Venkatram Mamillapalle agrees that these are extraordinarily difficult times for the automotive industry where VUCA (volatility, uncertainty, complexity and ambiguity) has peaked like never before.
Be it the semiconductor crisis, container shortage, input costs, China’s magnesium shortage and now the spectre of Omicron looming large, the world is grappling with a monstrous challenge. “Yes, everything is coming together but this is also the time when we have to show our performance. It is finally about teamwork,” says the Country CEO and Managing Director of Renault India Operations.
In his view, no single individual can do anything on his own; the key is to focus on team play and approach every problem with a business attitude rather than functional KPIs (key performance indicators). Sure, it is normal for large organisations to have structures where each person has a KPI but these are abnormal times which call for greater unanimity.
“We cannot be a watermelon that is green from outside and red inside. Everything will have to fall in place which essentially means focusing on business objectives while keeping customers satisfied,” says Mamillapalle. It is not the easiest of situations but as the adage goes . . . when the going gets tough, the tough get going.
Mamillapalle believes that balance between profits and employee morale along with maintaining a good equation with customers and dealer partners is crucial at the moment.
Not a walk in the park
The Renault India chief has no illusions that this is going to be a walk in the park. “We now have a Covid situation, shortage of chips, logistics issues and I really do not know what else is going to erupt in the near future,” he admits. His own company faced “slight” labour manpower unrest not-so-long ago but was fortunately able to douse the fire quickly before it could become an inferno.
Right now, says Mamillapalle, one of the top priorities is to ensure that employee morale is kept high. “When you are not doing volumes because of semiconductors, they are all worried,” he adds. After all, when companies do not make money, employees have no idea about salary increases or bonuses coming on time. Quite naturally, this puts a lot of pressure on them because they have families which need support during these difficult times.
“It is not just external but internal problems too that we need to handle. This needs a significant balance between people working for the organisation, customers who see us from outside plus all other issues we have to handle
. . . on the issue of chips, how to get an allocation, how to buy (chips) and ensure that we deliver quality products,” continues Mamillapalle.
After all, this goes beyond the salesman retailing a car in a hurry and heaving a sigh of relief in the process. It is more important to acknowledge that this is going to be a long-term asset for its owner. This essentially means that “you cannot go and buy something from the market just to sell the car today without looking at quality”.
That, in turn, is another challenge because a lot of chips are being bought from the spot market with little idea of their genuineness. “We have to be very, very careful and work on how the supplier partners have to be engaged as also the sub-suppliers. Then comes the validation of our engineering guys where everyone has to make sure that it is the right quality,” explains Mamillapalle.
All this will have to be done amidst the ongoing Covid situation where most people are still working from home (WFH). It is a tough time “but as a leader” one needs to balance things and keep the show going. In such a volatile scenario where the script is constantly turning awry, he concedes that it is obviously tough to anticipate crises.
“You need to approach this two-fold which is about anticipating the problems you know and reacting to the ones you face that you are not in control of like the pandemic,” says Mamillapalle. For instance, when Covid first broke out, everyone thought there would be a component shortage which was only natural since people were not coming to work and the entire supply chain was under stress.
“All of us were coping with this reality. However, the pandemic has taken a different direction like the consumption of home electronics which led to this semiconductor shortage,” he points out. It was not as
if chips were not being produced at the volumes they
were — the bigger issue was that their user base had diversified rapidly.
Be it laptops, cameras or “anything else”, their use had grown multi-fold during the pandemic with WFH becoming the norm while kids had to go for classes online. Families also ended up with more cellphones which typically meant that consumption had almost trebled with everyone seeking high-speed routers.
“Earlier we used to manage with dongles but everyone needs WiFi routers,” says Mamillapalle. Being a leader, the top priority for him was to keep his team’s faith strong during these times while ensuring that their day-to-day needs were met at home.
“Just because volumes are down does not mean that I have started moving my people. That is not my way of working and it is not the done thing,” categorically states the Renault India chief. When it comes to dealer partners, there is a breakeven to be met for their fixed costs and it is important to ensure that “we give them volumes so that they do not lose money”.
Dealers also need to keep their employees' morale high during this difficult period so that business can continue smoothly when things are back on track. “Hence, it is a chain of reactions which we have to manage and none of this was anticipated because of the pandemic. Today, we know how to react to such a situation,” adds Mamillapalle.
It is akin to the time when mankind had to face something alien and frightening like a tsunami which pretty much devoured everything in its path. People were helpless against a crisis of that magnitude but lessons have been learnt over time and tsunamis are now not as frightening as they were earlier.
“The point I am therefore making is that these kinds of situations teach people how to manage and get along while getting your business to be more appropriately fixed in a manner of speaking. At this time, it is more important to keep the whole system active and morale constantly high instead of merely looking at profits,” says Mamillapalle.
This, he quickly adds, should not be immediately interpreted to infer that “you will not make profits” but it is more relevant to know how to “keep a balance between profits versus people’s morale” along with maintaining a good equation with customers and dealer partners. While insisting that this is very important and yet not the easiest of tasks, corporate colleagues at headquarters in Paris have also been “helping out a lot”.
Geopolitical tensions have accompanied the pandemic and it is no secret that China is exercising its might in Asia with aggressive postures towards India and Taiwan. Mamillapalle believes that “the whole earth is one mass” and the pandemic has clearly shown that “you cannot isolate any country anywhere”. Every region world over has been impacted by Covid-19 without an exception.
