An essential growth driver for logistics

The phenomenal growth in India’s manufacturing, retail, automotive and pharmaceutical sectors has driven up the logistics demands of these sectors. A logistics service provider (LSP) who was just a transporter or warehouse service provider earlier was asked to deliver more value added services like customs clearance, domestic/international freight forwarding, cross-docking, reverse logistics, freight consolidation, warehousing of modern standards, to name a few. The sector has witnessed many developments and in order to match these standards, it is vital to have effective information technology (IT) system in place. Although there has been a commendable increase in investments to improve overall infrastructure and enhance service standards by adopting state-of-the-art technology over the past decade, the gap between the actual demand and supply still remains. Technology has emerged as a source of competitive advantage. As logistics channels become longer and more complicated involving more channel members, efficient coordination of information flow becomes the key to effectiveness. Increasing logistics efficiency can save an enormous amount of money. The efficient utilisation of IT systems for logistics operations and the strategic exploration of new opportunities is need of the hour. Dayanand Agarwal, CMD, DRS Group of Companies, said, “It is generally perceived that the India logistics sector is averse to the adaptation of IT tools in their day-to-day running of the business. Due to the fragmented nature of the sector and lack of regulatory control the general feeling among the players is that IT is an expense rather than a tool for controlling and reducing cost.” Echoing similar concerns, technology service provider Gurcharan Singh, Director, Rachna Technologiesis is of the opinion that in India, logistic technology is still at its infancy stage. LSPs are not very clear on what all can be achieved from the technology – This is applicable for both large and small LSPs. Large LSPs have already made some investment in IT, but they are unable to realise the benefits from their investment. One of the main reasons for this sorry state of IT in logistics is the non-availability of trained manpower in the industry. The success of any logistics service provider hinges on its ability to deliver their services regardless of the situation and this way, an LSP creates value for his customer. Here IT has an important role to play. IT helps in improving the flow of goods from the point of origin to the final destination and facilitates logistics planning decisions. However, implementing IT solutions is not only a solution to the industry. There is a vital need on the part of the service provider to choose appropriate logistics solutions providers, set appropriate service level agreements with them and collaborate with service providers. Service providers should have trained manpower who can plan the routings, select appropriate fleet etc. using analytical methods and techniques. IT can be an enabler but IT cannot and should not try to replace the manager’s decision making capabilities. The present state of affairs is illustrated by an example of the truck driver in India, who is a critical point of contact between the logistics company and its customers. The truck drivers today find it difficult to accurately record delivery records, understand delivery documents, negotiate for return business, handle queries etc. Considering this, Agarwal said, “The logistics industry is plagued by low rate of technology adoption and poor skill levels, though the industry now seems to be paying serious attention with use of RFID, vehicle tracking technologies, warehouse management systems etc.” “However while acceptance is perhaps not an issue anymore, the marriage between IT and domain requirement needs to be resolved. Those who have adopted and implemented the change enjoy an edge in the market place,” he added. The large courier and express cargo companies, and companies that are into multimodal operations have seen a significant growth in their business by investing in many technology-driven solutions like RFID solution, VTS, WMS, TMS. One such company is DHL. “The technologies that we have invested in have helped us to automate our processes thus helping us to reduce time, improve operational efficiencies and better customer relations. This has made information flow easier thus helping customers instill their trust further in us,” said R S Subramanian, Senior Vice President & Managing Director at DHL Express India. “Our technological innovations are now helping us create solutions meant for specific retail products like something we have recently done for our student offer in India and will continue to innovate on the same lines,” added Subramanian. IT systems are a key competitive factor to compete successfully in global markets. It has revamped the sector in terms of reducing costs, proper space allocation, accelerating the speed of delivery of goods and efficient transportation system as per customer requirements worldwide. Andy Weber, President, Kuehne + Nagel (Asia Pacific) Management, said, “Efficient supply chain management provides a significant opportunity for increasing cash flow, operating margins and market share whilst reducing costs. Furthermore, it enables organisations to improve customer relationship and market competitiveness,” adding, “Customer demands are changing quickly, as international supply chains have become more and more complex. Visibility, transparency and fast data transmission are requisites which must cover all transport stages from the moment the order is placed via all interfaces until the bill is issued.” Kuehne + Nagel has a forward-looking IT strategy in place. A key factor for providing high transparency throughout the supply chain is the consolidation and standardization of all processes in Kuehne + Nagel’s single, comprehensive IT system. Companies and manufacturers across the globe are now devising innovative IT solutions for streamlining the logistic operation; whether it’s a DHL Smart Truck; BufferBox; UPS Cloud platform, informs Singh. Consequently, logistics comprises a chain of activities where a number of actors work in coordination to achieve one final goal – movement of package from creator to consumer. In this chain, if one link fails it will have a domino effect on the whole chain. Correct usage of the technology can make sure that all activities in the chain are free from any human error. According to Singh, few key technologies that LSPs should adopt are: • ERP for managing resources; planning and bringing-in control • Mobile devices and applications which can connect their mobile workforce with the organization system. • Telematics for tracking moveable assets Agarwal shares, “We use technology extensively to conduct our business. Automation in processes is still only in its infancy for most of the players in the sector due to high level of fragmentation in the industry. This is a drawback that needs to be corrected.” India’s logistics technology market is set to grow at 19.8 percent and to cross $600 million by 2015. This growth is driven by demand from the thriving logistics, retail and manufacturing sectors, as well as government promotion. However, these technologies are highly expensive, making them unaffordable for majority of logistics service providers and end users, thus limiting the full potential growth of the Indian logistics technology market. Therefore, a lot more needs to happen if the logistics industry has to keep pace with the expectations of customers in service levels. Service providers should have IT based solutions which will allow for what-if analysis and scenario planning to choose optimal fleet size, location of hubs and to determine pricing of their services. There is need for solutions to analyze the vulnerability of a logistics network and to plan for contingencies. Weber stated, “In terms of technology in logistics there is substantial growth potential; however, the Indian logistics sector is still immature and there is much inefficiency which needs to be overcome.” The logistics industry will witness growth in leaps and bounds owing to rising demand of streamlined supply chains from the sectors like pharmaceutical, automotive, hi-tech and retail. For this, efficient IT supported logistics industry is the requirement. A lot has been done for the expansion and modernization of transport system, free trade warehousing zones and logistics parks. This needs more impetus. This will open vistas for investments in the IT area of logistics sector in the coming times and this will grow at a faster pace. n