By integrating IT solutions effectively and expanding its facilities, Mahindra Logistics aims to become a fully integrated third party logistics service provider and a US $1 billion company by 2018

POORNIMA KAVLEKAR

Incorporated in the year 2000, Mahindra Logistics Limited (MLL) is a 100 per cent subsidiary of the automobile giant, Mahindra & Mahindra (M&M). The company was the result of a strategic initiative by M&M to enhance focus on logistics services to both internal and external customers. MLL has been taking care of M&M’s complex supply chain needs including inbound and outbound logistics, inter-plant movement, warehousing, linefeed and value added services amongst other solutions. This expertise was gradually extended to other customers spanning various industry verticals. Currently, MLL aims to become a fully integrated third party logistics (3PL) company and wants to reduce its dependence on the parent company’s businesses. “Times are challenging, economic difficulties are not a thing of the past and both domestic and international demand has been in a slump,” admits Pirojshaw Sarkari, CEO of MLL. He continues, “But, these are not real detriments to temper our growth and aspirations but are opportunities to create, grow and do so inclusively.”

MLL also offers people transport solutions. According to Sarkari, “The advent of the IT / BPO industry in India, servicing clients in North America and Europe and employees working in the wee hours created a need for providing safe and reliable transportation solutions. We entered this space several years ago, as we saw an emerging need that a company like ours could effectively address.” MLL realised that the need of the hour was safe, reliable and cost optimised solutions.  Today, Mahindra people transport solutions (MPTS) offers customised, technology enabled people transport solutions to the IT, ITeS, BPO, financial service and manufacturing industries. MPTS transports more than 60,000 employees per day for its customers, performing more than 20,000 trips and deploying over 6,000 vehicles. “It is very different from a cab service as we offer specially designed, optimised transportation solutions to large corporations to ensure that their employees get to work and back home again on time, safely and in comfort,” says Sarkari.

The right business mix

The Mahindra Group provides MLL an opportunity to provide logistics solutions to mobility products from two wheelers to commercial vehicles as well as to other industries. “The size and scale of Mahindra Group’s volumes allow us to create and offer solutions to other industries and customers,” shares Sarkari. Currently, a major share of MLL’s revenue comes from the Mahindra Group. “However, the external business component is growing much faster and we expect this part of our business to increase significantly,” says Sarkari. Long focused on automotive logistics, MLL today serves customers across industries and business verticals – automotive, automotive components, consumer durables, fast moving consumer goods, hi-tech, retail and engineering goods. The company has grown at a brisk pace from Rs. 900 crore in FY10 to close FY13 with more than Rs. 1,500 crore in revenue.

The differentiator

“IT and how we integrate the same into our supply chain solutions is a key factor that differentiates us in this business,” states Sarkari. The company has invested more than US $1 million in project MILES – the Mahindra Integrated Logistics Execution System. MILES is based on the Oracle transport management system and seeks to create value for its customers and partners who have a considerable transportation spend.  Besides the significant investment in IT, MLL has also recently invested in over 5,00,000 square feet of modern warehousing space in western India. This is a mix of both multi-user and built-to-suite facilities in a single complex and adds to the four million square feet that it already operates. “Our plan is to now develop another million square feet of modern warehousing in south and north India. These complexes will include both multi-user and built-to-suite units with the latest design, engineering, layout, material handling systems, automation and warehouse management systems,” shares Sarkari.

MLL also has a separate team that takes care of supply chain design and efficiency. The team comes up with innovative cost saving initiatives and evaluates and redesigns the method in which the company can move both components and finished goods. Sarkari explains with an example, “We transport fully assembled engines from Igatpuri to Haridwar and by specially designing the fixtures and body of the vehicles we use, we are able to accommodate a higher number of assembled engines per vehicle, thus reducing the per unit transportation cost significantly.” Similarly across its various operations, the company is constantly innovating and improving its cost metrics.

MLL’s corporate governance and business practices ensure transparency and professionalism in a largely unorganised industry.

Entering the global arena

The global market is an area of considerable focus and a significant growth driver for the company. MLL is currently evaluating several international players to partner with and grow its business. “We want to partner with players who will support us on key lanes being developed, most importantly the U.S., Europe, South East Asia, China and Africa,” confirms Sarkari. MLL will soon be establishing a presence in several Asian counties, including China, Indonesia and Thailand. “Our plan is to gradually extend our 3PL solutions beyond the borders of India and support new and existing customers with such solutions across the globe. This expansion will be focused on value added 3PL services to several large customers in these locations,” he adds.

In India, 3PL penetration is much lower than in the developed economies. However, the pace of change is really accelerating today. “We have a large number of major players across industries who appreciate the benefits which a 3PL has to offer,” shares Sarkari. Today, MLL’s service portfolio is firmly focused on integrated 3PL solutions spanning the supply chain sector – from transportation, both domestic and international, to large format warehousing – multi-user and built-to-suite, in-plant logistics including kitting, sequencing and line feeding, to freight forwarding and various value added services.  To support its growth in this sector, the company is likely to come out with a public issue by 2016.

MLL currently serves over 200 large corporate customers across its operating verticals and aims to be a US $1 billion company by 2018 with a firm focus on integrated 3PL solutions. “This aspiration is entirely achievable given the size and growth of the industry in India,” states Sarkari. What would really make MLL different and allow it to evolve is how it integrates IT into its solutions. The company not only wants to grow its contract logistics business but also wants to build systems, processes, partnerships, technology and service portfolios which set it apart from the rest. “So the objective is consistent, profitable growth; not just in India but beyond our borders as well,” concludes Sarkari.

QUICK FACTS

• HQ of company –  Mumbai
• Geographic spread – 25 offices and more than 70 operating locations
• Vehicle deployment  – More than 25,000 vehicles a month
• Warehouse management – Over 4 million square feet
• Finished vehicle logistics – Over 8,00,000 vehicles per annum
• In-plant logistics – At 18 different manufacturing plants
• Revenue – Over Rs. 1,500 crore for FY 2012
• Customers – More than 200 large customers

TOP 5 CRITICAL SUCCESS FACTORS TO MAKE A 3PL COMPANY WORK 

• Skilled, trained and motivated people.
• Understanding your customer’s needs and designing appropriately customised solutions.
• Business partners who have the same goals as you and understand your vision and mission.
• A focus on ‘inclusive growth’ – environmental sustainability and the development of the communities in which you operate are very important.
• Have a clear understanding that supply chain management is the management of three flows – goods, funds and information. An integrated 3PL needs to optimise all three.