Advantages and Disadvantages of Supply Chain Management

A well-streamlined supply chain is the key to success for any business. With its rapidly growing economy, Indian companies are transforming their supply chains, with changes driven by technical advancements and government initiatives. 

Let’s understand the advantages and disadvantages of supply chain management and acknowledge its importance for India in the upcoming years. 

Importance of Supply Chain Management in India 

According to the World Bank, India’s economic growth is expected to reach 7% in FY 24-25 and remain secure for the next two consecutive years. India has boosted its competitiveness post-pandemic and has created new opportunities. The India Development Update (IDU) opines that to achieve the $1 trillion merchandise exports goal by 2030, India must increase their exports while building technology-enabled sustainable value chains. 

In this regard, the country needs robust supply chain management to become a global manufacturing hub. National initiatives like the National Logistics Policy and Gati Shakti aim to ensure seamless operations across industries. They aim to reduce logistics costs, leverage modern technologies, and improve the required infrastructure to make supply chain management central to India’s economic growth. 

Advantages of Supply Chain Management in India 

Having an effective supply chain management plan helps enterprises reduce their operational costs, increase their purchasing power, and strengthen supplier relationships while keeping risks in check. Let’s explore the advantages of supply chain management. 

Lower Costs

Supply chain management opens up opportunities to work with budget-friendly suppliers and retailers to maximise profits downstream. You may also learn how to save more on sourcing raw materials from India’s vast natural resources and affordable labour to lower your sourcing costs further. Eventually, this benefits your bottom line positively. Effective supply chain management also helps reduce invoice processing time and cost, thereby maintaining good vendor relationships.

Satisfied Customers 

Most Indian customers expect to receive quality products within super-fast delivery timelines, making them less likely to switch to competitors. That said, optimising the supply chain helps ensure a company stocks the right products and offers quick deliveries, thereby creating and retaining a wide base of loyal customers. 

Good Supplier Relationships 

One of the biggest benefits of supply chain management is achieving a reliable network of suppliers. Manufacturing industries, for instance, depend heavily on the timely availability of raw materials. Hence, if you’re running a business, building strong supplier relationships is crucial. Once you learn how to work closely with suppliers and maintain transparency, your business can gain access to better pricing, priority delivery, and a stable supply chain, which is key to long-term success. 

Risk Management

Agile supply chain management prepares companies for upcoming supply chain disruptions in advance. The business market can be severely affected by everything from monsoon seasons to political changes. So doing business in India warrants leveraging technologies like predictive analysis to assess risk factors and take proactive actions to avoid and recover losses due to disruptions. 

Improved Inventory Management 

Effective supply chain management helps an enterprise improve its inventory control by reducing stockouts and overstocking issues. They learn how to leverage advanced technologies to gain real-time insights into their inventory for accurate forecast demand and stock management. 

Sustainable Operations 

Supply chain management plays a key role in helping a business achieve sustainability goals. They can optimise transportation routes, reduce fuel consumption, and minimise waste, all of which contribute to more environmentally friendly operations. 

A More Agile Business

A well-managed supply chain helps a business quickly adapt to new opportunities and overcome inefficiencies. By maintaining strong relationships with suppliers, companies can plan dynamic strategies when challenges arise. A pool of reliable suppliers makes it easier for companies to leverage valuable tools or processes that can help address problems and drive growth. 

Disadvantages of Supply Chain Management in India

Poor supply chain management can hurt a business in many ways. In this regard, let’s take a look at some significant disadvantages of poor supply chain management. 

Potential for Information Leakage

Sharing sensitive information across a wide array of stakeholders can expose businesses to risks of data leakage. Competitors or cybercriminals may exploit this vulnerability, jeopardising trade secrets and competitive advantages.

Dependency on External Factors

Indian supply chains are heavily influenced by external factors such as volatile fuel prices, government regulations, weather conditions, and global economic trends. These dependencies make supply chains more prone to disruptions and demand advanced risk management strategies.

Data Security Risks

The adoption of digital technologies in supply chain management introduces cybersecurity risks. Many Indian companies face challenges in protecting their systems from breaches, ransomware, or unauthorised access due to insufficient cybersecurity infrastructure and awareness.

High Costs of Implementation and Maintenance

Implementing modern solutions for supply chain management often requires significant capital investment in technology, infrastructure, and skilled personnel. For small and medium-sized enterprises (SMEs) in India, these costs can be prohibitively high, limiting the ability to modernise supply chains.

Difficulty in Integrating New Technologies

The rapid evolution of technology, coupled with legacy systems still in use by many Indian companies, creates integration challenges. This can delay digital transformation efforts and hinder the adoption of cutting-edge solutions like AI, IoT, or blockchain.

Need for Continuous Monitoring and Compliance

Indian supply chains operate within a complex regulatory environment, requiring businesses to comply with local and global standards, such as GST, labor laws, and environmental regulations. Maintaining continuous monitoring to ensure compliance adds an additional layer of operational complexity and cost.

Increased Complexities, Leading to Bottlenecks

As supply chain management systems grow more sophisticated, integrating multiple processes, technologies, and stakeholders can inadvertently create complexity. Without proper planning and oversight, this complexity can lead to inefficiencies, miscommunication, and bottlenecks in decision-making or operations, undermining the intended benefits of streamlined supply chains.

Future Trends in Supply Chain Management in India 

The future of supply chain management in India is about to undergo a rapid transformation driven by government initiatives and new technologies. For instance, the Indian government has launched the National Logistic Policy (NLP) to reduce logistics costs to 8% of GDP by 2030, powered by new technologies and improved infrastructure. This initiative will promote digital platforms for real-time tracking of different modes of transport (rail, road, and aviation) through a consolidated, centralised system. It will be known as the Unified Logistic Interface Platform (ULIP). It’s a UPI-like framework for logistic companies. The government will use the Logistic Data Bank project to enable transparency in exchanging real-time information on cargo movements.