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this podcast is brought to you by India
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knowledge at Wharton please visit
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India for more information
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inclusive growth infrastructure
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development and collaboration in science
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and technology where the major themes
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discussed at the recent Global
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Partnership summit organized in
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Washington DC by the us-india Business
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Council business and political leaders
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from both countries participated in the
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event which also marked the u.s. IBC's
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33rd anniversary Indian knowledge at
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Wharton spoke with business leaders at
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the event about the challenges they
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faced doing business in a rapidly
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globalizing economy our guest today is
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rod Jiang president of Walmart India mr.
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Chen thank you so much for joining us
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today my pleasure
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before you joined Walmart could you tell
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us about your career at whirlpool and
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Unilever yes for sure I am an engineer
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actually by education and I soon after
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my engineering I joined Unilever where I
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worked in both in Europe as well as in
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India for 16 years and various
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assignments and manufacturing logistics
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supply chain and marketing and then I
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moved to whirlpool in the supply chain
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area and then finally I was the managing
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director of whirlpool India and then
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moved on to a regional role in Shanghai
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in China and then for last two years
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I've been working Walmart was based in
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Shanghai recently moved to India with a
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view to run a joint venture in India how
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did you move to Walmart come about well
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having worked for 10 years in whirlpool
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I was kind of getting a bit tired of
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selling appliances and and that industry
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so I was looking for a change and I got
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a call from somebody and they said
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Walmart was looking for a president of
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emerging markets to evaluate entry of
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Walmart and new countries outside of
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where Walmart was already present seemed
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like an interesting challenge I
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interviewed and led to this new job
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Walmart is the world's largest retailer
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and the number one company on the
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fortune 500 but Walmart in India is not
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really in
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retail business could you please explain
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this curious fact to people who may not
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know the whole story
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sure I think it terminates out of you
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know the fact that in India currently
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retailing is a protected sector and the
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government does not allow any
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multinational to operate and retailing
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so no foreign investment is allowed in
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retailing other than in wholesaling and
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also in 51% in a single brand retail
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which of course is not a business model
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so that's why we do not have any
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retailing in India what we propose to
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have in India is wholesale cash and
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carry business which is only permitted
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for business members and then we are
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also a franchisee soar to a retailing
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company which is party retail who are
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our joint venture partners who will run
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and own stores but we do provide them
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with merchandise and management
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expertise to do so how exactly would
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that business to business model work I
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think the way it works is essentially
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India is a nation of retailers if you
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look at it India has 12 million Khurana
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stores which you know per capita given
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even the population of India is I
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believe the highest in the world so we
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have a lot of small mom-and-pop stores
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in India catering to all kinds of
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consumers these Kirana stores
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traditionally buy from wholesale markets
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and some of them are also serviced by
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directly by manufacturers in fact India
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has one of the most evolved distribution
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systems by big companies so companies
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like Unilever for instance and ITC have
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probably one of the most evolved
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distribution systems in India and they
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service just close to a million of those
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12 million Kirana stores directly which
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basically means that you know 90% of
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Khurana stores actually have to go to
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wholesale markets to buy products and
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there is a very evolved wholesale
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network in India for products which
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these Khurana stores get serviced from
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it is a low-cost operation but it is
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also very inefficient and especially
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when you move to
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to produce areas fresh merchandise
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fruits and vegetables meat and so on and
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so forth
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it is very uninvolved and it is very
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archaic in many ways so how this model
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works is essentially that you have a
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selling point where you directly source
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products from manufacturers and then
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sell it sell those products to karana
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stores at you know great prices all
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under one roof Walmart's success around
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the world has been driven by your
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effective use of information technology
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and supply chain management techniques
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that is basically what allows Walmart to
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pass along low costs to its customers in
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the context that you just described how
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would you apply those principles yeah
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I'm in Walmart's mission a worldwide and
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I think which is extremely relevant to
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all emerging markets let alone the
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United States itself it's saving people
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money so that they can live better and
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therefore the whole Walmart business
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revolves around you know running a very
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efficient supply chain saving every
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aspirin in every aspect of that supply
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chain so it's not just about negotiating
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better prices with consumer with the
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suppliers it is actually about working
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with suppliers to remove any
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inefficiencies in the supply chain and
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that is exactly what we will do and are
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doing in India we are working with
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suppliers on packaging they're working
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with suppliers on stock control we are
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working suppliers and better management
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and inventory and so on and all those
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savings which come out of that effective
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management of supply chain would be
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passed on to our katana stores who will
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be our customers in this case you have
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also worked with Walmart in China what
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are the main differences between working
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in India and China India is very unique
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in fact I've lived in China so maybe I
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can say it with a little bit more
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Liberty that I think the only thing
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common between India and China is the
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one billion population and if you really
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operate in the two countries I think
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they're very different consumers they're
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very different legislations they are a
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very different you know level of
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economic development social
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infrastructure and government
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you know management of the economy so I
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would say there are lessons yes they
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always are but the differences in in
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China and India are very very unique and
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India is a very unique market because
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India is a very evolved wholesale
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network over several centuries what are
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some of the main challenges you face in
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implementing supply chain strategies in
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India I think the biggest challenge to
