Tier 2 supply network in India – A grey area

Supply chains across the world face common challenges of supplier rationalisation, increased outsourcing, product development and value generation from the supply network. The scenario is the same for companies in India. As far as the Indian Supply network is concerned the tier 1 suppliers are truly world class like the TVS group, Bharat forge etc.., However there seems to be substantial challenges with the tier 2 supply network.

With the growth pressure increasing for companies in the tier 1 level, there is also a pressure to increase the average scale of the tier 2 suppliers. Traditionally the subsidies and labor union laws have not increased the average scale of business operations. Government has encouraged only small scale operations and have made the supplier network structurally weak of the supplier capability of tier 2 network. But there has never been a higher need than today to increase the scale of the companies and also to increase the value generated from the tier 2 network.