure. Later in the day the 3M representative informed me that the entire stock was being re diverted to China. I offered the other two brands to my client and since they were not aware of the brand I got a negative for the same. This was when Covid 19 had just about started stage 3 in China. The client asked for 10 million surgical masks as they wanted all their users be provided with a free surgical mask as this was more inexpensive and it cost almost nothin in India. To break down the product cost of surgical mask one must understand the two raw materials required to make them. 1. Polypropelene roll . 2. Elastic. Polypropelene is a petroleum product which is manufactured as an by product. In India this market the key raw ingredient is controlled by Reliance Industries (I won't be surprised if RIL posts maximum profits for this quarter as oil price is in an all time low and the cost of pp has remained the same until covid19). So coming back to the cost of making a surgical mask I broke it down to labour, investment cost, PP cost, elastic cost, logistics cost and other fixed overheads and penned the number to 0.6paise per unit. I called up a couple of manufacturers of surgical mask by then they had received huge orders from China at an unprecedented rate. Masks were being exported to China and SEA at as high as 8Rs a unit. I was really surprised as surgical masks is a regular SKU for us as clients provide it to housekeeping staff during during. We used to buy a couple of thousand every now and then and also had donated over a lakh surgical masks collectively with our clients to flood hit areas of Chennai and Kerala along with tons of bleech during the cleanup process. Average cost we would pick at a wholesale point used to vary from .8paise to 1rs. I was shocked to know that the manufacturing hub of this product in south India (Chennai) was jam packed with orders and manufacturers were not accepting orders for the next 10 days! I gave up hopes of sourcing from cheap from the manufacturer and reached out to wholesalers in Bangalore. This was the beginning of the rush for masks. We managed to source a lakh or so and the government announces a complete blanket ban for any type of masks. During which I had heard wholesalers quote .80 paise for a mask at a 1 million volume to suddenly change their quote to 4 rs when they rang their buddies or cousins who are in similar business as them. I dropped the enquiry from the client as I realised if I provide a fixed cost to my client I will end up burning my hands as the price was very volatile. I opted to keep our brand name untarnished with the client over accepting the order at a particular price and then not honoring the same. Then there was a sudden rush of retailers who were asking around for masks everywhere. The price shot up everywhere to 8rs on a wholesale level before we could blink an eye. I mailed the client back stating the ban as a reason that we will not be able to service the order. Some smart Admin managers during that time reached out early to us and sourced the same at a very reasonable cost as we had a stockpile while we were trying to source for export. Later, during first week of March the masks cost hovered to 18Rs at the wholesale level and 25- 30 at a retail level. N95 stock was equivalent its weight in gold with the product being sold at 6 times of its MRP to 500rs. The price of both N95 and surgical mask have now been lowered due to stockpilers fearing govt crackdown and raids by legal metrology department on medical shops all over India. Even now a medical shop has an average 3 walk in every 5 min asking for a mask and they now give a negative if it is a chain store or sell it at lowered cost if it is a family owned store. Thus a product which was nowhere a top selling SKU suddenly had become every ones top SKU. A lot of our vendors strayed away from being a stationery supplier, gifting supplier to being a mask supplier and I spoke to a vendor who was nowhere connected with masks sales before to now having sold over 50lakh units in ten days! The price is just as the stock market and thanks to the governments efforts its crashing as I type this.

Sanitiser

This product was a regular product in our personal hygiene category for a long time but we never had sold much but for a few companies who always insisted on this being part of the reception. The consumption of which on a monthly basis was abysmally low even though there were a minimum 100 employees in such office. We happened to have a few clients who placed orders late February when the Admin was updated of the first Covid19 case in India. We too predicted we would get a lot of enquiries and we placed orders for about 8 cases so that we can satisfy all over client. (we would've ordered more but for Yesbank's Moratorium that affected our capital). This 8 cases of 24 each has lasted for over 20 clients since two days after we received our stocks the market blew up on this. We had clients who were not our regular clients anymore and asking us for stock. Bad paymasters clients clearing old dues and paying advance and collecting the stocks. New clients who heard of us from our existing clients and reached out to us and signed up as our clients because we helped them out in the time on need. All this while we were selling this product under discount when a Rs 350 bottle of Himalaya sanitiser was being sold in bulk for twice its MRP. I also made it a point to provide our regular clients, friends, family and employees with a free bottle of sanitizer and a pack of mask. We have advanced for 35 cases of sanitiser to help us weather the storm but we are awaiting for stocks and we have reached nil stock inspite of rationing out our stock. We insisted we sell known brands only and brands that carry MRP. Both of which is missing in the Mask SKU.

Thermal Guns

I honestly did not know such a product existed. Again a smart Admin of a company reached out to us and informed us that he needed help in sourcing three thermal gun. Google my guru showed me a list of products on amazon, flipkart. This was early March. These three sites were still showing discount and we managed to reach out to a few stockist some of whom by now answered the call without a hello and went straight to the point saying "bhaiyya thermal guns nahi hai (brother we dont have any thermal guns). We picked 3 at a cost way below MRP and provided our client with deep discount and supplied the same. Next two days we received atleast a hundred and the previous supplier was bone dry by now. We had clients who were ready to pay an advance and most of them new clients. The cost has now shot up to 7000rs per unit. Most of the guns not having an MRP on it which explains the sudden spike in price. We decided that we will be transparent with our clients on this and exposed our clients to the spike in price by declaring our input price and we showed that we were adding only a small markup on the same. The last 6 days days we sold an average of ten guns a day at different price levels and all the while maintaining the goodwill of our clients because of the transparency in which we have handled the price hike. Charging a markup for sourcing as a service is much better than exploiting the clients urgency and need and adding exorbitant markups on a critical product. ( this product is not declared as an essential commodity at this point which is why there is a free jump in price) . A non discrepant product which was used by foundry's and kitchens is now being used to figure out if a person is fit to enter a workplace or not.

The price jump of these three commodities is just a beginning. I predict the cost of commodities like rice, daal, atta, oil taking a jump as the virus progresses ( I pray on a daily basis for this not to happen for the wellbeing of my staff, clients and other small business). People will be stocking up for a month atleast and honestly there is no stock for everyone and there will be a sudden dip in stocks. Replenishments of products is going to take a couple of weeks atleast. Which is why we have come up with a work from home grocery pack which contains all the articles required to sustain for a person, family of two or a family of four for a month. We are not doing this end users as we do not have the logistics required to handle random area single kit request as we intent to bulk buy and work on a deeply discounted model for enterprises to take care of them employees. America and Australia witnessed an acute shortage of toilet rolls and it's now a meme running. But think of how many such essentials will be out of stock there and no one has publicised it as it was not funny but sad. As I pray that this virus vanishes as quickly as it came I urge everyone to stock up or order in as even stepping out to the supermarket is exposing one self to contamination. I would not term this as panic buying but Smart buying as you have planned a purchase for a month if not for a week. For those who don't know how to plan purchase and pick up obscene stock of a random product please ask the person who runs the purchase in the house and pick the quantity online.

For now. Hope and sing the full song . Carona go go go away.