"The buzzword is fourth-party logistics"

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: Gati was founded in 1989 with the objective of providing trucking and courier express delivery services. A decade on, the company claims to be doing well as a result of organic growth and successful acquisitions and partnerships. Headquartered in Hyderabad, with over 3,000 employees across the country and listings on the Bombay Stock Exchange and the National Stock Exchange, Gati claims to be the forerunner in the delivery business in India. In this interview, Anil Atri, who, for past year-and-a-half has been chief sales and marketing officer at Gati, speaks with FE’s Malvika Chandan about the benefits of choosing a third-party logistics company such as Gati for courier and trucking requirements.

What is the size of the logistics industry? How well organised is it in India and who are the key players?

The express delivery industry, which includes courier, cargo, perishable goods and airfreight, can be divided into the organised and unorganised sectors. The organised sector stands at Rs 7,000 crore, of which Rs 4,000 crore is contributed by domestic delivery, and Rs 3,000 crore by international delivery.

But purely courier would be about Rs 1,800 crore (domestic and international put together). The unorganised sector is hard to account for, as it is very fragmented. The Indian logistics industry is $90 billion today, and is expected to grow at a CAGR (compound annual growth rate) of 16% to $120 billion by 2011.

A fair amount of consolidation has taken place in the market. TNT acquired trucking company Speedage to grab a share of the express market. TNT is part of the Netherlands-based TPG (the company goes under the better known brand TNT). For surface carriers, DHL (part of Deutsche Post) is a big player, which acquired Blue Dart. Safex is another big player. Federal Express acquired Prakash Air Freight about two years ago. The other global players in the market are Expediters and Kuehne + Nagle as well as United Parcel Service.

What are some of the challenges faced by the industry today?

The challenges are related to dealing with the statutory and regulatory issues as well as the overlying physical infrastructure issue. Another reality is that this is a manpower-intensive industry. The key problem we face in India compared with the West is the slow movement of trucks between states because of different regulatory requirements within each state. Each state has its own naaka or check post and the hold up at these naakas is excruciating for truckers and slows down efficiency significantly. Additionally, each state requires separate paper work for tax etc. For example, West Bengal requires surface carriers to fill up Form 40 and Uttar Pradesh requires Form 31.

If you were to consider a movement from Kolkata to Mumbai, which is a distance of 900 kilometers, and if the trucker was traveling at 45 kmph, excluding breaks etc, it should not take more than about 30 hours, which is the norm in the West. However, the time this journey actually takes is, much longer in India.

Delivery and courier companies all over the country face regulatory issues and there was even a bid by an independent group in Kerala to run the check post in a district called Vayalar because of the particularly slow movement of trucks at this check post. If we were to name one wish on the regulatory front, it would be to standardise regulations at check posts across states to increase efficiency in movement. Another ongoing project is improving the country’s physical infrastructure in cities and on the state highways.

In India, our logistics cost to GDP is about 13%, whereas in the West it is 8%-9%. For example, consumer good companies have many more warehouses in India compared with their counterparts in the US because they do not want to deal with the inter-state regulatory issues and the physical transport issues.

Can you share an overview of Gati’s acquisitions and partnerships?

Gati acquired Kauser India last year. The acquisition brought us a fleet of 94 vehicles with a carrying capacity of 3-12 tonne and a temperature range between minus 20 degrees and plus 20 degrees centigrade. The company also has a partnership with the Netherlands-based General Logistics System for which we act as a gateway to India and which, in turn, acts as Gati’s gateway to Europe. Gati owns two Boeing 737s. Gati has completely outsourced bookings and deliveries to our 1,000-odd partners. We have another 300 partners who provide us with vehicles.

What are some of the advantages and disadvantages of using a third party logistic carrier versus an in-house logistics company?

The key offering of a third party logistics carrier is its three pronged strategy—IT, network and people competence. A third party logistics provider handles all the elements of your transportation including, shipping, packing, loading etc. The buzzword in the industry these days is fourth-party logistics, which are the consultancies such as Accenture that advise their clients on logistics solutions and help answer exactly the same question—as to whether third party logistics companies are better than in-house solutions.

Our pitch to customers would start with a simple proposition: if a computer vendor based in central Delhi has to ship a consignment of computers to another state, the consignment would in most cases reach much quicker with Gati than if the company were to use its own resources. That is because our assembly line churn, or domino discipline as we refer to it, is far more efficient.

What is the importance of technology in all this?

Gati’s strengths are its transportation, warehousing and process design capabilities. Our philosophy is to use technology to ensure transparency. We want the customer to know that we are not hiding anything. We use IT to provide real-time information online. Customers can view their docket receipt and delivery chalan online. Our customer relationship management is backed by Oracle Financials and Gati has its in-house enterprise relationship package called Gati Enterprise Management System and our warehousing is through a web-enabled tool.

We have not installed a general positioning system yet in our vehicles but are also exploring that option.

What is the function of Gati Café Deliver?

Gati Café Deliver was started keeping the young people in mind and currently we have five outlets including those in Pune, Hyderabad, Kolkata and the most recent one opened in Ahmedabad in July. It is the exact same model of (Fedex) Kinko’s that has outlets all across the US, and double up as coffee lounges. The outlets are designed like a business lounge where a customer can relax, surf the internet, check emails, send his documents after taking photocopies or printing them out.

What strategy is Gati adopting to become a household name?