For improvement in logistics it is critical that tax regimes need to be simplified and reduced to a single window and one-time levy across regions so that administrative processes do not hinder physical free flow of movement.
S Krishnamurthy, CEO, Reach Logistics, an AS Cargo Group company, which is into C&F, Logistics and Warehousing/Industrial Infrastructure creation activities.
Aun Aejaz, Director, Doehle Danautic Logistics, a leading freight, warehousing and distribution, and project logistics company.
How far did Indian logistics industry succeed in implementing logistics management?
The warehousing and logistics industry was one of the most un-organised sectors in India, was very sceptical to move towards organised. However, in the recent past, the warehousing segment has well accepted to move towards modernisation by implementing Warehouse Management System that has resulted in significant rise in the volume. This volume surge has provided the growth opportunities in all facets of logistics including transportation, warehousing, freight forwarding, express cargo delivery, container services, etc. Though the logistics sector is reluctant for a paradigm shift, the pulse of the market in view of the witnessed growth feels the demand is being placed on the sector to provide the solutions required for supporting future growth will certainly succeed in implementing logistics management but in a snail pace.
Just as the Nehruvian mixed economy model that India has followed, the Indian logistics sector has grown with the same genes – we have the international logistics and some Indian corporate players adopting the best practises while, the majority continue to follow the bidi/pan shop model of stumbling to service their customers. The fault again has to be laid at the steps of our policy makers in the government. We rarely take the holistic approach and do a band-aid job of quick fixes instead of addressing the two major issues: Red tape lead corruption and lack of spine to address problems head on and implement something as simple as GST.
Which are the key enablers of a successful logistics management system?
Despite holding promise, the logistics sector in India remains mired in too many complexities which have the potential of holding it back. The key enabler of a successful logistics management system is to overcome with the challenges currently facing that includes significant inefficiencies in transportation, poor condition of storage infrastructure, a complex tax structure, low rate of technology adoption and poor skills of the logistics professionals.
Once we have a simplification of procedures and get away with the mindset that all businesses are run to evade taxes a lot of corruption would go away. Of course, this has to be accompanied by a reduction and duplicity of tax policies – there are good role models in our neighbourhood such as Dubai which has literally risen from the desert sands and become a major trading hub.
Will more automation/technology help to create better management system?
Currently, the industry has low rates of technology adoption and very poor skill levels. The industry has now awakened on the technology front, now seems to be paying serious attention with the use of RFID, Vehicle Tracking Technology (VTT), Warehouse Management System (WMS), etc. Perhaps accepting to change is not an issue, marriage between IT and domain requirement needs to be resolved. Further progress on automation is dependent on a certain level of standardisation which is made more difficult by the high level of fragmentation in the industry. The skill levels in the logistics industry also require to be upgraded on priority. Quite a few institutions have opened up courses focusing on logistics industry. Awareness started looking logistics sector as the industry of choice for young graduates thereby making hiring of quality professional manpower easier but at high cost. Sourcing of the ground level staff is most challenging as they have a tendency of reluctance to entry level jobs due to increase in their basic level of education. A recent study has found that a variety of skills are required in the sector. These include technology skills, driving skills including safety procedures, industry understanding and multi-operations skills.
I think this emphasis on automation/technology is like putting the cart before the horse. We first have to clear the cobwebs in our policy and do away with red tape and than all other enabling factors like automation would follow like day after night.
How do you see logistics sector five years down the line?
Expected growth in the manufacturing and retail sector in the coming decade has a cascading effect on logistics sector which will step up to provide value enabling solutions for these sectors. Currently, the logistics sector assesses client needs in practical terms. Most of the logistics service providers do not have the finance to put in world-class facilities upfront and wait for the returns to be realised at a later date. Therefore, a logistics service provider today gives exactly the service that is demanded of him. Considering the expected growth, it is so inevitable that a tremendous upward swing on the investments for implementing logistics management by both ends is certain in the near future. This is perpetuated by the fact that today a logistics company can set up business, offer the best level of service with low margins because there is limited differentiation. Capabilities and skills are progressing in tune with the customers’ current demand.
With our age-old practice of one step forward and two steps backward hazarding a guess is just not worth the time.
Better management means better quality; but is market ready to accept it? What are the major policy changes needed?
For improvement in logistics it is critical that tax regimes need to be simplified and reduced to a single window and one time levy across regions so that administrative processes do not hinder physical free flow of movement.
Implementation of toll permit on lines of national permit, adopt a measures to reduce the multiple check points at state borders, simplification of the RTO inspection procedures and online payment of octroi, entry tax etc, would really boost the service levels of the logistics industry.
Reforms in urban planning should appear to factor in the enormous volumes of goods distribution catering to urban conglomerations in terms of road and peripheral infrastructure resulting in traffic restrictions and serious bottlenecks and logjams. The future of the Indian logistics sector lies ultimately in value propositions for the customer. Value solutions can be engineered only if the complex strands of supply chain mesh together seamlessly. These solutions are expected to command a premium but also come at a cost.
The cost conscious Indian market first has to be made to appreciate the value of premium services. In a supply-driven market, supply chain solutions need to unlock the cost saving aspect of efficient logistics services first. This would result a reduction in cost down the line, which can only happen when most of the deficiencies are removed.
Logistics companies can leverage further economies of scale when operations are expanded. This may require industries to collaborate with logistics service providers to nurture their businesses, possibly in a way the automobile industry in India nurtured the auto-component companies.
The growth of the mobile/telephony is a prime example of what the market can absorb and run with. Yes, there is this huge under 35 population which is impatient to match the best standards/global standard and this demand shall drive the quality.