Why Making India’s Value Chain Efficient Should be a Priority for Companies and the Country
By Prajakt Raut and Pankaj Bansal: Managing Partners — Caret Capital
At a glance:
The coming decade is a once-in-a-generation opportunity for the Indian corporations. However, business as usual with incremental innovation won’t suffice. Unless companies adapt transformative technologies, they will struggle to even survive, let alone thrive.
The Caret Capital Thesis:
For India’s growth story to be fully leveraged, the country and corporations need a comprehensive approach to making their value chain efficient.
The primary reason is that the way most corporations are organised, technology-enabled solutions are introduced in silos with a department or function creating solutions that address their most pressing business challenges and problem statements.
That approach was acceptable and working till now, when ~10–15% growth was considered good. But now, India is in an era where exponential growth is possible and necessary, and new entrants are disrupting existing business models.
It is now imperative for boards to create the organisational capacity to transform the three core components of the organisation’s value chain:
- Goods and Services Supply Chain
- Human Capital Supply Chain
- Infra and Assets Supply Chain
This requires company boards to drive a fundamental and holistic change in the way a company operates, with a significant change in processes, culture, technology and overall performance. Companies have to go beyond incremental changes and will need a comprehensive overhaul of various aspects of the business. Most certainly, without a transformative approach, current market leaders will find it hard to retain their leadership positions.
Industry leaders on what legacy companies need to do to stay relevant:
- Adopt cutting-edge technology and new business models or perish.
- Create the Capacity to Service Deep Rural Markets: (India’s rural economy is expected to be USD 4 trillion, the same size of India’s current GDP, when India becomes a USD 10 trillion economy).
- Become Truly Omni-channel: Else, they will lose ground quickly to emerging companies which start with an omni-channel DNA.
- Adopt Distributed Manufacturing and Supply Chain Resilience
- Adopt the new way of work like — on-demand and gig
- For the world to see India as a reliable partner, both as a sourcing destination and as a market, it will need three things — Political and social stability, Fair, transparent and predictable regulatory environment and adequate and tech-enabled Infrastructure for visibility and operational efficiencies
Sandip Das chairs Caret Innovation Labs — helping legacy companies adopt innovation.
New Realities Need New Technology Platforms
Till recently, consolidation for efficiencies of scale was the key business approach in most corporations. So, even companies that outsourced their manufacturing usually tried to work with one or two (or a handful) of large factories. Procurement was largely consolidated with a few trusted suppliers. Most current enterprise technology platforms are largely about synchronisation of their existing processes among a limited number of stakeholders. This won’t work anymore.
While it will be hard for large corporations to discard their existing ERP systems and technology platforms, they will need to quickly build the capacity to bolt-on use-case specific solutions on top of their existing platforms.
Neelam Dhawan is member of Caret Capital’s investment committee.
Corporations Need to Create the Capacity to do Several Quick Experiments and POCs
These experiments and POCs are imperative for corporations to adopt several technology solutions that comprehensively makes them ready for new market dynamics and the exponential growth opportunities.
Most organisations find it difficult to find innovative technologies and do quick POCs. Click here to know how Caret is helping corporations discover new technologies from across the globe, do POCs with the context of that corporation’s business dynamics and integrate these cutting-edge solutions into the corporation’s tech stack.
Old Business Models are Not Relevant in the Changed Market Dynamics:
Three examples where the market dynamics have changed fundamentally:
Rural Markets: Companies cannot service fragmented rural markets with very small demand individually via the traditional distribution channels models. It is just not practical or cost-efficient. Companies will have to fundamentally rethink the distribution models and disintermediate. Click here to see examples of how startups are enabling corporations to service deep rural markets.
Along with Sanjeev Shriya, Caret is creating an initiative to transform the economy of 50,000 villages by 2030.
Omni-Channel Model: To be omni-channel ready, brands need the agility to dynamically move stock from nearby micro-warehouses to where the need is — either in offline stores, dark stores of quick-commerce players or to fulfilment centers from where e-commerce fulfilment partners can service the demand. Click here to see examples of how startups are enabling corporations to transition to omni-channel models.
Adopt Distributed Manufacturing and SupplyChain Resilience: Supply chain resilience essentially means having a distributed supply chain. Right from procurement to manufacturing to distribution. New approaches like — near-shoring (being closer to markets) for resilience, nimbleness and sustainability — require corporations to shift from the old-world approach of mega factories to distributed manufacturing via micro-factories that are agile, flexible and capable of quickly adapting to changing market demands. Click here to see examples of how startups are enabling corporations to transition to distributed manufacturing.
Logistics, Warehousing and Manufacturing will be the Keys to Creating Millions of Jobs
India needs to create millions of jobs while ensuring equitable growth and social stability. Largely, three sectors — logistics, warehousing and manufacturing will play a critical role in India’s economy and for India to be seen as a reliable partner to the world.
Vineet Agarwal is member of Caret Capital’s investment committee.
Even for corporations, these three areas will be the foundation of competitive advantage and supply chain resilience, whether it is their own capacity or capacity that is leveraged on-demand. On-demand, which is the more efficient way (and undoubtedly more complex for organisations to handle), will therefore require technology-led orchestration.
Human Capital as Competitive Advantage: Companies that adapt the new way of work will create competitive advantage via their capacity to attract, curate, engage and leverage talent and human capital.
Corporations need to adapt to changing mindsets of the young workforce and the emergence of new business models like on-demand, gig work, hybrid/remote working, etc. These new models fundamentally disrupt the traditional ways of hiring, training, assessing, rewarding and retaining talent.
Companies that do this will be significantly better positioned to leverage the opportunities as India marches to a USD 10 trillion economy.
The Government of India is Creating an Enabling Environment
With favourable policies and cultural shifts that re-orient the government machinery towards a more enabling engine, the Government of India has shown the intent as well as walked-the-talk to help the world see the country as a reliable partner.
The Digital Public Infrastructure (DPI) are massive infrastructures that have laid a strong foundation for tech-enabling India’s economy for capacity optimisation and operational efficiency.
Rohit Bhayana is a member of Caret Capital’s Investment Committee.
In summary
India’s growth story is accelerating due to a variety of factors but will require making the entire value chain more efficient. This comprises goods and services supply chain, human capital and talent supply chain and infrastructure and assets supply chain.
Omni-channel model is becoming mainstream. Underserviced deep rural markets in India are the new frontiers for FMCG and consumer brands.
Now, there is an emergence of startups with services and technologies that are helping traditional companies survive and navigate the new market dynamics.
At Caret Capital, we are committed to nurturing and investing in category building startups that are making India’s value chain efficient.
Ankur Bansal is member of Caret Capital’s investment committee.
Caret Capital (Formerly known as Supply Chain Labs) is a Venture Capital fund that backs category building startups making India’s value chain efficient.
Caret 360 is the CXO community initiated by Caret Capital to help tech startups and industry discover each other. Collectively, the mission is to make India’s value chain efficient.
