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INTERVIEW

“India’s F&B logistics sector in sync with global practices”
Monday, 03 October, 2016, 08 : 00 AM [IST]
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The logistics industry - from freight to warehousing and from cold storage to value-added services - is now revolutionising the food and beverage sector. One clear trend in logistics is organisation play and aggregation of supply. Use of technology in newer and efficient ways to optimise the sector is also a visible trend. E-commerce, which is heavily dependent on efficient logistics, has created a lot of opportunities, especially in last-mile deliveries, said Anil Syal, chief executive officer and director, Flywheel Logistics, in an e-mail interaction with Nandita Vijay. Excerpts:

How do you view the opportunities in the food and beverage sector for logistics in India?
Food and beverages is a vast sector and has very high logistics dependence. The food and beverage industry, especially the processed food segment, is growing at a fast rate. The high rate of growth - being a consumption sector generates lots of opportunities for the  logistics industry, from freight to warehousing and from cold storage to value-added services. In each of these sub-sets, there are abundant opportunities for logistics businesses to be a part of this booming sector. Over the last few years, with retail becoming more formal and organised, there is demand for better logistics performance, and this has generated opportunities for organised logistics players to take the lead and step in.

Give us a snapshot of your presence in this space.
Flywheel Logistics is a strong contender in the processed food category. We handle a lot of fast moving consumer goods (FMCG) food products, from biscuits to confectionery, from packaged drinking water to soft drink concentrates and so on. We serve some very big businesses, including ITC Foods, Britannia, Coca-Cola, Pepsi, Haldiram’s and Jubilant Food Sciences.

What are the new regulations that govern this sector?
We are not the best person to speak about the regulations for the food and beverage sector, but on the logistics side, largely the Food Safety and Standards Authority of India (FSSAI) regulations obligate logistics operations within the food sector to also operate at a certain threshold. These regulations, on the face of it, are decent enough to ensure hygiene and quality, whether the service is for transportation, warehousing or storage.

According to you, are the freight charges adequate for logistics service providers?
Transportation of goods in itself is a low-margin business, but the volumes compensate for the lower margins. Like any other business with ample competitors in an open marketplace, there is competitiveness, which benefits the food and beverage sector and manages to contain the prices as well.

What is the kind of government assistance provided for this sector?
The assistance in transportation, storage and warehousing of food and beverages is limited to cold chain operations, including subsidies for cold storage and cold chain transportation. In dry and ambient transportation or warehousing, to the best of our knowledge, there is no government assistance by way of subsidy or low-interest debt.

What are the advances in technology for the logistics sector to handle raw materials, finished products and fragile items?
Most of the advancements in technology that have been adopted by the logistics sector is in tracking through GPS, which has increased transparency in the movement of goods, in back-end operations, which improves efficiency and hence performance. Specifically in the cold chain, newer technologies are being adopted, including sensors which help monitor in transit temperature maintenance.

Radio frequency identification (RFID) is an advancement in tracing packages. Has this helped the logistics service?
The technology of RFID-based tracking of consignments or packages works fine, but when considered for the food and beverage sectors, this could be high-cost technology to adopt. To maintain the visibility of inventory, the best technology in play as of now is bar codes along with mobile technology.

Globally, we gather robotic technology is adopted in logistics. Please comment.

Robotics is the best fit for large-scale manufacturing and it is used globally very optimally. In India, its adoption is gaining prominence, but in the near future, it would remain confined to manufacturing processes, and the chances of using robotics for supply chain processes in the food and beverage sector seem low.

How would you compare logistics in the F&B space to that of other developed and developing markets?
Logistics in India, especially in the food and beverage sector, is almost in line with global practices, barring a few differences. The food and beverage sector is a very high-volume sector. For primary transportation In India, we used to transport in nine-ton trucks, which have recently given way to 15-ton trucks and, in some cases, 21-ton trucks. In comparison, in most of the Western markets, food and beverage transportation is done in 28- to 40-ton vehicles. If that were done in India, the cost would reduce further. Another difference is in storage. A lot of warehousing and handling in some evolved markets is done in pallets. In India, we operate in smaller pack sizes in the supply chain. Handling 750-1000kg at a time in a pallet could change the operation cost if the same were to be done here in India. The key difference is our different retail model.

Would you agree that India has been gaining ground in providing a  proper transport network with road and rail connectivity and the industry has adequate refrigerated vans  and reefer vehicles?
The sector is under-serviced in terms of availability of cold chain facilities, including transport and cold storage warehouses.

What are the visible trends in logistics that are emerging?
Logistics in itself is a scattered and fragmented business. There are lakhs of service providers in this Rs 1,50,000-crore industry. One clear trend in logistics is organisation play and aggregation of supply. Use of technology in newer and efficient ways to optimise the sector is also a visible trend. E-commerce, which is heavily dependent on efficient logistics has created a lot of opportunities, especially in last-mile deliveries.

What are the key issues bogging the growth of this sector?
The logistics industry is dependent on externalities and economic factors. The economy growing at 7.5 per cent means the logistics sectors, at least the organised side, is growing at no less than 15 per cent. The key issues which need to be tackled include regulation and governance of the service providers. Inter-state movement is tough due to checkposts and taxation issues, which need to be handled. Hopefully that will get settled with goods and service tax (GST).

In the GST era, what is the impact of logistics on F&B sector?
Inter-state movement of goods will be the biggest beneficiary post-GST. Seamless movement of goods from one state to another would mean efficiency in the supply chain.

What are the future efforts of your company to grow in the F&B space?
We have managed to optimise our warehousing capabilities to the standards of FSSAI and have got recognised by the apex regulator as compliant. Our transportation was already best in class, with ISO-standard container managing movement of goods from point to point.
 
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