While India has been growing at a healthy pace, the problem area all along has been logistics. At a time when e-commerce is becoming the norm, having good logistics is critical. That’s where DB Schenker, a division of Germany’s Deutsche Bahn AG comes in. Over the past 15 years, Schenker has 64 warehouses across 2.3 million square feet across India. Oliver Bohm, CEO, DB Schenker India responded to an e-mail interview with Anup Jayaram on the road ahead for the logistics giant in India.
As the Indian economy the demand for logistics services has risen. How has DB Schenker been able to plug into India?
India’s geography and diversity makes it a challenging and complex market.With much the consumption in rural areas, only an organization with domain knowledge execution capabilities can sustain and benefit in the longer term. We bring in the over 140 years of transportation and logistics expertise and possess every capability needed for a market like India. However, today we see more companies here looking for a solution provider than only a transporter. To cater to customers in tier II and tier III cities, we have set up 44 offices in 37 locations which helps us connect them to any business destination across the world. We want to be a solution provider in their businesses by offering end-to-end services with a variety of value-added services.
You recently opened a logistics centre at Bhiwandi. How many such centres do you have here? How many more are planned?
We have 64 warehouses in India across 2.3 million sq. ft. now. These are operated from 32 strategic locations and include 13 large Multi Client Facilities (Schenker Logistics Centers – SLCs). The Bhiwandi warehouse is one such large SLC spread across 200,000 sq. ft. Others are in Mumbai, Delhi, Gurgaon, Ghaziabad, Pune, Patna, Bangalore, Lucknow, Chennai and Kolkata. These large warehouses are located strategically to serve customers and are the part of our strategy to strengthen our footprint to be closer to customers so that deliveries are made in the shortest time. Currently, the Bhiwandi warehouse caters to baby and mother care products, fire protection, camera & accessories and bath fittings. Other warehouses cater to a variety of products in automotive, electronics, consumer, industrial, solar, healthcare and aerospace verticals. We are serving almost all key industries in India. We see warehousing and distribution as one of the most prominent areas of investment for the future, especially for upcoming Indian MNCs.
How big is the Indian logistics business? How does it compare to other emerging markets and mature economies?
As the Indian economy grows, the logistics sector is estimated to grow by 10-15% annually. Newly evolved e-commerce businesses and retail are expected to add momentum to domestic distribution and warehousing. Going by the broad classification of world economies, India is at the forefront of growth among developing economies. Being the second largest consumer market, India presents a unique opportunity for the logistics industry. There is substantial room for growth on three fronts – demand, technology and skilled manpower. On demand front, continued growth of the economy will ensure healthy growth in the years ahead. On technology, more investment in information systems and state-of-the-art equipment is required to provide efficient end-to-end supply chain solutions. The shortage of skilled manpower is a big challenge which the government and industry bodies are trying to address through specialized courses and training centers.
Now that work on the rail freight corridors has gained traction, does it reduce the need for setting up logistics centers? How will that help your operations?
The freight corridors are expected to optimize warehousing and distribution apart from providing faster connectivity. Many industrial corridors and warehousing zones will be developed around it which will save cost and turnaround time. The freight corridors will provide us the opportunity to build a faster and cost effective model of distribution which will help provide faster solutions and handling larger volumes and deliveries at the same time.
The share of global freight forwarders in India is still quite limited. Why is that and how do you see that changing?
This is one of the most intriguing dynamics of the Indian market. One major reason seems to be the sensitivity towards the cost of supply chain services. But here, looking at the service levels we provide to our customers in the forwarding and contract logistics business, we have seen our suppliers’ end shrinking, which leads us to limited possibility of reduction in the cost to customer. To address the pain areas in the supply chain, optimizing the resources, dominance of unorganized players and multinational forwarder’s reliance on the import market; we are investing heavily in our processes, so as to attain competitive advantage over the competition.
Despite having 44 offices in 37 cities, DB Schenker has yet to cover the entire spectrum of the Indian logistics market. Once we are able to reach to customers in those areas, this business will take leap forward.
How does the introduction of GST boost the logistics business?
The logistics industry will reap the true benefit post implementation of GST in which India will act as a single marketplace. GST will boost logistics in many ways. A uniform and transparent tax structure all over India will make it a single market which is easy to access and operate in. By enabling the free flow of goods across India with tax levied only at the destination, the reduction in paperwork and waiting period will result in saving time for other operational activities.
What are the big challenges that you face?
The big challenge in India relates first to infrastructure. Highways, state highways, rail and waterways are not fully developed to their capacities. However the policy boost in the recent Union budget along with the announcement of river linkages will go a long way in addressing this issue and we expect to save significant costs once this is implemented.
The other deterrent is the uneven tax structure. But the implementation of GST will pave the way for reforms and the industry expects a turnaround soon. The logistics business needs to get industry status. At present, logistics cost is a major factor with regards to production cost. The other problem relates to the limited availability of skilled human resources. The government is looking to address this issue by offering specialized courses, skill development training, seminars, workshops and in-house trainings.