Prior to the COVID19 pandemic, manufacturing enterprises in India often relied on a highly fragmented supplier base. With few exceptions, replacing hundreds of vendors with a few strategic ones was not common. Procurement teams often made multiple small value purchases. Often, and perhaps by design each supplier got a small piece of the procurement pie, depriving them of opportunities to scale up. No supplier had the incentive to think beyond the purchase order at hand and invest in best practices, process improvements, systems and customer-dedicated investments.

Communication with suppliers was done largely through paper records, emails, and spreadsheets.  While many firms used ERP systems, few suppliers were integrated seamlessly with those ERPs.

The pandemic severely tested this inefficient system. Overnight, suppliers were shut either due to regulation or due to shortage of manpower. Communication channels broke down. Working capital was a challenge. Order tracking and visibility was non-existent. Finding alternate suppliers was a slow and arduous process. In short, the supposedly solid supplier ecosystem, wasn’t quite what it was made out to be.

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