INDIAN

LOGISTICSA mighty power in the making

A jaded yet funny take on Indian logistics sounds like this - How many logisticians does it take

to change a light bulb? None! The light bulbs are late. Experts like Prof. G. Raghuram, Dean (Fac-

ulty) – IIM Ahmedabad, put the onus mainly on the players in the sector. “I would put maximum

responsibility on the industry itself. Because you are all small you compete on cost and then you

beat each other down so much that you want to make money through overloading. You put a cost

on the roads because of that. Regulators are also limited. They get low salaries, so they are willing

to make extra money.”

He suggests that willingness to frame a reform system, regular reviews and improvements is

what will heal the logistics sector in India. In his words, “we must have a mindset of continuous

change.”

So what ails Indian Logistics?

Why is it that in a large economy like India, the logistics sector remains unorganized and is

deprived of industry status, despite talent, resources and technology? Its shyness to work towards

becoming organized comes from the fact that the small indigenous players continue to work with

By Sarada Vishnubhatla

Perfecting the

art of logistics

presupposes

minimum wastage,

optimum resources

and timely deliveries.

Mature economies may

be closer to the ideal

status. But expanding

economies are literally

juggling to make ends

meet. In other words,

manufacturing com-

panies need to pull up

their socks, broaden

their tunnel vision,

think big and organize

things. We take a look

at why the road to In-

dian logistics is bumpy

and crater-illed.

MOTORINDIA l August 201564

LOGISTICS

a tunnel vision. Lack of broad perspective and professional at-

titude limits them to localized pockets.

According to Novonous, a market research and knowledge

management company, India spends around 14.4 per cent of its

GDP on logistics. Other developing countries spend less than

eight per cent. The Indian logistics sector is expected to grow at

an average rate of 12.17 per cent by 2020.

Even this hinges on a few crucial ‘ifs’ like:

• GST implementation and handling post-implementation

scenario

• Revised Land Acquisition Act

• Enhancement of regional transport links in South Asia

• Continued boom of e-commerce

The Indian logistics sector is cost-driven. As Prof. Raghuram

puts it: “Almost 75 per cent of the leet is owned by those with ive or less trucks. So the competition between them is always on cost.” Hence, value addition becomes tough.

Mr. S. Ravichandran, Executive Director, TVS Logistics

Services Ltd., feels, “the awareness of logistics in India as a

complete solution provider is still very low, and the mindset

leads to many control measures when the segment itself is

largely fragmented.”

The few big logistics companies are striving in their own way

to move from traditional

methods of working to

seek IT integration and

technology to contain

costs and meet customer

demands. The urge is to

become end-to-end sup-

ply chain solutions, but

the way ahead seems less

than smooth.

Mr. V. Karthick,

Deputy General Manager,

Vertical Market - Au-

tomotive, DB Schen-

ker, echoes: “Local and

domestic players are pro-

viding the services at a

lower cost than an MNC

like DB Schenker. So,

though we are providing

the additional services

at a slightly higher cost,

the perception of being

an expensive freight

forwarder remains.”

While this is true, Mr.

Sushil Rathi, Mahindra

Logistics Ltd.’s Senior

Vice President - Supply Chain Management, feels, “we see

prime focus shifting from mere cost cutting to value addition.”

Could it be more wishful thinking rather than ground reality?

At the current growth rate, opportunities in India’s logistics

market owing to South Asian trade is likely to reach about $5.18

billion by 2020. However, if economic ties are improved with

the special efforts by

the Central Govern-

ment, it may even

reach around $6.5

billion.

A further illip to the logistics sector can

be expected through

infrastructure projects.

According to Frost &

Sullivan, the primary

reason for delay of

most the infrastructure

projects, including

Mr. S Ravichandran, Executive Direc-

tor - TVS Logistics Services Ltd.

Mr. Sushil Rathi, Senior Vice President

– Supply Chain Management, Mahindra

Logistics Ltd.

Mr. V Karthick, Deputy General Man-

ager, Vertical Market – Automotive,

DB Schenker

MOTORINDIA l August 201566

LOGISTICS

those in the logistics sector in India, has been the challenge

of land acquisition. The revised Land Acquisition Act would

beneit developers of logistics infrastructure and investors participating in PPP projects. As delayed logistics infrastructure

projects are expected to be completed quickly, new planned

projects are expected to be launched and other smaller logistics

are also expected to gain momentum.

Chaotic web

It is normal for a government to grant industry status to any

activity if it meets the pre-requisites for the same and is speciic about the expected beneit. Ironically, the goods transporters are shy of quoting speciics. Mr. Chittaranjan Dass, Secretary-General, All India Confederation of Goods Vehicle Owners As-

sociations (ACOGOA), points out: “They continue to grumble

on not being granted the industry status, but during the past

couple of decades or more,

they have not been able to

spell out as to what their

expectations are from be-

ing identiied an industry nor have they ever asserted

as to what should be the

shape of goods transport as

an industry per se.”

