Fortune Global Forum 2023: Reimagining Global Supply Chains And Manufacturing

Fortune

Natarajan Chandrasekaran, Chairman, Tata Sons  Raj Subramaniam, President and CEO, FedEx  In conversation with: Clay Chandler, FORTUNE

Transcript

00:00 Okay, well, according to the Brookings Institution, the world now has four billion consumers. I think

00:06 consumers are defined as people who have more than $12 a day to spend. That's about half the

00:12 world's population. Next year, 113 million more people will join the consumer class,

00:19 and India and China will contribute much of that. That growing consumer class,

00:24 plus rapid advancements in technology, the transition to clean energy, lessons learned

00:28 from the pandemic, those are all factors that are reshaping global manufacturing and supply chains.

00:34 We're going to learn how now from leaders of two truly iconic companies on how to lean into these

00:41 transformations to foster growth and resiliency within an organization. Natarajan Chandra

00:50 Sakkaran, we all call him Chandra. He's chairman of Tata Sons, the holding company and promoter of

00:56 all Tata Group companies, and Raj Subramaniam, president and CEO of FedEx. They're going to be

01:02 joined by Fortune's executive editor for Asia, Clay Chandler, for a fascinating conversation.

01:07 Please welcome them to the stage.

01:19 Thanks, Alan. Welcome. Thank you both for being here. It's such a privilege to have you with us.

01:27 As Alan hinted, the last five years have been a period of tremendous upheaval in global supply

01:35 chains. If you think about the major business stories of the last five years, that's got to

01:41 be one of them. We've had factor after factor compounding on each other to drive this change.

01:49 There's been things like natural disasters, earthquakes, weather, some of them climate-related

01:55 shocks to the system. There's been the pandemic that caused disruption in ports. Borders were

02:00 closed. Then there's this kind of rising geopolitical tension between the world's two

02:07 largest economies that has complicated trade and investment. Then you've got all this technological

02:12 change going on. On the positive side, you've had the rise of some smaller economies, Southeast

02:20 Asia and especially now South Asia, that have really opened their borders to business and

02:24 investment. Firms are all trying to capitalize that and negotiate that. It's just a fascinating

02:31 moment. You two are both on the front lines of that shift. I'm eager to hear your views

02:37 on what's happening. Raj, maybe I could start with you. FedEx famously launched in '73 with

02:44 400 employees and maybe 14 planes or something like that. It's now got a fleet of 650 or more

02:51 and 600,000 workers, which is amazing. I think I read that you deliver 15 million packages a day.

02:59 How have all these disruptions affected your strategy and your business?

03:05 Well, I think it's safe to say that the pandemic fundamentally changed the supply chain conversation

03:13 forever. Before 2019, if I had mentioned supply chain in polite conversation, I would have been

03:20 escorted to the door. Now it seems to be a talk show subject. I think historically, supply chains

03:28 have seen these bullwhip effects over time because of variabilities and so on and so forth.

03:36 Over a period of 20, 25 years, because of systems like FedEx and because of technological advancements,

03:44 those were relatively muted. Of course, there were some swings, but they were relatively muted.

03:48 Then came the pandemic. Now we are seeing the supply chain bullwhip effect that we have been

03:55 seeing for ages. It went up and then on the way down and it normalizing post-pandemic.

04:00 During the pandemic, especially the issues on supply chains were twofold. One was lack of

04:07 availability of parts for manufacturing. Second was simply bottlenecks, particularly on the ocean

04:16 front on the ports. A lot of the issues were, when you look at the United States, there were

04:23 100 ships waiting to unload. A lot of the issues were in that first 20 miles of the coast,

04:30 from the vessel operator to the crane operator, to the trucks, to the warehouse, and the lack of

04:36 information flow between all of these things. Once it got bottlenecked, it was very difficult

04:41 to unravel. That was what the issues were. From a FedEx point of view, we were flying over it.

04:48 We kept the supply chains alive, so to speak. As you record from the pandemic,

04:56 we distributed almost a billion plus vaccines. We moved so much PPE and other healthcare related

05:06 stuff during the pandemic. We kept it going, but most of the issues were on the port and primarily

05:11 in the ocean side. In a way, the pandemic was a boon to your business because there was this

05:17 explosion of e-commerce. Then as the pandemic ended, how did you adjust to that?

05:23 I think one way to describe that in macro terms would be, I think from before the pandemic,

05:31 e-commerce represented roughly about 16% of retail. During the pandemic, it rose to 22%.

05:39 That was a significant increase. That's now down to about 19%. It's stabilizing. If you actually

05:48 think about it, if there was no pandemic and you look post pre-pandemic to where we are today,

05:54 the trend would be kind of okay, except that we went through this cycle here. I think that's

06:00 where we are. I think we are kind of normalizing to levels where we would have been had there been

06:08 no pandemic, especially on e-commerce, but that was in the middle, up and down.

06:12 I want to ask you, Chandra, a little bit, if I could, about India and where India fits into

06:18 this equation. We have seen increasingly global manufacturers take a look at India that they

06:24 haven't been willing to do in the past. Apple, for example, has been willing to do that.

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