Supply Concentration Risk Highlighted by Closure/Relocation of Approx. 1,000 Factories, Opportunity for Redesigning India's Chemical Supply Chain [A.T. Kearney]

A.T. Kearney (Tokyo, Japan; Representative: Takefumi Harigaya) has published a white paper titled "Enhancing Resilience in India's Chemical Supply Chain," which summarizes the implications of external shocks, China Plus One, sustainability, and digitalization on supply chain redesign for the Indian chemical industry.

The paper identifies three major trends shaping India's chemical supply chain: the shift in global value chains and the rise of China Plus One, increasing emphasis on sustainability, and accelerating digitalization and innovation. It suggests that traditional designs focused solely on cost and efficiency are no longer adequate for navigating a highly uncertain environment, and companies must embed resilience through network designs integrated with business strategy, trust-based collaboration with partners, and investments in digital technologies and human capital.

Three Structural Trends Driving Transformation: From Efficiency Optimization to Resilience Design

India's chemical industry is expanding, driven by rising GDP and income levels, low penetration in various sectors, cost advantages in supplying export markets, a strong talent base, and favorable regulatory conditions. However, the industry is deeply intertwined with global value chains and is vulnerable to external shocks such as the COVID-19 pandemic, geopolitical disruptions, and climate-related events.

The white paper outlines three structural trends redefining India's chemical supply chain in this environment. First, the rise of China Plus One, promoting diversification of supply and production bases. Second, the growing emphasis on sustainability, driven by demands from customers, regulators, employees, and investors. Third, enhanced visibility and decision-making capabilities through digital twins, IoT, GPS tracking, and advanced analytics. All these trends are pushing a transition from traditional "cost reduction" designs to designs that "withstand volatility and adapt quickly."

Approx. 1,000 Factory Closures/Relocations and CBAM 2026: Supply Concentration and Decarbonization Force Rewiring

Over the past two decades, chemical production has shifted from Western countries to low-cost emerging markets in Asia, with China becoming a dominant player. However, a series of supply shocks in the last seven years have highlighted the risks of relying on a single sourcing hub. The paper cites the closure or relocation of approximately 1,000 chemical factories due to stricter environmental protection regulations, such as the Jiangsu development plan in 2016, as an example of supply concentration risk.

Simultaneously, sustainability demands are another pressure point for supply chain redesign. The Carbon Border Adjustment Mechanism (CBAM), set to require EU importers to purchase carbon certificates from 2026, necessitates companies to track and reduce their end-to-end carbon footprint. Furthermore, SABIC's shift from road transport to rail and intermodal transport, aiming to reduce CO2 emissions by approximately 65%, indicates the importance of reviewing not only procurement and production but also the logistics network itself.

Companies' responses are expanding into energy, transportation, and supplier collaboration, as seen in DCM Shriram's partnership with Renew Power to procure 50MW of renewable energy for its chlor-alkali production facility in Bharuch, Gujarat. In the future, information sharing and joint initiatives with supply chain partners, including addressing Scope 3 emissions, could significantly impact competitiveness.

Six Imperatives for a "Just in Case" Approach: Digital and Talent Investments Drive Competitiveness

Current supply chains often rely on centralized assets under a "just-in-time" philosophy, constrained by long lead times and siloed manufacturing processes. However, in an environment of increasing uncertainty, companies need to integrate business and supply chain strategies and adopt a "Just in Case" approach to prepare for demand and supply fluctuations.

The paper outlines six dimensions as imperatives for achieving excellence in chemical supply chains: integrated supply chain and business strategies, future-proof network design, planning capabilities, trust-based partnerships, true digitalization, and an organization that supports transformation. These should be viewed not as individual measures but as interconnected transformation elements linking networks, processes, data, talent, and KPIs.

Digitalization, in particular, means more than just implementing tools; it signifies a transition to data-driven decision-making across all supply chain operations. By combining visibility, scenario planning, information sharing with partners, and talent development, Indian chemical companies can enhance their responsiveness to volatility and achieve sustainable competitive advantage.

- About the White Paper

Title: "Enhancing Resilience in India's Chemical Supply Chain"

URL: https://www.jp.kearney.com/issue-papers-perspectives/driving-resilience-in-the-chemicals-supply-chain

- Supervisor

Fumi Hisayama, Partner

Prior to joining A.T. Kearney, Hisayama worked in general trading companies, managed startups overseas, and worked at a US-based strategy firm. He has over 10 years of consulting experience in more than 10 countries, focusing on energy & resources, transportation, and manufacturing industries. Having spent the majority of his career overseas, particularly in emerging markets (ASEAN, Africa), he has extensive experience in developing go-to-market and new business strategies under the vision of "Transforming the growth of emerging markets into vitality for Japanese companies." He has also led numerous projects involving structural reforms, operating model transformations, and organizational/cultural changes for global companies facing difficult challenges.

As a personal mission, he is fully committed to the revitalization of companies and human resources in the Kansai region where he was born and raised, and maintains his family's base of life in Kansai while conducting his activities.

- About A.T. Kearney

A.T. Kearney (global brand name: KEARNEY) was founded in Chicago, USA, in 1926 and entered Japan in 1972. Its core strengths lie in its high level of expertise, delivery of tangible results, and close collaboration with clients. Today, it has offices in over 40 countries worldwide, with approximately 5,900 staff and a global network. Its main clients include Global 1000 companies across all major industries, as well as major companies and government agencies in various countries, providing consistent, high-quality services from strategy to operations and IT. For more information, please visit our website: https://www.jp.kearney.com/