Supply Chain Challenges for MSMEs

What Can Be Done?

To resolve these challenges, initiatives like PM GatiShakti, ULIP (Unified Logistics Interface Platform), TIES, National Logistics Policy (NLP), and PLI schemes are now focusing on:

Building multi-modal hubs near clusters.
Encouraging logistics tech adoption among MSMEs.
Offering shared logistics infrastructure and cold storage.
Digitizing logistics documentation and customs.
Training programs for logistics personnel.

Supply Chain Challenges for MSMEs

Micro, Small, and Medium Enterprises (MSMEs) in India play a critical role in economic development, but logistics challenges continue to hinder their growth and integration into global and domestic supply chains. Below is a detailed overview of the key logistics challenges faced by Indian MSMEs

India’s logistics costs are ~13–14% of GDP, compared to 7–9% in developed economies.

For MSMEs, these costs can go up to 20–25% of the total product cost due to small shipment volumes, lack of scale, and inefficient routing.

Lack of aggregation leads to unoptimised truckloads, increasing per-unit transportation costs.
Remote industrial clusters are often not well connected to ports, highways, or rail networks.

Inadequate first-mile infrastructure leads to delays in sourcing raw materials.

Last-mile delivery becomes inefficient and expensive due to lack of warehousing and proper access roads near customer zones or export hubs.
Over 85% of the Indian trucking industry is unorganised—mostly small fleet owners with <5 vehicles.

MSMEs have difficulty accessing reliable and cost-effective logistics providers.

Fragmented handling also results in more damage and pilferage, especially for fragile or perishable goods.
MSMEs are rarely integrated into multi-modal logistics parks or railway freight corridors.

They rely heavily on road transport, which is costlier for long hauls.

Inland waterways and coastal shipping remain underutilised due to limited docking infrastructure and coordination.
MSMEs in food processing, floriculture, pharma, seafood, and dairy face massive losses due to inadequate cold chain infrastructure.

~30–40% food loss happens due to improper temperature control during transport and storage.

Cold chain services are expensive and concentrated in metro cities, unaffordable for small players.
Shortage of grade A/B warehouses in Tier 2/3 towns and industrial clusters.

Absence of shared warehousing models raises storage costs for MSMEs.

Lack of scientific inventory systems leads to stockouts or overstocking.
Complex paperwork at checkpoints (especially for inter-state goods) delays movement.

MSMEs struggle with e-Way bill, GST compliance, port documentation, etc., due to limited digital literacy.

High toll and fuel taxes across states increase logistics expenses.
MSMEs are slow to adopt ERP, TMS (Transport Management System), GPS tracking, or warehouse automation.

This leads to:

Poor visibility of goods in transit.

Inability to manage returns/refunds efficiently.

Limited access to data-driven decision-making.
Export-focused MSMEs face challenges at customs, ports, and air cargo terminals due to delays, high costs, and paperwork complexity.

Lack of awareness about international logistics standards and Incoterms further hinders their competitiveness.
Poor availability of trained personnel in supply chain operations, freight handling, and warehousing.

Small firms cannot afford supply chain professionals or logistics consultants.

Impact Summary

Challenges	Impact on MSMEs
High logistics costs	Reduced competitiveness, lower margins
Poor first/last-mile access	Delays, increased lead times
Fragmented ecosystem	Unreliable delivery, inefficiencies
Limited multi-modal options	Over-reliance on expensive road transport

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