The Distribution Challenge
The large geographical area of India and its relatively weak infrastructure are the most important constraints on distribution. India is a land locked country for internal distribution. High proportion of retail business takes place in the ‘unorganized’ sector and in rural areas that may be many miles from paved roads – which lead to much higher levels of ‘safety stocks’ than in organized retailing. The state sales tax regime encourages local stock points in each state, say companies.
The transport and warehousing industry is also fragmented and lacks scale – the average load carried by trucks in India is low by global standards, at around seven tons. Third party logistics is also undeveloped, and most businesses manage distribution and logistics themselves. There is no well designed hub-and-spoke distribution network in India and partly the taxation barriers between states act as barriers to efficient regional distribution. Another big distribution problem is the lack of cold storage chains.