Indian Contract Logistics Industry Pegged At $1.3 Billion: Gautam Dembla, Spear-FM

Pune-based contract logistics company Spear Logistics, which was acquired by French firm FM Logistics last year, thinks the industry in India is becoming organized now and reforms like GST will further improve the situation.

In an email interaction with BW Businessworld, Gautam Dembla, Managing Director of Spear- An FM Logistic Company (Spear-FM), explained the organized players in the contract logistics industry are growing at about 15-20 per cent annually. Edited excerpts:

How do you see the progress of the logistics industry? Do you think the industry has bottomed out and the situation will improve from here on?

Logistics industry in India is becoming more organized. There is great growth in infrastructure by way of quality warehousing and of course professional service providers.

I do not think that the industry ever bottomed out. On the contrary, growth has always been good. It is the overall cost of logistics in the supply chain that needs to come down or be close to standards in developed countries.

Mid-term investments in infrastructure and on-going reforms with GST (Goods and Services Tax) in force will gradually change the logistics network in India for our customers.

The contract logistics industry in the country is pegged at around $1.3 billion and the organized players in the segment are growing at about 15-20 per cent annually.

What impact GST had on the logistics industry as well as on Spear-FM?

The initial 20 odd days of GST implementation was tough for most companies and were expected to be that. Some problems got resolved while some took time, but within the limitations that lie with a country of our size and complexity it has by and large been a smooth transition. Changes and amendments to rules will take time to settle down and we all hope that the number of tax slabs will eventually reduce.

Real benefits of GST have already started showing. Removal of check posts by most of the states reduced transportation time from the North to the South by about 2 days.

There are opportunities we see with GST. Our focus is to offer complete and integrated solutions to our customers. There are several value added services that we can provide to our customers within contract logistics which were hitherto a challenge due to myriad tax regimes. These are now simplified under GST and we can offer our customers these services under one roof from our facilities. This frees up space within customer manufacturing facilities so that they can put their infrastructure to better use.

Post GST, there is no restriction to offer sub assembly and other value added services. We would like to build our warehousing services around value added services including sub-assembly services.

GST has opened up new avenue of services like vendor management and procurement services for logistics players like Spear-FM. We are already exploring possibilities of offering these services to some of our existing clients.

What is the potential of technology usage in logistics industry? How Spear-FM is catering to this new trend?

There is an immense scope of technology usage in the logistics Industry. Over a period of time, Spear-FM has also invested in technology. It has increased its reliance on information technology. These comprise modern systems like WMS (Warehouse Management System), TMS (Transportation Management System) which is a subset of supply chain management and a dashboard to streamline operational processes.

We are already launching our new version of web based WMS. The use of TMS also helps in offering E-PODs (Proof of Delivery) to the clients. Such small initiatives and services help measure performance.

With our transport management capabilities, we were able to meet the client’s goal to cut the transport cycle times to reduce cash cycles and lower the inventory.

There are also a number of technologies such as Automated Guided Vehicles, Pick to Light, Automated Storage & Retrieval, and automation in conveyors and sorters that are available with us. We have modern methods for inventory checks that require barcode and RFID (Radio-Frequency Identification) scanning available with us. These are of course very capital intensive and can be used only when economically viable in the Indian context.

How your warehouses make use of technology?

Currently in some of our warehouses we are using various degrees of automation. Each warehouse that is dedicated to a specific customer would have its own level of automation.

One size does not fit all in the contract warehouse business. For instance, e-commerce customers require a 24x7 service and typically orders are for single units unlike multiple units and higher hash quantities for say a FMCG or a FG customer. Our WMS will be customized to meet these specific requirements for one.

In terms of handling and storage equipment too there will be varying levels of technology. As an example, consumer durables would not need advanced technology in terms of storage or handling. Whereas service parts warehouses would need a fair amount of automation.

Globally, we work with a lot of technology and automation companies in developing suitable technologies for our business. We have some IoT (Internet of Things) pilots planned in order to facilitate the real time tracking of reach- trucks inside the warehouse or to facilitate the tracking of trolleys or different logistics support between distribution centers, suppliers and stores.

Are there any new segment that you are looking to enter?

Our focus is to offer integrated solutions - Warehousing + Distribution+ Value Added Services, for all channels (B2B & B2C). In addition we are going to develop and strengthen our transportation activities and bring added value to our existing customers. We basically want to offer our customers whatever they may wish to outsource; things like vendor-managed inventory, assembling, break-bulk, consolidation, de-consolidation, their back office functions of procurement, invoicing etc.

Is it going to be through a technical collaboration, joint-venture or independently?

Independently

How do you keep improving your products to stay ahead of the competition quality wise, yet keep the cost under check?

Spear is focused on measurable quality deliverables. Spear organization has been designed to clearly address roles and responsibilities. Proper orientation at all levels has resulted in a quality culture in the organization.  Spear has emphasized on understanding customer needs and the essence of quick decision making. All our warehouses are driven by KPIs (Key Performance Indicators) and SOPs (Standard Operating Procedures). We handle large no of SKUs (Stock Keeping Units) / lines from diverse industry sectors. Spear adopts a customer centric approach and it has resulted in long relationships with its customers.