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The Changing Paradigm of Logistics Operations

Shanmukh Singh, Consultant, ISCM
June 23, 2021

Shanmukh Singh, Consultant ISCM spoke to Alexandre Amine Soufiani, Managing Director FM Logistic India on the reasons their customers trust them to deliver value even in difficult times, and how digitalization has helped them to deliver seamless omni-channel experience.

Shanmukh Singh, Consultant ISCM spoke to Alexandre Amine Soufiani, Managing Director FM Logistic India on the reasons their customers trust them to deliver value even in difficult times, and how digitalization has helped them to deliver seamless omni-channel experience.

 How do you think FM Logistic has performed since the start of the pandemic?

Like other businesses, the Indian warehousing segment is reeling under the effect of the Corona virus crisis. Driven by robust growth in the e-commerce and manufacturing sectors as well as rising demand in emerging tier-2 and tier-3 cities., logistics and warehousing space absorption is expected to grow by 35% in 2021. And will be fastest to recover from the COVID-19 pandemic. Growing demand for temperature-controlled warehouses to cater to the pharmaceutical and food and FMCG sectors, as well as growth in organized retail, are the likely drivers for this growth.

Non- essential goods warehouses remained closed for some time and resulted in job losses. However, the future is bright as a recovery of the logistics sector is one of the fastest post-pandemic. Warehousing demand is increasing and particularly driven by the e-commerce and pharma sectors

The Government of India’s focus on making India a global manufacturing hub has caused warehousing clusters to expand rapidly beyond the top cities and into Tier 2 and 3 cities. Also, as most of the Tier 2 and 3 cities in India are aligned with industrial hubs the demand for A-Grade warehouses in these cities has increased substantially.  Simultaneously, the increasing internet penetration in rural areas in addition to rising household income and the government’s push on digital in rural areas, has increased the pressure on manufacturing organizations to move closer to their customer base in these areas. In this endeavor to cater to the hugely untapped rural customer base, organizations have realized the importance of developing quality and world-class warehousing facilities, as these facilities not only offer operational excellence but also facilitate cost optimization.

In addition, the government’s “Make in India” policy will continue to fuel growth for the industry. The warehousing sector is expected to expand manifold, despite the short-term issues, owing to various factors contributing to its future growth. Experts are of the opinion that warehousing would be among the first real estate segments to recover from the shock of the Coronavirus and might even attract huge capital, as investors switch to more resilient asset classes.

On account of our strong people and customer policies, we have emerged as a resilient, responsible and reliable logistics service provider

In 2020, despite the pandemic situation looming in the country, we added 1 million sq. ft. of warehousing space under our operations as we acquired new businesses. The main impetus for this growth has been on account of great focus on the e-commerce, Omnichannel, FMCG, food, and Pharma sectors.

In recognition of our efforts to support the supply chain of our customers during the nationwide lockdown and the subsequent relaxation of lockdown restrictions, we were awarded the “Overall Excellence in Logistics and Supply Chain Award” at the SCALE Awards organized by the Confederation of Indian Industry. On account of our strong people and customer policies, we have emerged as a resilient, responsible, and reliable logistics service provider.

Moving forward, we plan to expand our operations by another 30 lakh sq. ft. by the end of 2022-23. We will be setting up our own warehouses in the major consumption areas of the country like Mumbai, Bengaluru, Hyderabad, Chennai, Delhi. etc.

Who are FM Logistic’ major customers? How have they been affected by the recent disruptions?

FM Logistic India has an extremely strong clientele that includes several blue-chip Indian and multinational corporations. We provide them with an array of supply chain services including Warehousing, Distribution, Co-packing for the FMCG, Retail, Automotive, E-commerce, Engineering, Telecom, Pharma, and other sectors.

