Speaker: Mr Prashant Kamal, Head Global Procurement and Supply Chain, Flex
Mr Prashant Kamal is presently handling Global Supply Chains for Flex. Mr Prashant Kamal is a seasoned professional with over 20 years of experience in Supply Chain management. He is Head Global Procurement and Supply Chain at Flex which is the third-largest global electronics company. He with his 2000 plus team is supporting 80 manufacturing locations worldwide. A graduate from IIT Kanpur, Prashant earlier worked with Nokia, LG, and Microsoft.
Dr Nitin Batra is CEO of Amity Institute of Training & Development. Dr Nitin was earlier Global Head Brand Innovation at Johnson & Johnson and also held senior marketing positions at Pfizer. He has also led strategic projects as a Consultant at McKinsey.
Click below to watch the recorded conversation.
Amity: - Flex is a global player with operations across geographies. Could we begin by understanding what Flex does and how does it do it? Our participants would like to understand the supply chain management of a global company like Flex.
Mr Prashant Kamal: - Flex is known, as you already shared, as the largest PMS, an outsourced manufacturing service provider. We pride ourselves on being the right function in terms of innovation, in terms of design, building, delivering, and managing the entire supply chain. It's about delivering the right products based on how the customers want and request and how we can as quickly as possible respond to that.
So the first step is in terms of technology innovation. The technologies and terms of the early design sketches, simulation, and modelling set us apart. The rapid prototyping and design for manufacturing processes give a very strong advantage. But in larger advantage we get is in terms of the built, looking at the manufacturing capacity that we have and the footprint. We are currently working in 30 countries with over 108 manufacturing locations, which is massive manufacturing across the globe.
The other key strength that we have, essentially in terms of the delivery of the supply chain modelling and the supply chain strength that we have is quite solid to talk about. And of course, managing the reverse logistics and spare parts, that gives us the other advantage. If I want to put that in numbers, what you are looking at is enough, this is an expectation for this year. We are going to have a revenue of 24 billion. We are in the top 500 in terms of global companies. But in terms of the size, we are looking at 160,000 employees out of which we have 4000+ designers and engineers. From the supply chain perspective, we have 10,000 supply chain people as well. So we have 1000 customers and for each customer and the way they behave, we have technically 1000 supply chains as well because not all of them are in the same segment. We have to handle 16000 suppliers and as I said global operations which consisted of 108 manufacturing facilities and the remaining design and finance centres.
In sense of the key segments that we operate in, we have classified into 8 key industries – Auto, Healthcare, Cloud Computing, Communications, Energy, Industrials, Lifestyle, Consumer Devices. That is not all, there are a couple of more which we have not mentioned here, which also includes Defence. So Flex is currently active in all the industry segments that we speak as of now. We are looking at 1000 supply chain, we look at a million components of the stock keeping units suppliers. But more importantly, we are talking about 10,000 supply chain professionals and 25,000 purchase orders which we execute on a daily level. So that’s what I have given you a scale at which Flex is currently operating.
Amity: - During this year's first 10 months, do you have a ringside view of the impact of COVID-19 19 and the disruption it has caused to businesses? Can you help us understand this impact in different regions of the globe, different countries and how do you see the impact on different industries going forward?
Mr Prashant Kamal: - I will answer it in two steps. One, I would say what happened and how the Flex responded to it. Given the skill, we were massively impacted. I will also talk about how we see things going forward as well. Now for that, let's look at the first section that I have. The outbreak happened, which was Govt recognized, which happened somewhere around 27 January. So the action happened one hour later that's how Flex responded. We have seen lots of companies that have responded a week later, a month later but we were able to respond almost immediately and I will tell you how and why. So at that time when the total confirmed cases crossed the 2500 limit, that’s when we started to put the issues, things that we are concerned about right now. If you look at the total, as we spoke about, in terms of the total manufacturing and the total suppliers that we have i.e. 16000 suppliers. Quite a large amount of them have a pretty strong footprint in China. Now, this entire thing began in Wuhan, Central China but there are lots of manufacturing units quite close to it, Shanghai area, Shenzhen area. All of these areas are highly populous and moving areas. So we guessed that entire China would get affected quite soon. What we had slightly missed at the beginning but we have to post correct, we assumed that the issue will remain endemic to China and not become a pandemic. What we have seen is, all of us are aware of how that happened. We used that by putting in very strong Flex management and response. So we set up this immediate war room team where we had people from every function. But then we also have the Indirect Procurement Team, Legal Team, the Resiliency Advisory Team, the Supply Chain Solutions Team which are developing IT solutions so that we can fix all the issues at the same time. This was a day level communication at the war room that we had. This is highly possible to do if you can centralize many of these activities. In quite a few areas, in quite a few companies that I have been with, each factory works quote and unquote independently. In this case, the idea is to putting all together and responding at the same time giving the same solutions starts to add a large amount of value.
