Supply Chain Fundamental Rethinking

An unprecedented inflation in commodities has created an equally unprecedented situation for enterprises. In India, the WPI has consistently been in double digits over past 15 months or so & CPI has been in single digits, indicates that the enterprises have absorbed larger part of input cost inflation. Supply Chain teams, particularly the Sourcing / Procurement teams have experienced a phenomenon that most of the practitioners have never experienced within their working life - a pandemic followed by sudden spurt in demand followed by trade barriers followed by geopolitical conflicts and in all that an unforeseen material inflation. Post the first few months of pandemic, commodity prices have shot out of the roof, post the Ukraine - Russia conflict even Oil is up 60% or so, agricultural commodities in some case have doubled. During these challenging periods enterprises ability to pass on the input cost to its end consumer has been limited due a post pandemic recovery period. Now wit...

"Elephants don't change directions very often, but when they do, it takes a lot to make them turn back again". Commodities have a lot in parallel to that. History exhibits that commodity cycles don't change very fast but when they change the direction its a multi year phenomenon with probably some hiccups on the way. Supply Chains from various industrial sectors will need to align themselves differently. The alignment & much needed adjustment with the commodity super-cycle is a function of multiple things. a. Commodity cost contribution to the overall Supply Chain cost - While many believe that Steel price increases would hurt badly, its not true for all equally. e.g. A Supply Chain analyst may believe that in case of Ship building industry the steep increases in steel prices would hurt. I was listening to the CMD of Garden Reach Ship Builders & Engineers, where he said that steel co...