GST to drive consolidation and scalability

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GST to drive consolidation and scalability

“With GST, the time has come for businesses to align their design logic based on market requirements, installed base and geographies through network optimization models,” asserts Dr Arunachalam R, CEO, ProConnect Supply Chain Solutions, during an interaction with Celerity. With transport efficiencies set to increase with bigger payload vehicles being introduced, 3PL players who have the required network across India will play a major role, believes Dr Arunachalam.

With GST, organized logistics is slated to grow exponentially. How do you see the dynamics changing?

India predominantly has been an unorganized logistics market with just about 10% plus business falling in the organized sector, leaving a lot of opportunities for the organized sector to work on. With the advent of GST, logistics market that was driven by strategies based on statutory requirements than on geographies and reach will now shift towards the rationale of positioning their warehouses and distribution centres based on market requirements and strategic locations. This change in thought will drive the customers to look for logistics service providers who have state-of-the-art facilities with required IT backbone to achieve the required benefits. Many businesses have been operating standalone facilities for their requirements and with GST, 3PL operators would be preferred for the scale at which they operate and the various automation and cost benefits that they bring through shared facilities driving the market to move towards 3PL and we are scaled up to reap the benefit.

What are your strategies to ride growth? Organic, Inorganic, launching new services, expansion, etc.

Growth plan of ProConnect is well laid out and we have been on track with both organic and inorganic growth. Our first step towards that has been big news in the market with us taking a majority stake in Rajprotim Supply Chain (RCS). RCS has a deep rooted presence in the Eastern and North-eastern part of India with operations spanning warehousing and transportation through a dedicated fleet of 1000+ vehicles. ProConnect’s business division Mission Critical Services is one of its kind business model that offers critical and time-sensitive deliveries to its customers through well laid out processes and practices. We have major plans in the days to come to venture into medical and FMCG businesses and with GST, there will be a big boost to the transportation requirements and we are geared up to make the most of the opportunity. We are also working on the App based aggregation model for transportation to start with.

What have been the challenges you faced as a 3PL for GST compliance? How are you aligning with those issues?

Registration in multiple states, getting the bills of service providers in those states, making our offers to clients very differently, management of closing stocks of June 30, treatment for stocks more than 1-year-old, getting GST compliant invoices ready & those getting acceptances from clients etc, are some of the issues that we faced towards the transition. Having said that, we have a very able team for GST migration and hence we have been able to tackle these proactively.

Technology and infra will play a big role in logistics services. What are your plans on the same?

Technology has been ProConnect’s strength ever since our foray into 3PL and Transportation. Our ADC located in Chennai and Kolkata are testaments to this with best of breed WMS and high-end material handling equipment deployed for better efficiencies and throughput. We have plans of operationalizing more such ADCs in key strategic locations for customers to have a better technologically enabled facility for shared use. We have a single platform solution that cuts across all functions of ours and works seamlessly enabling higher efficiencies. We have taken trials with robotics to enable high efficiency automated warehouses and RFID enabled technology will be the next enabler. Our automation design and engineering team constantly work on latest trends in the market and keeps adopting newer technologies like IoT, e-POD, etc., for better efficiencies and productivity.

What changes do you foresee in the way clients would now choose 3PL services?

India logistics/network design has been driven by statutory related requirements all this while as stated earlier and now with GST, the time has come for businesses to align their design logic based on market requirements, installed base and geographies through network optimization models. ProConnect specializes in this area and has been doing this study for its customers. We foresee customers shifting from own setup operations and unorganized sector towards more organized players who offer better value to their operational requirements.

Consolidation of multiple warehouses operated to an optimized minimal number of warehouses catering to their needs at a better TAT will also be a major driver in the days to come. With this consolidation happening, transportation requirements will increase and clients will look at the 3PL service providers for handling the same as part-load requirements are set to increase.

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