As global competition heats up, logistics companies are banking on intelligent IT infrastructure for differentiation.
Wat will make life easier for you: Smart cars or smart trucks? While intuitive cars mean instant personal gratification, smart trucks as launched by DHL and its group company, Blue Dart Express, have wider ranging benefits. These trucks talk to each other, get alerted about traffic snarls and even tell their drivers if a package meant for a different route is on board. A new route planner harnesses satellite data and radio homing to do the magic. In a country with 13 per cent of its GDP sunk in logistics costs (other countries spend in single digits), such technology could save time in many different ways. Time saved in logistics, as in everything else, translates instantly to money saved.
The smart truck is just one of the ways the branded express logistics sector in India, estimated at Rs 5,800-6,000 crore, is trying to work around the impediments that India’s infrastructure poses. Express logistics will play a greater role when companies streamline their supply chains. Right now, according to Devinder Chawla, partner, business advisory services, Ernst & Young, the bulk of the business is still about couriering — ferrying around documents. “The biggest clients are from the BFSI (banking, financial services and insurance) and telecom sectors that send bills and documents to their customers in the same city,” adds Chawla.
While the express logistics industry still has a considerable unorganised segment (25 per cent), national players are moving beyond being just glorified couriers. The process of consolidation has already started; some national companies have been bought over by international players in their bid to get ready for the Indian market. “Most of the international players have followed their global clients to India but without the acquisition jumpstart, getting a toe-hold in the Indian logistics market could have taken them years,” according to Chawla.
With time, express logistics could also remove complex inventory loops from supply chains. Vinayak Chatterjee, chairman of infrastructure consultancy Feedback Ventures, cites some international trends. “Companies with time-critical supply chains such as medical equipment manufacturers are even known to keep some inventory of spares with their express logistics partners. It brings down transport time in case of emergencies to less than a day,” he explains. R S Subramanian, country head, DHL Express India, agrees. “In the case of just-in-time supply chains, we could decrease the intermediate steps of transporting inventory from the factory of say, an auto-component manufacturer, to its European client. We would be able to break bulk ware and reduce the need for 45 stock points to just three.” Srinath Manda, industry analyst, transportation and logistics practice, Frost & Sullivan, points at another possible push factor. “If Goods and Service Tax (GST) is levied, it will lead to uniform taxation policy and companies won’t need as many distribution centres. So, new support might be needed with the help of express logistics.”
The task for the new entrants, however, is cut out. To quote an industry observer who doesn’t wish to be identified, “The national express cargo arms of international brands need to move beyond a consulting attitude and take on more problem-solving.” Some of them are trying to do just that.
The smart trucks that Blue Dart, a part of the DHL group (which has three other arms in India), is piloting in Bangalore is set to improve route-planning and delivery time to begin with. Blue Dart MD Anil Khanna says, “It allows us the flexibility to accommodate an urgent pick-up without costing the truck time for other deliveries. The GPS-enabled trucks have an intelligent route planner that lets the driver ascertain the most efficient way on his run.” With the airport a good distance away from the business districts in Bangalore, the city was the natural choice to pilot the trucks, which Khanna says will be rolled out in the rest of the country in phases by the end of 2012. The travel time has been brought down by 5 per cent and there has been a 10 per cent reduction in turnaround times at the warehouse (that involves loading, sorting into the vehicles), according to him. These trucks debuted in Germany last year for DHL and had reduced the miles travelled by 15 per cent, making for a greener journey as well.
Not just technology investments, logistics companies are also introducing services suited to Indian businesses and even managing the entire freight or supply chain for companies to emerge as true third-party logistics (3PL) partners.
One of the products that are finding favour with clients of express logistics services is time-definite deliveries. Manda says, “India Inc. spends an estimated Rs 2,50,000 crore on transport but express logistics accounts for just about Rs 9,000-10,000 crore. Logistics managers prefer regular transport (truck fleets) on a fixed schedule and use expensive express services only during emergencies. But time-definite deliveries strike a middle ground.” Time-definite deliveries don’t have the typical overnight deadlines of express ferrying. Instead, they are supposed to cut down transport time by two-three days from regular transport time.
The express players’ IT tracking adds to the reliability. Vineet Kanaujia, general manager, marketing, Safexpress, says, “We were the first to launch time-definite deliveries for surface transport. Our vehicles leave at the designated time for deliveries, whether they are full or not. This lets the logistics manager hold as less inventory as possible.”
Not everyone is impressed by this logic though. Samir Chaturvedi, senior manager, distribution and logistics, Amway India, points out, “Even if one uses express logistics services, the time to ply between Delhi and Bhopal, for example, can’t be brought down beyond a certain amount. At the same time, where regular trucks will charge Rs 4-6 per kg, they charge Rs 40-60. So, it does not always work out for us.”
However, certain sectors are increasingly turning to express logistics partners for their transport needs. DHL’s Subramanian says, “Historically, the express industry was about couriering documents and cargo was often materials from the fashion/textile industry. But over the last five years, engineering, pharma and online retail have been increasingly using our services.”
Both DHL and Blue Dart are focusing on customising for the pharma sector. They both claim to offer “the facility of temperature controlled logistics”. The offering allows the pharma companies’ packages of drugs to be delivered in temperature controlled vehicles, with temperature records, and packaging provided by the company. FedEx also has a system geared to let clients monitor temperatures of the air-borne consignments.
