Gammon India becoming a 3PL February 22, 2008Posted by Ramnath Rangaswamy in Blogroll, Business, Emerging Markets, India, Indian Economy, Logistics, Supply Chain.
There is no doubt that the Logistics business in India is rocking! Logistics spending comprises 10% -13% of the GDP and growing in line with GDP @ 8% – 9%. That amounts to Rupees Four Lakh Crores!![ India’s GDP of US$ 1000bn x 10% as Logistics spending = Rs 400000 Cr]. Market Share of LSPs/3PLs is ~9% of the total logistics business in India. This amounts to Rupees Forty Thousand Crores. [ India’s GDP of US$ 1000bn x 10% as Logistics spending x 10% as LSP/3PL market share of Logistics Services = Rs 40000 Cr]. So I am not surprised that Gammon India wants to get into the space.
[1 Crore or Cr as it is abbreviated = 10 million or put in another way 100 Crore = 1 Billion]
A 3PL/ LSP business is different from a Construction business, which is Gammon’s core competency. Gammon getting into the LSP/3PL business is similar to a building contractor who gets into the business of running a hotel assuming he knows how to run a hotel because he knows build one!!!
Now, 3PL/LSP business is not simple business. In most cases, 3PLs/LSPs handle processes for their clients which are business critical or mission critical – shipping products to customers on time, ensuring the right raw material reaches the right plant at the right time. Hence, a Manufacturer, Producer or Modern Retailers will want to be confident of the skills, experience and competence of the 3PL/LSPs before giving him their business.
A 3PL/LSP requires an in-depth supply chain knowledge.The 3PL/LSP should understand the business priorities of the client and how the supply chain enables the client to meet their business goals. What are the supply chain priorities? Is the supply chain’s focus on delivering the lowest cost? Is it focused to deliver innovations at a fast pace? Is it supposed to deliver outstanding service?
A 3PL/LSP should understand the needs of different segments of clients. The Modern Retailer will require cross-docking and will look to the 3PL/LSP to provide the expertise to execute cross-docking. A food producer would require strict FIFO control. The food producer would look to the 3PL/LSP to give a list of expired and about-to-expire products and help reduce obsolescence. A pharma or drug producer would require GMP compliance in their warehousing and transportation processes. FMCG and White-Goods producers would require a fast turn around of orders and a very high customer service levels.
How will Gammon differentiate itself from the other Indian 3PLs/LSP who have wide experience in India? Or differentiate themselves from the international big 3PLs/LSPs like DHL, TNT, Linfox, etc?
The 3PL/LSP will be expected to provide other value added services- WMS, customization, transportation, import-export, sea-freight, air-freight. Gammon will have to get this expertise by buying other players or recruiting top class and experienced professionals.