Supply chain disruptions and operational efficiency of manufacturing SMEs in India: an empirical investigation

Abstract

Supply chain disruptions have emerged as one of the most formidable threats to the operational continuity and economic viability of Small and Medium Enterprises (SMEs) in India's manufacturing sector. This study empirically investigates the nature, frequency, and operational consequences of supply chain disruptions among manufacturing SMEs in Telangana and Andhra Pradesh, two of India's emerging industrial states in the Deccan region. Using primary data collected through a structured questionnaire administered to 240 owner-managers and operations executives across seven manufacturing sub-sectors, the study employs multiple regression analysis and Structural Equation Modelling (SEM) to examine the relationship between supply chain disruption intensity, mitigation strategies, and operational efficiency outcomes — measured through production downtime, inventory turnover ratio, on-time delivery performance, and unit cost variance. The findings reveal that raw material shortages, logistics failures, and demand volatility are the most prevalent sources of disruption, collectively accounting for over 68 percent of operational inefficiencies reported by the sample firms. Critically, firms that adopted proactive mitigation strategies — including multi-sourcing, digital procurement platforms, and safety stock policies — demonstrated significantly higher operational efficiency scores (p < 0.01) compared to reactive counterparts. Firm size and technological capability are found to moderate this relationship significantly. The study concludes with actionable recommendations for SME managers, industry associations, and state-level policymakers aiming to strengthen supply chain resilience without proportionately escalating operational costs.