Welcome to Procurement Game Changers, the podcast for procurement leaders that make a difference.
Today, we’ll be discussing how to build a sustainable supply chain. That’s why I have the great pleasure of receiving Kartik Iyer, a supply chain geek with more than 15 years of experience.
His professional expertise spans every field of supply chain management, which includes, but is not restricted to inventory handling, strategy planning, logistic control, and a few more.
He especially takes pride in his acumen for negotiations, including contract terms, pricing, and performance management.
An exceptional communicator and much loved leader, Kartik also dons the hat of a coach and motivational speaker. We’re glad to have you with us today. Welcome to the show, Kartik.
Thank you, Helene.
So Kartik, could you tell us what led you to procurement?
Well, that’s an interesting story, to be honest.
In fact, I still remember this was my final year of my engineering and I was being interviewed for a job position as a graduate engineer training, and the interesting thing was they basically asked me, they basically give me two options, if I would like to be in technical or if I would like to be in procurement, and the way I told them that I don’t want to be in technical.
So then I started interviewing for my procurement position and the interesting thing was this was the final interview with the vice president who was heading the procurement over there, and this is an automobile company.
So everything was going absolutely fine, and he basically asked me, do I watch any sports, and I said, “Yes, suppose I do watch cricket, football, and Formula 1.”
And he really interested in Formula 1 and he asked me, “So do you remember the last Grand Prix?” I said, “Yeah, I think it was a Belgian Grand Prix.” So this is back in 2006 if I’m not mistaken. So he asked me, “So who won the Belgian Grand Prix?” So I don’t remember the name of the driver.
I said, “I guess it was driver A.” So he said, “No, it’s driver B.” Then I think we had a small discussion about it and finally, I guess I was able to convince him that it was driver A, but as soon as my interview got over.
I just got out and we didn’t have smartphones at that time, so I had to go home and check who the winner was, and then I realized that it’s driver B and I was wrong and the head of procurement was right. At that time, I thought I’ve lost my job.
But to my surprise, about three months later, I got the offer letter, but the interesting thing is as soon as I joined, this was back in 2007, the vice president called me to his office and during our gentle introduction, he said that, “Do you remember our interview,” and I said, “Yes, I do,” and I apologized to him saying that “I’m sorry that I was wrong and it was you who was right,” but he said, “One of the reasons we hired you was you were able convince me even though you were wrong, and that’s the kind of conviction which we require in procurement,” not necessarily always that you’re wrong, but generally, the conviction which is required to speak to the suppliers, and I believe that’s how my procurement journey began.
Yeah, that’s funny. Just stand your ground. That’s a good one. Thank you for sharing. Let’s dive into this topic, and so every supply chain and procurement leader wants to create an unbreakable supply chain, one that’s reliable, resilient, and sustainable.
So it’s easier said than done, obviously, and the truth is that we can no longer afford to ignore the damaging effect global supply chains have had on the planet, and it’s time for us to take action.
So if you think building a sustainable supply chain is challenging and want to learn for those who that got there, you’re in the right place. Today, we will dive into practical advice for constructing a sustainable supply chain.
So buckle up, it’s time for your journey through practical advice from an industry pro. So let’s get started with basic, how would you define a sustainable supply chain?
What is Sustainable Supply Chain?
A sustainable supply chain is something where you start with something because what I believe is every country is in a different maturity curve across the globe because some countries are much far ahead, some countries are behind, but the most important thing is to understand to have a vision, that you have to be sustainable, specifically within the remote supply chain. So you need to start with a vision and then start with one block at a time.
You cannot expect things to change overnight, and specifically, if you’re looking at the Indian region and the subcontinent region, we are still quite far behind with reference to sustainability. I would say about 70% of India’s sustained or India’s energy is still driven by coal and fossil fuels.
But slowly, the country has a vision to change. The country wants to be carbon-neutral by 2070, and so it means that there are a lot of projects which are coming along. So at the same time, it’s quite important that you take advantage of these situations.
You start building a base, you start educating the suppliers, you start educating your customers in and around you because at this point of time where we are, sustainability comes at a cost. It doesn’t come cheap.
It’s only with the volumes and scales which will come in the future, you will see sustainability or the greener energies, getting more pocket friendly.
But at some point of time, the bigger organizations need to take a step ahead. They need to take a stand saying that it’s fine, that they are okay to pay more.
