We need to find ways to be more helpful to our customers, take our people along in this journey by transparently discussing with them about the situation and conveying that all of us are in this together
DATE OF INTERACTION: April 11, 2020.
Where were we at the time: This talk was held two weeks into the nationwide lockdown. Confirmed Covid-19 cases in India during this time had crossed 7,000. Hospitals and healthcare workers were gearing up for an uncertain future. All factories and production lines, barring a few that were making essential supplies like hygiene products, PPE and food items, had come to a standstill. Lakhs of migrants from the major cities had started their march home. Work-from-home was starting to become a reality for millions of public and private sector employees, except those battling on the frontlines of the epidemic.
It was during times of extreme despair and unparalleled uncertainty, when we held this talk. We were fortunate to speak to two experienced and battle-hardened industry leaders – Mr TK Ramesh, MD & CEO, Micromatic Machine Tools, and Dr Rakesh Sinha, Founder & CEO, Reflexive Supply Chain Solutions
This interview was conducted over the web and was joined by over 100 attendees from all backgrounds: senior managers, company founders, academicians and students. An edited, abridged version of the talk follows the Key Takeaways segment (which provides the highlights of the interview). The detailed interview that follows gives a deeper perspective:
KEY TAKEAWAYS
MR. TK RAMESH
- The MSME sector, which forms the largest base and employs the largest number of people, is the hardest hit. It is also the sector that buys a lot of capital equipment. A lot of value-add and job generation happens in this sector as there are a lot of big and small companies in this sector that export goods. There’s a great amount of disbelief and shock among people in the manufacturing sector.
- The most important indicator of demand sensing in capital goods business is the prevailing and expected consumer sentiment.
- It is hard during such times to predict anything, but the larger expectation appears to be that in the short term, markets are going to come back to only about 40-50 percent [of the pre-Covid state of the economy]. I say this not only from an Indian market’s perspective but also from that of what’s happening in Europe and China.
- Globally, it’s still too premature to predict how things will go, a lot will depend on the movement of people and goods, or the regulations and the financial stimuli that different economies will put in place in the coming months.
- Many companies and industries will have to deal with this crisis through the application of what is called a Five R methodology that comprises the following stages: Resolve, Resilience, Return, Reimagination, and Reform. Resolve and resilience are about dealing with the crisis, looking at cash, inventory, cost, and people. This is the stage where the bigger OEMs and the MSMEs are; companies who are trying to look at how to best take care of their people and business at this point in time.
- One thing that’s very different this time from the supply chain disruptions of the past like the Icelandic volcanic eruption [or the Fukushima nuclear accident] is that the accidents impacted one or two geographic locations, but this crisis has impacted everyone, everywhere.
- With the global supply chain being affected, it’s going to get worse but I believe that this would also impel the governments to do things better. If you look at India’s vehicle density as a measure of the number of vehicles to people ratio, it’s still far lower than what it is in the developed countries. The creation of infrastructure in the interiors of the country will create job opportunities, and that will see transportation becoming one of the most important sectors in India.
- The whole information overkill has been there for at least the last couple of years. Moreover, we have always had more information than what we could handle: the only difference was it was in the books and on shelves and in files and papers; it couldn’t jump out at us. We had to look for it. That scenario has changed with all of us wedded to our cell phones. I believe it has more to do with human behavior rather than the flow of information itself.
- Today, people who are beginning their careers see entire professions disrupted time and again. Therefore, people of the young generation will need to reinvent themselves accordingly. We see that in the IT sector, programming languages [in vogue] change overnight. With developments in Artificial Intelligence, you know that anything that follows application of data and logic can be automated. So people who are beginning their career, should be ready to keep reinventing themselves at least once every three to five years. Of course, everybody has to become more and more entrepreneurial and learning skills for professional survival.
- Two thousand years ago, what a person needed to survive was to know where his food was going to come from the next day. As professionals and the way technologies are changing, we need to get into that kind of mindset, and be prepared to reset accordingly.
- We need to find ways to be more helpful to our customers, take our people along in this journey by transparently discussing with them about the situation and conveying that all of us are in this together.
- We have had many difficult times before and if we really look back on history at any point in time, whenever difficult things happen, they give way to better things. I personally believe that yes, these times could last a little longer, there would be some sacrifices that people will have to make, but I strongly believe things will get better and we will all come out stronger.‘
DR. RAKESH SINHA
- Firstly, let us all admit that this is a real Black Swan event, which nobody could have predicted. So all we can do is to respond to the challenges that we are facing every day now. In this case, the disruption is both on the supply side as well as on the demand side.
