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N. Ramakrishnan

TCI has carried out innovations in the management of space inside the closed vehicle-carrying trucks, though the maximum cost-saving flexibilities have been possible only in the open carriers.

Transport Corporation of India Ltd, which has interests in trucking, shipping and the express cargo business and also operates a joint venture company that handles the logistics for Toyota Kirloskar Motor Ltd, sees growth in all its businesses.

Mr Vineet Agarwal, Executive Director, TCI, spoke to Business Line about the group and the challenges before logistics providers, especially in the automobile sector, where the demand for cost compression is the highest.

An alumnus of Carnegie Mellon University with specialisation in economics and industrial management and social decision sciences, Mr Agarwal dwells on how the concept of logistics providers is evolving into supply chain managers.

Excerpts from the interview:

Can you tell us what is happening in TCI?

Last year, the listed entity was worth about Rs 635 crore. With unlisted entities, it was about Rs 700 crore. This year, the group should end at about Rs 850 crore. The growth segments are express, logistics and shipping businesses.

A fundamental shift is taking place towards logistics and supply chain management. We have re-branded our logistics division as TCI Supply Chain Solutions because we were doing a lot more for clients than just basic logistics. Most companies do not understand the difference between supply chain management and logistics. In any organisation the purchase is separate from marketing and sales, whereas there is great linkage in their logistics in the supply chain.

It actually means that if companies create a supply chain department, which is not really completely theirs in the sense that most of the work they do is outsourced to 3PLs (third-party logistics providers) and the right kind of supply chain providers, then they will see a huge net savings. Auto companies have realised that.

Almost all of them have outsourced their logistics to a professional service provider...

In some way or the other, yes. Auto companies are on the cutting edge in terms of supply chain because the cost pressures are amongst the highest. The (car) models are in a way perishable commodities, because they keep changing every two-three years. The variants have increased and so they have to tweak the supply chain all the time.

Where is it that automobile companies can save on costs as far as supply chain is concerned? Where do you think companies like yours can bring the kind of expertise that automobile companies want?

It is in effectively managing in-bound and out-bound logistics. The management of inventory is another area. Inventory management does help you to save, but I think it is at the back-end of the chain — the dealers, for example. Auto companies have created C&F depots all over. They send vehicles from the plant to the C&F, who might send it to the distributor, who sends it to a dealer.

Essentially, it means that this chain needs to get compressed. They need to build in efficiencies at the touch points, the dealers and the C&F. The touch points are at the factory level. We have seen the kind of inefficiencies that exist inside plants.

Like...

Simple things like First-in, First-out do not happen. Bikes of a certain make, model, colour, are just in one corner and other things are moving out. Quality checks do not happen that frequently at that touch point. It is not rigorous.

Do you mean to say that automobile companies listen to a logistics provider like you when you point these out?

Yes. Some of them have started listening. They have in fact started offering `why don't you handle the entire in-plant, out-bound logistics process.' Right after it comes out of the factory production floor and after the companies have QCs (quality checks).

There are lot of areas where cost compression is possible in the supply chain. Ownership of the logistics chain, for example. Today, the ownership of the logistics chain does not lie with the manufacturer. It is actually with the supplier. You typically buy the part delivered to your factory rather than the one picked up from the supplier.

But then that would increase the cost for the manufacturer?

It would not, because the supplier is building the cost on to the product anyway. Which means an automobile manufacturer should come pick up the part at the supplier's premises at his own cost rather than getting it delivered at his doorstep?

Exactly. Then efficiencies improve a lot. It is a mindset change where when you start picking up from suppliers. Supplier management is huge, compressing the supply chain, managing the touch points, and also areas like spare parts.

Availability of parts to dealers at a specific time is not always there. Typically dealers overstock. If you have a warehouse or a stocking system or a delivery system that is efficient, they don't need to do this.

Where have third-party service providers like you got this expertise from?

One is our alliance with Toyota, from the business that we do in the joint venture company. We have a lot of exchange of information, knowledge-sharing, and there is a lot of learning that happens.

