2012 Automotive Logistics Special: Revised wagon policy likely to be announced

At the Frost & Sullivan strategy workshop on 'Supply Chain Transformations 2012' held in Gurgaon on August 23, discussions revolved around the current status of the logistics industry and the skill shortages it faces.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 17 Sep 2012 Views icon3866 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
The central government is believed to be working on a revised wagon policy that it is likely to announce soon. It will enable railway wagons to be used optimally by OEMs for transporting vehicles. As per the new policy, the wagons will have two tiers to facilitate cars or SUVs to be parked in the lower deck and two-wheelers in the upper deck. At present, there are no decks in wagons, which make for limited flexibility.

The rail ministry is also working on an auto logistics hub at Bijwasan in Delhi and on putting up a siding or a privately-owned railway line from Maruti’sManesar facility to Mundra Port and beyond. The line already exists from Bijwasan and according to P K Goel, secretary general, the Chartered Institute of Logistics and Transport (CILT), investments are likely to come from the private sector if it is for a specific user but if the ministry develops it as a common user facility, then the railways will make all the investments.

Maruti is believed to have expressed its willingness to invest in the crossover and rail link, which is expected to cost between Rs 5-10 crore. Vehicles from its Gurgaon plant will be loaded on the rail wagons at the Bijwasan hub to facilitate transport a third of its cargo by the rail link.

At the Frost & Sullivan strategy workshop on 'Supply Chain Transformations 2012' held in Gurgaon on August 23, discussions revolved around the current status of the logistics industry and the skill shortages it faces. At current levels, the industry is expected to grow yearly by around 10 percent for the next decade with the supply chain cost being 13 percent of GDP (the unorganised sector accounts for 90 percent of it) compared to nine percent in Europe and US.

The contribution of organised players, mainly logistics service providers (LSPs), to logistics spend is currently around seven percent and is projected to contribute 22 percent by 2020. But the sector still does not have an industry status and suffers from extensive fragmentation with lack of good basic infrastructure. Despite high employment generation of 50 million people, there is no focus on developing manpower skills. Road transport still accounts for 60 percent of freight movement in India with state and national highways being very congested with high accident rates.

Prem Kumar Verma, CEO, Tata Motors Distribution Company, says that the cost to the system is $ 20 billion per annum. With the demand for drivers expected to rise to five million by 2016 against the current three million, shortage of truck drivers is expected to impact every industry as the railways transport 35 percent of freight in tonnage with an unutilised coastal line of 6,000km.

The railways contribute an estimated five percent to auto movement compared to 30 to 60 percent in developed countries. To reduce dependence on roads, the railways’ share needs to move up from five to 20 percent by 2020, else 36,000 trailers will be needed for projected volumes. About 95 percent of vehicles (cars, two-and three-wheelers, and small CVs) were transported by road last year. But due to non-availability of skilled drivers, 10 percent of the fleet remains unutilised. Moreover, the total automotive volumes are expected to rise to 44.6 million by 2020 from the existing 18 million.

In addition, the emergence of markets in rural areas, Tier 2 and 3 towns will throw a new spanner in the auto supply chain. Also, the enforcement of the GST regime and multimodal transportation will provide an opportunity to OEMs and LSPs to consolidate and reduce cost. But collaboration is still considered an ‘impractical fad’ by a majority of the LSPs and end-users as they fear risk of critical information leak to competitors, says Verma.

The key sectors that leverage logistics are automotive and auto components, retail, pharmaceuticals, engineering and electronics. According to VG Ramakrishnan, vice- president, transportation and logistics practice, Frost & Sullivan, packing, labelling and kitting are the main areas for collaborative logistics among logistics service providers and end users. This will enable optimisation of costs, resources and processes. However, since contracts are mainly for a year currently, long-term contracts will be required to facilitate the service provider to invest in infrastructure including larger vehicles, a pan-India network and high-end technology and equipment.

However, a serious problem dogging the logistics industry remains the shortage of manpower particularly at the entry level. This fact was reiterated by Gauri Gupta, Lead strategy and program management, National Skill Development Corporation (NSDC), who also pointed out the human resource-intensive nature of business in packaging, transporting, warehousing, repacking and delivery.

NSDC has earmarked funding of Rs 2,500 crore with plans to skill 150 million people by 2022 by fostering private party participation in different sectors. Currently, the sector skill councils are undertaking diligence of various sectors for skill development including for logistics and transportation as a priority sector.

To help the skilling of manpower, the need of the hour is for educational institutions to start specialised graduation and post-graduation courses in logistics, create awareness among students towards this industry and impart qualitative training for them to understand this industry thoroughly, besides undertaking regular workshops to promote career growth and future prospects. A step in this direction can be manifested by institutions by reducing costs of logistics courses.

SrinathManda, programme manager T&L-Menasa, Frost & Sullivan, highlighted the low coordination among institutes and industry as an area of concern, the low focus of the educational sector on logistics as well as the low presence of women in the sector, which he feels needs to be changed with government support if the logistics industry is to go on a higher growth trajectory in the future.

SHOBHA MATHUR
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