Targeting tough terrain

 

Retailer: What is the current market size of Indian logistic industry and what is your market share in the same?

Lars Sorensen (LS): India’s logistics industry is quite fragmented and involves various activities and intermediaries.    Hence it is difficult to arrive at a market size and more importantly put that market share into an appropriate context.  Various market agencies estimate the size of the 3PL industry from USD 125 billion in 2010 to USD 385 billion by 2015.

Being a fragmented market, no player has a significant market size and even the market leaders would have only under 3-4 per cent market share. As far as Damco’s market position is concerned we are one of the leaders in ocean freight and are amongst the top 15 in air freight.

 

Retailer: It’s been more than two years that Maersk Logistics and Damco merged together to form a single Damco brand. So, what difference it has on your business operation in India?

LS: Over the past two years we have received positive feedback from our customers regarding our choice to merge the two brands to one. The new Damco brand has allowed us to be a one stop shop for providing logistics services and strengthen our focus on customers, and to leverage our operations and processes across products. Coupled with this, being part of the AP Moller-Maersk has helped Damco to energise the strong global network allowing us to deliver solutions as per the client’s specific requirements.  A streamlined organisation as a result of the single brand strategy has enabled us quick decision making and fostered a fantastic team spirit in the organisation.

 

Retailer: What is your investment plan to fuel the geographical expansion?

LS: India is experiencing industrial development and many new geographical markets are emerging in the country. Take for example, North East India where many heavy industrial units are emerging. Damco will be targeting these markets to ensure our growth momentum is maintained. We will also look at markets like Nagpur, Nasik and other locations to expand our presence geographically. 

 

Retailer: What is the idea behind your plan to expand services in auto and consumer goods sector? What would be the expected revenue from this venture?

LS: The increase in domestic consumption as a result of a strong demand from the Indian consumer has led to the presence of many global brands in India. As per a study by a consulting firm India continues to consolidate its position at a global level as one of the world’s top 10 auto-producing countries and is currently the seventh largest vehicle producing nation in the world which roughly accounts for 5 per cent of the total global auto production. The same study states that the Indian market will register the fastest CAGR of 14 per cent between 2009 and 2020 which is more than double that of China.

Another report by a different consulting firm estimates that retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015. Sales of consumer electronics, same report suggests, will grow by 66.8 per cent from US$ 29.14 billion in 2011 to US$ 48.61 billion by 2015. These are very impressive growth figures and are a result of the growing domestic demand. Inarguably, to satisfy this demand goods will be required to be imported in India and herein lies the opportunity for a 3PL such as Damco to position itself as a trusted logistics partner and help customers to reap benefits from selling to the Indian consumers. 

We believe that auto and consumer goods vertical should contribute roughly

20 per cent to our overall revenues.

 

Retailer: What kind of services will you offer for auto and consumer goods sector?

LS: Since we are one of the world’s leading providers of freight forwarding and supply chain management services, we provide services such as Airfreight, Ocean Freight, Supply Chain Management & Development, Green Logistics, Warehousing and Value Added Services such as Cargo Insurance, Customs Clearance, Road and Rail Transportation and Trade Documentation. Thus for the auto and consumer goods sector our service offering remains as mentioned above with the focus being on customising solutions as per the customer’s requirements and ensuring that KPIs such as timely delivery, reliability, complete on-route visibility and environmental sustainability are fully delivered. 

 

Retailer: What are the new technological innovations made in the logistic industry? How different are your services from that of your competitors? 

LS: One of the key innovation areas that technology can and does help the logistics industry is to provide visibility across the entire supply chain management process. This is very important as it helps the customers to manage inventory levels, reduce wastages, and plan future demand effectively. 

Damco as a supply chain partner has been able to deliver innovative solutions to complex customer problems. For many customers we have linked their systems with ours through Electronic Data Interchange (EDI). This basically helps the customer and Damco to be on the same page as far as information generation and transfer is concerned. Also, we have developed new service offerings such as SupplyChain HealthCheck™, Supply Chain Carbon Dashboard and Supply Chain Development through which we assess the entire supply chain process of the customer and suggest improvements wherever possible. 

 

Retailer: What are the major hurdles being faced by company in India and steps taken to overcome them?

LS: The infrastructure is still in the developmental stage in this region the logistics costs are high and thus it is sometimes challenging to create the required reliability for the customer. Added to this is the current low adoption of IT and other forms of technology to support the entire supply chain process. 

The logistics and supply chain services market in India is quite fragmented. Some of the other issues which act as a speed breaker in the growth path of the logistics industry are lack of development in rail/inland waterways modes, multiple taxation structure and absence of a single logistics authority for obtaining clearances and licenses. Besides, there is a lack of human resource. However, with planned investments of around USD 250 billion in infrastructure development over the next four years, this will have a positive impact on helping the logistics industry to provide integrated logistics solutions which are increasingly cost competitive.

 

Retailer: After venturing into auto and consumer goods sector, what’s next for the company?

LS: Our current approach is to focus on industry verticals. Hence, apart from auto and consumer goods, we consider retail, chemical, consumer electronics, apparel as our growth areas. We are also looking at increasing our presence in landside activities such as Road and Rail Transportation, Warehousing & Distribution, developing trade lanes in routes such as Intra-Asia, Africa, China and Europe and significantly increasing imports and air freight volume.

 

Retailer: How the Indian retailers are adoptive of 3PL? Could you name some of your retail clients?

LS: Indian retail industry is at a nascent stage and we are witnessing the initial period of growth currently. Many of the Indian retailers are in the process of understanding the supply chain mechanics for large scale operations and hence their supply chains are evolving consistently. We have seen that the Indian retailers are keen to adopt the latest supply chain practices and are eager to fine tune their supply chains. Many of them would certainly adopt these practices once their size and scale increases in the future.

Stay on top – Get the daily news from Indian Retailer in your inbox