The Supply Chain Lesson

As we move
toward commoditization of IT products, particularly PCs, margins assume paramount
importance. With competition gaining pace in Asia and the difference between one brand of
PC and another fast disappearing, what really matters is the efficiency with which the PC
is produced and reached to the consumer who demands it, quickly, faultlessly, and
efficiently. The demand satisfaction chain has to be finely tuned and ruthlessly
efficient. In many global PC vendors, this is the real competitive edge, not of getting a
fatter margin by selling at a higher price but rather by selling at a lower price but
simultaneously manufacturing at a far lower price and thus earning margins. Across the
corporate boardrooms of PC companies, the corporate strategy is supply chain management.

This is not just true of PC companies, but
also of other non-IT enterprises which are using IT as a key factor of production. In many
an FMCG company, the main differentiation will be efficiency of production and
distribution rather than a higher sticker price per unit. Competition has seen to it that
the latter will rarely be possible in most markets.

This is another and possibly a very good
reason why investment in IT is not only necessary but also a survival strategy. In most
companies where market forces dictate terms, a faster response to customers and a more
efficient manner of production and delivery are actually deciding whether the company
stays around or not.

There is a lesson here. In the
not-too-distant future, the Compaq-Digital type of deals are likely to happen in India
too, as in many sectors, not excluding the more well known public sector, where our
efficiencies are nothing much to talk about. If we are to compete in the global market
(not that we have a choice), then faster induction of IT in our enterprises and our lives
is pretty much a given. Failure to do that will mean extinction or acquisition of Indian
entities, saffron belligerence notwithstanding.

May be then we might learn. Again, we might
not.

L Subramanyan

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