- Companies which have relatively good demand-sensing mechanisms in place are able to sense what type of demand is coming from the retail outlets and accordingly from the distributor level. These companies are able to respond better to the crisis.
- There is definitely an information overload and we can’t wish it away. It’s really up to each one of us to separate good information from bad – there are some good things which appear from time to time even from unknown sources. It depends on the individuals to decide how they can be discerning enough to pick up what is good for them and not waste too much time reading each and every bit that comes from each and every person.
- Many of the youngsters can take to their own ventures once they come out of college. I believe this is a much better time for a startup because in all this turbulence, when the future is so much uncertain, the business models need to be reinvented so do the delivery models.
- I empathize with the transportation industry because they have faced a lot of disruption especially during the early part of the lockdown when the trucks were not allowed to move. To add to the woes, the drivers migrated back to their villages. Now thanks to a lot of good work that is happening in the transportation industry, things are getting back to normal.
- Many times, the traditional logic does not apply, especially in these conditions, but our heart tells what is the right thing to do, and we should go ahead and do that.
THE TALK
How has Covid-19 impacted the respective manufacturing and supply chain sectors in terms of the functioning of plants, and supplies?
Mr. TK Ramesh (TKR): We are in the capital goods business. We manufacture machines that make parts which go into sub-assemblies used to make final products, be it cars or aircrafts or, say, earth-moving equipment. We are in the B2B sector, which has been badly hit.
The MSME sector, which forms the largest base and employs the largest number of people, is the hardest hit. It is also the sector that buys a lot of capital equipment. A lot of value-add and job generation happens in this sector as there are a lot of big and small companies in this sector that export goods. The suddenness with which the Covid-19 outbreak happened, followed by how the industry came to a standstill, is something I have never witnessed in 40 years of my career. There’s a great amount of disbelief and shock among people in the manufacturing sector. This is a one-of-a-kind situation that I don’t believe any of us have experienced before. This is my impression of what’s happening.
Dr. Rakesh Sinha (DRS): I can speak from the perspective of the FMCG industry, a B2C industry. Firstly, let us all admit that this is a real Black Swan event, which nobody could have predicted. So all we can do is to respond to the challenges that we are facing every day now. In this case, the disruption is both on the supply side as well as on the demand side. On the demand side, consumers who are now locked down in their homes, do have to go out to buy essential groceries which include some FMCG products. However, they are rightly minimizing the store visits. One of the implications of minimizing the store visits is that every time they go to the store, they buy products in bigger volumes or numbers. Also, certainly the demand for many hygiene products including hand sanitizers etc. has gone through the roof.
On the supply side, during the first week of the lockdown, there was a lot of confusion, which has still not been completely sorted out – whether we can run factories or need permission to do it or how long would it take to get the permission, can the workers come to the factory, who issues passes and how long does it take to get those passes and so on. Everyone’s units along the supply chain needs to run – whether they are of our vendors, or the packaging-material suppliers, or the raw material suppliers. And their workers need to come to the factories. So the first one week was pretty turbulent but after that things started getting sorted out.
In the logistics sector, there was a complete ban on interstate movement of trucks – they came to a standstill wherever they were on the highways. This was sorted out after some time but now things are becoming more normal compared to how it was at the beginning of the lockdown.
Now there are a couple of things that companies can do: one, improve the ability to sense demand. Companies which have relatively good demand-sensing mechanisms in place are able to sense what type of demand is coming from the retail outlets and accordingly from the distributor level.
These companies are able to respond better to the crisis. Companies that don’t have good demand-sensing mechanism in place are really struggling in the dark.
Two, after you sense the demand you need to respond to it much faster, which requires flexibility in the entire system. Flexibility in sourcing for manufacturing, in the ability to scale up the lines from one product to several products [or vice versa], and flexibility in distribution strategy.
