When it comes to global manufacturing and supply chain management, sourcing from India has gained significant attention in recent years. As a manufacturing powerhouse, India offers a competitive advantage as a cost-effective alternative to China, often called the “China+1” strategy. However, sourcing from India comes with its own set of challenges. This article will explore the key challenges associated with sourcing from India and provide effective solutions to overcome them.
Understand the Challenges of Sourcing from India
Businesses must navigate various sourcing challenges in India to ensure a smooth and successful supply chain. Let’s delve into the most common challenges and their corresponding solutions.
Fragmented Supplier Base and Varying Quality Standards
One of the primary challenges of sourcing from India is the presence of a fragmented supplier base. India is home to numerous small and medium-sized manufacturers, making supplier selection and quality control crucial.
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Businesses can engage with local sourcing agents or consultants who possess in-depth market knowledge and can help identify reliable suppliers to address this. Thorough due diligence on suppliers is essential to assess their capabilities, certifications, and track records.
Here are some statistics on the fragmented supplier base and varying quality standards in India:
- As per SSRN, 90% of Indian manufacturers are small and medium-sized enterprises (SMEs).
- According to the World Bank’s Enterprise survey, only 44.9% of Indian manufacturers have international quality certifications.
- The cost of quality control can be up to 10% of the total production cost in India.
Logistics and Transportation Challenges
India’s vast geography presents logistics and transportation challenges. The movement of goods can be hindered by inadequate road infrastructure to congested ports. Investing in robust logistics and supply chain management is crucial to mitigate these challenges.
This includes optimizing transportation routes, exploring alternative modes of transportation, and leveraging technology for real-time monitoring and tracking.
Here are some statistics on logistics and transportation challenges in India:
- The average speed of freight movement in India is 25-30 kilometers per hour, which is 50 – 60% lower as compared to the USA. (Source: Ministry of Road Transport and Highways)
- The cost of logistics in India is 13-14% of GDP, compared to 8% in developed countries. (Source: pib.gov.in)
Limited Infrastructure in Certain Regions
While India has made significant progress in infrastructure development, certain regions still face limitations. Power outages, inadequate connectivity, and limited access to utilities can disrupt manufacturing operations. Businesses can strategically choose locations with better infrastructure or invest in infrastructure development in collaboration with local authorities to
address this.
Here are some statistics on limited infrastructure in certain regions in India:
- 40% of the roads are dirt roads, and over 30% of villages have no access to all-weather roads. (Source: University of Reading)
- 40% of Indian households do not have access to clean drinking water. (Source: indiawaterportal.org)
- Power cuts in the city have brought down production by 10 percent. (Source: www.business-standard.com)
Intellectual Property Protection Concerns
Protecting intellectual property (IP) rights is critical when sourcing from India. Businesses should conduct thorough due diligence on suppliers to ensure they adhere to IP laws and have robust security measures in place. Implementing nondisclosure agreements (NDAs) and clearly defining IP ownership in contracts can provide additional protection.
Managing Supplier Relationships and Communication
Establishing effective communication channels and building strong relationships with suppliers is essential for successful sourcing from India. Clear and timely communication helps overcome language barriers and cultural differences.
Utilizing technology for real-time collaboration, such as video conferencing and cloud-based project management tools, facilitates efficient communication.
Ensuring Timely Delivery and Meeting Production Deadlines
A smooth supply chain is crucial to meeting production deadlines and ensuring timely delivery. Regular communication with suppliers, setting clear expectations, and collaborating on contingency plans can help mitigate risks and ensure on-time delivery.
Here are some statistics ensuring timely delivery and meeting production deadlines:
- A supply chain disruption is reported by more than 85% of businesses annually, and more than 50% of manufacturers report two or more disruptions. (Source: livesource.com)
- 73% of businesses say that they have lost customers due to late deliveries. (Source: multichanelmerchant.com)
Mitigating Risks Associated with Political and Economic Uncertainties
India’s political and economic landscape can introduce uncertainties that impact sourcing operations. To mitigate these risks, businesses should stay informed about local policies, regulations, and economic conditions.
Since 2015, political risks have substantially escalated in India. In LinkedIn’s APQC poll , 63% of respondents admitted that their suppliers are situated in nations that are going through political unrest.
Collaborating with trusted partners and associations in India who deeply understand the market can provide valuable insights and guidance.
Solutions to Overcome These Challenge
Businesses can implement the following solutions to overcome the sourcing issues in supply chain management in India:
- Engaging with local sourcing agents or consultants who possess in-depth market knowledge and can help identify reliable suppliers.
- Conducting thorough due diligence on suppliers to assess their capabilities, certifications, and track records.
- Building strong relationships and effective communication channels with suppliers, utilizing technology for real-time collaboration.
- Implementing quality control and assurance measures to monitor production progress and ensure adherence to quality standards.
- Investing in robust logistics and supply chain management, optimizing transportation routes, and leveraging technology for real-time monitoring and tracking.
- Utilizing government schemes and incentives designed to facilitate smoother operations and encourage investment.
- Collaborating with trusted partners and associations in India to gain valuable insights and guidance.
- Implementing risk management strategies and developing contingency plans to mitigate the impact of political and economic uncertainties.
Streamline Sourcing from India with Zetwerk Sourcing from India
Sourcing from India presents immense opportunities for businesses looking to diversify their supply chain. While challenges exist, implementing effective solutions can help overcome these hurdles and ensure a successful sourcing experience. By engaging with local experts, conducting thorough due diligence, establishing strong relationships, and investing in logistics and technology, businesses can navigate the complexities of sourcing from India and unlock its vast manufacturing potential.
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FAQs
Businesses can mitigate risks by staying informed about local policies, regulations, and economic conditions, collaborating with trusted partners and associations, and implementing risk management strategies and contingency plans.
The manufacturing industry faces various challenges, including fragmented suppliers, logistics and infrastructure limitations, intellectual property protection, supplier management, timely delivery, and mitigating political and economic risks.
Businesses can ensure timely delivery by implementing quality control and assurance measures, maintaining clear communication with suppliers, setting clear expectations, and collaborating on contingency plans to address potential delays.
Local sourcing agents possess in-depth market knowledge and can help businesses identify reliable suppliers, navigate cultural differences, and provide valuable insights and guidance throughout the sourcing process.
Thorough due diligence on suppliers, engaging with local sourcing agents or consultants, and implementing quality control and assurance measures are key strategies to address varying quality standards and ensure product quality.