Doubtless, it is important for automakers to have capabilities within their reach in terms of talent, technology and resources for the businesses they are operating in within a particular region. “You may want to call it Asia-Pacific, Asia, India, Tamil Nadu or even Chennai but narrowing or closing down (borders) is not the solution,” he reiterates.
Renault India is targeting better planning and improved cash flow across its dealerships to tide over the current challenges.
Pandemic as an eye-opener
The pandemic has been a huge eye-opener to everyone that “we are just not Indians or Chennaiites where we can sit and have our cup of coffee in splendid isolation”. As Mamillapalle says, this is just not conceivable since any product made in Japan, Taiwan or Australia is spread across the world.
While isolation is no answer despite the fact that there are tensions brewing in Russia and China, industry should be practical enough to have key resources easily accessible as pointed out earlier. Beyond this, it is impossible to think of self-sufficiency in areas like electric vehicles for instance.
To cite an example, where does a country like India get lithium from? It cannot be sourced locally, making it therefore imperative to source it from another part of the world in order to make the batteries. “Interdependency is the call of this generation, rather than becoming independent or dependent, and this will only become more aggressive in the years to come,” says Mamillapalle.
In the current VUCA world, he believes that there are a few things that can be controlled, some managed and yet others that need to be expanded. A case in point is the container shortage where it is “impossible to imagine” where they have vanished overnight. After all, containers are “supposed to be sailing all the time” and not lie marooned in ports.
“This is one thing the logistics companies have to correct, align and balance out,” says the Renault India MD. After all, the show will have to go on once normalcy returns and this is when it is critical to figure out how many ships and containers will be put into use.
He makes it clear that it is not his view that there is no shortage of containers. “Of course, there is one but there are enough people across the world who can make containers. Possibly they will have to gear up,” he adds. And to make containers, steel is essential which means that manufacturers will have to produce enough.
“Everybody has to come back eventually but right now the pandemic is threatening the world and remains the biggest challenge. Look at how things are in Europe right now. It is tough to say how long this wave will last since I am not an astrologer!” quips Mamillapalle.
On a more serious note, he dwells upon the chip crisis which “is not going to last forever” and will come back. “Nobody is going to buy routers everyday and I believe 2022 will still be tough though not as bad as 2021. The chip crisis should ease out by the last quarter of 2022 or the beginning of 2023,” says Mamillapalle.
Isn’t it frustrating for manufacturers like Renault to think that this is an opportunity lost in terms of orders piling up for cars but shortage of chips playing the spoilsport? He does not quite buy this argument.
“I would look at it differently and focus on removal of fat to bring more efficiency into the system. Of course, I am not happy with the situation but it is helping towards becoming lean across levels and bringing efficiency to high levels,” says Mamillapalle.
For instance, ideas which could not be generated
earlier are happening now with a whole lot of activities across Renault and its employees, supplier and dealer partners where efficiencies are being built. On the dealership side, there is better planning and cash flows have become very efficient “which is more than vital for a business to stay healthy”.
Likewise, inventory control has significantly improved and whether it is at the plant, transit or supplier locations, everything is perfectly balancing out. Interestingly, the just-in-time (JIT) concept typically happens only at the assembly line and not through the value system of the supply chain.
However, now “you see a very efficient supply chain which is coming along nicely perhaps due to the chip or container crisis”. Thinning and layering of the supply chain system is in control which is welcome news. Employer efficiency has increased across levels too.
“Our travel budget in 2020 was almost negligible and we
still sold cars. Why can’t we stay as efficient in normal times too when things are not so difficult? I am not saying travel is unimportant but you need not spend so much and should only do so when it is completely essential,” says Mamillapalle, while highlighting some of the positives thanks to the current situation. “Yes, it was forced but we have got used
to it,” he adds.
The topic shifts to electric and the challenges of rebooting skills at the workplace. In his view, evolution is inevitable and involves a process of adaptation. It is not as if it is something impossible — after all, people who were experts overseeing the challenging Y2K transition did not become obsolete after 2000.
“Everyone has to move on for their own survival,” says Mamillapalle. Chips were an alien commodity decades earlier but are holding the industry to ransom today. Cellphones similarly were once perceived as luxury items but nobody can survive without them today. Likewise, the move to electric will see people adapting themselves quickly to new skills and creating yet another success.
“Learning is important on the job and you experience it once before going in for perfection and then diversify into different fields. A purchasing officer cannot sit in isolation and you need to have knowledge across a wide spectrum so that you deploy things at the right place, time and with the right talent. This is why we at Renault keep rotating people for experience and new ideas which is done very well across the world,” says Mamillapalle.
Whilst on the subject of electric, he also makes it clear that evolution is a continuous process in the automotive industry and it is not quite right to assume that there was a sense of recklessness about the past especially on vehicular emissions. “I would not think that there was any wrongdoing in the past because this is an evolution and innovations constantly happen,” he says.
Knowledge and technology levels available then were adapted to the prevailing situation and constantly improved. As he puts it, “Perhaps, 150 years from now, people may say that their great-grandfathers should not have used EVs!” The underlying message is that “we use the right technology for the environment and who knows what things will be like in the future”.
Essentially, nothing can be termed wrong about
the past when circumstances and knowledge contributed to the present use of the internal combustion engine which, in turn, could be seen as being overly maligned in recent times.
Whether EVs are the solution is “something nobody knows” but for now everyone agrees that it is important to reduce emissions. “Electric is the current answer but this does not mean that this is about remedying the wrongs of the past,” stresses Mamillapalle. The future may well throw up a host of other options even as protecting the planet is now top priority.
This feature was first published in Autocar Professional's December 15, 2021 issue.