Arun Seth
regional manager for the Indian Subcontinent region,
Trans Global Logistics
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Seth |
In October, Arun Seth became the regional manager for the Indian Subcontinent region for Hong Kong-based Trans Global Logistics. A veteran of the industry in India, Seth has a unique perspective of the country's nascent logistics ambitions, as well as a broader view that only comes with working with a global logistics company. Namaste talked with Seth in December about the state of logistics in India, and found that companies looking to the subcontinent region have to be flexible and patient above all else.
Namaste: Logistics is a hot topic in India, but how much of it is talk and how much is actual happening in terms of making supply chains more efficient?
Seth: Even though logistics is a hot topic and every freight forwarding company is using logistics in its name banner, very few companies qualify to be branded as complete logistics providers. The bulk of the logistics work is handled by the manufacturers and distributors themselves, as they do not believe in the logistics service providers.
Customers use freight forwarders for pick-up, brokerage and transportation. Supply chain management is not handled by logistics companies except in industries like automotive components and, to some extent, fast moving consumer goods, computers and retail distribution.
Namaste: To what extent is the Indian government (including the various state governments) helping or impeding the development of international class supply chains?
Seth: The Indian government has not chalked out any plans to help develop international supply chain systems. India’s greatest impediment is its inability to quickly and efficiently move product from inland facilities to its ports, a problem directly linked to dated and disconnected transportation infrastructure.
India must improve transport connections to meet the just-in-time requirements of complex international supply chains. The government is trying to handover the bulk of needed development to the private sector, but this requires political will power and consensus. It will take time because of restrictive labor laws and large-scale bureaucracy.
Namaste: Infrastructure is clearly a problem, but what other barriers are preventing companies from setting up reliable logistics processes?
Seth: The main setback for companies in setting up reliable logistics process is the huge investment required to procure and set up the network systems with warehouses, information technology, bar code readers, CCTV systems, etc. Also keeping and updating huge inventory is a challenge. Apart from the investment, manpower is the main constraint.
Namaste: Does “just in time” exist in India, and if so, could you give an example or two of where it’s happening?
Seth: “Just in time” exists in India. At every stage in the supply chain you find just-in-time solutions, whether procuring raw materials, coming out with finished goods, or delivering goods to the end user. Just-in-time solutions are being implemented in inventory reduction and quality but the pace is slow. We see this mainly in garment manufacturing companies.
Namaste: In speaking to foreign companies looking to enter the Indian market, I sense excitement mixed with caution. In speaking to foreign companies already in India, I sense excitement mixed with frustration. What do you think your customers think of India, and is the excitement completely warranted?
Seth: Foreign companies see lots of money in India. There is obviously a huge market here, and there are significant cost reductions and other benefits available to these companies. That is why companies are very excited to take advantage of these benefits to bolster their growth and profitability.
In an effort to capitalize on trading with and sourcing in India, many companies have already set up offices here. However, many companies are finding it difficult to survive due to very low margins and restricted working systems. The complicated tax structure, deep-rooted corruption and high bureaucratic control are equally frustrating and take much of the shine away the India opportunity.
Despite that, India is still strong and the economy is expected to grow at 10 percent or more for the next five to seven years. In addition, the attitude of the middle class is changing fast because of the influence of the media and additional buying power. Those factors are helping many companies to make their mark in India.
Companies like Hyundai, LG and Vodafone are not only surviving, but they are able to establish their new brands in the India market.
Namaste: Name a logistics practice Indians do better than the rest of the world realizes, and one in which they could greatly improve.
Seth: Due to the high incidence of customs duties — up to as much as 100 percent in the past — customs brokers can find innovative solutions to minimize duty and taxes. (As for improvement) Indians can greatly improve in real-time performance by reducing paperwork and simplifying duty structure.
Namaste: Is it possible for a company that relies wholly on a logistics company or 3PL to manage its goods movement in India to also learn the market for itself, and if so, how?
Seth: Yes, it is possible but it may be necessary to use two different companies for best results. Normally, transportation and freight forwarding can be outsourced to (small and medium-sized) external service providers with relevant expertise, and infrastructure and warehousing and (management information system) functions to be managed by companies that have the ability to leverage global expertise and industry knowledge across multiple customers and industries.
For learning the market, warehousing and MIS functions can be gradually shifted in-house. That approach also provides the opportunity to draw on and implement best practices based on lean warehousing methods, value stream mapping, visualization, simulation, safety and security. When an international company enters into a service contract with an Indian company they then have to be thorough with the Indian arbitration laws.
Namaste: Do you find yourself selling India to your clients, or do you find your clients coming to you asking how to get into the Indian market?
Seth: It works both ways. Many times, clients approach us to get into the Indian market. India as a brand name is still not well established.
Namaste: Which sector is farther along in terms of global best practices: air freight or ocean freight?
Seth: Between the two, ocean is farther along in terms of global best practices. On the air side, many carriers and forwarders are being questioned on (an investigation into improper fuel surcharges).