With carmakers demanding the same level of 3PL service in India as they do elsewhere around the globe, Ramesh Kumar discovers the strengths that enable the country’s homegrown providers–such as TCI Supply Chain Solutions–to compete with global players.
When Jasjit Sethi, the chief executive officer of TCI Supply Chain Solutions (TCI SCS), gives his opinion on the state of the Indian third party logistics (3PL) market, he isn’t trying to be provocative. Rather, the venerable supply chain manager states with a simple and characteristic cogency: “We are the best and on par with the global 3PL players in the inbound automotive logistics segment.”
It’s a message that Sethi has not been afraid to express before, whether in India or abroad. At previous Automotive Logistics conferences from the US to Europe, he has pointed out that carmakers in India can expect the same level of 3PL service they would in developed markets. Given India’s infrastructural and bureaucratic constraints, the performance of providers such as TCI might even be more notable.
“Toyota or General Motors or any global player enjoys the same 3PL service standards in India that they experience in any other part of world. And in many places, things tend to run more orderly and smoothly. That’s nothing like India, where we have to deal with multiple interstate borders and congestion on highways. With all these constraints, we are doing a far better job than [global] providers,” he says.
Sethi suggests that it is TCI’s grasp of the peculiarities of the Indian market that will continue to set it apart from global competitors. “That is our trump card,” he says.
But while Sethi is confident about the development of Indian 3PLs and 4PLs for inbound, he is less so for outbound logistics, where quality is poor, lead time unreliable and margins are razor thin. There is a long way to go towards developing the 4PL in the outbound arena, he admits.
TCI SCS–part of the publicly-listed Rs.17.6 billion ($335m) TCI, which boasts of ferrying around 2.5% of India’s gross domestic production (GDP)–accounted for around 22.35% of total revenue for its parent company in the financial year ending March 31, 2011. The division, with over 1,500 employees, posted 59% growth over the previous year, the highest at TCI. Automotive is one of the six verticals that the Sethi-led TCI SCS is handling. Others include: high tech, retail, cold chain, telecom, life sciences and healthcare.
Under the automotive segment, TCI SCS is focused on the sub-verticals of SUVs and MUVs [multi-utility vehicles], twowheelers, commercial vehicles, earth-moving and construction equipment, tractors and farm equipment and tier suppliers. Fourteen automotive plants in India are using TCI SCS as their lead logistics provider (LLP), including Toyota, Bajaj Auto, Hero motocorp, General Motors, Tata Motors and Maruti Suzuki. “We take a schedule from the OEMs and examine what is required and at what time and from whom and where. This is customised to suit Indian-based OEMs with a greater visibility and efficiency,” elaborates Sethi, who cut his logistics teeth at one of the leading tyre manufacturers in India before moving into his current role in the early 2000s.
In today’s competitive business environment, automotive manufacturers worldwide are shifting their attention towards understanding and implementing extended supply chain management that integrates the product, process and information flows across organisational boundaries.
Sethi believes that in such a scenario, there is a pertinent need to understand and evaluate the supply chain metrics followed by auto and ancillary industries in India to benchmark them for best practices. This is how the industry in India will continue to improve, he says.
TCI SCS’s services for inbound are already on a par with global competitors: it handles just-in-time, vendormanaged inventory, milkruns, crossdocking, sequencing for parts consolidation centres, assembly line and central parts warehousing. On a typical day, Sethi’s men perform more than 3,000 pickups. On the outbound side, the firm manages customs clearance and freight forwarding for global plants, regional stockyard or distribution centres for finished vehicles by rail or road. TCI SCS also offers reverse logistics: returnable packing on the inbound side and warrant returns for outbound.
Sethi believes that TCI SCS’s success is partly down to high levels of IT integration and technological adaptation, allowing the company to remain efficient. It has not been unusual for this journalist to hear rivals cribbing privately that: “TCI SCS rates are unmatchable. At this rate, we will be out of business”.
But is TCI SCS playing a predatory pricing game?
“That is utterly rubbish,” responds Sethi. Rather, he believes there is no dearth of inefficiency in the current system and making progress on each aspect helps to bring down cost. Most importantly, TCI SCS’s cross-learning from managing other verticals also comes in handy. Sethi credits the shelf management of fast-moving consumer goods as a specific instance for TCI SCS’s performance.
However, yard management for outbound logistics is a hot issue for Sethi. Notwithstanding the fact that he has been managing more than 23 stockyards for various carmakers across India, it has been speculated that TCI SCS has chosen not to participate in the Transport Vehicle Park (TVP) project for Maruti Suzuki at Nagpur. There are rumours circulating in the market that Sethi has burnt his fingers in bagging Maruti Suzuki’s Bangalore TVP at low rates. However, Sethi rubbishes such arguments as well. He declines to go into detail, but he insists that “returns from yard management are not that great”.
Passenger car yard management is still in its infancy, he believes, compared to the model for two-wheelers and tractor/ farm equipment. For example, one core difference is that the practice of bill-to-stock has yet to happen in the passenger car segment, which remains in the bill-to-order phase. The absence of a multi-user stockyard concept is another irritant for Sethi, as no carmaker is ready to share its yard with others. Sethi hopes that carmakers’ attitudes will change over the next decade.
Responding to the ‘predatory pricing’ charges, Sethi categorically maintains that he looks from the customer’s point of view. His credo is that one must find the best solution at the most affordable cost. “We look at the sustainability of the market,” he says. “We look at customers as our partner. If they are successful, I will be successful. Naturally, my focus will be on how to reduce cost.
“When you move away from the plain vanilla transporter mindset and instead view the business through the prism of a ‘customer-as-your-partner’ paradigm, everything changes. Service quality and pricing improves where you as logistics service provider and customers are aligned to each other. We quote what we believe to be the right price. We continue to make profit. That says it all,” concludes Sethi.
What about the future? “We are the leading player and the market is growing. So, we are bound to grow. We are noticing a change in mindset among the corporates who have begun to believe in supply chain–outside automotive and telecom, too. As far as the automotive vertical is concerned, we are performing exceedingly well in most of the sub-verticals. Our present focus is on making inroads for commercial vehicles, both inbound and outbound, while consolidating and growing our lead in other sub-verticals,” maintains Sethi.
