While much of the world is coping with a slump in demand, India's markets continue to grow. Last year, the country experienced an estimated growth rate of 6.8 percent, with gross domestic product topping $1tr. And while predictions for this year are somewhat lower-in the neighborhood of 5.5 percent-India continues to struggle with the challenge of managing a rapid spike in demand, according to JDA Software Group Inc. "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," says Stephen McNulty, regional vice president of Asia Pacific with JDA. "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."
JDA has come up with five recommended strategies for companies looking to set up a flexible supply chain in India's expanding market. The first is ensuring "a clear understanding of local principles, customs and barriers." Companies should be familiar with tariff structures, road taxes, patent legislation and labor laws. In particular, knowledge of the limitations of India's transportation infrastructure is essential to building a flexible supply chain in that country.
Second is the need for constant communication-not an easy task, given India's size and inadequate communications infrastructure. Web portals are one means of exchanging information between trading partners. Some large manufacturers are giving vendors and dealers direct access to their internal supply chain management systems, JDA says.
Companies should develop a set of comprehensive procedures which will allow them efficiently to scale their operations in India. For example, JDA says, a structured base for demand forecasting allows companies to gather and analyze distributor sales data. They can also analyze the impact on customer demand of key drivers such as pricing and promotions. At the same time, supply chain managers need to ensure the quality of their input data. "Most merchandising plans are developed today without any actual demand data, causing gaps between customer purchasing information and supplier planning forecasts." Such failures invariably lead to stockouts and excess inventory.
JDA's final recommendation addresses the human factor. Logistics and procurement personnel should share responsibilities as part of a "supply chain team" which can overcome the drawbacks of remote reporting. The action will allow companies to capitalize on the strengths of each individual, while lowering costs and boosting customer service, JDA says.
