Reimagining India’s Supply

Chain: A Bold 2030 Vision

Pre-conference concept note for CII Supply Chain Leadership Conclave
(CPG & Pharma)

September 10, 2020

COVID-19 has exposed the weaknesses of the supply chain globally with nearly 75 percent of global companies
experiencing supply chain disruptions. Worse still, most companies have reported the lack of any contingency plan to
deal with a problem of this magnitude. In India, the pandemic has only accelerated digital adoption. Online grocery
providers like Big Basket initially experienced unprecedented demand, forcing them to limit access to existing
consumers in April and May 2020. COVID-19 disruptions have created an opportunity for decision makers to re-imagine
the supply chain management in the country. It is more urgent than ever for Indian companies particularly in the
Consumer-Packaged Goods (CPG) and Pharma industries to reconfigure and redesign supply chains with greater
thought to use of disruptive technologies roadmap and risk management.The CII Supply Chain Leadership Conclave
aims to showcase important debates on the issue in the CPG and Pharma industries. We hope this paper will be a
thought starter for the ideas presented and debated at the CII Conclave. It covers challenges and opportunities for the
supply chain in India, learnings from international examples, and the vision for an efficient, resilient and sustainable
supply chain, that shape players’ aspirations.

Challenges and opportunities in the Indian supply
chain
COVID-19 has not only accentuated the weaknesses of the
supply chain but it has also revealed new possibilities for the
Indian supply chain industry. Each of the challenges described
below has hidden opportunities. Capturing them will create the
foundation for reimagination of the Indian supply chain.
 Talent scarcity coupled with labour shortage:
Finding qualified and interested talent is becoming
increasingly difficult. Supply chain leaders need an
extensive understanding of the key competencies
and functions needed for supply chain management
and the ability to source specific skill sets and
approaches to developing future leaders.
COVID 19-induced mass migration has exacerbated
the talent supply challenge. For example, a chronic
shortage of long-haul drivers in Q1 2020 has lowered
trucking capacity, leading to delays and disruptions.
With social distancing and hygiene norms that must
be met, talent fulfilment becomes even more
challenging.
In this situation, supply chain leaders must
reconsider how they source talent. An option is to
identify talent internally and retain this talent by
offering stimulating experiences, constant challenges
and an accelerated career path. Another opportunity
in the face of reduced labour supply is to automate
and digitise the supply chain to remove dependence
on transient labour.
 Disruption in global linkages: The current
pandemic has disrupted global linkages and
channels. For example, even though India is a large
exporter of pharmaceuticals, it is still heavily
dependent on China for Active Pharmaceutical
Ingredients (APIs). The lockdown in China thus
caused temporary disruptions in manufacturing.
Similarly, the United States is one of the biggest
importers of medicines and medical supplies from
China. The pandemic underscored the problem with
this over-dependency.
COVID-19 has highlighted the need of global
corporations to diversify production from North Asia
into other regions. The Government of India has
taken strong steps in this direction with initiatives like
“Atmanirbhar Bharat” and “Make in India” for self-
reliance with reduced global dependence. In fact,
there is encouragement from the government for the
Indian pharmaceutical industry to manufacture APIs
for domestic use and exports.
Concept Note
 Poor quality infrastructure: Though India has the
second-largest road network in the world, totalling
5.5 million kilometres, most of it is of poor quality.
National highways account for less than 2 percent of
the total road network, but carry 40 percent of traffic.
India’s logistics sector is highly defragmented with
presence of many local players and no national or
regional players who can create end-to-end
platforms. India’s demand for warehousing space
has been increasing and with prevalence of the e-
commerce sector, it has only heightened. Storage of
drugs and perishables consumer goods require more
cold storage facilities.
New-age supply chain start-ups in India in last mile
logistics and next generation trucking such as
Delhivery, Rivigo, and LoadShare are using
technology to make the logistics process smoother
and more visible. Another opportunity exists in multi-
modal logistics through expansion to coastal and rail
networks.
 Limited adoption of latest technology: Slow
adoption of supply chain technology remains a
challenge for India. Organisations globally have
adopted the latest technologies to ensure full visibility
and real-time information of processes in the supply
chain.
With the potentially long-term effects of the global
economic slowdown, organizations in India must
continue to invest in technology to improve their
competitive advantage. There is a clear opportunity
to invest in Artificial Technology, Blockchain and
Internet of Things solutions to transform supply chain
operations. Several Indian start-ups are providing
technology solutions in a SaaS model and this
creates an opportunity for supply chain executives to
experiment with such technologies in a low
investment model.
 Complexity due to multiple channels and supply
chain layers: The supply chain network in India is
highly stacked/layered. Looking at the Pharma
industry, the supply chain market is split with the kind
of products that are available, the kind of diseases
and therapy areas. With the growth of the industry,
there are new emerging therapy areas, making it
difficult to focus on the existing ones and further
increasing the complexity to bring everything under
one channel.
Consumers also buy products from multiple
channels increasing the routes that the supply chain
network must adapt to. The channels vary from e-
2

