The Hindu Business Line : IT is changing the face of India’s logistics sector

We provide an integrated value chain of services and plan to ensure end-to-end visibility across different services — international logistics, warehousing and distribution, on a real-time basis. - AJAY MITTAL, CMD, ARSHIYA INTERNATIONAL

AJAY MITTAL, CMD, ARSHIYA INTERNATIONAL

Shubhra Tandon

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The logistics sector in India has grown over the years from running a few trucks, or loading and unloading of goods. With the changing business environment in India, entry of organised retail and more global players looking to expand base in the country, the logistics industry is witnessing a sea change. Information technology, GPS systems, etc., are helping logistics companies improve their productivity. But how far is the reach of IT in the Indian logistics industry currently? The Chairman and Managing Director of Arshiya International, Mr Ajay Mittal, shared his thoughts on this with Business Line.

Excerpts from the interview:

How can information technology help the Indian logistics industry?

With global players entering the Indian market, the logistics industry is facing a challenge on the execution front of benchmarking with global standards. Given the current service scope of the logistics sector and the level of transition it has to go through, information technology is going to be the enabling factor making this transition possible.

This will call for Indian companies that are looking at the global space to embrace technology to put the building blocks in place which will help them build efficiencies, provide visibility and proactive alerts in their operations.

In which areas is IT being used in the logistics sector in India?

IT is being used at a very basic application level currently — Customs clearance, warehousing, trucking, freight forwarding, etc. The focus has been more on enabling a “piece” of the logistics chain and now to enable a single view of the complete supply chain. For instance, in the freight-forwarding space, the current focus is more on ensuring the basic mandatory documents are taken care of. India is yet to reach a level where logistics players start thinking of using IT in the “end-to-end visibility and planning” to benchmark and improve the efficiencies.

Looking at it from a positive aspect there is huge scope for leveraging on the proven IT applications in mature markets such as Singapore, Hong Kong, and adapting them to the Indian environment.

What are the major bottlenecks in the implementation of IT in the logistics industry?

The major hurdle is more in “awareness” and “adoption”. It requires a change in mindset, where logistics players stop looking at IT as a cost centre and see it as a “differentiator” that will help in improveg efficiency and gain more leverage with the customers.

What are the average costs for implementing IT systems in the logistics sector?

The IT systems market in itself is going through a major transformation. A global benchmark is to spend about 2.5 per cent of the revenue on IT in the logistics sector. Some companies that are small but dynamic and fast growing actually spend double of that for a few years and build a certain size quickly.

IT infrastructure (hardware, software and people) are the major areas of cost. But with the transition in the IT space and many companies starting to offer “on-demand” or “SAAS” (software as a service) the cost factor on infrastructure is reducing.

Which are the areas where Indian supply chain management companies can benefit with the use of IT?

The focus of supply chain management companies is building in efficiencies at an “end-to-end” level as against a “piece” level approach taken by some of the logistic players. Their focus is on defining the best possible chain which will enable the running supply chains across FMCG, engineering, chemicals or any other industry vertical.

Leveraging the power of IT gives them the “end-to-end” visibility and proactive alerts to take timely decisions and manage and improve the supply chains. They are able to have control of the supply chain and strike a right balance between being asset based and non-asset based. IT gives them control over their “virtual warehouses” the “dynamic inventory” which is in transit and responds as per the market requirements.

What are the practices in terms of use of IT infrastructure in the logistics companies overseas?

In the Asian region the leading global hubs Singapore and Hong Kong have been consciously investing in IT infrastructure with reliable data centres, broadband connectivity, Wi-Fi infrastructure, hardware support centres and enough talent to manage all these. Shanghai and Dubai have been playing catch-up with these locations and challenging their positions. In India we have gone through a major transformation on the telecom front.

Is the necessary IT infrastructure (and the manpower to operate it) all coming from overseas market or is there home-grown technology available for the sector? If yes, is it at par with international standards?

Indian companies have the abilities and have been supporting many of the global players by providing the software and the people expertise on an outsourced basis. Some of them have built up relevant intellectual property of their own to start looking at expanding in the Indian market.

With global players coming in and local players increasing their exposure in the overseas markets, we expect more Indian software companies playing a role in the IT market for the logistics sector. On the hardware front global giants such as IBM and HP dominate the market and their services are available in India to be leveraged by the logistics operators.

Do you feel that home grown IT systems would be more suitable for the Indian market as they would be designed keeping in mind the domestic environment? If no, why?

Home-grown IT systems have been providing basic Customs clearance, warehousing, trucking, freight forwarding functionalities, etc., with the complexities of the Indian environment (multiple States, tax laws, etc), so they have a strength there.

Global systems are focused on leveraging the power of Internet, providing functionalities such as RFID, GPS tracking, online visibility and analytics, route and space planning, real time collaboration of buyers, vendors and service providers, etc. The key will be who is faster to adopt and merge the offerings and offer comprehensive solutions to suit the environment and enable growth.

Which Indian companies are currently involved in supply of IT infrastructure to logistics companies?

Global players such as SAP, Oracle, SSA Global, Manhattan, i2 technologies, are present in the market. Indian companies such as Arshiya-owned Cyberlog, Take Solutions (with 4-Soft acquisition), etc., are present in the global market.

How is Arshiya trying to create its niche in the market through IT and what are the company’s plans to leverage technology for further growth?

Arshiya provides an integrated value chain of services. Arshiya plans to provide end-to-end visibility across different services — international logistics, warehousing and distribution, FTWZ and rail infrastructure, etc., on a real-time basis.

It is investing in technology and IT infrastructure to be able to weave together all these individual pieces together and to put an integrated picture before the customer and enhance the efficiencies in supply chain.