Growing sales of automotives, emergence of new markets, shift in the mode used to transport vehicles & auto components, implementation of GST, new regulations and rise in usage of technologies are leading to revolutionary changes in the automotive logistics, says Rakesh Rao.
In the recent years, the Indian logistics sector has received major boost due to various factors such as GST implementation, infrastructure status by the Government and technological advancements among others. The domestic logistics sector is projected to grow from Rs 6.4 trillion in FY17 to Rs 9.2 trillion by FY20 - at CAGR 13 per cent. At the same time, the third-party logistics space is expected grow at a 19-20 per cent CAGR to reach Rs 580 billion by 2019-20 from Rs 325-335 billion in FY17.
The new Central Motor Vehicles Rules (CMVR) regulation on car transporters calling for a standard 18.75-m trailer length for car carriers came into force in April last year. As a result of the new dimension and safety requirements for car carriers, carmakers and logistics providers have been scrambling to make their truck fleets compliant and secure new capacity.
“The standard size of 18.75-m across India addresses quality and safety concerns that have been a burden on logistics companies for years. Reduction in size will reduce the number of cars a trailer can carry that will push many logistics companies to invest in additional capacity. With many logistics companies being small or medium sized, this investment in adding new fleet may pose a challenge,” opines Rajeev Singh.
However, he feels that this can be addressed effectively if there is good OEM-to-OEM level collaboration. He explains, “Trucks bringing new cars from North for a car company can return with set of new cars of another OEM on the return journey. The new load carrying norms announced very recently will cut freight costs and fasten movement of goods on highways. Logistics and transport sectors will gain from the new norms through quicker supply chains that will have an overall positive impact on the economy.”
With the introduction of GST in July 2017 that simplified taxation processes, many auto makers and logistics companies have consolidated their warehouses by moving from the earlier tax-efficient model to obtain maximum operational efficiency.
Rajeev Singh elaborates, “The impact of GST has been positive overall. In the initial few months, there was confusion on the six different tax slabs and number of changes for different vehicle categories. A major boost for logistics industry was the improved journey times for goods/freight across Indian highways. Recently introduced e-way bill system for transport of goods between different states has also reduced lot of paper work and delays at state borders. Post GST, OEMs are also reducing the number of warehouse locations wherever it make business sense.”
Speaking on the occasion, Sushil Rathi, COO, Mahindra Logistics Ltd, said, “At Mahindra Logistics, we are committed to provide effective and efficient services to our clients. The new warehouse at Chakan is part of our post GST strategy of offering strategically located facilities, to cover a larger area. The interesting part about this warehouse is that it is a multi-product, multi-user one, and can come with flexible capacities and tenure.”
Eyeing such potential business, Avvashya CCI Logistics Private Ltd (ACCI), a subsidiary company of Allcargo Logistics Ltd, is investing close to Rs 60 crore in the next two years to build an auto engineering part warehouse in Guwahati. The warehouse will provide end-to-end management for aftermarket spare parts to service the North-East sector, which includes last mile delivery. ACCI covers the entire spectrum of logistics services for preparing, transporting and importing vehicles in completely knocked down units (CKD) or semi knocked down components (SKD).
"As companies from different sectors and brands tap this market, the need for warehousing will grow manifold in this region. Distance from the mainland was one of the key reason for North East not getting it’s due recognition and this is precisely the reason why this region will need more than its fair share of warehousing. The topography also inhibits development of a robust rail network thus necessitating use of road transport – yet another reason for a booming auto trade," says Arindam Chakrabarti, Head - Automotive and Engineering Solutions, Avvashya CCI Logistics Pvt Ltd.
Indian Railways (IR) does not use specialised wagons for transporting cars and they use modified rakes that are used for goods transport. To address this issue, IR is investing in special rakes to transport cars.
Many automotive manufacturers are also stepping up efforts to shift more finished vehicles from road to rail and coastal shipping. For example, a major OEM in North transports its vehicles between North (Delhi) and South (hub near Bangalore) using special rail wagons. Few other auto companies are trying coastal routes.