TKR: Yes. Demand sensing is key. It is as significant but a bit more complex from a B2B perspective. For example, in the capital goods business, the demand for parts are going to come from the anticipated sales of, say, cars, or white goods. The component manufacturers, the sub-assembly manufacturers or the OEMs work with certain predetermined levels of stocks. Therefore, inventory levels and cash flows become important criteria in determining the minimum-order quantity of stocks. The most important indicator of demand sensing in capital goods business is the prevailing and expected consumer sentiment. For example, at present hand sanitizers and soaps have to be bought whether one can afford it or not. But it is not expected or certain whether anyone will buy a car or take public transportation. I think that the industry may not get a sense of clarity on demand for another twelve weeks or so. Maybe we will get a better idea by June or July [Mr. Ramesh’s instinct was right. It was only around mid-June that non-essential buying started to kick into first gear. – Editor.]
It is hard in such times to predict anything, but the larger expectation appears to be that in the short term, markets are going to come back to only about 40-50 percent [of the pre-Covid state of the economy]. I say this not only from an Indian market’s perspective but also from that of what’s happening in Europe and China. China is slightly ahead of the curve. It appears that they are getting back to normal with industries in Wuhan having begun functioning to an extent around the first week of April.
Globally, it’s still too premature to predict how things will go, a lot will depend on the movement of people and goods, or the regulations and the financial stimuli that different economies will put in place in the coming months. Many companies and industries will have to deal with this crisis through the application of what is called a Five R methodology that comprises the following stages: Resolve, Resilience, Return, Reimagination, and Reform. Resolve and resilience are about dealing with the crisis, looking at cash, inventory, cost, and people. This is the stage where the bigger OEMs and the MSMEs are; companies who are trying to look at how to best take care of their people and business at this point in time.
Which sectors have been the hardest hit in India?
DRS: From a manufacturing industry perspective, all the sectors have been hit whether it’s the consumer durables or the automotive sector as the demand has almost collapsed. Just think of the summer coming in, and if the demand for ACs and such products drops, that will set into motion a chain reaction – the industry will take quite some time to come back up. The demand for daily essentials, understandably, has gone up.
TKR: To add to that, a lot of consumption of goods happen when the service sector [of an economy] is robust whether it is the travel or the hospitality sector. As things stand now, none of these sectors are going to restart until absolutely essential, that will compound the slack in demand of manufactured products. Even after the lockdown opens, people are not going to come back the next day with full vigor to the markets, the movie theater or the hotels. Which again gets connected to consumption of petrol and therefore to the oil price and so on. One thing that’s very different this time from the supply chain disruptions of the past like the Icelandic volcanic eruption [or the Fukushima nuclear accident] is that the accidents impacted one or two geographic locations, but this crisis has impacted everyone, everywhere. For example, even in China, where some factories have begun to function, work cannot resume as before because the international cargo sector has not yet opened. This crisis has impacted every sector, everyone across the board.
The automotive sector is the biggest buyer for the manufacturing B2B industry and it has been the worst hit. Do you feel this crisis is going to affect it even more since it is already struggling with a lot of underlying issues like a quick transition to BS-VI norms and slowing growth of recent months?
TKR: With the global supply chain being affected, it’s going to get worse but I believe that this would also impel the governments to do things better. If you look at India’s vehicle density as a measure of the number of vehicles to people ratio, it’s still far lower than what it is in the developed countries. The creation of infrastructure in the interiors of the country will create job opportunities, and that will see transportation becoming one of the most important sectors in India. To answer your question, yes, this crisis has hit the automotive industry hard in the short run – the short run could be anywhere between one year to 20 months – but I believe it will pick itself up again to create greater opportunities. So it’s not just doom and gloom.
How long could this crisis pan out and how are you and your peers in the industry dealing with the whole situation and what do they expect as to how when this cloud will clear away?
DRS: Initially the sentiment wasn’t so bad but over a period of time once everyone understood the gravity of the situation, people started getting much more serious. But now I think people are coming out of panic and they are taking more considered and informed decisions now as to how to go about it hereon forward. I see a lot of work being done by people in the right direction, so I’m happy about that.
To what degree do you attribute the sense of panic to the infodemic [the flood information from all corners] whether it is the social media or WhatsApp or the mainstream media?
TKR: The whole information overkill, and I’m talking from a business and economic point of view, has been there for at least the last couple of years. Moreover, we have always had more information than what we could handle: the only difference was it was in the books and on shelves and in files and papers; it couldn’t jump out at us. We had to look for it. That scenario has changed with all of us wedded to our cell phones. I believe it has more to do with human behavior rather than the flow of information itself.
