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Supply chain management in India

April 4th, 2011 | By: Martin Arrand

I am planning to write a few posts about supply chain management in India. I am in the country working with a local client for a couple of weeks, back for the first time since my 6 weeks living in Delhi earlier in 2010/11.

This is a very exciting topic, and though I have been visiting the country for nearly 20 years I am addressing it with some trepidation, as I know that India has its own very well-informed and qualified experts in SCM, some of whom may stumble upon this blog (big news: the internet is global). So apologies for those on the subcontinent for whom this is very basic stuff and old news. But I know from speaking to colleagues here in the UK that professionals in Europe and the US have very little idea of what goes on in India, so I hope this is of use to some.

A really good starting point to learn more about SCM in India is a study McKinsey published in July 2010 titled . “Transforming the nation’s logistics” Without trying to paraphrase a 70 page report, here are some points that stood out for me.

  • Freight movement in the country is forecast to triple in the next decade
  • Economies with similarly large populations and geographical area (China, USA) transport more freight by rail and water than India – in fact if current investment plans hold rail’s share of freight in India will decline from 36% to 25%
  • The skilled logistics will have to increase from 10 million now to 20 million in 2020, including over 100,000 warehouse managers
  • Waste caused by poor logistics infrastructure is estimated at USD 45 billion a year, which is a massive 4.3% of GDP, and this will rise to 5% by 2020

Let’s take that last point about waste and run with it. Anyone who was in India as I was over the winter will know that one of the top news stories has been the onion crisis. For weeks the price of onions rocketed, swinging wildly up and down as the government tries desperately to stabilise the price. Food inflation is a big issue in India, reaching 18% at the end of 2010, and the onion being traditionally a staple food for the working Indian, these huge increases (500% at times) in onion prices have great political significance. Governments have fallen over the issue. (BJP government in Delhi 1998).
Among the various analyses of the problem I read, I noticed an salient point in an article by Abheek Barua (chief economist at HDFC Bank) in the Times of India 14/01/2011. He suggests that food supply-side problems aren’t limited to the poor harvest last year but to “an abysmal cold chain network network… that results in roughly 30% wastage in post-production”.

My impression is that infrastructure is going to be a big challenge, one of the things that will cause friction in India’s growth trajectory. Medium distance road journeys are currently highly frustrating, and entering/leaving large conurbations involves long delays. In both cases this is due to the large volume of traffic on the roads. Road building has certainly been pursued with gusto, and in Delhi the Metro has taken a lot of passenger traffic off the roads. But growth rates of 10% per annum are set to yield growth in the automotive market in 2011 of 30%, so it seems likely that road infrastructure will lag demand significantly for some time to come.

The same is likely to be true of personnel and skills. Take those 100,000 warehouse managers. Now that is a difficult job, and if done ineffectively it has a big impact on the cost and quality of logistics services. It is also a role that, while requiring technical skills that can be taught formally, is highly dependent on soft skills and acquired intuition that take years on the job to develop to a satisfactory level. So again, skills are likely to lag the requirement for effective logistics management. And though the McKinsey report sticks to logistics, the same will be true for other supply chain management roles (planning and forecasting, materials management, procurement, etc.)


Comment from Muffaddal
Time 11 September 2011 at 4:47 pm

Hello Sir,

Can you let me know something more about SCM practices in India….I have a project on the same…

Thanks & Regards,

Comment from Martin Arrand
Time 12 September 2011 at 5:25 pm

Hi Muffaddal,

I guess you have already looked at the McKinsey study I linked to in this blog. For more general news and information that is specific to India you might try http://logisticsweek.com/.

If you let me know the objective of your project I may be able to help further.

Best of luck,

Comment from Muffaddal
Time 16 September 2011 at 2:51 pm

Hello sir,

Thank you so much for your response actually me and my team have to make a presentation on SCM practises in India.. The objective is to understand that how is India in terms of SCM…is it possible for the country to compete with other countries on the SCM level?

Thanks & Regards,

Comment from Muffaddal
Time 2 October 2011 at 2:34 pm

Hello Martin,

The presentation done by my team was awesome thanks for your information.:)

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