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Is Logistics A Hurdle in Business Productivity?
At a CIO Roundtable organized by DynamicCIO recently, I had the opportunity to meet the CIO of a large manufacturing company. The discussion began with the weather and soon shifted to our concerns about the mounting pressure on urban infrastructure before moving on the challenges faced by the CIO himself.
He was candid to say that the functions of a part of the supply chain automation at his company's manufacturing plant were only on paper. This was not because of any reluctance at the end of the employees to enter data but because of extraneous factors. This primarily includes the logistics that is responsible for bringing raw material to the plant.
The CIO said that given the pressure on the production plant to meet its target, the raw material is quickly moved to the shop floor as soon as it arrives. Thanks to the lopsided infrastructure and no dedicated corridors to move commercial goods, the logistics companies also find their hands tied at the back. Many a times, the material that was supposed to arrive early morning, lands up only late night on the factory door, he said, as he cited the example of Japan which has dedicated lanes across its highways only for moving commercial goods. Besides, the lack of automation at the logistics companies itself makes matters worse.
In India, however, the logistics sector is waiting to get industry status. India's logistics cost is among the highest in the world - estimated to be almost 13 per cent of its GDP, even as the sector has been demanding the setting up of a regulatory body on the lines of Insurance Regulatory and Development Authority.
Despite logistics being such an important cog in the wheel, more than 60 percent of companies surveyed by Gartner view logistics as nonstrategic; yet expectations for near-perfect performance are placing increasing stress on global logistics organizations.
Gartner has published four predictions that are expected to affect global logistics organizations over the next four years. These cover environmental issues, risk and compliance, international flow optimization and supply chain execution convergence. These predictions will affect most logistics organizations, however the impact will depend on how prepared they are to adapt to these events, Gartner says.
It predicts that by 2016:
1. More than 50 percent of Global 1000 logistics organizations will be required to systematically report verified emissions and environmental data.
2. Less than 10 percent of logistics organizations will have a chief compliance and risk management officer
3. Around 20 percent of Supply Chain Management organizations will adopt a supply chain execution convergence application strategy
4. Slower global trade growth will force shippers to adjust from proliferation to optimization of international flows
It remains to be seen how soon Indian logistics companies will be able to match pace with their global peers.