GST to be harbinger of change in India logistics

Frost & Sullivan’s two-day conference last month in Bangalore on 'Supply Chain Transformations 2014' threw up interesting insights on the challenges for logistics service providers (LSPs) in India, the impact of e-commerce and the likely benefits of GST when it becomes a reality.

Speakers at the conclave wondered if there can be model for rural logistics versus urban logistics with some even suggesting that such as dichotomy was irrelevant. The other issues that came up and were debated included the impact of FTAs on trade and how India can leverage that, as well as the knottiest of all issues, how to lick the continuing issue of last-mile connectivity, and finally getting the right human resources.

Speakers admitted that some of these issues are not likely to see any short- term solution, and that companies have to learn to live with such situations, and hopefully learn from one another.

To set a context to the conference’s many proceedings, Niju V, director, Frost & Sullivan, began by saying that India could take the advantage of the re-alignment of the world’s manufacturing footprint which is moving towards Asia.

In one key presentation, F&S' Collin Noronha touched upon the five key issues which include technology, infrastructure, skilled manpower, regulations and collaboration, themes which found resonance in other sessions that followed.

In terms of technology, it was said that with supply chains becoming more complex, the need is for technology that enables a company to know its suppliers’ suppliers and its customer’s customers. Visibility along the supply chain is imperative, and in this context, Harpreet Singh, Country head, TNT Express India, spoke about the company’s i-Clear solution that aims at essentially this.

The impact of e-retailing was also discussed with one speaker suggesting that players both present and entering need to ascertain the viability of the business before taking the decisions that are needed.

On GST, there seemed to be unamity that its introduction will increase the need for organised players but more importantly, it will lead to consolidation of warehouses and individual warehouses becoming bigger but it was pointed out that the benefits of GST cannot be seen in isolation. The eco-system would require better roads on the one hand and the building of required infrastucture such as cold chains, on the other.

The need for training came up as that was one weapon to tackle the issue of lack of HR talent and many seemed to say that this wasn’t a problem that was going to be solved any time soon.

One issue that was discussed was customer transparency. One LSP seemed to say that if customers are transparent with their LSP, a lot of problems including wastage can be resolved but here the touchy issue is that the customer would not want to cede control to a LSP. Resolving this, needs not only trust but clear communication and a sustainable plan.

RURAL VS URBAN LOGISTICS

Setting a context for rural and urban logistics was a data-filled presentation by Srinath Manda on the profiles of Indian states as far as their road networks as well as urban-rural structures go.

Based on the 2011 Census, the road density is just 0.4km in the rural areas as against 2.4km in urban areas. However, interestingly, the increase in per capita incomes is rising faster in rural than in urban areas, and this has implications for deliveries of goods from FMCGs to medical products and indeed to cars. In the auto sector, companies like Maruti and two-wheelers players such as Yamaha and Hero MotoCorp are looking to cater to smaller towns and rural areas.

If rural logistics is challenging, urban logistics presents its own with congestion and unorganised trading structures.

NRP Bhat of TAFE, one of the participants, said that in rural areas, buying is more of an emotional rather than a rational decision. He also highlighted the fact that logistics need to seen in more holistic terms as not just transportation, per se but the total cost of business.

He provoked some debate when he wondered if brand loyalty is dead as far as LSPs go, suggesting that buyers have 2-3 players in their top recall. The fact is that as far as last- mile connectivity goes, there are many local suppliers and the big players who use LSP need to have a comfort factor with them.

Speakers at the two-day event came from a variety of backgrounds that included pharmaceutical, automotive, express delivery companies and others. From the auto sector, panelists included Anand Venkateswaran, senior GM - sales logistics of Hyundai Motors, TAFE's NRP Bhat and Ramkumar Subramaniam, head- business development, TVS Logistics Services.

Clearly, LSPs hope that the introduction of GST will make things smoother on the operational and costs front. But while the introduction dateline remains a mystery, LSPs will have to come to grips with a new way of handling their business for which there are no real precedents. India’s logistics accounts for 14 percent of GDP as against the global 8-9 percent norm. What will it take to make the sector more efficient is the challenge that the industry faces.

Photograph: Frost & Sullivan’s Niju V moderates a session on growth opportunities and challenges from trade from a logistic service provider and end-user viewpoint.