Firms look at IT infrastructure, outsourcing to stay competitive

P.R. Sanjai, Mumbai
Mint
BK Madhav and Sons is one of the many customs clearing agents in the Ballard Estate area of south Mumbai. Like many of his peers, Prathmesh Madhav, the firm’s promoter, was never interested in investing in information technology (IT) infrastructure.

The economic slowdown has now compelled Madhav, who manages customs clearing for the Indian unit of a global automobile firm, to integrate his processes and trim costs using technology. This has also cut his customs filing time to five minutes from three days earlier.

Like BK Madhav, many other small, family-controlled Indian logistics firms are considering investing in IT infrastructure to cut costs and outsourcing non-core functions.

“Recession is forcing logistics companies to take a hard look at their operations and look at ways to improve productivity and work on customer satisfaction and retention,” said Sumeet Nadkar, head of the logistics strategic business unit at Kale Consultants Ltd, a software firm in Mumbai that sells applications to logistics companies and airlines. “This industry has very low technology adoption. There are challenges in proliferation of technology and a lot of players are taking time with their technology buying decisions.”

For a mid-sized freight forwarding company, administration costs can be reduced by at least 10%. Features such as automated email or SMS (short messaging service) alerts to customers and partners also minimize telephone costs, while auto emailing invoices eliminate paper and courier bills, Nadkar said.

“This will further reduce 20-30% of communication costs. Similarly, the application sends proactive alerts to prevent service failures. That means there is savings in terms of steps taken to correct the service failures and additional resources required for the same,” he added.

Cyrus Guzder, chairman and managing director of logistics firm AFL Ltd, says there are three objectives behind outsourcing certain functions. “One is cost savings. But the most important reason could be increasing the productivity and having superior quality of service,” he said. AFL outsources its entire software development, hardware support and network management to Accenture Ltd.

Amit Maheshwari, chief executive officer and managing director of Mumbai-based Softlink Logistic Systems Pvt. Ltd, said technology can help prevent revenue leakages from operational issues as it streamlines and integrates the various processes involved.

For instance, key firms in the logistics chain, such as customs agents, freight forwarders, exporters and importers, can exchange data without needing to re-enter it manually at each stage, he said.

“Technology can decrease operational cost by almost 20% if used appropriately. Our clients have themselves given examples of reducing the man hours from 120 hours to 5 minutes for certain operational processes,” Maheshwari said. Softlink has some 2,500 clients.

“Moreover, given enhanced and redundant communications and connectivity infrastructures, shipping documents can just as easily and transparently be processed in Mumbai, Mexico or Manila,” said Jaison Augustine, vice-president, industrial and infrastructure services, at New York-based outsourcing firm WNS (Holdings) Ltd. “The average cost savings at different levels for a logistics company is anywhere between 30-60%.”

At least two big Indian logistics companies have started outsourcing some of their activities to outsourcing firms to cut costs, Augustine said over the phone from New York. He did not name the two firms.