Logistics industry world wide is relieved that oil is back to $45 (In fact, now we are speculating when it will touch $30!!). I argued some time back that oil at $147 is in a way good for the industry as it will make it more efficient and less wasteful.
So what now? Unfortunately for the industry, oil is where it is because nobody needs to fill their trucks as there is NOTHING TO MOVE !! Even in India, there has been a marked slowdown in trucking activity due to industrial slowdown.
In spite of recent reduction in diesel prices, the short term future of modern logistics is uncertain. There has been a rethink on plans to expand "modern" logistics services. The trend towards transporters becoming logistics service providers has come to a halt. The reason is auto and organized retail- the two drivers of modern logistics are in bad shape.
Both these industries require large scale movement across India and require consolidation/ consolidation services in a timely manner- the very reason for logistics service providers.
Thus, it remains to be seen how the industry responds to the downturn- whether oil is $35 or $147.
Wednesday, December 10, 2008
Friday, October 17, 2008
The New Gen takes over Indian Logistics
What is your image of a "Traditional Indian Transporter"? Beaten down office with a BMW parked outside, unorganized, unprofessional, cutting corners, happy to corrupt officialdom, pays pittance of a salary and disdain for technology. This image has endured for decades and even today a visit to Masjid Bunder or Bara Bazaar or Roshanara Road will confirm the same.
But a revolution is unfolding in many of these "family driven" companies. Aware of their image, educational limitations and background, the transporter community sent their children to best of business schools- typically in the US and UK (You can not pay your way into IIMs!!).
Now, this generation is ready to take over the reins of their family empire. Almost magically, every major traditional transort company is headed by someone who is 26-38 years old. They are wanting deperately to get out of the old mould and get into LOGISTICS. They are aready to spend- on good offices, on IT, on professional staff and branding. And they have the money and land- accumulated over years by very cash rich parent companies.
As this generation slowly unshackles the past- they will drive Indian logistics into modernity. The so called "unorganized' sector is getting organized- and fast. MNCs and corporate logistics players need to watch out !!
But a revolution is unfolding in many of these "family driven" companies. Aware of their image, educational limitations and background, the transporter community sent their children to best of business schools- typically in the US and UK (You can not pay your way into IIMs!!).
Now, this generation is ready to take over the reins of their family empire. Almost magically, every major traditional transort company is headed by someone who is 26-38 years old. They are wanting deperately to get out of the old mould and get into LOGISTICS. They are aready to spend- on good offices, on IT, on professional staff and branding. And they have the money and land- accumulated over years by very cash rich parent companies.
As this generation slowly unshackles the past- they will drive Indian logistics into modernity. The so called "unorganized' sector is getting organized- and fast. MNCs and corporate logistics players need to watch out !!
Wednesday, August 20, 2008
Supply Chain Visibility for Mumbai Locals
Ever seen a Mumbai railway station when a train is late? A sea of humans stretching, anxious and looking for that faint sign of yellow that may be their train. Also wondering how crowded it will be. Should they wait for next one or will that be late too and thus even more crowded?How they wish they had REAL TIME VISIBILITY into movement of all trains with crowd density numbers populated every 30 s on their mobile phones. They can then focus on reading that book or listen to that song carefree !!Supply chain visibility means- for people and industry- a life more certain, less anxious and free to do things that really matter.
Wednesday, July 16, 2008
WMS Vs. Warehouses
Experts and IT vendor decry lack of use of modern WMS in India. An advanced WMS can improve location management, reduce pick time and pick failure and provide "visibility" within warehouse.
Sounds great but why WMS is not a standard feature in modern India? The reason is that India does not have WAREHOUSES it has only GODOWNS.
A modern WMS requires modern warehousing practices on ground and also assumes certain scale of warehouses. Most warehouses in India are in 3000-10000 SQFT range with some exceeding 25000 SQFT. In such a place, it is not very difficult to find products manually. Also, being less productive in warehouse means adding a couple of more workers, not a terribly high barrier.
The need of the hour is VISIBILITY ACROSS WAREHOUSES. A company can not own ALL warehouses or put up their own ERP at all locations.
How to fill the gap?
The warehouse service providers can use basic but web-based WMS across warehouses. This way, all stock across locations can be captured and viewed online.This will allow decision makers to manage their supply chain better as now they know what is lying where.
For coming few years, the focus will be on visibility. As GST kicks in and local laws as well as real estate prices make it difficult to have warehouses within metros, larger warehouses will be built. These will then house multiple customers and feed into retail within a large city. Modern WMS will find utility in warehouses greater than 50,000 SQFT and more than 1000 SKUs.
Till that time, WMS vendors should focus on value adds such as WSP billing, expense control, inventory visibility and order management rather than automated, PDT driven WMS.
Sounds great but why WMS is not a standard feature in modern India? The reason is that India does not have WAREHOUSES it has only GODOWNS.
