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Sep, 16 2010

Bridging distance divide

A business house's growth will not happen if their consignments are not delivered or transported on time. The delay may damage their reputation in the market, thus signifying the success of logistics and supply chain services.

A business house's growth will not happen if their consignments are not delivered or transported on time. The delay may damage their reputation in the market, thus signifying the success of logistics and supply chain services.

Business potential

The current size of the logistics industry is estimated to be around Rs 4 lakh crore. The Indian cold-chain industry forms a major part of the logistics business and is estimated to be around US$ 2.27 billion, which is a fraction of the overall sector. The logistics business is not much organised, leaving a lot of room for organised players to step in. Even after the slowdown onslaught, the logistics industry is growing at around 15 per cent every year. DTDC and Safexpress are major express and logistics providers.

The current size of the courier services industry is approximately Rs 2,500 crore in India. For cold cargo, 60 to 70 per cent of the volume falls under corporate category. The rest can be attributed to direct-to-home business. In case of DMCS Pvt. Ltd, 90 per cent of its clients are corporate. Safexpress provides supply chain and logistics services to over 5,000 corporate clients across 10 business verticals. In case of Blazeflash Couriers, about 20 per cent of clients fall under the corporate/SME category.

Flip side

Lack of electricity in many areas of the country is the biggest challenge the cold chain industry is facing today. Using generators to sustain temperatures is neither economical nor environment-friendly. This problem needs to be addressed and more efficient ways of maintaining perishable products need to be implemented. The unorganised players in this business are highly competitive though they provide low-quality service in terms of temperature control movement. They undercut organised players and corporations are often happy with their services, even at the cost of their product quality. Lack of multi-product/multi-temperature zone cold chain storage facilities in the country is another important challenge to be overcome. The cold storage sector is largely fragmented and unorganised. Share of the organised sector is less than 20 per cent. According to Jose Kumar, Managing Director, Cold Cargo and Express Logistics, “The market remains largely untapped by the organised players. Growth is expected from large-scale cold storage facilities and more demand from the end consumer for frozen/long shelf-life fruits/vegetables and other ready-to-eat, ready-to-cook products.”

Franchisability

The business of logistics is difficult to transfer over a short period of time. Companies in the logistics sector choose franchising to ensure rapid growth, both in terms of financial and operational requirements. Cold Cargo works jointly with the franchisees in setting up territories.

As per S.D. Agarwal, Chief Managing Director, Blazeflash Couriers, “The concept of franchising is a right option for growth of courier services because no courier company can cover the whole India by its own strength. There is not much of technicalities involved in educating the franchisees and by importing a few hours of guidelines about company's systems and guidelines, they become well acquainted and fully prepared for working independently in the market.”

Cold Cargo will operate the warehousing, call centres, marketing and many other critical business operations in each of the city where it is franchising. Cold Cargo's training plan is customised as per location and lasts for over two months with each franchisee.

The franchisee has the responsibility of helping Cold Farm develop its business in the territory assigned. The franchisee takes care of all home deliveries, using multi-temp vans and collects all the payments from the end customer. The franchisee is also responsible for moving all B2B shipments for cold cargo and most importantly, takes active part in the marketing efforts of Cold Farm services in their territories.

Expansion

It is estimated that the cold chain industry will grow rapidly in the next five years (9-10 billion USD market). Cold Farm is is now operational in Bangalore and will start services in Mumbai, Delhi, Gurgaon, Noida and Faridabad. Cold Cargo plans to partner with franchisees for Delhi NCR, Mumbai, Pune and Hyderabad by the end of year 2010. In 2011, Cold Cargo will expand to Kolkata and Chennai and then to other tier II cities. “We are in a rapid expansion mode to bring Cold Cargo and Cold Farm services to the main metros by the end of 2011,” adds Kumar.

“We are already having 4,737 franchisees scattered all over India and wish to increase the number to 5,500,” informs Agarwal. Kumar's advice to prospective franchisees is, “Check the execution capability and experience of your franchisor. He must prove that he can bring you to an operational state during the time he has committed to.”

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