This goes to all the organizations across India or across other developing nations. It’s only when the bigger organizations see a future they start believing in. It’s the strategic suppliers, tier one suppliers and tier two suppliers, they will also start believing in.
So you need to make a start, and I believe that a lot of big companies have already started making a start. So this is where I believe it’s going to start and I think I’m quite looking forward for the future, and I genuinely believe that as a country, we are in the right way towards sustainability.
So it’s interesting you mentioned that, okay, each country at its own level of maturity and you can only assess where you start and where you want to go, and that’s the way moving forward. Why is it so important?
Why is it important? Because just assuming, just I’ll give you an example for Europe. So Europe has been quite far with reference to the entire sustainability effort, that the infrastructure is available or at least the companies or the governments are aiding in helping the infrastructure made available.
Majority of Europe’s needs as of today is coming from gas or nuclear power, which is comparatively less polluting. The way towards sustainability, I would say, I think way towards green energy is you move from, say, fossil fuel or, say, oil to gas. Gas is the biggest transition towards sustainable energies.
And hence, they have already started making the transition, but specifically, if you look at countries like India, I think they’re still a bit far ahead.
You also need to take into consideration the history. India is a huge country, I would say in terms of land mass or in terms of complexities, languages, is as big as Europe.
Even if you look at the history, I think specifically European countries and mostly the western European countries have started making this development 20, 30 years before, and so I think they’re much ahead in terms of the curve.
And if they want to be carbon-neutral maybe in 2030 or 2040, it is practically not possible over here, and second thing, you also need to take into consideration the purchasing parity of the country where most of the European countries average anywhere between I would say 40 or $50,000, and India stands at 2000, $3000 looking at the shared population.
So it’s very important that, of course, you need to first cater to the basic requirements and then you move ahead towards the sustainable journey, but as I mentioned, it’s extremely important to start it, start the journey.
Yeah, it’s interesting that you’re saying that. It’s true that in Europe, the fast-growing period is behind us and we have consumed quite a lot of coal and fossil fuels at the time, and so it’s much easier to reduce and optimize when you already accrue speed, I would say, even some would say that we are declining.
Much more difficult when you’re building a country and still improving the level of life of individuals and trying to make that harmonized among such a huge country, and you were saying it’s as big as
Europe maybe, but you’re three times as much as Europeans. So we are only 400 or 500 million people. So that’s quite a challenge. So the why it’s important is I think obviously, we’ve talked a lot about it in recent communications.
In Asia in particular, there were some major disasters linked probably to climate change and we’ll see things coming that more and more often in every parts of the world, and of course, I think that it’s important in that sense that we need to find another way to do it, but each country has to find its way that is not compromising its growth at the same time.
That’s why it’s so hard, I think in particular in emerging countries. So we discussed about that. Obviously, it’s important each country has its own way and structures and ambitions.
Now, if we look at a company that wants to lead the way, as you were mentioning at the beginning, the big companies should lead the way and show how it’s done and so on, what are the key elements that they need to put in place to achieve a sustainable supply chain?
First is a vision, and it’s extremely important that the company has the vision to ensure that this wants to go in a specific path. Second thing is look at the current possible solutions available in the market. As I said, in every country, you will have different kinds of solutions, different opportunities. At the same time, it’s super important to understand what is available in the market and how could these companies leverage these options. If you look at India, I know there is a possibility of using greener energies, and certain parts of India provides the electric city grid operators, provides green energy operations.
So maybe is it something which the big companies could purchase? Second option possibly is there is a big rail network, which mainly runs on electricity. Can these big companies use them to transport goods?
Third possibility I would say is especially even the big Indian [inaudible 00:12:23] (MNC) or they’re using electricity, which is center by the electric operators, can they possibly solarize certain part of their consumption?
How could we reuse the materials which have been produced by them? Can we recycle the waste and can we have a plan? Can we work with suppliers who are actually providing these opportunities?
This is one of the ways the companies could explore. Second important thing is I’m assuming that the big multinationals across the globe, they would be having a lot of experience working with the suppliers who have similar ports or similar vision or similar perspective on being sustainable.
So the big companies needs to adapt or learn from other countries or other regions and try developing suppliers in the local market and invest in these suppliers.
Invest not necessarily has to be in terms of monitoring value. When I say investments, it is basically training the suppliers, giving visibility to the suppliers, and taking them them outside.
