Focus should be on greater integration of India in the global value chain

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If India intends to strike a balance between managing vulnerabilities in global value chains (GVCs), and building resilience, it may need to reassess its regionalisation strategy to take advantage of the accelerated momentum towards regional value chains (RVCs). This will necessitate deeper reforms in labour markets, trade infrastructure, and improvements in the overall business environment. In an exclusive conversation, Adarsh Hegde, Joint Managing Director, Allcargo Logistics informs Upamanyu Borah, India’s need to adopt a holistic perspective focussed on ‘whole of the supply chain’, by driving strategic changes in its investment-development paradigm, dismantling bottlenecks and through greater integration with the global economy.

Post-lockdown, how long would you estimate it would take for our industry to get back to business as usual?

The logistics industry has survived the COVID-19 pandemic crisis and is, in fact, recovering. The industry, as a matter of fact, is at an inflexion point. Our views are the recovery for the logistics sector could be W-shaped, as there will be periodic lockdowns and subsequent unlocking in various parts of the country till a vaccine is invented or the intensity of the pandemic reduces. Currently, we are witnessing a phase of recovery in various manufacturing sectors. We expect import volumes to keep improving post-August this year if the recovery continues.

In the later phase of lockdown, what is the ground reality? Has seamless transport systems been restored?

As lockdowns ease in various parts of the country, businesses are gradually opening up. Where there are disruptions and challenges, players across the logistics ecosystem are collaborating more closely together to resolve the situation and keep trade moving. Logistics services providers are taking the required efforts to ensure safety and also provide incentives to drivers, equipment operators and handlers, so as to continue serving their customers.

We, at Allcargo, have been operating throughout the lockdown and are now opening up our offices at various locations in strict adherence to government rules and regulations for COVID-19 prevention and safety. We are in constant touch with our customers, taking the necessary steps to offer them seamless logistics services to the maximum extent possible.

Despite few unavoidable situations due to the COVID-19 crisis, the transport systems continue to operate and are bound to only get better and more efficient in the coming days.

How your organisation had been providing customer experience during the lockdown?

As port and CFS operations come under essential services, those were operational throughout the lockdown phase. We made all the required arrangements so that our unit employees and handlers were housed in our CFS facilities, allowing us operate seamlessly during the lockdown.

The adverse impact on our business was relatively less as we were supported by our multimodal transport operations across the world through our wholly-owned global subsidiary ECU Worldwide.

Besides, we have adopted various digital tools and technologies, enabling our teams to work remotely. Our in-house ECU360 platform launched in some countries emerged as a utility platform both for us and our customers. We also facilitated e-payments, electronic-delivery order and electronic bill of lading, amongst other digitally-enabled operations.

Furthermore, during the lockdown phase, our teams went the extra mile to ensure customer satisfaction. They worked tirelessly to manage the space constraints in our CFSs to help both, customers who needed deliveries of essential goods as well as customers who were not being able to take deliveries. This ensured that ports do not get choked and global trade kept moving.

Our Projects & Equipment (P&E) division undertook special efforts to transport Over-Dimensional Cargo (ODC) for critical projects even during the COVID-19 induced lockdown phase, displaying professionalism and operational excellence. Right from permissions to documentation, and maintaining social distancing and all safety precautions, we have emerged stronger in the face of challenges.

Which sector related developments are set to help address the growing freight transport demands?

The COVID-19 outbreak has seen the e-commerce segment take center stage as a primary delivery source for essential items. Going ahead, in the post-COVID-19 phase, it is likely that a large number of households will go online for procuring supplies of household essentials.

The anticipated surge in last-mile deliveries of essentials to the end-consumer presents a huge business opportunity to express logistics players in the country. These developments present the potential for the domestic logistics segment in the country to transition from a purely operational role to a strategic one. Factors like a robust IT infrastructure, providing value-added services to customers, a streamlined distribution model and penetrating untapped markets in the country’s hinterlands will be the key to any express logistics company while retaining market share and expanding business operations.

In addition, the warehousing sector in the country is set to emerge as an attractive asset class in the commercial and industrial estate segment. Logistics players in the country will need to place emphasis on creating a digitally advanced warehousing infrastructure with an onus on modern Warehousing Management Systems (WMS) and IT-driven solutions.