commerce websites selling directly to third-party
marketplaces like Amazon, Flipkart and from large
store retailers and wholesalers in metropolitan cities
to the small shops of a locality (popularly known as
Kirana shops). Managing multiples supply chains to
ensure enriching customer experience is posing a
serious challenge for supply chain managers.
The biggest challenge with omni-channel is its
breadth. It touches every single aspect of the supply
chain, meaning there’s no quick solution to
implement. Network design, facility design,
operations, systems, packaging, inventory
deployment, supply chain planning, etc. all of it needs
to adapt to the evolving marketplace or organizations
will find themselves losing ground as they struggle to
meet the expectations of an expanding business
model.
However, in the long-term, effective use of the
omnichannel will lead to effective and efficient
solutions, ensuring sustainability in supply chain
operations. Omni-channels can also play a significant
role in decreasing costs and de-layering the supply
chain.
Devising an integrated alliance ecosystem for
stakeholders can help achieve the minimum
threshold necessary for sustained progress and
continued value add. The government can also be
added along with direct partners. Such a system can
help align processes leading to faster payback on
investments in digitalization while enhancing its
sustainability.
 Volatility in inventory management due to
demand disruptions: Maintaining inventory and
ensuring smooth delivery has always been a
challenge in supply chain. The on-going pandemic
has accentuated demand disruptions in two ways. At
one hand, there is a huge shrinkage in demand for
premium, experience oriented goods which cannot
be bought online along with consumer durables and
automobiles. On the other hand, there is an
increased demand for PPE kits, masks, and hand
sanitizers. It is both a problem of plenty and few. The
crisis also brought in a channel switch in the nature
of demand where purchases from traditional brick
and mortar stores are increasingly moving to online
platforms.
COVID-19 disruptions have provided an opportunity
for companies to focus on better demand forecasting
using machine learning and creating agile and
resilient supply chain networks to deal with both
Concept Note
supply and demand shocks. It is an opportunity for
managers and leaders in to field to reinvent the
traditional supply chain practices and replace it with
a technologically efficient system ensuring end-to-
end visibility. Another opportunity is to create national
B2B marketplaces connecting suppliers and vendors
to manufacturers and the retail front-end (general
and modern trade) with several start-ups such as
Udaan, OfBusiness, Moglix leading the charge on
this area.
All of these challenges combined are resulting in an inefficient
supply chain and increasing costs in order to maintain
inventory levels, carry out timely deliveries and passing
regulatory scrutiny. It has made India’s supply chain less
competitive and unreliable. In fact, the supply chain and
logistics costs in India account for 14% of the GDP which
it at a disadvantage when compared to other developed
countries such as the USA and China where the logistics
and supply chain costs are 8 to 9% of GDP. This creates a
competitiveness gap of nearly USD 200 Billion in 2020 for
Indian industry to overcome.
The competitiveness gap will continue to contribute to the lack
of global competitiveness of Indian industry. With an inefficient
supply chain, aspirations of an Atmanirbhar Bharat enabled by
Make in India and Start-up India will remain unrealised. In such
a scenario, increase reliance on imports will adversely impact
inflation and bottleneck the India growth story. Disruptions due
to COVID-19 has hence now provided decision makers an
opportunity to fundamentally reset the Indian supply chain to
leapfrog into the supply chain of the future.
International learnings and Next Practices to build a
21st century supply chain
The fourth industrial revolution applications and technology
particularly on big data, augmented reality, internet of things,
blockchain etc have created several opportunities across
supply chain configuration, planning, processing and logistics
whose effective application can reduce operating cost by 40%
building more resilient and flexible supply chain networks.
In light of these Industry 4.0 applications, we have seen four
broad technology enabled global trends in supply chain
management and purchasing (see Exhibit 1), notably,
 Value chain synchronization
 Flexibility in customer operations and channels
 Process visibility and transparency
 End to end process excellence
3
 Concept Note

Exhibit 1 sourcing, product design, development and testing,

4 broad technology-enabled trends in global SCM and purchasing and distribution played a key role in this adaptation.

