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 !!

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...