Lt jan 15 net by Raj Misra

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January 2015

How the scene will play out for Logistics and Supply Chain Industry...

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Logistics Times

CONTENTS

All about Transportation, Distribution & Infrastructure

Volume 5: Issue No.9 * January 2015 Raj Misra

Editor in Chief

rajmisra@logisticstimes.net Ritwik Sinha

Editor

ritwik@logisticstimes.net

Sales & Marketing

S K Hussain

Sub Editor

Neha Richariya

Photographer

Mohit Malik

Designer

Kausar Syed

Circulation & Distribution

Kamruddin Saifi

Legal Advisor

Rakesh Garg

Our Bureau Mumbai

Rahul Kumar rahul@logisticstimes.net

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Chennai

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Hyderabad

Sudhir Kumar sudhir@logisticstimes.net Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Pawanexh Kohli CEO/Chief Advisor, NCCD Samir Srivastava Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Management Ramesh Kumar Member, National Committee on Supply Chain & Logistics, Govt. of India

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How the scene will play out for Logistics and Supply Chain Industry... Edit Note

News Brief

Highway Notes

IN THE NEWS

Safexpress unveils a new logistics park

BUSINESS TREND Auto Industry

REPORT Engineering Exports

EVENTS ACCD Annual Ball

EDIT NOTE

New Impetus

As has been our wont in the past, we are starting the new year by focusing on “Looking Back, Looking Ahead” theme again. And this time we are noticing a qualitative change in the nature of responses which we managed to elicit from the senior industry leaders and analysts. As circa 2015 sets in, the hope of a better business spell in the months ahead is simply high. And the qualitative difference lies in the kind of assertion which we noticed this time. I clearly remember my edit piece presented in January 2014 which was titled – Hopeful, Yes! Confident? While the beginning of a new year itself could be a trigger to rekindle hopes, it was the confidence element which was largely missing for last couple of years. No secret to anybody, it was an allencompassing trend for all businesses (including logistics, supply chain and allied industries) triggered by the kind of policy paralysis witnessed during the larger part of the UPA II regime. But after a spate of 2-3 years, the players in the fray seem to be finally in a confident mood again with the arrival of the new government at the center. Intentions apart, some of the initiatives which Narendra Modi government has set afoot are being perceived as those critical catalysts which would pull their businesses out of the air pocket of stagnancy. If I have to zero upon some of the new drivers which logistics and supply chain industry leaders are pin-pointing, then probably the most impressive impetus initiated by the new government is its mega “Make in India” programme. The dream to make India a manufacturing power house is probably going somewhere now and this has enthused logistics players too given the fact that their destiny is intrinsically inter-linked with more production. The government’s stress on expeditiously clearing roadblocks in the critical infrastructure sector is also being looked as that much-needed dynamo. We have repeatedly heard for last so many years that the initiation of GST would be that ultimate game changer for the supply chain business. And now we are noticing the center and the states finally rallying to a converging point by eliminating their points of differences and having a larger accommodative approach. The explosion of e-commerce on the Indian business scene is clearly the biggest takeaway of 2014 and this is a trend which is slated to further multiply in the new year. Players in the supply chain vertical are well aware of the new opportunities which e-commerce business is putting on their palate and missing it would amount to committing hara-kiri. Responding to the rapidly growing “I-want-it-now” consumer class would require scale building and significant operational fine-tuning at the back end and, therefore, 2015 may well see supply chain processes being re-defined in the country. Wishing you all a very happy new year. Waiting for your response Ritwik Sinha ritwik@logisticstimes.net LOGISTICS TIMES August 2011

NEWS BRIEFS

India is one of the most liberal countries in terms of FDI According to Amitabh Kant, Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India, India is one of the most liberal countries in terms of its FDI regime as over 90% of the proposals fall under the automatic route. Kant made this observation while addressing a session on “Make in India: Offering a New Partnership Opportunity to Industry” at The Partnership Summit 2015 organised by the Confederation of Indian Industry (CII), the Department of Industrial Policy and Promotion (DIPP) and the Government of Rajasthan in Jaipur during 15-17 January 2015. According to Kant, job creation is a major challenge in India given its demographics. He pointed out that growth in India was largely driven by the services sector and India and not through manufacturing. He felt that India now needed to adopt a policy of manufacturing led growth in order to create the quantum of jobs required for India’s growth. He pointed out that one of the key features of the Make in India campaign was to make India an easier place to do business. It is in this context that several laws, rules and regulations had been simplified. The use of technology was being promoted to make compliance easier. The new e-biz platform, he pointed out, was created for just that purpose.Kant highlighted that as a part of this initiative the FDI regime had been liberalized and FDI restrictions on several sectors such as railways, defense and construction had been relaxed. According to Kant, another major feature of the Make in India campaign is the focus on infrastructure development. In this context, he spoke about the Delhi Mumbai Industrial Corridor and pointed out that by 2017, it is expected that goods from Delhi would be able to reach Mumbai and loaded onto ships in a matter of 14 hours instead of 14 days at present. Similarly, several other corridors being developed in different parts of India should help link industrial centers inland to ports. In his address, Martin Hamilton-Smith, Minister for Investment and Trade, Government of South Australia LOGISTICS TIMES January 2015

stated that his state was ready to support the Make in India campaign. He stated that South Australia was a major center for high value added manufacturing such as robotics and industrial automation which could help make manufacturing processes more efficient. William Danvers, Deputy Secretary General, Organisation for Economic Cooperation and Development (OECD) and Li Yong, Director General, United Nations Industrial Development Organisation (UNIDO) both highlighted the need for India to address issues such as infrastructure and regulatory bottlenecks so as to attract greater investment into the manufacturing sector. These, they stated, included reforms in areas such as labour regulations, land acquisition, tax policies among others. In her address, Patricia Hewitt, Chair, UK-India Business Council stated that UK companies are already manufacturing in India – some for several years now. She pointed out that UK was the largest G-20 investor in India if one were to consider portfolio investment and FDI together. India, in turn, was one of the largest investors in the UK and Tata Steel had emerged as the country’s largest employer. Ms. Hewitt stated that the UK could extend support to India in areas such as smart cities, re-juvenation of older cities, embedded services in manufacturing among others.

Proposed industrial investments dip 20%

There has been a sharp decline of about 20 per cent year-on-year in total amount of proposed industrial investments comprising industrial entrepreneurs memorandum (IEMs), letter of intent (LOIs) and direct industrial licenses (DILs) received by states across India in various sectors, apex industry body ASSOCHAM said today. “India received 1,421 industrial investment proposals worth Rs 362,805 crore in this calendar year till September which had declined significantly from 1,906 proposals worth Rs 451,643 crore in the corresponding period last year,” according to analysis of figures from Department of Industrial Policy & Promotion (DIPP) under the Union Ministry of Commerce and Industry conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). Interestingly, Chhattisgarh has acquired lion’s share of about 45 per cent in the total amount of proposed investments with 24 investment proposals worth Rs 161,836 crore which had increased from Rs 31,067 crore thereby clocking a year-on-year growth rate of over 420 per cent, highlighted the analysis carried out by theASSOCHAM Economic Research Bureau (AERB). Maharashtra (8.9 per cent), Gujarat (8.8 per cent), Odisha (5.9 per cent), Karnataka (5.4 per cent) and Andhra Pradesh (5.1 per cent) are other leading states in terms of share. However, Madhya Pradesh, Odisha and Gujarat have registered significant decline in their share in total investment proposals. Amid other states that registered significant growth in terms of proposed investments included - Punjab

(184 per cent), Karnataka (166 per cent), Himachal Pradesh (108 per cent) and Assam (25 per cent), highlighted the ASSOCHAM analysis. Services, construction development, telecommunications, computer software and hardware, drugs and pharmaceuticals, automobiles, chemicals (other than fertilizers), power, metallurgical industries, hotel and tourism are amid top 10 sectors attracting foreign direct investments (FDI) into India, further noted the ASSOCHAM analysis. While Mauritius, Singapore, United Kingdom, Japan, Netherlands, United States of America, Cyprus, Germany, France and Switzerland are top investing countries in India, it added. “Considering the growing competition between emerging economies for foreign investments, FDI is highly imperative for India considering that it has completely transformed the quality, productivity and production in sectors it has been allowed and can supplement domestic efforts significantly,” said a senior official of the chamber while releasing the findings of the chamber’s analysis. “Restrictions on sector caps and entry route to sectors other than those of national importance must be liberalized further and constant reviewing of policies must be done, besides, the Government must ensure consistency of policy so as to perk up the business and investor confidence,” he added. “Besides, bureaucratic delays and process vis-à-vis plethora of Governmental approvals and clearances involving various ministries must be fastened to increase the absorption of FDI in India,” he further said. ASSOCHAM has recommended the government to devise a mechanism to facilitate a consultation between the centre and state governments before rolling out a policy to ensure that decision once taken does not get affected. Government must recognize that good regulations and efficient processes are key catalysts for FDI as accessible and reliable information together with efficient and predictable actions by public institutions help create a business environment conducive to investment. ASSOCHAM has also called for a time-bound, non-discretionary, simplified and less number of procedures and approvals to help uplift the overseas investors’ confidence and foster more investments in India. LOGISTICS TIMES January 2015

NEWS BRIEFS

RoRo facility at Pipavav Port

APM Terminals operated Gujarat Pipavav Port and NYK Auto Logistics (India) announced setting up of a dedicated automobile yard (RoRo) at Pipavav Port last month. Under the arrangement, NYK Auto Logistics (India) has been sub-leased land parcels by Gujarat Pipavav Port inside its premises for developing a dedicated common user integrated RoRo terminal with India’s first port based PDI and Vehicle Processing Center. Gujarat Pipavav Port will provide all the port and related facilities to the logistics operator for ensuring smooth and seamless flow of automobile cargo. The Yard is expected to be commissioned in Q2CY15. Commenting on the new business opportunity, Managing Director of APM Terminals Pipavav, Prakash Tulsiani said, “We are committed to increasing our existing service portfolio from container, bulk, liquid and now automotive cargo. NYK is a proven leader in operating auto terminals worldwide and has an extensive fleet of RoRo ships offering regular sailings to and from the major ports around the globe. We are happy with this association.” Takaya Soga, General Manager of NYK Auto

LOGISTICS TIMES January 2015

Logistics Group, Tokyo commented that the NYK group is operating in India from last 120 years and RoRo terminal at Pipavav is another step towards its commitment to customers in Indian market. NYK group operates eighteen (18) RoRo terminal globally including Seven (7) in China, Thailand and Singapore and has a solid expertise in development and management of RoRo terminals. The common user integrated RoRo terminal with PDI and Vehicle Processing center at Pipavav shall provide global quality services to customers in Northern and Western Automotive Cluster. Naotaka Ishizawa, Managing Director of NYK Auto Logistics (India) added that NYK shall implement global best practices at Pipavav RoRo Terminal and support the growth of automotive exports from India under Prime Minister “Make in India” initiative. The RoRo yard at Pipavav with annual designed capacity of 250,000 vehicles shall operate 365 days x 24 hours and be equipped with dedicated custom bonded area, RFID for track and trace and CCTV cameras for security of cargoes. The staff operating the terminal shall be trained to Global Standards for cargo care to meet the stringent quality requirements of automotive customers.