Technological advancements and the Internet of Things (IoT) have made a transformative impact across sectors and FM’s adoption of these technologies ensured that our customers are not impacted by the pandemic. Seamless integration across the platforms like WMS, TMS has ensured uninterrupted services to customers during pandemics. Companies now more than ever use digital analytical and forecasting tools to assess market demand and meet the ever-changing consumer expectations. They have understood that technology has become essential in enhancing growth and productivity.

Businesses today have been making a shift towards complete automation, with an aim to bring the entire chain from procurement to distribution on the same platform. Many industries have implemented a distributor management system to make transactions both speedy as well as more accurate. It has helped in tracking secondary sales daily, managing inventory better through automated demand fulfillment, process claims online, and manages master data from a centralized location.

The pandemic brought a sudden and unpredictable change in consumer behavior which left businesses in a tough spot. In order to deal with such situations, companies have understood the importance of having a real-time pulse of the market and invested in different technologies to cope up with the ever-evolving consumer behavior. Today, an increasing number of companies are embracing technology to gain an edge in this highly competitive environment. While technology upgrade is an ongoing process, companies are actively working towards its adoption to provide the best of their services to their consumers. They have realized that it will play an increasingly important role in making sure that the products reach consumers faster and will also result in increased cost savings.

To enable our customers across various sectors to cater to the ever-changing demands of their end consumers, FM Logistic India has an indigenous warehouse management system in place which works on the plug-and-play model to seamlessly work for both B2B mode (where large stocks go to shop and malls) and B2C mode (where they go to particular customers). From the same stock that was dedicated to physical stores, our WMS enables our customers to access piece orders instead of bulk. The WMS allows customers to go to the piece level. This requires a lot of integration. Our WMS is capable of managing the seasonality and skews of our customers’ supply chains. Additionally, we provide efficient Value Added Services, i.e. kitting, packing, labeling, etc. to help our customers to manage their supply chain seamlessly. Our proven expertise in provisioning e-commerce and omnichannel logistics has helped us to remain a step ahead of our competitors – even during COVID times.

What has been FM Logistic’s USP apart from timely and quality rolling out of logistics services?

FM Logistic India is a pioneer in providing the best-in-class warehousing and distribution services to our customers. We have invested heavily in digitalization and notably in our fully integrated WMS (Warehouse Management System), TMS (Transport Management System), and Warehouse Automation that offer high-quality service, real-time visibility to our customers. We emphasize the need to understand our customers’ requirements to provide tailored solutions and the essence of quick decision-making. All our warehouses are driven by KPIs and SOPs. We handle a large number of SKUS/lines from diverse industry sectors. Our inventory accuracy across all our warehouses is above 99.98%. FM Logistic handles more than 45 billion inventory and processes 12 million lines per annum.

Given below are few of our USPs:

  1. Flexible and agile service offerings

To keep pace with the ever-increasing customer demands, FM Logistic India offers warehousing and distribution solutions that are tailor-made to provide our customers with what they want, whenever they want it and wherever they want it. We undertake various customer centric measures like:

  • Extreme focus and action orientation to address customer concerns on urgent basis;
  • Measurement of possible customer concerns before and as they come up and present solutions to clients for resolutions;
  • Structured MIS and monthly review meets with customers;
  • Specialized team of industrial engineers to:
    • Make processes leaner and more efficient;
    •  Systems and workflow customization;
    •  Manpower planning and training;
    •  Centralized audit team to audit inventory and processes.

2. Omni-channel Logistics

We have commissioned an array of WMS and IT solutions to enable Omni Channel services for our customers, which is indeed the need of the hour. We partner with clients to realign supply chains to cater to omni channels (both B2B and B2C flows) from the same warehouses, from the same inventory under one roof.

FM Logistic India has successfully provided omni channel services to many customers. Our omni channel strategy synchronizes inventory, logistics and distribution functions across all sales channels to meet our customers’ demands. Our state-of-the-art Multi-Client Facilities, backed by our indigenous WMS and IT solutions, our well- experienced collaborators efficiently manage omni-channel operations and can support our customer’s growth strategies. We have the required expertise and technological know-how in terms of IT modules that enable us to offer customized warehousing solutions to our clients.

