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.

What should Supply Chain do to prepare for Economic Recovery?

Economic and financial gurus have predicted that the recession will bottom out very shortly and recovery will start by end of 2009. Not sure if it has a sound scientific base but commodity prices and stock markets are on upward trend.

Unlike the way we were caught unaware with recession staring at face, we should start making plans for recovery of economy. When recession hit all of us, we were stuck with huge inventories, capacities and resources. During last 6 months we have learnt to live with recessionary trends, used our wisdom to liquidate inventory and unwanted capacities & resources. We have learnt to take a conservative approach to demand and changed our mindset that allows losing sales opportunities here and there rather than blocking cash in resources. We have shed all possible buffers and extra flab. Many suppliers of materials have closed their shops and skilled manpower has been lost.

Should the recovery starts by end of 2009, as projected by many experts, are we prepared to embrace it without any major hiccup? The one who is prepared for recovery, is certainly going to gain market share and competitive edge in future. Imagine a situation that there is increased demand from the customers but we can’t meet the demand because we either don’t have enough capacity or material suppliers for the additional demand. We will be caught on the other side of the “bullwhip effect”. What are the options available with Supply Chain? Should we start building extra resources hoping that recovery will happen?

Let us explore the possible ways that we can adopt without much of risk. We categorize these under External Actions and Internal Actions.

External Actions

1. Check macro indicators: Certain indicators like construction activities, prices of metals and other commodities, manufacturing index, import and exports indices can provide a view on overall economy.

2. Maintain a close contact with customers: It is your customers who can give you first signals of recovery in demand. It is very likely that they would have also scaled down their level of operations during recession. Look for these signs:

-If you are in consumer goods business check if there are frequent stock outs at shelf or Distributors’ warehouses.

- Erratic order pattern from the customers, with intermittent & frequent spikes in demand. It may happen because of the reduced capacity of the entire downstream pipeline not able to cater to increased demand.

- Customers placing more frequent orders albeit each order is small.
Increasing number of delivery or service complaints from the customers or consumers.

- Last but not the least, the mood and behavior patter of your key customers. If they look more relaxed it means that they are able to recover their money better but not yet ready to invest back in the business.

3. Monitor unusual increase or decrease of imports and exports of the products in similar category. Due to increase in local demand and inability of domestic suppliers to meet the demand, the imports may increase. Similarly increase in demand in the country may result in lesser availability for exports. It can work both ways.

4. Start talking to suppliers who had either scaled down operations or closed shops. They should re-oil the equipment that was shut, line up requisite manpower (not necessary employ them right away), talk to their bankers for increasing credit limits. If that doesn’t work out, start scouting for new suppliers who can be developed at a short notice.

5. The same holds true for the logistics and other service providers. They will need to revive their capacities to handle higher volume of products.

Internal Actions
1. Evaluate spare manufacturing capacity & upward flexibility. Build “what-if” scenarios and options e.g. whether to revive own capacity or outsource till the time there is sufficient confidence or sustainability in demand.

2. Review stocking policies for the raw materials, finished goods for various levels of demand and estimate cash required. Make plans with finance teams to prepare for the most likely scenario.

3. Watch out for likely inflationary trends in commodities and revise your budgets accordingly.

4. Most importantly, make plans to retain talent because revival will also lead to more job opportunities.

Let us hope that this prognosis of recovery by end of this year really comes true.

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.

Role of Supply Chain In Riding Over Financial Crisis

The US economic crisis has taken all the economies, big or small, by storm. Or should we say a "Typhoon" with no signs of receding in near future? Financial liquidity has tightened & credit dried up, especially for the small businesses. In these troubled times, it is very important to be able to keep head above water. It is critical that not only you but your business partners, be it customers or suppliers, are able to survive the crisis.

Supply Chain Managers can play a very critical role to help the businesses ride over the "Economic Tsunami". Here are few suggestions, based on my own opinion and that of some of the experts:

1. Go lean on Inventory. Availability of Cash is the biggest need of the hour to sustain the business. Building inventory for strategic or speculative reasons, under these circumstances can be a disaster. Even if it means keeping your capacity or manpower idle that would erode margins, is a better option than keeping inventory for an uncertain demand that would block cash needed for meeting operating requirements of the business.

2. Don't push Inventory to Customers. It is like shooting in your own foot. There is a general tendency to push inventory to customers to achieve sales target numbers. It only converts your inventory into higher credit in market or outstanding from customers. The financial risk goes up if your customers are facing liquidity crunch and some of them go bankrupt or don't pay at all. By pushing inventory to your customers, you are not only increasing your own risk but may kill the customer with high debt.

3. Plan, Replan & Replan. In a scenario of uncertain demand, do not pre-commit resources & materials in advance. Build visibility into your demand chain and align your supply / production more frequently than you have been doing in past. Catch the demand signal early & do not hesitate to change the production schedules, even if it means more changeovers or setups on production lines.

4. Stop producing slow moving or not so fast moving items against the forecast. Rely more on the actual demand signals than on the forecast. Or best agree with your customers to produce/ assemble these items against their orders. It may lead to increase in response time but unlock the capital blocked in such items.

5. Service efficiently. It doesn't mean service at lowest cost or cutting corners. Redesign your network that can service smaller lots and at a higher frequency to your customers. If your network cannot support frequent & smaller deliveries, use a reliable 3PL. Consolidate number of service providers & shipments. Evaluate alternate modes of transport e.g. Railways, multimodal shipments that are economical as well as reliable.

6. Form alliances. Taking a cue from the alliance reached between Jet Airways and Kingfisher Airlines, it is not a bad idea to share assets wherever synergy is feasible. Join hands with others, including like mind competitors, to find collaborative ways of saving costs in manufacturing, servicing and logistics. Remember, recession is a bigger threat compared to your competitor.

7. Follow lean processes. Tough time is also an opportunity to re-engineer your processes. Evaluate your processes, cut out wasteful activities and minimize wastage in the supply chain. Order processing time, inventory idle time, supply lead times are some of the few candidates that would need a very close look. Inventory inaccuracy or leakage in warehouse, transit damages, storage conditions would require stricter controls.

8. Pay your suppliers on time. Don't push your liquidity crunch to your suppliers by delaying their payments. The suppliers sustainability is as critical as your own business continuity. Incentivize your suppliers to reduce lot sizes & implement JIT, Vendor Managed Inventory / Replenishment. Consolidate suppliers & shipments for economy of scale. Renegotiate the contracts & shift to "value" suppliers, wherever possible.

9. Motivate people & upgrade their skills. The economic scenario can dampen the spirits of SCM people due to pressures from suppliers, customers & internal stakeholders. It is important to help them overcome difficult situations, upgrade their functional & leadership skills. Motivate them to take difficult decisions that benefit overall business.

10. Network with Supply Chain professionals from similar or different industries, learn how they are coping with difficult situations, share your learning and help each other in solving the problems.

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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