TCI board approves preferential placement of equity Transport Corporation of India (TCI) has decided to raise approximately Rs. 60 crore by allotting upto 24 lakh shares to IDFC Premier Equity Fund. TCI board of Directors recently approved allotment of these shares (which will be around 3.17 % of post issue capital) at an issue price of Rs. 249 per share. The company will utilize the fund to partly finance its capital expenditure and future expansion plans which it intends to undertake to meet the growing market demand. The company has earmarked Rs. 500 crore towards the capital expenditure for the next three years to purchase new trucks, ships, develop hub centers and fulfillment warehouses and other miscellaneous expenditure. Commenting on the development, Vineet Agarwal, MD, TCI said, “We anticipate economic recovery in the coming years and believe that Indian logistics industry is at the turning point of its development. As part of this belief, we intend to deploy significant capital over the next few years to support the company’s growth plans.” He further added, “We are confident that with the

support of IDFC Premier Equity Fund we will be able to delight our customers and further strengthen TCI brand promise.” TCI is expecting increased demand for logistics services to come from e-commerce and other consumption driven sectors with growing per capita income. The trend of increased outsourcing of logistics services by non-traditional industries is also one of the prominent growth drivers for the company which is now witnessing demand for services like order processing, kitting and packaging. The company is hopeful that implementation of GST will lead to rationalization of taxes on production, distribution and inventory management leading to the creation of a common market, increased demand for warehouses / hub centres and multi-modal movements between hubs. Upcoming dedicated freight corridors and diamond quadrilateral project will reduce unit cost of transportation by speeding up movement by rail and road besides promoting bulk multi-modal movement.

LOGISTICS TIMES January 2015

NEWS BRIEFS

Rhenus Launches Second Warehouse near Chennai

Rhenus Logistics India, the Indian arm of the globally valued Euro 4 Billion Rhenus Group, recently announced opening of second warehouse near Chennai, spread in an area of 55,000 sq. ft. With opening of this warehouse, Rhenus now has two multi-user facilities, with about 1 lac sq. ft of warehousing space near Chennai. This new warehouse will exclusively cater to the chemical sector and boost the industry in Tamil Nadu. This warehouse is a state-of-the-art facility and fully enabled with latest technologies, facilitating the company to handle chemical products with the highest level of efficiency and safety. The warehouse is endowed with modern equipments and in-house warehouse management software “Rhenus WMS” that takes care of inventory traceability and transactions. It has a capacity of 6000 Pallet Positions (PP) with further scalability options, efficient Reach Trucks with the lifting capacity of G+7 racking systems for 1100kgs

and Forklifts for Floor management. It has prospects of fulfilling both JIT and Milk run concepts. This warehouse has got clearance and approval from the Tamil Nadu Pollution Control Board (TNPCB). With this, Rhenus is probably one of the few logistics companies in India which has three PCB (Pollution Control Board) approved facilities for storage and operations of chemicals in India and they are also compliant with the HSE (Health, Safety and Environment) norms. Rhenus is one of the few logistics companies in India, who have their warehouses certified with quality, environmental and safety accreditations in place such as ISO 9001, ISO 14001 & OHSAS 18001. “In India we have about 11 lac sq. ft. of warehousing space of both multi user facilities and customer specific dedicated facilities in the cities of Mumbai, Delhi, Chennai, Pune and Ahmedabad. We plan to add 4-5 lac sq. ft. of warehousing space every year. We lease the space and invest in mechanization of operations”, said Vivek Arya, MD, RhenusIndia. The Pollivakkam facility is 12kms from ChennaiBangalore highway (NH4) which will be an added advantage. Several other multinational giants have their existence close to the facility.

The Bengaluru (BLR) Airfreight Terminal facility of Air India SATS Airport Services Pvt. Ltd (AISATS) received its Good Distribution Practices (GDP) certification last month, which made AISATS the first service provider in India to get such a certification. Maintaining product safety and quality is of utmost importance in the pharmaceutical industry and Good Distribution Practices (GDP) is a quality system that ensures that the quality of a pharmaceutical product is maintained throughout the distribution process. With this certification, AISATS once again demonstrates its commitment to providing world-class and industryrecognised quality standards in every aspect of its facilities and services. AISATS’ customers can be assured of strict compliance with the GDP requirements set out by the World Health Organisation (WHO) when it is handling pharmaceutical products. Willy Ko, CEO, AISATS, said, “AISATS has always been aligned towards establishing itself as a worldclass service provider. We firmly believe in setting the benchmark for Distribution Practices and this GDP certification is a sure-footed step in the right direction.

AISATS plans to continue to enhance its facilities and will look to invest in more multi- temperature control facilities to cater to the increasing demand of temperature-controlled cargo”. This GDP certification is the latest in a line of firsts in AISATS’ BLR Airfreight Terminal. This facility was the first air cargo terminal in India to introduce carton clamps on its forklifts for more efficient handling of loose cargo, the first to introduce the Automated Storage and Retrieval System (ASRS) and Very Narrow Aisle (VNA) equipment to assist in the smooth handling of cargo. The AISATS Bengaluru terminal also has the distinction of being the first Air Cargo Terminal in India, Middle East and Africa region to be awarded a TAPA (Transported Asset Protection Association) Class A certification, showcasing their ability to achieve high security standards in warehouse operations while delivering efficient and excellent services. In addition, this facility also recently launched an e-freight initiative, a significant step towards improving efficiency while contributing towards environmental sustainability.

AISATS achieves “Good Distribution Practices” Certification

LOGISTICS TIMES January 2015

Modern Service Center facility in Chandigarh Early this month, DHL Express announced its investment in infrastructure in Chandigarh with the inauguration of a new service center facility, aimed at supporting the growth of export and import demands of customers in the region. The facility was inaugurated by Anuj Chawla, MD, Active Industries and RS Subramanian, Senior Vice President & Managing Director, DHL Express India. On the occasion RS Subramanian said, “DHL Express has been an integral part of business in Chandigarh Tricity for over 29 years now. Due to rapid industrialization, the Tricity has grown in prominence as an industrial hub. Through the service center facility, we are strengthening our infrastructure and capabilities to support our customers’ growing business. We will now be able to move shipments faster and with greater efficiency, providing superior service quality.” Located centrally in Chandigarh’s Sector 34 A, the new facility will serve as a pick-up, delivery and sorting center, with a shipment handling capacity of over 100,000 shipments a year. It will also allow for early

delivery of export shipments and later pick-ups of import shipments, giving customers more time and flexibility to work. DHL Express facilitates exports and imports for a wide variety of customers across industries such as automotive, engineering and manufacturing, pharmaceutical and life sciences, textile and garments, electronics and banking. All shipments for Chandigarh, Dera Bassi, Mohali, Panchkula and Zirakpur will now have a same-day connection to Delhi.

Mundra International Container Terminal joins the million club Mundra International Container Terminal (MICT) has hit the one million TEU (twenty foot equivalent units) annual container throughput milestone for the first time. From handling twenty thousand TEUs in its first year of operations in 2003, MICT has achieved the landmark while pioneering the container revolution in the Kutch Region and emerging as the gateway for the North and the North West regions of the country. Tejas Nataraj, Chief Executive Officer, MICT, said: “This remarkable achievement means that MICT has carved a place for itself in the premier ranks of the global container market.” “Customer service is central to everything we do and we constantly invest in infrastructure, equipment, technology and training to increase our operational efficiency and ensuring a fast turnaround of vessels.

We service over 55 vessels and more than 160 trains a month with over 30 crane moves an hour. The confidence of our partners, the local community and our customers has helped us achieve this remarkable growth and we hope to continue this success while delivering world class service to our clients.” MICT is one of the most sophisticated and technically advanced port facilities on the Indian sub-continent with its strategic location, hinterland connectivity and on-dock rail facility attracting shipping lines calling along the Indian coast. It regularly upgrades its IT systems and equipment to keep them comparable with the latest developments in the industry with employee skills developed by an Operator Training facility. An active programme of engagement with the local community and stakeholders is also a feature of its drive to promote sustainable business practices.

LOGISTICS TIMES January 2015

NEWS BRIEFS

GLOBAL TIACA calls for risk-based approach to security TIACA members have been advised that recently released updates to Security Programs for allcargo aircraft in the USA must be implemented by February 16th, 2015. The updated Security Programs, issued by the United States Transport Security Administration (TSA) on December 29th, 2014, affect all US and non US-based freighter aircraft operators within, into, and out of the US. “The timing of the announcement over the holiday season, and the short implementation period are not ideal,” said Doug Brittin, TIACA Secretary General. “While the updates incorporate some ideas which the industry has worked on with the TSA, they do not address the risk-based approach, which we have discussed and fully supported.”

The programs incorporate structural changes and previous Emergency Amendments and Security Directives, but also require some changes in compliance procedures. Forwarders, regulated agents, and passenger carriers who tender cargo to freighter operators may also see an impact and should be notified by the operator where necessary, according to TIACA. In accordance with the US Code of Federal Regulations (CFR), all-cargo/ freighter operators may notify their appropriate TSA Representatives regarding any elements of the program changes which they cannot implement by the effective date, and seek amendments. However, given the short implementation timeline, this also poses a challenge for industry. TIACA is recommending that members initiate this where necessary as soon as possible, to avoid any compliance issues. “TIACA will continue to work closely with the TSA on these and other security issues, with the goal of building a risk-based rather than ‘one size fits all’ approach to global air cargo security measures which impact all segments of our industry,” added Brittin. “We would also urge the TSA to consider reinstating an air cargo division to facilitate an even closer working relationship with industry.”

TOP and Europe Cargo merge Trans Ocean Pacific (TOP) – the NVOCC subsidiary of Europe Cargo BVBA, the Belgian member of the FPS network of independent forwarders and consolidators – has been absorbed into the parent business with effect from January 1st 2015. The resulting business is now active in general freight forwarding, ocean freight consolidation and project shipping. All TOP staff have joined Europe Cargo, and all TOP activities will now be handled by the newlymerged business. TOP’s senior management have also joined the Europe Cargo board to ensure continuity of service and standards. The merged companies see clear advantages to continuing their activities in Belgium under a single name in the future, explains Director Eric Vrolijk: “One business name is easier to market than two, especially as they are involved in similar business. But there will be no changes to ownership, management or staff, address, or contact details.” LOGISTICS TIMES January 2015

Europe Cargo was founded in 1992, while TOP was launched a year later. In the past year, Europe Cargo had already taken a majority stake in Trans Ocean Pacific, and January 1st saw the conclusion of this process. Says Director Fred Konings, who has managed TOP in recent years: “Through this amalgamation of the businesses, we are creating a stronger company which is ready to take on new challenges and develop new activities.”

Accenture Ports Center of Excellence Launched Accenture has launched a Ports Center of Excellence in Hong Kong which is focused on providing terminal operators with process excellence and technology implementation for performance management, operations management and enterprise management. Industry specialists at the Accenture Ports Center of Excellence are implementing Accenture Port Solutions (APS), a portfolio of industry-specific technology solutions combined with business consulting and outsourcing services, to help clients create the business analytics capability, operations flexibility and resilience required to cope with the short and volatile economic cycles in the ports industry. “Our Ports Center of Excellence supports our clients who are operating in a highly dynamic economic environment which requires improved operational efficiency and the ability to collaborate with a range of organizations across the global supply chain to meet the changing needs of customers,” said Eric Schaeffer, global managing director of Accenture’s Automotive, Industrial Equipment, Infrastructure and Transportation practice. The Accenture Ports Center of Excellence was at the heart of teamwork and collaboration with Modern Terminals Limited (MTL) in the design, implementation and ongoing support of a new terminal operating system on the Navis N4 terminal operating system (TOS) platform. This leading container terminal operator handles approximately 5.5 million TEUs (20-foot equivalent unit) annually. MTL’s legacy TOS had approached its system capacity limit. By moving to N4, MTL’s operation is running on a sustainable technology infrastructure adhering to international standards, supporting MTL’s long-term

growth strategy. “This was a large and complex implementation that required hard work and dedication of the joint Modern Terminals, Accenture and Navis teams,” said Anders Dommestrup, COO, MTL. “We look forward to continuing to work with Accenture as MTL continues enhancing productivity and efficiency to benefit our customers and the wider port community in Hong Kong.”