Exhibit 2
Trends in SCM & Purchasing ..
Building an agile network using the latest technology will ensuring
flexibility and resilience
Value chain Flexibly in customer Process visibility & End-to-End Process
synchronization operations & channels transparency Excellence Industries Rise of global Ecosystem- Omni-
Sustainability XaaS Diversity
convergence infrastructures orientation channel

Machine Decision Data Science & Language Visual Virtual Collective

Learning Management Analytics Processing Processing Workforce Intelligence

Automated and Decision-making based Automated extraction, Speech processing to Processing of visual Management and Cooperative and Integration of Intelligent 5G Smart Spaces Blockchain
cognitive identification on the analysis of the evaluation and enable communication interaction to enable steering of digital data remote decision new and legacy interfaces
of patterns within impact of previous interpretation of data between humans and communication flows to facilitate making based on Convergence of IT and OT AI-driven
digital datasets decisions & behavior from different data computers between humans and automation of manual multiple, independent
Additive Cyber Security
sources computers processes data sources
manufacturing Autonomous
Edge Computing
Quantum Technologies
AR/VR Things Computing
Source: Arthur D. Little Analysis

1
Source: World Economic Forum, Gartner, Arthur D. Little Research

COVID-19 has only accelerated the adoption of new age

technology solutions. Reflecting on these four trends and  Digitalization and use of disruptive technologies:
considering the supply and demand shocks of COVID-19, The primary focus of organisations currently should
decision makers are rethinking new ways of doing be significant investments in technology and
businesses and bring innovation into their planning and automation. Increased demand of e-commerce with
operations in order to build a sustainable and resilient supply a surge in online ordering has forced manufacturers
chain. and retailers to optimize their supply chain operations
to efficiently deliver high volumes of packages
The next practices to building a resilient next 21st century directly to the customer. Reduced manpower in the
supply chain equipped to deal with the “new normal” are as supply chain can only be supplemented through a
follows : robust technological system in place. Maintaining
inventory to ensure just-in-time deliveries will largely
 Building agile networks: The on-going pandemic
be driven through the use of data analytics.
has forced the industries to take a step back and
Digitalising the supply chain will provide a
review their current strategies, operations and
collaborative platform for sharing information with the
processes. It has also conveyed a lesson that these
stakeholders and managers at each point. This
disruptions are not one time and therefore, the
information will also help in improving the quality and
organisations need to build networks and channels
speed of decision making in the organisation. We
that equip them to navigate quickly and easily in a
see 3 disruptive technologies notably Artificial
changed environment. This will require a flexible
Intelligence, Blockchain and Internet of things
supply chain ecosystem with production spread
shaping the reimagination of supply chains (see
across manufacturers. Organisations will have to
Exhibit 3 for more details).
build systems that can optimize costs, accelerate
reaction times, and diversify channels. For networks Procter & Gamble’s strategy to deploy cloud-based
to adapt quickly and function easily, it is also platform to provide real-time information on
important to build agile teams that are willing to production and external demand helped minimize the
change and adapt quickly to the external fallout when Hurricane Sandy hit New Jersey in 2012.
environment. Swift reaction to disruptions can help Production in P&G’s factory producing 91% of its
bring faster change minimising the damage it can perfumes was disrupted. Use of advanced analytics
cause (see Exhibit 2 for details). and quick decisions limited the plant’s downtime to
2½ days. Further, in 2017, P&G used digital tools to
Recently, the production of disinfectants and medical
predict which suppliers, plants and distribution
gears by the French and Italian medical supplies ran
centres are likely to suffer damage from Hurricane
short to combat the spread of COVID-19. Within 72
Irma in Florida. It allowed the company to prepare for
hours, LVMH’s perfume factories were producing
contingency and could avoid disruption and financial
hand sanitizers. Designer clothing factories of
loss.
Giorgio Armani, Gucci and Prada were producing
medical overalls and trench coat plant of Burberry
started making face masks and nonsurgical gowns.
Flexible supply chains along with rapid raw material