3. Digitalization and Automation

Driven by rapid technological advancements and greater affordability, robotic solutions are entering the logistics domain in a big way, supporting zero-defect processes and boosting productivity. This is a primary area of focus for FM Logistic.

In India we have implemented drones for inventory control and are in the process of getting this implemented across all warehouses. We have also implemented fully automated packing lines for various clients across India. Globally, FM deploys AGVs and Robots for various activities like loading, unloading, picking, palletizing, etc.

4. Value-added services

At FM Logistic India, we offer end-to-end warehousing services to meet the ever changing demands of our customers. We offer a range of value-added services enabling a variety of logistics delivery models that improve customer service while mitigating inventory and transportation costs.

Value-added services include Kitting and De-kitting, Pre-packing, Co-Packing and Co-Manufacturing, Labeling and MRP Stickering, Bundling, Customized Packing and Return customization.

5. Best-in-class warehousing infrastructure

At FM Logistic India, warehousing infrastructure is notches ahead of competition. We provide top of the line storage and handling equipment like advanced VNAs. All these offerings help us to increase the operational efficiency of our customers. Thanks to FM2 floors having 6 T/m2 UDL or more it allows up to 12m high vertical storage which brings high cubic efficiency and better productivity allowing competitive operational cost. Each of our facilities offer ample docking stations to enable the smooth flow of inventory without any bottlenecks.

To enable our customers across various sectors to cater to the ever changing demands of their end consumers, FM Logistic India has an indigenous warehouse management system in place which works on the plug-and-play model to seamlessly work for both B2B mode and B2C mode

Our Product Development goes through a value engineering process and all our service offerings are simulated over 7-10 years with the projected changes. At various stages of the product life cycle, we bring in booster changes either by patch of technology, processes optimization or value stream mapping, introduction of right MHEs with the change of business needs etc. The entire effort has one objective – achieving the defined deliverable at minimum cost of operations. This is our DNA and our solutions and development teams continuously challenge various cost drivers to make them efficient as an ongoing process.

6. Commitment to sustainability

An increasing shift towards renewable or ‘green’ energy sources (solar, wind, etc.) is propelling the development of electric mobility and facility solutions for logistics.

FM Logistic is a proud member of the United Nations Global Compact Network in India. Sustainability is in the heart of our DNA at FM Logistic. We are one of the few 3PL service providers in India to be associated with this initiative for sustainable development with the United Nations Global Compact Network.

  • In 2019, FM Logistic released its first sustainable impact report. This report includes animations, videos and infographics illustrating the key impacts of the company’s activity on the economy, society and environment. It covers areas such as jobs, health, education, greenhouse gas emissions and air pollution. The report also describes the measures taken by FM Logistic to contribute to a more sustainable supply chain.
  • We commissioned our first solar project at one of our warehouses for the largest industrial manufacturer. Solar panels having a capacity of 150 kW will be used to power up a large warehouse of 1,80,000 sq. ft.
  • Efforts are being made across all warehouses to reduce the use of plastic in packaging by using sustainable filler material and thus, reducing the plastic filler material. Also the option of using paper based tape instead of plastic tape for packing is being explored.
  • All our upcoming MCFs will have solar panels to power electricity needs but also able to share excess solar power back to the public grid.
  • Diversity in the organization fosters a more creative and innovative workforce. At FM Logistic India, we are consistently working towards building a diverse workforce. At present, around 20% of our workforce is constituted by females. We target to increase this to 35% by 2022.
  • Through the FM Foundation we support, accompany and co-build social innovation projects, led by the employees of the Group, in the areas of education of underprivileged children. In India, we have partnered with a few NGOs to carry out various social welfare activities.
  • Green loans are granted to finance projects with environmental and societal objectives only. The loan repayment rate will be defined according to the achievement of the objectives by the company. In January this year, Bati Logistics, FM Logistic’s sister company, signed a 9-year green loan of EUR 222 million with a group of banks.

