AFL sees opportunity in current slowdown

As the global and Indian auto and auto components industry is increasingly focusing on innovative supply chain and logistics practices to balance costs, and improve service levels; the third-party logistics (3PL) market is basking in the growth that this entire sector is witnessing.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 10 Jun 2009 Views icon4138 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
AFL sees opportunity in current slowdown
In the current market scenario AFL Logistics, the 3PL player, is using the downturn as a time for change and meeting new challenges. It sees the slowdown as a blessing in disguise. The current market conditions require a logistics operator to handle a number of supply chain delivery challenges, and as a 3PL player AFL claims it is equipped to offer end-to-end supply chain solutions that help reduction in cost by eliminating investments in warehouse and distribution assets to varied automotive players. At present it handles three automotive clients -- Bosch, Yokohama and UPS – and provides them multiple tactical logistics services.

As a 3PL player operating since 1996, AFL has provided integrated logistics solutions to a lot of Indian as well as global companies. Juzar Mustan, CEO, AFL Logistics, explains why the slowdown is an opportunity: “This slowdown has come across as a blessing in disguise. It has enabled us to lease space at an opportune time due to relative decline in rentals. Along with this we have been regularly consolidating our warehouse spaces thereby extracting greater economies of scale. Our focus on multi-user warehouses provides us a unique flexibility to keep filling our unutilised space faster than other players who are dependent on one or few clients. We have been working on some key customers to closely understand their demand and supply patterns and reconfigure our services better to offer right solutions. In doing this, we have being consistent with all our customers. For some clients, we have also been able to re-negotiate fixed contracts to variable contracts whereby customers pay on per-use basis with no fixed cost.”

Mustan further adds, “While the current economic slowdown has somewhat dented the spirit of the logistics sector, we still expect growth of 15 to 18 per cent this year. At AFL we are targeting a 50 per cent increase in our revenue in the current year, which is expected to come from new customers and verticals.”

Opportunity for AFL in 3PL

The Indian logistics industry is mostly fragmented and disorganised. In order to reduce logistics costs and focus on core competencies, Indian companies across verticals are now increasingly seeking and using the services of third-party logistics service providers (3PLs).

Realising the potential in the contract logistics market, AFL is gearing up for the enhanced client needs. In the automotive sector AFL has developed a dedicated warehouse and distribution capability for automotive spare parts wherein it can move the products quicker and cost efficiently throughout the system. Recently, in addition to other clients, for UPS it has pooled in more resources, trained them, and upgraded technology as well.

According to Mustan, “We are already a pan-India player in the supply chain management and logistics space. With 50 state-of-the-warehouses and a distribution capability of over 1,400 locations, we are now focused on further growth and expansion and are also looking at the aftermarket vertical as focus area for AFL. We intend to revolutionise the way our clients approach inventory ownership and service parts management. Our vision is to be one of the recognised leaders in this vertical within the next three years.”

At present the highest priority of all industries, whether automotive or otherwise, is to achieve a consistent presence of their products across a maximum possible network, at a low cost. No wonder then that with more investment being pumped into this sector growth will come. There will be new infrastructure built by way of Free Trade Warehousing Zones (FTWZ) and logistics parks. In addition the upgradation of existing warehousing facilities will continue as well, whether it is AFL or any other player. Thus this sector is currently enjoying an upward trend in the availability of trained, skilled manpower and similar demand from other areas such as Retail and Automotive industry.

AFL and Bosch

AFL works in tandem with its clients and to get a perspective of how this works we spoke with Bosch, which is one of AFL’s leading automotive clients. Bosch already has a department responsible for planning and logistics. The company sources material from its different plants and vendors, which includes 28 vendors for the trade and another 20 for service tools. It has a monthly planning cycle whereby it gets the requirements of its plant and vendors (15 days in advance for its plants) and based on this it starts supplying to all four of its manufacturing plants, including Bangalore, Jaipur, Nashik and Naganathapura. This is where AFL comes into the picture.According to V Vijay Kumar, DGM, Customer Logistics & Planning, Bosch, “Our plants supply to our Area Distribution Centre and from there all our material get redistributed to 21 of our own warehouses also called Local Distribution Centres (LDCs). They then bill to the 500-odd end customers.”

There is a detailed analysis conducted by part number with planners monitoring each and every one of the 16,000 part numbers. Kumar adds, “We have got 28 prominent vendors from whom we take products and send it to our 21 warehouses. From these warehouses it is directly sold to customers. Once these products come from our vendors they are packaged and sent to our distribution centres or warehouses. Our target is to keep the logistics cost under control. We can’t go beyond three percent and the industry is operating something like 68 percent.”
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