Contract logistics companies possess a deep understanding of how different industries work to best manage the logistics of a variety of companies. They combine the skills and experience of their operations managers and supply chain designers, to visualise, implement and operate logistics solutions allowing them to deliver value to their customer’s business through. All this has one goal, to increase the overall performance of logistics processes and reduce costs.
International trade has seen major change in recent years; in the past, logistics involved simply moving goods from one place to another. Today, the market demands comprehensive services and specific logistics processes, making contract logistics the ideal solution for companies wishing to monitor and manage their operations.
Contract logistics is defined as the comprehensive process from production to distribution at the final point of sale. Simply put, it is the interface between manufacturer, supplier and end user. This means that contract logistics is not simply the process of moving goods, but a far more comprehensive course of action that merges traditional logistics with supply chain management processes.
Contract logistics companies, particularly third-party logistics (3PL) providers handle activities such as designing and planning supply chains, designing facilities, warehousing, transporting and distributing goods, processing orders and collecting payments, managing inventory and even providing certain aspects of customer service. However, today, with fourth-party logistics (4PL) entering the picture, the main logistics operator (who thus far has been functioning as a 3PL provider) coordinates operations with a fourth stakeholder who is in charge of managing the supply chain, creating a value chain in which many different stakeholders play a role.
Asia Pacific’s strength
The degree of outsourcing in contract logistics is low indicating significant room for growth. Globally, the share of outsourced contract logistics in the total market stands in the range of 10-15 per cent only. With Europe and North America suffering from both stagnating retail sales and manufacturing production growth, Asia is taking advantage, driving growth for the global market as a whole. Although economic growth rates in developed nations are forecast to pick up slightly, they will continue to be far surpassed by emerging markets. None of this is especially new, but it is the reality the market faces. Going forward, China and India are two significant potential markets for outsourcing in the Asia Pacific region.
According to industry insights, Asia Pacific is the leader in the global contract logistics market accounting for a share of more than 30 per cent. The market for contract logistics in Asia Pacific region is anticipated to grow at a CAGR of more than 5.5 per cent during the forecast period (2019-2024). The fast-growing economies in the region, growing industrial production, increasing consumer purchasing power, and high young population, fast growing retail markets present significant outlook for the contract logistics market. The region is also a home to a large number of SMEs which are going online to increase their business opportunities. Contract logistics offers the e-commerce businesses of all sizes advantages such as easy management of business, advanced technological solutions, reduced risk, and scalability. The rapid growth in e-commerce is also resulting in high demand for warehousing space. The operators are spending millions of dollars to secure a warehouse in strategic location which allow them to reduce delivery times.
India’s lucrative market
Talking about India, the country’s contract logistics market is relatively less developed when compared to other countries in the region. Most of the retail spending in the country goes to the unorganised sector and the possibilities of outsourcing are very less. However, with a lot of new businesses being started in the region or expansion of existing businesses in the manufacturing and consumer goods sector being observed, contract logistics market players can potentialise on a lot of opportunities for growth. The challenge as ever will be to operate successfully in a logistics and supply chain environment which is so often dramatically different.
“Logistics industry in India is becoming more organised. There is growth seen in infrastructure by way of quality warehousing and professional service by providers,” says Karthi Baskar, Deputy Managing Director at Kintetsu World Express (KWE) India. Theindustry is going through re-alignment post-GST, new logistics regulations are coming in. This will help remove “multiple level of handling and anti-profiteering” which will benefit the customer on the long run, allowing them to reduce logistics cost.
Undoubtedly, with GST becoming a reality, its benefits are being derived; companies are able to build their supply chain design purely from the first principles of the supply chain and not really from taxation point of view. What one would probably see going forward is large scale high efficiency models which will come into play. There are several value-added services within contract logistics contract logistics that players can provide to its customers which were hitherto a challenge due to myriad tax regimes. These are now simplified under GST and players can offer their customers these services under one roof from their facilities. This in return is freeing up space within customer manufacturing facilities, they are now able to put their infrastructure to better use.
Also, like any other sector, the logistics industry is bound to grow and solve major challenges just by adopting new technologies. Among the various transformations technology has been enabling in the logistics sector, the most apparent in recent times have been the ability to enable platforms that enhance connectivity between a fragmented logistics services community and end users, and enhanced visibility and accountability across supply chain stakeholders resulting in operational efficiencies and reduced costs.
