Logistics

Increased throughput time, manpower shortage hit goods movement

Abhishek Law Kolkata | Updated on July 29, 2020 Published on July 29, 2020

Warehousing, supply chain and logistics players are witnessing an increase in throughput time and longer waiting time for trucks, as manpower shortage continues to persist.

Moreover, with demand recovery still slow, transporters have raised concerns over a number of vehicles — trucks — going off roads, as they fail to clear EMIs once the mandated moratorium periods are over.

In the warehousing industry, throughput refers to the number of units that can be processed within a certain time. For example, an outbound team normally works for eight hours a day. In that duration, the team is able to pick, pack and hand over to the dispatch team for delivery an average of 80,000 cartons daily. The throughput will then be 80,000/8=10,000 cartons per hour.

Interestingly, an increase in throughput time means trucks are taking longer to unload/load goods at these warehouses. It also means lesser revenues for warehouse operators and slow movement of existing stock.

According to industry sources, the average clearing time of trucks across major warehouses have moved up by 3-5 times. For instance, if the time taken normally was 2-5 days earlier, now it’s 10 days at least. Moreover, movement of goods, for categories like fashion and apparels, are slow.

“In March-April period, industry saw a drop of business volume by 70-75 per cent, thus reducing movement of goods. Subsequently in June, business volume stood at approximately 45 per cent of pre-Covid levels. It will still take a minimum of  6 - 8 months or more, depending on how the pandemic eases, for demand to come back in business verticals like fashion, retail and consumer industry and throughput time to come down to peak 2019 levels,”  Koushik Roy, Chair- Logistics and Freight Panel of IET, told BusinessLine

Absence of manpower

One major reason for increase in throughput and delayed truck clearances is the lack of manpower.

Many warehouses were operated through migrants, sourced primarily through contractors. Reverse migration has seen them return back to their hometowns. On the other hand, the local community people are being used at almost 30-50 per cent higher cost.

Moreover, there are social distancing norms and guidelines on the capacities to which warehouses can operate. Most are operating at 50 per capacities still with there being regular gaps in between shifts for carrying out sanitisation operations. This has only increased the time taken for operations by at least 30 per cent, a warehouse operator said requesting anonymity.

“Shortage of manpower will continue. The rural economy is booming. There is work in the fields, especially with the monsoons being good this year. Plus, MGNREGA has been highly remunerative. Hence, there is an increase in labour cost and a shortage in supply too. This will be the case for quite some time now,” the warehouse operator said.

Fear of the virus spreading into rural areas or hinterlands has also made people reluctant to come out and work in far away distances, particularly these warehouses located along the highways and few kilometres off nearby villages.

Localised lockdowns have an impact on supply chains and truck movements across States in some cases.

“Such lockdowns are affecting both factory production and supply chains in the given region. There isn’t much impact on sales to the end-user though, as these are announced in advance. And customers are preponing purchases,” said Varun Chaudhary, Executive Director, CG Corp Global (makers of Wai Wai noodles).

Trucks count losses

However, for truck operators, it is a different story. Around 75 per cent of the long route trips have resumed (and vehicles are back on this route). But increased waiting time and localised lockdowns have take a beating on their margins. Margins per trip are down anywhere between 10-40 per cent, depending on the waiting time.

According to Anjani Mandal, CEO and co-founder, Fortigo Network Logistics, margin hit apart, there are also erratic payment cycles (to vehicle owners). A 30- day payment cycle now stands extended to 60-90 days, even by mid- to large-sized companies (with turnover of over ₹1,000 crore). Smaller ones have “deferred payments indefinitely” saying absence of cash flows.

“Margin hit — because of large waiting times — and deferred payments have hit truckers and supply chain players. This will see a spin-off effect in many truck owners not being able to pay EMIs for vehicles once the moratorium period ends in August,” he pointed.

Mandal explains that a monthly EMI of ₹50,000 on a truck is recovered through 5-odd trips by the vehicle in a month. As waiting times go up by at least three-four days for various reasons, the average monthly trips are reduced to 3.5 days now. Costs go up by 30-40 per cent too.

“There is a moratorium now. So this EMI is delayed. But, if turnaround times don’t improve soon, many of the loans will have to be renegotiated or trucks will go off roads or will be repossessed,” he added.

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Published on July 29, 2020
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