LOGISTICS TIMES January 2015

NEWS BRIEFS

IN-THE-NEWS

Safexpress unveils a new logistics park

Domestic LSP major Safexpress launched as state-of-the-art logistics park at Faridabad early this month. Spanning over an area of 1,80,000 sq feet, this ultra-modern logistics park is strategically located on NH 2. Speaking at the launch ceremony, Pawan Jain, CMD, Safexpress said “Faridabad is a major economic growth center of Haryana. It is one of the important industrial regions of North India and a hub for both large as well as small scale industries including mechanical and light engineering goods. Faridabad is famous for various industrial products which include

LOGISTICS TIMES January 2015

tractors, motorcycles, switchgears, refrigerators, shoes and tyres. The city is strategically located and serves as a nodal point for supply chain & logistics across North India region.” Safexpress supremo further highlighted “Supply chain & logistics has a very vital role to play in the growth of numerous industrial centers spread across the Haryana region. Despite being an industrial hub, Faridabad does not have adequate warehousing and logistics infrastructure to support its huge number of industries. Keeping this in mind, Safexpress has developed an ultra-modern

facility at Faridabad, which will serve as a transhipment hub as well as a warehousing facility. Safexpress, with its Logistics Park at Faridabad, will bridge the infrastructure gaps and serve the supply chain & logistics requirements of the entire region.” Also present on the occasion was Vineet Kanaujia, VP – Marketing, Safexpress who highlighted the USP of the logistics park at Faridabad in these words, “Our logistics park at Faridabad has a column-less span of over 151 feet and enables loading/ unloading of over 26 vehicles simultaneously. The dedicated bays and docks at our logistics park in

Faridabad provide an uninterrupted and unidirectional flow of inbound and outbound goods. The logistics park has a floor load capacity of 6 metric tonnes per square meter and has a truck docking area width of over 73 feet. To provide safe & smooth movement of goods within the Logistics Park we have installed high-tech equipment. Moreover, to make our logistics park eco-friendly, we have taken special go-green initiatives by investing in rainwater harvesting and developing special green zones.” Kanaujia concluded by saying, “This Logistics Park will be operational 24x7, 365 days in a year to provide time-definite deliveries. Due to our non-stop operations, we will be providing the fastest transit time for deliveries all across India to over 610 destinations from Faridabad.” LOGISTICS TIMES January 2015

BUSINESS TRENDS

MHCVs to Drive Volume Growth India Ratings & Research (Ind-Ra) has revised the outlook on the auto industry to stable from stable to negative for FY16. The revision in the outlook is based on the early signs of a recovery in volumes being witnessed in 2HFY15 and on the bottoming out of the sales decline. “We expect the volume growth in the commercial vehicle (CV) segments for FY16 to be driven by medium and heavy commercial vehicle segment (MHCVs; 13%17% yoy), with the volumes of

light commercial vehicles (LCVs) registering a marginal growth (0%3% yoy),” an agency statement maintained. “We expect the MHCV segment growth in FY16 to be backed by higher growth in the second half than in the first half. This is based on the agency’s expectation of stronger recovery in industrial activity in 2HFY16. While the moderate volume increase in 1HFY16 would likely be due to replacement demand, the volume increase during 2HFY16 will be driven by the expansion by fleet operators resulting in significant growth for the full year. Due to the lower cyclicality in LCV segment, it is expected to lag behind MHCVs in terms of recovery,” it further added. According to Ind-Ra analysis, the LOGISTICS TIMES January 2015

industry capacity utilisation in case of CVs in FY14 was around 50% of the estimated capacity of 1.4 million units. Despite the estimated recovery in volumes in FY16, utilisation levels are likely to reign in the range of 45% to 50% in case of CVs. Hence, despite this volume recovery, capacity overhang is likely to continue which could intensify the pricing pressure for original equipment manufacturers. Ind-Ra expects growing volumes to benefit credit profiles of even those CV companies with limited geographical or product diversification. In particular, MHCV players could see a marked recovery in their credit profiles in FY16. WHAT CAN CHANGE THE OUTLOOK? Positive Outlook Unlikely: Given the structural issues of overcapacity and intensifying competition, IndRa does not envisage a positive outlook revision in the event of a modest revival in sales. However, the curtailment or postponement of planned capacity addition coupled with sales volumes equal to those in FY11-FY12 could have a positive impact on the credit profile of the sector. Weak Demand, External Shock: A negative outlook revision could result from the sales revival for MHCVs witnessed thus far in FY15 not being sustained in FY16. A significant decline in the sales volumes of various auto industry segments due to muted economic activity or otherwise could also negatively impact the outlook. Additionally, any external shock pressuring the rupee and the subsequent spurt in the interest rate could impact the economy moderately. This may affect the volumes as well as the credit profiles of auto companies.

COVER CO OVER FEATURE FEA ATUREE

How the scene will play out for Logistics and Supply Chain Industry...

LOGISTICS LOGIST LOG ISSSTTICS IST ICCS TTIMES IMEES Janu January uary 22015 015 015

The beginning of a year has this uncanny knack of generating hopes in all segments of the business world. While in the past couple of years, the new year triggered hopes have by and large remained unrealised, the equations seem different this time as circa 2015 sets in. There is a new government at the helm which is promising a major push to manufacturing through its mega â&#x20AC;&#x2DC;Make in Indiaâ&#x20AC;&#x2122; programme and also by clearing roadblocks in the critical infrastructure sector; the center and the states seem to be finally rallying at a converging point on the issue of GST and the rapid stride of e-commerce is billed as that major catalyst which will dynamically change the scene on many operational fronts. We bring you the opinion of senior logistics and supply chain industry representatives and analysts on the possible churnings in this domain in 2015... LOGISTICS TIMES January 2015

COVER FEATURE

E-commerce business will further expand The Asia Pacific region continued to be the engine of global economic growth and will continue to increase its economic significance, considering that it houses three of the world’s four largest economies by purchasing power parity namely China, India and Malcolm Monteiro Japan. Despite this, the CEO, DHL eCommerce Asia Pacific regional GDP increased merely 6.0% annually in the third quarter and represented the weakest growth since Q3 2012. Today, Asia Pacific holds a significant share of the pie in the dynamic global e-commerce industry. Over the next five years, this industry which was pegged at € 962 billion in 2013 is expected to grow by more than 10 per cent per annum with Asia Pacific leading the way. The region is soon expected to surpass North America and Europe as the biggest online market in the world. The e-commerce market in India is growing at 12 per cent annually with online shopping valued at € 2.3 billion in 2013 and expected to touch € 4.1 billion by 2018. As the sector witnessed consolidation and big ticket investments, the year would be best remembered for m-commerce coming of age. Most e-tailers registered 40 to 50% purchasing traffic from mobile phones. Another interesting aspect which came to the fore is that over 50% of the business came from tier II and III towns & cities, which puts the onus on logistics service providers such as us to reach the interiors. Through its Indian subsidiary Blue Dart, part of Deutsche Post DHL’s Post – eCommerce – Parcel (PeP) division, DHL is investing aggressively in infrastructure and development of last mile delivery capabilities, fulfilment centres and multiple delivery options to position the company as the preferred provider for the e-commerce industry. Blue Dart’s unrivalled domestic delivery system and network capabilities in India provides the perfect base for piloting the development of region wide e-commerce solutions. We are working closely with leading brands, market place sellers and retailers to help them establish a sustainable e-commerce footprint, contributing with our role as a trade facilitator and enabler. In 2014, the group announced plans to invest more than €100 million in India over the next two years LOGISTICS TIMES January 2015

to strengthen infrastructure across all divisions, with an eye on potential growth opportunities in express (small parcel transportation), aviation, e-commerce, warehousing and freight-forwarding businesses. The Indian aviation industry, particularly air cargo, has so far only survived on hopes and a lot more is expected from the new government. It is encouraging to note that the government has identified critical sectors that need attention, especially infrastructure. It has adopted policies to ease the working of the sector like integrating multi-modal transport facilities, AFS, warehouses, manufacturing hubs, etc. The air cargo industry depends on the country’s economy and the government has been taking right steps in creating favourable business environment backed by industry friendly policies. The recent spate of economic reforms shows that efforts are in the right directions, also vindicated by reports that the country is expected to clock a GDP growth of 5.5% in the current fiscal and 6.6% in FY16. I see the continuing global recovery and fall in oil prices, a critical cost component for us, strengthening the upturn this year. While sectors like pharma, insurance are likely to register good growth, the sector to watch out for is e-commerce which is expected to continue its juggernaut in 2015 and attract more consumers and investors. As the government is keen on digital connectivity, we can expect an increased pattern in online shopping from tier II & III towns and cities. Given the tax and regulatory issues that the e-commerce industry was challenged with last year, it is likely to witness increased scrutiny by the regulatory authorities. In such a scenario, the e-commerce industry needs to engage more with the government to allay any adverse impact of tentative regulations. We look forward to see a consensus in the rollout of Goods and Service Tax (GST) which undoubtedly will have a critical role in the next level of growth and make the logistics supply-chain more efficient and cost effective. On the policy front, the implementation of the new Aviation Policy should see an upswing in the industry and we expect it to happen without much delay. The government’s increased focus on infrastructure development will help the logistics industry trim down its operational costs. We are eagerly awaiting the Union Budget this year and hope our long pending demand of getting industry status is met which will go a long way in making the industry self-reliant and

strong.

‘Make in India’ initiative will give a big boost India has witnessed tremendous optimism in 2014 with the onset of the new economic reforms. The announcement of the Union Budget has spurred excitement among the Indian logistics industry professionals. The proposed investment of Rs Pirojshaw Sarkari 37,800 crore into NHAI and CEO, Mahindra Logistics Ltd. state roads with a focus on development of expressways will provide a humongous fillip to the transportation industry which is heavily skewed towards roadways at present. Along with this, public private partnerships (PPP) for developing rail infrastructure will go a long way in transforming railways into an important mode of transportation for the Indian logistics industry. I am personally excited about the Delhi-Mumbai Industrial Corridor (DMIC) project. It is one of India’s biggest infrastructure projects till date and is expected to expand our infrastructure and industry with the development of ‘smart cities’, industrial clusters and multi-modal connectivity along the route of the corridor. Apart from this, development of ports, SEZs and new

airports in Tier 2 & Tier 3 cities are some of the other infrastructure projects which are bound to benefit our industry. The ‘Make in India’ initiative has opened a sea of opportunity in terms of human resource and business expansion for us. Increasing 24X7 customs clearance at ports and airports is an indication that government policies will no longer be perceived as a hindrance to the progress of the industry. The establishment of ICEGATE, the Customs EDI Gateway Portal of Government of India which provides a single window integrating customs, excise, and all other relevant agencies involved in EXIM clearances is a reinforcement of this fact. The new year looks promising with plans such as implementation of the much-delayed GST which will not only boost outsourcing of warehousing activities but also give impetus to inter-state transportation. The proposed investment of Rs 5,000 crore in warehousing is a welcome step and highlights the growth potential of the warehousing sector. The emphasis on reducing post-harvest losses has also brought to light the need for developing agriculture logistics. The surge in e-commerce has increased focus on the need for backend logistics and it won’t be long before we will have to gear up for handling international e-commerce.