“The industry is going through a phase of transformation, and it is the need of the hour for new logistics solutions which can streamline processes while helping providers increase visibility in terms of assets,” says Vishal Sharma, CEO – Cluster India and Indian subcontinent, DB Schenker. Emerging technology trends will further spur the industry towards modernisation and growth, with digitisation and automation playing a major role.
Taking into account the same, Mayur Toshniwal, Managing Director, Future Supply Chain (FSC) notes, “The change is visible in different fronts including development pattern, occupier’s preference, funding structure and technology inclusion in its sub-components. Software-supported process is growing dynamically in the sector bringing greater benefits to businesses.”
Contract Logistics Solutions: Active players in the Indian market
Whether satisfying customers need for a medium-sized storage and supply chain solution, or a multi-branch national logistics infrastructure, contract logistics players has the scale, scope and technology to provide customers the freedom to focus on their core business.
TVS SCS is a top third-party logistics company in the country with integrated supply chain solutions across the world, directly or through joint ventures and subsidiaries. Its services include contract logistics, warehousing, transportation, freight forwarding, packaging, design and solutions to sectors like automobile, beverages, IT, Healthcare, Telecom, Retail, FMCG and Defence, globally.
R Shankar, CEO – India, TVS SCS was more than excited to inform on their offerings that include a comprehensive and complete bouquet of services comprising Sourcing, Inventory Planning & Management, Demand Forecasting & Planning, Network Planning, Transportation and Warehousing, Last Mile B2B Delivery as well as the entailing value-added services.
“TVS SCS provides appropriate technologies for supply chain visibility and effectively use data for decision support. Our operations are efficiently delivered at the optimal cost with best-in-class quality. Customer reviews and operations management are all done through real-time dashboards which aids in initiating swifter corrective actions,” explains Shankar, adding that the company has seen proof of the pudding in their enhanced metrics. “We are also working on proof of concepts for IoT based solutions with regard to material handling solutions and asset utilisation in terms of vehicle tracking and security for inventory in-transit.”
DB Schenker, the transport and logistics division of the Deutsche Bahn Group offers a complete range of international air and ocean freight, contract logistics and global supply chain solutions from a single source. The company has a portfolio of clients spread across verticals like Aerospace, Electronics, Industrial, Automotive, Retail & Consumer and Healthcare. The company plans to double its warehousing capacity from the current 3.5 mn sq ft spread across 53 warehouse locations and enhance efficiencies through technology deployment for faster processing and real-time updates across the value chain.
“Our aim is to develop solutions that help our customers manage their supply chains, optimise inventories and significantly reduce logistics costs,” says DB Schenker’s Sharma. “We are using Artificial Intelligence (AI), especially for our internal processes, predicting market trends, network optimisation, route management, and freight rates where large sets of data are available and accessible.”
“To provide cutting edge technology services to aid large enterprises as well as SMEs since we contribute to 40 per cent of the nation’s exports, DB Schenker recently introduced Connect 4.0 Ocean platform to allow customers to track shipments in real time, access to features like quotes in real time, get an estimated delivery time and also manage booking of freight consignments,” Sharma goes on to inform. “The services will soon be available for air as well.”
With the diversified Future Group as its anchor client, FSC provides contract logistics solutions, cold chain solutions (both warehousing and transportation), as well as express delivery function to companies across all sectors, with large market share in e-commerce, food and FMCG, and fashion industry. The company operates a pan-India distribution network, offers integrated warehouse management systems with highly automated state-of-the-art technology systems, and hub and spoke transportation model that enable innovative service offerings to the customers in an optimised and cost-efficient manner. As of June 30, 2019, FSC operations are run through 80 distribution centers across India, covering approximately 8.09 mn sq ft of warehouse space, while its ‘hub-and-spoke’ distribution model comprising 13 hubs and 126 branches across India.
“We have efficient program management capabilities along-with supply chain experts to handhold the transition effectively and this is aided by strong processes,” says Toshniwal of FSC. “Our flagship Distribution Centre (DC) – MIHAN’s technological prowess is unmatched in India. The entire supply chain process at our MIHAN DC is automated. High-speed cross belt sorter, boom conveyors for inbound and outbound operations running up to 4kms, laser scanners, put-to-light technology, voice picking and 12m high spiral conveyor enable efficient and cost-effective operations. We have the capacity to throughput a million articles every day,” informs Toshniwal.