Going back, talking about the systems tools, the total amount of tools that we have has given us a really solid advantage. Somewhere down the line, we will talk about how the tools help in supply chain resiliency. The one thing that I wanted to talk about here again is that we are talking about is all of these issues that we have where companies have to respond, they are addressing the key topics of supply chain resiliency, how resilient is your supply chain. Now for the first topic of resiliency, we are trying to understand how large the impact is and how we can react to that. There the key concerns become – do we have wide sets of data, do we right people to respond to that in place so that we call about a decent amount of change in terms of organization.
When we started at Flex for this, there was not a single manufacturing site that was not affected. I will first probably talk about that from the people's perspective. The priority of course is that people are safe. Despite a huge amount of orders that are coming in from various customers, we had a very transparent and a very honest discussion with the customers often that these factories are impacted so your deliveries would be slightly later. The other conversation that we had is with all the suppliers that we need to reconfirm every delivery to look at are they able to deliver that or not. Again, to get that scale in place when we started, we had 67000 purchase orders which was circumspect and that later expanded to 2,00,000 purchase orders. So, we have to manually track through call every supplier and fix 2,00,000 purchase orders. We began to see gaps in the information system that we have. When you place a purchase order to a particular supplier the address that we normally have is the finance address, who are we going to bill to, address, and shift to address. In many of those cases, we are not sure that we have all the information in place. So the gaps in data, we can find very quickly and also those gaps in data as well. Quite a few of the people realized that the key difference between the coronavirus outbreak that we had, particularly the disruption and all the previous disruptions is that, this disruption has been worldwide. It is not limited to a particular area. We had Tsunamis before that, we had earthquakes in Japan, some of the experienced people would remember the flood in Thailand I think in 2011 when worldwide we did not have hard drives available so computers and phones had problems, I think memory chips. But those were endemics to those particular areas and most recently we had this massive disruption in terms of the trade war, the tariffs that Trump Govt imposed on the Chinese Govt. So all the materials that were coming from China to the worldwide moving onto the US immediately got impacted. But again this was a large disruption but still not of the scale of Corona Virus. Because here the impact was across everything.
The first step that we will talk about - do you have the right amount of data and how quickly are we able to get that data, the existing system of using ERP and downloading the data from ERP, creating excel files, and working out. That would not work because we have to work on a 24-hour cycle to ensure that we can move forward. I will stress the data in a bit. Now, this is how Flex has come out if you look at how we look at things, there has been a huge amount of study on it, forecast and how we are going to look at the world.
Amity: - The first half of 2020 saw global GDP nosedive and we have seen some recovery in the last few months. But again, second and third waves are hitting many countries. So how do you see things plan out in the next few years?
Mr Prashant Kamal: - Nobody has a crystal ball to answer that. But again in the Supply Chain, what we need to do is forecast and work based on the forecast. We are making the best guess based on all the information that we can get. The idea is how quickly we can put the information together. So what we expect to see at least a couple of months, we are anyways seeing a worldwide drop in the annual expectations. The second quarter has been massive but if we put it up for the whole year, the expectation still was that India would still do okay, but now the thing changed quite a bit in the last month, we have looked at what the latest published numbers are. But one thing is clear we have seen quite a strong downtrend in the whole world. But what is troublesome is the job creation, the unemployment rate that we expect is going to go quite massively high. How that is going to impact. That is going to impact very strongly, first, the customer demands in quite a few sectors. But this is what we expect right now. And I will probably move on to where we are looking at.
In terms of segment-wise, there are two ways of looking at it. I will just put it in a summary here. There are some segments or some industries which are going to get a positive impact and there are a few which are going to get massively negatively impacted. Look at software services and E-commerce. We have work from home, all of us are listening, working from home, we are still able to fix. The software services are still working as it was before. The demand has only gone up even more. E-commerce, all of us are well aware of how Amazon, Flipkart all of them have done. That is again on a pretty strong upsurge. So E-commerce and Software are looking quite positive.
Financial Services, not many have free cash to invest and frankly, the companies are also not very clear as to what the future holds. They are trying to hold back their investments at the moment. The Stock Market is of course behaving quite differently. The Auto Sector was impacted very strongly in the first quarter, from March onwards. March, April. June, we have heard a huge number of shutdowns of almost every auto industry, and also the pickup of the auto segment has done okay but it is still not to that of the pre-COVID-19 level so we still expect what auto will be a slightly short-term negative impact. But Oil & Gas and more importantly the entire Tourism sector be it hotels or be it air travel, has been massively hit. We also expect some quite downturn here unless we have Govt interjections, we don’t see serious problems in both of these sectors. But one of the ways of looking at it, we have classified these into 5 key segments in terms of the advantage of future manufacturing. There we are going to see is, in the beginning right now we are going to see massive material shortage which we are dealing with right now and trying to get that in place.
