India stands at a pivotal moment in its journey to becoming a global manufacturing powerhouse, but success hinges on overcoming the twin challenges of resilience and sustainability in manufacturing supply chains. These challenges can either hinder India’s growth or open the door for India to lead by adopting supply chain models promoting resilience and sustainability.
Despite the manufacturing sector contributing 17 per cent to GDP and employing over 27.3 million people, supply chain inefficiencies are holding back its growth. Researchers have already developed supply chain models that tackle such inefficiencies by embracing resilience and sustainability issues. Resilient supply chains are not just strategic but essential for surviving disruptions like pandemics and geopolitical tensions. Moreover, sustainable supply chain practices will improve India’s competitive edge, making it a favourable destination for multinational companies.
These models aim to reduce emissions and waste, maximise resource use, and promote circular economy practices, crucial for a resource-limited country like India. By adopting renewable energy solutions backed by India’s growing solar and wind power sectors, these models can reduce carbon footprints and give India a competitive edge in eco-conscious global markets. Integrating AI, blockchain, and IoT can further enhance these models, driving cutting-edge sustainability practices.
Potential applications in Indian manufacturing
A prime example of where these models can be implemented is the Indian automotive sector, which contributes 7.1 per cent to the country’s GDP. With its reliance on both local and international suppliers, this sector is highly vulnerable to disruptions, as seen during the 2021 semiconductor shortage that shook global automotive production. To mitigate these risks, the automotive sector can adopt resilient models by localising parts of their supply chain, prioritising low-risk suppliers, and ensuring backup suppliers. Sustainability is critical for India’s commitment to reducing emissions under the Paris Agreement.
Manufacturers can reduce emissions by adopting models that minimise vehicle travel distances and implement carbon offset policies. Companies like Mahindra Group have already demonstrated the potential of such models by reducing emissions by 20%, showing that economic competitiveness can go hand-in-hand with sustainability. Supply chain models are also crucial for waste management and recycling, as demonstrated by ITC, which has achieved zero waste to landfill in some of its units.
Sustainability extends beyond environmental aspects to encompass social concerns. Supply chain models can incorporate social concerns like supplier incentives, accident risk minimisation, job creation, supplier diversity, workplace safety, and traffic congestion mitigation. Offering incentives to suppliers not only improves supply reliability but also enhances customer service. Promoting supplier diversity ensures a more equitable distribution of economic opportunities, as seen with Hindustan Unilever’s engagement with women-owned businesses and small suppliers, which strengthens local economies and increases supply chain resilience.
Workplace safety is another critical factor, especially in Indian manufacturing, where approximately 10,000 occupational injuries and 1,000 fatalities occur annually. Companies like Tata Steel have significantly reduced workplace accidents by implementing strict safety protocols. Additionally, to combat urban pollution and ease traffic congestion, Flipkart has introduced night-time deliveries using electric vehicles (EVs) as part of its innovative same-day delivery scheme.
Many other Indian manufacturers can also adopt sustainable and resilient supply chain models to support inclusive growth and boost India’s global manufacturing leadership.
Government policies and initiatives
Various Indian government policies and initiatives can promote sustainability, which supply chain models should incorporate while delivering sustainable solutions. The National Action Plan on Climate Change (NAPCC), with initiatives like the National Solar Mission (NSM) and the Green India Mission (GIM), advocates for carbon reduction and renewable energy integration across manufacturing industries.
The National Green Hydrogen Mission (NGHM) promotes green hydrogen as an energy source for industries like steel, cement, and heavy transport. The National Logistics Policy (NLP) promotes using renewable energy and EVs. Dedicated Freight Corridors are fully electrified and use solar energy to promote green logistics. A low Goods and Services Tax (GST) of 5% on EVs promotes eco-friendly practices. However, the increase in GST on renewable energy devices from 5 to 12 per cent in September 2021 can be viewed as a setback to achieving sustainable goals.
Corporate Social Responsibility (CSR) strengthens social sustainability by requiring manufacturers to invest at least 2 per cent of their average net profits from the past three years into community welfare and worker safety initiatives. Make in India and Skill India focus on job creation and workforce development. Additionally, the Public Procurement Policy for MSMEs and Stand Up India promote supplier diversity by supporting unprivileged groups.
Challenges and the path forward
While transitioning to resilient and sustainable supply chains may seem daunting for Indian manufacturers due to high initial costs, technological upgrades, and resistance to change, the long-term rewards easily outweigh the initial hurdles. Challenges such as implementing government policies stem from infrastructure gaps and limited funding, but the payoff is substantial, such as lower operational costs, compliance with environmental regulations, and enhanced brand reputation.
Manufacturers can leverage AI for demand forecasting, blockchain for traceability, IoT for real-time monitoring, and renewable energy for operations to build transparent and green supply chains. Though these innovations may be costly for MSMEs and startups, government support can make resilience and sustainability attainable for all, shaping the future of Indian manufacturing.
Thus, in an increasingly unpredictable world, adopting resilient and sustainable supply chains will not only safeguard Indian manufacturers from disruptions but also solidify their position as global leaders in sustainable business practices.
