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 :
- V – Volatility
- U – Uncertainty
- C – Complexity
- A – Ambiguity
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:
- Diversify Offshore Supply Chain for Finished Products: It has become imperative to have more than one source of supply for your products. Many organizations have learned this the hard way in 2020 when 100% of their supply was stopped for few months leading to stockout and consumer retention challenges.
- Agile Supply Chain for Raw/Pack: Quick and planned reaction to supply disruption. This can be achieved by developing a backup ecosystem of vendors who can scale up at short notice at the same or marginal cost increase. This will reduce risk on the overall business strategy.
- Digital Supply Chain: Identify supply chain decisions into non-critical and critical. Enable automated decision-making for non-critical decisions while leverage digital supply chain to improve the quality and speed of critical decision making within the supply chain ecosystem consisting of sales, planning, manufacturing and vendors.
- Control Tower: Almost every organization has adopted the usage of control tower, but what needs to be evaluated is, if your organization has truly implemented full-scale control tower or not. Control tower gives real-time visibility to key decision-makers to ensure right decisions are taken to respond to any adverse or sudden external change.
- Machine Learning (ML) and AI: Adoption of ML and AI will enable the Lead Team to work on multiple scenario simulations before taking major business decisions. ML/AI also helps in processing live internal and external data and provide early warnings to decision-makers while providing calculated responses as well.
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:
- Rising Population: We are one of the largest food producers and consumers of the world and increasing urban and rural income will drive the demand of agriculture sector.
- Government Policies: Robust policies aimed to double the farmer’s income by 2022 and increase the exports to 60+ Billion USD by 2022.
- Diverse Climate Condition: India enjoys unique advantage of having diverse climatic conditions which can be utilized to cultivate all kinds of crops as per consumer demand. This coupled with large fertile landmass and good rainfall/water availability will help to achieve the desired 2022 goals.
- Increased Investments: Establishment of Food Parks in different parts of the country has attracted high investments from foreign investors which will help to fuel the revival of the Indian economy.
Manufacturing (FMCG, Defence, Electronics, Infrastructure, Automobiles):
- Domestic Demand: We have one of the biggest domestic markets with an increasing middle-class population driving high consumption of goods across sectors.
- Increase in Investors’ Confidence: There is an increase in investments from both Indian as well as foreign investors.
- Government Support: Schemes like “Make in India” and “Production Linked Incentive (PLI)” are aimed at making India a global manufacturing hub and provides lucrative incentives to investors.
- Demographic Dividend: Over the next 15-20 years, India enjoys the unique advantage of young population which would further help to achieve the full manufacturing potential.
- Digital Transformation: Software services sector is going through a major revival on account of transformation happening across all business sectors it serves worldwide. This is giving rise to new skill sets and more jobs are getting created in this sector.
- Skilled Talent: India has the largest pool of IT and ITES Talent available at a very competitive cost in market today. The demographic dividend incentive applies to Service Sector as well and will help immensely to revival post Covid.
- Rise in Digital Entrepreneurs: We are heading into the most exciting period for India’s Startup ecosystem. The senior talent in IT and ITES sector who understand the need of customers are venturing into Boutique Startups catering to specific challenges of each sector. This coupled with digital transformation will open doors to infinite opportunities for service sector in near to medium term.
- Global Business Services Centres: Majority of companies are moving towards a centralized hub consolidating all their business services into a single location. This could either be a captive service centre or an outsourced service centre. India has become the most favourite destination for MNCs due to high quality of talent at extremely competitive costs. This helps in reducing operating costs and also improve customer service and drive long term projects on standardization and transformation with excellence.
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 :
- Give bigger voice to the Industry which would help drive more aggressive policies towards benefit of the sector.
- Help Government identify the impacted people in time and provide necessary support just like other sectors.
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.
- Incentivize Green Logistics – Encourage use of electric vehicles, push logistics companies for Green initiatives such as recycling of packaging material, etc.
- Logistics Sector-specific Skill Development – With an increase in cold supply chain, automated warehousing and digital transformation in product tracking and tracing, it is critical to set up sector-specific skill development to upgrade the existing workforce to new ways of working and also introduce advanced courses in existing skill-building programs.
- Dedicated freight corridors for goods transport at lower cost and lower lead time has been a huge enabler. We now need to increase the coverage and the capacity to create competition in goods transport logistics.
- Simplification in import/export documentation leading to faster clearance at ports and reduction in demurrage costs.
- Modernization of PSU Supply Chains – Incentivize innovations in supply chain. We have a huge talent pool in India, working in MNCs and into Consulting who are driving some of the best supply chain innovations in the industry and can help Government identify the losses in supply chain. Government should tap into this talent pool and create best in class supply chain for itself by driving both physical and digital transformation projects.
Disclaimer: The views and opinions expressed are personal and do not reflect the views of the organization.