At the same time, in the segments for which we do have materials, we are going to see a drop in demand. We are going to see workers shortages, cash flow issues and finally, we are going to see planning issues because nobody can frankly forecast as to what is going to happen soon. We have additions in terms of what the midterm and long term would look like, the near term future is going to be troublesome. Now if you can look at all the 5 segments, Consumer Segment, Transportation, and Logistics, these are the areas where the massive hit is in terms of the drop in demand. Now because of the scenario that we see for right now in Q3 and how that will plan out in Q3, Q4 is something we need to keep a pretty close watch on. However, it all depends on how the Govts, how the hospitals, how the WHO, and more importantly how the pharmaceutical companies react to the requirements of the new vaccines. Everybody is quite massively optimistic about looking at the V shape curve overall. There are quite a few segments that will take a much longer U shape curve. But we see a pretty strong V shape curve for Q3 for quite a few segments. However, it still depends. Now we can look at the 5 top scenarios that are coming up based on quite a few of the consulting companies. All of this depends on the health impact and how soon and how quickly, we can get the vaccine in place. The most likely scenario looks like where we have seen recurring health impacts, controlled by somewhere around mid-21 that is when we are expecting to see the vaccines effectively deployed across the world. And that’s why we are potentially seeing enough that this area could be where we could be. This is what we are looking at in terms of the short term.
Amity: - Pandemic is not the only threat or risk to the supply chain. But this pandemic has opened our eyes to many other risks that can threaten our businesses. Could you help us understand some of these risks and how can companies respond to these risks to mitigate them?
Mr Prashant Kamal: - One of the key things that we have learned and picked up from the challenges during COVID-19 are: first, identifying which are your single points of weakness.
The second key thing becomes geographic overconcentration. All of our electronic manufacturing across the world has a pretty strong base in China. I would not put a number to it but I wouldn't be remiss if I spoke about 45%, to 70% of most of the electronics supply chain across the world are based out of China.
The third thing that we're seeing is more visibility to second and third-tier suppliers. We know exactly what our suppliers are doing but what are their suppliers doing, we are looking at. Given the supply constraints are we able to manage those demand surges? And again, more importantly, what we are seeing some very positive some not so positive but unprecedented Government involvement so the Government is getting in quite strongly into all of this. I put all of these together, and then we talk about where all do we see these kinds of scenarios coming up again? So the one thing that we are quite clear, we were talking about force majeure kind of scenarios like a natural disaster like for example, for whatever reason, if you were not able to have this discussion today, I would call it a force majeure, we had a cyclone, we had lost the connection we are not having it, so that will be presentation risk that we potentially could have happened.
Most of the thing was quite clear that none of us actually expected a worldwide pandemic but somewhere at the back of the mind we knew there was a risk, we never addressed that risk, but we were aware that no such kind of risk could potentially happen. But the problem right now is looking at the entire world scenario now the economic shocks, the geopolitical tensions, we expected the large economies again most of the experienced players in the supply chain fields, do not look at geopolitical tensions between large economies to continue because the economic impact is quite massive or the geopolitical tensions and tariffs, to a large extent go hand in hand. Now we have seen some scenarios where we have tension between Japan and South Korea, in terms of the trade war and tensions that we have. Now Japan and China-US and China, South Korea and China so the geopolitical tensions and therefore tariff become tighter. Brexit, there are quite a few of us have been hearing about Brexit we have also been working on mitigation actions. But what would the new border restrictions mean for manufacturing in the United Kingdom? Would we still want to move materials from mainland Europe, all the way through the border through the channel have two border checkpoints one exporting out of Calais and the other importing into Dover? Are you interested in getting into that rigmarole or can we just pick up all the manufacturing out from the United Kingdom and put it up in Poland, Hungary, or maybe even Romania? Now this kind of perplexed interest by putting up these border restrictions, what is the long-term plan? Regulatory changes, Make-in- India has been quite decent and actually can be a much stronger impact in terms of how the manufacturing and import are happening in India. We all know about how the regulatory system in Brazil is forcing all of us to start manufacturing there. For example, if you import a mobile phone you end up paying 35% duty, a PlayStation five attracts 40% duty. So all of these companies go there and start manufacturing in towns like Manaus or Sao Paulo. Similar rules coming up here have been called for example. Even Flex has set up the entire manufacturing facility in Chennai, and quite a large business rule moved in because of these policies by the Modi government, in terms of putting in the additional tariff for importing of the PCB assembly. Now, a PCB assembly attracts a tariff, however, manufacturing in India does not affect tariff. It becomes so much better and that's why movement happens. The point is, how quickly can a company respond to this? Malicious actions are known cases so they are very difficult for us to estimate but it's not a secret issue that we should be able to fix that, as we move along.