Pharma companies concentrated in small and medium enterprise clusters such as Baddi (Himachal Pradesh) and Siliguri (West Bengal) are being serviced by Blue Dart’s temperature-controlled offerings. Lupin’s president of finance and planning, S Ramesh says, “Most of the drugs in our Rs 2,000-crore domestic business are for lifestyle diseases such as diabetes, hormonal imbalance, birth control etc.
These need temperature control at all stages, especially in climactically sensitive regions of India. Ninety per cent of our transportation is through the express logistics route. Lupin’s vendor attends the company’s planning meetings to improve time to transport the products to Lupin’s stockists and six warehouses across India. “Turnaround times have improved by 20 per cent,” says Ramesh.
Fuelling demand
Another sector that is fuelling demand for the express services is the automobile industry in India, which services both the Indian and export markets. Blue Dart services automobile companies that demand express connectivity to their service centres in a given state. TNT has also set up an automotive control centre which is its single-point service unit for automobile clients and is part of its global portfolio. The attention to the clients includes email updates to every stakeholder, including dealers at the client’s end.
Of course, cost is an issue. K Mohan, general manager, marketing and services, Tube Investments, says he primarily uses the regular truck services of a national player that also operates in express logistics. “Even though it is not express, it helps me by saving time and I can also track the movement to some extent,” he adds. When Tube Investments needs to ferry things abroad, it depends on its bargaining power. “Most of our components are made of steel; which means more tonnage per unit area. We negotiate for such ad hoc emergencies with air cargo players,” informs Mohan. He adds, “Express logistics will be 2-3 per cent of an auto company’s monthly shipments.”
Subramanian cites the example of automakers offering premium SUVs in India to explain why the automobile industry is one of the biggest clients for the express logistics industry. “There are a certain number of spares to keep a car on the road. While the automaker won’t store many of the expensive spares in their India facility, their discerning customers would not like to be made to wait. Our after-market supply chain helps them promise a six-day turnaround time as we are capable of bringing the parts (a bumper or a windshield, for example) from their global warehouses in two-five days.”
While Indian companies such as Safexpress have been honing their skills for years with an enviable network spanning 550 locations, 3,600 vehicles and millions of square feet in logistics parks, relative newcomer FedEx is also keen on going down the 3PL path. FedEx Express Managing Director (marketing), Middle East Indian Subcontinent & Africa), Rakesh Shalia says FedEx is working on sprucing up its 3PL services such as warehousing, critical inventory management and value-added logistics. It covers 262 domestic destinations and 1 million square feet of warehouse space. Shalia plans to tap what he says “customer preference for a single provider”.
When FedEx TSCS acquired the warehousing, transportation services and express delivery undertakings of AFL earlier this year, it also acquired a captive client base of automotive component and e-commerce companies. It has built a dedicated cargo village outside the Delhi airport which has a custom clearing unit. Its proprietary technology helps in real time update and online billing. “Our operations are all done in-house without the help of freight-forwarders and commercial airline or trucking companies. This allows for better compliance with stringent client supply chains norms,” says Shalia.
Customisation for the Indian market remains incomplete if one doesn’t talk ‘price’, and the most price-sensitive segment for the industry are SMEs. The express cargo players are tailoring products that would egg them on to use more of their services. Blue Dart through its Dart Apex services is providing them with a pick-up service with freight on delivery. “The SMEs will be able to hand us the demand draft for freight and service when they collect their packages,” explains Khanna. DHL-Blue Dart’s retail segment contributes 8-10 per cent to revenues, and is projected to grow at 20 per cent in the next three to five years. DHL services SME clusters with its ‘clear in the air’ system where it processes all documents for clearance etc. even before cargo of a client lands in the country. For SME clusters, these companies run dedicated vehicles for picking up and delivering cargo.
Manpower issues
It helps that these players are betting their money on their manpower. Subramanian says, “Logistics in India is like a sunrise industry. So, training talent and then retaining them is a challenge.” This year DHL has launched an accreditation module called Certified International Specialist to train all its 100,000 employees worldwide. It equips its staff to help customers grow their business beyond national borders. In India, it even boils down to training them to double-check hygiene factors such as addresses. Blue Dart has had to issue a strict mandate to its pick-up staff to get complete addresses. Says Khanna of Blue Dart, “You cannot imagine the number of times the address is incomplete. That is why we have our pick-up managers to follow up with the shipper for addresses.” The smart trucks helped with the sorting of shipments according to the route, a process earlier done manually. Custom-clearance groups of rivals have also led to cutting their lead times by 1.5 days.
While international players have their back-end such as IT systems for records and tracking bang on, they sometimes fall short in front-end expertise — understanding the nook and crannies of geography and regulations in India.
Kanaujia of Safexpress says, “The Indian geographic, regulatory and economic environments are intricate. Being well versed with only one area and leaving the rest for someone else to manage might not be very wise. Here, you need to be able to micromanage well. For example, in route planning, one needs to calculate the number of check posts and petrol pumps and which side of the highway they will fall.” However, as Mohan of Tube Investments points out, domestic players severely lack in their back-end processes such as IT. “I should be able to track the vehicle with my cargo at the click of a button,” he explains.
