Learning to live with it: How brands are rejigging operations to counter the supply chain chaos
Navigating the past 18 months has been nothing short of a roller-coaster ride for Bala Sarda, Founder & CEO of Vahdam India. Supply chain disruption led to delays in 80-90% of the company’s shipments and top products ran out of stock. Revenues of the homegrown premium tea and superfoods brand took a direct hit.
Sarda recalls how shipments that were delivered within 60 days last year were delayed by as much as 140 days during this period. “This led to two things. First, we ran out of stock on a lot of our products, which is disastrous when you are trying to grow a business. Second, we could not sell a lot of inventory. We had to destroy seasonal products because a lot of them could not be delivered during the season. For example, a lot of Christmas limited-edition products were delivered in January. As a company, the only thing we could do was to dispose of those. So, we took a massive hit on our P&L,” he says.
Sarda anticipates it to be an extremely “tough year” in the midst of the ongoing Russia-Ukraine conflict. While transit times have improved now, freight costs continue to be high. Rising commodity costs, in the war's aftermath, have only aggravated the supply chain woes that started since the onset of the pandemic.
For brands like Vahdam and other fast-moving consumer goods (FMCG) companies, this means a longer road to recovery than anticipated — more than even what was estimated after an economic recovery looked likely as the Covid crisis started to ease. With factors such as high logistic costs, a surge in crude oil prices and higher input costs continuing to play havoc on businesses, FMCG companies are rejigging their operations to stay ahead of the disruption curve.
Rajat Wahi, Partner, Deloitte India, says such players have done a real rethink of the value chain. “They are consciously striving to be less dependent on fewer locations and spreading sourcing more uniformly across locations. To some extent, it is a bit more inefficient and expensive, but it improves raw material availability during a crisis. Also, the products are being value engineered to see how to bring in more local raw materials rather than importing these,” he adds.
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