7. Urban logistics with green energy and last mile as the next priority

Public space is an increasingly scarce resource for cities, crystallizing the problems of congestion and pollution. Today, these problems have not only become priorities for cities but also for businesses. In particular, it is the duty of cities to ensure a good quality of life for their citizens, which means guaranteeing them healthy living conditions while providing them with easy access to the services and goods to which they aspire.

FM Logistic is committed to the objective of decarbonizing our distribution activities and last mile logistics.

FM Logistic created City login, an urban, sustainable and effective solution, in 2014. The objective is to limit the impact of delivering goods (pollution, noise, congestion, etc.) in city centers, by using suburb-based warehouses and small hybrid or electric vans.

In India, we will soon be launching electric vehicles for intra city transportation in metros. We are having a set plan to be deployed next month to invest locally in Electric Vehicles (EVs) for urban distribution as a sustainable and environment friendly solution to support our urban intra-city logistics strategy without adding to the current high air and ear pollution from which our cities are suffering.

8. Safe and secure working environment for collaborators

The health and safety of our employees is our biggest priority. We are making consistent efforts towards ensuring that all employees have access to good working conditions in terms of hygienic working environment, welfare facilities, enough ventilation, adequate lighting, etc. As a part of our safety-first initiative we are running a safety campaign in India, “Project Sifar- Zero Accidents”, which is in accordance with our strict policy of safety and accident avoidance. It is committed towards avoiding workplace injuries due to unsafe acts and/or conditions and aims for Zero Accidents at the workplace. When the pandemic struck India, we indigenously developed and launched a proprietary mobile app to ensure that social distancing is maintained at the warehouses at all times. It is the first of its kind to be developed and launched by the logistics sector in India. This app is available for use only to FM Logistic India collaborators. 

Today, with the advent of new digital tools, we are transitioning into a futuristic era.

We have all the necessary compliances in terms of QHSE in place. FM Logistic India firmly believes that our employees are our biggest asset and hence, we take utmost care to ensure that all our collaborators have access to safe and secure working conditions. We have the highest standards of employee safety and security in place to ensure the well-being of our employees. With the idea of employee well-being in mind, we ensure that our employees have access to a dust free environment, hygienic recreational and sanitary space, etc.

What challenges do you see emerging in the logistics sector in the foreseeable future?

The warehousing sector is one of the fastest growing sectors in India.  Experts believe that the Indian logistics and warehousing sector is set to grow by 35% in 2021 according to a report by Welspun One Logistics Parks (WOLP). Fueled by numerous factors, including positive government policies and initiatives like economic stimulus package to industry, international trade environment, and possibilities around India becoming one of the top manufacturing hubs in the world, the Indian warehousing sector is set to become a strong contributor to the country’s growth, post the pandemic. According to The Indian Express, India’s manufacturing sector activity strengthened in December 2020, with manufacturers stepping up production and input buying amid efforts to rebuild their inventories following business closures earlier in the year. India’s Manufacturing Purchasing Managers’ Index (PMI) was at 56.4 in December, a tick higher than November’s reading of 56.3 and above the critical 50 thresholds for the fifth straight month.

However, despite this growing demand, logistics in India is plagued by numerous challenges which include cost pressures, high returns (reverse logistics) and poor infrastructure. Managing returns and collection of payments will be the real challenges.

  1. High cost of land

High cost of land is a major challenge for investors interested in Grade A warehouses. Land cost constitutes a major component of a warehousing project investment. The cost of constructing a good quality Grade A warehouse structure varies between INR 1,200–1,800 per sq. ft. depending on the contour of land. The cost of land in India varies by a huge margin depending on the location and quality of infrastructure near the land parcel.

