The increase in commodity prices in the last one-and-a-half years is extremely “disruptive” and requires a lot of efforts to navigate and manage in such times, a senior executive of the diversified Mahindra Group said on Thursday. The group is into various sectors, including auto, farm equipment and hospitality.
Mahindra Group Executive Director (Auto and Farm) Rajesh Jejurikar said organisations need to work around creating resilience in supply chains and building agility and adaptability in the company.
He was attending as the chief guest a virtual session on ‘Building Resilience in Supply Chains and Communities’ at the POMS India International Conference on Thursday. The three-day conference, which commenced on Wednesday, has been organised by the SP Jain Institute of Management and Research (SPJIMR).
“Commodity prices have hurt us badly. We have in our business seen almost a 17% inflation in commodity prices in the past 18 months. So, it is as significant as it can get. It’s never easy because there is clearly a threshold to what customers can bear in our business,” Jejurikar said. He stated that the business has not seen this kind of commodity inflation, probably ever. “This kind of an increase in such a short time is extremely disruptive. And, it does take a lot of effort to navigate and manage (the costs).” “And, we do have to do the balancing on the trading of demand-supply; fundamentally, not losing the sweet spot on price with customers as we navigate through this… These are the times when you have to look at other costs very strongly,” Jejurikar added.
Sometimes one has to trade off some or postpone some longer-term initiatives to create room to manage the short term, he said.
“It’s a series of levers that you play with. What’s the right amount you can pass on? What is the right amount of stretch, you can create a driving cost down? “How much of that is this fundamental improvement in your cost structure? How much is deferred to better times,” Jejurikar said. He emphasised that one of the key takeaways for the Group in the past 18 months was that as an organisation, “we need a process to pick up the signals” which companies generally realise only being hit by the crisis. He added that but it will be possible to anticipate if “we know what are the potential disruptions at multiple levels in the supply chain”.
Jejurikar cited the example of the semiconductor issue, the shortage of which has hit the automobile industry globally. Anyone who was reading the geopolitical situation and the societal trends could see that there’s a huge move to telecommunication, there is a conflict happening with Taiwan and there is going to be a crisis around the availability of semiconductors, he said.
“And, some people saw that because they had a very good process to project, not just demand but multiple other factors. And, they started building inventory well in advance of the crisis. “So that I think it became one critical learning for us out of the past 18 months in creating a resilient supply chain, it is about reading and preparing for the signals,” he said. When organisations are fundamentally agile, open to inputs, transparent, and hence, adaptable, they can cope with short-term challenges and are much better equipped to do that besides building a better ability to see the future, Jejurikar said.
The group has business interests in various sectors such as automotive, farm and construction equipment, information technology, logistics, insurance, retail, hospitality and agri industry, among others.
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