Overcoming Challenges of Rising Supply Chain Costs in India

In recent years, supply chain costs have been on the rise in India, causing a major headache for both buyers and suppliers. From raw materials to labor, the costs of producing and moving goods along the supply chain continue to climb, making it more challenging to remain competitive in a constantly evolving market. The recent surge in inflation in the US, reaching a 40-year high in January 2022 with a Consumer Price Index increase of 7.5 percent, has only exacerbated the problem. In this article, we will delve into the major difficulties and challenges of rising supply chain costs in India, the key reasons behind them, and offer practical solutions to help buyers and suppliers stay competitive amid higher prices and rising interest rates.

The Major Difficulties and Challenges of Rising Supply Chain Costs

One of the major difficulties of rising supply chain costs in India is the impact it has on logistics costs, shipping budgets, consumer demand, inventory carrying costs, order lead time, delivery time, and holding goods. These costs are being driven up by factors such as persistent shortages in semiconductors, raw materials, and labor, giving the highest payer a clear advantage in the market. Additionally, the increase in consumer spending projected by S&P Global Market Intelligence, at 4.2 percent this year, is not necessarily a positive for the durables category, which is facing headwinds.

Another challenge is the impact rising supply chain costs have on the price of goods and services. Price increases can come from various sources, including raw materials, labor costs, and freight and distribution costs. As the cost of production and delivery goes up, so too does the price of goods and services. This can lead to a vicious cycle of price increases, driving down consumer demand and causing companies to cancel orders with vendors or offer discounts to clear out excess inventory.

The Key Reasons Behind the Difficulties

The main reason behind the rising supply chain costs in India is the persistent shortages in critical materials such as semiconductors, raw materials, and labor. These shortages drive up the cost of production and delivery, making it more challenging for companies to remain competitive in the market. Additionally, the recent surge in inflation in the US, reaching a 40-year high in January 2022, has only added fuel to the fire.

Another key factor behind the difficulties is the impact of labor costs on prices. In India, labor costs are a significant component of the overall cost of goods and services. As wages and benefits increase, so too does the cost of production, leading to price increases for consumers.

Freight and distribution costs are also affected by rising supply chain costs in India. As the cost of transportation and delivery goes up, so too does the cost of goods and services. This can lead to longer delivery times and higher inventory carrying costs, making it more challenging for companies to remain competitive in the market.

How Businesses are Responding to Higher Prices and Interest Rates

In light of these challenges, buyers and suppliers must find ways to stay competitive amid higher prices and rising interest rates. One solution is to look for alternative sources of raw materials and labor to reduce costs. This can involve working with suppliers in other countries or investing in new technologies to reduce waste and streamline processes.

Another solution is to focus on improving operational efficiency. This can involve investing in new technologies, such as automation and data analytics, to improve forecasting demand and supply. By better understanding consumer demand, companies can better manage their inventory levels, reducing the risk of overstocking or understocking.

Finally, buyers and suppliers can stay competitive by offering value-added services to customers. This can include faster delivery times, better customer service, or more flexible payment options. By offering customers incentives or discounts to clear out excess inventory, companies can mitigate the impact of rising supply chain costs. However, it is important for companies to carefully consider the long-term effects of such actions on customer relationships and brand image.

Staying Competitive Amid Higher Prices and Rising Interest Rates

Another strategy for staying competitive amid higher prices and rising interest rates is for companies to adopt new technologies and processes that streamline their supply chains and increase efficiency. For example, incorporating automation into warehouse operations and utilizing digital tools to manage logistics and track shipments can help reduce costs and increase accuracy.

In addition, companies can also consider diversifying their supply chain to reduce their dependence on a single source of goods or services. This can help to mitigate the risk of price spikes or disruptions to the supply chain and ensure that they have access to the resources they need to meet customer demand.

Finally, it is important for buyers and suppliers to collaborate and establish open, transparent communication to identify and address potential issues in the supply chain. By working together, companies can find creative solutions to manage rising costs and remain competitive in the market.

Digital Transformation and Supply Chain Intelligence

By offering customers cost savings and increasing efficiency through digital renovation, businesses, and supply chain companies can improve their supply chain operations. Eunimart’s supply chain intelligence can help achieve cost savings of up to 20% by optimizing the supply chain through data analysis and a matrix of shipping partners. By using deep learning solutions to power demand and supply prediction and network logistics optimization, Eunimart can help businesses understand which products will sell in which geography, allowing them to get better control over sourcing, procurement, and replenishment.

Eunimart’s solutions also help businesses understand important inventory management concepts such as safety stock, economic order quantities, minimum order quantities, etc. This information, combined with an understanding of the best locations to find warehouses/fulfillment centers and how much stock each product holds, helps minimize the costs associated with overstocking or understocking. The use of optimal shipping partners can also minimize delivery time, thereby reducing costs and increasing efficiency.

Overall, the integration of digital tools and data analysis into supply chain operations can drive down the cost of the supply chain by at least 30%. By keeping ahead of the latest trends and innovations in supply chain management, businesses, and supply chain companies can stay competitive amidst rising prices and interest rates.