4
 Concept Note

Exhibit 3 manage unknown risks will be building strong

The integrated end-to-end use of disruptive technologies will be a key defences, a risk-aware culture with a speedy
success factor in global supply chain transformation response team and system that can help sustain the
Example: Use of AI to shocks and provide competitive advantage.
predict the path food has
increased efficiency by 20%
Decision making for Lineage Logistics
Automated data analytics,
learning and decision Reflecting upon the trends and next practices that have been
making done by software
or devices
adopted globally, there are a few important strategic
Optimizing SCM
by integrating
implications for supply chain executives in India, notably:
asset
Data generation Transactions
portfolios,
Vast amounts of granular
data captured with a data Open and secure
management of data and
 Moving towards omni-channels integrating
network of smart devices
that sensors and can act
and new automatization of Example: Walmart’s
mango tracking challenge
Example: Amazon
uses 100,000 robots
technology contract execution
Before blockchain: general trade including Kirana stores: There is a
in its warehouse that 6 days, 8 hours, 14 mins
After blockchain:
can carry up to 750
pounds of load 2.2 seconds need to address the gap between virtual sales (e.g.:
Source: Arthur D. Little Analysis
e-commerce websites or third-party channels like
3
Amazon) with in-store sales (e.g.: Kirana stores or
huge retail chains). A huge inclination towards the
 Ensuring end-to-end visibility: Visibility plays an
former estimates that, India’s e-commerce market
important factor in determining the response rate in
may lift to around $85 billion by 2024. The e-
the supply chain system. It provides flexibility to
commerce industry is projected to grow at 30% over
manufacturers, distribution centres and retailers to
the next five years. Therefore, the increasing gap in
respond quickly to the ebbs and flow of consumer
the ratio is here to stay and the organisations need to
demand, without the need for additional labour or
adopt to new systems of supply chain like omni-
resource allocation. For example, the panic hoarding
channels to ensure sustainability.
of toilet paper could have been avoided had
consumers had visibility to the toilet paper inventory  Simplifying and delayering the supply chain to
level. Digitalization of goods through radio frequency build flexibility and resilience: De-layering the
identifications or barcodes could help with visibility at supply chain and directly going to manufacturers to
each step of the supply chain and help forecast reduce cost is the new trend. Devising a plan and
demand ensuring availability of goods. conducting pilots to supplement this new change
could help transform supply chains. Re-designing the
Toyota has created a database to visualize its supply
supply chain will help adapt to newer ways of building
networks for each of its component. Through this, if a
a resilient system. The just-in-time delivery system
disaster strikes, they know exactly which parts are at
will need a robust supply chain equipped heavily with
risk. It also identifies components produced by only
technology and automation. Incorporating these
one manufacturer and difficult to replace. This then
models require agility in the supply chain structure to
helps them reduce dependence and align other
ensure timely deliveries.
suppliers for production.
 Using latest technology particularly AI,
 Moving from risk mitigation to risk management:
Blockchain and Internet of things: Indian supply
Organisations have been vulnerable to supply chain
chain is heavily human-driven and therefore,
risks and disruptions much before the current crisis
integrating physical and IT networks could be the key
losing millions of dollars. In a survey, approximately
to make supply chain sustainable. Skill development
two-thirds of the executives expressed their risk from
at all levels of leadership in supply chain will support
supply chain disruptions and acknowledged that it
the shift to digitalization.
continues to rise. The reasons for rising risks range
from lack of transparency in the supply chain to data  Building 21st century multi-modal logistics and
restrictions which makes it difficult to ascertain the warehousing: Building the next generation multi-
probability and severity of risks. modal logistics with a consolidated network using
technology to ensure end-to-end visibility. Ensuring
Organisations should now take a proactive role in
creation of high-quality warehousing and cold
tackling these issues by structuring, cataloguing and
storage facilities with widespread availability to
addressing known risks and creating resilient system
ensure smooth movement along the supply chain.
to tackle unknown risks. An example for known risks
The next generation supply chain structure should be
could be supplier bankruptcy. Such risks could be
enabled by technology at all points.
managed by organisations through maintenance of
an active record and giving due consideration to  Shaping regulatory and policy support at the
disruptions that this can cause. The best way to centre and the states: Government intervention will

