The presentation covers the impact of the COVID-19 pandemic on supply chains, detailing how the 'just in time' model faced significant challenges, leading to supply disruptions and altered demand dynamics. Key lessons learned include the need for diversification in sourcing, re-evaluation of product portfolios, and the adoption of the 'China +1' strategy to mitigate risks. Looking ahead, the document emphasizes the importance of sustainable supply chain practices and innovative approaches to face future challenges, especially concerning climate change.

1. CRISIS MANAGEMENT
IN SUPPLY CHAIN
Presented by Pankaj Dant
27 July 2023

2. Presentation Framework
Pandemic - the recent big supply chain crisis- how it played out
• Just in Time model & the Pandemic
• Supply disruption
• Shipping Crisis
• Dramatically altered Demand dynamics
Managing crisis / lessons learnt
• De risking supply chain
• Sourcing Implications
• Manufacturing implication
• Product portfolio re-evaluation
Looking into the Future

3. Pandemic - The Perfect Storm

4. Pandemic- how it played out- 1
• ‘Just in time’ model challenged:
• Time tested, widely adopted model for better working capital management
• Created by Toyota, followed by Japanese companies in 70s; globally adopted
as a business ‘best practise’
• Lean raw material….order only when needed…..manufacture and supply to
customer just in time
• Successful model during the normal times
But what happened to time tested ‘Just in time’ model during the pandemic?

5. Pandemic- how it played out- 2
Supply disruption:
• Raw material shortages
• Product requires a large no of components
• Companies accustomed to global sourcing to minimize cost
• Even the smallest component could stop the product from being manufactured
 Industry Example: a raw material was essential for Instant Tea manufacture; China was the sole supplier;
contingency plan initiated to revive local defunct suppliers at higher cost
• Production was disrupted
• Hurdles in travel to reach factory/ office
• Restriction in deployment of labour in factory
 Indsutry Example: Plant needed permission from District officials to be operate; restriction on space
between workers on factory floor; constant contact with DMs office to ensure minimize production loss;
Export unit got special permission;
 stepped up Outsourcing option to meet supply shortfall
Business had to run under extreme uncertainties; daily review with business head.
Business Reviews with CEO would begin by supply review

7. Pandemic- how it played out- 3
Shipping Crisis:
• Usual turnaround of Shipping containers affected
• Containers piled up in some ports – at customers end
• Shortage of containers – at suppliers end
• Consequent delays in supply of products
• Took a long time for this imbalance to be corrected
Industry example:
- Shipments to US delayed due to shortage of containers
- Freight rate were up 3 – fold; had to pay for meeting customers’ orders
- Customer retention called for selective air freighting
- Sole suppliers to some customers
Managing customer relationship a key challenge and focus during this crisis;
Opportunity to build customer trust by stepping up to meet their demand- builds customer loyalty

8. Pandemic- how it played out- 4
Dramatically altered Demand dynamics:
• Demand went up instead of coming down
• Stocking up by customers due to uncertainties of future supplies
• Government cash dole-outs to citizens in developed economies leading to greater purchasing
power by consumers
Industry example:
- Customers orders in export markets went up significantly - especially US
- Limited supplies had to be ‘rationalized’ to ensure a more equitable supply to all customers
vs meeting over-stocking requirements of a few customers.
Managing customers expectations was a key challenge.
Spike in current demand from customers also made it difficult to forecast future sales.

9. Pandemic- how it played out- 5
BULLWHIP effect set in - causing distortion in demand:
Increased consumer demand leads to uncertainty of future demand- leading to creation of ‘buffer’
in each link in supply chain- retailer / distributor / manufacturer / supplier leading to excess stock build up

10. Managing crisis- lessons learnt
“Crisis is an opportunity to do things that you think you could not do before”

11. Managing crisis / lessons learnt- 1
 Do not count on Environment, Social & Political
Stability (ESP)
 Follow business instincts- not just a cost focused
approach.
Example: Political & Economic conflicts between US & China
are leading to large manufacturers to re-examine their supply
chain strategy using multiple suppliers across different regions

12. Managing Crisis / lessons learnt- 2
De Risk your Supply Chain:
• Diversify suppliers & manufacturing partners.
• Incorporate ‘Risk Management’ tool in Supply chain planning
• Sourcing to focus on better control over critical raw materials, take ownership of vital
components
• Diversified sourcing of raw materials across different geographies
• Manufacturing: single large factory vs geographically dispersed
Industry example:
- Tesla – designing and making its own Microchips
- A recent initiative by Apple- which one?
Supply chain is not just sourcing of raw materials but involves all flow of goods and services
that transform Raw material into Final product.

