Challenges to setting up a successful supply chain in India

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India is $1.6 trillion dollar economy which is growing at an average annual rate of 7.5 percent. No global corporation can ignore that. To do business successfully in that geography, their Indian business units and partners must be able to overcome the challenges from several domains: supply chain, regulatory and socio- cultural. I am going to write about the first one here.

Recently I came across this post where the author has given a very good perspective of supply chain issues, mainly infrastructure (unpaved roads), taxation (tax on movement of goods) and has an interesting takeaway in the end, “Traditional methods of supply chain design and management do not always apply,” and I fully agree with that statement. Let’s look at couple of success stories.

In spite of challenges, there exist very good examples of six sigma supply chain setups in India, like Dabbawalas, which operates in the most populous city of India, Mumbai. Dabbawalas is a company which picks up and delivers fresh and home cooked lunch to office goers. It’s a highly specialized business service that involves various lunch box carriers throughout the city and they do close to 200K deliveries a day with less than one error in 6-million (if you are vegetarian you can be assured you never end up with chicken curry lunch). Readers may refer to Wikipedia for more details on their business and for more technical insight they may read the Harvard Business Review case study on in its success, and how FedEx learnt from it for better operations of its Indian BU.

Another good example of success in setting up a supply chain is major auto manufacturer, Maruti. By establishing close collaboration with its suppliers, it overcame typical challenges posed in the country. Lack of a good infrastructure makes getting the raw materials and carrying out the finished goods distribution very complex ― there is more than an average number of distribution points or warehouses a product has to go through before reaching the end user. The current state of infrastructure in India forces companies to use several modes of transportation in the value delivery process. The highways and rail systems do not reach major portion of the country, and a product has to travel on train, truck, or auto/cycle rickshaw before landing into the end customer’s hands. Every time the mode of transportation changes, there is handling, sorting, and storage involved - this make the supply chain very complex and decreases the reliability of whole chain. In my opinion, to have more reliable and successful supply chain setups in India corporations should keep these things in mind:

  1. Visibility – As the number of warehouses and distribution points grow, better visibility into your network becomes more necessary for customer service and a competitive edge. If you know what is where, then you can control it.  Systems should be able to do all kinds of simulation for exceptions, so decisions can be made quickly.
  2. Collaboration – As cited in Maruti example, the way to beat the supply chain challenges was to collaborate with suppliers and distributors. This makes the supply chain issue not a company issue, but an issue of the entire value chain - from supplier to end product distributor - and everyone tries to overcome it.
  3. Simplification – Keep it simple, in fact, very simple. Use a system which is clear to understand, not only by your employees, but also by your customers and suppliers. India is a country of several languages and several cultures. There is huge risk of “lost in translation” if anything is complex. Use visual tools as much as possible.
  4. Flexibility – Pick a supply chain solution which can work with several applications. When collaborating with local suppliers and distributors, it should be no surprise to discover that some of them still operate on dated custom-built systems. The supply chain solution should be flexible enough to work with all of them.
  5. Mobile Phones – This is one technology that almost everyone has access to. Access to them is very inexpensive, and most people have them (over 800 million out of 1.2 billion in India). Any supply chain strategy should leverage this, similar to how Marketing firms have used mobile phones very effectively with SMS campaigns.

World class Supply chain is the mantra for building competitive advantage; having good understanding of country specific needs and having solutions for them will enable corporation to be world class across all geographies.


Trevor Miles
- December 20, 2011 at 6:21am
Hi Pradeep

These are good leassons learned and well worth sharing.

Lora Cecere, one of the best commentators on supply chains, recently wrote a blog about trends in the supply chain - - in which she writes about supply chain needing to become 'outside in' whereas they are mostly 'inside out'. Lora writes that "Today’s supply chain processes are designed from the inside-out (from the enterprise processes of procure to pay and order to cash). Tomorrow’s processes will be designed from the outside-in (from the external environment to internal processes). The focus will be on sensing, shaping and driving an intelligent response. This evolution will take many years and will require the redefinition of current supply chain architectures."

Lora is undoubtedly correct, but we in the West need to extend the concept of 'outside in' by accepting that much of the volume growth will come from the BRIC markets, which include India, for the forseeable future.

So your blog is very timely in reminding us that we need to adapt to the conditions we find rather than impose the conditions under which we are accustomed to operate. To me this is the essence of the 'outside in' concept.

There is also the need for the West to redesign their product profolios to address the market needs of the BRIC countries. I wrote about this a few years ago - I'd be interested in your view.

Pradeep Chadha
- January 23, 2012 at 2:24am
Very relevant correlation between my blog and the concept of 'outside-in' supply chain design. The core technology supply chain architecture used by big multi-national corporations should be able to adapt to local or regional situations or outside in. And I loved your blog post – “Recession or Reset?” dated June 2009. And I can also use Nirma case study is an excellent example to complement my blog post. There was a true point made on the difference between consumer demand between west and RDE nations. At the macro level – Aggregate consumer demand is very less as compared to developed economy and at micro level- Price Sensitivity/Packaging/Product Positioning etc. The issue at macro level is very serious one as in global economy it causes global recessions. If you think about it RDE manpower has hours to make goods but lack resources to enjoy them. Their geographies are as blessed as ours, but there is lack of infrastructure and security to encourage tourism. And there are several such examples. In a given amount of time same dollar changes 10 hands in a developed economy vs. far less times in RDE as saving rates are exorbitant. But slowly with globalization this is going to get balanced, and there is huge opportunity for corporations to benefit out of it.

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