A vibrant 2015 awaits

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The financial year 2014-15 was heralded by the Modi juggernaut steam rolling its opposition and taking its rightful position at the helm of power that for the next few years, at least, will hopefully drive “India Shining” to a “Glorious and Victorious India.” The Vikram Mansukhani GDP at 5.3 (Q2 FY14-15 Head Business Development and up from 4.6 Q4 FY13-14) Corporate Services, DIESL has been symbolic of the feel good factor that the change in government has generated across the classes and masses within the country. There is a wave of positivity coupled with a drive to succeed and innovate across the corporate and social strata in India, vying to be recognized as globally superior in production, services, education, healthcare and infrastructure. For the logistics industry, growth in GDP is a direct opportunity for growth in service requirements whether

these be in new geographies, industrial segments or solutions. While the implementation of GST now seems imminent only in mid-2016, there has been a flurry of debate on how this will pan out and impact OEMs across industries and how they would cope with their need to serve multiple customer requirements with hopefully lower cost of market penetration. This has generated various simulations being run by OEMs, 3PL operators and network transportation companies on where and how large operating facilities (warehouses) should be. The recent sharp drop in fuel rates have also reduced the end to end supply chain costs leading to a drop in input cost of product. As the availability of labor and their management becomes progressively more challenging , the shift from C&F agents to organized 3PL operators has started, albeit slowly. Service users are looking at focusing on their core and allowing experienced 3PL operators to engage with them on a long term supply chain improvement plan which envisages end to end resource, cost and service optimization via a solutions based approach. The lead, opportunity and negotiation LOGISTICS TIMES January 2015

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buckets are overflowing with queries although the order finalization is still a little slower than expected. For 3PL and logistics service providers the challenge will be to attract, grow and retain a large middle management which is capable of understanding customer needs and sensitivities while running the day to day operations. A large number of operations management schools have mushroomed across India and students quite clearly see logistics as a growth sector that they would like to be a part of. It would only be pragmatic though for the recruiting firms to caution the new incumbents that everything that glitters is not gold.

While the government focuses on the India growth strategy it must quite clearly realize that logistics will make or break the dream run! Availability of logistics zones free from “local interference” , green channel through the check posts for preferred transporters at least till GST is implemented , providing micro-finance options to small and medium transporters, and granting logistics an industry status are only a few of the steps that if taken will provide the much required impetus for growth in the logistics space. Roll over 2014, a vibrant 2015 awaits the logistics industry!

an exceptional year for India. From cyclones and floods, to sensex soaring to unimaginable highs, to e-commerce emerging as the propeller of business, and finally a majority government in parliament after three decades… Vikas Anand 2014 has certainly been an Managing Director, eventful year for India and DHL Supply Chain for the rest of the world. At DHL we have always believed in the ‘India story’ and the potential the country holds to become one of the fastest growing economies in the world. We believed in the future of India and in keeping with our strategy to stay ahead of the curve, we had announced a substantial investment of Euro 100 million for infrastructure development in 2012. With our plans on track, I am pleased to share that five of these large sites are already functional, with another three expected to go live in Q1 of 2015. Additionally, in keeping with our efforts to provide path breaking solutions to the supply chain industry in India, we have launched two Logistics Service Centres in Mumbai which offer significant value to DHL Supply Chain’s customers with innovative solutions that help them manage costs and simplify their business. Looking forward, our wish list for 2015 would include: 1) GST: With a majority government in place, one would hope that 2015 sees a lot of action on the GST implementation front. Reams have been written about GST and how its implementation could lead to a substantial improvement to India’s GDP. Apart from that, the long term impact of GST will benefit far more than simply adding to its overall growth in numbers. 2) Infrastructure: India has done well in infrastructure but there is still a mountain to climb.

infrastructure projects and formation of proper regulatory policies which will make land acquisition easy and attract private participation in infrastructure projects. 3) Global headwinds: The current headwinds as seen globally by the vulnerability of many economies and dependence of the others on oil along with currency fluctuations (USD and Euro), denotes 2015 is beginning with a unique set of challenges. 4) Fiscal stimulus: All signs in 2015 point to a rate cut in the early part of the year and a good strong budget that will provide effective stimulus to the economy to rally. Our industrial index numbers could do with some strengthening as also controlling inflation along with other economic indicators which could be prepped up as well. All in all the first four months of 2015 will provide a very good indicator as to which way India will tilt in terms of its economy in 2015. Logistics in India continues to face quite a few challenges and a good part of the industry is rising up to them. Investments are being made by the players and a little regulatory boost would go a long way in helping build world class supply chains in India. Delays,which increase cost and lead to wastage need to be addressed even more aggressively by the industry and the regulatory authorities. Tax breaks, encouragement of FTZ’s, added focus on the sector to make it even more organized, development of world class ports, expressways, e tolls, single window clearances, etc.; and so many other items which have been work in progress over the last decade still remain a challenge in the logistics industry. Apart from the above, developing industry ready talent and making logistics an attractive sector for young graduates should be on top of every logistics player in India. As stated earlier 2014 was an eventful year and 2015 promises a lot of exciting action too. We are excited and geared up, looking forward to new beginnings and tremendous growth opportunities for our business.

2015 promises a lot of 2015 action should see added impetus into clearing huge The year 2014 has been

LOGISTICS TIMES January 2015

Investments in technology will go up With time, technology has been playing a very more important role in the success of supply chain & logistics business. At Safexpress, we have been adopting the latest technologies for the last many years. That said, the year 2014 saw a marked increase in new technology VINEET KANAUJIA adoption by our firm. This VP - Marketing, Safexpress clearly indicates a shift in terms of the way technology is getting vital for our business. In the light of the above, one can safely say that technology adoption will be the way to go in 2015 as well. The second vital trend in 2014 was the focus on skill development by the sector. Our sector has now got really conscious about the need for bridging the prevalent skill gaps. Safeducate, India’s premier supply chain & logistics skilling firm and a part of Safexpress Group, has undertaken large number of initiatives to bridge these skill gaps. The third important trend is the advent of e-commerce logistics in the country. E-commerce business in India is presently estimated to be around USD 15 billion and is forecasted to grow radically to USD 100 billion in the next five years. As e-commerce industry in India

explodes, e-commerce logistics seems to be the biggest critical success factor for this unique and lucrative business. Delivering the product to the consumer on time is a huge challenge for virtual stores. While e-commerce industry per se has seen exponential growth rates in India, e-commerce logistics is an area where a lot still needs to be done. In line with the above trends, 2015 will see numerous challenges as well as opportunities. To start with, the sector will witness massive investments in technology, which will enable it to enhance efficiencies. On the skill development front, there be numerous projects which will be undertaken in 2015 in continuation with the previous year trend. Also, on the e-commerce side, massive capacity build up and infrastructure development will happen in 2015. Safexpress has formed a separate firm by the name ‘Safexpress B2C’ to develop its e-commerce logistics business. Safexpress B2C has tied up with large number of e-commerce companies to provide its specialized logistics services to them. The company plans to procure 1000 Maruti Suzuki Eeco vehicles in 2015 to build its e-commerce deliver muscle further. This will be a very unique and pioneering initiative. Presently, e-commerce business in India has a 2-wheeler delivery model with most companies relying on bikers for delivery. But, Safexpress B2C will bring a huge paradigm shift towards a 4-wheeler delivery model.

Air Cargo segment needs more focus

Being one of the largest consumer markets in the world, India’s $110 billion logistics sector is driven by industries such as automobile, pharmaceuticals, FastMoving Consumer Goods (FMCG) and retail. The industry is now growing at 15 per cent to 20 per cent annually which is almost Willy Ko twice that of the global CEO, AISATS average of 10 per cent. This rapid growth rate has been accompanied by a phenomenal rise in the volume of freight traffic movement. While the growth rate is a positive trend, inadequate infrastructure is the major bottleneck impacting the development of logistics and the efficient movement of cargo in the country. With the government now

laying emphasis on increasing manufacturing and exports, logistics has become an imperative sector to achieve the desired levels of development foreseen for the country. Although the sector has witnessed increased investment, evolving regulatory policies, mega infrastructure projects and several other initiatives, there still is a need to significantly accelerate the pace of such developments. There is a direct relationship between domestic and international trade and logistics infrastructure. While growth in trade stimulates the requirement for supporting infrastructure, availability of infrastructure at competitive rates promotes trade and improves global competitiveness of a country. In this context, Air cargo serves as a vital link between domestic and international markets. The contribution of air cargo, thus, needs to be adequately and appropriately focused upon, so that India’s fast growing international and domestic trade by air is facilitated, integrated and expanded. Over the previous year we have witnessed the emergence of new air cargo centers and improved LOGISTICS TIMES January 2015

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air cargo infrastructure at airports. This clubbed with the emergence of modern warehousing formats also facilitated streamlining air cargo logistics to quite an extent. Therefore the need of the hour is to develop an efficient logistics infrastructure that can reduce cost

of transportation which in turn can contribute directly to economic development of the country. Overall, the outlook for the logistics sector is expected to be stable for the next fiscal and with more favourable regulatory decisions being made by the government, the associated sentiment is bound to be positive.

New Year is the time for both - glance back and look ahead - and that has always helped us to comprehend the path we all are heading towards. The year 2014 has definitely been a basket of mixed occasions; however, 2015 may be considered Suunil Dabral as the year for Indian Logistics’! Cold Chain Industry will speed up in the coming years In spite of being the second largest producer of fruits and vegetables, India has seen tremendous loss of these produce due to spoilage and poor cold storage facilities. I think a big lesson from 2014 is that despite the government trying to introduce initiatives and policies for this sector, the gap between the total produce and the storage facility available for the same has been huge. With the demand at an all-time high, along with a growing number of incentives, many companies are expected to move towards venturing into the cold chain industry in the coming years. On a positive note, the introduction of certain direct tax benefits related to warehousing/supply chain management were provided in the last budget, which facilitated reduction in the duties and taxes related to the equipment’s/ machinery used in the cold stores. We hope that companies will make use of the government support to have a state-of-the art cold store with personalised warehouse solutions along with innovations to best use the space available. This should be one of the trends to look out for in the year 2015.

the e-commerce platform and marked an increase in online shopping. Having the best product is definitely a need; however whose product reaches the customer first becomes a competitive advantage. New generation consumers are very demanding and they have the “I need it right now” attitude. The speed at which the e-commerce industry is growing is quite evident. Changing trends in consumer demand and behaviour will soon call in for ‘Just- in- Time’ and quick response inventory management. As far as 2015 is concerned, companies will have to strategically design their supply chain in a way to meet the unpredictable demands of the future requirements. This will be the time when the expertise of the intra-logistics solution providers will come into picture!

