India is currently the 12th largest economy in the world,having experienced an estimated 6.8% growth in 2008. Its GDP surpassed the $1 trillion mark. And, though current predictions show a slowing to 5.5% in 2009, India continues to face pressing issues, specifically in terms of effectively managing a rapid spike in demand.
"To keep pace with India's growth rate, companies have been focused on building production capabilities, distribution networks and retail outlets resulting in complex supply chains with long lead times," said Stephen McNulty, regional vice president, Asia Pacific, JDA Software. "As the market continues to mature, companies must focus on optimizing operations to become more efficient. More frequent operational reviews are now essential to meet increased demand, adapt to varying fuel prices and account for fluctuating currency valuations."
To effectively counter the challenges of India's rapid growth, JDA Software outlines five key strategies to help companies establish an efficient, flexible supply chain.
- Ensure a clear understanding of local principles, customs and barriers. Doing business in India requires a thorough understanding of the unique culture, legal regulations and infrastructure of the country. Understanding tariff structures, road taxes, patent legislation and labor laws is crucial to running a successful enterprise. Knowing the limitations of Indias transportation infrastructure is critical in adjusting distribution strategies and having the flexibility to adapt to the varying restrictions and needs that exist within India.
- Establish constant communication. The size of India and its insufficient communications infrastructure pose unique challenges for companies doing business in this region of the world. This requires adapting traditional means of information sharing to ensure that manufacturers, suppliers and retailers are all on the same page. Leveraging dedicated Web portals for exchanging information helps address communication issues by enabling trading partners to share information from diverse sources in a unified manner, reducing lead times and operational expenses. In fact, many large manufacturing companies are allowing their partners, vendors and dealers to have direct access to their internal supply chain management systems in order to increase visibility with minimal investment.
- Develop comprehensive procedures and processes. Due to the rapid growth of India's economy, little time was spent establishing the clearly defined processes and procedures needed to continue to scale efficiently and effectively. Streamlining supply chain functions, as well as sales and marketing operations, allows companies to implement and adopt standardized processes that can be easily replicated as companies expand. By operating with a structured base for demand forecasting, companies can easily gather and analyze distributor sales data for generating distributor-centric forecasting and networks. The next step is to analyze the impact of various types of drivers like pricing and promotions on overall customer demand which can significantly improve forecast targets that result in overall lower supply chain costs. By synchronizing the multiple dynamics of demand planning and production planning, companies will have the ability to reduce over-stocks and stock-out situations.
- Identify and integrate the right professionals and insist on teamwork. The supply chain is not only about material flow but also about interconnected people across organizations. The scarcity of a skilled, knowledgeable and committed workforce is a challenge facing Indian companies. With an increased number of mergers and acquisitions and management takeovers, remote reporting is becoming a mainstream part of corporate life. Combining logistics and procurement personnel into a "supply chain team" with shared responsibilities enables companies to utilize individual strengths and strategically map skill sets to help lower operational costs and bring in efficient customer management and sustainability.
- Ensure the quality of input information. Information flow and data quality is a primary concern for many Indian companies. Most merchandising plans are developed today without any actual demand data, causing gaps between customer purchasing information and supplier planning forecasts. As a result, shelves are filled with too much of the wrong inventory or customers are not finding what they need when they need it. Investing in Collaboration, Planning, Forecasting and Replenishment (CPFR) solutions and Sales & Operations Planning (S&OP) solutions provides a link between disparate information by allowing companies to create plans based on actual demand data. By enabling suppliers and retailers joint visibility into inventory management, current and expectant inventory levels and requirements can be continually updated and merchandising, inventory, logistics and transportation needs are synchronized.