The Missing Link - Logistics Skills and Talent

Logistics is a lifeline of a country’s economy as the two major sectors i.e. industrial and agriculture directly depend on the logistics infrastructure of the country. The logistics spend varies from sector to sector but can be as high as 20-30% of the total cost for the industrial commodities and 50% to 70% for agricultural produce.


The “non-existent” Logistics Talent Pool in India

A lot has been said and written about the talent pool in the logistics sector in India. Numerous reports and whitepapers have been published on the current skill gaps in this domain. National Skills Development Corporation (NSDC) has laid out a special focus on logistics skills development under a Public Private Partnership program. The logistics companies have begun to feel the pinch of the skills gap but yet they have not come forward to take stock of skills short in supply in the medium and long term. The Logistics Sector Skill Council for India, the starting point for preparing the roadmap for addressing the gap, is yet to be put in place.

“Skills for Logistics” – an initiative of UK- is a good example for how skills and productivity needs of logistics sector can be addressed. The council has developed the inventory of skills and competencies, called the Professional Development Stairway, mapped to various levels ranging from the blue collar to the leadership roles. The Stairway also lays down the training needed for career progression at each step. Last year, the council decided to set up national logistics skills academy with government funding.

The vocational training framework in India is largely driven by the ITIs (Industrial Training Institutes) and ITCs (Industrial Training Centres), covering skills ranging from Electrician, Welder, mason, Carpentry, Painting, and Catering etc. However, logistics skills have not found its place in the current setup because of its quasi-technical nature.

NSDC has estimated a need for 17-20 million logistics professionals by year 2022. The job roles ranging from drivers to individuals with specialized skills, such as, handling hazardous materials and cold chain are expected to be in high demand. However, there is no educational framework or adequate infrastructure to support this requirement. NSDC is largely a funding agency to support the skills development programs under Public Private Partnership, without expertise in defining the education framework.

As aforementioned, approximately 17-20 million logistics professionals will be needed in the logistics sector by year 2022. The job roles ranging from drivers to individuals with specialized skills, such as, handling hazardous materials and cold chain are expected to be in high demand. However, there is no educational framework or adequate infrastructure to support this requirement. NSDC is largely a funding agency to support the skills development programs under Public Private Partnership, without expertise in defining the education framework.

The issue that needs to be addressed on the supply side is the lack of attractiveness of logistics as a career of choice. The logistics sector is believed to be labour intensive, lower paying and having more difficult working conditions compared to the other sectors such as sales, hospitality, IT etc. The lack of awareness about logistics as a career at the school and college level, and fewer institutions offering logistics courses in comparison to other professions are the key reasons for not being able to attract the right talent. In the past, not many logistics companies invested on training the employees requiring specialized skills. Most people in this sector have acquired these skills on the job through experience over time. There has not been a concerted effort to develop these employees and help them move up the career ladder.

The scenario has changed at a fast pace in the recent years. While cheap manpower is becoming a thing of the past, companies have started focusing on automation and efficiency that require people trained in logistics skills. It has been one of the prime reasons for the crying need for the skilled manpower in logistics. Also the entrance of multinationals in the logistics sector and emergence of organized retail has acted as catalysts in generating the demand.


Bridging the Logistics Skills Gap in India

This problem of the widening gap between the demand and supply of skilled manpower in logistics requires a multi-pronged approach.

1. Building awareness: The logistics sector is wrongly considered as a non-glamorous occupation. However, people with aptitude and flair for this field have found tremendous opportunities for career advancement. In order to build awareness, the industry, education providers and professional logistics organizations need to conduct seminars in colleges, road shows, workshops and events to popularize logistics as career of choice. Conducting career fairs at a regular frequency focused on the logistics sector and participated by the logistics companies and education providers would go a long way to build awareness.

2. Sector Skills Council: Establishing a Sector Skills Council to develop the inventory of logistics skills mapped to various job roles is the first step towards developing the skills development framework. Defining the competencies and career roadmap would help in laying down standards of education. NSDC has been actively seeking the participation of the logistics sector to form and contribute to the sector skills council.

3. Education and Training Standards: Developing standards would ensure consistency and quality of education and training aligned to the needs of the industry. NSDC can play an important role by bringing together the logistics players, NCVT (National Council for Vocational Training), UGC (University Grants Commission) and private training providers for development of standards of curriculum, content, trainers and accreditation.

