Logistics Landascape In India After March 2010

In the last Union Budget, the CST rates were brought down to 2%. This gives a confidence to government's commitment to phase out CST by March 2010.

This decision will obviate the existing need of maintaining CFA or Depots in every state to avoid double taxation. This is going to change the entire logistics landscape in the country. This will provide a huge opportunity to reduce logistics cost (10% - 15%) by consolidation of warehouse infrastructure. Currently, all consumer goods companies operate 20 to 40 warehouses in the country, that can come down to 5 t0 10 progressively. This would also mean that small players will be out of the scene and big 3PLs will take over the majority of logistics business.

Is the logistics industry preparing itself for the change, well in advance? The logistics players must start planning & building the infrastructure "now". The Planning requires mapping the demand pattern of major consumer goods companies, creation of logistics hubs, looking at the high volume / high speed trucks, container handling facilities, railways connections etc. The role of 3PLs in the supply chain will increase to customer service, route optimization instead of just shipping goods.

With reduction in number of warehouses, servicing small customers /orders will become difficult. So, 3PLs will have to create cross-docking facilities to operate efficiently, like a relay-racer end to end. The order servicing time to distributors or customers will increase, so this will need a mindset change. However the service reliability will improve with professional 3PLs and stock-outs will reduce due to consolidation of inventory.

This will also open doors for greater multi-modal transportation opportunities using road, rail & even ships for long distances. Railways will be an important mode for the consumer goods companies and not just for bulk items. Also, containerized movements will get a fillip and container requirement will go up substantially.

However, it is not known if the things like differnt forms for different states , octroi, road permits, toll gates will also be done away with. If these bottleneck remain then the entire benefit will not be realized. The industry or CII should represent to government to already take steps in abolishing non value adding procedures.

We propose to form a work group of people who are interested in it.

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Next Evolution in Supply Chain

Whenever we think of Supply Chain what comes to mind is Efficiency, Costs, Responsiveness, Customer Service. While these topics will continue to keep Supply Chain managers busy, what is it that will figure prominently in the tomorrow's Supply Chain vision and strategy statements.

According to few experts, the next evolution will be "Green Supply Chain". With crude having crossed USD 100 mark and pressure to reduce carbon emission, it is the thing that will catch the management attention in every company that is involved with transportation of goods. In a country like India, the scope to reduce emission by Logistics industry is huge. According to one estimate Indian outsourced logistics industry is slated to grow at CAGR of over 16% between 2007-10. There are about 3 million trucks on Indian roads, consuming almost 20 million liters of diesel every day and emitting about 500,000 of CO emission. We all know about the condition of roads as well as of trucks plying on these roads. The laws made to regulate the life of trucks & load carrying capacity for each kind of trucks have met with little success. Overloaded trucks on the highways is a common scene & helping only to fill pockets of few. However if the road conditions improve & laws are enforced properly, the CO emission should come down by 30-40%.

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We have not seen any CNG trucks despite success of CNG based public transportation in Delhi. Compared to diesel trucks the carbon emission from CNG trucks is 75% lower. Government should make plans to make CNG available widely & incentivize CNG based trucks.

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Another area where logistics companies can bring down emission is through energy bills of their warehouses. A recent study conducted for a logistics service provider that operates 3 million sq feet of warehouse space, shells out Rs. 1.25 per sq ft per month. Energy audit of one of their warehouse showed that energy bill can be reduced by 25% by doing simple things like improving power factor, energy efficient lighting and improving efficiency of DG sets.

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Very soon many of the Supply Chain Managers will be grappling with these numbers along with their regular costs & efficiencies. Let us be all prepared for the Green Supply Chain.

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