Budget 2021 should have some key policy changes encouraging the unorganized sector to move towards the organized sector: Global Director, Supply Chain Shared Services, The Kraft Heinz Company | CPO INNOVATION
Viraj Mehta, Global Director, Supply Chain Shared Services, The Kraft Heinz Company is an experienced supply chain expert with a demonstrated history of working in the consumer goods and food & beverages industry. He is a strong business development professional skilled in Continuous Improvement, Transformation Acceleration, End to End Planning Synchronisation, Warehouse Operations, Management, Logistics Management, Purchasing, and Manufacturing.
In an exclusive conversation with CPO Innovation, Viraj Mehta shares his views on how supply chain navigated through the current global crisis and what lessons the industry learnt from this pandemic. He also shares his expectations from the upcoming union budget 2021-22 for F&B and supply chain industry.
Here are the excerpts of the interview.
CPO Innovation: What are the lessons learnt from one of the toughest years for the supply chain industry?
Viraj Mehta: 2020 proved to be the VUCA year which supply chain experts have been warning about since the last couple of decades and pushing to design supply chain around it. For the uninitiated, VUCA stands for :
Key learnings for the entire industry are – the necessity of an organization-wide “Agile Supply Chain Strategy” and a strong Business Continuity Plan (BCP) to counter the VUCA scenarios that might impact the overall business strategy.
In 2020, we have witnessed the speed and agility of many organizations that rose up to the challenge very quickly and redesigned their supply chains to meet the consumer demand and therefore beating their own growth targets for 2020. Similarly, we also witnessed several organizations of the same sector scaling down their operations either temporarily or permanently as their supply chain model was not designed to change at such short notice.
While the growth indicator of India is showing strong signs of revival, the situation is still unstable for global supply chains which will have a certain degree of impact on Indian markets. Therefore, there is still a window of opportunity for most organizations to rethink their supply chain strategy and introduce the culture of defining how their business would respond to any such VUCA scenarios in the near to medium term.
Personally, I am a firm believer of conducting live-fire drills of BCP to ensure that my organization’s supply chain is ready to serve irrespective of any VUCA scenario. We started conducting remote management drills in January and also reached out to alternate suppliers well in advance in case of any supply disruptions. This helped us to identify any potential risks in case of any adverse situation. By the time the crisis started, we had closed 100% of the gaps in serving business and were able to respond effectively. I call these fire drills as “Supply Chain Stress Test”.
To summarize, companies with robust BCP or agile supply chain were able to respond much faster to the change in business environment compared to companies without BCP.
CPO Innovation: What are the opportunities in supply chain ahead?
Viraj Mehta: 2020 has taught companies that crisis can happen in the most unexpected ways. Following are the opportunities for supply chain ahead:
CPO Innovation: What’s your estimate of business and job losses in Food & Beverages industry over the last year?
Viraj Mehta: 2020 was a very challenging and mixed emotions year for F&B Industry.
Overall, Food & Beverages industry is one of the sectors which did well in terms of financial performance in 2020. Packaged Foods and QSR companies which were agile to ramp up their production during lockdowns and connected stocks to customers in time saw huge spike in demand and outperformed their growth projections.
Several QSR food chains reacted quickly and scaled-down their real estate presence into malls and restaurants. This helped them to save operational costs which were invested into opening several cloud kitchens and delivery infrastructure. Net, lower operating expenses and cost of service and higher reach leading to higher sales.
Several big FMCG companies have also entered into direct delivery models as an experiment. For example, it is already in the public domain that Kraft Heinz launched its first-ever direct-to-consumer service in UK at a small scale which received extremely positive feedback and opened the door for many such future initiatives.
However, the service sector of F&B Industry has been hit severely which includes Hotels, Restaurants, Malls, Event Management companies and associated vendors in the Tourism of F&B industry to name a few. Service sector of F&B Industry is the worst hit in terms of both businesses as well as job losses. While there are several unverified numbers floating around in media with regards to job losses in F&B Service sector, as per discussion with Restaurant Association Members in my network, overall jobs have shrunk by 20-35% depending upon the structure of the organization whether the business is in locations affected by tourism, or whether is only dine-in, or only delivery or both.
CPO Innovation: What areas will lead the revival?
Viraj Mehta: Personally, I am bullish on all major sectors for revival of the Indian Economy. However, I would like to list down top 3 sectors that will be ahead in the revival curve.
Agriculture and Food Processing Industries:
Manufacturing (FMCG, Defence, Electronics, Infrastructure, Automobiles):
Services Sector:
CPO Innovation: What is your expectation from the upcoming budget for F&B and supply chain industry?
Viraj Mehta: For F&B Service Sector:
The biggest challenge in providing relief to the service sector for F&B Industry is that it is largely an unorganized sector. A lot of small to medium scale restaurants are below the radar and it is extremely difficult to estimate how many employees are impacted. F&B sector is enormous for India and it is high time that there are big reforms to modernize this sector.
I see this as a major problem in executing any major reform for F&B Service sector or providing relief to the right person who is impacted. Just for perspective, there are 7 million restaurants in the organized category and 23 million restaurants in the unorganized sector and this would impact the quality of any reform change or relief provided to the sector.
So following the right process, the upcoming budget should have some key policy changes encouraging the unorganized sector to move towards the organized sector by providing tax exemption for limited duration or any such incentive that would help in meeting the goal. This will serve two purposes :
For Supply Chain Industry:
A lot of reforms are happening in Supply Chain Industry at present and there is excitement in the industry in terms of manufacturing expansion and food processing sector expansion, focus should be on how do we further expedite these reforms and simplify the processes.
Disclaimer: The views and opinions expressed are personal and do not reflect the views of the organization.