With logistics as the epicenter of growth, companies are diverting their attention towards streamlining their once so-called supply chain as a cost center to turn it into a profit center. But for this to happen, the industry needs to harness the right talent and impart them with the best in class training as well as a boost in infrastructure is what is needed to ensure holistic growth, writes Manish Saigal, MD, Alvarez & Marsal (A&M).
For a long time, logistics as a function has remained a responsibility of team disconnected to core business, working in isolation, given an ad hoc task of reducing costs for every movement and storage the company outsources. This treatment for the function has been because of the following reasons:
- Limited control over external factors like infrastructure and hence limited control over outcomes
- Limited opportunities to innovate due to lack of differentiated scalable service providers
- Lack of standardization and consistency in operations leading to numerous ad hoc and mechanical tasks
- Evolving business models of the company resulting in ad hoc requirements
- Maintaining compliance and operating standards extremely difficult and hence companies prefer to turn a blind eye.
Logistics remains one of the key functions to service any customer from real sectors like coal and steel to modern new age industries like e-commerce and organized retail. This approach towards logistics function has resulted in lack of creativity, standardization and innovation. Insufficient infrastructure and lack of focus on logistics has resulted in costs which are higher than most global benchmarks. The lack of focus has been largely due to company’s intent to solve other parts of the puzzle first – markets, products, sales, marketing, customer service etc. However, in recent past there has been significant effort to bring back vitality in supply chain and logistics function. The reasons can be attributed to demand and supply side both:
- Cost of exception has gone up significantly – delays, detention, demurrage, pilferage, spoilage
- Business models of companies have become stable and logistics is considered important to improve market share
- Technology is available to improve reliability and control external vendors
- Quality of service providers has gone up significantly.
In a research conducted by a reputed research organization in June 2017, over 40% of companies have logistics KPIs now linked to reliability and service levels. Around 15% have KPIs linked to carbon footprint. Safety, Health and Environment (SHE) are increasingly being focused by logistics team and implemented for internal functions and external vendors. It is expected that logistics team’s KPI will increasingly shift from cost to reliability and market availability. According to another research conducted on manufacturing sector in India, supply chain officers control 50% of company’s annual spend and 66% of employees directly report to the role.
Growing recognition of supply chain
The trend of supply chain and logistics increasingly controlling more and more resources is expected to continue. This can be explained as follows:
- Growing industries like ecommerce and retail thrive on supply chain. Some of these industries operate at very low margins and logistics is the most complicated function to drive profi tability and customer experience. Supply chain excellence is a source of competitive advantage.
- Companies are increasingly practicing lean and reducing delivery time for customers simultaneously. This could lead to business continuity risks. Logistics and supply chain increasingly needs to rely on science and technology to mitigate the risk. Supply chain disruption is a big reputational risk. Hence, supply chain is increasingly becoming an important discussion point in board meetings.
- Exposure to logistics and supply chain creates a well-rounded professional with understanding of both customer needs and operation complexity. Improvement in professional intake in logistics vertical has created pool of leaders who are increasingly assuming roles in the boardrooms.
Sourcing young talent
Given the above, it now becomes imperative that professionals are available to deliver the expectations of the business. Logistics needs to come out from its dark image and needs to be projected as a ‘cool’ career for youngsters. What can be more exciting than jetting around the globe to finalize delivery partners, or supervise installation of new automation machinery in a warehouse or designing delivery models to the most modern stores. As the country grows, logistics knowledge infrastructure needs to improve. This sector has more than 20 million people working. Some of the key initiatives required are as follows:
- Inclusion of logistics curriculum in mainstream business institutes
- Investments by companies to improve and train logistics team capabilities
- Vocational training for drivers, equipment handlers and warehouse operators
- Government sponsored initiatives for integration and information sharing between various infrastructure bodies.
According to one research, 48% of supply chain and logistics company’s heads feel that non-availability of talent is the biggest gap. Logistics fraternity needs to come together to address this challenge and keep the engine moving, which is one of the most important puzzle piece for the country to grow.