4. Creating Training Infrastructure: Setting vocational skills centres for logistics requires substantial investment for placing the equipment e.g. forklifts, reach trucks, cranes, conveyors, simulators, RFID and barcode scanners, and creating a real life working environment for hands on training. Also these centres need to be strategically located not only closer to the logistics hubs but also to those locations where a large mobilisation of people is feasible as well. Funding supported by NSDC and VCs to the private training providers as well as extending the role of ITIs / ITCs to include logistics skills in their curriculum would help achieve this objective.

On the non-vocational side of logistics, UGC may introduce logistics as a specialization at graduate and post-graduate level across various universities. The private education providers, specialized in the logistics sector, can play a role of delivering these courses at the college level as well as driving placement of qualifying students in the industry.

The training and education framework should not be limited only to provide employment to the fresh students, but also to the entire career cycle of people employed in this sector for their career advancement. This shall be done by creating an industry approved flexible framework of multi-tiered qualifications and continuous learning programs.

5. Employment: Matching the availability of skilled resources and demand is as important as creating the training & education framework. Backing it up with the appropriate employment opportunities and career development is important for its success. A nodal agency to build a network of employers, staffing service providers and training providers, using online portal and skills registry would be a big step towards ensuring suitable employment for the trained students.

6. Technology: In order to scale up the training effort at a much faster pace as well as maintain consistency of delivery standard, the use of communication technology such as VSAT, Webex, e-Learning must be explored actively by the private education providers as well as government run institutes.

7. Funding: Last but not the least, availability of funding such initiatives at a large scale is the key enabler. Though NSDC is the key source as far as funding the vocational skills are concerned, however, a holistic approach towards the entire spectrum of job roles needs to applied. The education providers who can service the skill gaps at all levels, including vocational as well as white-collar jobs, are the ones who would be able to scale up this effort much faster and have a successful business proposition. Therefore, the private VC and PE funds with interests and mandate in the education space need to come forward and participate in the development of one of the fastest growing sectors.

Given the skill gap in this sector and business potential, we foresee many players jumping into the logistics education and training space. It will be a good development for the sector; however, the quality of education in the absence of any standard framework may be a big concern. We expect that the logistics players, reputed education providers and government accreditation agencies will come forward and take this initiative beyond the fragmented solution to this problem.

Innovative Logistics

Innovation doesn't always mean the technology. It is at times means driven by end or value for money.

Supply Chain Is A Risky Affair

“Fire at Lite-On plant affects more than 50% of LCD monitor production capacity” (source: emsnow, Feb 06 , 2008)

“In 2002, the International Longshore and Warehouse Union was locked out, shutting down ports along the West Coast of the United States for 10 days. The lockout was estimated to cost the US economy up to 2 billion dollars per day. The lockout closed several factories including a joint venture between GM and Toyota.” (source: cnnmoney, Oct 3, 2002)

“Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster” (source: CIO, Jun 15, 2004)

I was doing a little research on Supply Chain disasters and came across many examples that were eye opener. SupplyChainDigest has published a list of top Supply Chain disasters that resulted in businesses going bankrupt or CEOs having resigned or sunk investments.

And a recent example of milk adulterated with melamine that killed or seriously sickened babies in China.

I wonder how many of the supply chain leaders take into account such risks in their decisions and have mitigation plans. When it comes to sourcing cheaper and thereby getting a perceived savings in cost, we turn a blind eye to such risks. However there are few exceptions like HP’s Procurement Risk Management Program that works out possible scenarios and shares both risks and rewards with their suppliers.

Let us analyze the factors that have resulted in greater need for focusing on supply chain risk management:

Global Sourcing : Lot of sourcing has shifted to low cost producing countries. Other than challenges of increased lead times, lack of visibility & communication problems, the risks of supply failure, quality & environment related issues have increased manifold. There have been cases of high toxic contents in the plastics used for children toys and recycled leaking batteries. Such incidences have the potential to spoil the reputation of company for ever.

Demand volatility : With current recessionary trends, estimating demand reasonably well has become virtually impossible. The risk of producing excess stocks that may have to be either discounted or written-off. On the other hand potential of losing sales to competition if a pessimistic view of demand is taken.


Cash Flow : Despite all governments announcing revival packages & pumping liquidity in the market, the credit crunch continues. To achieve sales targets, some companies may extend credit to their customers. As a result cash flow and therefore business sustainability is severely impacted.

Single sourcing : We all grew up in Supply Chain learning the advantages of single sourcing and supplier collaboration. The current situation calls for a review of the single sourcing strategy. I am not advocating to start developing second source for every item, but have a review of the assumptions for single sourcing.