I would like to add just one thing in terms of organizational eco-system. When we look at the pandemic kind of scenario, the one thing that we miss is the financial health of our suppliers. So when we say, a fragile supplier what we are talking about is what is his resiliency in terms of surviving a one-month lockdown say, for example. If a supplier is comfortable with a small scale and let's say his financial health and quick ratio debt is at one. Would he be able to survive one month of lockdown? And what is that impact if the supplier goes down, how does that impact our supply chain? So, as of now, that is literally what we are dealing with. Labour unions, I have seen cases of strikes are up, stick to India the Nokia manufacturing facility in Chennai had one key issue in terms of the labour union. And that's how that process. So, if you look at supply chain risk there is not a single area, which is not a risk. And now thanks to COVID all of us including you, because you bring this topic up, how are we able to have a supply chain risk, earlier the point was execution, execution, execution. The supply chain target for all executives across the world was executed. Now, resiliency, mismanagement, and this structure has made it so much clearer.
Dr Nitin Batra: - I just wanted to clarify one thing. You said COVID recovery will happen in waves. And I just wanted to understand from this risk chart that you showed, is that a ripple effect of COVID that we may experience which may result in more shocks. For example, some of these big companies that may be short on cash may not be able to survive for much longer they disappear and then that starts to send a ripple effect in the market. Do you have a perspective on that?
Mr Prashant Kamal: - You are talking about a dangerous area; I think that's something that deserves to be discussed. When you have large suppliers, in terms of the large companies going under because of financial issues. This is where the governments also step-in in terms of how much support they can give in terms of the short term. If you look at the Airline industry the US Government is funding quite a large amount of bailout packages for Airlines. The bailout packages in terms of Supply Chain manufacturing at least for us in the electronic and mechanical industry are not that large. The Governments don't look at that, however, we are the largest in terms of job providers, so to speak. Now this is where the role of the customer and supplier come in, and there are a lot of suppliers where flex is taking into account that we are already upfront paying, we have all of us on the payment term.
So, in an industry, nobody pays unless it's very specific. We have to supply with whom we have payment terms of 60 days, and we'll get the business and we'll pay them within the next 60 days. Looking at the financial situation and also the criticality of those suppliers, we begin to pay cash in advance. We “loan them” so that they can fight over this period. Now, this is where we start to get into extremely strong relationship management. The way SRM, CRM used to be seen before. What does the way SRM CRM is seen now? Both of these managements have now undergone. I would not be remiss if I call it, it's a paradigm shift. Talking about two things. One is the level of transparency and honesty has gone up because right now we know we are in deep trouble. We know the supplier is in deep trouble. The customer is in deep trouble, or they're having the same discussion. One of the key issues in the supply chain always remains to forecast. How do you forecast the demand? The customer guesses we double guess, our suppliers' triple guesses. But if the customer wants 10, I prefer an upward 12, because the supplier will try to manage to get 15. Now, the supplier still thinks I need 15 what is it that you want. So that is in the short term, we have been this pretty strong is honesty and transparency built in saying these are books, these are data, I can get you nine. Does that work for you? Give me 8 that is good enough, one you give me for the next month. So that's one level of relations development but more critically is this. If you have fragile suppliers, but we need our suppliers and I'll probably get into that in a bit. So why do we need multiple suppliers? Because again, as I said a minute ago, earlier this supply chain was all about execution.
And one way of execution is to be at the lowest cost. Supply chain resiliency does not come at the lowest cost. Each company has to decide where do they want to go. Are they going to go for a spot or longer survivability? What is your resiliency factor 10 years ago? Let's look at India specifically, or let's look at it worldwide, how many of these happen. Few, if at all. Last 3 years how many happened. I have a chart here this is purely just in the US. Look at the account of Hurricane, US-China trade war, LA port disruption, flooding in Mississippi, Syrian war, the Mexican drug war, MERS happened, SARS happened, COVID happened. We have been talking about globalization and now we are talking about the exact opposite. We are talking about regionalization. Dr Batra, I'm sure you have been to Rome a couple of times. Now in front of the Spanish Steps, there is an Mc-Donald restaurant, it looks extremely odd, but the most cultural places in the world with Bernini designing the Spanish Steps and you see a McDonald's there. It looks odd also when you go to the pyramid of these and pyramid eating the burger at Mc-D actually who wants to go to Egypt to eat at Mc-D but people are doing it.