5

be required to ensure both widespread physical
connectivity by building multi-modal logistics and
broadband connectivity to reach rural areas.
Regulations by the government can play a huge role
in changing the manufacturing landscape through
GST consolidation, supply chain clusters, etc. The
support from the government to create a supply base
through MSMEs could ensure equitable economic
growth and skill building.
COVID-19 has made us all aware that how vulnerable we are
to disruptions in the supply chain. With lack of flexibility in the
system, the intensity and frequency of shocks to the global
economy are increasing. It is now that we need to adopt to new
changes in the system so as to manage risk and crisis
situations of tomorrow with resilience. Discussing and
addressing these imperatives will lead to the right questions
that will further help set aspirations for the transformation of
supply chain in India.
Setting aspirations for transforming the Supply
Chain: Vision 2030 for India
COVID-19 has opened an opportunity for supply chain
managers to use it as a catalyst for long-term transformation
of supply chains. Effectively addressing the challenges and
strategizing on the next practices adopted by the global world
could transform the supply chain systems from what we know
of today.
Going forward the Indian supply chain will need to be
reimagined. It will need to both shrink in scale and complexity
and expand in scope to address business continuity. For a
number of sectors in India (including Pharma and Consumer
Products) this is a big opportunity as sectors and organisations
can decide their entry strategies i.e. where in the business
lifecycle is it more profitable and less risky to start or strengthen.
Supply chain function will be called upon to play a more central
business role and a more strategic decision-making role. As
organisations get risk management strategies in place, the
additional investment in these strategies will require a re-look
at all elements of the business processes and markers for
profitable growth. In the spirit of debate and discussion, we
propose the following 2030 vision for supply chain in India
The supply chain industry in India needs to be reimagined
and efforts need to be put to move towards creation of an
optimized and automated logistics ecosystem, a
delayered distribution system and a sustainable, green,
resilient and flexible supply chain. It will be powered by Next
Gen technologies like Bigdata, AI, Blockchain and Internet of
Things backed by 21st Century infrastructure. It will be aligned
with best practices across world at par with global standards.
The re-imagined Supply chain will make India ‘Atmanirbhar’
Concept Note
and supplement Make-in-India and Start-up India strongly,
catering to global supply chain.
Keeping the above mentioned vision in mind, the aspiration for
the supply chain should aspire for the outcomes described in
Exhibit 4 below
Exhibit 4
5 broad themes to focus on for a Vision 2030
n The average supply chain has a digitization level of 43%. Aspire for 75-80% for top
Digitalizing the companies and 50% for mid level companies
supply chain n Highly digitized supply chains can expect efficiency gains of 5% annually and revenue
boost of 3% a year.
n Privatization of logistics infrastructure with PPP models for road, coastal, and rail
Improving logistics
n Achieving a target of 50% freight by rail network as compared to current 33%
and warehousing
n Reaching cold storage capacity of 60 MT by 2030 in line with growing demand
n AI-powered forecasting will reduce errors by 30 - 50% , leading to a 65% reduction in
Widespread use of
lost sales due to out of stock situation and decrease in warehousing costs by 40%
data analytics
n Monitoring with use of sensor-based technologies will reduce wastage up to 20%
n The archaic distribution system to be scrapped and delayered to a 2-3-layer system
Re-designing supply
n Targeting share of digital retail sales and organized retail to reach 40-45% each by 2030
chain structure
n Integrated system for as many stakeholders for sustained progress and value add
n Senior management to become comfortable with digital transformation, data analytics
Talent management and AI for faster adoption and hiring and training new talent
& investments n Skill re-alignment of front/ middle line for automation, IoT and data driven decision
making
Source: Arthur D. Little Analysis
The benefits to realising this vision is multi-fold. India can aim
to reduce its supply chain and logistics costs to 8-10
percent of GDP by 2030. This will make India globally
competitive versus most developed countries particularly US
and China. As a result, Indian industry will be able to bridge a
2030 competitiveness gap of up to USD 500 Billion.
In order to give shape to these ideas and establish concrete
steps towards a sustained transformation of the supply chain
system, we look forward to discussing these pressing issues
at the CII Supply Chain Leadership Conclave on September
11, 2020. The key themes that we expect CII Supply Chain
Leadership Conclave will address as illustrated in Exhibit 5.
Exhibit 5
Key questions to be addressed in the CII Supply Chain Conclave
1. Who will be the key stakeholders in the evolving Supply chain industry?
Resetting the
supply chain –
alignments & partnerships
2. What role will the government and regulatory bodies play in realizing vision 2030?
in these challenging 3. How will the PPPs support the industry?
times.
Supply chain 1. How will the large unorganised retail sector be addressed in the long run?
design changes
2. What will be the key steps towards achieving the right balance between
for a profitable
Omni channel digital, unorganised and organised?
growth.
3. How to promote adoption of new technologies in physical stores?
Process 1. What kind of disruption will the industry see in the coming years with increasing
Innovation and
number of start ups?
Digitalization for a
more efficient, agile
2. With boost in digitization and digitalization, what will be cybersecurity measures
and de-layered
and privacy handling of data?
supply chain.
5
With this conclave, we wish to shape aspiration for the
transformation of supply chain in India and catalyse a holistic
portfolio of interventions to reimagine the Indian supply chain
by 2030.
6
 Concept Note

Contact
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Authors

Barnik Chitran Maitra, Managing Partner, India & South Asia

Thomas Kuruvilla, Managing Partner, Middle East and Global

Board Member

Arthur D. Little

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Chain: A Bold 2030 Vision

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