Auto And E-commerce Logistics Will Continue To Be Focus Area
With e-commerce set to rise exponentially I the coming years, logistics is the next business to watch out for. Avvashya CCI, which does end-to-end logistics specialising in auto, chemicals and E-commerce, has plans to increase its 3.5 million Sq feet of operational facilities to 10 million by 2022. Naresh Sharma, Managing Director, speaks to BW on company's future plans.
Excerpts from the interview
What has been the impact of GST on the logistics sector? How has Avvashya CCI’s business environment changed post GST?
GST coupled with the E-way bill remains a potent disruptor to Indian logistics and warehousing sector. Even though it is very early to comment on the impact of this regulation on the sector - one thing is certain, GST has the potential to bring in consolidation and improve efficiencies in an industry traditionally dominated by unorganised players. Implementation of GST has definitely accelerated the evolution of warehousing, logistics and supply chain industry in the country towards being more organised and transparent in the coming years.
What is the impact of CMVR regulation on 18.75-m trailer length for car carriers came into force on logistic sector?
The impact of the Central Motor Vehicle Rules (CMVR) regulation, which limits the length of road-based car carrier equipment, also means that an alternative mode is necessary to take the pressure off capacity constraints now impacting the 15,000-plus car transporter fleet in the country.
The 18.75-metre length will limit the transporters to carrying eight cars, which results in approximately 25% reduction in the number of cars carried compared to the longer trucks which could lead to a rise in costs of more than 20%.
Car manufacturers and logistics service providers will now seek for alternative modes of transport mostly railways and waterways so as to reduce the cost. The government regulations have been conducive in this regard. Indian Railways has ambitious plans to increase its share from 4% to 20% over the next decade. The railways has opened a multi-user hub in Chennai. Changes are also being made to the shipping regulations to allow for domestic short-sea services.
What are focus areas for Avvashya CCI’s?
Specialty Chemicals currently contributes to half of the revenue of the company while auto logistic and retail e-commerce business account for 35 per cent and 15 per cent, respectively. Over a period of time, chemicals will contribute to 40 per cent of our revenues while the remaining 60 per cent will be split equally between auto and retail. While auto will continue to remain a key focus area for us, we plan to enhance penetration by increasing services, the growth will be more in retail e-commerce business where the industry has been growing at a compounded annual growth rate (CAGR) of 30-34 per cent.
With the recent acquisitions and consolidations in the retail space, the industry will grow manifold in the coming years. Retail and e-commerce industry needs facilities that are able to scale-up and scale down to meet the seasonal requirements in terms of space and resources and quality infrastructure at strategic locations.
Moreover, our investment in technology for automation of processes and storage operations enables us to multiply manifold without compromising on quality while allowing us to scale down quickly. This flexibility alongside scalability and economies of scale has been the key recipe we have presented to the retail industry,” Balaji said.
Going forward, what's Avvashya CCI’s investment and expansion plans?
We plan to invest Rs 1,500 crore by 2022 to expand our warehousing capacity to 10 million sq ft as the Goods and Services Tax regime drives consolidation in the logistics industry. We currently have 3.50 million sq ft of operating facility across the country. By 2022, we are looking to grow it to 10 million sq ft. The expansion will focus on three key areas: speciality chemicals, retail associated with e-commerce and auto engineering.
Our contract logistics business is growing aggressively at 40-45 per cent. We are acreating state-of-the-art, compliant warehouses at strategic locations. In a year’s time, ACCI has scaled up from 1.5 million sqft (msqft) in 2016 to 3 msqft currently and plans to aggressively scale up to 10 msqft of operating warehousing space by 2020. We are creating logistics parks for EXIM and DTA businesses.
This will facilitate customers to consolidate their requirements and choose an end-to-end compliant logistics partner like us. We are planning to invest ₹400 crore by 2022 to expand our warehousing capacity. These warehouses we come up with will be of the built-to-suit (BTS) model where technology and automated processes will play a major role. We have earmarked an investment of around ₹250-300 crore in warehouse automation in an endeavor to offer world-class services to customers and bring in cost and operational efficiency.
With increased emphasis on logistics and infrastructure development, the overall outlook for business is positive. Consumption-driven Indian economy andWe expect the sector to get a boost led by
What's the competitive edge Avvashya CCI enjoys in business?
We believe technology will be the key differentiator in business to offer better and customised solutions. We are also fully aligned from business operations and technology perspectives. At Avvashya CCI, our warehouses are tech compliant with the backend process automated. This robust system helps save time, effort and offers seamless customer experience. Our investment in technology for automation of processes and storage operations enables us to multiply manifold without compromising on quality.
Further, this also allows us to scale down quickly, offering the much needed flexibility. . Our process Automation includes: a) WMS – warehouse management software, b) Track & Trace – shipment visibility software’s, c) Pick optimisation tools (middle wares). Logistics function will undergo a fundamental change as artificial intelligence and machine learning get deployed to handle domestic and international movement of goods. The use of autonomous fork-lifts is “reaching a level of maturity” in warehouse operations
What is your outlook for the business?
Logistics sector comprises of inbound and outbound segments of the manufacturing and service supply chains. Of late, the logistics infrastructure has gained a lot of attention both from business industry as well as policy makers. From July 1 2017, the goods and services tax (GST) has led to consolidation of warehouses. The move allows firms to redesign their supply chains and centralise hub operations to take advantage of scale economies. The removal of toll-nakas, measures such as e-way bills and ease of entry across states has reduced transportation delays. However, this requires streamlined IT systems and ready-to-use documentation at the entry points.
From the 3PL perspective, the costs of designing a logistics network will be less complex and firms which are asset-light will be able to quickly adapt and benefit more compared to asset-heavy firms. All in all the industry will move towards an organised framework. We would also see some degree of consolidation in the industry, either by smaller players coming together or larger players acquiring the relatively smaller ones, to win economies of scale.