Get ready to serve “I need it now” customers

As e-commerce matures in India, supply chain industry will emerge as a parallelgrowing industry 2014 was a promising year for the Indian e-commerce industry with the biggest deals and investments from the top players of this industry. Various initiatives and promotional activities undertaken by the market players witnessed a tremendous surge in LOGISTICS TIMES January 2015

Automotive Industry has come a long way Several factors are going to decide how the automotive industry is going to perform in 2015. After a downward spiral in 2013, car sales gradually picked up in mid-2014 due to several factors like the decrease in excise duties on small cars from 12% to 8% and the formation of the new government. Vehicle sales across categories registered an increase of 5.68% as compared to 2013. The big challenge that emerged in the year 2014 was the diesel deregulation, wherein the customers started migrating back towards petrol cars and several carmakers which recently bumped up diesel engine production capacity are in for a serious setback. The sector has witnessed slow but sustained growth and by 2015, India is set to become the 4th largest automotive market by volume. This will entail a sustainable domestic demand and initiatives like ‘Make in India’ which will drive more automakers to take up the export growth model and manufacture and export from India. Therefore there will be a need for further investment in increasing production capacity and warehousing capabilities to meet the growing demand in domestic as well as export markets. This will give tremendous opportunities to the warehousing and intra-logistics business in India.

GST implementation will have a strong impact Looking at the progress and initiatives taken by the government to roll out GST is a clear indication that future holds a better picture. Implementation of GST will definitely reduce the tax burden and motivate manufacturers to focus on matters like facelift of the warehouse, up gradation in technology, automation in material handling, etc.. With all hopes from the new Indian government

under Prime Minister Narendra Modi, massive changes are expected in the coming year which should work in favour of the logistics industry. The business commitment and policies facilitated by the government for the foreign companies are clear signals inviting the international companies to support the country in becoming a modern industrial magnet. These developments will offer enormous opportunities.

We had a mixed 2014; very good politically since it saw an end of the coalition era with a stable government coming at the helm though it was not too good a year from economic perspective. Nevertheless last few months is seeing continuous drop in world Kalpesh Pathak oil prices bringing in some VP (Supply Chain), FIAT India cheer for us since 80% of our oil requirement is imported. This has certainly helped the new government to check the inflation. From auto industry perspective it was not a bad year at all, although it could not achieve double-digit growth. But there was good growth in two wheelers, marginal growth in passenger vehicles, and negative growth for heavy commercial vehicles. Outgoing government did support the industry with temporary tax benefits carried forward by the new government till end of year. However, from the beginning of the new year the relief has been withdrawn. Certainly not good news for the auto industry as it is still struggling. This is a big worry for all stake holders in the industry since it is grappling with over capacity. No doubt sentiments have changed but over capacity has to get filled up with strong demand which will then lead to fresh investment proposals across the spectrum of the industry to bring the cheer back. Big question in mind of all stake holders today is: when will we actually see the robust growth? 3 months, 6 months down the line or another year or so ! All eyes are on the forthcoming union budget which will set the tone.. New government working on new policy amendments like Road transport and Safety bill, amendment to CMVR for car carrier dimensions, etc

seem to be good long term directions but they are sending short to medium term jitters to the logistics industry. It will call for strong discipline and may be huge investments particularly when it comes to car carriers. Can the industry afford with not so positive market condition? There is no choice and certainly it is a forward looking step to support the long term growth of the industry as well as nation with safety

Auto industry awaits robust growth spell

New government working on new policy amendments like Road transport and Safety bill, amendment to CMVR for car carrier dimensions, etc seem to be good long term directions but they are sending short to medium term jitters to the logistics industry. It will call for strong discipline and may be huge investments particularly when it comes to car carriers. as top priority, However timing for phase in phase out is going to be very critical to sustain the industry in short to medium term. We auto industry professionals are full of optimism and firmly believe that long term growth is assured. It is matter of timing as to when the ratio of auto products consumption starts catching up. A surge of 15-20% over current base is going to bring all the cheers back with double digit growth in the overall market. LOGISTICS TIMES January 2015

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Integration of various logistics ministries 2014 was a year of contrasts for the Indian logistics sector. While the first half of the year witnessed continued pressure on growth, margins and profitability in an environment shrouded by prolonged economic uncertainty Prahlad Tanwar and a static market, the Director – Transport & Logistics, KPMG second half witnessed a burst of optimism and activity led by the induction of a new government, the growing presence of the e-commerce industry and emerging interest in domestic and niche logistics segments. Industry priorities rapidly shifted from optimization to innovation, global to domestic focus and from cost saving to investment ready modes. A reflection of the universal optimism around the sector was evident in the increased value of several listed logistics entities. The past year witnessed growing recognition of smaller, niche operators offering specialized services to specific industries, while it brought upon a sense of vulnerability amongst larger, more established players as they were confronted by a situation where their legacy strengths including processes, IT platforms, network, asset configurations and talent hindered their ability to quickly react to emerging market opportunities. Overall, while the sector saw a few bright sparks, it was a muted year with marginal real-time EXIM and domestic volume growth. The growing emphasis on alternative transport modes, thrust on outsourcing driven by growing business complexity, significant drop in oil and fuel prices and imminent roll-out of GST are expected to be positive enablers for the sector in 2015. From a policy and regulatory perspective, the integration of various logistics ministries, Prime Minister Modi’s ‘Make in India’ campaign and the launch of initiatives like the Sagarmala project are expected to lay a foundation for growth of the sector in the coming years. While the fundamental ethos of the logistics industry to deliver goods ‘on-time, in-full at the right place, condition and cost’ will remain unchanged, the expectations of logistics buyers and end-consumers will be significantly heightened and altered. Track-and-trace applications will now move from institutional milestone based desk-top searches LOGISTICS TIMES January 2015

to real-time updates via handheld smartphone devices. Data analytics and cloud based systems will enable real-time and predictive planning disrupting traditional supply chain planning methods. And e-commerce will drive fundamental changes in the operating ethos of several logistics operators. Some key trends anticipated include: 1. Polarization of market share and activities to groups of companies across logistics segments, driven by their growing market presence and ability to leverage economies of scale 2. Vertical focus will dominate the strategy of operators as they concentrate resources on addressing industry specific supply chain opportunities 3. Talent infusion will become a priority as operators seek fresh perspectives to reinvent and modernize existing capabilities 4. Transformation as several established players

Prime Minister Modi’s ‘Make in India’ campaign and the launch of initiatives like the Sagarmala project are expected to lay a foundation for growth of the sector in the coming years. breakaway from legacy operating models and business processes to address emerging business opportunities 5. Multi-modal operations will be driven by various initiatives such as the roll-out of GST and other policies being promoted by the Government to reduce dependence on road transportation Higher involvement of industry stakeholders is expected to drive standardization and consolidation of logistics services across industry practices, resulting in the development of a logistics ecosystem. With the government responding to external factors such as infrastructure constraints and changing regulations, the outlook for logistics sector in 2015 and beyond looks positive.

There is a predictable policy environment now Year 2014, thanks god it’s over! First half of the year saw Indian economy touching its nadir, almost all international financial institute / credit rating agencies were competing to give Indian GDP lowest growth credit, 6.7% to 6% Amit Kumar to 5.6% to 4.8 % to 4.2 % Supply Chain Division Amway India but finally GDP closed at 5.6 %. Second half, however, was eventful and saw two notable events - first, globally, we saw fall and fall of crude oil which initially got cheers but now is a matter of concern as current trading level is at USD 49/Barrel as against the breakeven price of USD 65/barrel. Second zinger happened in May when in India, BJP or rather Modi got overwhelming majority in Lok Sabha election to run India as a CEO than a PM. He undeniably will have oversized

influence. To give you my crystal ball view of 2015 - each month is pivotal. The masterstroke has been played – “Make in India” program which is getting things organized, has already got its nut and bolt in the right place by the way of labor reform bill, land acquisition bill, decontrolling diesel & GST, and has swept smokescreen of fickleness by giving predictable policy environment. If comments of certain economists are to be phrased – India is going to sputter in 2015, will see a resurgent economy specially when global economy is not faring well. China, for the first time, in last 20 years will be registering lowest GDP growth rate of 7.4 % and is becoming increasingly costlier due to higher wages of labor which is pushing US, Europe& Japan to have “China +1” policy for manufacturing and hence India’s candidature for being shop floor of the world becomes more relevant today than ever. Economically, year 2014 was a year where cart was before the horse and hence it was going nowhere. But the new year has got horse at the right place and I am sure it will gallop too.

Last year was a forgettable spell for the Indian economy and logistic industry in particular with a week government in the first half, rising diesel prices and corruption derailing economy and Industry. But with the change of government Ramesh Krishnan in May, there is a new Head (Supply Chain) expectation and optimism Sahara Q Shop due to apparently serious intent of the new dispensation under the influence of Narendra Modi. While the economy was not growing, the more disturbing fact was the tight money market and delay in payment which was crippling the logistics sector. However, positive changes seem to be round the corner. There are some very positive developments on GST with the centre and states’ nearly coming to a common platform and it is expected to be finally implemented very soon. New government is very keen on opening the tap of FDI which will not only boost economy and demand but also bring in jobs and opportunity to small

and large enterprises. With efforts on controlling the black money and channelize it legally back to India and with real estate prices having stagnated or coming down, it will probably make it viable for the logistics Industry to go for their own infrastructure and warehouse capabilities. Also the major positive trend is the inflow of huge funds to the e-commerce businesses which would directly give boost to logistics and supply chain Industry. I also expect that thrust on e-commerce will have a very positive impact on the last mile logistics. This has been one area where every national player and local players have faltered drastically as neither has industry been able to control cost or improve service levels of last mile delivery till date. Flipkart is now planning to work on three hours window which is going to be one big challenge. Fuel rate decrease has not seen proportionate decline in the freight rate which is interesting. In fact till now logistic industry has never been able to increase the freight proportionately in case of fuel increase thereby profitability getting a squeezed. Let us hope Modi Sarkar gives the country reasons to really feel good in 2015 and logistics industry is able to concentrate on strategic development and not as usual get besieged by day to day hassle and funding issues.

E-com growth will improve last mile logistics

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Domestic cargo will grow by over 20 percent Let me begin on a positive note, What is behind us now is not important. Aas experts say India requires simple micro-management of the economy. One of the reasons of fall in inflation rates is due to the decline in international commodity prices, Bharat Thakkar especially that of crude. Former President, ACAAI Perhaps no one has a clue as to why price has declined even as it can soar dramatically as the world has experienced since 1979. There was a gradual growth by end of first quarter right through upto just about before end of 3rd quarter, which had slowly picked during 2013. Though OCT showed strong global growth, specifically from ASIA. As in 2013, commodity of the year in 2014 was again Pharma specifically due to emerging economies of the African continent. A continent comprising 52 countries and population equal to India, it is the fastest growing market for Global air cargo trade.

Airlines, therefore, must look at African sectors. With falling oil prices there is no excuse of high operational cost due to imbalance of out bound from Africa , which can also be overcome by effective use of hub and spoke model. We have experienced tremendous growth in domestic cargo to the tune of 20 % and it is expected to grow at over 25 % in the next few years. What is needed today in the Air Cargo industry is talent. It is my understanding that unless this gap is bridged urgently by every stakeholder and they adapt advanced technology, it will only lead to disruption ,instead of development. Having said that with such growth expected in the next few years, we come to over all infra requirements and I am not referring square feet /meters as every thing does start and end at terminals be it CFS/ Airport, India’s biggest challenge is Efficient Planned Transport Infrastructure- we need dedicated motor ways linking production centers to highways which link to ports and airport for seamless flow and help Exim to restrict transaction costs by faster transits with least time spent by goods sitting on trucks due to traffic chaos including congestion at Airports and CFS’s and ICDs. Costal Shipping development should be on top most priority.

