India’s logistics and supply chain sector is undergoing a big change as two moves by the government — goods & services tax (GST) and infrastructure status to the sector — have prompted many companies to invest more in the logistics sector, and hire the right talent to steer it.
“The industry has one common wish list from GST: one market, seamless flow of goods to help businesses focus on real cost optimisation in their supply chain, and eventually lower their transaction cost optimisation in their supply chain, and eventually lower their transaction cost,” said RS Subramanian, India head of DHL Express, the world’s biggest international express service provider by volume.
“Right away, we see the improved speed of goods movement with reduced roadblocks, but for the rest, it’s early days yet. GST implementation is on a phase of continuous improvement — it’s a matter of time before the benefits begin to flow,” he said.
Kishore Biyani, founder of Future Group, said supply chain and logistics are the most important backend aspects of the group’s overall business, and their importance has only increased in the past one year. Now, the heads of group companies’ logistics arm are a crucial part of every managerial decision that the group takes, something that didn’t happen earlier. He said the logistics cost of the group is less than 2%, claiming it’s at least 50% below any competitor.
Future Group’s logistics arm Future Supply Chain Solutions is making a debut on the bourses this week.
The government made a historic tax overhaul from July 1that replaced at least seven indirect tax heads, including countervailing duty, special additional duty of customs, excise duty, service tax, central sales tax, value-added tax, octroi and state cesses with one tax on goods and services.
The government also conferred infrastructure status to the logistics sector on November 21 which means any more investment in infrastructure — like warehouses and cold chain storage — would get cheaper financing from banks.
“Now, the companies that build warehouses and cold chains will get loans at 2% lower interest rate than what’s prevalent. This will decrease their costs and ultimately have a positive impact on the rentals 3PL (third-party logistics) companies like us are paying for leasing that infrastructure,” said Anshuman Singh, chairman of the Warburg Pincusbacked Stellar Value Chain solutions.
He, however, said the government still needs to “attack” the e-way bill, the complicated digital bill that is being planned to replace the paper bills in these operations.
Industry players and state governments have been raising concerns on the new bill, prompting the government to postpone its implementation to April 1next year.
Ramesh Agarwal, chairman of logistics firm Agarwal Packers and Movers, which also helps move houses, said the benefits of GST are already being seen in lower charges and improved efficiencies.
“We have already given an 8-9% discount on packing and our transit time has improved by 15-18% due to the removal of toll posts. We will get further input tax credit when we invest in a new fleet of trucks in 2018. That and the e-way bill will give an advantage of another 8% to our customers,” he said.
Hiring trends have immensely changed for logistics companies, said Shashi Kiran Shetty, chairman of Allcargo Logistics, which according to several head hunters ET spoke to, is the biggest recruiter of young talent in this still-burgeoning field.
Allcargo has hired 23 fresh graduates this year, its highest ever, and more than double the number of hires last year, said a spokesperson.
“There’s a huge uptick in demand for skilled professionals within the supply chain. Compared to last year, the number for our company is 35% higher,” said Pranshu Upadhyay, director at global head hunter Michael Page.
“A lot of this hiring is in the field of supply chain and data analytics which is a career that a lot of young professionals look forward to,” he said.
Warehousing plans and structures have changed drastically. There is a prominent shift to bigger structures and a clear emphasis on higher automation.
The companies to do it in India, sources said, are Ikea, Philips and French auto component maker Valeo.