Growth & Challenges in Supply Chains & Multi-Modal Logistics With Vineet Agarwal

Introduction

In the weekend edition of The Core Reports, we delve into the evolving landscape of logistics and supply chains in India, particularly in light of recent shifts in policy and consumer behavior. Vineet Agarwal, Managing Director of the Transport Corporation of India (TCI), joins us to discuss both the opportunities and challenges facing the logistics sector.

The Impact of Quick Commerce

The rise of quick commerce—providing rapid delivery of goods, especially in urban areas—has fundamentally altered how logistics networks operate. Companies like Hindustan Unilever are now directly supplying products to millions of kirana (local grocery) stores, bypassing traditional distributor networks. This shift has led to protests from distributors but presents a significant opportunity for logistics enablers like TCI.

Changes in Supply Chain Dynamics

Supply chains have become increasingly dynamic, especially with the growth of e-commerce. The logistics industry has had to adapt quickly, with significant changes in warehouse operations, smaller order sizes, and a movement toward daily deliveries. Vineet points out that while their operations remain primarily B2B, the nature of order fulfillment is shifting towards accommodating e-commerce demands.

For instance, the order quantities for deliveries have shrunk due to consumer preferences for smaller, more frequent transactions. TCI is now managing warehouses with increased complexity, where products are often dispatched as individual units instead of bulk cases. This has resulted in higher operational costs, as fulfillment at a unit level is generally more expensive.

Founded in 1958, TCI has evolved from a small transport company to a leading integrated multi-modal logistics provider. With a network of 14,400 branches across the country, TCI is responsible for moving nearly 2.5% of India's GDP annually. The company operates across various transportation channels, including road, rail, and sea, aiming to reduce logistics costs through a multi-modal approach.

Vineet emphasizes that while road transport constitutes the majority of cargo movement in India (about 60-65%), there is a growing need to enhance the share of rail and coastal shipping in order to optimize supply chains and reduce costs.

Resilience and Flexibility in Supply Chains

The pandemic and global disruptions have made companies focus more on building resilient supply chains. There's a trend towards 'near-shoring'—bringing supply chains closer to home—especially in sectors like electronics. Government incentives, like Production Linked Incentives (PLI), are encouraging domestic manufacturing, further fueling this shift.

Sustainability and Compliance

Sustainability is a key consideration for modern supply chains. Companies are increasingly looking to reduce their carbon footprints and are adopting practices like flexible and recyclable packaging. TCI is actively addressing this need, highlighting compliance and safety in industries like chemicals, which require specialized handling and transportation.

Looking Ahead: Opportunities for Growth

The future looks promising for the logistics sector, as TCI sees growth across various industries. Changes in consumer behavior, increased investment in infrastructure, and formalization of the economy through GST are all driving the logistics market forward. Enhanced visibility through digital platforms is becoming a crucial component in enabling companies to ensure timely deliveries and low costs.

Moreover, sectors like telecommunications, defense, and semiconductors are emerging as significant growth areas, requiring efficient logistics solutions. Vineet notes that businesses should be closely monitoring these trends while maintaining a long-term perspective to strategize effectively.

Conclusion

As the logistics landscape continues to evolve, TCI is focused on leveraging these growth opportunities while managing challenges related to changing consumer expectations, compliance requirements, and sustainability demands.

Keywords

Quick Commerce
Supply Chains
Multi-Modal Logistics
E-Commerce
TCI (Transport Corporation of India)
Sustainability
Compliance
Near-Shoring
Infrastructure Development

FAQ

1. How is quick commerce impacting supply chains?
Quick commerce has shifted logistics operations towards smaller, frequent deliveries to meet consumer demands, prompting changes in warehouse management and distribution networks.

2. What is multi-modal logistics?
Multi-modal logistics involves using several transportation methods, such as road, rail, and sea, to optimize the supply chain and reduce overall logistics costs.

3. How is TCI adapting to the changes in logistics?
TCI is adapting by enhancing its digital platforms for better visibility, investing in multi-modal transportation, and transitioning to accommodate smaller order sizes driven by e-commerce trends.

4. What factors are driving growth in the logistics sector?
Key drivers include changes in consumer behavior, formalization of the economy, infrastructure development, and emerging sectors like telecommunications and defense.

5. What focus areas are crucial for future logistics operations?
Future logistics operations will need to prioritize sustainability, compliance, technology integration, and building more resilient supply chains.