Having the global suppliers come in, have meetings with them, having conferences with them, providing some kind of assurances on the business part, assume the supplier invests in these sorts.
Maybe I think once they attain a certain level of sustainability, maybe the companies can sign future contracts with them that they will start working with them at a specific date, and most important thing is giving the society of confidence that, or the suppliers a confidence that they are there to support them.
At the same time, I would say that it’s also important that to understand what the government thinks.
And possibly work with the governments to figure out if certain sustainable actions could be put into solution in certain specific areas so that both the suppliers and the MNCs could make use of them.
So these are some things which the standpoint needs to be looked at, but one interesting thought about sustainability, I would say even whether it’s in supply chain or procurement, it’s not only about going green, it’s also about ensuring that you have the right atmosphere made available.
This is in terms of the human resources, this is in terms of whether the companies, the local suppliers are complying to the local conditions, ensuring that there are no child laborers, ensuring that everyone has the right atmosphere to work, safe atmosphere to work.
So as big companies across any nations, they also need to figure out, work with suppliers who have similar thought processes and push the local community to ensure that the people who are working from them as a contractor or as a supplier have safe working conditions, are getting paid on time and getting the minimum wages, they’re having the right amount of tools to work, there is no hazardous or harmful atmosphere because of these working.
So this is also, I would say one part of sustainability which needs to be looked into rather than just only focusing on greener energies.
Absolutely. So if I resume, you need to have a vision of where you want to go. You need to explore your option in the market, in your local market to see what’s happening. You need to work you with your suppliers and develop them.
You need to work with the local authorities to make sure that not only they will build what is next and you can anticipate what they have in mind, and then you have to work on the mindset. This is kind of-
What you recommend. So we talked about, in particular, the suppliers, and you touched upon that a little bit, but how do you develop your suppliers who are indeed, and I’ve been discussing with some of your colleagues based in India, the structure and company structure in India is different from what we can see in Europe with a lot of family businesses and small suppliers.
How do you make them to take their part in sustainability at that point in the growth, in that point in the growing up as companies?
It’s important to start focusing… So you’re absolutely right that in India, it’s a lot of family owned businesses. Doing business is very emotional. There’s an emotional equation always associated with the business.
So you have different generations of people in the business. You’ve got someone who has close to about 40 years of experience, got 20 years of experience, got 10 years of experience, and you also have a lot of people who, the second or the third generation who start just coming to the business, and I think these people have a different mindset because they look at the world differently.
I personally believe that if you move at every five year scale, you will see people looking at things much differently. I don’t think a generation is 10 years anymore. I personally believe it’s half a decade.
So you need to start working with the younger generation, specifically on the supplier front, showing them the vision and ensuring that because they are going to be the one maybe in the next five to 10 years actually taking care of the larger businesses.
So it’s extremely important to take them into, show them the vision and show that they also start believing in the vision.
I would say, I think as some people say that global warming is a sham, but it’s a reality. At some point or time, it’s going to hit us if you don’t start doing things differently, and the younger generation are much aware about this. So I personally believe that start investing in the next generation of the same suppliers.
Second thing is give them the tools and the required ammunition to start working on this specific part. It could be different things. As I said, it could be training, visibility, it could be some assurances for future contract, some basic investments.
Sometimes it’s also important that bigger companies needs to invest in smaller companies or potential smaller companies so they could work and collaborate together in the future, and also at the same time, it’s not only about investing in your suppliers, it’s also about also discussing with the peers of the same organization.
Assume that if one company wants to bring a change and at the same time, the same similar kinds of companies wants to bring a change, so automatically, when there is volume, when there is scale.
So the suppliers or at least the infrastructure or even the government will start taking interest. The local bodies will start taking interest because they see the scale, they see that this is what the company wants, the bigger company wants. So that is something which you also need to start figuring out that how do you convince your level of companies to start having a similar vision? You need to collaborate specifically in the world of sustainability, and you need to collaborate initially so that you create an atmosphere and you create a market.
And once the market is set and once the market start maturing, you can start competing with each other because now you have both layers available in the market.
So that is a second thought process, which you need to figure out, and the third thing is, of course, as I specifically mentioned, that there should be a big focus on the human side of sustainability also.
Otherwise, if it’s only going to be processes and things on paper, and if you ignore the human side, at some point of time because at the end of the day, the companies are made by human beings and if you don’t make the right atmosphere for the human beings and the right culture, safety culture, the pyramid will collapse at some point of time.