Even Indian Railways has been taking number of initiatives in recent time to capture automobile traffic and emerge as the most preferred carrier of automobiles in the country. Immediately after becoming the Minister of Railways in September 2017, Piyush Goyal liberalised Automobile Freight Train Operator (AFTO) policy to encourage more private investment in special wagons, procurement of IR's own BCACBM (high-capacity railway wagons) and NMG wagons. As a result, the loading from automobiles traffic increased by 16 per cent during 2017-18 and earning from automobile traffic increased by 18 per cent as compared to 2016-17.
In April 2018, IR took two more game changing decisions to allow handling of automobile from all container terminals and to allow loading automobile and auto spares in privately owned wagons in different directions for optimal utilisation of stock.
With Government of India’s focus on promoting alternative means of transportation to reduce carbon footprint, the demand of transporting vehicles through rail mode is increasing. To tap this potential market, Adani Logistics Ltd (ALL) and NYK Auto Logistics India Pvt Ltd (NALI) last month agreed to form a joint venture which will specialise in transportation of finished vehicles using automobile freight trains.
It is expected that finished vehicles distribution through rail mode will grow faster than the industry’s growth rate and the ALL-NALI JV aims to ride on this growth wave. Accordingly, the JV plans to commence operation with 6 automobile freight trains and aims to increase it to 25 trains in three years.
"ALL’s strength lies in rail operations and having a network of multi-modal Logistics Parks, while working closely with APSEZ having a pan India port footprint. This formidable association combines the strengths of individual parent companies, putting the JV in a very unique position, utilising these readily available assets and expertise, to deliver an end-to-end value driven, asset and service based, supply chain solutions, to the automobile industry in India. This new JV marks yet another milestone in our strategic efforts to explore opportunities in rail transportation by auto wagons in designated territory in India," said Karan Adani, CEO, Adani Ports & SEZ Ltd - the parent company of ALL, in a press release.
With rising global oil prices putting pressure on the road transport sector, industry experts believe movement of finished vehicles via railways to rise in the coming years.
A few years back, warehouses were mostly managed by unorganised players. However, in recent times, warehousing sector has witnessed almost a revolution with go-downs upgrading into large-scale distribution centres and deploying advanced technologies and modern automation. “Many progressive warehouses at the moment are installing AI-driven autonomous robots which reduce their order fulfilment and inventory replenishment time. These unique solutions cater to various in-house operations such as inventory storage (put away), replenishment, picking and combining orders. Hence, they play a major role in enhancing business agility and growth as well as eliminating complexity,” says Vivekanand, Country Manager, India and SAARC, GreyOrange, which manufactures advanced robotics systems for automation in warehouses.
To tap the thriving automotive industry, GreyOrange plans to supply robots for manning warehouses of auto component manufacturers. “The Butler goods-to-person robotics system is well suited for automotive components as there are numerous SKUs for automotive use and these components have very diverse product attributes; some are lower value and are fast moving components, and some are very high value and may be slower moving. The way the Butler system fulfills and consolidates each order results in higher efficiency and accuracy. Among the sites we are currently deploying, one of them will be used for distribution of automotive components,” informs Vivekanand.
Through smart integration of technology and right strategy, auto OEMs and auto component makers can increase their efficiency and make their logistics processes more effective.
Slow adoption of new technologies has been another big constraint. Awareness about the economic benefits of using digital technology is low and collaboration among stakeholders far from satisfactory. As a result, the logistics ecosystem is fraught with operational inefficiencies and poor asset utilisation.
Rajeev Singh opines, “An expanding digital consumer base, coupled with inadequate and ill-planned infrastructure facilities, has left India trapped between growing demand for logistics services on the one end and a fragmented logistics services market on the other. Already some experiments are being made for adopting digital technologies in the country. But given the potential for significantly higher value to be created for the Indian economy, the sector cannot benefit much until a concentrated and collaborative effort is made by each stakeholder, including infrastructure providers, terminal operators, logistics service providers and technology companies.”
The new load carrying norms announced very recently will cut freight costs and fasten movement of goods on highways. Logistics and transport sectors will gain from the new norms through quicker supply chains.The changing landscape of automotive logistics
Many progressive warehouses at the moment are installing AI-driven autonomous robots which reduce their order fulfilment and inventory replenishment time. These robots play a major role in enhancing business agility and growth as well as eliminating complexity.
The topography (of North East region) inhibits development of a robust rail network thus necessitating use of road transport – yet another reason for a booming auto trade.