By Pawan Kumar
The consumer durable industry is among the key sectors of an economy that are driven by consumer sentiment. As a result, it was not surprising that when COVID-19 struck, it was one of the most impacted industries. The consumer durables manufacturers were found off-guard and reeled with disrupted supplies due to the pandemic-induced factory shutdown and disruption in supply chains. Although the sector has almost recovered from the COVID-19 onslaught, it is still facing challenges like a shortage of semiconductors and dependency on China. These are the two most crucial supply chain issues for the sector.
Finding ways around these challenges is critical for the consumer durable industry’s long- and short-term success. The industry expects a substantial jump in numbers in the coming months during the festive season. According to a report, consumer durables and home appliance companies expect a potential growth of up to 35% in sales during the festive season.
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The industry is expected to go full throttle on online and offline channels amidst the improved consumer sentiment. However, the semiconductor shortage and dependency on Chinese suppliers is a challenge that will take some time to be resolved. It is interesting to note how the industry manages its supply chain in such a scenario. Here is how the consumer durables industry is tacking the supply chain issues:
Better alignment with suppliers
The past two years have highlighted the importance of better alignment with global supply chains and suppliers. Consumer durable manufacturers continue to increase engagement with their suppliers to meet the pent-up demand. With better communication and understanding of the production schedule, suppliers can meet the increased demand for materials and finished products in time.
Focus on Indian manufacturing partners
An increased number of consumer durable manufacturers rely on Indian manufacturing partners due to the uncertain global ecosystem and the thrust on self-reliant manufacturing. As a manufacturer has the support of domestic suppliers, the company is in a better position to handle the supply chain issues in the process. There is an increased demand for reliable suppliers in the consumer durables industry. The focus on Indian manufacturing partners has helped build a robust finished product inventory to meet the increased demand.
Buffer stock of popular products
Building a safety stock of popular products is one of the most preferred routes to handling supply chain challenges. While this strategy has further pushed the demand for semiconductors in the global market as most manufacturers ordered more than the current requirement, consumer durable companies have built buffer stock for products that attract a high demand during the lean period. As consumer durables manufacturers continue to rely on this strategy, it is expected that consumers will be able to upgrade their home appliances without much wait.
Better coordination with service providers
Apart from ensuring better coordination with the suppliers, a consumer durable manufacturer must have better visibility from service providers. As a result, consumer durables manufacturers are working closely with global service providers for the timely arrival of vessels in India. It helps ensure the supplies are on time and results in improved efficiency in business operations.
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These are some ways the consumer durables industry handles supply chain issues. The support from the government in streamlining the supply chain issues has also been praiseworthy. For instance, the government has recently announced the National Logistics Policy, which is expected to reduce the cost of logistics and develop a data-driven support mechanism for building an efficient supply chain. The government will likely continue to push the Indian industry to move up in the global value chains and develop domestic capabilities to boost the manufacturing ecosystem for consumer durables in the country. (The author is CEO, Elista. Views expressed are personal.)
