Gartner, Inc. is the world’s leading information technology research and advisory company that delivers the technology related insight necessary to make the right decisions. Vikas Sarangdhar shares his outlook on the logistics and supply chain sector in India in this interview with Jibran Buchh.
What is your view on the Indian logistics sector?
In terms of logistics, there is substantial growth potential; however, the Indian logistics sector is still immature and there are many inefficiencies which need to be overcome. As a result, the logistics cost in India is 13 per cent of GDP vis-à-vis developed countries like the US and Germany where it is only 8 per cent to 9 per cent.
The technology adoption in logistics in India is very low. Things like inventory management and supply chain visibility, which are facilitated by technology and information systems, are lacking in the Indian logistics industry. So a logistics company is seen more as transport provider.
We have a fragmented and regionalised logistics industry which consists of small players. One may find companies which are big but only in their own region not throughout the subcontinent.
Distorted taxation system is yet another problem and requires the implementation of GST at the earliest.
The roads and railways are 40 to 50 years old. It’s of great importance how these problems are addressed.
What is the current scenario with regard to warehouse infrastructure?
In logistics, about 25 per cent to 28 per cent of cost goes into warehousing. What’s peculiar about our warehouse industry is that a large amount of pie is dominated by unorganised sector which is around 50 per cent. The capacity of the industry is 70 to 85 million metric tonnes; the statistics may not be exact because the industry is driven largely by unorganised sector.
Only 30 per cent of this industry is outsourced, whereas there are people globally who manage warehouses and logistics players offer end-to-end services. So, in developed countries the number is roughly 75 per cent for warehousing operations outsource. This is one of the key differences between the developed nations and India.
How much investment is expected in upgradation and expansion of warehousing infrastructure?
Around $200 billion in logistics infrastructure of which a major chunk of $50 billion to $75 billion would majorly spent on warehousing and $100 billion would be spent on warehousing infrastructure. The contributors are going to be both government and private players because of the proximity of warehouses to rail, port and other amenities, which can only be achieved when the government steps in. So there is going to be a balance in planning and investment of warehouses.
Can you share your outlook on supply chain management in India?
When we speak about supply chain it encompasses all the verticals of product planning, demand planning, sourcing, manufacturing, distribution and all elements of end-to-end supply chain.
In terms of overall business outlook, India has an opportunity; it’s just that after the downturn, in line with the global markets, the emerging markets like India and china are also getting stabilised at a new normal which will be slightly at the lower level vis-à-vis what the country used to grow at.
Comparing India with other emerging markets, the per capita GDP is low but there is a lot of potential.
What are the loopholes and challenges in the supply chain management?
Indian subcontinent faces different challenges vis-a-vis developed nations. In foreign countries the problem is demand; in India, demand management has been a great challenge.
India still has a long way to go in terms of best practices. Maturity level of most of the companies on demand driven value network is low. DDVN is essentially about being customer centric.
Apart from the above-mentioned points, the key challenge is the lack of human resources followed by infrastructure in terms of logistics, power, and water.
The other challenge which exists in a vast country like India is that the customer base is diverse and widely distributed. The point I am making is that the real growth which will occur in India is from rural areas and remote locations. For companies to win over the Indian market which is huge, they need to have right end-toend supply chain strategies in place, covering network strategy, proper human resources, and infrastructure.
The other key challenge is volatile demand, needs and preferences consumers, and customers are changing rapidly, hence creating uncertainty in the demand patterns.
Tell us about Gartner, Inc. and its plans in the subcontinent.
Gartner took over AMR in 2009. The company used to be a global leader in supply chain research and advisory services. Since then, business is growing quite fast across the globe. The main focus used to be on the US and now it is also on the EU and APEC. Hence, we are investing in resources and infrastructure in this region.
We are focusing on end users as well as providers. We already have world-class providers like our clients Wipro, TCS, Infosys and Geometric. Research and advisory front remains the main point of focus. We engage with our customers calls, provide them access to our global research base, and conduct seminars and conferences to present best practices.
We act like coaches and help companies to build their own capability in supply chain through world-class knowledge.