Why is an efficient supply chain important for a nation?
(Version: 16-May-2019)

We often see the sectorwise split of India's GDP into agriculture, manufacturing and services. Services dominate at more than 50% share. This is good for services, but we still live in a primarily physical world, where the manufacture and efficient delivery of physical goods is necessary and desirable. A healthy and diverse manufacturing sector not only makes us self-sufficient for many of our needs, it can also provide crores of jobs, aiding in the goal of broad based prosperity. Not to mention, manufacturing strength is also necessary to provide affordable goods in the export markets and thus be globally competitive to meet external demand.

Here we focus on the delivery part. Consider an item like an electric generator. It comprises various components manufactured by different vendors, all of which in turn rely on their own vendors, and so on till we reach the base materials at the end. Transportation costs are incurred throughout this process from base materials to finished products. Delivery schedules and timings also have second order effects like inventory costs, production efficiency, etc. Lastly the finished product may have to be delivered and installed atremote locations, so that it can start serving us usefully.

To a greater or lesser extent, such considerations are important for every industry. Not just the essential ones like food, medicine, energy supplies, but also in plastics, chemicals, electrical equipment, consumer goods, construction, and everything else. Even the services sector requires extensive support on the physical side of things, whether its copper or fiber optic cables to provide internet/telephony services, or cooling equipment for office buildings, and even the provision of furniture, computers and stationery for office employees.

Efficient supply chains need inputs from various stakeholders. The government ofcourse, in helping build infrastructure, whether its the roads, railways or waterways or ports. Logistics firms to create affordable multi modal solutions on top of this infrastructure. Fleet owners for the actual delivery. Warehousing and cold storage firms to store the goods appropriately. Freight forwarders for seamless exports and imports.

Although much work on these fronts has been done, a lot still remains. We should study the supply chains of developed nations and other manufacturing heavy economies, and continuously close the gaps where we still have to catch up, while simultaneously also innovate to gain a competitive advantage over others.