So that's something called a slow food movement. You have heard fast-food movement with its natural growth in stops like McDonald's and Burger King. The Italians have something called a slow food movement. And from there we began this concept of slowblization, so I just didn't want to use that phrase slowblization to confuse people but it's nice to discuss. Globalization was focused on essentially to get economies of scale. Even something as simple as registers let's take the simplest part, registers in the electrical industrial one factory in China would probably manufacture 20% of the world requirement of registers. Now, imagine this because of that scale, what kind of cost they get. That has been the drive since the 70s 80s 90s anyone in the mid-2000s, would get economies of scale, and therefore get costs. We have seen the impact of geopolitical concentration now. China is not on the best of terms with the quiet of its neighbours for various reasons. Let us not get into politics but we are aware of that as a supply chain professional must be aware of what is happening to his neighbours. With the Philippines with Vietnam, with Malaysia, what if something flares up, would we be able to get our materials to Mexico or India or Europe. That is what is causing this “Slowblization”, which is regionalization, the supply chains are now getting shorter. The entire US take for an example is now looking at manufacturing everything in the US itself or looking at manufacturing in Mexico looking at labour costs. So they're trying to move, manufacturing locations from China to Mexico. The actual manufacturing costs might go up, but your response rate is so much faster. Even in the kind of digital world that we are in, communication happens so quickly. They demand change to see how you're able to react, strictly for that regionalization becomes massively important. That's one key change that we are seeing and that's also one of our predictions that you know you'll see a lot more. Globalization has to a large extent, ended.
It makes sense for every consumer to the manufacturer to be as close to the consumer as possible. In terms of data analytics now, I told you about the scale that we have in flex in terms of million components and 45,000 questions out of a day. How are you putting all of this information together becomes an absolute necessity? If you're not able to put all the information together, “real-time”. We are in a deep problem that I just probably look at the one particular chart if you allow me, is this the Data Architecture. This is a little complicated but what I am trying to show here is something like Tera data and Hadoop to ensure that all the information that we have crossed the hundreds of manufacturing locations across all these countries with 15,000 suppliers is all in one single place. And we can draw information from this on an hourly basis. So if there's any change any impact anywhere you can react immediately. And more importantly, it also starts looking at business intelligence In terms of artificial intelligence and machine learning, you can also look at where is the trend going to what is the potential risk, and are we in the right place to react. We have also start simulating scenarios we have done quite a similar thing in the case, China production is down. What is the impact in one month, what's our impact going to be in phase three four, or five short-term periods? So data analytics becomes extremely critical for all of us. And that is something that, that we should be working on.
The regulation on the supply chain, this is quite a talk on the government regulations as well. I briefly entered about you know the trade war or other issue between the US and China in terms of the tariffs. That was the first step to having this kind of regulation in terms of tariffs. The second thing also is, how are the manufacturing locations centralized and how much local control do those governments have. Japan for one has almost raised a billion dollars to ask for its suppliers to move away from China to move to Japan they get an additional budget and getting support in terms of moving to Vietnam and also moving to India. So, the UP Government has tied up with the Japanese government to set up a Japanese manufacturing village somewhere near Noida, which is also coming up. So, there is a pretty strong governmental push from Japan to move the Japanese supply. Similarly, you are seeing a push again from the US, and according to European manufacturing as well to move the pharmaceutical manufacturing out of China. The criticality of health has become extreme, no matter, I can only understate the criticality of the health requirement as of now. So all of the pharmaceuticals which are focused in China and India and then also looking at the manufacturing locations in each of those countries because health becomes a top priority for every government. So again, a pretty strong regulation coming in electronic manufacturing auto manufacturing almost every manufacturing now we are seeing a lot stronger supply chain regulation coming in from the government.
Now before we are talking about free-market cost whichever works best to work best we have stronger regulation. Again Dr Batra asked that we touched already “transparency”, a deeper structured assessment of the supply base, and we have honest transparent communication, and you also need to understand not only supply but supply second-tier third tier, we have a case live right now that are talking about we had the third tier supplier who got fired that now he is roughly 70 to 80% of the manufacturing of that particular component, not a big impact. Now, flex has a large fan base we are not seriously impacted based on that. Think about quite a few other companies in that particular area and imagine their supplier’s supplier is shut down. They entirely completely shut down. So, firstly it's also about for each manufacturer to look into their supplier and other second-tier third tier places, the amount of sourcing study that has to go down, has to be much more stringent and has to be a lot more transparent. Otherwise, cannot handle disruptions and cannot talk about resilient supply chain issues if you have blind to a spot. And finally, it would be the organization. Now the CEOs and boards, the CPOs, all the CXOs need to start looking at residency, totally different levels because this one is going to take a hit rate on your profit. It is not going to be the lowest first however, it's going to be the most sustainable. So a short term cost impact is something that the CEOs would have to take into account. So that's what I meant by preparations from the CXOs.