A modern WMS requires modern warehousing practices on ground and also assumes certain scale of warehouses. Most warehouses in India are in 3000-10000 SQFT range with some exceeding 25000 SQFT. In such a place, it is not very difficult to find products manually. Also, being less productive in warehouse means adding a couple of more workers, not a terribly high barrier.
The need of the hour is VISIBILITY ACROSS WAREHOUSES. A company can not own ALL warehouses or put up their own ERP at all locations.
How to fill the gap?
The warehouse service providers can use basic but web-based WMS across warehouses. This way, all stock across locations can be captured and viewed online.This will allow decision makers to manage their supply chain better as now they know what is lying where.
For coming few years, the focus will be on visibility. As GST kicks in and local laws as well as real estate prices make it difficult to have warehouses within metros, larger warehouses will be built. These will then house multiple customers and feed into retail within a large city. Modern WMS will find utility in warehouses greater than 50,000 SQFT and more than 1000 SKUs.
Till that time, WMS vendors should focus on value adds such as WSP billing, expense control, inventory visibility and order management rather than automated, PDT driven WMS.
Monday, June 30, 2008
Fuel Price Rise is GOOD for Logistics Industry
Over 90% of goods movement in India is carried out by the unorganized sector-the much awaited shakeout and consolidation have never materialized. But the latest fuel price raise ( and many more to come with oil likely to remain in $130-160 band) can actually be the proverbial "tipping point".
Transport rates are already up 15% plus and by end of 2008 will end up 25% above December 2007 levels. It is but natural that industry will lean hard on transporters to suppress prices as much as it can.
But that may work only in short term. The need of the hour is to have larger transport companies with all India fleet, modern management, superior use of technology and collaborative approach.
But this means heavy capital infusion into vehicles, talent and technology. This is beyond transporters with less than 20 vehicles, let alone single truck operators.
The higher fuel price will lay a premium on services such as load planning, reverse load management, route optimization, variable capacity in line with demand etc.
As regular transporters will fail to offer above, they will be able to compete only by reducing margins. This will lead to many downing shutters or merging to become larger entities.
Thus, fuel price can actually do some good by placing a premium on value added services that can save even a small percentage of fuel bill.
Get ready for the shakeout- no other way at $140 crude.
Transport rates are already up 15% plus and by end of 2008 will end up 25% above December 2007 levels. It is but natural that industry will lean hard on transporters to suppress prices as much as it can.
But that may work only in short term. The need of the hour is to have larger transport companies with all India fleet, modern management, superior use of technology and collaborative approach.
But this means heavy capital infusion into vehicles, talent and technology. This is beyond transporters with less than 20 vehicles, let alone single truck operators.
The higher fuel price will lay a premium on services such as load planning, reverse load management, route optimization, variable capacity in line with demand etc.
As regular transporters will fail to offer above, they will be able to compete only by reducing margins. This will lead to many downing shutters or merging to become larger entities.
Thus, fuel price can actually do some good by placing a premium on value added services that can save even a small percentage of fuel bill.
Get ready for the shakeout- no other way at $140 crude.
Friday, May 2, 2008
How deep is Internet uasge in India?
Internet is believed to be used by "English speaking urban middle class". That well may be but ground realities are changing fast and how.
During my recent client visit, I was checking with an operator how he is using our online software and what problems he faces. For those of you not so familiar with manpower quality in logistics industry- a data entry operator will be 12th pass, will have a basic knowledge of computers and knows just enough English to use the keyboard.
At this point his superior walked in and we got into a discussion. Using this break, the operator switched to an ICICI site. I noticed that he was actually using Net banking site. After checking his account, he proceeded to make an online payment to LIC !!
I got curious and tried to find more. He said he uses Net banking often and he has no time to visit the bank as he works for 12 hours a day. Thus, he also pays his bills and insurance payments online !!
This person was about 21-22 years old and his spoken English was atrocious. He is from a small town in UP and works in Delhi. He represents 300-400 mn Indians who form the layer below "English speaking elites".
Internet and its usage- even online payments- is growing fast in young India and it is evident that we have a work force ready for the future.
Ignore it at your own peril !!
During my recent client visit, I was checking with an operator how he is using our online software and what problems he faces. For those of you not so familiar with manpower quality in logistics industry- a data entry operator will be 12th pass, will have a basic knowledge of computers and knows just enough English to use the keyboard.
At this point his superior walked in and we got into a discussion. Using this break, the operator switched to an ICICI site. I noticed that he was actually using Net banking site. After checking his account, he proceeded to make an online payment to LIC !!
I got curious and tried to find more. He said he uses Net banking often and he has no time to visit the bank as he works for 12 hours a day. Thus, he also pays his bills and insurance payments online !!
This person was about 21-22 years old and his spoken English was atrocious. He is from a small town in UP and works in Delhi. He represents 300-400 mn Indians who form the layer below "English speaking elites".