Business Trends and Future Possibilities India’s logistics sector is expected to be worth $200 billion by 2020. E-commerce market alone is likely to touch $20 billion by then with the companies investing around $2 billion in logistics, infrastructure and warehousing over the Prof. Samir K Srivastava next six years. Investments IIM Lucknow in logistics infrastructure tripled from about $10 billion in 2003 to $30 billion in 2010 and are expected to grow to $500 billion in 2020. There have been investments in roads, railways, ports and highways, warehousing, freight forwarding, express cargo delivery, web based integration systems and end-to-end tracking services for e-commerce, container services and shipping services, many of which have started showing some good results. An ASSOCHAM and PwC study projects that the e-commerce industry would invest $950-1,900 million in logistics, infrastructure and LOGISTICS TIMES January 2015

warehousing by 2017-2020. The logistics sector will see a slew of deals in the next one year as international and Indian investors scout for targets. While big companies in the market are likely to go for public listing, mid-sized companies will seek strategic or PE funding. Private equity firms and foreign funds are focusing on agri-logistics, freight terminals and warehousing projects and innovative businesses for investments. SoftBank Corporation has already invested in companies like Snapdeal, Paytm and Olacabs. The Government of India is developing a project called Logistics Data Bank under the DelhiMumbai Industrial Corridor, which envisages putting in place a system to track the movement of containers in real time. The project aims to remove logistical bottlenecks and ensure timely delivery of consignments. It is also working on rationalisation and swapping arrangements for 40 thermal power projects, which could save up to INR 6,000 crore in logistics costs. India Post is ramping up its operations to meet the growing demand for delivery and logistics of e-commerce firms where it made a foray in 2013. It is setting up data centres, besides

providing hand held devices to about 15,000 postmen and other hardware in mail offices by Dec 2015. Actually, it should follow the China model where the government postal agency tied up with Alibaba and had a resounding success. Similarly, Railways have plans to align more closely with e- commerce industry by offering logistics support like designated pickup centres at identified stations. It has signed an MoU with South Korea for technical assistance and cooperation on areas such as high speed rail, modernisation of rolling stock, railway operations, modernisation of signalling, construction and maintenance technologies, and development of logistics parks and terminals. Concor, a Navratna from July 2014, plans to set up logistic parks at Krishnapatnam, Kakinada and Machilipatnam in Andhra Pradesh and at Karimnagar and Parancheru in Telangana. JNPT is planning to develop a special economic zone (SEZ) on 2,077 hectares near the port as well as doubling of the 44-kilometre road network to the port from four-lane to eight-lane, building a multimodal logistics park on 100 hectares to facilitate movement of goods to ports, and tying up with Asia-Pacific Economic Cooperation (APEC) for setting up a training centre at the port. India’s largest private port Krishnapatnam Port has tied up with automobile manufacturers like Isuzu Motors and Volvo India while eyeing a large portion of automotive logistics business. GreenDust, a retailer of refurbished goods, is in talks with e-commerce major Alibaba for providing services around management of returned goods and re-selling of refurbished items sold through AliExpress.com. It has also launched a B2B e-auction platform. There have been innovations like various web and mobile based applications including a central location management application called Zippr that shrinks a lengthy address into an eight-digit alpha-numeric short code. However, the picture is not completely rosy. Presently, the annual wastage of fruit and vegetables in India is around INR 440 billion. This is attributed to the failure to set up temperature control facilities and adequate storage houses to store the perishable goods. Government needs to promote facilities for post-harvest operations, including setting up of food processing industries and augmenting farm gate infrastructure, supply chain logistics and storage capacity. Indian e-commerce companies are unable to sell their products in the international market as they lack the logistical strength to ship products to global customers. This needs positive intervention. Intra-state tax regime and FDI in retail continue to be contentious issues. The structural and policy issues

and insufficient skills and infrastructure continue to be causes of concern. A number of initiatives to overcome hurdles on demand, supply, technological, policy and regulatory fronts are still awaited. We need improvements in the legislative framework, changes in the administrative set up and probably an institutional mechanism to develop the logistics sector. Further, safety measures provided by serviceled industries like e-commerce and logistics service providers need a review to establish proper checks and balances for avoiding undesirable situations. The government needs a paradigm shift to move from a regulator’s role to a facilitator’s role. It needs to chalk out and establish a time bound plan. We need to consider setting up a statutory “Logistics Regulatory Authority of India” and bodies like “Logistics Exchange” and “Bureau of Logistics Service Efficiency”. We also need to focus on community capacity building and capability

Investments in logistics infrastructure tripled from about $10 billion in 2003 to $30 billion in 2010 and are expected to grow to $500 billion in 2020. development involving all stakeholders. The logistics industry needs to focus its resources on better training and working conditions of its workers. With a new government at helm, 2015 could be a game-changer if there are major structural and policy changes, more integrative contributions towards intra- and inter-firm diffusion of best practices, green technology transfer and focus on environmental performance measurement. It offers opportunities to LSPs in India for developing technology solutions and infrastructure for providing quick and cost-effective multimodal transportation. Warehousing, Cold Chain / Cold Storage, Custom Bonded Warehousing and Project Cargo continue to offer strategic growth opportunities. Port containerization, e-tailing and rail based logistics seem to be other major strategic growth areas. LOGISTICS TIMES January 2015

COVER FEATURE

New opportunities in inbound segment When one looks back the past years , there is a mixed feeling. We still cannot forget that India had reached GDP growth rate of nine per cent few years back which gives certainly a confidence to Indians that nine per cent growth rate and beyond Prof. Akhil Chandra is an achievable target. Consultant, Logistics & Supply Chain management Unfortunately this story of growth was spoilt by systemic corruption and too much subsidy distribution during UPA II regime. Success story of allowing FDI in Automobile sector and Telecommunication and partially in other areas coupled with liberalization during the last decade brought foreign competition in India and consumers in the country had a taste of quality products. This rightly raised the demand for quality products. During this churning period many domestic companies perished because they could not face the foreign challenge and unfortunately Government at that time too did not do much to encourage manufacturers from supply side. Manufacturing remained mere fifteen per cent of GDP. The last year was really tough for the country and Indian industry. GDP growth started dwindling below five per cent and current account deficit started moving up with dollar exchange rate to Indian rupee touching even to seventy making things really difficult. For looking ahead with a positive outlook and hope, last six months of stable government of Modi have certainly given reason for the optimism and with rising sensex , it is evident that investors both foreign and Indian have welcomed the steps taken by new regime and market sentiments are now high . Still much more needs to be done. The country is lucky too as 2015 is a year where fortunately inflation is at its lowest thanks to the sharp decrease of oil prices globally and the GDP growth once again is on the upward trend reaching now beyond 5.2 per cent. People expectations are now high in the year ahead and growth model of Modi government have many takers in the new environment of hope and optimism prevalent in the corporate sector and among all the participants. For the ogistics sector now there is lot to cheer about too. New regime has focused its all-out efforts on manufacturing sector with launch of â&#x20AC;&#x2DC;Make in LOGISTICS TIMES January 2015

Indiaâ&#x20AC;&#x2122; program coupled with efforts to improve logistics infrastructure of ports, roads and rail. This has opened new opportunities to third party logistic players in the area of inbound logistics. Needless to say that unless inbound logistics succeeds, the challenge of rendering cost effective manufacturing shall remain a distant dream and we shall not be able to meet the competition brought out by foreign products especially from our neighboring country China bringing out products with value for money approach. The new reforms of land acquisition and labor reforms by the government of India though brought through ordinance are efforts in right direction for improving manufacturing in India. Further Government is quite serious about implementing goods and service tax which would be a boon for incorporating large and state of art

E-Commerce is really booming with players like Flipkart, Amazon.com,Myntra, Snapdeal and many more new kids on the horizon. This is really good news for third party logistics players. State of art warehouses and transportation facilities with speed are a key for success of E-Commerce. warehouses and logistics industry as a whole. E-Commerce is really booming with players like Flipkart, Amazon.com,Myntra, Snapdeal and many more new kids on the horizon. This is really good news for third party logistics players. State of art warehouses and transportation facilities with speed are a key for success of E-Commerce. The 3PL players have really now lot to celebrate for expansion in growth opportunities with this new development and the good news is that they are rising to the challenge. Year 2015 is a year of optimism, faith and growth as country in this year is poised to become 2 trillion dollar economy.

Transportation and Logistics Sector Outlook Market Overview The logistics industry in India recorded estimated revenues of US $104.11 billion during 2014, witnessing about 4.9 percent growth over the previous year. This growth was lower than that witnessed in the previous year. Srinath Manda, Program Formation of the new Manager, Transportation & Government at the Center Logistics Practice, Frost & Sullivan with a decisive majority in the mid-year created a notable positive change in industry’s confidence and outlook. However, the actual realized growth in industry’s output and market consumption as well as the exportimport scenario did not witness any notable change, thus restricting the overall economy’s growth and also logistics sector’s growth. Liberalization of FDI participation in defense and railway sectors is expected to have a positive impact on the logistics sector, especially liberalization of the latter sector. The Government’s ‘Make in India’ initiative aimed at enhancing India’s role in global manufacturing is also expected to have a significant positive impact on the logistics industry in the country.

10th Annual Indian Logistics Industry Benchmarking Study found that for most of the top 10 parameters considered by end users in the selection of a domestic Logistics Service Provider, the overall performance of LSPs was reported to be lower than the expected level. Further, 84 percent end users reported that the inability to reduce logistics cost despite outsourcing to a specialist LSP was their main challenge, because cost reduction was reported as their primary reason for outsourcing logistics activities.

The CEO’s Perspective of the Complex Business Universe Technology Impact Adoption of technology (primarily web/mobile based) solutions by logistics end users was reported to have grown significantly during the year. Reported usage of barcoding, Warehouse Management System (WMS), e-Procurement, and e-Sales solutions witnessed growth in the range of 20-30 percent over the previous year.

Competitive Analysis During 2014, the organized LSP segment faced a challenging market scenario, because end-users reported to have restricted outsourcing or used unorganized providers to obtain cost savings to deal with their own sluggish markets. This resulted in a decline in share of end users employing 3PL service providers from around 34 percent in 2013 to 31 percent this year. Market leading LSPs have reported to be exploring new services/segments to sustain their revenues. However, the year witnessed significant penetration of organized LSPs in emerging segments such as e-retail logistics.

Global Opportunities The government’s series of focused initiatives to enhance regional peace and cross-border trade with immediate neighbors and other major trade partners such as Russia, Japan, the USA, and ASEAN nations is expected to have a positive impact on the country’s industrial and logistics sectors. Enhanced trade facilitation with these nations is expected to boost the country’s manufacturing and export volumes as well as domestic consumption volumes, thereby benefitting the logistics sector. End-User Perspective Logistics end users reported that service providers did not meet their expectations this year. Frost & Sullivan’s

Industry Convergence While there were a few non-solicited news shared by industry participants of asset sales, optimization or downsizing among some small-medium sized LSPs in the country, the year did not witness any notable industry convergence activity. Economic Impact The sluggish economic growth of less than 5 percent during the year, owing to stagnant domestic consumption levels and export volumes, has restrained the logistics sector growth in the country. Major economic growth contributing industries like automotive, engineering, oil and gas, chemicals, and textiles have all witnessed sluggish or stagnant growth during the year, resulting in a challenging scenario for the logistics sector.