In India we have implemented drones for inventory control and are in the process of getting this implemented across all warehouses

Through NG Concept, FM Logistic’s sister concern, FM Logistic India is developing Grade -A Multi-Client Facilities to cater to the growing logistics industry in India. We will soon be starting operations at our own MCF in India at Farukhnagar, near Gurugram. This new A+ grade facility will be the first in India to combine LEED and FM Global Certification. With a built up area of 700,000 sq. ft. this MCF enjoys strategic access to Kundali, Manesar and Palwal expressways for faster connectivity to all major consumption centers in the North. The new MCF will have a storage capacity of 100,000 pallet positions and provide a dedicated area for co-packing and other value-added services. Furnished with best-in-class safety and security features, the MCF will offer cost efficient quality, storage and handling services.

  • High rental costs

As Grade A warehouses are equipped with the best-in-class services and facilities, the rentals for these facilities are higher than that of Grade B warehouses. However, as Grade A warehouses offer high cubic storage, it reduces the operational costs for the customers.

  • Trained manpower

Trained manpower is essential both for the third-party logistics sector as well as manufacturing and retailing sectors, which is very weak at a practical level, i.e., IT, driving and warehouse as well as at a higher strategic level. The disorganized nature of the logistics sector in India, its perception as a manpower-heavy industry and lack of adequate training institutions has led to a shortfall in skilled management and client service personnel.

At the warehouse level, FM Logistic India has launched the Supervisor Development Program through which existing warehouse associates can become Team Leaders. The eligible associates are evaluated based on their performance.

FM Logistic in India has also invested in the digitalization of its various functions, notably WMS (Warehouse Management System) and TMS (Transport Management System) that offer high quality service and real-time visibility to customers. Our WMS, known as Trariti, is 100% customizable and integrated with our TMS.

We often hear that the role of logistics function is evolving. How is this role evolving and what role will the sector play in the near future?

Logistics is a rapidly evolving market; many factors are shaping the future of how companies move goods and what they will require from their logistics partner. Since the beginning of the Coronavirus crisis, the logistics industry has been on the frontline ensuring that the supply chains remain intact. Since the manufacturing industries were severely hit due to the shortage of labor and the restrictions being imposed on the movement of goods and businesses, the supply has been disrupted. The logistics industry provides significant macro contributions to the national economy by creating employment and generating foreign investment influx. Thus, it holds critical importance as it connects various markets, suppliers and business areas like material handling, warehousing, packaging, supply chain management, procurement, and customs service dotted across the country.

The Indian logistics sector provides employment to more than 22 million people. Rapid and technological advancements in digital technologies, changing consumer preferences due to e-commerce, government reforms, and shift in service sourcing strategies are expected to lead the transformation of the Indian logistics ecosystem. In the new normal, technology has proven its utility and adaptability. Strong market trends towards the e-commerce segment continue to transform how brands and consumers interact. The pandemic has brought an increase in the demand for essential items such as groceries, food, and pharmaceuticals. Many logistics companies cater to this demand whilst adhering to safety protocols with OTP-based contactless delivery of items. Leveraging state-of-the-art technology, logistics aggregators should focus on increasing the efficiency of services and optimizing cost.

Another method adopted by logistics aggregator brands is to help the MSMEs and align with the Government’s self-reliant movement. For small-sellers who want to take their business online and increase their customer base, logistics aggregators have become the one-stop fulfilment solution. With automated warehousing and packaging services, they should ensure that there are minimal weight discrepancy and seamless post-order experience.

Have you seen increased demand for logistics services apart from the metro cities? What has been your strategy to target the tier 2, tier 3 cities, and the rural nodes of India?

