By Karthik Ravikumar | Manager, Supply Chain Design | and | Prateek Chauhan | Manager, Supply Chain Strategy & Operations | Chainalytics
Site selection–choosing the right siting location(s) from a mix of potential candidates for manufacturing, warehousing or distribution–is one of the foundations of a solid supply chain network design and an optimized supply chain strategy anywhere in the world. Successful network design always incorporates quantitative factors like demand and supply. But companies attempting to develop their best network design in a growing, dynamic economy like India’s need to look at other factors that will impact their long-term success, as they select sites. Infrastructure, accessibility and proximity to supply and governance all impact the chosen site’s long-term effectiveness. Providing the right candidate sites in a network model can yield significant network savings. Three Broad Criteria that Impact Site Selection
- Supply & Demand Changing demographics, growing consumer demand, the creation of smart cities and better access to technology mean consumer demand will shift from India’s urban and metropolitan areas to Tier 2 and Tier 3 cities. In five or 10 years, the Indian consumer profile will be very different, so supply chains will need to adapt. In addition, access to and/or physical proximity to domestic/international supply and existing industry-specific supplier bases and networks can impact site selection success (for example, the many ancillary auto industry businesses in Chennai mean national and international automobile manufacturers often want to grow their footprint in the area). In addition, the likely introduction of India’s Goods and Service Tax (GST) means new hubs will emerge and companies will start to carefully identify and invest in a national distribution center (NDC), regional distribution center (RDC), facilities that enable cross docking and/or mixing centers.
- Infrastructure Fifteen years ago, India had no golden quadrilateral, no East-West or North-South corridors. But today not only do we have these massive road networks but the current government is working on expanding the road networks, dedicated rail corridors and bullet trains, inland waterways, interlinking of rivers and modernizing air and ocean ports. The transportation conversation has gone from “Can I get a truck?” to real time tracking with GPS-RFID enabled trucks and the majority of businesses have moved from from “godowns” to fully or semi-automated warehouses. Logistics service providers from across the globe are introducing sophisticated transportation and warehousing approaches and technologies–especially in western areas like Gujarat. Access to these options will enable companies to focus on their core competency and outsource transportation and warehousing to the experts. Land availability/acquisition and cost are obviously a very critical factor. Access to resources like water, reliable energy sources and ores are also critical and must be included in your hunt for candidate sites.
- Governance, Sustainability & Environmental Responsibility Governance, tax incentives, ease of doing business in different states, labour laws and new special economic zones (SEZs) should also be considered as part of facility siting in your network. These economic incentives can make or break the site selection and development process in a network: We have seen cases where on their own, companies have been waiting to get building and permitting clearances for many years. But by outsourcing the siting function to a professional services firm like Chainalytics’ industrial real estate partner CBRE, companies are much more likely to secure the space they need, unlocking their new network’s operational potential a long way in advance. With India’s focus on environmental responsibility and sustainability, companies should also carefully review incentives or penalties among the different options provided by various state governments.
The process of selecting a site is part art and part science. It involves balancing numerous moving parts. Many factors impact the selection, which in turn impacts many aspects of supply chain resilience. With the right candidates and right decisions, companies can unlock a sea of opportunities especially in India’s growing economy. Prateek Chauhan–a manager in Chainalytics Supply Strategy & Operations competency–has managed consulting projects in supply chain strategy, inventory optimization and deployment, replenishment planning, master planning, procurement planning, and supply and demand management in areas including fast-moving consumer goods (FMCG), semiconductor and consumer electronics. A manager in Chainalytics’ Supply Chain Design competency, Karthik Ravikumar, has many years of experience in supply chain network design, transportation design, transportation procurement, pricing and bid optimization, supply chain management and process improvement, operations, process innovation, and project management. He has consulted with clients of varying sizes in many geographies in many verticals and is adept at working in dynamic, global environments and focusing on clients’ change management and organization-building needs. Read more about how Chainalytics provides supply chain expertise in India and the larger APAC region: