Supply chain and operations - an enabler for modern trade
Improving supply chain and logistics will enable retailers in India to significantly enhance overall competitiveness and successfully deploy growth initiatives. India’s retailers are building supply chains, improving back-end processes and instituting technologies. These efforts will ensure—
A smoother transfer of goods from point of origin to point of consumption
Increased operational efficiencies
A reduction in overall costs
Improved customer service since goods can be moved between factories,
warehouses and outlets more efficiently
Mastery of supply chain dynamics is a critical enabler for the growth of modern trade. (Supply chain costs can form over 50 percent of total operating costs.) As modern trade grows in India, supply chains will become essential for growth since—
Regional variances exist in demand patterns which result in differences in goods distributed to cities/rural areas
Value conscious consumers demand lower prices, which require retailers to be cost efficient
They can assist retailers in creating strong customer value propositions, such as being more cost effective, providing fresher products, providing better product assortment and having a better reach
India is a large and fragmented country and the absence of strong infrastructure and logistics systems make it challenging to reach consumers located in urban, semi-urban and rural India. With the Indian government making investments into state highways, an overall decline of logistics costs will occur; studies suggest that logistics costs are between 10 to 12 percent of total GDP. The Budget 2009- 2010’s extension of investment-linked tax incentives to businesses engaged in the development of cold chain units/warehousing facilities should help drive the development of this important sector.
Supply chain expertise and manpower availability are the sector’s major challenges. Few institutes offer specialised courses in this terrain and most courses remain theoretical and general. Attracting and retaining talent is a major issue and companies need to develop a high degree of professionalism among staff.
Cushman & Wakefield (C&W) estimates that the Indian logistics industry will grow at around 15 to 20 percent per annum, reaching revenues of USD 385 billion by 2015. Market share of organised logistics companies are expected to be 12 percent by 2015.
Secondary research indicates that total market for cold chains in India was worth approximately INR100 billion (USD 2.2 billion) in 2008 and is estimated to reach INR 400 billion (USD 8.7 billion) in 2015.
C&W estimate that Indian warehousing sector will be USD 55 billion by 2010- 2011. Forty five million square feet of warehousing space and 110 logistics parks will be developed in India by 2011. Warehousing activities account for 20 percent of the total Indian logistics industry and offer robust growth potential.