Consultancy in Post-Pandemic World

Even before the Covid-19 pandemic stuck, the world was witnessing a quiet churning. Sino-American trade war was brewing in the midst of other geo-political tensions in South and South East Asia. In the middle of all this, the Covid-19 pandemic stuck in China. 

A supply shock that started in China in January and the demand shock that followed as the global economy shut down as the pandemic spread to engulf increasingly other parts of the globe, businesses, of just about every nationality and hue, were exposed vulnerabilities in sourcing and production strategies.

China being the manufacturing hub of the world, it was bound to be. And businesses, of almost every nationality and hue already confronted with rising tide of nativism, will be forced to take into account a host of such factors once the pandemic subsides and markets open in normal course.

Indian businesses, especially MSMEs apart from these larger issues are confronted with the issue of being afloat. More than 25% of them have closed down since the Lockdown was imposed last year. Many of these companies, including logistics, are grappling with the issues of survival, keeping afloat, credit availability and shrinking orders. 

Mahesh Vyas, Director and Chief Executive, CMIE suggests, “MSMEs have suffered as they are unable to survive the severity of pandemic, the sudden and prolonged lockdown and the consequent shrinking of overall businesses. Large companies are not only better placed to ride out of storm but also gain by cannibalizing markets of the withering smaller companies.” Logistics & distribution players are no exceptions. In the days to come, we shall see ‘stake sale’, ‘acquisition’ and ‘take over’ all too often. Darwinism is in real.

This is where the services of a consultant become very important. When a logistics company may hit challenges which for one reason or the other, is simply beyond its ability to resolve with internal resources alone, and has to seek the services of specialists, consultants and consultancy services. 

A logistics consultancy is a specialised service that does a cost-benefit analysis of the operative model of a company, study its logistics operations, use data as a tool for comparative analysis, and by employing the best model of information technology at structural level, come out with an efficient solution. Apart from this, it studies the prevailing scenarios in the world as the one described above and suggest measures or models that could provide for the necessary wherewithal, like

•   Integrating decentralized & flexible sourcing units in the value chain of manufacturing     companies;
•   Become a dependable partner for manufacturers and traders;
•   Build an infrastructure in trucking and space that could sustain for medium to long-term;
•   Build warehouses in strategically important sourcing and industrial cities and connect     them for end-to- end logistics;
•   Invest in skilling and retention of manpower;
•   Inventory control measures and controlling spillover and
•  Adopting technologically flexible infrastructure.

Despite everything that could be happening in Indian logistics and supply chain and in the world, a logistics consultant would need to keep in mind that there would be pressure on logistics to be efficient. Highly competitive environment would ensure that there is no unpalatable cost escalation – consumers would keep looking for value for their money. Apart from this, no two sizes fits all. 

A logistics consultancy service would need to understand the premise or context of operation. For example, India is challenged by poor integration of distribution networks that could hinder end-to-end logistics, warehousing & distribution facilities. This is compounded by a lack of adequate awareness and appreciation for IT infrastructure and a counter-productive regulatory environment. 

Importantly, manufacturing, 3PL & distribution partners would be forced to innovate and move to decentralizing their facilities so that in exigencies, their other units are operational.

Source: https://www.reddit.com/user/safexpress1/comments/nknqny/consultancy_in_postpandemic_world/ 

Logistics in Post-Pandemic India

 Modern businesses are built on the principle of specialization. Their finished products may often be consisted of critical components or sophisticated materials that require technological skills to make. For example, a car at the showroom floor is unthinkable without an AC, an   LCD panel or touch screen none of which is manufactured by the automotive company. Apart from these highly sophisticated products, other spares - from simple nuts-bolts to BSV1 compliant engine-parts- are sourced from SUPPLIERS specializing in their manufacturing. These suppliers could be spread in different parts of the country or even continents. Connecting the sourcing units to the manufacturer and the manufacturer to the end user is the important role the logistics & supply chain industry performs. Of late however, logistics industry is going through a phase of uncertainty. The supply shock that started in February last year in China was followed by a demand shock the world over as the global economy shut down, have exposed the sourcing units, manufacturing companies and the logistics, 3PL and supply chain partners to uncouth vulnerabilities.

In the years subsequent to economic depression in 2008-09, amidst widespread unemployment and rising inequality between rural poor and urban middle classes, populist regimes riding the nativist slogans came to power in many countries the world over. They centralized power to

·         Encourage domestic production to create employment

·         Imposed a tariff barrier (import substitution) making cross-border trade an expensive affair

Economic nationalism thus developed has resulted in a huge disequilibrium in demand and supply. Manufacturing companies, dependent as they are, on a variety of sourcing companies spread across the globe, will resort to procuring from domestic suppliers which often lack resources, and credit availability to scale up. This will escalate the product prices and at the same time quality could be questionable. Nonetheless, a vast consumer-base across nationalities, already exposed to the quality and efficiency of the products, would continue to look and demand the same. In the immediate to medium term, though, there would be pressure on the manufacturing to logistics companies to invest heavily in value-chain while being competitive at the same time. Easier said than done.

As we have seen since the late last year and what has come to be known as “Vaccine Nationalism,” a group of chemicals which are used for developing DNA and mRNA-based Covid-19 vaccines and DNA-based drug therapies are sourced mainly from China and South Korea. Because of rising nativism, many vaccine producing countries and companies have become vulnerable. This has disrupted the vaccine manufacturing, and India which used to source raw materials to manufacture vaccine for the world, is faced with an unprecedented crisis.

