Covid-19 – Demand is up – supply chain is still recovering!

Could the Covid-19 pandemic’s unprecedented hit be the black swan event that pushes the FMCG, food, and pharma industry to rethink and make structural changes in its global supply chain model? Without a doubt, the pandemic has already exposed the vulnerabilities of many organizations, especially those with total dependency on China for raw materials or finished goods.

On 27 November 2020, Reed Manch Exhibitions organized a webinar titled “Changing Face of Industry – Leveraging the supply chain to boost your company’s bottom line.” The webinar witnessed the participation of supply chain experts from the FMCG, food, and pharma industries. The panel moderated by Vivek Dahiya, managing director, Logistics and Industrial, Cushman and Wakefield , highlighted the industry’s significant challenges during the pandemic and the approach followed to overcome those challenges.

Pavel Mehta of Nestle gave a quick overview of the overall supply chain industry over the past few months. “In the first phase of the lockdown, there was a swift response by the consumer industry in terms of stocking. Speaking of the pandemic’s impact,” he said. “There was a big shift from a certain size or SKUs. On the other hand, the industry was facing a huge challenge in the logistics movement and labor availability.”

According to him, even though it was a shock initially, most consumer product industries can now tackle disruptions created by the Covid-19 pandemic. “Earlier, the supply chain was only looked at as a cost center. Its main objective was to deliver the quantity while the quality was taken for granted. During the last few months, there is an increased focus on the safer supply chain. Safety in basically two broad areas – Safety from Covid, and to ensure that continuity despite disruptions.”

Mehta believes that now there is a much bigger focus on scenario planning. Companies are looking at investments differently. “In the next three to four years, warehousing has to evolve, and that is what we are doing at Nestle. We have invested in the warehousing operations in the South which is scalable and just right for the current scenario.”

Ajith Gopinath of Mondelez International agreed with Mehta and added, “The integration between the supply chain and our businesses has increased manifold due to Covid-19. Many of the earlier conversations we were having internally as supply chain practitioners were fast-forwarded and brought to the present. Whereas many of these processes were a part of the long term pipeline before, they now seem essential. For example, the eCommerce demand has been shifted from offline to online.”

While eCommerce was always growing as a percentage of the business, it has shifted to fast forward due to the Covid, according to Gopinath, “Logistic automation was already in the pipeline in the coming three to five-year plans.” He also believes that the SKU rationalization trend is here to stay.

Vickram Srivastava of Ipca Laboratories said that in the beginning phase of Covid-19, everyone was empathizing with the service partners. “Soon when people realized that there are alternative means to bring product to the market that emotion changed expectations. People wanted to get their product out irrespective of the situation on the ground.” According to him, during the pandemic, human capital took precedence in terms of quality and quantity. “Everything that has happened around digitization and automation is fundamentally because of the understanding and the realization about human capital and its importance on the shop floor has gone up manifold.”

Commenting on the demand during the pandemic, Mehta added, “The pandemic had a direct impact on demand. At the beginning of the pandemic, there was a certain pull of our portfolio’s products, such as milk-based products and Maggi, a huge business for us. The segment which remained unaffected due to the major disruptions was the food business because of the nature and the kind of products we are making.”

However, he observed in Nestle’s previous months’ sales that consumers bought much less chocolate during the initial phase of the pandemic.” Chocolate has a very unique and different route to market. One of the businesses that have seen a drop is the ‘out of home’ business where we supply tailor-made products to businesses, hotels, hostels, and restaurants that took a big dip and continues to be a big challenge.”

According to Mehta, Covid has exaggerated the structural issues in many companies. “As far as the demand is concerned,” he said, “we are back to the pre-Covid situation. Although on the supply chain front, we need a lot of work to recover back to that level.”

Srivastava explained that the pharma sector also faced challenges initially, but eventually, came out of the situation. “Challenges, as I saw them in the pharma sector, included an impact on procurement (sourcing of goods) and production. However, the demand has recovered, but it is nowhere near the numbers we were projecting before pre-Covid.”