Inefficient Supply Chains Cost India $65 Billion Each Year

The Indian retail sector is in high-growth mode, and analysts expect it to grow more than $879 billion by 2018.

But, a new study says this growth is jeopardized by inefficient supply chain systems.

The new research, conducted by the Confederation of Indian Industry (CII) and Amarthi Consulting, says India loses $65 billion every year due to inefficient supply chain systems. The country, ranked 47th on logistics, lags behind others, such as Japan, US, Germany and China, and faces significant supply chain challenges, including:

inadequate supply chain infrastructure (only 20 percent of roads are in good condition, e.g.),

complex taxation laws,

high levels of intermediaries,

product proliferation, and

lack of supply chain visibility.

All told, supply chain costs in India are about 12 percent to 13 percent of the gross domestic product (GDP) compared with 7 percent to 8 percent of GDP in developed countries and the report recommends that companies begin to focus on supply chain optimization by reducing intermediaries, improving visibility and integrating sustainability.

As I posted about last month, Indian officials are now considering moves to relax the country's strict restrictions on foreign retailers. However, overhauling the system to accommodate retailers like Walmart could take several years. Is India ready to rise to the challenge?

Some industry experts think so. Anshuman Singh, managing director and chief executive officer, Future Supply Chain Solutions Ltd, a unit of Future Group, told moneylife that India has the potential to build "the best" supply chain because the country can be flexible, changes with the times and has "no baggage of the past."

TAGS: Finance
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