PERFECTION IS ACHIEVED NOT WHEN THERE IS NOTHING MORE TO ADD, BUT WHEN THERE IS NOTHING LEFT TO TAKE AWAY.
Project Logistics: Indian Scenario
“There was a time when transporters were not professional and did not care or participate in safety activates. There is a price to safety and companies need to learn that, as it is their social responsibility too.”
Project logistics, which includes everything involving end to end logistics, is one of the toughest forms of logistics in the world. There are some fundamental questions people always ask us and in this article we would like to answer as much as possible. What is the project industry scenario? What is the current potential? Where are the major challenges? What does the future hold?
Project logistics being a very complex form of logistics; there are very few companies who have the knowledge and expertise to execute the same. It is not only the huge sizes of the cargo that have to be moved but in certain time frames depending on the assembly pattern of the factory. Even if one major part is not brought in the lead time as planned the entire project can be delayed causing millions of dollars fine in LD (Late delivery). It is this kind of criticality that has made this niche sector still shielded from major competitors. As every project is different and needs a diverse set of solutions not many are able to scale up compared to other logistics divisions. It is absolutely dependent on the EPC (Engineering, Procurement and Construction) sectors trajectory and hence is dependent on the countries economic status.
What is the project industry scenario?
India is at the focal point globally, thanks to the marketing of the current government. To the outside world it seems like the best place to be and the way hope is being pumped in the economy it seems to be navigating on a self-fulfilling prophecy. We in transport and logistics are the first point of contact whenever a factory has to be setup or materials have to be moved for manufacturing anywhere across India. Hence one great indicator is Commercial vehicle sales in the country to determine economic growth.
In my opinion currently, E-commerce and Pharmacy are the only two sectors that are going well. Projects over all have been sanctioned but it is moving at a glacial pace. Infrastructure is in the same trouble and is unable to move forward without the true support of the government. The reason I say true support is because there is a big difference between saying we will release funds and actually releasing the funds. Nothing much has changed in the infrastructure to carry ODC (Over Dimensional Cargo) the ground reality of regulations has changed a bit; they have made it easier to get permissions for the same. This has reduced the lead time tremendously and has hence brought down the costs as trucks can now make more trips.
Coastal Shipping of ODC is also an avenue that has grown tremendously over the last few years. So much so that new ODC manufacturing plants are built much closer to ports. This not only reduces the costs but also decreases the lead-time and in-transit challenges. Hopefully if promoted by the government in the long run this will bear fruit to a new way of transport in India for all kinds of cargo.
The project companies now are shifting their focus back to their core competency i.e. manufacturing, most of them are looking for an all package deal. End to end logistics, which includes transport, warehousing, packaging clearing and freight forwarding is the new favourite. This not only brings the responsibility to one firm but also ensures that companies do not suffer in costs, time and resources.
Chemical companies are also slowly adopting this in their domestic and international logistics. We have brought one of the best 3PL chemical logistics firm and partnered with them. This requires immense understanding on safety norms and resource allocation to efficiently bring down overall costs.
What is the current potential?
The new age professional transport companies are serious about safety and give that extra level of service. Many chemical companies understand their responsibility as to not limit safety to their factory premises but also in the trucks and ships that carry their cargo. This can be monitored using GPS and rash driving or other unsafe driving practices can be now traced.
To track the way ODC will be transported there is 3D mapping that can show the exact route mapping of the cargo and the way it will be transported from start to finish. This is helped many in the top management to take key decisions on how to transport super huge materials in a safe manner.
Using technology in transportation has resulted in huge levels of transparency, which has brought back the trust that was lost in fleet operators.
After repetitive mistakes recently most multinationals have realised the importance of professional transport companies and their long term benefit. The potential is huge in road transport compared shipping related activates as there are still few professionals in that space. People who will invest in large fleets today will most likely benefit from it.
What are the major challenges?
Today the major problem facing most EPC firms is Payment, they aren’t able to stick to their committed dates and their credit limit has increased 3 fold. Most transporters as they are stuck cannot withdraw and are facing huge losses due to the same as they are anyway working on cutthroat rates. That’s when robbery and unethical practices seep in; we have heard of numerous cases where this is being practiced and now is a norm.
Companies across the board are treating logistics service providers more like bankers where a new vendor is brought in when the capacity on the last one is extinguished. Most of them who are paying on time have a hand in glove relation with the logistic heads. This never challenges the systems and pulls the company down in the long run.
There was a time when transporters were not professional and did not care or participate in safety activates. That was good for costs but bad for human welfare. Many domestic chemical companies want to bring down their logistics cost and hence are still neglecting safety practices outside their factory i.e. in-transit. It should not only limit itself to hazardous materials but even the Fmcg, e-commerce and other sectors too. There is a price to safety and companies need to learn that, as it is their social responsibility too.
What does the future hold?
Thanks to the E-commerce boom logistics sector has been expected to be the next sunrise industry. This is partly true as scalability is a big question as transportation has become very fragmented over the centuries. It is very challenging to involve local goons who want their piece of the pie in major warehousing locations. The Hub spoke model is future as it globally present. Yet most transport companies have become super specialised and have a clear distinction between HCV and LCV movement changing that will take time.
With that the time for middle men (brokers) will end as it is becoming more professional and companies want to deal with the fleet owners directly. Online platforms will take their place and hopefully the many companies that are working on this since years should crack the code soon.
Projects are still in doubt and will not be able to predict unless some major changes takes place and money is pumped back into the economy. Policy changes like GST has nothing to do with it for now yet the only major change will be the reduction in lead time in-transit. Consolidation only replaces the already existing spaces of warehousing. Yet at the current retention rate of drivers the costs are only going to increase for logistics companies in the long run. Politically funded transport organizations where most of the current black money is channeled through will reduce as the government norms become stricter. This will bring in more professionalism with the right ethics and socially responsible companies will prevail eventually.
Over all one has no choice but be positive and keep moving forward.