Mixed Budget for the Logistics Industry

- Ajay Chopra

A budget is an exercise that a government carries out annually and at basic level it serves the purpose of outlining the manner in which money collected by the government from us - the taxpayers - will be utilized. This year’s budget was even more historic as it heralds the completion of two decades of liberalization initiated in 1991 by Dr. Manmohan Singh, the then Finance Minister.

So, did the budget meet the expectations on this front? Well, answer is both yes and no.

Yes, in the sense that coming in midst of high inflation and global economic pandemonium and with the pressing  needs of social and infrastructure sector investments the Finance Minister has done a commendable job of maintaining continuity. Mr. Pranab Mukherjee has also put a thrust on increased expenditure in these areas which will result favorably for the logistics sector. The tax-free bonds of INR 30,000 crore to boost infrastructure will reap benefits in terms of improved transport infrastructure. Investments in warehousing of up to INR 2,000 crore and Cold storage projects being classified as infrastructure are encouraging signs.

The bad news in the budget is in the sense that coming at such critical juncture the budget fails to bring any path – breaking initiatives. It shows certain timidness on the tax front on both direct and indirect taxes areas. For example, the DTC while announced still fails to include all provisions into it and while there was mention of GST roadmap a number of times, no clear timelines still emerges. On custom duty also once again individual items have been looked at for concessions instead of systemic improvement.

The biggest challenges confronting the Indian economy currently are inflation (especially the volatile food prices) and the slow speed of infrastructure development. Last year National Highways were constructed at the rate of only 4 kms per day as against the target of 20kms per day. These find no concrete solutions or action plan in the budget document.

(Author: Mr. Ajay Chopra is the Chief Executive for Drive India Enterprise Solutions Ltd. (DIESL), a TATA group company.)

Challenges in Outsourcing

- Jayanta Ghatak

Long after Outsourcing has become a buzz word in many industries, logistics it seems is still waking up to it. The challenges in outsourcing are plenty but in my reading – the most crucial among them is the mind set. For instance - the fear of leakage of sensitive data and information, which should also be a deterrent for the I.T industry, does not hamper outsourcing for the likes of Wipro and TCS. On the contrary outsourcing is a key driver for the information technology industry. The above in reality is a perceived challenge – other challenges of the mindset include Loss of Internal Logistics Management Facilities, biased choice of service providers, service degradation, emergency response, longer order cycle time, loss of control and representation, reduced contact with final consumer and less visibility to customers.

Apart from perceived challenges, outsourcing also throws up some real ones. They can be broadly classified into a) Strategic, b) Organizational, c) Operational, d) Selection and e) External challenges.

Strategic challenges include Management Buy in, Scope of Outsourcing and Cultural fit. Scope of Outsourcing corresponds to the problem of the extent of outsourcing the company needs to offload. Scope of Outsourcing can be tricky as companies are usually unsure about drawing the line between what works in house and what needs to be outsourced. The ability of cultural amalgamation between the client and LSP is a necessity as the latter functions as an extended arm of the client and for many end consumers the LSP is the client.

Organizational challenges include redeploying existing resources which at times become a major roadblock to outsourcing and improving efficiency. Change management also becomes a key area of focus in an outsourcing scenario. Companies face a daunting task of forecasting the quantum and the timing of change.

Operational challenges include reengineering existing processes in view of outsourcing strategy, framing KPIs/ SLAs both for internal resources and for external agencies, implementing processes across the organization and initiating MIS generation and measuring performance and benefits of outsourcing.

Selection challenges include ability to understand and assess customer’s requirement, Project management and roll-out capabilities, framing appropriate performance measurement system, information technology integration and interface, IT and communication infrastructure up gradation, managing relationship with customers/ vendors/ authorities/ employees, developing short-term and long-term infrastructure, developing strong intra-country dependable distribution service, ability to scale-up/ down depending on customer’s requirement, developing and enhancing Intellectual Capital, Continuously enhancing and expanding service offerings, developing and implementing industry-specific SCM solutions with tangible measurable results.

    Apart from the above, outsourcing also deals with external challenges like poor road conditions, lack of dependable communication infrastructure, managing multiple government authorities and understanding and adopting laws of land.

(Author: Mr. Jayanta Ghatak is the Zonal Business Head (East) for Drive India Enterprise Solutions Ltd. (DIESL), a TATA group company.)