Market Outlook Strategic Outlook for 2015 In 2015, the logistics market in India is expected to witness enhanced growth at about 5.6 percent and reach estimated revenues of $110.1 Bn, primarily driven by enhanced industrial output and India’s international trade performance. The new government’s accelerated efforts for implementing the uniform goods and services tax (GST) regime by 2016 is a major development that is expected to impact the logistics sector significantly in the later part of 2015 and in 2016. This is likely to LOGISTICS TIMES January 2015

COVER FEATURE

transform/restructure warehousing and distribution infrastructure and practices of most manufacturing industries in the country – with several remotely located warehouse/distribution facilities being relocated closer to most connected central locations. Overall Strategic Conclusion The Indian logistics market witnessed slower growth in

2014 when compared to the previous year and multiple factors including sluggish economic and trade scenarios contributed to this non-impressive status. However the new Government’s initiatives for enhancing trade ties with neighbors and major trade partners, and improving India’s role in global manufacturing activity are expected to result in a notable positive change for the market by the next 2-3 years.

Intelligent supply chains will make a mark In my opinion, prospects in 2015 are quite bright vis-a-vis the year that has gone by. The new business opportunities are immense. There was a time when many of us beleived that we can manage any kind of upsurge in demand for supply chain activities. Maybe, it was just the Pradeep Shukla expression of complacency. Director & CEO Primo Integrated Services In reality, Indian supply chain players have seen a lot of ups and down. During last October, when almost all e-commerce players geared up for the mega sales, they had very little doubt about getting the orders and boosting their sales. But almost all of them failed to analyze of what kind of supply chain support they would need to gear up to for reaching to the last mile. Most of them were caught unprepared - the logistics teams sitting inside the company, their logistics partners, either in terms LOGISTICS TIMES January 2015

of warehousing or the last mile delivery partners or for that matter even the workforce required. All calculations went wrong for most of them. There was such a demand upsurge that even the best logistics companies came to a halt with their warehouses jampacked and their delivery hubs chocked. Everybody was looking for more space and more processing hubs. This failure had made everybody wiser across the value chain. This was evident during the “Google Online Shopping Festival” or the GOSF. Before entering the sales, everybody had made elaborate plans for getting the products to the consumer. The year ahead seems more of learning from our past mistakes. I hope, the industry would have become much wiser to deal with the unexpected situations. This year will definitely not see the kind of failures that happened during the last mega sale festivals. Now most of the e-commerce players understand the need of seamless supply chain services across the chain. This year will not only see intelligent supply chains coming to the fore but will also witness reduced supply chain cost across the board.

HIGHWAY NOTES

Who safeguards cargo on Indian highways? God alone knows!

* Ramesh Kumar

Windy, it was. Chilly too. Unusual rains over the past two days had added to the misery of hundreds of truck drivers hanging in the open already shivering from freezing January temperature. How many gallons of garam chai being consumed from plastic cups, nobody knows. Vigorous palm rubbing is in full swing to generate heat and warmth to ward off the cold wave sweeping Uttar Pradesh. As I walk into the transport office just outside the materials gate of Pata plant of Gas Authority of India Limited (Gail) in Auraiya, Uttar Pradesh in January 2015, display of two prominent posters attract attention. One a rectangular, eye-catching TCI Foundation publicity material for a health camp it did conduct with Gail management a few weeks ago for truck drivers. The second one, smaller in size, is a photo copy of an article Kanpur edition of Hindustan daily in Hindi. “Yeh afsar wale, bade bade baat karte hai. Lekin, karte kuch nahi,” (The Gail officials talk big, but do nothing) laments an elderly truck driver, buttonholing me at the crowded room where representatives of transport companies busy preparing ‘kagaz’ (paper work to enable quicker entry of trucks that bring in raw materials into the plant). Sensing my puzzlement, he drags me to the Hindustan poster stuck up at several locations in this crowded hall and LOGISTICS TIMES January 2015

commands that I read. Sipping a hot cuppa thrust into my hands by a concerned driver, I tried to speed-read the Hindi news reportage, though it is not my mother tongue. Lucky that I studied Sanscrit in school and college and hence reading the devnagiri script poses no problem. But, I cannot read like a native. While I read, someone provides a ‘running commentary’ on this story. I know what the ‘story’ is all about. The title tells everything: Eleven trucks carrying Gail plastic seeds have vanished with no trace. Interestingly, there is hardly any mention of Gail management giving its own version. Actually, this attitude does not bother me because that is how Indian managements behave. “I-Don’t-Care” attitude is their hallmark. Gail, the socalled “gem of a company owned by government of India” (navaratna company status, given out selectively by, who else, the government itself!) Self-congratulatory mode. Bodies of two drivers had been found somewhere in the country, the report tells. The usual spiel of “police investigation is on. We will come back with details when we get” is part of the media story. I could not resist laughing. Perhaps this is not the first time such “lost forever” trucks phenomenon is happening at Gail Pata plant. There may be many more such hijacking of Gail

material in the past and again some deaths or ‘untraceability of drivers after the hijacking’. Local media must have had a field day for a day or two. Gail officials at the plant would have maintained “no comments” or parroted “we are concerned. Human lives are valuable and police investigation is on. We care for our drivers” dialogue for a few days and hoping the story dies quickly. It invariably happens because the Indian media’s agenda is something different from being in serious pursuit. The vehicle possibly would be found in some godforsaken location. Of course, without the material. Hijackers are not stupid. Fate of the driver? Don’t be stupid. No one is bothered. On the contrary, there may be speculation that he himself was part of the gang that looted the vehicle! Possible, but generalisation is unpardonable. Gaddi found or not, the fleet owner would have filed his insurance claim and waiting for settlement. So, he is covered. Material lost is again insured by the consignee – Gail, in this case. It would have recovered. Or likely to. The point is Indian highways are not all hunky dory. Cargo-laden vehicles are hijacked regularly across India, but does not attract public attention. Those who want to know, should subscribe to local transport-focused dailies mostly published from huge

transport hubs because their coverage of hijacking and death of drivers is most exhaustive because it is the staple diet for them. Cases, most likely, will remain unsolved because there is no time to chase these incidents, as one senior Delhi Police official shared with me when I was chasing him to know the fate of a Siddhi Vinayak Logistics vehicle loaded with high priced Zinc (approx. Rs.1.2 crore) from Silvassa to Ghaziabad that vanished from Delhi where it was spotted via GPS around Diwali 2013. GPS or no GPS, cargo theft is here to stay. It is generally believed that state police force is fully aware of the hijackers – organised crime groups with political patronage or otherwise – and hence helpless. Uttar Pradesh’s Etawah – where the GAIL plant is situated – is the hotbed of hijacking. Cargo safety is a serious issue. Though consignees and fleet owners recover their losses through insurance claim, cargo theft is a blot on the transport ecosystem. Why? Highway patrolling is talked about, but not implemented with the seriousness it deserves. Secondly, there are literally no – repeat NO – safe parking hubs on the highways supposed to be built as part of wayside amenities by the government on its own or in association with auto OEMs and other stakeholders. Again, they all talk, but no action on the ground. Pathetic. Dhabas that serve as parking lots for cargo carriers has no fool proof security apparatus to provide security of vehicle and cargo when drivers want to sleep at night. In fact, long haul drivers confess that most thefts- cargo or fuel - happen at dhabas where they halt for dinner and night halt where it is alleged dhaba owners illicitly work hand in glove with local gangs to loot drivers put to deep sleep through mixing of food with a dosage of sleep inducing stuff. VRL Logistics National Head

(Operations) Vishwanath Karmadi, overseeing 4,000-strong fleet, says that an extra provision of an iron net over and above the tarpaulin cover is resorted to for cargo safety. “That’s the best, one can think of,” says he. Talking about tarpaulin, one cannot escape mentioning the phenomenon called the “Tarpaulin Mani”, a notorious gangster who used to operate in the Mysore-Coimbatore hilly route with 36 hairpin bends. He used to chase the slow moving cargo trucks on this stretch with his gang, jump onto them, cut open tarpaulins and decamp with valuable consignments to be disposed off at whatever price. He has no concern over production cost! Every single Rupee is a profit for him. In fact, a Tamil flick Nedunchalai (Highways), captures this culture with a heavy dosage of romance. The movie captures the cargo hijacking modus operandi in detail. Dr Deepak Baid, Director of Siddhi Vinayak Logistics, owning 7,000 strong fleet and a big player in moving high value zinc and copper for Hindustan Zinc on highways, has decided to act on his own. Says he: “As a business entity, my company has to ensure cargo safety at any cost. Otherwise, what is the point of being in this business? How can I throw up my arms in despair and declare from rooftops that cargo safety is not my

concern, but that of the states that we pass through? Utter irresponsibility.” Therefore, SVLL has gone in for its own armed escort vehicles along with its convoy of zinc/copper carrying vehicles on Indian highways. Of course, it involves extra cost which, it is believed, the consignee shares a portion of it, if not fully. This is a welcome move. Another area of concern is the behaviour of consignees. If the grapevine is to be believed MRF, one of the reputed tyre manufacturers, does not insure its cargo when it is moved. The burden, it is alleged, is shifted to transporters/fleet owners who in turn, take the risk just to be in business with the tyre giant! Significantly, tyre is one of the most hijacked items on highways. Transported Asset Protection Association (TAPA), an international group, does have an Indian chapter but its focus is believed to be safety at warehouses, plants etc. It is still unclear whether it has hammered out something on safety of moving cargo on Indian highways. “If at all any consignment that leaves manufacturing site to the market and reaches safely, it is not because of a robust cargo safety system is in place. It is in spite of it. We leave it to God!” laments a leading transporter in Indore. He’s not off the mark. Bang on!

* The writer is the author of 10,000 KM on Indian Highways, Naked Banana! and An Affair With Indian Highways. He also runs KRK Foundation, a registered Trust, focused on improving the working and living conditions of truck drivers and their families living in remote villages of India. He is reachable at ramesh@krkfoundation.org LOGISTICS TIMES January 2015

REPORTS

Growth of Indian Engineering Exports (FY 2014 – FY 2019) Engineering Export Promotion Council (EEPC) recently unveiled a strategy paper for the growth of Indian Engineering Exports in next five year. The paper has been prepared by consultancy major-KPMG and it is based on the feed back and data collected from the fraternity of engineering exporters. Here is the executive summary of the report: Engineering exports from India was US$62 billion in FY 2013-14. The share of engineering exports in India’s total exports is around 20% and has remained nearly the same over the last decade. India’s share in global engineering trade is around 1.2% whereas China’s share is around 12.3%. In the 34 product categories as defined by DGCIS classification, India does not hold a dominant position in any product category. Clearly, India has failed to establish a leadership position in any engineering product category and can be at best categorized as a ‘follower’ nation. India should strive to achieve leadership in at least some of the identified focus product categories within next five years and have detailed plans to achieve this objective. India primarily exports low and medium technology intensive engineering goods. The share of LOGISTICS TIMES January 2015

high tech goods is less than 6% of the overall engineering export basket. Almost all exporters from India rely on the labour cost arbitrage and this has resulted in limited exports in the high end segment. India’s workforce will remain young compared to its competitors and low wages may help sustain labour cost arbitrage over the next decade. However, emerging trends like near shoring and disruptive technologies may threaten India’s advantage owing to labour cost arbitrage. Further, bulk of the Indian engineering export basket is accounted by SMEs who neither have the financial prowess to invest in technology nor the capability to initiate path breaking research work. This report has made some specific suggestions with regard to identifying winners in the SME category and then embedding professional management in them.

