'GST presents a golden opportunity to revisit, rationalise and re-engineer transportation and logistics networks.'

Oliver Bohm has held various leadership positions with DB Schenker in the Asia Pacific region and globally. In his new assignment as CEO in India, he is responsible for the overall country management and growth of the Indian subsidiary, Schenker India. An email interview by Shobha Mathur.

What are your priorities after taking over as Schenker India’s new CEO?
The Indian automotive sector is one of the most dynamic and fast moving in the world. Within India’s industrial segments also, it has one of the fastest growth rates.

Our priority area in automotive logistics in India is to augment our capability to the supply chain requirement of customers and make it more competitive in today’s global market. We want to share our best practices on freight and transportation management, production scheduling, warehouse planning and operations as well as aftermarket logistics solutions with customers in India to facilitate them in this high growth market.

As the industry evolves in India, we keep on upgrading and customising our capabilities as per the local market for one stop solutions to customers. Through our global and regional competence centres, we are well-versed with the latest development in automotive logistics requirements and accordingly keep on investing to scale up capability for the Indian market.

How much does automotive logistics contribute to  Schenker's business in India?
We are involved with the supply chain planning and implementation of many automotive customers in India. A typical operation consists of freight and transportation management, customs clearance at origin/destination ports, warehousing and domestic distribution. Value – added services like quality check, CKD, assembling, JIT, JIS services also play a key role in the automotive value chain. Many big automotive OEMs who are our customers have agreements with us as their logistics service provider globally, so their India operations come under the purview of complete solutions design and implementation globally.

Automotive is one of the most important vertical markets (VM) for us. We have a defined and specialised approach for vertical market logistics solutions. Among other VMs like electronics, solar and semi-con, consumer, retail, industrial and aerospace, automotive remains one of our focus areas for growth. Market forces play an important role in vertical market expansion and being in India, I think we are on the right side. As a result, automotive contributes a significant percentage of our contribution today by vertical market.

Which challenges is the company facing at present in India?
A sharp surge in the Indian automotive industry creates new challenges for the logistics service providers. This is because of two factors – one, demand increase in the domestic car market and second, export market for the Make in India car, especially in the entry level segments.

Domestic and international supply chains have their own constraints. Domestically, there is always a high cost of logistics involved in India and the OEMs are working to minimise this to become more competitive. This puts pressure on the service providers to contain the cost with global service standards. Supplier- manufacturer-service provider integration also plays a key role, and technological collaboration, transition and risk management makes it more complex for us.

In India, we are working on a very thin line of expectation and delivery. Industry stakeholders including the customers want faster delivery, integration of the value-chain, investment in facilities and cost effective solutions. So we rely heavily on the infrastructure to support, provide connectivity to market and consumers, tracking systems, better skill set of human resource and ease of processes. There are multiple associated reasons which leads to a higher logistics cost in India, however, the supply chain innovations and policy support is a way out. GST implementation, railways and a dedicated freight corridor can be a game changer here.

How do Indian auto logistics operations compare with European and global functions?
Auto logistics operations are different in India compared to the European Union or other developed markets. This is primarily because of difference in infrastructure, ports and airports, laws and procedures, highways and in-land connectivity. In India, the logistics industry is growing fast; but is at a nascent stage and annual logistics cost is too high. Secondly, the logistics market is dominated by the unorganised sector, which means access to world class technology, skilled human resource and communication is low thus creating a visible gap in the logistics value-chain.

In contrast, the European freight and logistics market is a significant contributor to the economy and a key enabler to other industrial sectors. The industry is a pioneer with technology-driven changes, a collaborative approach and creating value-add through integration within the logistics chain. Most of the large LSPs are headquartered in Europe and there is a significant trend towards outsourcing of logistics activities. Apart from this, infrastructure, technology and skill development initiatives are the key driver for the one of the fastest growing industries in Europe.

How will the enforcement of GST impact logistics in India?
GST has the potential to accelerate the growth of the logistics industry. The GST presents a golden opportunity to revisit, rationalise and re-engineer transportation and logistics networks. The changes in the proposed indirect tax system could reduce transportation cycle times, lead to consolidation of warehouses, which could help the logistics industry reach its potential in terms of service and growth.

It will also help in cross-state transportation, streamlining paperwork for road transporters and bringing down logistics costs. On an average, a vehicle on Indian roads loses 24-48 hours in paperwork and formalities at different check posts. This could be reduced by the implementation of GST and demolishing the toll at national and state highways, which will lead to a direct reduction in cost and delivery time.

How big is the logistics industry in India?
In 2013- 2014, the Indian logistics industry was estimated to be $ 130 billion. The market is expected to grow at a CAGR of 12.17 percent by 2020, driven by the growth in the manufacturing, retail, FMCG and e-commerce sectors. 

The contribution from the movement of goods including freight transportation and storage is about 90 percent. Roads dominate the mode of freight transport constituting about 60 percent of the total freight traffic. Rail and coastal shipping account for about 32 percent and 7 percent respectively. The Indian logistics industry is highly fragmented and yet to develop as an important contributor of an efficient supply chain.  n

This interview has been published in the November 1, 2015, 'Automotive Logistics Special, of Autocar Professional