KWE India, the Indian subsidiary of Japanese logistics giant Kintetsu World Express (KWE) is one of India’s leading, end-to-end, comprehensive logistics solutions provider. As a one-stop international logistics services provider, KWE India offers international air and sea freight forwarding, customs handling, import & export of goods, warehousing, and last-mile delivery to both B2B and B2C businesses across India. The company’s strength lies in its ability to offer a full-range of reliable, value-added and optimal supply chain solutions that are significantly more comprehensive than mere ‘door to door’ services offered by typical logistics companies.
“KWE India builds flexibility into the supply chain to increase visibility, drive efficiency and lower costs. Our specialisation in supply chain management design 3PL, fulfilment and hybrid models to optimise and support our customers supply chain, helps reduce costs and release precious capital from their domestic and global operations,” says Baskar.
Apart from covering all aspects of logistics planning, control and supply chain process from collection through to final delivery, contract logistics players work alongside their customers to tailor a range of flexible value-added services to meet the latter’s specific business needs. With a number of diverse solutions at their disposal, customer’s requirements are satisfied with one or a host of many components.
TVS SCS works closely with their customers and their customer’s partners to plan and implement the most cost-effective solution whilst meeting the service levels they require.
“Being a knowledge services and operations company, we believe in partnering with our customers by understanding their pain points and then co-creating solutions that are enabled by the emerging technologies and IT processes. Our collaborative approach adds significant value to our customers. We bring in our global expertise of delivering best-in-class operational performance to our customers. Our value-added services range from sourcing, inventory planning, inventory management, demand forecasting, demand planning, network planning, transportation, warehousing to last-mile B2B delivery,” states Shankar.
Today, the world faces accelerating social, economic and demographic changes and supply chains must prepare to change with it. Over the last century, supply chains have demonstrated that achieving high performance requires fast recognition and response to the challenges and opportunities posed by the changing world. From serving a single purpose of delivering the product from point A to B, supply chain and logistics has become an important lever to improve profit and differentiate one’s proposition in a complex business environment. Therefore, for every corporation, it has become necessary to invest in their supply chain team, or rope in highly qualified, reliable and established end-to-end integrated logistics solutions provider.
DB Schenker’s value-added services not only improve operations workflows, but also facilitate strategies to postpone final assembly and labelling of products, till final consumption takes place. “We provide effective automotive logistics solutions that include procurement, distribution and aftermarket logistics, besides extending consumer, electronic, healthcare and pharma, and industrial logistics solutions. We believe that offering value-added services globally such as labelling and packaging, reverse logistics, FTWZ (for past payment of duty), cargo insurance, white glove delivery, etc. can help our customers focus on their core competencies, providing a seamless integration of our services,” voices Sharma.
Similarly, KWE India, besides their core services, offer a wide variety of value-added services such as kitting/assembly, testing, order fulfilment, packaging/repackaging, configuration/customisation, labelling, repairs, quality inspection, customs clearance procedures, and fiscal representation that are provided according to customer’s specifications. “Our tailored value-added services are especially designed to offer customers optimum flexibility, ensuring that they consistently meet their partner’s needs,” remarks Baskar.
To meet the diverse business needs and add flexibility in the supply chain, FSC also offers a wide range of value-added services which include kitting, promo-bundling, labelling, packaging, bar-coding, stickering, quality control and returns management.
A complete solution to suit
Today, companies need leaner supply chains and logistics solutions providers have demonstrated their ability to help customers with better utilisation of capital, assets, space and manpower. The extensive and complementary services of a logistics provider’s partner businesses, in addition to the services of contract logistics, ensure a complete solution to suit. Through the course, logistics solutions providers nurture experts and resources that work relentlessly to ensure customer satisfaction. More than service, their quest is to deliver a great experience to our customers. At this point, logistics players like DB Schenker, TVS SCS, KWE India, and FSC not only provides one-stop solutions but also empowers customers.
