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NT Bureau
Chennai, Sept 22:
 

        Logistics industry could promote outsourcing for the Indian manufacturers to reduce the escalating cost in supply-chain management, according to a study.

        The organised sector of third party logistics (3PL) providers — 3PL companies — growing at a rate of 25 per cent is poised to expand its market reach. Leading 3PL players who took part at the Logistics summit, a three-day exhibition organised by the Confederation of Indian Industry, focused more on enhancing its knowledge offerings which promised huge cost savings in supply-chain operations, reduced lead time and safe transportation of high-value goods.

        'Logistics is not a new name of transportation business. It is about offering supply-chain solutions from ensuring delivery of components 'just in time' to manufacturers to door delivery of finished products to end consumers. The business comprises the entire movement of goods, within and without an organisation,' said G Ragunath, deputy general manager, Marketing, TVS Logistics Services Ltd. He said that 3PL companies helped OEMs (original equipment makers) and their tier - I, II suppliers effectively implement best practices such as lean management and vendor-managed inventory.

        Taking off the anxiety from manufacturers on the timely availability of components, 3PL companies drastically reduced the inventory cost. With the entry of 3PL firms, there was a lot of clarity on what constituted the core business of stakeholders across the supply chain. Moreover, OEMs could achieve a direct cost saving of over 15 per cent by partnering with 3PL companies. Having a dedicated fleets that did not depend on daily orders, 3PL industry adopted scientific practices for route optimisation and employ trained manpower to reduce the transit time by over 30 per cent. Realising the benefits, auto manufacturers have made 3PL operations integral to their business. The size of the organised 3PL market in automobile was estimated at nearly 5 per cent of the turnover of automobile industry in India. TVS Logistics had registered a turnover of Rs 250 crore in the last financial year.

        A spokesperson of AFL Pvt Ltd which catered to the needs of electronics and IT hardware said the 3PL operators were consolidating their warehousing facilities and transportation based on a resource sharing model. 'Many 3PL companies are partnering with electronics players to focus on door distribution to deliver laptops and desktops to the end consumers, following the hub and spoke model of distribution.

        On the changing dynamics in the logistics industry, Sanil Kumar, sales manager, GATI, Chennai, said the supply-chain services were increasingly sold based on pallet locations, rather than on floor space. 'Once we acquire an account, we spend a couple of months to understand our customer's business and hire, train human resource and streamline our operations. We also establish infrastructure such as warehousing to suit the particular needs,' he said. Out of GATI's turnover of Rs 456 crore last year, around 26 per cent came out of its logistics operations. The company was setting up a dedicated 3PL infrastructure in Chennai with one lakh sq ft of warehousing facility.

        However, a couple of bottlenecks for the 3PL industry were the lack of trained manpower and poor adoption of modern technologies. 'In India, the concept of 3PL is yet to catch up. Industries still do not readily believe that an outsider can manage supply chain which has been managed in-house all along,' said Abraham Varghese, general manager, Business Development, Total Logistics India Pvt Ltd.

        Logistics 2007 Summit organised by the CII had 106 exhibitors who represented a wide cross section of the logistics industry, including IT solution providers, automobile manufacturers, makers of material handling equipment, shipping firms and automation players, among others.