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Inadequate supply chain infrastructure, complex taxation laws, high levels of intermediaries, product proliferation and lack of supply chain visibility are a few supply chain challenges faced by the retail industry in India
Though retail in India is making progress and is expected to grow more than $879 billion by 2018, the country loses $65 billion every year due to inefficient supply chain systems, says a study report.
According to the report published by industry body Confederation of Indian Industry (CII) and Amarthi Consulting, India is ranked 47th on logistics and is behind countries such as Japan, US, Germany and China. The report titled, 'Global competitiveness of retail supply chain-Challenges, Strategies and Recommendations', mentions that supply chain costs in India, which deal with the procurement, manufacture and distribution of products and services, and drive the success of the retail sector, are about 12% to 13% of the gross domestic product (GDP) compared with 7% to 8% of GDP in developed countries.
Currently, the retail industry in India is a $410 billion market and is expected to grow to more than $879 billion by 2018. Food and groceries account for 70% of the retailed items followed by textile and apparel at 7%. However, 95% of the retail sector is unorganised and fragmented. The textiles & apparel segment represents about 40% of the organised sector.
According to the study report, inadequate supply chain infrastructure, complex taxation laws, high levels of intermediaries, product proliferation and lack of supply chain visibility are a few supply chain challenges faced by the retail industry in India.
"Post Independence, there has been only 20% capacity addition to the Indian rail network, while traffic has grown tenfold. Besides, due to the complex taxation laws prevalent in the country, a product is taxed twice, once by the Central government and then by the respective state governments," the report said.
Improving supply chain infrastructure, implementation of goods and services tax (GST), reducing intermediaries, and adopting green supply chain practices are some of the recommendations of the report. (Green supply chains involve integrating environmental thinking into the core operations of a company, starting from material sourcing to delivery to end-of-life recycling. It is expected that implementing green initiatives along a company's supply chain can raise productivity, enhance customer and supplier relations, support innovations, and enable growth).
The retail industry is facing challenges in the form of inadequate supply chain infrastructure and the complex taxation laws prevalent in the country. Investments in road infrastructure have not kept pace with the growth in road traffic, the report states. Only 20% of the roads are in good condition. The rail network is congested as freight moves on the same line as the passenger line.
At the company level, retail in India is facing challenges like product proliferation, high levels of intermediaries, fragmented and large number of retail outlets, suboptimal supply chains and lack of supply chain visibility. The report recommends - among other things - that companies should optimise the supply chain network, reduce intermediaries, improve supply chain visibilities and adopt green supply chain practises.
However, despite these challenges faced by the retail industry in the supply chain system, India has the potential to build the best supply chain across the world, feel some industry players.
Anshuman Singh, managing director and chief executive officer, Future Supply Chain Solutions Ltd, a unit of Future Group, said, "We can be flexible, change with the times and as we have no baggage of the past, we can build the best supply chain."
Besides, he also called for priority to be given to the basic supply chain over green supply chains. "(The) green supply chain has (a) great market, no doubt about it. But, let's first get the basic supply chain right," he said.