KWE India offers complete integrated supply chain management solutions bolstered with leading edge technology and the most comprehensive distribution network available. With large investment in Singapore’s APL logistics and GatiKWE- the joint venture company between Gati and KWE, the company now has a full array of service for all transportation modes in house, which help them leverage and stay focussed to:
- Increasing customer productivity and efficiency
- Developing Certainty and reliability
- Leveraging on the fast, accurate and detailed network
- Be all the more responsive to Contract Logistics
Baskar rejoins, “With keeping in view the local infrastructure and available modes of transportation, KWE India’s dedicated corporate solutions team study data and inputs provided by customers and helps build long term solutions.”
With a clear vision of offering customised solutions as per the requirement of clients, supply chain experts at FSC visualise the complexities of this volatile business environment and adopt a holistic approach to design solutions and add velocity to their customers businesses. According to Toshniwal, FSC examines and understands the business requirements of its customers and designs an optimal customised solution. “Focussing on major aspects of the supply chain like inventory planning and route optimisation, we analyse various scenarios and then plan and operate end-to-end supply chain of our customers.”
Although, creating a network among business partners across key markets while catering to individual requirements can be a challenge. Keeping this in consideration, with support of their worldwide network of branches, DB Schenker connects all important global economic regions and offers logistics solutions tailor-made to the customers’ requirements. “We cover all stages of the supply chain – from supplier to customer delivery, from reverse logistics to aftermarket support, in different industries such as automotive, pharma, infrastructure, and so on,” raises Sharma.
While TVS SCS offers support in the all areas of supply chain, their offerings in international freight forwarding and EXIM supply chain management are value-added services. “We have adapted the newest of technologies for all our services with the objective of deciphering our customer’s pain points and effectively finding lasting solutions to those,” says Shankar.
Flexible fulfilment option
Today, logistics solutions providers also see the growing need for warehousing and are investing in expanding their warehouses across the globe. They have also started investing in tools that make complex warehouse operations more efficient. This will, in turn benefit their existing as well as prospective customers who can avail their services to achieve higher operational efficiencies. McKinsey Global Institute estimates that the transportation-and-warehousing industry has the third-highest automation potential of any sector; contract logistics and parcel companies particularly stand to benefit from it.
Additionally, with the e-commerce boom, efficient sorting has become increasingly important, particularly in parcel operations. Advanced conveyor systems use scanners that can pick up bar codes on any side of a package to determine the appropriate action. Autonomous palletizers use robotic arms to build pallets from individual units and cases, often using advanced analytics to determine the optimal placement for each box.
FSC has developed built-to-suit warehouses for their customers from different sectors with varied requirements. “Our integrated solutions combine all the necessary services (warehousing and distribution) to drive efficiency and ensure a responsive and reliable supply chain,” says Toshniwal, adding that FSC is at the forefront of process automation and technological enhancement. “We have put-to-light and high-speed cross belt sorters, which help make critical operational processes smooth. In our multiuser facilities, we have products with low to high complexity, with varied dimensions and goods that need appropriate handling. Through voice pick technology, we have made the picking process faster and more efficient. With the introduction of inbound and outbound automation, we are able to reduce loading and unloading time by around 1/3rd.”
With the increasing demand for impeccable customer service, today’s warehouses are pressured to raise performance goals, to streamline its operations, and improve efficiency in every aspect of warehousing activities. One of the most proactive ways of doing so is the use of a warehouse management system (WMS) that is designed to speed up order turnaround time, improve inventory accuracy, provide instant order status information, manage warehouse space and enhance labour productivity.
Also, challenged by rising freight rates, driver shortages, tight truck capacity and changing customer demands, players are using more technology to work through these and other transportation-centric problems. As the true workhorses of the supply chain management software cluster, transportation management systems (TMS) have become the “must have” for companies that—working under the pressures of e-commerce and omni-channel—need to move beyond clipboards, spreadsheets, and phone calls to manage their increasingly sophisticated transportation networks.
Nonetheless, digitalisation platforms, technologies, integration capabilities and applications are making TMS and WMS accessible – and affordable – to the rest of the business world.
As demand for complete visibility and fast delivery continues to rise, FSC’s WMS and TMS modules,are able to seamlessly fulfil that requirement. “By integrating client applications to our suite of applications, manual intervention is minimised. WMS helps us in managing inventory, monitoring and analysing operations, enhancing productivity and ensuring compliances. For end-to-end visibility, from warehouse to customer, our TMS portal which is integrated with Vehicle Tracking System (VTS), allows real-time information flow and gives transparency,” continues Toshniwal.
