‘Supply chain mgmt sector must be regarded as industry’

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Chennai, Nov 17 : The economic scenario globally compels every auto manufacturer to be cost competitive for survival. The complex supply chain management (SCM) of fully finished units and spares for after-market services when managed well, will give the competitive edge. Supply chain management sector should be regarded as an industry.

Unless this happens, it will not benefit the overall industry, said auto industry insiders. The manufacturing companies in India tend to look at logistics service providers largely as physical service providers. This is the reason why the integration and alignment of common goals between manufacturers and logistics companies have not taken place yet which in turn mounts pressure on auto companies, they said.

“Though OEMs proudly proclaim the logistics players as 3PL or 4PL suppliers, the partnerships are only in papers not in mind. The manufacturing sector should consider logistics services as in-sourcing, rather than outsourcing. Both the service providers and companies should have a common objective and aim at bringing down the total cost instead of trying to cut down the profits of one other,” said R Dinesh, joint managing director, TVS Sons.

There is a great business scope for logistic solution providers who position themselves as knowledge leaders in supply chain to integrate the supply chain elements through alliances, and joint ventures.”For every job created in the manufacturing sector, the logistics industry will create three to four jobs. It should be recognised as in industry,” he added.

“The inter-modal logistic solution will be extremely important for Indian automotive industry, which is aiming to penetrate suburban and rural markets to tap the after market potential and augment the dealership network in the coming years,” said K Venkatraman, Partner, ATKearney.

According to Srivats Ram, Managing Director, Wheels India, “since the automotive industry is highly fragmented, the information move through a number of points and layers result in distortion and inaccuracy. OEMs order for components based on the information they get from market.” He said that the turn-around time at ports is still a major handicap due to lack of quality supply chain management in India, particularly on the logistics side.

R Seshasayee, managing director of Ashok Leyland Ltd said, “The current infrastructure set up in India is a disadvantage for overall economic growth. Due to that the Indian companies lose competitive advantage as compared to their counterparts in other countries. It is time now for the government to focus on creating better infrastructure which will ensure a better supply chain management”.

With a 10% more cost, the national quadrilateral highways can be made into smart ones, incorporating technology into it, thereby ensuring uninterrupted logistics service from one place to other place. By incorporating technology into the highways services such as toll collection, right loading, documentation among a host of other services can be made easy to ensure speedy logistic services, Seshasayee said.

Sumeet Nadkar, Head, Logistics SBU, Kale Consultants, said the logistics industry is on the “run-way” and about to take-off and the time is right for us to realise the importance that can remove internal process efficiencies and help collaboration in the supply chain. He said the size of the Indian auto logistics industry was Rs 3,400 crore in 2006-07. In The logistics cost for the automobile industry is around 2% to 3% of sales, whereas in the case of auto components industry, it is about 3% to 4% of sales. The reverse logistics is estimated at 0.5% to 1% for both auto and auto components industry. Nadkar said that developing efficient supply chain is mandatory for sustaining growth of organisations. Efficient supply chain means providing goods and information wherever needed and whenever need in most efficient manner.

The supply chain, which has various elements such as shipper, forwarder, carrier, airports, hubs, ports and customs, is as efficient as the weakest link in it.