The industry and stakeholders should attempt to consider the transformation in the aftermath of the coronavirus outbreak through a positive lens in order to improve supply chain and logistics management so as to provide high-value and even more outstanding services to the society, since it has now been made abundantly clear that supply chains are the veins of an economy. In an exclusive conversation, Jasjit Sethi, CEO, TCI Supply Chain Solutions reveals Upamanyu Borah, about identifying new alternatives to build, diversify and reorient supply chain and distribution capabilities which will represent an important component of the strategies to build resilience against future disruptions, while constantly innovating products and processes.
You are a thought leader in the supply chain scenario. What are the perceptible changes you have found in the mindset of the customers in recent times?
COVID-19 related disruptions have challenged many status quos.
More than ever, clients are now acknowledging logistics as a key enabler rather than viewing it as a cost optimisation domain. The sudden economic lockdown, affecting movement across national and international borders, have made organisations to consider reshaping their supply chains, relook at warehouse network, and possess higher safety stock to deal with similar supply chain disruptions in the future.
We can also see a visible increase in the interest of organisations to outsource their logistics operations and re-engineering of their supply chain network with support of stable 3PLs with a sound ecosystem.
What you consider as thetop 3 challenges the industry is currently facing?
First and foremost is the ‘re-jig or re-look’ at the supply chain from source to consumption, ensuring sustainability.
Next are the regional and local issues due to restrictions in the form of containment zones and fluid situation. While it has not impacted TCI, the migrant labour exodus is a big issue for many organisations.
Overriding above all of this is the fact that COVID-19 is touching 3 million cases in India, and the situation is far from plateauing off.
What are the best- and worst-case scenarios, and is your business adequately equipped to cope?
The best and worst case scenarios depend from company to company. Those who are playing a catch up game will continue to struggle.
For example, while we did not know the depth and length of the lockdown situation, TCI was much ahead of the curve and had done scenario analysis before the nation-wide lockdown was announced. We had the necessary infrastructure in place supported by secure processes for awareness and precautions around COVID-19. During the lockdown, we ensured our employees were safe and in-station and our truckers were with their vehicle while arrangements for their food and shelter were monitored. We had created quarantine rooms in all our staff mess across the country as a precautionary measure.
The motive in our plans towards dealing COVID-19 disruptions was facilitating business continuity for our clients in a way taking care of all the stakeholders in the ecosystem. We closely planned with every single client to deal with the situation in ways relevant to their business vertical. We ensured smooth movement of essentials during the lockdown. Our planning for the first three months of this financial year was good, considering our emphasis on keeping our network active and working.
While the surge in demand is an outcome of the economy opening up with each industry on different rebound timelines, the best case scenario is that logistics continues to function and remains an enabler. The worst case is breakage in any part of the chain due to any of the factors mentioned above.
How should we organise capital investments plans in light of unexpected shocks to revenue and potential permanent changes to the usage of transport networks?
While being mindful of the current financial health, capital investment plans should be part of long-term strategy.
Shocks like COVID-19 cause demand-side issues which eventually turn to supply-side bottlenecks. Hence organisations would do well if they keep their plans in place with setting a deferment period, keeping in mind that y-o-y levels may be similar in Q3 and Q4 of this fiscal.
In the post COVID-19 scenario, experts believe the standards that are required both in terms of handling of cargo and personal hygiene of truck drivers will improve. Does this indicate there will be more automation coming into the entire supply chain for handling of cargo in a multimodal network?
Hygiene standard improvements are imperative. With physical distancing norms in place and when industry is facing a labour crunch due to migration, dependence on automation will definitely help.
I certainly believe that automation now will be a business continuity consideration along with commercial consideration to accommodate for operating during unprecedented circumstances like today. To avoid any possible spread, the inkling is towards reducing the number of touch points in handling of cargo, thus automation becomes crucial here.
With above, palletisation of cargo throughout the supply chain will improve to facilitate automated handling that shall ultimately contribute to lower handling time and cost. Incorporation of conveyor systems, robotic handling, use of drones, etc. is also expected to catch momentum.
On the brokerage side, things like spot market rates and volumes are doing well. How do you view that situation?
Current situation is quite volatile as COVID-19 hasn’t settled down, it is continuing to impact supply chains in clusters across the country. Till now, we have seen a balance in volume produced by OEMs and availability of trucks and manpower. Overall, there is no supply–demand gap barring few industries. It is just that impact on freight rates have come up due to the abrupt surge of fuel prices in the last few weeks.
In the near future, we don’t see any sharp increase in spot market rates, even though there might be some temporary gap in demand and supply.
What is the current scale of operations in your transportation and warehousing segments?
Our warehousing operations are almost back to what was pre-lockdown. However, in transportation, currently, we are having a fleet utilisation of 50-70 per cent. There has been a gradual increase month on month, and we expect to be back to business as usual by Q2.
Your business operates on an asset-light model. Has that helped?
At TCI, we adopt an optimum asset model. This has definitely contributed in maintaining stable profitability over the years. In general, it helps in minimising the cost incurred as well as efforts on maintenance. For vehicle fleet, apart from the ones we own, we have long-term vendor partners, and we give equal focus on fleet utilisation of both (our own and vendor-owned).
Is there a way to roll up the biggest challenges facing warehouse/DC operations considering this new environment?
We have to learn to live with this ‘new normal’ and build our processes accordingly. Close monitoring of hygiene standards are needed, but accessibility of safety and hygiene infrastructure to everyone in the ecosystem has to be first ensured.
The need for essentials and warehousing got widely proven during the crisis. Warehouses across the supply chain spectrum kept the nation running and replenished the necessities in a timely manner, although the challenges were plenty.
Physical distancing norms are putting extra strain and working hours have gone up. Therefore, relaxation in wage rules on working hours can be worked upon to manage productivities.
A collaborative approach is needed to create quarantine facilities in each warehouse facility or logistics parks to build a safety ecosystem, ultimately contributing to the confidence of the workforce.
We have to seek areas of optimisation by using ‘Machines over Men’ to meet the challenge of productivity while maintaining physical distancing norms and reducing the number of touch-points inside warehouses or fulfilment centers.
Do you think there will be consolidation in the industry? What measures are you expecting from the government?
The logistics industry at large still remains unorganised in nature. The cash flows of many small players were gravely impacted during the lockdown and the dwindling production volumes in many sectors with uncertainty of return to complete normalcy have endangered the survival of these players. In such circumstances, consolidation can be seen around the corner. However valuations would need to be realistic.
The expectations from the government are balanced and more procedural than SOPs. These are:
- Extension of the validity of documents for warehousing and trucks till the end of this year as business have suffered due to low throughput
- Reining in the Inspector Raj in various departments (Labour, RTOs) and moving to electronic modalities, which are possible with E-way bill and online PF/ESI
- Reducing the licenses and documents for operations by removing overlap
- Passing on the benefit of global crude prices to the industry instead of profiteering from it
Overall, it is a golden chance for the government to prune departments and go for a quantum leap in digitisation, besides removing rules where unethical practices have fostered overtime.