DB Schenker plans to scale up its operations in the country by expanding its warehousing capacity as well as deploying technological solutions capable of processing shipments at a quicker pace. “We have been proactive in adopting digital technologies to keep pace with ever-evolving industry demands. Our existing online platform eSchenker features track and trace capabilities meant to improve fluidity and transparency. Further, there are opportunities to introduce new and advanced technologies such as scanning, auto picking, and locational capability, at our upcoming facilities over the next few years,” mentions Sharma.
With the goal of developing an increasingly productive, efficient, and fully flexible automated warehousing environment, DB Schenker has collaborated with ‘IAM Robotics’ to create ‘Warehouse of the Future’. This new collaboration is intended to serve as a foundational platform for the use of automation and robotics technologies to help shippers work smarter, better, and faster.
TVS SCS believes that adopting the right technology not only helps in productivity enhancement and superior quality in delivery but it also aids ergonomics by reducing the physical strain on warehouse operating staff. “We have a WMS and our warehouses are equipped with video analytics, facial recognition, IoT, RFID, and relevant technologies. In this way we ensure efficient storage, quick retrieval and effective order management,” says Shankar, emphasising on the company’s data analytics processes that assists in enhancing planning and inventory optimisation and higher fulfilment.
Over a period, KWE India has also increased its reliance on information technology. The company has already launched its new version of WMS. In addition, with the use of TMS, the company is able to meet customer’s goal to cut the transport cycle times and reduce cash cycles and also lower the inventory.
Alongside the focus to consolidate logistics services to boost customer’s bottom line, logistics solutions providers should constantly keep on evaluating new business opportunities. Players should be on the lookout for new service offerings with an intuitive understanding of not only their customers’ operations, but also their culture and their business objectives.
Today, as the country prepares itself for better logistics, the increasing influx of international players are prompting domestic 3PLs and logistics solutions providers to expand their footprint and focus on transportation service, warehousing and investing in logistics parks. This has opened up prospects for partnerships, and domestic companies now have exposure to the advanced technologies introduced by global players.
Recently, Nippon Express Co Ltd- a Japanese global logistics services company, entered into a strategic partnership with FSC. The partnership aims to leverage Nippon Express’ competency in diverse sectors for the Indian market aspiring to become India’s leading logistics player. In return, FSC will demonstrate its 3PL capabilities, attracting potential new business opportunities from Nippon Express’ existing Japanese and MNC clients.
Whether an opportunity is an addition of a new capability to their existing services or a foray into a new sector, if TVS SCS has the conviction that there is business potential and scope for scale, the company is upfront to take the next step in the new initiative. “We have demonstrated capability as an independent service provider and also seen remarkable success in joint and collaborative ventures. However, the nature of the business model will depend largely on the type and geography of the new initiative,” attests Shankar.
In 2015, TVS SCS, in a consortium with technology company team Leidos, won a key contract from UK Ministry of Defence (MoD) for its procurement solutions. The contract, worth £5bn, will see TVS play a key role in data management, inventory management, procurement and product sourcing for the full range of military and non-military commodities required by the Ministry, including food, clothing, pharmaceuticals, medical equipment and general supplies. As part of the contract, TVS will introduce improved procurement processes that will lead to reductions in stockholdings and commodity prices and generate £500m (INR 500 crore) worth of efficiencies to the UK Ministry of Defence over the next 13 years.
Until now, TVS SCS has made three acquisitions in the UK.
In the case of KWE India, the company plans to develop and strengthen its domestics and cross-border transportation for countries such as Bangladesh, Nepal and bring added value to its existing customers. As mentioned previously, KWE as part of its expansion invested in GATI, a pioneer in domestic transportation in India, and also acquired APL Logistics globally.
Today, many companies tend to have an asset light business model where they own relatively fewer capital assets compared to the value of their operations. For companies, the purpose to choose and become asset light is also because it helps them offer customisation.
At the same time, many companies also constantly look at churning the portfolio. They try to develop a good mix of asset light and asset heavy like commodity and non-commodity business or services. The intent is to create a balanced portfolio.