The consumer sentiment being low now and considering economic downturn across the globe, what will be the scenario of logistics services requirement in the next couple of years?

The demand for logistics services in the next two years will primarily be driven by the e-commerce boom. E-commerce players are relying on logistics service providers for their first-mile pick up and last-mile delivery. Traditional businesses are also embracing digitalisation to remain relevant to the consumers. As the purchase behaviour of consumers change due to COVID-19 scenario and become more contactless, the demand for tech-enabled logistics services specially designed for e-commerce players will continue to grow.

In this ever-evolving new normal business environment, many countries looking to de-risk and diversify supply chains by relocating their manufacturing. Even this may open up great opportunities and potential for India, especially in the warehousing sector.

Experts say the industry will also see lot of automation across industries with less staff and more of machines doing the job. Is this a curious case of commercial consideration or a business continuity necessity?

Artificial Intelligence (AI) and Internet of Things (IoT) are transforming logistics operations. Automated processes powered by AI as well as Machine Learning (ML) can accelerate many logistics operations while reducing inefficiencies and optimising the available resources at every level of the logistics supply chain. We have been taking forward strides in optimising our operations further by implementing AI and IoT. In the post-COVID-19 scenario, we’ll intensify our focus on implementing advanced automation. Technology, after all, is the future of the logistics industry and is very likely to be a necessity for business continuity.

Do you see some modal shifts in the way the industry had been working earlier?

We are already seeing some shift in ways the industry is moving. The effects of COVID have only accelerated this and the industry is likely to witness a significant modal shift in its functioning.  This can be further made possible if the government places priority onus on expediting the completion of the high-speed, dedicated freight corridor project which will account for the transportation of long haul and bulky commodities. This is expected to streamline the container freight movement and reduce turnaround times. Apart from having a positive multiplier impact on the Indian logistics sector, the project will play a vital role in decongesting a highly saturated road network.

It is also anticipated that coastal shipping in the country will get a boost with the share of inland waterways increasing substantially in the country’s overall transportation modal mix. An impetus on developing a robust Inland Water Transport (IWT) network will not only make freight transport cost-effective but also lead to reduction in logistics cost to around 10 per cent of GDP from the current levels of 13-14 percent.     

Can we expect more automation coming into the entire supply chain for handling of cargo in a multimodal network?

Automation is expected to play a pivotal role in the handling of cargo in a multimodal network.  The integration of technology and digitalisation will be critical in steering the logistics sector on a high growth trajectory. Artificial Intelligence (AI) can and will play a key role in creating route optimisation systems for the channelisation of cargo movements. By leveraging real-time data for improving decision-making capabilities, IoT can boost supply chain monitoring efficiencies and streamline the overall inventory management processes.

What are the areas logistics professionals globally need to keep an eye on and put up a unified front?

Logistics professionals will need to realise that, the customer’s experience and feedback will determine the reputation and brand recall of the company on a global scale. Only companies diligently following a customer-first approach will survive in a highly volatile global business environment.

It is important to be aware of the customers’ ever-increasing demands and expectation when it comes to safety. In addition to ensuring security of the cargo, implementing all necessary COVID-19 precautionary measures, a focus on the health and safety of staff members and visitors at offices and locations will be of utmost importance.

Logistics players will also need to leverage new-age technologies to interpret real-time data and develop timely insights to predict upcoming contingencies. They will need to build seamless data sharing and exchange platforms which will not only help in harnessing cross-functional synergies but also build mutual trust and transparency in the global logistics ecosystem.

How can the logistics ecosystem players need to gear up in supporting India’s dream of becoming a manufacturing hub?

Providing cost-effective logistics solutions and building an integrated, digitally robust supply chain infrastructure is the key to positioning India as a global manufacturing hub.

Logistics players in the country will need to place responsibility on improving maritime linkages, promote port-led industrial development, and strengthen road and rail connectivity within the interior regions of the country. The focus should also be on greater integration of India in the global value chain. The country will need to make rapid progress in establishing trade links with newly emerging global markets. This will help the Indian manufacturing sector expand its market presence in untapped geographies.

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