How India can lead in getting foreign investments, woo firms to relocate? This industry aspect holds key

September 30, 2020 10:24 AM

The pandemic has disrupted value chains across the globe. While the supply chain for essential commodities continued to operate through the severe lockdowns, value chains for goods that relied on an uninterrupted global system of logistics came to a halt.

Pandemic has severed global supply chain.

By Bhairavi Jani

The Covid-19 Pandemic has disrupted value chains across the globe. While the supply chain for essential commodities continued to operate through the severe lockdowns, value chains for goods that relied on an uninterrupted global system of logistics came to a halt.

The pandemic has led many companies to relook at their manufacturing location and raw material procurement processes. De-risking of supply chain as opposed to labour cost leverage is becoming a deciding factor for setting up manufacturing facilities. Countries that have shown themselves to be more agile in adapting to the new normal are being viewed favourably for production relocation or fresh investments.

Domestically, the Pandemic has put the spotlight on our last-mile deliveries in both urban and rural areas. It has also highlighted the criticality of a robust supply chain; while a strong supply chain can be a competitive differentiator for the country, a weak supply chain can bring it to standstill.

We can only strengthen our domestic logistics capacity and strengthen our role in global supply chains if we focus on innovation and entrepreneurship. In his vision for India in the year 2022 – India@75, Professor CK Prahalad articulated three core principles, which have become the guiding tenets of Confederation of Indian Industry’s work for the India@75 mission. They are:

  • Aspirations must always exceed present resources.
  • Progression towards the vision must be a process of discovery; of ‘folding the future In’.
  • There must be innovation and development of ‘next practices’.

At the heart of any entrepreneurial activity is the first principle – aspirations greater than resources. When we apply this to our supply chains a few things become imperative. First, is the need for complete digitalization of our supply chains in the next three years.

Indian EXIM trade is caught in the clutches of signatures, approvals and permissions. While we work to reform and repurpose the very need of such permissions, we need to move the current process online. In a country with millions of transporters and a highly unorganised logistics industry, this is a challenging task, but not impossible.

The entire export and import process can be digitalized, using knowledge-based, data-driven form filling that allows for faster documentation, reduction of errors and time.

This entails creating an online platform for players across the EXIM supply chain to plug into and transact. Such a platform must allow seamless data exchange between different systems of exporter/importer, CFAs, shipping lines, airlines, cargo agents, freight agents, customs and transporters. An open public-private platform that allows for collaboration and innovation should be considered a priority. The Government can take the lead in setting up this platform. The Netherlands has a platform called DINALOG which is funded and established by the Government in partnership with industry and academia to foster multi-stakeholder approach to problem-solving in logistics and supply chains. We can make a start with a platform that first looks at the digitisation challenge.

The cornerstone of efficient logistics is robust infrastructure in roads, railways, airports and ports. India has almost three decades of public private partnership experience in infrastructure. With a coastline of more than 7500 kms, a rail network that is one of the largest in the world, an ambitious plan to develop more hinterland airports and rapid road construction; we appear poised for a watershed moment in our multimodal logistics. But we must plan better and apply the second principle of India@75 in folding back the future. We must imagine a future reality for our logistics infrastructure to be driven by multimodality and then fold it back to a milestone-based roadmap for realising that future.

The process of discovery articulated in the second principle can be specifically applied to our rural supply chains. We need to reimagine the role of our rural supply chains and deepen our investments in cold chain and last mile delivery in rural India. The Indian Postal network can be leveraged to reach entirely new markets. A model of cold-chain based on needs of small farm holdings and closer to farm facilities empowered by renewable energy, can completely transform the income and livelihood landscape of rural India. As long as we are willing to be on a path of discovery, we will remain open to ideas that can change on-ground realities for millions of rural Indians.

Hyper local aggregators and delivery companies are shaping the contours of India’s ecommerce and urban last mile delivery. A model of shared economy has taken birth and thousands of young men and women are participating in it. It is here that we can invite large scale innovation and development of “next practices,” as indicated in the third core principle of India@75.

Best practices are abundant and Indian entrepreneurs have shown great skills in adapting them to Indian circumstances, but we need next practices, which are innovations driven by local Indian conditions that create affordable, accessible technologies for urban logistics.

Design, technology and financial infusion and incentives for urban delivery e-vehicles can be a starting point. UAVs or drones can also play a major role in easing urban congestion. Giving incentives for domestic manufacturing of drones that can carry up to 500-1000 kg cargo can be a breakthrough for urban logistics. We can adopt a shared economy approach and build drone stations that companies can rent parking space from or pay fees – much like airlines do at airports. This will help them off load the cargo for distribution and then do door deliveries either through drones or bikes. This can reduce the number of last mile delivery trucks entering the city. Such next practices can be applied to the rural context and can also be shared with other nations.

Covid-19 is a difficult time for the logistics sector and for supply chains within India and globally. But this crisis must not be wasted. We must create models for collaboration, innovation and enterprise that allow our supply chain capabilities to leapfrog and create new global benchmarks for efficient, effective, agile, accessible and affordable supply chains.

  • Bhairavi Jani is the Executive Director, SCA Group of Companies. Views expressed are the author’s own.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1ICICI Bank shuts down operations in Sri Lanka
2Risk averse banks continue to lend with caution; bank credit up marginally, deposit growth stable
3Russia’s Sberbank to host AI contest with prize pool of Rs 66 lakh; expects large-scale Indian participation