When Mr. Natarajan, a procurement manager in a manufacturing unit in Bangalore, raised an indent to source few carbide cutting tools for his plant, never did he expect that it would turn out to be another ordeal for him. Having a supplier/vendor base which runs into 100s and an aggregated inventory which typically boasts of 2-3 months of buffer, he seemed confident of meeting the demand of the production team. But, unfortunately, he was facing a situation where he had run out of options and the problem was multi-dimensional. Supplier response was a challenge in the first place because it was a non-regular item, even if he discovered few suppliers the lead time to procure was anywhere between 6 to 8 weeks, the minimum order quantity (MOQ) was way too high, then there was unknown fear of dealing with non-regular suppliers and the list went on.
For the nth time, in his 18 years of procurement career, he wished he had more control over the situation rather than being controlled. Isn’t this an anti-thesis that businesses in India and abroad are still following ancient sourcing practices in 21st century?
During last 8-10 years, India has seen a surge in activities in online space due to increase in penetration of internet, mobile users and consumerism in general. Today India boasts of a US$ 2 trillion economy and growing at a scorching pace which is second to none in the world. While the euphoria is buoyant and the head room to grow is phenomenal, a
closer look at the turn of events, shows that much of the activities are happening on the B2C (Business to Consumer) space. Be it fashion/electronic retailing or food/grocery delivery or travel/hospitality, the card to play for an entrepreneur has been “make them feel empowered” with assortment & convenience and technology has made it look so easy.
In contrast, B2B (Business to Business) space has been less active primarily because of the way historically business has been going on and the variables are way beyond price/assortment discovery. Unlike B2C purchase, where impulse plays an important role, traditional business buying process involves collective decision making and the process is mostly rational than impulsive. Typically, stakeholders range from users, purchasers, influencers and others who have myriad of criteria to go for a product selection which are governed by asymmetry of information, product accessibility and their individual experiences. This is a long standing pain point for business and the silver lining is that technology has immense potential to de-bottleneck the process.
We already have many examples where virtual market places are thriving through demand-supply mapping. If procurement as a function has to evolve beyond a cost center approach, then this is the first step for any business entity to discover. With the intervention of technology there will be increased transparency in the procurement process and the
benefit will be directly added to the bottom line/product pricing. Technology can also help focus on limited no. of suppliers with assortment and competitive price that will make life of a procurement manager easier. Simple historical trend analysis, forecasting models can be used if there is less fragmentation of supplier base and with time, procurement process can be automated through tech-enabled platforms. Less human intervention and independence will provide the foundation for next wave of efficiency deriving models in supply chain like VMI (Vendor Managed Inventory), JIT (Just in Time) delivery, Fulfillment centers etc. In the long run, commitment from the supply side also puts counter pressure on the demand side which is long due for India, as a nation. We, as a country, have been happy-go-lucky with Jugaad (Patch-up) approach and have given a miss to systems, processes, scale which is synonymous with China’s rise in manufacturing world order. If we want to realize the “Make in India” dream, the next wave of manufacturing productivity has to come from product innovation, economy of scale, cost optimization and of course, supply chain efficiency.
The time is not far off when people like Mr. Natarajan will be spending their time on sourcing analytics to drive cost optimization, efficiency and scale than to brood over basic questions like who/where/when/how. In the next 2-3 years’ time, technology is going to bring in a paradigm shift the way B2B sourcing is done and its potential is enormous. Also, it has a much larger cascading effect on the economy which will force ancillary economies to buckle up. Thankfully, the timing could not have been better for India with “Make In India” and “Digital India” initiatives in the country and companies like Moglix working hard to bring the technology, process and sales efficiencies in the Indian manufacturing system.