The small and medium

enterprises dominating the

logistics industry are pre-

dominantly lacking in pro-

fessionalism and expertise,

depriving the sector a substantial

status. Siddhi Vinayak Logistic

Ltd.’s Director, Mr. Deepak

Baid, laments: “The mode of

operation is still decades old.

Entry of new technologies is at

a snail’s pace. Concepts like JIT

and Six-Sigma are still unknown

terms. There is absolutely no

set mechanism of control by

the government, and there is

also the case of skill gaps and

demand-supply gaps in terms of

drivers.”

The fact that entering logistics

business is easy and does not

require any special skill forces

this sector to continue to remain

highly unorganized. Mr. Kar-

thick explains: “India’s logistics

sector has varying require-

ments and costs. MNCs, with

high technology expertise and

capability of undertaking global supply chain operations, do not

have deeper penetration to all the geographical areas. The local

players are dominat-

ing the market and

providing the last mile

connectivity with no

other option.”

What the sector

requires to give it a

leg up is a separate

ombudsman on the

lines of Telecom

Regulatory Authority

of India (TRAI) and

an integrated policy.

Knotty weave

It is the few big

players with leet sizes of more than

100 who are strug-

gling to offer added

value to their services

like timely delivery,

better packaging, better relationship, attending to situations gone

wrong with promptness despite many road blocks. What bogs

them down is government slack on various fronts. Says Prof.

Raghuram: “There are many regulations in India, and unfortu-

nately, even if on a legitimate basis you want to get speed you

have to often bribe your way. If you are an organized sector irm Mr. Chittaranjan Dass, Secretary

General, ACOGOA

Mr Deepak Baid, Director, Siddhi Vinayak

Logistic Ltd.

MOTORINDIA l August 201568

LOGISTICS

then you may have to satisfy rules like, for example, a large bus

corporation has to ensure that the driver changes every eight

hours. But if you are not organized, and if the driver feels he can

go, he will go. Nobody questions. So it is these laws that have

partly driven the system to be small. So, you have to untie some

of these knots.”

Untying these knots will take time in bringing together the

highly localized players. Mr. Karthick adds: “The unorganized

sector which consti-

tutes a major portion

of the Indian logistics

industry is driven by

the local factors and

cannot be stand-

ardized, say, at an

all-India basis. So it is

dificult to unite them under a single policy

all over India.”

Agrees Mr. Chan-

drashekar Viswa-

nathan, Managing

Director of the Ban-

galore-based Shekar

Logistics: “There

are no standardized

norms prescribed for

the small leet owners.

Most of them do not follow the safety norms, engage untrained

drivers and lack standardized billing system.” The standard-

ized way of working that is applicable to all players, whether

big or small, is perhaps the sole way to push the sector towards

becoming organized.

And the cup of woes overloweth. More knots that need straightening are, for example, infrastructural bottlenecks,

complex tax structure and lack of IT standards and skilled

manpower. These are really stiling the sector’s growth. But Wallenius Wilhelmsen Logistics India Pvt. Ltd.’s Managing

Director, Capt. Gur Prasad Kohli, sounds hopeful that the tide

shall change soon what with “the Government infusing coni-

dence with an allocation of Rs. 70,000 crores in the infrastruc-

ture space.”

The new tide, if and when it comes, brings with it concerns

like handling information and inancial low in a professional manner.

The road blocks

For one, the much-awaited Goods and Service Tax (GST) is

yet to be passed. And then, multiple barriers lower our logis-

tics eficiency. Implementation of GST can render multiple state barriers obsolete. This shall automatically ensure smooth

logistics management and beneit the economy, the consumer, government and industry.

Mr. Baid explains: “The rate of growth at which the logistics

sector will grow in the next ive to 10 years is sure to multiply. But a few pre-requisites for this to happen are uniform GST,

implementation of multi-modal policy to boost infrastructural

development, technological ad-

aptation by smaller enterprises,

warehouse infrastructure and

automation, besides focus on

business analytics in logistics.”

Mr. Rathi feels: “GST will be

a game changer for this industry

as the logistics companies

would no longer need to set

up small warehouses across

varied locations. It will enable

consolidation of warehouses

and ease inter-State transporta-

tion. Companies will be able

to follow a hub-and-spoke

Mr. Chandrashekar Viswanathan, Managing Di-

rector, Bangalore based Shekar Logistics

MOTORINDIA l August 201570

LOGISTICS

model for freight

movement from the

warehouses to the

different manufactur-

ing plants, wholesale

outlets, retail outlets

and the various points

of sale.” But the wish

for its implementa-

tion must be strongly

spelt out by the sector

itself.

Another beneit of GST reform is greater

transparency in tax

systems leading to a

corrupt-free method of moving goods and lower cost of busi-

ness. According to a study by Frost & Sullivan, the implemen-

tation of GST requires the manufacturing sector to reorganize

its overall distribution infrastructure. Each logistics service

provider will have to realign his operations too.