Apart from that, today, it’s pretty much impossible to find a company that doesn’t utilise third-party vendors. Due to trends towards specialisation and outsourcing, companies increasingly focussed on core competencies are engaging greater numbers of third parties to perform key functions in their business value chain; third-party activity is typically responsible for driving approximately 60 per cent of a firm’s total revenue.
DB Schenker doesn’t use any single vendor policy but has collaborative arrangement with their partners, which leads them to build asset light business so as to provide efficiencies in services to customers and achieve scale of efficiencies.
TVS SCS’s business operates on the framework of an asset light model. “We partner extensively with transporters and warehouse property owners. We also believe in partnering with start-ups if we identify a mutual benefit in the collaboration. We do this in order to provide agile and cutting-edge solutions to our customers,” echoes Shankar. “Our partnership with vendors who have been in a sustained relationship with us has helped them grow along with us; there is a mutual trust and this greatly aids in joint capacity building.”
For FSC, to remain asset-light is one of their fundamental philosophies. “We do not invest in buying warehouses or trucks. Our investment goes into technology, material handling equipment, etc. the movable stuff which goes into the warehouse. It enables us to grow rapidly, impart agility to our business offering to our customers,” explains Toshniwal.
Being a global logistics company, KWE’s business directly comes from global customers, mostly. Alongside, the company seems to maintain an asset-light logistics business model to preserve service flexibility.
Business competition can be fierce, especially in markets like India with aggressive competitors and where customer expectations change dramatically. It becomes imperative for businesses to find out what matters to their customers at every moment- is it lower price, more flexible or premium service, the latest products? Businesses need to develop and consolidate on unique selling points (USPs) that taps into what customers want by being more responsive to their needs and expectations. It should be clear and obvious – no one should have to ask what makes the company’s offerings different.
What’s more? Skilled and motivated employees underpin vibrant, growing businesses; attracting them means more than paying a competitive wage. Additionally, the ever growing pool of smart customers are often more impressed by a good working atmosphere, and benefits such as flexible working and structured career development. High levels of employee motivation are intrinsically linked to high levels of employee engagement.
Post-GST implementation, DB Schenker has seen tremendous opportunities in expanding their domestic logistics offerings through contract logistics and land transport. According to Sharma, with more companies starting to realise the importance of a specialist like DB Schenker who understands the changing landscape, gives them possibilities to lead the space. Following this trend, the company has been constantly helping customers to design better supply chains, more adaptive and resilient. One such initiative is the “reduction of lead time in long-haul movements” obtained through efficient track /trace/ongoing run time of the vehicle.
As an organisation, TVS SCS has been early adopters of `Lean Principles’ from the Toyota Production System, cites Shankar. The company imparts training to its team to equip them with knowledge application of waste elimination and problem-solving tools. Adding to this, Shankar says, “We have trained all our employees extensively in these areas and it is our endeavour to continuously seek improvement in all aspects of our operations. We keep track of all our projects, processes, and tasks as well as the financials to appraise the effectiveness and efficiency of innovations and new initiatives.”
Apparently, KWE India is committed to proper orientation at all levels, which has resulted in a quality culture in the organisation. Over time, the company has emphasised more on understanding customer needs and the essence of quick decision making. Baskar stresses, “KWE is focussed on measurable quality deliverables. Our warehouses are driven by key performance indicators (KPIs) and standard operating procedure (SOPs). We handle large no of Stock Keeping Units (SKUs)/lines from diverse industry sectors and adopt a customer-centric approach. This has helped in establishing long relationships with our customers.”
KWE India is ISO 9001:2015 certified for its Quality Management System across India. Apart from that, the company has 14001:2015 certifications for Environmental Management System and ISO 45001:2018 for Heal and Safety. The company has also obtained good distribution and storage practice (GDSP) certificate for a warehouse in Hyderabad.
FSC also operates out of good quality, global standard warehouses, which they either build or follow a strict mandate of compliance with property owners. “We have a strong network of 90 DCs which cater to the demands emerging not only from tier I but tier II and III cities as well. Our DCs are BS OHSAS 18001 and ISO 9001 certified and equipped with state-of-the-art features,” highlights Toshniwal, adding that their DCs are scalable and can be converted to multi-user facilities to adapt to the changing needs of customers.