Amity: - We discussed resilience, we discussed risk management, but suppose coming to the point number 5 CEOs and Boards to make rigorous contingency planning, this is exactly what we want to come to about. What kind of crisis management planning can companies, what kind of framework and system they can put into place. I have videos of a very good example of how in January, February, March when we discovered that no more endemic it is pandemic, how you handle the whole thing, but for smaller companies and medium, smaller enterprises how do you suggest that they effectively manage these crises.
Mr Prashant Kamal: - In this case again we can talk about or show you a broad perspective because again it will depend on your geography and it also depends on your segment in the area in which you are working, however, we can definitely look at, look at your supply chain risk that you have and then see how is it is going to respond. I am just putting in some examples. For example, labour disputes, changing customer requirements today. I like Nirma detergent powder, tomorrow I might like Ghadi Detergent Tikiya so those are some kind of changing customer requirements. Now those risks to anticipate are comparatively limited but we can react to them much easier because the amount of time that we have to react to those is comfortably large. However, if you have some of these Black Swan events like a war or a flood, and these have a massive impact. We have extremely no way of anticipating them with the current way of collecting gathering information and the information setup that we have. If we can improve that, that would help, but a chart in terms of when you anticipated then what is the impact for your business it might be different for different companies. For a global company this works, for a local company, something else should work but also in terms of a company in terms of which segment they're in it should behave. The auto industry will behave very differently from let say a health industry manufacturing MRI scanners or cap machines will behave very differently from the way let's say Maruti Suzuki works. What is your ability to anticipate and what’s your impact, based on those we can start looking at how is it that we are dealing with. Very obvious we need to have reactive mitigation strategies where anticipation is much lesser. You're not sure when what will happen so it will come to you as a shock. In that shock, you should be able to have a very quick reactive mitigation strategy. You would never know when it is going to hit whereas in the bottom case you can anticipate comfortably but you should have a much better proactive mitigation strategy. In terms of Black Swan events, I would call this entire COVID pandemic was a Black Swan event. We can look at that the tariff between China and the US was again a semi Black Swan event, however, Brexit we know is a brewing storm. If you look at this problem with something like Black Swan all of us would always propose and maintain a healthy reserve for part of the long recovery time.
The problem is the moment you have a reserve, it is inventory, which is money. That’s a call one company or factory need to make. None of the mitigation strategies is free or is cheaper than before. Are we willing to take that hit for the long term? what is that hit? That cannot be decided by an outside agency. That the company’s call that needs to be made. I just want to touch upon one of the points is in terms of business challenges. Now can we switch from A to B from B to A this is a comparatively much easier process to work on? The problem also comes here when the risk is lesser but we can and our anticipation is also lower is again a culture scenario or dual social strategy. We have the example of one supplier who failed. We should have had a second alternative or maybe looked at changing the design of manufacturing so that we work based on that. The key 3 blocks, if we talk about, would be visibility, flexibility, and collaboration. We have spoken about these 3 in different languages. The basic problem in terms of visibility, do you have the right information data flow system? Every large company works on an ERP. You have your sales setups in different systems, you have your reverse logistics or transport management in a different system. How are you able to put all of it together into one common structure? We have something called PULSE in Flex. I have been across quite a few countries, I would say this thing has been by far one of the most powerful tools that I have ever seen and our PULSE is not only in terms of computers, but I can also look at the entire company data right now on my phone, I can look at what my inventory was one hour ago, how many purchase orders have been released, which are from which country which supplier, in case anyone calls me right now and says we have an issue with that supplier it will take me 30 seconds to say what the impact to Flex is going to be and that is how I can react that quickly. The first thing to be able to react quickly do you have the right amount of visibility? Once you have the visibility, do you have the right amount of flexibility? You have information, what are you going to do with it?
There are 3 ways where the supply chain can create flexibility. The time you can react later, can you afford more time is your call. The second is the capacity. You can always have excess capacity and start keeping items but that costs you capital expense. Third, you can talk about is in terms of managing inventory. You have excess inventory, inventory again inventory carrying cost, surplus cost, scrap cost. These are the only 3 ways any supply chain can be managed. Flexibility, time, capacity, and inventory. None of the supply chain executives wants to have any of this. You need to define what could be your best setup to be able to manage things. All the 3 have the right level of flexibility, of course, collaboration. Honest, the transparent discussion throughout the supply chain otherwise if we keep double-guessing each other we are never going to be resilient.
