Supply Chain Resilience, Digital Integration, and Financial Performance

The COVID-19 pandemic exposed critical vulnerabilities in the supply chains of Indian manufacturing small and medium enterprises (SMEs), triggering widespread demand shocks, supplier failures, and logistics disruptions that led to an estimated 18% decline in SME output in FY2021. This study examines how pre-pandemic investments in digital supply chain integration (DSCI) — encompassing ERP adoption, IoT-enabled inventory visibility, supplier portal connectivity, and digital payment infrastructure — moderated supply chain disruption severity and influenced post-disruption financial recovery trajectories. Using a longitudinal dataset of 312 manufacturing SMEs across automotive components, pharmaceuticals, and textile sectors in Gujarat, Maharashtra, and Tamil Nadu (data collected at five time points: Q1 2020 through Q4 2022), we estimate fixed-effects panel regression models with disruption severity, recovery velocity, and three-year cumulative revenue as dependent variables. Findings indicate that firms in the highest DSCI quartile experienced 34% lower supply disruption severity (measured as the ratio of fulfilled to total customer orders during April-June 2020) and achieved revenue recovery to pre-pandemic levels 4.3 months faster than lowest-quartile firms. The relationship between DSCI and disruption severity is non-linear, with a significant inflection point at approximately 65% digital adoption completeness — below which additional digitalisation yields diminishing marginal resilience benefits, suggesting threshold effects in digital supply chain investment returns. Sector analysis reveals that pharmaceutical SMEs exhibit stronger DSCI-resilience relationships than automotive or textile firms, consistent with pharmaceutical supply chains' pre-existing regulatory compliance-driven digitalisation. Implications for government MSME digitalisation policy and bank credit assessment criteria are discussed.