Internet and its usage- even online payments- is growing fast in young India and it is evident that we have a work force ready for the future.
Ignore it at your own peril !!
Tuesday, April 29, 2008
When will be the "NSE moment" for Indian Logistics Industry?
In early 1990s, National Stock Exchange introduced ONLINE stock trading in India. This was where trading occurred by "Dhotiwallas" on the floor of Bombay Stock Exchange. NSE was dismissed as "not for India" given its infrastructure, lack of industry support, "first world" technology etc.
Today, ours is one of the most automated stock trading systems in the world with trading spread all across Indian towns and stock culture so deep that it dominates headlines of even vernacular TV channels.
Indian logistics industry today is where Indian stock exchanges were in early 1990s. Paper driven, highly labor intensive, no data connectivity between users and providers and a general lack of modern IT usage.
So what will jolt Indian logistics out of its slumber ? What will be logistics industry's NSE moment? And most importantly- WHEN??
We think entry of International Retail Chains will be the "inflection point". Just as FIIs changed the game, MNC retail chains will bring its own set of "ways of doing business" to a whole lot of suppliers.
Even today, if you want to be a supplier to a Wal-mart from India, you have to send documents electronically. And obviously so !! Think of each vendor of Wal-mart sending a paper invoice or a docket or dispatch advice. Wal mart will have a mountain as large as one of its super stores DAILY !!
Then why Indian retailers are happy with paper? For same reason has Kotak, DSP and KR Chokseys of India were happy with paper before NSE came in.
Once Wal-Mart or a Tesco are given a go ahead, the first thing they will insist upon will be Electronic Data Interchange with all partners- vendors, warehouses, transporters.
This will require all players in supply chain to adopt IT- especially transporters and that too the ONLINE variety. No XLS, no e-mail- Digitally Signed Automated Electronic Messages will be the norm.
When will this happen? Well, may be in 2009 after the General Elections. Thus, we are fast approaching the NSE moment for Logistics - be prepared !!
Today, ours is one of the most automated stock trading systems in the world with trading spread all across Indian towns and stock culture so deep that it dominates headlines of even vernacular TV channels.
Indian logistics industry today is where Indian stock exchanges were in early 1990s. Paper driven, highly labor intensive, no data connectivity between users and providers and a general lack of modern IT usage.
So what will jolt Indian logistics out of its slumber ? What will be logistics industry's NSE moment? And most importantly- WHEN??
We think entry of International Retail Chains will be the "inflection point". Just as FIIs changed the game, MNC retail chains will bring its own set of "ways of doing business" to a whole lot of suppliers.
Even today, if you want to be a supplier to a Wal-mart from India, you have to send documents electronically. And obviously so !! Think of each vendor of Wal-mart sending a paper invoice or a docket or dispatch advice. Wal mart will have a mountain as large as one of its super stores DAILY !!
Then why Indian retailers are happy with paper? For same reason has Kotak, DSP and KR Chokseys of India were happy with paper before NSE came in.
Once Wal-Mart or a Tesco are given a go ahead, the first thing they will insist upon will be Electronic Data Interchange with all partners- vendors, warehouses, transporters.
This will require all players in supply chain to adopt IT- especially transporters and that too the ONLINE variety. No XLS, no e-mail- Digitally Signed Automated Electronic Messages will be the norm.
When will this happen? Well, may be in 2009 after the General Elections. Thus, we are fast approaching the NSE moment for Logistics - be prepared !!
Saturday, April 19, 2008
Better infrastructure=better supply chains (Have you been to Gurgaon of late?)
The common belief is that better infrastructure will result in better supply chains. Better infrastructure in India is defined by better roads, bigger airports, shiny bridges.
Really? If you have been to Gurgaon of late there is a classic case study on of infrastructure gone wrong, where toll collector actually lets traffic flow for free to ensure smaller queues !!
Similar case can be seen at new Shamshabad airport at Hyderabad or to be opened airport at Bangalore. You will never be able to have same day meeting at Hyderabad and Bangalore anymore as time to reach airports is 90-120 minutes one way !!
Thus, we are spending a lot of money shiny infrastructure to solve only part of the problem. This will only increase capital intensity of growth as it has happened in China without proportionate benefits to the economy.
More on this argument in future posts...
Really? If you have been to Gurgaon of late there is a classic case study on of infrastructure gone wrong, where toll collector actually lets traffic flow for free to ensure smaller queues !!
Similar case can be seen at new Shamshabad airport at Hyderabad or to be opened airport at Bangalore. You will never be able to have same day meeting at Hyderabad and Bangalore anymore as time to reach airports is 90-120 minutes one way !!
Thus, we are spending a lot of money shiny infrastructure to solve only part of the problem. This will only increase capital intensity of growth as it has happened in China without proportionate benefits to the economy.
More on this argument in future posts...
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