I interviewed Ram Raghuraman who discussed Procurement & Supply Management in India - Challenges & Opportunities.
Hi Dustin, glad to be talking to you today.
As I try and answer that question, it is important we understand the evolution of the Procurement function. There have been 4 major upgrades in strategy and function of Procurement as it continually evolves to address the changing internal and external demands. During the initial days Procurement was a purely clerical function operating like an administrative center– it then evolvedinto a Cost Center, with the primary focus being to lower costs. Closer the 21st century, Procurement has morphed into a Profit Center with emphasis on analytics and Total Cost of Ownership and in the cases of certain mature organizations evolved into a Shared Service Provider contributing to both the top and bottom line. In my eyes, this is a four level hierarchy that defines Procurement maturity – Administrative Center – Cost Center – Profit Center and Shared Service Provider. Even the term Procurement is slowly fading away and is being replaced by the more strategic and broader scoped Supply Management.
Coming to India, the Procurement function is still quite a ways away from operating as a Shared Service Provider, they are somewhere in between levels 2 and 3 – I find a lot of companies beginning to invest in technology and focus on improving value rather than concentrating solely on costs. However, suppliers are not yet viewed as partners and there aretoo few collaborative efforts – the big companies practice it somewhat, but as you go down the tiers you will find that there is still a lot of opportunities to improve.
Why is it important – who should care?
Beneath the shiny exterior of Corporate India, there are a few chinks that need to be identified and ironed out. While the bigger companies have policies and processes to eliminate inefficiency and unethical practices, they still abound in the smaller companies which are a vital part of the Supply Chain. This is important to understand for companies that operate in India as well as those that source from India. They should look to increase their visibility into the lower tiers of their supply base and invest in mechanisms to track and enforce compliance. Given the abundance of low-cost resources, Indian companies have never had to focus on efficiency as a means to add value – but with rising costs and weakening global demand, companies are now forced to take a closer look at improving productivity in their Supply Chain and elsewhere.
Small and Medium enterprises in Europe and North America should look to tap into the skilled labor market in India especially since the cost of resources is still very low compared to what you will find in developed economies. From a Procurement and Supply Management perspective, organizations are moving a lot of tactical functions to India – Analytics, Category Management, Indirect and Tail-spend management, Sourcing Support, Contract Management, Compliance & tracking to name a few and I see that trend continuing to grow in the coming years. The larger organizations have been able to do this successfully; I see a great opportunity forSME’sto replicate this proven model and increase shareholder value.
Challenges and Opportunities:
I will talk about the opportunities first. At a macro level, over the last decade India has become a strategic focus for countries and organizations worldwide. There is a huge pool of young, hungry and professionally qualified Indians in the job market – in fact, more than 65% of the total population of India is under the age of 35 with 50% less than 25. Over the next few decades, India will have over half a billion employable people.This is an important statistic to consider not only for companies looking to outsource to India, but also for global organizations that are setting up shop in India to cater to the Indian market. Companies should look at evolving their culture and policies to adapt to a younger demographic as they look to attract and retain talent.
Infrastructure, corruption and bureaucracy continue to remain a challenge; however several positive steps have been taken to address this in the recent past. India now has a government committed to encouraging Foreign Direct Investmentand has made several policy changes to make it easier to do business in India.For example, starting April 2016 India will have a uniform Goods and Services Tax across the country to replace the myriad taxes levied by the state and central governments – this would be a significant step in the indirect taxation reform. The government has also identified infrastructure creation as a central part of its road map for economic growth with a multitude of projects underway in building roads, high speed trains and expanding ports. Several new power plants have been commissioned to address the burgeoning energy requirements and an ambitious project to develop 100 smart cities is also underway.
India hopes to become a global economic powerhouse within the next few decades and I see no reason why it can’t!
I am the Founder and Principal at BCube Global Solutions based in Chennai, India – we provide a wide range of solutions in Procurement and Supply Management to companies across the world. You can find us on the web at www.bcubeglobal.comPrior to founding BCube I was based in the US working for an earth-moving equipment manufacturer in a number of roles in Supply Management. Thanks to the nature of my roles, I’ve worked with companies across the globe, especially in NA and Europe as well as in China and India. I have an MBA in Global Supply Chain Management from Purdue University and Bachelors in Computer Science and Engineering. In addition I am alsoa CPSM - Certified Professional in Supply Management.I’m a Director at ISM India, an affiliate of the ISM USA which is the oldest and largest supply management institute in the world. This helps me stay in touch with the latest global trends in Supply Management and practice lifelong learning, which I am a big proponent of.
I am very passionate about fitness and traveling, I like exploring various cultures around the world. Sports continue to remain a big part of my life – I play amateur cricket over the weekends and follow football and soccer.
About Ram Raghuraman
Founder, BCube Global Solutions and Director, at Institute of Supply Management (ISM) India