'It's time for businesses to relook at supply-chain operations to consider resultant risks arising from disruptions'
India can use its seasoned IT service providers to take up new and exciting roles to provide tech-led procurement services, according to Singapore-based business leader Girija Pande.
Improving logistics, sourcing and procurement are major focus areas of the Indian government and third-party logistics is expected to grow 8 per cent CAGR (compound annual growth rate) during 2021-25, Pande told PTI on Sunday.
Highlighting some trends in the sector, he said, ''Resilience and sustainability of supply chains is a matter that is engaging urgent attention of political and business leaders in all major economies.'' ''The supply chain industry is transforming by diversifying supply sources, going beyond China, until now a clear choice of most as a manufacturing hub of the world,'' Pande said adding ''this is an opportunity for India and other countries as the next potential source of supply.'' Three major global trends impact global supply chains today, Pande, Chairman of Apex Avalon Consulting in Singapore, pointed out. These include the impact of pandemic, impact of geopolitical rivalry playing out between China and the US and increasing impact of climate change, he explained. The global push for all round sustainability is clearly enshrined under three popular ESG goals: environment, social and governance themes, he said.
These trends will force businesses to take a harder look as to how companies organise themselves to effectively source and procure their supplies, specifically, select suppliers who will survive this coming disruption to future proof their supply chain to become resilient and sustainable, he observed. ''This in turn requires a very different approach to organising a company’s sourcing and procurement organisations,'' suggested Pande, who was earlier the President of Tata Communications Services for Asia Pacific.
Currently, he said, many global and regional companies tend to favour large, centralised procurement functions which can be better monitored as well as provide business with cost efficiencies involved in company-wide purchasing. Many have regional procurement hubs that source from varied regional suppliers with whom they have built long-term relationships, observed Pande, noting that the major concern in the industry is around lowering costs while maintaining standards and reliability. ''In the world of ‘just in time’ inventory, this has worked well.'' However, in the new world impacted by scourge of geopolitics, pandemic and sustainability, the procurement and logistics will become very difficult to manage. He said, ''Instead of just in time, very often it may become just in case!” Pande elaborated with questions. ''Are the in-house procurement organisations ‘fit for purpose’ in a future world with these triple supply chain challenges? Can we envisage specialised companies or vendors that are solely tasked with successfully navigating such changed environments? These specialised entities will then handle procurement functions for many organisations using specialised skills, scalable processes and state-of-the-art tech platforms to improve transparency in procurement: See better, buy better!'' The task of the procurement function within large organisations will then be of a much higher order of supervising these specialised buying entities, holding them to set metrics rather than handling both short-term procurement operations and trying to create a resilient and sustainable supplier base for their organisations. ''In the new world, this may be the way forward,'' Pande pointed out. The tasks that these specialised procurement vendors will focus on will be four-fold: using their preferred bulk buying position to drive price-effectiveness across multiple companies, leverage diversified supplier base, providing digitalisation platform as a service, embedding ESG framework as part of procurement services, the veteran business consultant said.
Increasingly, such specialised vendors are becoming more prominent. Some are being carved out of existing procurement organisations, for instance, said Pande, citing the example of Chain IQ in Zurich a spinoff of UBS Bank which decided to outsource its procurement and sourcing functions by creating a neutral entity. In some cases, large IT/business process outsourcing (BPO) vendors such as IBM and Accenture have taken on this task in addition to their existing services; or, as in the case of Indian procurement vendors like GEP and WNS Holdings, tech-focused companies setup by procurement specialists, he said. Indian tech giant WNS is among heavyweights with solutions in the global market. Many of these entities provide some or all the above tasks and many have, often, in-sourced procurement staff from customers in a BPO deal that benefit both, according to Pande's observation.
Pande suggested, ''It’s time for businesses to comprehensively re-look at their supply chain operations to consider resultant risks arising from triple disruptions that lie ahead. The winners will be those that take heed and restructure early.'' PTI GS MKJ MKJ
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