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start with is there is no organized
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supply chain in India and actually we've
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been even surprised by some of the the
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leading manufacturers in India like
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Unilever Procter and Gamble and some
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other big names who are actually
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welcoming the the arrival of organized
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supply chains in India and Walmart
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pioneering that effort in India because
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you know because of the lack of that
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supply chain today there is no
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forecasting there is no understanding of
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how demand is it's largely push based
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system and so on and so forth so I think
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getting that transparency across the
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supply chain I will be very unique the
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other thing is there is no refrigerated
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Cochin for fresh produce in India so
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therefore a lot gets wasted by
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McKenzie's own work which Mackenzie has
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done almost 40 percent of fresh produce
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in India gets wasted from farmland to
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the time it reaches the consumer and
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thirdly because there is non
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transparency of of consumption the
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farmer and the small manufacturer is
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actually ending up selling to the
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middlemen who actually then you know may
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or may not be so transparent about
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pricing some of these challenges seem to
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be big issues that the government should
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be tackling rather than an individual
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company how are you navigating you be
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around those challenges I think they are
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as far as possible working with the
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government and trying to tackle some of
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those issues I think the good news is
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that government recognizes it is
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restricted in its ability to invest and
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do a lot in this area so there is a lot
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of public-private partnership
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possibilities in this area we are
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working with the government in areas
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like training and development government
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is very keen on promoting training for
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people who can work in the supply chain
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area we are working with the government
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in the area of setting up
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large warehousing and distribution
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facilities and making land available at
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reasonable cost to us to be able to do
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that so there are several initiatives
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which we are working with the government
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the government has also recognized this
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as an issue and I think from a taxation
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standpoint in the recent budget actually
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reduced the taxation on Courchesne
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equipment which will I think go a long
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way in making some of those investments
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possible
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what is Walmart sourcing strategy for
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India and how does it differ from that
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strategy in China sure I think Walmart's
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the relationship with India is actually
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much older than our recent joint venture
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and our recent steps in the area of
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wholesale supply chain we've been over
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10 years in India sourcing products in
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India largely textiles apparels home
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products now recently gems in jewelry
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and so on we do approximately 400
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million dollars worth of sourcing out of
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India currently and that can grow
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several fold as we go forward but once
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again you know the efforts become
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magnified several times if there is a
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deeper understanding of the supply base
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and I think with this new effort in this
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joint venture about wholesale
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cash-and-carry we will make deep inroads
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into small and medium industries and
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help develop those industries to a level
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where they can improve their quality and
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and compliance where these products can
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then be taken on to other parts of the
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world so I see a very bright future for
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sourcing out of India with Walmart over
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the next decade one of the big problems
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in sourcing from China was the recent
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controversy over lead contamination that
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affected products like toys do you see
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any hidden landmines in sourcing from
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India that consumers should be concerned
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about I think the issue of India is once
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again developing responsible sourcing
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points in India and manufacturers in
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India and as I said earlier you know
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developing that responsible base which
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is compliant to global standards in
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terms of the kind of labor which is used
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the manufacturing practices and finally
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the quality of the product is critical
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and as Walmart we spend an enormous
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amount of time and energy doing that and
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it is a slow process it doesn't happen
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overnight so I think we all we need to
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do is to just be patient and work
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through those processes to ensure that
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Indian small and medium manufacturers
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come to that level having said that
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there are some very high-quality
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manufacturers already in in India who
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are supplying to us already so we are
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very pleased with our sourcing
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operations out of India where will
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Walmart India be four to five years from
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now I think you know we are just setting
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up the initial foundation of our our
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very business in India from from a
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wholesale cash-and-carry standpoint I
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think it's learning about the market
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learning about the end consumer learning
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about the trade and you know developing
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a team of good leadership and a team of
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large associates who can make this
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business work if all goes as per plan I
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think in five years from now we should
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have several cash-and-carry operations
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in India may not be across India but
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certainly in the important geographies
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in India and we should have a very good
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understanding of the end consumer of the
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trade and we should have a scale from
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which we can grow very rapidly our
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submission to the Indian government is
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that in this time frame we hope the
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government would liberalize you know the
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the FDI regulations in retail and permit
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Walmart and companies like Walmart to be
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able to participate in the retail growth
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going forward in thinking back on your
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career what is the single biggest
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leadership challenge that you have faced
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how did you overcome it and what did you
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learn from it I think the single biggest
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leadership challenge in my experience
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has been to to craft a vision which is
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way beyond quarterly goals which is way
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beyond financial goals and sometimes
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leaders get to you know mired into
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achieving financial targets and so on I
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think a compelling vision which is not
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unique to the business but it's good for
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the larger society and the customer
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which you are serving is important and I
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think WA important is being staying true
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to it
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because for leaders it is very easy to
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get derailed into meeting financial
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quarterly goals and so on and so forth
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so if your if your vision is compelling
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and if you can stay true to it I think
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developing a sustainable business
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becomes that much easier in whatever you
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do
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mr. Jane thank you so much for joining
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us today thank you very much for the
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opportunity for more information please
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visit knowledge Wharton UPenn dot edu
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slash India