Toyota teaches us. We have used that opportunity to send people outside the country and we have been able to get the benefits of that expertise. Then we start using some of the best practices with other companies as well.

Can you tell me something about your joint venture for Toyota?

We are 49 per cent and Mitsui is 51 per cent. We handle the complete logistics of Toyota, in- and out-bound. Our responsibility starts once the imported parts come to the domestic port. And from there we bring them to the plant. All the OEM parts from the 70-odd suppliers from across the country. We transport the cars and the spare parts to the dealers.

Is there any innovation possible in actually transporting the cars? Like open trucks or closed trucks?

Toyota was the first company in India to introduce closed trucks. They insisted on closed trucks. A shift took place from open trucks to closed trucks in the last few years. Unfortunately, there have not been many ways to reduce cost there because as the body is fixed, the number of cars that can come into it is fixed. Some innovations have come in management of that space but not a lot.

A huge change has happened in the two-wheeler segment. When we entered the segment, a two-deck vehicle used to be the norm. That used to have only 50 bikes. We used design engineers to redesign the trucks. We raised it to 55-58. Then we did additional modification. We made a universal system that could be adjusted depending upon the type of bike. Now it is a flexible truck.

We had started using trailers for car carriers. Why can't we use trailers for bikes, we thought. Then we rejigged the whole thing so that we could have cars as well as bikes in them. Now those trailers can carry approximately 85 bikes. It was a paradigm shift in the industry.

The companies are still not used to it because the loading base that they have can't take trailers. Nor can the dealers when we are unloading them. They have to go through a complete change at the plant level and as well as at the dealer level.

Then we designed trailers with a triple deck. The third deck can go all the way to the bottom and all the way to top so when you are bringing cars, they are foldable. Instead of 85, we are carrying 110 bikes. This is something so unique that we have filed for a patent on it.

In each of these trucks we have also installed GPS (Global Positioning System). The manufacturer can track it on the Internet. Triple deck is on an experimental basis, we have got 10 such trucks. We are doing such innovations in other segments.

Going back to the TCI group, what are your plans to expand the various businesses?

In the logistics business, we are seeing a shift in the sense that companies want us to do a lot more of their supply chain work, including managing their warehouses.

We are also looking at longer-term contracts. In the logistics and supply chain division, we are looking at doubling business year on year, by adding more warehouses.

Simultaneously we are competing in our respective verticals. In the express segment, we have just launched our courier business. We have also launched the cold-chain division in the express business.

We do work for Cadbury, Amul and for some companies that have time-bound perishable products. For the first time in the country, we have linked the temperature of the truck with the GPS unit. We have added a global product. We have Customs clearance and freight forwarding licences in several parts of the country and we are tying up with many agents and freight forwarders across the world.

We work with Emirates Post where we deliver packages from expatriates who live in West Asia to, say, Kerala. The package is called Bharat Parcel Guaranteed, where up to Rs 10,000 you can send any package duty-free.

We deliver on time or your money is returned. That has been a hit and 70 per cent of the deliveries are to Kerala, mainly from West Asia.

We are expanding the air cargo business as well. Air cargo is growing in the country and since we have linkages we are adding on to that business as well.

The transport division is expanding at a regular pace. The advantage that we have is the network and access to lot of customers today, which can be potential clients to either of our other businesses. We have a CRM package that will help us to identify the right kind of customers and cross-sell our products.

TCI Seaways Ltd, which is our shipping business, is based in Chennai. It has four ships working the Visakhapatnam-Port Blair, Chennai-Port Blair sectors.

A few ships go internationally as well. They are small vessels, essentially a niche segment. The average tonnage would be 3,500 tonnes.

There is lot of need for people to send only 3,000-4,000 tonnes of material. They don't want to charter an entire ship. They don't also want to wait for regular ships. Then there are certain odd dimension cargoes. And, these can be used for containers as well. They are actually versatile — break-bulk and containers.

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