From backroom to boardroom: Changing dynamics of supply chain & logistics services

At the time when one of India’s leading supply chain and logistics companies Safexpress started its journey in 1997 – with 9 offices, 12 vehicles, and 9 hubs across the country – the decision to invest in logistics services were the last thing on every retailer’s mind.
But at a time when change has remained the only constant and the ability to respond effectively to these changes in buying behavior and to quickly satisfy customer demand has become an integral part of a business strategy, the importance of supply chain and logistics cannot be overlooked.
Safexpress, which provides value-added logistics services for nine different business verticals ranging from Apparel & Lifestyle, E-commerce, Healthcare, Hi-Tech, Publishing to Automotive, Engineering & Electrical Hardware, FMCG & Consumer Electronics and Institutional, has remained a testimony to the change from over two decades now.
In an exclusive interview with Indiaretailing Bureau, MD, Safexpress, Rubal Jain talks about the changes in the logistics and supply chain mechanics, what it’s like to work with new age digital companies, implementation of Goods and Services Tax (GST), and the company’s future.
How have supply chain and logistics mechanics changed over the years? What are the major breakthroughs that you have witnessed?
The biggest change has been the fact that supply chain has now become a boardroom topic. CEOs and manufacturers of goods are talking about it. Earlier the real market differentiations were one of these – either your product was cheaper or your brand was superior and hence sold better. However, today, in almost every sector, the real differentiation is based on who has the better supply chain, since consumers have a lot of choices. Retailers have started to take supply chain as a very integral and important part of their business strategy and this change has changed service providers as well.
Today, people track things on what time and how soon they reach. Until ten years ago, products were largely sold regionally but now brands are easily available across the country, so service providers also need to have a nation-wide network, especially since we now have access to better infrastructure, faster trucks, higher salaries and smarter talent.
You recently entered the B2C segment by extending your services to e-commerce players. How different are B2C dynamics from B2B?
From the supply chain perspective, the dynamics are completely different. In a normal B2B (Business to Business) retail business you are delivering to the same shopkeeper or retailer, again and again, every week or a month which means that you as a company, your driver as an individual and the retailer as a customer are all in sync. The retailer has given you a certain time in a day to deliver the consignments hence you have a set structure.
However, in the B2C (Business to Consumers) segment consumers may not available at our convenience or e-commerce companies may want increased deliveries on Sundays or late nights so there is no structure.
Also, since one is delivering to a new address every day, the shipment sizes are different, but all this adds up to the excitement. The opportunity is humungous and ever-growing, so one cannot ignore that.
What alterations were made in the business model for e-commerce clients?
For us, since we are present across the country, our entire middle mile i.e city-to-city transportation has not changed as we are the fastest player in this segment and we already have a strong infrastructure. What changed was the way we address the last mile customers.
We are the only company in India which is 100 per cent four-wheel delivery company, everybody else is delivering on bikes and we don’t think that deliveries should be made like that. At the end of the day, it’s not sustainable and you need a vehicle network to address the needs of a specific client.
We have dedicated over 600 vehicles for delivering just the e-commerce consignments. Moreover, all our partners are using us for the services that they know nobody else can deliver; products which are bulkier, heavier, precious or harder to maneuver.
For instance, we do a lot of work with online furniture retailers sites that are selling the heavy bed, dining tables, among other and various home shopping networks who sells the product in big quantity like TV, fridges, full dining table set etc.
We are currently working with almost all the players like Flipkart, Snapdeal, Shopclues, Pepperyfry, Fabfrunish, Star CJ, TV 18’s shopping network, et all.
But a lot of e-commerce players have also invested in their own supply chain network. Does that impact an entrenched player like you?
E-commerce companies claim they can deliver goods in a few hours’ time. While at present they are not charging to these services, premium services will soon become paid. The question is: how many people in India will pay for these premium services. This, in my opinion, is not a sustainable supply chain model.
So, given that, I think it doesn’t affect what we are doing in general.
With GST coming in, the logistics industry is expected to reach its potential in terms of service and growth. What do you think will change and how prepared are you?
We had come about with a campaign nearly six years ago saying: “we are GST ready, are you?” and for the past six years, we have been waiting for it. With GST finally being implement 2017 onwards, we have re-launched our campaign.
Once implemented, GST will eliminate multiple state taxes and encourage logistics companies to consolidate warehouses instead of maintaining one in each state to avoid Central Service Tax. We have already set up a network in a way that we can cater to the entire country within a very small period of time without needing any localised warehouses – something which other players will find tough to do initially.
We have 30 massive logistics parks spread all over the country and have a fleet of over 4,000 vehicles. This gives us the flexibility to deliver goods in just 3 days to retailer as opposed to 10-15 days which others need. We are the fastest on the ground and we can reach every part of the country in a time defined frame.
GST will also adversely affect full-time truck companies since warehouse-to-warehouse movement is going to reduce.
What savings are you expecting after the implementation of GST?
While the cost of running a business is not going to come down considerably, net profits are bound to increase. As we are an asset-light company, there is not a lot of net cut off that we will get but we are hoping that it is going to make the supply chain a lot smoother so costs should come down.
How many logistics parks are you planning on adding to your network this fiscal. What are the focus areas going forward?
Currently we have 30 logistics park across India and at any given point of time between three to four are always under construction. So right now, logistic parks are under construction at Bangalore, Hyderabad, Siliguri, Jaipur, Bombay and Aurangabad.
We are very bullish about the Indian economy and feel that it’s a long-term play and not just a one-year or two-year return play. We never buy a warehouse plot and sell it at a higher cost we use it for development because it drives the economy.
Our focus is to remain domestic and we are focusing on domestic ground transportation, domestic air transportation, for B2B largely.
While our B2C is growing aggressively at a 100 per cent every year, it’s currently at 2-3 per cent of our overall revenue. We are not looking to increase the contribution aggressively as we want to do things sustainably. B2C is a long-term commitment for us.