Currency Risk : Indian rupee has depreciated by 25% in last one year. RMB has been artificially kept low against USD despite balance of trade in favor of China. There will be a day when China sourcing will not be as lucrative as it is today.

Geopolitical Risks : The governments are under tremendous pressure from local population to put trade barriers to encourage domestic business. Obama has come out against outsourcing of services to low cost countries. Many countries are putting safeguard duties on imports to protect domestic industries against global competition.

Supplier Sustainability : The entire supply chain is not under control of a single entity. You have suppliers as well as suppliers’ suppliers. They are all part of your value chain. What if any of these suppliers follow illegal practices, pollute environment unlawfully? It can be a big risk not only due to disruption of supplies but also the dent in the reputation of the companies associated with such suppliers.

Well, there are other risks as well e.g. unrest, terrorism and natural disasters, which is beyond anyone’s control.

Every Supply Chain Manager should start analyzing and prioritizing risks to their business, as part of Supply Chain Strategy and make a plan for risk mitigation. The risk management involves three key steps:

Assessment : Identify key vulnerabilities in supply chain and the potential risk alternatives. Quantify the potential economic impact of current supply chain risk profile.

Analysis: Through analysis, make a business case that identifies, quantifies, and prioritizes critical supply chain risks and potential alternatives.

Roadmap: Develop detailed plans needed to implement the changes required to achieve organization’s future state risk profile. Institutionalize risk-mitigation into the supply chain planning and execution and measure process effectiveness and results.

AMR’s supply risk management guru Mark Hillman said, “The greatest risks are the day to day operational risks that can detract from shareholder value and performance. You need to focus on high probability risks that you can control, such as supplier failure or market risks, and take steps to mitigate these.”

Cost Pressure : Are we complaining?

Indian Retail sector is crumbling under economic crisis & looking ways to cut cost. The other day I visited one of the famous retail outlets in Gurgaon. The kind of waste I saw over there didn’t indicate that there was any cost pressure on the company.

The most obvious was the indiscriminate use of plastic bags. The goods were already packed by manufacturer, which went into smaller plastic bag and many such bags into a bigger plastic bag. On an average they would be giving 2 big plastic bags per buyer (assuming smaller plastic bag is unavoidable). Assuming 5000 buyers per day & 100 gm weight per bag, they would be using 1 T per day of extra plastic and 300 T of extra plastic per year. That is a wastage of Rs. 20-30 million waste per year per store. This is apart from the disastrous impact on environment these plastic bags have. How can the highly experienced & sought after Supply Chain managers of these retail chains ignore such a leakage of money?

On the other hand , we have an example of Wal-Mart’s sustainability measures specifically focusing on packaging not just in their stores but even at the suppliers’ end. It has set a goal to reduce packaging in the supply chain by 5 percent by 2013. Reaching that goal would prevent 660,000 tons of carbon dioxide from entering the atmosphere, a feat equal to taking roughly 200,000 trucks off the road every year. It would also save the company more than $3.4 billion. General Mills is a leading example of the changes: straightening its Hamburger Helper noodles meant the product could lie flatter in the box. This, in turn, allowed General Mills to reduce the size of those boxes. The move saved nearly 900,000 pounds of paper fiber every year, reduced the company's greenhouse gas emissions by 11 percent, took 500 trucks off the road and increased the number of Hamburger Helper boxes on Wal-Mart shelves by 20 percent.

Wal-Mart has unveiled a packaging scorecard in 2008. It will help to evaluate the sustainability of its suppliers' packaging. The company's buyers will then use the scorecard to make more informed purchasing decisions.

I am yet to see any effort by any of the retail chain in India, to reduce, recycle or reuse plastic bags. This economic crisis is an opportunity for the retailers to take initiative, not only within their own chain but also involving suppliers & customers. As a retailer, involving consumers into sustainability efforts will only strengthen their ties with brand. Consumers can be encouraged to reuse or drop in the collection bins placed near the store. Many consumers park their cars in the parking lot & carry the trolley to the car. At that point they can discard the plastic bags & deposit in the bin placed nearby. One can visit http://www.plasticbagrecycling.org/00.0/ to have access to resources that would help to take an initiative in this direction. I liked this toolkit http://www.plasticbagrecycling.org/00.0/images/toolkit.pdf with very clear direction for plastic bag recycling.

Let us not blame the economic crisis but think out of the box to eliminate “waste chain” in the supply chain.

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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