India Supply Chain Costs of 12 % of GDP

A recent report (http://www.moneylife.in/article/4/8786.html) summarizes the CII report on “Global Competitiveness of Retail Strategies”. It lists India’s supply chain inefficiencies as costing the country over $ 65 billion each year and supply chain costs of 12-13 % as compared to developed country costs of 7-8%.  Supply chains are affected by infrastructure – rail cars, roads, warehouses etc.  Lack of infrastructure capacity, many intermediaries, tax rules etc are all listed as contributing to these costs.

But one would assume that given India’s much heralded software capability, inexpensive cell phone access etc, supply chains could compensate for the infrastructure with information regarding order status. After all, it is really unpredictable supply rather than longer lead times alone that create costs.  Can state of the art information systems, RFID active tags to locate shipments, use of cheaper higher labor content solutions to offer on site delivery etc compensate for the infrastructure issues ? Can high-touch solutions permit customized supply chains that may be a competitive advantage ? After all, courier services at competitive prices have solved the delivery problems in many cities across India. Your comments.

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About aviyer2010

Professor
This entry was posted in Global Contexts, Supply Chain Issues and tagged , , , . Bookmark the permalink.

One Response to India Supply Chain Costs of 12 % of GDP

  1. Richard Ingle says:

    India’s supply chain costs are higher than for developed countries due to its lesser developed transportation systems and more bureaucratic ways of doing business. Organisational and market structures compound these physical disadvantages, with many different agents involved in the supply chain, rather than a smaller group within which it is easier to share information. Increasing lead times is not necessarily of itself a problem but longer lead times are normally associated with a greater absolute level of variability in delivery times. This unpredictability of delivery time is easy to imagine when the train system is often operating at full capacity and only 20% of roads are in good condition. Complicated and opaque tax rules are one example of how red-tape ties up business time and energy through obfuscating and prolonging decision making processes, increasing uncertainty and therefore the cost of doing business. High technology order-tracking and communications can mitigate some of these problems but they will neither directly resolve them nor completely offset the deleterious effect caused by these inefficient physical movement and official approval mechanisms

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