With localized lockdowns in the face of epidemic and devastating second wave that is ravaging India has put Indian logistics firms and 3pl players in a perilous position. Manufacturing units kept the machines running and when the lockdowns announced, they were caught unawares flush with a lot of inventory. There is a scarcity in demand especially for discretionary items and warehouses are full to the brim with little possibility of normal operations anytime soon. Whatever the pent up demand created last year after lockdown was lifted would be harder to come by this time around. Obviously, when it rains it pours.

3PL and logistics partners would be required investing big to stay in the game. To start with,

·         End-to-end logistics and integration of value chain across spectrum. Logistics companies  have to invest further in hub-and-spoke concentrically operating, to connect sourcing/supplying units with manufacturing plants and then to the consumer across board

·         With self-reliance in manufacturing a theme, tertiary and secondary units will be encouraged to build themselves around larger manufacturing plants. They will have little capacity to hold the inventory and would require a 3PL partner. How quickly the 3PL and express distribution partners will invest in and around manufacturing belts and SEZ areas would be able to reap the benefits

·         Technological innovations and finding a right balance between human force and automation would be another key element for 3PL & express distribution companies

·         Uncover and address hidden risks in operations and invest in creating human capital up for such exigencies in future.

Importantly, manufacturing, 3PL & distribution partners would be forced to innovate and move to decentralizing their facilities so that in exigencies, their other units are operational.

 

Source: https://www.reddit.com/user/safexpress1/comments/nhjth5/logistics_in_postpandemic_india/

 

Ecommerce Logistics: Prospect amid Pandemonium

 Early this year (January 13, 2021), Dublin-based ResearchandMarkets.com published a report titled, “India E-commerce Logistics  Market Forecast to 2027 – COVID-19 Impact and Regional Analysis by Service Type, Operational Area, and End User.”  According to this report, Indian e-commerce industry is estimated to grow at a CAGR of 18.8% to reach $11.48 billion by 2027 from its current figure (2019-20) of $2.93 billion. 

While the study shied away from presenting the methodology and base figures to arrive at its proposition, it nonetheless underlined the service and operational aspects of Indian Ecommerce industry. Indeed, more than 4/5^th of share in Indian ecommerce industry is of services; it is the operational or its business to consumer (B2C) aspect that should be matter of interest in the field of logistics. Astronomical figures in valuation and impressive growth forecasts looks good but often fails to identify the bottlenecks and to address the operative economics.

Indian e-commerce and B2C market has been flourishing for over a decade and half due to tele-revolution, internet penetration, a burgeoning deep-pocket middle class armed with smartphones; favorable demography, and a policy-business confluence that is fundamentally conducive to this growth. However, it will be erroneous to see B2C logistics separately from B2B logistics. 

Except for marketplace, basic architecture of hub-and-spoke, network penetration and reach and capability to service to the “number” of pin codes remain largely the same for both B2B & B2C. Ecommerce or B2C is an organic journey of logistics from transportation to express distribution to business to consumer. Logistics and business processes evolved and in recent years, it is consumer satisfaction which is the key. 

Most profound impact that the e-retailers have had on traditional methods of Indian logistics is their adoption of tech-enabled business practices and automation. This has compelled the entrenched B2B firms to invest big and cut-out on manual interventions. We now see a greater urgency on efficiency and processes.

With the adoption of GST as a uniform taxation system, the urgency has further enhanced. The invoice sizes have reduced thereby adding wings to the packages. There is now an enhanced recognition to the last mile delivery ecosystem, with the focus of business shifting from the seller to the consumer, both the traditional and B2C businesses are forced to invest on the personal hygiene and soft skill development of delivery staff. 

A peculiar and welcome development in the field of logistics is taking place silently. There is a greater demand for drivers and helpers well-versed in handling smartphones, have knowhow of the technology, and trained are in soft skills. Demand for “entrepreneur drivers” is already very high and we are soon going to see driving schools churning them out.

Ravaging Covid pandemic, however, has a detrimental effect on overall logistics industry and ecommerce is no exception. With localized lockdowns and severe restrictions in movement, things have gone for worse. With only essential services allowed and people are too shocked to be indulgent in consumerism, inventory is piling up, warehouses are crunched for space and there is hardly any incentive to move around. All the major e-retailers have been focusing on groceries, medicines and other dietary products & supplements which constitute less than 10% of India’s B2C business.

When it rains, it pours is an age-old wisdom. The economic turmoil caused by the pandemic has exposed its vulnerabilities. In this decade, much will depend on the ability, intent and urgency with which the ecommerce ecosystem will address its systemic ills, like

·         Concern over data security and individual’s privacy,

·         Bringing about synergy in FDI policies of the Government of India & Ecommerce marketplace,

·         Developing a right mix of automation and human contribution to processes and results,

·         Consolidation or Fulfillment Centre expansion, efficiency in process flow,

·      Balance between commercial interest and consumer protection issues, including protection from fake   and imitation items.

Most important item on the agenda of ecommerce or B2C companies, however, should be on addressing the gap between product cost and product pricing. For, we have been witness to a score of them as quickly vanishing as they come up.

Source: https://www.reddit.com/user/safexpress1/comments/nfvnr5/ecommerce_logistics_prospect_amid_pandemonium/