We can have the 3 verticals customer, supplier, and market, what are you going to do in terms of visibility, flexibility, and collaboration of relationships. This is a kind of framework that you can look at how you want to start getting resilient. I would touch upon 2 other points now.
Look at these 5 areas how is your planning and supply network, logistics for example many of you would be impacted. Shanghai shutdown 2 days ago. Shanghai hub is now under COVID and the Port Authority has an airport. Now we are seeing how the transport and logistic hit in Shanghai has going to impact worldwide. Financial resiliency, do you have the right amount of money to be able to handle so that's why every company talks about cash reserve and nothing is more important financially today for any company than cash reserve and cash reserves are driven, or we talk about cash conversion ratio, which is driven essentially by supply chain, there is payment outstanding, a sale is outstanding, there is inventory that is what going to view your cash reserves. Product complexity and organization maturity are ones in terms of operations look at levels ratio, cash ratio, operating margin in terms of finance. This will then define how resilient your suppliers are. This is something we need to look at for every supplier and then you can choose which are the top ones.
Imagine that your integrated circuit is a risk, then your frequency is the one chipset that might be a problem if you look at RF transceiver, there is only one guy who can manufacture your RF transceiver. The supplier landscape is basically in red. What are you going to do to handle the supply landscape for the RF transceiver? That is the kind of job that the sourcing professional is now getting into and try to get the resilience back into shape. These were the basis of points about resiliency. I would like to go back and stick to this particular slide when we talk about how we are going to handle all of these 5 points,
We are going to talk about solubilization or regionalization. Do you have the right data in place? All talk of artificial intelligence, ML, big data which used to be academic is extremely important right now there is nothing academic about these three, extremely practical right now, government regulation, how transparent we are, what is organization structure?
Amity: - Could you tell us a little bit more about what are new technologies that have now entered the supply chain organization? What new things are coming up in other parts of the world and what has come into India? Can you tell us a bit about the new technologies which will help people manage their supply chains better?
Mr Prashant Kamal: - In terms of the supply chain, one of the fundamental shifts that has happened in terms of the basic tools which is ERP now you can use PE. Now, none of these technologies is new. We never had paucity or scarcity of individuals to stand alone. I would probably focus on aLoop MicroStrategy and Teradata. The focus has never been on artificial intelligence and ML-like it is right now. In the data management toolset Phyton is coming up strong is because of artificial machine learning that is required. The restaurant state of the supply chain has to be much stronger. The system can pre-empt what potentially happens, so you are doing proactive supply chain management. If you are looking at the Sugar CRM, the customer relationship management from the customers' side so Sugar is one of the new things. That is for quite a large level of computing very strongly with salesforce on the customer side. The operational side does not have to see which kind of ERP you have but LOOP is now coming into very big shape in terms of data warehousing. Micro Strategy Pablo is a data warehousing tool used in terms of how you going to visualize and crunch data. From data to information, information to influence, and from influence to action. There is no shortage of data in the world but how you convert data to information that’s the first step and that you are working very strongly. Now and from information to influence and that's what presentation tools like Tableau help. it's officially from NIIT side which has been a fundamental shift in the business.
Dr Nitin: - I think you talked about pre-COVID Era and Post COVID Era and there is this huge shift in mindset on contingency and safety and so on. I just want to get your thoughts on this, there was this movement 3 -4 years back, and before that supply chain created new business models, can we innovate around the supply chain right, so the poster child is Amazon and so on. Has that time now gone or postponed, will we start worrying about the safety of the supply chain and not innovation what is your perspective on that?
Mr Prashant Kamal: - The existing businesses would be looking at surviving but they would be looking at creating this resiliency and trying to maintain so the existing businesses that we have would be that. But I would be with you Dr Batra in the sense that we should be looking at and we should be aware of and hopefully, we are a part of the new disruptive technologies of the disruptive supply chain that are going to come up. One of the key things if you look at in terms of the slowblization or regionalization is that there is going to have a massive impact in terms of how it is going to happen. It's going to create a huge amount of opportunity as well in terms of how we're going to look at setting up new manufacturing facilities across the world. But all of this is not the existing models, with database minor variations in the ways those are going to happen but stuff like Ecommerce and also in terms of other delivery models now also you look at I would also say education is quote-unquote in as supply chain. How are you reaching the end customer into their house that entire model I would be probably jumping the gun in saying that you are going to have massive changes there as well. If anybody believes that the supply chain in 2021 would be the same as supply chain in 2025 I would like to smoke what he is saying.
Dr Nitin: - Your definition of resilience is not just bunkered down it is actually to figure out how you can innovate to create resilience as well. So resilience is both the path of safety as well as innovation.