No, it’s true. And when you mentioned that younger generation are more sensitive and aware what’s happening, I have three Gen Zs at home, so trust me. I know that. I know about that between 14 and 20, so yeah, absolutely.
You’re absolutely right. I think that maybe one of the mistakes that we’ve been doing is to either consider only the long term or only the short term, but sustainability is about long-term, midterm, and short term, and long term is obviously on their child shoulders and they’re the ones who will be there.
And if we get them on board and they’re frustrated, actually. We see all those movements worldwide and them striking and not going to school because they feel like politics and large corporation are not listening to them.
I think this is important enough to take that into consideration, and indeed, count on them already to be part of that movement. I think that’s a very smart move.
So you were saying so we work with the suppliers, we work with them in terms of developing them and then helping them, giving them tools. That means that procurement has a real role into that.
So how does procurement contribute and help to that greater effort practically?
Procurement has a huge role because there’s a big focus of sustainability towards procurement and globally, a lot of companies have a separate arm measuring sustainable procurement. So it’s a different thing that what I’m saying as a business, that we need sustainable suppliers and all these things.
As procurement, it is also a responsibility when it’s them who needs to actually start working with them and doing the groundwork, and they have to do the work at grassroots level. That’s the most difficult part.
A lot of times, what happens that you work with 10 suppliers and only two or three of them could actually come up, but you won’t know. You would’ve done the due diligences, you would have explored the markets, you would have got assurances for them.
But something at some point of time, things fall in between chairs. So it’s only when you work with, say, 10 or 15 people or suppliers, maybe three or four of them, and will actually come and start supporting you, but you won’t know which, two or three of four of them.
So there’s a huge effort which needs to be made by procurement at the initial state. Second thing is convincing them. It’s not an easy factor because see, it’s easier for bigger organizations to come and tell them that fine, we give you future contracts and we’re ready to pay more or the future, but it’s at the same time, if a company who has a turnover of assuming 10 million, and they make yearly, a profit of one million dollars, so their first thought process is should we reinvest, then make more money.
Or should we invest this in sustainability and I could possibly make money in the next five years? So I think the answer is a no-brainer.
They would first want to get to a certain level, but getting to a certain level, people at some point of time, because they want to see money on a shorter term, sometimes they lose the way and they really don’t want to go the sustainability way, and so it’s there where procurement plays a role to ensure that you work with them, you figure out a structure for them.
That could be a possibility that you work with the business and do some investments with them, which will help them grow better. This is where procurement plays a role. Last thing is on the procurement side, most of the companies, what they do is they do a supply segmentation.
And the supply segmentation, you have strategic supplies, you have level one supplies, you have level two supplies.
You also need to get some kind of knowledge sessions or some kind of thought sessions with them that if they don’t make the move today, it’s basically, it’s a game of carat and stick.
So if you also need to tell them that in case if we do not move the sustainability way in five years’ time or in three years’ time, they will lose their contracts. So you also need to put indirect pressure that this is the way the company is going.
Either you do the investments now or we work through it, or we will only work with suppliers who will have a similar vision as the big company.
So it’s not an easy thought process at this point, especially coming from a developing nation like India, but I still believe the vision is there, the thought is there, but it’s going to be a difficult journey.
It’s interesting. So I think it’s time to wrap up and to go to the takeaway. So if there was one thing that you would like a listener to remember for our conversation, what would that be?
India is changing and the thoughts are changing and the mindset is changing, so it means that the supply chain and procurement is also changing, and I personally believe that it’s changing towards the right direction.
The world needs to be patient and at the same time, and it also needs to be supportive. So once we receive the support from the world, I personally believe that’s maybe five years, 10 years down the time, India will have an extremely conducive infrastructure for sustainability and there will be opportunities where I personally believe that in a few years’ time, India could lead the way in terms of the sustainable procurement and supply chain.
So this would be my takeaway.
Thank you. Thank you for your time, Kartik. That was extremely interesting.
Thank you, Helene.
So now, it’s your turn to tell us about your experiences and your challenges when building a sustainable supply chain. Don’t forget to subscribe if you want to be notified when a new episode is out. Thank you for listening and I hope you enjoyed this episode, and if that’s the case, don’t forget to give this a thumbs up. So happy sourcing to you all. Bye, and au revoir.
PS: To listen to our previous PGC episode CLICK HERE!