The study further says that most of the logistics users and ser-

vice providers are not ready to perform this exercise too soon.

Only approximately 15 per cent of the logistics service provid-

ers and 23 per cent logistics users have taken some initiative in

this direction. So until the time the realignment happens at all

levels, wishing for the GST shall remain just that – a wish.

The ups among the downs

One of the few ups among the downs bogging down the In-

dian logistics sector, according to Capt. Kohli, is, “the market is

on a growth trajectory owing to rapid globalization and 100 per

cent FDI in logistics.”

Another boost comes from the ‘Make In India’ campaign

which has the potential to give a illip to the manufacturing sector. According to Capt. Kohli, multi-modal transportation, if

encouraged, using incentives by the government, shall remove

the illegal practice of transporting over-dimensional cargo

off the roads and onto water-based logistics solutions. This,

he feels, “will reduce the overall cost of logistics and further

promote foreign investments in this sector”. He wishes for the

implementation of the dream project Sagar Mala and establish-

ing dedicated rail freight corridors.

Another mega trend that has the potential to impact the Indian

logistics sector largely is e-commerce. Online retailing cur-

rently occupies around seven per cent of the organized retail

sector. However, this sector is witnessing a strong growth and

is receiving heavy investments. Online retailers are competing

not only on prices but also on shorter delivery cycles and service

coverage.

On the whole, a national policy to deine the basics of infrastructure development and different modes of transporta-

tion shall help. With this comes the need to build multimodal

logistics parks which shall help reduce transport and storage

costs. What will also help is developing large-scale projects

like building container terminals that are integrated with remote

connectivity plans with a view to improving the last-mile con-

nectivity issues.

Customized solutions

Offering customized solutions is one way to counter the lo-

gistics sector fragmentation. Embracing technology and offering

its fruit to customers is the key. It may take small players time

to match capabilities with big players who are gearing towards

offering customized solutions to customers.

Mr. Karthick asserts: “Technology and capabilities are the fac-

tors which will differentiate the organized from the unorganized

in the long term. Customers want deliveries with their global

parameters, faster responses on their queries, more transparency,

real time information and tracking, ease of processes and, above

all, a value for their money.”

Fleet telematics is another potential contributor towards align-

ing the sector and help it perform professionally. Mr. Raghav

Himatsingka, Director, Ideal Movers Pvt. Ltd., shares: “India

currently has an estimated Vehicle Tracking Systems (VTS)

adoption of less than one per cent as compared to near 100 per

cent in developed economies. VTS and leet telematics help improve proitability and operational eficiency because VTS systems can track four essential data points: speed, time, loca-

tion and direction.”

Fleet telematics has the potential to perform activities like

measuring driver behavior, besides helping the owners meas-

Capt. Gur Prasad Kohli, Managing Direc-

tor, Wallenius Wilhelmsen Logistics India

Pvt Ltd.

MOTORINDIA l August 201572

LOGISTICS

ure and monitor data to be able to give a better service to customers. Bigger logistics

players are utilizing modern technology like cloud-based IT systems, ERP applications,

custom-made solutions, real time shipment information and mobile apps to improve

their customer interaction.

Mr. Viswanathan shares: “A few organized logistics companies have implemented

IT-enabled logistics models along with warehousing model of 3PL. We hope this will

compel the other transport companies to follow or join hands with organized logistics

companies.”

Mr. Karthick feels: “Many of these are standard service packages running in devel-

oped economies, whereas in India these are specialized service packages. Above all, this

is a signiicant proportion of their cost and they want to minimize it. Technology at an

affordable cost will serve India to come

faster at the global standards of service

delivery.”

While the sector is still largely strug-

gling with basic professional perfor-

mance, cracking the just-in-time (JIT)

puzzle remains more or less a wish. Mr.

Viswanathan says: “With the growing

trend of maintaining JIT inventory, the

supply chain of a company demands more

co-ordination and better communication.”

But, is JIT possible ever? Prof.

Raghuram differs: “We are moving in

that direction where we are saying, ‘do I

have to manufacture in anticipation of the

demand or can I reduce my lead time for

manufacturing’? So the more I reduce the

lead time, the earlier I need to forecast. So

instead of one month ahead, may be one

week ahead, if today my technology and

systems allow me to get something pro-

duced in a week, then I need to forecast

one week ahead. So that itself gives me an

advantage of being able to forecast more

accurately. So if I am moving in that di-

rection, I am relatively more just in time.

To me, just in time is just a philosophy.”

There are too many large drivers that

have an impact on the Indian logistics

sector today. Only if these knots are

straightened can the sector stumble

towards becoming an organized one.

Till then the long wish list of the few big

players will remain far from becoming a

ground reality.

w

Mr. Raghav Himatsingka, Director,

Ideal Movers Pvt Ltd.

MOTORINDIA l August 201574

LOGISTICS