You do a lot of things today because it’s easy and it doesn’t cost. So one receives some information and sends it to 200 people whether it matters or not. I’m not making a judgment about us, but the infodemic has more to do with human behavior rather than the information itself.
Coming back to your question from a long-term perspective, I believe information should be based on data. Now there must be some discerning methodology of looking at what is good data and what is not. Yes, the hyper-connectivity is giving an opportunity for more people to participate in the circulation of information, and because there is participation of a larger number of people there is larger amount of confusion. I don’t know if this is the right comparison now but if you ask anybody anywhere in the world what is the best form of government, I believe everybody would say democracy now. But democracy also means [generation of] chaotic information. We could allow for this hyper-flow of information to find its own level and I think it will happen at some point.
DRS: There is definitely an information overload and we can’t wish it away. It’s really up to each one of us to separate good information from bad – there are some good things which appear from time to time even from unknown sources. It depends on the individuals to decide how they can be discerning enough to pick up what is good for them and not waste too much time reading each and every bit that comes for each and every person.
What is your advice to entry level professionals and those were starting their career on how to come out best from this situation?
TKR: WhatI strongly believe in from my readings and from what I have seen – for the older generation, life for us was largely divided into two time zones; there was a period of time when you were given a formal education and then you entered the workforce.
Today, people who are beginning their careers see entire professions disrupted time and again. Therefore, people of the young generation will need to reinvent themselves accordingly. We see that in the IT sector, programming languages [in vogue] change overnight. With developments in Artificial Intelligence, you know that anything that follows application of data and logic can be automated. I’m talking about a horizon of the next 30-40 years, there are going to be major disruptions from a human-skill perspective, whether it is in the fields of technology or science or even humanities and arts. So people who are beginning their career, should be ready to keep reinventing themselves at least once every three to five years. Of course, everybody has to become more and more entrepreneurial and learning skills for professional survival. Two thousand years ago, what a person needed to survive was to know where his food was going to come from the next day. As professionals and the way technologies are changing, we need to get into that kind of mindset, and be prepared to reset accordingly.
DRS: Yes, flexibility and the willingness to learn things on the go are very important skills. One more thing I would like to add is that many of the youngsters take to their own ventures once they come out of college. I believe this is a much better time for a startup because in all this turbulence, when the future is so much uncertain, the business models need to be reinvented so do the delivery models. The youngsters can do it much better as they can find out what really works and what doesn’t. This is the right time to do a startup. Most billion-dollar startups started during and after the financial crises [of 2001 and 2008]. I would advise them to take the plunge and work out something which is going to be much better suited to navigate such turbulent situations than the known business models.
These are challenging times for the young generation where they are entering the industry at a very turbulent time and there are certain ways of navigating it. I’m sure they would take the right steps, for I don’t see them getting panicky except in a few cases when internships got cancelled at the last moment.
It’s a difficult time but they would find their way out – they are quick on their feet and smart and quite knowledgeable and intelligent.
Audience Question: How can the machine tool companies, particularly the SMEs, deal with this crisis?
TKR: The machine tool industry is not essentially a mass producer; it is largely dependent on people. The first and the foremost thing is that we really have to look at how best to collaborate with your people, making them a part of your core team whether it is about the necessary financial savings, or application of lean management practices.
The second most important thing is capacity utilization, which is going to be a big concern for our customers. In the immediate future our customers would be focused on getting their respective companies back into operations – this is where we can really serve our customers with the expertise that our people have. We can help them start up quicker and easier, help them to retool, help them with flexibility as Dr Sinha pointed out. For example, if they want any modifications in their machine to transition from making, say, motorcycles to tractors, as machine manufacturers we can help them retool their machines.
Third, there are always areas you can find where cash flows or cash or inventory is stuck. So you can use this time to time to reduce waste and become more lean.
In summary, we need to find ways to be more helpful to our customer, take our people along in this journey by transparently discussing with them about the situation and conveying that all of us are in this together; that if we need to emerge successful it’s not just me or you or the company or our customers, we have to do it together. These are some of the things that we as machine tool manufacturing companies need to do, and do them very transparently over the next 12 to 16 months by which time we are able to understand what is going to be the new normal.
Audience question: We are from the transportation industry. My question is what steps we have to take to come out of this critical situation?