Mr Prashant Kamal: - Visibility, flexibility and then moving on to collaboration none of this means that you create an inventory, or you start to create multiple partners. So once the supplier fails others would come up. What is the other way for you to create a much risk-free supply chain? For example regionalization or solubilisation is one of the key resiliency factors. Say, the bread for the burger is coming in from China for the chicken burger in India. The chicken is coming in from Malaysia and then mayonnaise is coming in from the US. How confident can we be of getting a burger in 20 minutes? Being the owner of this business how would we talk about having the lowest cost and make the most amount of money it's true for every business. Now Dr Batra maybe we could have worked with this Pre COVID Era. Flights were not a problem, people were moving around and there was an economy of scale. Do you think we will talk the same thing now again given that I am your customer and if you are not able to deliver to me it might cost you heavy for whatever reason? That is the kind of innovation that is not coming. Now we cannot afford to not deliver and that would create quite a few different avenues and directions in which we need to go ahead. Do I know what they are I would want to venture into that area but I would expect it to be a lot different if you're talking in five years I'm sure we'll be talking different models here?
Dr Nitin: - I am with you Prashant. I have two remaining questions for you. One is we are in November 2020 and all of us have COVID fatigue. We are still looking at a few more months of COVID. What keeps you awake at night? What is it that you are worried about? I looked at everything that you are doing which for me is huge learning in terms of how to manage cutting edge supply chains so thanks for that. What keeps Prashant still awake at night?
Mr Prashant Kamal: - From my work perspective, first of all, we are seeing that we are a pretty large part playing in this entire COVID health field. We'll talk about ventilators, masks. Flex is playing a pretty critical role there and that makes sense. It makes me happy that I am part of something that’s fixing the world. But more importantly, what keeps me going on in the market dynamics is the way they react. What I was doing yesterday is not what I will be doing tomorrow. So you set up a process and I am sure that it is going to fail one week later and then we will do something else again. So that's how you keep improving rather you keep changing.
This is what interests everybody in the supply chain world. It is so dynamic. and associate today is changing so much that is what is the most interesting. Now there's nothing but a single boring hour in supply chains in Flex.
Dr Nitin: - I have the good fortune of knowing you for over 20 years and we are reconnecting. I wanted to check two or three things which are perhaps the life philosophies that have helped you to succeed as a leader and be where you are today managing so many SQUs but also so many lives and so many professionals rely on you. So what has caused you to be a success as a leader?
Mr Prashant Kamal: - I am not sure whether I am successful as a leader. I have two or three life lessons that we can probably discuss, now one thing is I am not afraid to fail this is what I've been telling my entire team as well. It is okay to fail what is not OK is not to try. People don't try new ideas because they think they might fail and that is why again Dr Batra you and I as engineers we hate two numbers zero and hundred. If any fellow has achieved 100% the target was way too low. If you have achieved 100% you are playing a little too safe. Never play safe. Here again, you need to find the right organization and you need to find the right environment as well to take risks. You can't take a risk with the ventilator. When you decide where is it that you will experiment learn, you will learn only if you fail. If anybody says they have attempted a new technology or a new model and they were right the first time they did not take the right risk. But I think I would say I have taken risks and I would propose and advise take the risk, take a little harder call, let your manager know your system known to try on a pilot scale, do not try at the whole company level, but experiment and fail.
I thought I'd probably stick to that but also in terms of the other leadership skills which I would like to see more in people and almost everybody or the people who I am impressed with this as well. It deals with the level of transparency and honesty. I will show you the big picture, never ask someone to do something say what is scenario is and how to look at it, and let the other person decide what needs to be done and how needs to be done. If a leader explains what the concern is, shows the big picture. Identify three or four people out of your 100 who can say okay for this picture. This can be a potential direction to go ahead and then you coach and mentor them. They are the ones who are going to take the company to the next level. What happens is many people many managers point to this trap they will say exactly this is this then you do this, then you report to me this after approval then you do this. He's the manager he can never be a leader. A leader says this is what it is how do we go ahead with it. That’s what I would say is a leader, which I would be interested, and I hope I would be doing something similar.
Dr Nitin: - It is an honour to reconnect as well as hear you. I know quite a few of us were listening to you quite intently. I think the supply chain as a topic is now much more fundamental when we're thinking about business models and you have painted the picture very well for us. You've also highlighted mindset both as a leader as well as supply chain. Thank you for sharing your insights, your knowledge effortlessly and in an easy to connect manner through your stories. Now I will check out the McDonald's restaurant in front of the Piazza in Rome for sure. I may not have noticed it the first time so thank you.
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Credits:
Moderated by: Dr. Nitin Batra | Brig. R. K. Sharma