The Hindu Business Line : For third party logistics service providers, it is boom time

Handling logistics for the automotive industry can be quite complicated given that in a manufacturing facility over 50,000 parts are required at any point of time, of which about 5,000 are fast moving. This makes it challenging for third party logistics (3PL) service providers to serve the industry.

However, the Chennai-based TVS Logistics Services Ltd, a part of the TVS group, has made its mark as a niche 3PL (third party logistics) service provider for the automotive industry. Though in logistics business since 1995, TVS Sundaram Iyengar and Sons Ltd, the parent company of the TVS group, hived off the logistics division into a wholly-owned subsidiary in November 2004.

AWARD-WINNING COMPANY

TVS Logistics beat a number of competitors to get the Frost & Sullivan's 2005 Voice of Customer Award for best domestic logistics service provider for automotive and auto component industries.

Research was carried out with logistics managers of automotive and auto component companies to determine the parameters for evaluating logistics companies. The parameters used encompassed various aspects of transportation, warehousing, value-added services and overall capability.

"We wanted to be a niche player in the highly complicated auto industry, and will continue to focus in this sector," said Mr S. Ravichandran, President, TVS Logistics. "We move goods worth Rs 5,000 crore a year," he said. Last year the company reported a turnover of Rs 75 crore, and this year it is likely to be about Rs 140 crore. Its subsidiaries in Spain, Thailand and Germany would contribute Rs 45 crore, said Mr Ravichandran. "Our target is to reach Rs 500 crore by 2007-08," he said.

GROWING IN INDIA

According to Mr Ravichandran, outsourcing of logistics to a 3PL has been happening in Europe and the US (80-90 per cent of companies in America outsource their logistics requirement) for many years.

However, in India 3PL picked up momentum in the last decade with a number of multinational companies setting up operations.

The role of a 3PL is not only to provide transportation services, but also help clients reduce the cost of supply chain, and ultimately the cost of operations. Competition is forcing companies to cut down unnecessary expenditure and outsource non-core areas such as logistics, he said.

In India, companies spend 7-8 per cent of their turnover on supply chain. This includes raw material inventory, finished product, transportation, packing and unpacking, he said. The automobile sector was much ahead of other sectors in embracing supply chain. TVS Logistics plays an important role in the supply chain management. The company analyses data and does a "part-by-part" planning, he said.

GROUP CONTRIBUTION

According to Mr Ravichandran, 40 per cent of the company's revenue comes from TVS group. However, the aim is to get more business from outside the group. TVS Logistics would like to help companies, especially small and medium size, with warehousing facilities and international exposure. People look at supply chain to reduce cost. "I look at it as a tool to bring a competitive edge in the system. We would like to be a logistics partner for original equipment manufacturers for their entire supply chain requirement," he said.

MILK-RUN SYSTEM

Citing an example of how TVS Logistics reduced costs significantly for one of the group companies, Mr Ravichandran said each day about 250 vehicles used to enter the client's premises. After studying the supply chain of raw material requirement, inventory and transportation, the number of vehicles was reduced to 14 a day. The company used the "milk run" system, a parts collection method in which the logistics service provider goes to supplies and picks up parts, rather than awaiting delivery from the suppliers, he said. The client saved Rs 50-60 lakh a year, he said.

TVS Logistics' list of clients includes Ashok Leyland, Ford India, General Motors, JCB, Mahindra & Mahindra, Royal Enfield, Tata Motors, TVS Motor Company, Pricol, Cummins and Rane group. The company has over 15 warehouses in India and six in Europe. TVS and Sons has two companies abroad — one in the UK (TVS Automotive Europe) and the other in Sri Lanka (TVS Lanka) — for carrying on the dealership and distribution business.

TVS Automotive Europe's client base includes leading Tier-1 and Tier-2 component suppliers and this company will act as the parent for setting up logistics joint ventures in Europe, he said.

More Stories on : Supply Chain Management | Automobile Components

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Cathay Pacific freighter service to link Chennai

Where is the threat?

Five-month saga

Vizag is No 1 port

KRL project set to transform face of Vypeen island

Screen-based FFA

DPW boxes-in South Asia

For third party logistics service providers, it is boom time

`Despite initial shortfall, we hope to maintain last year's throughput level'