• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Raja Simhan T. E.

"MY experience in these two days has been intuitive, investigative and be innovative (on logistics). It makes me think in a more positive manner on ways and means of implementing our service." These were the opening remarks of Mr Sudhir S. Rangnekar, Director, Shipping Corporation of India Limited, while chairing a session on "Supply chain management learning from international experiences" at Logistics2003, which was held in Chennai last week.

The summit on logistics and supply chain management, along with a four-day exhibition, was organised in Chennai by the Confederation of Indian Industry between October 8 and 12.

While the two-day summit was an eye-opener for many of the 500-odd participants on logistics and supply chain management, one issue that dominated the entire event was lack of infrastructural development in India.

The speakers, mostly from the logistics industry, emphasised that lack of infrastructural facilities was the major deterrent in the growth of India's $50-billion logistics industry.

And everybody compared India with China, and stressed the latter's rapid infrastructural development. China is building 10-km of highway every day across the country, a speaker said.

"Notwithstanding the current expectation, India has a long way to go in the area of (logistics) outsourcing. At present, India's infrastructure development is still lagging behind China. However, India's infrastructure development which has been slowing logistics growth, has become a priority for the Indian government now," says Mr Benjamin Kan, Managing Director, PricewaterhouseCoopers Corporate Finance Limited Private Limited, in the company's logistics bulletin.

The country has initiated the National Highway Development Programme, the largest highway upgrading initiatives to-date consisting of the Golden Quadrilateral Project and the North-South and East-West corridors, he said.

In a comparative study with Chinese Railways, Mr Kan said carrying 1,305 billion tonnes over 58,000 kilometre, Chinese rail's performance was 4.6 times better than Indian Railways, which carried 282 billion tonne km over a route length of 63,000 km.

According to Mr V. Sanjeevi, Director of the Chennai-based e-Logistics Private Limited, a consultancy firm on logistics and supply chain management, a majority of the participants at Logistics2003 were in charge of logistics and SCM in their organisations.

This was not the case earlier, when junior level personnel in the logistics department attended the event, and could not take any decision in their firms. This only shows the seriousness in organisations to strengthen logistics and SCM to increase efficiency and become competitive globally.

So, why has logistics become an important issue for Asian companies, especially India and China?

Traditionally, manufacturing companies in Asia managed their own logistics requirements in-house, partly due to lack of capable third party logistics players (3PLs). However, as competitive pressures escalate and local logistics companies become more proficient, Asian manufacturers are starting to outsource their logistics needs to capable local service providers so as to focus better on their core competencies, Mr Kan said.

The situation is more or less similar to that of outsourcing in the information technology industry. In a bid to cut cost and to improve efficiency in their respective field, IT companies abroad and in India are outsourcing their non-core activities to a third part IT service provider.

Say Prof N. Viswanadham and Dr Roshan Gaonkar of the Logistics Institute, Asia Pacific, the potential savings for India if logistics cost decreases by one per cent is about $4.8 billion per year. India's logistics cost is 13 per cent of the country's $480-billion gross domestic product.

"The mindset and culture of outsourcing logistics activities to capable third party logistics service providers is just emerging. The lack of proper infrastructure has also resulted in the absence of world-class logistic service providers. In fact, there is no general awareness of standard logistics practices due to the protected environment for Indian industries as there was no incentive for companies to improve their operational performance till recently. A part of the reason is the lack of professionally competent logisticians," they said.

"India should recognise the extraordinary role logistics plays in economic development and in enhancing the competitiveness of all the three — agriculture, manufacturing and services -sectors of the economy".

In a theme paper on "Leveraging logistics to enhance Indian economic competitiveness," the authors said one of the key contributing factors for the inefficiencies of the Indian manufacturing and logistics sector is the complexity of the international trade documentation process.

Internationally, pioneering countries such as Singapore and Hong Kong have implemented automated trade systems such as TradeNet and Digital Trade Transportation Network for trade documentation and Customs permit applications.

The United Nations has estimated that such systems could save up to 3 per cent of import value through efficiencies resulting from automated and standardised trade documentation.

Such systems would make Indian goods more competitive globally. "The success of today's market leaders such as Wal-Mart, Dell, Cisco and Toyota is primarily based on their superior operations and logistics capabilities," they said.

In their white paper on "Roadmap for logistics excellence: Need to break the unholy equilibrium", Prof G. Raghuram and Prof Janat Shah of Indian Institute of Management, said the country has various export disadvantages and higher inventories.

Quoting various sources, the authors said the average inventory level of grocery stores as 45 days of sales in India compared 11-22 days in developed countries. This is caused by higher lead times due to lower speed of transport, number of check-points and turnaround time at ports.

Further, a truck in India averages 250 km per day, while in the developed countries the average was closer to 600 km.

The average turnaround time at Indian major ports was 5.9 days in 1998-99 compared to international average of two days. During 2001-02, the average turnaround in major ports was 4.5 days, they said.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Open-skies for Asean — Closing horizons for IA/AI?

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line