Improving India’s supply chain could boost businesses
Supply chain operations in India, which have historically been hindered by a complex tax structure and poor infrastructure, could see significant improvements over the next few years thanks to a recent government bill, said Crimson & Co in a recent statement.
Coupled with the focus on infrastructure improvements, there are greater opportunities for companies to increase market share and decrease supply chain costs than ever before, according to the global supply chain consultancy.
India’s supply chains have long been hampered by border regulations and poor road-surface quality. Cross-country road freight transport faces stop-and-search controls at state boundaries, complex forms to fill out verifying the goods, along with state taxes on import, manufacture and the sale of goods and central government taxes.
In the past this has dramatically increased the cost of goods. Although India reportedly has the second largest road network in the world most roads are of poor quality, including the national highways, further increasing costs.
That being said, government action over the past few years has opened doors to dramatic improvements to India’s supply chains. The Goods and Services Tax (GST) Bill, officially known as The Constitution (122nd Amendment) Bill 2014, is set to be a game changer for the economy when it is fully implemented (expected to be by 2017).
It will reduce the tax burden on companies and have a significant impact on supply chain optimisation, allowing warehouse consolidation, distribution hubs and associated inventory reduction.
This is in contrast to current fragmented distribution models. Additionally, the Indian government has heavily invested in improving India’s national motor highways and is also developing the Dedicated Freight Corridor in the rail network. This will significantly increase rail transport speed, decrease costs and enable intermodal transportation.
For Ravikant Parvataneni of Crimson & Co India, these changes mean that businesses can optimise their supply chains, increasing efficiency in line with local market requirements.
“Business leaders in India have long faced difficulties in operating nationally with fractured supply chains and historically poor infrastructure necessitating numerous local operations. This strategy is not only costly to set up and operate, but coordinating transport can become a logistical nightmare.
“The GST Bill 2014 will work wonders for supply chain efficiency. With uniform taxation and better infrastructure, businesses can consolidate their supply chains. Industries that rely upon the frequent movement of raw materials over long distances such as minerals and tea already benefit from rail transportation but the Dedicated Freight Corridor will have a significant impact on the consumer goods sector in the future.
“Of course, there is still work to be done before India’s supply chains can match those in more cost-effective global regions. However, as companies optimise their supply chains in line with the new taxation regime and infrastructure developments, they need to consider the fragmented sales networks with hundreds of thousands of small outlets needing smaller order quantities. This local network is very different to distribution models in other countries.”
Ravikant concluded: “There has never been a better time for businesses to start reconfiguring their supply chains in India. With operations no longer dictated by the tax regime and infrastructure improvements over the coming year, supply chains in India can start to deliver significant cost savings.”
Elon Musk's Boring Co. planning wider tunnels for freight
Elon Musk’s drilling outfit The Boring Company could be shifting its focus towards subterranean freight and logistics solutions, according to reports.
A Boring Co. pitch deck seen and shared by Bloomberg depicts plans to construct wider tunnels designed to accommodate shipping containers.
Founded by Tesla CEO Musk in 2016, the company initially stated its mission was to offer safer, faster point-to-point transport for people, particularly in cities plagued by traffic congestion. It also planned longer tunnels to ferry passengers between popular destinations across the US.
The Boring Co. completed its first commercial project earlier this year in April. The 1.7m tunnel system is designed to move professionals between convention centres in Las Vegas using Tesla EVs. It says the Las Vegas Convention Centre Loop can cut travel time between venues from 45 minutes to just two.
Boring Co.'s new freight tunnels
The Boring Co.'s new tunnel designs would allow freight to be transported on purpose built platforms, labelled as “battery-powered freight carriers”. The document shows that, though the containers could technically fit within its current 12-foot tunnels, wider tunnels would be more efficient. Designs for a new tunnel, 21 feet in diameter, show that they can comfortably accommodate two containers side-by-side, with a one-foot gap between them.
The Boring Co.’s new drilling machine, dubbed Prufrock, can tunnel at a rate of one mile per week, which is six times faster than its previous machine, and is designed to ‘porpoise’ - mimicking the marine animal by ‘diving’ below ground and reemerging once the tunnel is complete.
Tesla’s supply chain woes
Tesla is facing its own supply chain and logistic issues. The EV manufacturer has raised the price of its vehicles, with CEO Musk confirming the incremental hike was a result of “major supply chain pressure”. Musk replied to a disgruntled Twitter user, confused as to why prices were rising while features were being removed from the cars, saying the “raw materials especially” were a big issue.
Car manufacturing continues to be one of the industries hit hardest by a global shortage in semiconductor chips. While China’s chip manufacturing levels hit an all-time high in May, and the US is proposing a 25% tax credit for chip manufacturers, demand still outstrips supply. Automakers including Volkswagen and Audi have again said they expect reduced vehicle output in the next quarter due to a lack of semiconductors, with more factory downtime likely.
Top Image credit: The Boring Company / @boringcompany