13. Managing Crisis / lessons learnt- 3
‘China + 1’ Strategy :
• ‘China +1’ coined way back in 2013;
• Strategy in which companies avoid investing only in China; diversify their businesses
to alternative destinations.
• Why this strategy?
• Past 30 years Western countries have invested in China due to cheap labour and production
costs
• Hence- concentration of business interests in China
• Pandemic + growing conflict between US leading to increased risk of
overdependence on China
• & China
• Hence China + 1 strategy has gained momentum
Pandemic & growing conflict between US & China driving the China +1 strategy

14. Managing Crisis / lessons learnt- 4
How much has India tapped into the ‘China + 1’ opportunity?
• India has huge potential to gain; large domestic market is a key strength
• Experts vary in their opinion of how well India has done so far.
• Parliamentary panel (Mar 2023) report suggests that India has not done as well as it
should have so far
• Southeast Asian economies like Vietnam , Thailand, Cambodia & Malaysia are bigger
beneficiaries due to lower labour cost, free trade access, and a growing market
This is still being played out …….so India has an opportunity to catch up

15. Managing Crisis / lessons learnt- 5
Re-evaluation of Product portfolio
 Last few years has seen high degree of personalization of products
(niche / highly personalized / ‘segment on one’ products)
 Low margin products with complex supply chain often lack a strategic purpose
Implications:
 Eliminate some products
 Modify some products- simplify design, standardize constituent raw materials
 Build a more profitable but leaner portfolio
Industry example:
- business practise already exists
- greater momentum expected post pandemic
A sound Product portfolio strategy requires striking a balance between offering a wide range
& over proliferation with low margin products.

16. Managing Crisis / lessons learnt- 6
Re-evaluation of Product portfolio
 Last few years has seen high degree of personalization of products
(niche / highly personalized / ‘segment on one’ products)
 Low margin products with complex supply chain often lack a strategic purpose
Implications:
 Eliminate some products
 Modify some products- simplify design, standardize constituent raw materials
 Build a more profitable but leaner portfolio
Industry reference:
- business practise already exists
- greater momentum expected post pandemic
A sound Product portfolio strategy requires striking a balance between offering a wide range
& preventing over proliferation with low margin products.

17. Looking into the future- 1
Future Innovations in supply chain / manufacturing :
 We are likely to see further innovations in the way supply chain and manufacturing is organised given a
more uncertain environment that we face today
 What could these be??
Nano factories: an interesting innovation:
 Unilever has invested in factories that can be dismantled and moved to locations wherever need arises
 Suitable for new age E Commerce / Digital channels that require high assortment but less scale
Can space exploration add a new dimension: there is diversity of raw materials on moon; could
mining of space resources become a reality? – these are areas that are being explored
What else could we see in the future? …..would be an interesting area to explore
Supply chain was considered a relatively un-exciting function earlier; pandemic brought this to
the forefront. Given the current geopolitical situation, we can expect more challenges ahead.
The future of supply chain certainly appears both challenging & exciting.

18. Looking into the future : Climate Change
The pandemic induced Supply Chain Crisis gave the world a glimpse of what a
climate crisis would look like if left unchecked.
A global climate catastrophe can dwarf the impacts of the pandemic. Its
consequences will be felt especially by developing countries that are already
suffering far greater economic losses when compared to high income countries
due to climate related disasters.
This calls for an approach of Sustainable manufacturing & Supply chain strategy
to be adopted by the business.
Businesses have a responsibility to manage profit in a responsible manner
while caring for the environment

19. We must make sure the future is not this :)