Pirojshaw Sarkari: 'Today industry is confident that Indian logistics players can handle Just In Time and Just In Sequence.'

by Kiran Bajad 22 Sep 2018


image

Mahindra Logistics, which caters to most vehicle makers in India and many Tier 1 component suppliers, aims to be a Rs 6,000 crore logistics service provider by March 2021. CEO Pirojshaw Sarkari reveals the advances the logistics industry has made in the past few years, GST as a growth driver, the advent of multi-modal transportation, the big positive in recently introduced axle-load norms for trucks, and challenges in the form of fast-changing technology and need for skilled manpower. An interview by Kiran Bajad.

How do you see a 3PL logistics company like Mahindra Logistics evolving in the automotive sector?
The 3PL concept has actually originated from the automotive sector. Over the decades, OEMs have developed an efficient-working and robust supplier base and today they only assemble the parts. In the USA, a typical automobile plant’s job is to assemble the car, everything comes from the suppliers. This makes logistics one of the major focus areas – Just-in-Time (JIN) and Just-in-Sequence (JIS) are what vehicle manufacturers engage in for building vehicles. Vehicle manufacturers no longer store parts in their factories; instead, they want the vendor to park the parts outside, then their logistic partner brings them in just in time to the assembly line. This makes the role of logistics provider highly important for the efficient working of vehicle manufacturing process.

How has being a Mahindra Group company helped?
We were first a division of M&M for eight years (2000-2008), which helped us learn the requirements of automobile manufacturing including in-factory logistics. When Mahindra Logistics was formed, it was transferred to a separate company. So, in that sense, we are unique because we started off with logistics business worth Rs 800 crore from our parent company. We work with M&M for its logistics needs, both in-plant and outbound.

Our first customer outside M&M was Ashok Leyland way back in 2008. Today, we do the in-plant logistics for every plant of Ashok Leyland across the country, including the new Pantnagar plant. At present, we work with all the major OEMs in the automotive sector in India. We provide in-plant logistics for Volkswagen and General Motors, and several Tier 1 suppliers such as the Anand Group and Wabco India among others. We bring to the table the best practices for our automotive customers and provide end-to-end logistics support. As such, they don’t have to really look into any logistics activity and instead focus solely on manufacturing their products.

What kind of logistics support do you provide to M&M’s automotive division, and to the automotive sector as a whole?
Besides the in-plant logistics solutions, we also do outbound transportation for M&M with our car carrier transporting vehicles across the country. We also do warehousing and freight forwarding for the automotive sector. Our entire automotive business is built upon the backbone of being M&M’s logistics solutions provider. We also handle M&M’s tractor business; when we transport tractors which are often carried on a flat-bed, the same flat-bed trailer is used for container movements too. If the tractors are being taken close to a port city, then the same trucks use car pick-up containers.

Logistics is all about reverse load management – if a truck gets a return load, the cost of logistics cost always reduces. We also do aftermarket spare parts logistics, which is quite large for every OEM. After implementation of GST, this business will expand rapidly with OEMs reaching out to their dealers and last mile retailers across the country.

What are the changes you see today in the automotive logistics industry compared to a decade ago? Are there any new trends emerging for OEMs?
There is huge change. Till around 5-6 years ago, every auto company was carrying out its own logistics or bringing in international players to handle their logistics needs. Companies didn’t believe that Indian logistics players could handle their needs efficiently. A lot of them today have transferred their logistics operations to the Indian logistics players. The confidence that Indian logistics players can do JIT and JIS, which is highly critical for any vehicle maker, has gained over the last five years.

After GST, the trend we expect is what is already happening in the USA and Europe.  In those markets, they do not manufacture the entire vehicle inside the plant, though they build the vehicle inside the plant. There is a lot of key PDI happening outside the plant like rim fitting, mirror fitting, wheel caps which are done by a 3PL logistics players. This was not happening in India due to the excise law before GST which didn’t allow the manufacturer to move the vehicle unless it’s completely built.

Now with GST in place there is no excise duty, and this opens is a totally new avenue for 3 PL logistics player. Also, many auto companies are exporting products to different parts of the world; this has also increased in the last few years bringing additional opportunity for logistics players.

How do you see the regulatory changes impacting the logistics sector?
In the past year, there have been unprecedented regulatory changes which are going to impact the industry enormously over the next decade. I have not seen such radical policy decisions within a year by any government in the past 25 years for the benefits of the logistics sector.

After GST implementation, there is a requirement of large warehousing, so the government gave infrastructure status to the warehousing. This helps in taking loans on affordable rates and a longer repayment period which is important for the growth of the warehousing industry.

The government also realises that transportation won’t be sustainable only on trucks, so it is working on multi-modal transportation with an introduction of ‘Sagar Mala’ which is basically using the waterways for moving goods. Now regional airports have been opened for better utilisation of air services too. The government has also set up a logistics department under the Ministry of Commerce for the help logistics industry needs.

Finally, there's the the E-Way bill. Each of these are large projects; while some of them can be implemented immediately, some will take time. But I am confident that all these policy changes are going to have a big impact on the sector.

The axle-load norms for trucks have also bought some uncertainty in the trucking industry. What is your view from the logistics industry perspective?
The last axle load norms were announced three decades ago. After that, things have changed in India including the infrastructure which has improved vastly not just the expressways but arterial roads have expanded. Naturally, trucks can take higher loads, so the 20-25 percent range increase should have happened sometime back.

Also, this decision doesn’t impact the entire industry, a lot of goods today move on a volumetric basis where the load is not relevant. So I would say this decision is going to be positive for the logistics sector.     

Logistics costs in India cost are nearly 14-15 percent compared to a single digit in the developed world? What are the key areas to improve upon for bringing down the cost?      
Certainly, regulatory change is one big aspect of this reform but equally important is the implementation of that change. For example, there was an expectation that GST would help dismantle the check-posts outside the states. But there are still check-posts existing at various states in the country. Therefore, on-the-ground implementation takes a lot of time in India. Similarly, even after the E-Way Bill coming into play, there continue to be squads on the road to check the state permits. Again this is not required. So first is a policy decision and second implementation is necessary for the efficient movements of goods to bring efficiency in the sector to reduce the cost.

It is often said in the industry that transporting vehicles to dealerships by roads is not sustainable and cost-effective. Do you see in India multi-model transportation evolving anytime soon?
Road transportation will still exist but will reduce to some extent with the Delhi Freight Corridor coming up. Railways rakes are being opened to private players for vehicle transportation which will help positively but still there are limitations. So large-scale transportation of vehicles will remain on road for a foreseeable future. For example, Mahindra Logistics' 90 percent automotive transport is by road and 10 percent by rail.

Sector-wise, how much does automotive contribute to Mahindra Logistics' revenue?
In our total turnover of Rs 3,000 crore, the automotive business including M&M's contributes nearly 68 percent to Mahindra Logistics. But I would like people to see our business as non-Mahindra, which is 28 percent in the automotive sector because the M&M business is going to stay with us. For us to grow the non-M&M nonautomotive business is the real focus area.

What are the key challenges for organised 3PL logistics players in India?           
There are several challenges but the biggest challenge is skilled logistics manpower. The logistics sector today doesn’t have a lot of skilled manpower. So it is imperative for us to bring in raw people and train them. It would be good to have trained people joining the sector.

Secondly, the big change in the industry that after GST, we are today changing the way we do logistics in the country, even for companies like ours it’s a big change management. Thirdly, technology is changing at a rapid pace and to keep up with technology is extremely challenging for us. First is to get good technology, and right people to work for a logistics company is not easy, therefore attracting talent has become a huge challenge. 

 


comments powered by Disqus