45 This report was developed after taking a holistic view of the industry trends, data analysis and stakeholder interactions to arrive at the recommendations. During our interactions, large exporters did not discuss about incentives whereas every small exporter focused on incentives. This shows the importance of incentives to small engineering exporters who constitute a major share of the membership of EEPC. Further, this report highlights the fact that WTO SCM may withdraw export incentives in the future; hence it is imperative that the country focuses on institutional reforms to address competitiveness issues. Impediments such as high energy costs, high interest rates, unrefunded tax benefits, lack of adequate physical infrastructure, outdated manufacturing processes and lack of best practices, increase the cost of manufacturing, rendering Indian manufacturers uncompetitive in the international

markets. Providing subsidies to neutralize the costs incurred on account of such structural deficiencies is a sub-optimal way of reallocating scarce resources, whereas measures to remove such structural deficiencies through institutional reforms may result in savings and dispense benefits to a much larger population of exporters for a longer period. It is to be noted, that the focus of this study

is institutional reforms. Suggestions with regard to incentives have already been captured by the Gujral Committee Report (2013) and the Padmanabhan Committee Report (2013). In this report we have collated learning from competitors like China and Germany in different sections. However, the mechanism of Chinaâ&#x20AC;&#x2122;s growth, decline, regrowth and impending decline does

Impediments such as high energy costs, high interest rates, un-refunded tax benefits, lack of adequate physical infrastructure, outdated manufacturing processes and lack of best practices, increase the cost of manufacturing, rendering Indian manufacturers uncompetitive in the international markets.

LOGISTICS TIMES January 2015

REPORTS

46 not appear to provide a model worth emulating. Before the industrial revolution established hegemony of the West, China, in contrast, was the world’s leading innovator (and also a leading economy) with inventions like gunpowder, compass, paper, printing press etc. to its credit. Over the years, on account of various reasons like socio-political evolution and geographical spread, China could not harvest the boom of the industrial revolution . In the Deng Xiaoping era, China grew at an unprecedented pace and became an engine of growth for the global economy. After three decades of rapid growth marked by industrial expansion and urbanization, China stands on the verge of a calamitous environmental situation and a debt crisis. Thus, we believe that adopting the Chinese model may have undesirable consequences for India which should rather adopt a ‘HYBRID’ model based on practices of different leaders of the engineering world. The pillars of this study are market attractiveness, competition and inherent capabilities which along with other elements strengthen the contours of our growth strategy. The attractive markets for engineering exports are USA, China, Germany, UK, Canada, France, Russia, Japan, Australia, South Korea, Saudi Arabia and Southern Africa. Saudi Arabia and Southern Africa are emerging attractive markets for engineering exports. The main competing nations are China, Germany, USA, Japan, Republic of Korea, Mexico, UK, Thailand, France, and Indonesia. Threats can be expected from Brazil, Turkey, and Poland. ‘Innovation and R&D’, ‘attracting FDI’, ‘skilled workforce’ and ‘ease of funding’ have been identified as some of the sources of competitiveness, which India may adopt in order to boost engineering manufacturing and LOGISTICS TIMES January 2015

exports. The focus product categories including sunrise sectors are shown below. Among these some product categories need greater attention whereas for others support needs to be extended further. The main product categories from an import substitution perspective are ‘Defence’, ‘Iron and Steel’, ‘Infrastructure related Equipment’ and ‘Medical and Scientific Instruments’. In order to reduce import dependency, the following is suggested below: Some changes are suggested in the current approach of the Government of India and EEPC towards the promotion of Indian engineering exports. Our recommendations are divided into five themes ‘Government Policy’, ‘Marketing and Branding’, ‘Skilled workforce’, ‘Innovation and R&D’ and ‘Infrastructure’. Some of the recommendations which may improve India’s competitiveness are highlighted below: Trade agreements may be put in place with attractive markets identified in this report like Southern and Northern Africa, Gulf countries. There is a threat associated with signing of TTIP, TAFTA and Indian government needs to proactively take steps to mitigate associated risks Invest in leading SMEs globally to create a foothold in innovation. Exporters or Government may invest in the ‘hidden champions’ discussed in this report Build engineering SEZs closer to ports and create ecosystem to attract global manufacturing firms Introduce tax incentives for expatriates who work in SEZs driven by FDI so that they will be interested to work or invest in India. Create an institute dedicated to research and development of engineering goods for SMEs.

Initial funds to establish institute may come from Government and then operating costs to be shared with SMEs. Institute may also do engineering trend analysis in order to remain abreast about buyer trends and also have strong relationship with SMEs. From an Indian context reverse engineering may also be important Create a national skill set inventory which is essentially a database where workers and skills will be mapped. This may be defined for trades like ‘glass mould cleaners’, ‘welders’ etc., This can be aided by developing ‘alumni database’ of ITI’s, diploma schools etc. Professional firms with requisite experience of developing and maintaining such databases can be engaged If labour productivity is not improved or disruptive technologies reduce need of labour then India may gradually lose its labour cost arbitrage. Hence adequate international professional expertise is needed to improve labour productivity Some of the key recommendations which may yield results in the near future are listed below: Participation in global supply chain accounts for ~60% of international trade, hence India should increase participation in these global supply chains Major turnkey project suppliers to be empanelled as vendors Exporters should look at mega events like Olympics, World Cup, World EXPO, to tap opportunities for export. These events are planned well in advance giving exporters sufficient time to tap opportunities. A professional multi-dimensional effort has to be coordinated to succeed The large scale infrastructure

47 projects funded by multilateral agencies like World Bank, Asian Development Bank, DFID, and etc. generate demand for engineering products and also turnkey projects and hence need to be tracked. Focused discussion with key stakeholders of these agencies is required Identify and invite innovative engineering firms to set up or expand manufacturing base in India Indian SME jewels to be identified and promoted. Equity investors with global expertise need to be introduced to these firms to enable growth and global practices We believe that all the recommendations mentioned (also refer to recommendations section) can be implemented immediately and although, completion time may exceed five years, some benefits are expected to yield within the next couple of years. All stakeholders, including, but not limited to Government of India, exporters (large or SMEs), research institutes, EEPC and other agencies will have to work together to achieve the desired success. EEPC has a critical role to play in the growth of engineering exports and thus Government may look to strengthen EEPC to facilitate growth of engineering exports. Detailed recommendations related to EEPC can be found in the section ‘Role of EEPC’. Some of the key recommendations are mentioned below. Continue to organise focused engineering exhibitions and trade promotion activities in attractive markets. For such engineering exhibitions, the role of EEPC India should be defined while drawing annual plans Set-up of lean onshore offices in top five attractive destinations, focused to promote interests of engineering exports

All stakeholders, including, but not limited to Government of India, exporters (large or SMEs), research institutes, EEPC and other agencies will have to work together to achieve the desired success. Consolidate trade leads to create a database of importers and buyers. Potential opportunities can be accessed by any interested member. Dissemination of information would help validate buyers in overseas markets and eliminate bad transactions Improve the quality of exports by helping exporters to adhere to global quality standards and spread awareness programmes related to quality Ensure that every promotional event has a product-market fit to ensure maximum benefits Create awareness amidst exporters to cut down on emissions and conform to pollution guidelines. Focus on sustainable practices which ensure long term success of exporting firms Create a national skill set inventory which is essentially a database where workers and skills will be mapped. This may be defined for trades like ‘glass mould cleaners’, ‘welders’ etc., This can be aided by developing ‘alumni database’ of ITI’s, diploma schools etc. Professional firms with requisite experience of developing and maintaining such databases can be engaged If labour productivity is not improved or disruptive technologies reduce need of labour then India may gradually lose its labour cost arbitrage.

Hence adequate international professional expertise is needed to improve labour productivity Marketing Support: Enhancement of budget and scope under MDA/MAI schemes; greater focus on brand building and trade fairs; support for E-Commerce Productivity/Technology/ Skill Upgradation:Modification in labour laws to enable more overtime hours and employment of women in night shifts with necessary safety; enhancement of technology upgradation schemes with both capital subsidy and interest subvention; setting up of research/ resource/product development centres and linkages with the technical institutions and CSIR laboratories Infrastructure for MSMEs: - 24x7 facilities for export consignments at major air cargo/sea port complexes Institutional Framework: - Constitution of a Standing Committee of Secretaries to resolve policy and implementation related issues; greater coordination at the ground level between Customs and DGFT offices General Recommendations: - Increase in capital investment limits in the definition of MSMEs. Couretsy: EEPC LOGISTICS TIMES January 2015

EVENTS

ACCD Annual Ball

The Air Cargo Club of Delhi (ACCD) organized its Annual Ball event on 10th January , 2015 at JW Marriott Hotel, New Delhi. The event saw an overwhelming turnout of about 600 people from the cargo fraternity. LOGISTICS TIMES Janaury 2015

The event was an incredible success with TV actor Hussain Kuwajerwala & IPL Host Archana Vijaya, being the emcee for the evening. The event was full of entertainment where some fantastic performances were

staged. The added attraction was over 35 lucky draws, sponsored by Airlines & Freight Forwarders. There was a little cake cutting ceremony by the managing committee, as the ACCD completed 38 years on the 11th Jan.

AWARDS EVENTS

DIESL wins outstanding company award

Drive India Enterprise Solution Limited (DIESL), the logistics arm of Tata group has been conferred as winner for “Outstanding Company in Logistics (Infrastructure Category)” Award at the 5th EPC World Awards 2014 which was held on 18th December 2014 at New Delhi. The event was endorsed by Zee Business, along with Ernst & Young LLP who were also the audit

partners for the award ceremony. Key Industry members like Vijay Jolly, Convenor of 5th EPC World Awards 2014, Pramod Deo, Former Chairman of CERC, Sushi Shyamal, Partner – Transaction Advisory Services from Ernst & Young LLP, R. S Butola, former Chairman of Indian Oil Corporation, P. Uma Shankar, Former Power Secretary, Sonmoni Borah, Former Commissioner of Chhattisgarh

Housing Board, Raipur, Anuj Puri, Chairman & Country Head India from Jones Lang Lasalle, Tejasvi Sharma, MD & Editor-in-Chief of EPC World Media Group, R.S. Sharma, Chairman of SW Asia Operations, Lloyd’s Register, S.K Chaudhary, Director (Projects) from NBCC and Ranjeet More, Vice Chairman of UCM & E Ltd were the part of the award jury panel.

V-Trans Chairman felicitated on the eve of Pravasi Bharatiya Divas Ashok Kunverji Shah, Chairman, V-Trans, a major transport & logistics services group and an ISO 9001:2008 company was felicitated on 6th January 2015 for his immense contribution to the transport industry, society & knowledge sharing at various platforms. The function titled ‘Jewels of Gujarat’ held on the eve of Pravasi Bharatiya Divas 2015 saw the felicitation of global Gujarati personalities for their yeoman service to building Indian industry.

LOGISTICS TIMES Janaury 2015

RNI No. DELENG/2011/39329

Regd No.: DL(E)-20/5380/2014-16