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