Supply chain related costs and expenditures in India account for around 13% of the GDP, a substantial negative in comparison to other developed nations.
An instance of how the supply chain can affect a production process can be found in the ailing Indian agricultural sector.
Accounting for numerous factors like road conditions and other logistics related limitations, a significant percentage of agricultural products are lost due to supply chain mismanagement.
In turn, this accounts for approximately 35% hike in costs for the buyers; emphasising the need for better management of the supply chain.
- Inventory holdings can cost anywhere between 20% and 40% of a product’s value, making them an important aspect of management of the supply chain.
- Transportation accounts for around 30% of the supply chain cost, though it can vary depending on the distance and other factors.
Note that these figures are indicative of agricultural products but they also apply to multiple other vital manufacturing and service sectors for the Indian economy albeit with different values. Cumulatively, the effect on all these parameters is extensive.
While the emphasis and necessity of enhanced supply chain management are obvious, it is also important for entrepreneurs to understand how proper optimisation and improvements can increase output or revenue.
The impact of properly managing a supply chain can be traced in the following fields of a business venture.
Boosting Customer Experience
Business revenue is directly proportional to customer experience since happy customers can be expected to return in the future to avail the offered services.
One of the things every businessman should know about supply chain management is managing it properly to achieve efficiency and minimise loss of output.
This is because better quality service or products are offered at cheaper rates, making it a preferred option for the customers.
Reduction of Operational Costs
Enhanced supply chain management ensures the reduction of operational costs, which directly impacts the revenue generated by the business.
On one hand, proper management reduces the wastage or misappropriation of resources which reduces overhead costs of a business.
Furthermore, with lesser wastage due to enhanced management, the total production costs can also be reduced or channelized towards expansion.
Enhanced Business Relations
Among the different tips on how to avoid a business financial crisis, common advice is that of maintaining business relations to ensure the continuance of the supply and production chain.
While in times of financial crisis, these relations help by offering raw materials and other facilities in credit, maintaining supply chain properly enhances these relationships and vice versa.
Proper management ensures there is no unnecessary due credit, which also helps in managing the best deal from the suppliers and other business relations.
Increases Working Capital
Working capital is the backbone of any business venture since it ensures that an enterprise maintains its production chain which in turn maintains revenue generation.
Consequently, the vital aspect of working capital management comes under that of the supply chain since it ensures that the supply of different materials remains unhindered.
Furthermore, proper management of the supply chain can also enhance the working capital or help accumulate finances which can help in business expansion.
Entrepreneurs can also consider going through a businessman’s guide to working capital loans if they intend to expand their business but have not been able to preserve much yet.
Such loans can be easily cleared with proper management of the supply chain and ensuring revenue generation.
Entrepreneurs must also note that there are numerous related expenditures which often come up while running a business.
Though proper supply chain management ensures savings for organisational or technological upgrades, enterprises can find themselves in the need for external financing.
Under such circumstances, entrepreneurs should explore the numerous business loan options which are provided by different financial institutions in India.
Many different lines of credit are offered by financial institutions to aid businesses with working capital requirements, technological upgrades, etc. Even the best business ideas can benefit from such unsecured loans, which do not require any collateral for their approval.
Reputed financial institution Bajaj Finserv even provides pre-approved offers which make loan application fast and convenient. These offers are provided on numerous financial products including business loans, machinery loans, personal loans, etc.
- 150 billion has been granted by Delhi Mumbai Industrial Corridor and Development Corporation to develop logistics hubs in Delhi, Maharashtra, and Gujarat.
- Around Rs.102 billion is being proposed for grants to build the same in UP and Haryana.
Multiple businesses in India are exploring the convenience offered by supply chain management software programmes. Though integrating them can be costly, these can effectively help in maximising the revenue generated by a business. Entrepreneurs considering integration of such software programmes can easily manage the expenses with business loans from a financial institution.
Mary Ellers is Wahu Times’s senior journalist covering federal politics. She has previously wrote for NPR and is a regular contributor to Medium. Mary graduated from Georgetown University’s journalism school with distinction in 2014.