DRS: I empathize with the transportation industry because they have faced a lot of disruption especially during the early part of the lockdown when the trucks were not allowed to move. To add to the woes, the drivers migrated back to their villages. Now thanks to a lot of good work that is happening in the transportation industry, things are getting back to normal. One good thing is that the trucks are plying much faster on the highways for there is hardly any traffic. Secondly when it comes to distributing the products within the cities, earlier there used to be restrictions that the trucks couldn’t enter the main city during peak hours; nowadays those restrictions are in my understanding not there in a lot of cities so it’s much easier to distribute. The question really is how fast can the transportation companies double up and increase the distance travelled per day. Most of them do about 350 kilometers a day. Can they do 500 kilometers a day? So the faster transit time, a better ability to distribute within the city, is what is coming out as the two key things that we are looking forward to from the transport industry.
An audience member shares his experience: Within our company we have made a task force and risen to the occasion. We are supporting the industry in a big way in moving a lot of essentials all across the country. But we are encountering various challenges. The roads are free of traffic but the interpretation and implementation of government guidelines on those roads vary from state to state and city to city so even if the truck driver has a permit, the local authorities have no hesitation in stopping him and parking him for up to six hours even if he is carrying essentials. These are some hazards which we are facing. Perhaps things will settle down a bit more we hope.
TKR: One thing that we have to understand and realize is that this is a medical pandemic but when it comes to enforcing social distancing, we use dated laws like section 144 and use terms like curfew. The definition of these words in the minds of police force is something very different from what the situation demands today. These words are originally used to curb unrest. Therefore, the lathis come out. Now these are again learnings that we are also seeing at every level.
Any conclusive remarks, may be an advice to viewers on how to cope up during these times?
DRS: Do what you think is best. Many times, the traditional logic does not apply, especially in these conditions, but our heart tells us what is the right thing to do, and we should go ahead and do that.
TKR: Dr. Sinha is right, please follow what your heart says. We have had many difficult times before and if we really look back on history at any point in time, whenever difficult things happen, they give way to better things. These are the times that really bring out the best in us. I personally believe, that yes, these times could last a little longer, there would be some sacrifices that people will have to make, but I strongly believe things will get better and we will all come out stronger.
INDUSTRY SAMURAI
TK Ramesh, MD & CEO, Micromatic Machine Tools
Mr. Ramesh is the Managing Director and CEO of Micromatic Machine Tools Pvt. Ltd., the marketing arm of the Ace Micromatic Group.
Mr. Ramesh, a Mechanical Engineering graduate from BMS College of Engineering with a PGDBA from Bangalore University in 1984, began his career in BFW and has over 30 years of experience in Machine Tool marketing in the domestic and international markets.
Ace Micromatic Group is India’ss largest machine tool conglomerate with a market
presence in several countries across Asia, Australia, Middle East, North & South America and Europe. Formed with the intent to provide its customers a one stop shop for all machining needs, the group specializes in the manufacturing of CNC controlled turning, milling and grinding machines along with subsystems like tool turrets, ATC etc. Building on its expertise in machine tool manufacturing, the group has further diversified into manufacturing of components for various industry segments. In addition, the group also offers products to enhance its customer’s productivity through real time machine monitoring.
Dr. Rakesh Sinha, Founder & CEO, Reflexive Supply Chain Solutions
Dr. Rakesh Sinha is an alumnus of IIT-BHU, NITIE, IIT-Bombay and Harvard Business School. His passion in Supply Chain Management got him the first doctorate in this field in India.
He has decades of rich experience with Godrej Consumer Products, a leading FMCG company, holding leadership positions in the areas of Manufacturing, Projects, Strategy, Information Technology, Marketing and Supply Chain Management with responsibilities across India, US, Indonesia, Africa, Argentina and Chile.
Dr. Sinha is also a Chartered Financial Analyst and a qualified Cost Accountant, complementing his operational skills with astute knowledge of key financial concepts like EVA and Activity Based Costing.
His pioneering work in the area of TOC and the mapping of DDMRP logic in a standard ERP has been widely recognized. He has won several awards for his work, including Platinum Level International TOC Excellence Award by TOCICO, Digital Business Leader Award from IDC, Distinguished Alumnus Award from NITIE, Lifetime Achievement Award from ISCM, and another Lifetime Achievement Award from WBC.
Dr. Sinha is passionate about spreading the knowledge of TOC and DDMRP across industry and academia. He is closely associated with leading business schools like NITIE, SPJIMR and Welingkar Institute of Management, advising them on the SCM curriculum.
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