Inside Tier II India: Redefining the digital supply chain The emergence of digitally enabled supply chains, hyperlocal distribution models, last-mile delivery networks, and national logistics corridors has significantly expanded MSMEs' market access across domestic and global platforms.

Walk into any small-town factory or manufacturing unit today, and you'll see a silent yet strong and unmissable kind of transformation happening. Today, the pulse of India's next digital revolution isn't beating in metros anymore, but in Tier-II/III towns often called Bharat. The affordable smartphones and low data prices have been fueling the digital adoption amongst businesses. On top of that, the pandemic in 2020 created a huge tailwind for MSMEs to pivot to digital/online solutions overnight. And this adoption has impacted on the entire chain of business activities, including logistics solutions. The transformation of logistics and supply chain, has been at an unprecedented pace over the last decade, and there are multiple enablers for that change.

• E-commerce: With ease of payment solutions (UPI in particular), the e-commerce adoption in Tier II towns has been at a rapid pace, higher than metro cities. Such high pace penetration of e-commerce made it essential for all Tier II towns to have a robust logistics network. Today, 63% of ecommerce orders are from Tier II and beyond cities, vs the metros.
• Conducive Policy Environment: Government policies like Bharatmala, Gati-Shakti, and many more such policies have strengthened the overall infrastructure, enabling connectivity to Tier II/III towns. This made logistics not only affordable but lucrative for businesses. The robust infrastructure, coupled with the attractive PLI scheme across multiple sectors, encouraged businesses to look at Tier II towns to set up their manufacturing facilities. All these new hubs are becoming home ground for large-scale logistics and supply-chain networks.
• Q-commerce: In the last few years, we have witnessed a whirlwind adoption of quick commerce across all demographics. This has further intensified the need for quality logistics chains in Tier II cities. Consumers' need for healthier, organic, and eco-friendly ways of living has also sparked brands and companies' movements towards cleaner, better supply chains and explore options beyond the metros.
• Affordable Rentals and Land: With expanding logistics networks, the warehousing needs are also growing. The low land prices in Tier II towns make the complete logistics solutions much more attractive than the large cities. No wonder we are seeing mushrooming of logistics hubs emerging within 50-100 kilometers of large cities. Farukhnagar, Bhiwadi, Bilaspur-Tauru-Sohna Road, Dadri, Greater Noida etc. are emerging as home to large factories and warehousing units, near the capital city Delhi. Similarly, the Golden Triangle (Mumbai-Pune-Nashik) serves as the core manufacturing belt for the state of Maharashtra.
• Technology: Last, but the most critical, technology has been one of the key enablers for logistics solutions lately. With the adoption of AI, IoT-led operations and cloud integration, today's warehouses in these Tier II cities have become smart logistics solution centers. The AI-led data analytics is helping businesses to run with much better demand forecasting, working out the most optimized route plans, and efficient inventory planning. No wonder these supply chain networks serve more than 50,000 towns and villages daily, seamlessly.

The emergence of digitally enabled supply chains, hyperlocal distribution models, last-mile delivery networks, and national logistics corridors has significantly expanded MSMEs' market access across domestic and global platforms. Platforms such as IndiaMART, Amazon, and ONDC have democratized opportunities, allowing even micro-enterprises in Tier-II and III cities to directly connect with national and international buyers.

Opportunities

The numbers tell a compelling story of how Tier II and smaller cities are leading the digital transformation, but there is still a long way to go. Given the sheer volume of these smaller enterprises contributing to the Indian economy, we still have significant headroom ahead for digital adoption and massive economic growth.

While Tie II towns continue to make strides, there are a few issues that remain to be ironed out. For many traditional businesses, supply chain operations remain largely manual or fragmented. Lack of knowledge or skill set, limited resources to experiment, high upfront cost, weak technical support, and limited access to finance discourage small businesses from transitioning towards implementing smart logistics solutions. These areas are being steadily worked upon by various public and private initiatives.

India's economic story is increasingly being written by its MSMEs operating out of Tier II and III cities. By 2027, 15 million MSMEs are expected to actively buy and sell online, against 6 million today. This expansion will fuel 7 million jobs, increase MSMEs' share in exports, and boost the country's GDP. With steady digital transformation, strengthening infrastructure, improved public and private participation, these Tier II & III regions will become pivotal to next-generation smart logistics and supply chain solutions, contributing their share towards country's vision for a Viksit Bharat 2047.