Over the years, the Indian warehousing and logistics industry has achieved significant growth in terms of both size and scope. Today, businesses are on the lookout for logistics service providers who are capable of integrating advanced technologies, process automation in their warehousing solutions and support them to move closer to their end consumers. Faster time to the market and ever increasing demand from the time sensitive e-commerce sector has changed the dynamics of the logistics industry.  The logistics sector has become more organized as well as standardized. Grade A warehouses and increasing use of technology are the stepping stones in this process as they provide an ease in time-bound delivery, customer satisfaction and risk-free business environment.

The booming e-commerce market and a robust demand for the strengthening of retail supply chains across industries, has bolstered the demand for Grade A warehousing facilities across the country. More so the ongoing COVID-19 pandemic has led to the increase in demand for quality warehousing space. E-commerce and omni channel operations have fueled this growth. Today, there has been a tremendous shift in consumer behavior as the majority of customers across the country – even those in Tier II and Tier III cities, have resorted to online shopping. Customers today need to have access to their required products when they need them and within the shortest possible period of time. In order to deal with such situations, companies have understood the importance of having a real time pulse of the market and are investing in Grade A warehousing facilities in smaller cities. This has helped them to cater to the rapidly increasing customer base in these cities.

FM Logistic India is focused on developing Grade a Multi-Client Facilities (MCF) in the most important economic zones in India. Our Grade A MCFs are state-of-the-art facilities that provide the best-in-class services and are built on par with international standards. Our MCFs provide A grade warehousing infra with FM2 flooring and high cube vertical storage to enable our customers to optimize their space. We also provide top of the line storage and handling equipment. All these offerings help us to increase the operational efficiency for our customers. Thanks to a very high flooring resistance of at least 6 T/m2 it allows up to 12m vertical storage which brings huge cubic efficiency and better productivity allowing competitive operational cost. Each of our facilities offer ample docking stations to enable the smooth flow of inventory without any bottlenecks.

We have all the necessary compliances in terms of QHSE, fire, etc. in place. FM Logistic India firmly believes that our employees are our biggest asset and hence, we take utmost care to ensure that all our collaborators have access to safe and secure working conditions. We have the highest standards of employee safety and security in place to ensure the well-being of our employees. With the idea of employee well-being in mind, we ensure that our employees have access to a dust free environment, hygienic recreational and sanitary space, etc.

Our Grade A MCFs are state-of-the-art facilities that provide the best-in-class services and are built on par with international standards

All FM Logistic warehouses are equipped with electronic surveillance systems. We have also deployed the appropriate access control measures in terms of doors, locks (restricted access to inventory storage area to only specific teams) and other security systems to prevent unauthorized access and improve cargo security. All our warehouses are equipped with beam detector systems and intruder alert systems with SOS sms to the concerned team. Our security team undergoes rigorous training and mandatorily conducts regular checks on a daily basis. We frequently organize night audits as well. Warehouse security audits are organized monthly to identify specific risks, if any.

We are supported in the endeavor of developing Grade a Multi-Client Facilities in the established and upcoming logistics hubs by NG Concept – our real estate arm which develops warehouses for FM Logistic worldwide.

In 2019, FM Logistic India broke ground for our own MCF in India at Farrukhnagar, near Gurugram. This new A+ grade facility will be the among the first in India to combine LEED and FM Global Certification. With a built up area of 700,000 ft2 the Farruknagar MCF enjoys strategic access to Kundali, Manesar and Palwal expressways for faster connectivity to all major consumption centers in the North India. The new MCF will have a storage capacity of 100,000 pallet positions and provide a dedicated area for co-packing and other value-added services. Our upcoming Multi Client Facility in Bhiwandi, Mumbai spans across an area of 4, 00,000 sq. ft. This facility, too, is strategically located and provides faster connectivity to the major consumption centers in West India.  Furnished with best-in-class safety and security features, both our facilities will offer cost efficient quality, storage and handling services.

In nutshell, the next wave of warehousing belongs to tier II and tier III cities and FM Logistic India is contributing by strategically placing its MCFs.

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