The Delhi-based Safexpress now plans to invest Rs 1,000 crore as part of its growth strategy to develop 32 state-of-the-art logistics parks all over India in the next two years. Of these, three have already been inaugurated in April 2009 in Gurgaon, Nagpur and Ahmedabad. By the end of the year, over a dozen logistics parks will have been opened. Meanwhile, the next fortnight will see the company launching logistics parks in Kolkata, NCR and Chennai. While Gurgaon, Pune and Chennai have already developed as important automotive manufacturing centres in north, west and south India respectively, Kolkata has the potential to become an important automotive destination in the east.
“We are developing world-class warehousing facilities at key industrial hubs across India. We intend to create five million square feet of additional warehousing space across the country in the next couple of years. Our total investment in these logistics parks is around Rs 600 crore,” says Vineet Kanaujia, general manager (marketing), Safexpress Pvt Ltd.
Speaking to Autocar Professional, Kanaujia notes that the Indian supply chain and logistics industry in the country has huge growth potential. Development of the organised retail industry, rise in demand from the manufacturing industry and growing investment in infrastructure development are giving a fillip to improved supply chain management and the logistics industry, he said.
In order to reduce supply chain costs and to focus on their core competencies, Indian companies across verticals are now increasingly seeking and using the services of third party logistics service providers (3PLs) like Safexpress, to whom they can outsource their logistics needs.
“Special Economic Zones (SEZs) are among the major driving forces for the warehousing business and the Central Government’s policy to cut excise duty rates for manufacturing goods will help boost the warehousing business further. A large number of upcoming SEZs have necessitated the development of logistics parks for the domestic market as well as for global trade,” he said.
According to Kanaujia, the demand for high-tech ultra-modern warehouses will grow exponentially in the coming years. Earlier, to save on Central Sales Tax (CST), manufacturers preferred to maintain multiple warehouses at multiple locations to show the movement of goods from one company warehouse to another. However, with the phasing out of CST by 2010, manufacturers are readily outsourcing their warehousing requirements to third parties. This will not only help them save costs, but also they will be able to focus on their core competencies.
“We are driving this warehousing revolution across India, and in the near future we hope to totally redefine the way the supply chain functions in the country today. With the phasing out of CST from next year, development of SEZs and FTWZs (Free Trade Warehousing Zones), growth in manufacturing and modernised retailing, warehousing will play an ever important role in the Indian supply chain industry,” he adds.
For Safexpress, the automotive industry is one of its key clients and contributes close to 10 per cent of the company’s total business revenues. The logistics service provider, at present, caters to 10 different verticals including automotive, retail and apparel, healthcare and pharmaceuticals, publishing, IT, telecom, consumer electronics, engineering, electrical and FMCG.
Large fleet and specialised services
With growing demand from the auto industry for entire supply chain management, Safexpress is equipping itself with both vehicles and the latest software to enable smooth logistic workflows.
“We have a GPS-equipped fleet of over 3,500 weather-proof, ISO-certified, containerised vehicles operating on a well-connected nationwide network of over 560 destinations and more than 1,000 routes. Safexpress essentially provides three lines of specialised services including express distribution, 3PL services and supply chain consulting. Special value-added services are provided by the company to its key clients that include store-ready delivery, packaging, labeling and reverse logistics,” said Kanaujia.
With the promise of being ‘Custodians First, Carriers Later’, Safexpress offers a single-window solution for all kinds of logistics requirements with the capability of delivering to every square-inch of India. The company’s USP is that it provides time-definite express deliveries to its customers. It claims to have the capability to deliver in 1.8 days on an average to over 562 locations in India. “We provide the entire gamut of logistics services to several automotive companies. Since around a tenth of our total business revenues are being contributed by this vertical, our focus on the automotive supply chain is very high. We have been consistently innovating and providing specialised logistics support to many automotive organisations for over a decade now,” notes Kanaujia.
Safexpress provides the ‘Vendor Managed Inventory & Distribution’ solution to automakers like Maruti Suzuki Ltd and Mahindra & Mahindra, and is the critical link between the suppliers and the client. Starting with various suppliers, it collects and consolidates the inventory of numerous components that are required for the production of a finished product by the client. Then it keeps supplying them these components in the desired quantities and at the desired time. These parts come packaged in boxes and are delivered to the client, as per the specific number of units required on a specific day.
Furthermore, the company’s systems are totally integrated with that of its clients and the replenishment takes place scientifically with no room for error. Even a small delay in a consignment could result in an assembly line bottleneck. “The solution requires us to demonstrate very fine micro-management skills in order to live up to the client’s expectations day after day,” says the Safexpress spokesperson. It works on the value chain concept using a framework for examining linkages between suppliers, producers, buyers, intermediaries and end users, marrying local know-how with the best global practices, technology and perspective.
Taking on the challenge
The company has launched a special bailout package for the automotive industry to help it combat the ongoing slowdown. As supply chain cost constitutes a major part of the cost structure of an automotive company, by remodeling or modifying its existing supply chain networks, companies can minimise inventory related costs. This would help them enhance their operating efficiencies as well as help them achieve their profitability targets.
According to Kanaujia, poor infrastructure including the existing road and communication networks and ports are among the biggest challenges Safexpress faces. National highways form only two per cent of the entire road network in India, but handle over 40 per cent of the national road freight traffic, putting enormous pressure on the highway infrastructure and causing major traffic bottlenecks. On an average, a commercial vehicle in India records speeds of 30kph compared to over 100kph in the evolved markets of western Europe and the US, Kanaujia points out.
“Our country also has complex regulatory structures which form a major bottleneck and bring down the on-road time of vehicles substantially. The bulk of the time which a vehicle takes in moving from one location to another is spent idling at check-posts. High transactions costs arising from an inadequate and inefficient infrastructure currently prevent our economy from realising its full growth potential, regardless of the progress on other fronts. The sooner the government takes some concrete steps to improve this situation, the better it would be,” he says.
To enable smoother workflow and improved coordination of the supply chain, Safexpress has implemented cutting-edge IT solutions in partnership with players like Oracle, IBM and Cisco. This has not only smoothened workflows but also helped it bag a number of awards in the past year. These include the ‘Best Logistics Company of the Year’ by CMAI, ‘International Business Excellence Award’ by Institute of Economic Studies, Bosch Award for ‘Excellence in Logistics Services’, and ‘Brand Loyalty Award in Logistics Industry’ in India Loyalty Summit. Recently, Safexpress's chairman and managing director Pawan Jain was awarded the ‘Retail Leadership Award’ at the Asia Retail Congress 2009 in recognition of his contribution towards the growth of the retail industry in India.
It is expected that the next two years will see the logistics industry offering an even wider spectrum of services. With massive investment in a slew of Special Economic Zones (SEZs) in India, coupled with the phasing out of CST by 2010 and implementation of VAT, the majority of organised logistics players will be investing on infrastructure development and expansion of services. Consolidation of the supply chain and the logistics industry will be another key trend that will be emerging in a big way. “Safexpress has managed to augment its brand image tremendously over the past couple of years through its powerful marketing initiatives,”
says Kanaujia.