Well it is commonly known that business leaders always mention human resources as sources of strength when the companies are doing well and the lack of genuine talent as one of the key factors in turbulent times apart from business externalities.
In India, the shipping and logistics industry has been in a very tight spot and perhaps, in the near future will continue to do so. There is genuine lack of good educational institutes that impart holistic training in shipping and logistics. The only good one that I personally know of is NITIE School of Management that only takes in engineers and most of the talent from this business school ends up in logistics departments of FMCG and Automotive companies. A couple of reputed business schools did try to bring in specializations in Supply Chain Management either in the Indian campuses or their branches in Middle East or Singapore, but based on my interactions with people in the industry, there is no formal institute as of now that imparts holistic shipping and logistics training at bachelors and masters level.
The reasons for this come from the fact that there is genuine apathy to the logistics industry in India overall and lack of industry experienced faculty in educational institutes [Finance, HR, Marketing segments don't face this challenge usually] In fact, even in the crowded 'head-hunting' space, you will find executive search consultants not knowing the difference between shipping, contract logistics, freight forwarding, 3PL/$PL and many still consider supply chain management to be different from logistics!!!
As mentioned in the earlier post, the shipping and airline [both asset heavy industries] are in bad shape and this trend is expected to continue for at least 3 more years before some meaningful turnaround takes place. So there won't be much recruitment in 'carrier' firms and there will be a lot of focus on operations strategies to drive value in corporations' operations and thereby balance sheets.
On the logistics front, be it contract logistics or freight-forwarding firms, there is ample entry and exit of players including private equity firms and this trend is expected to continue over the next decade or so. Over a period of time, there will be consolidation in this space as well but this front has a lot of potential to grow and add value to an organization.
The most disturbing trends in the human resources side has been the lack of culture of meritocracy. Over the last 5 to 8 years, so much activity has taken place that there has been a lot of movement of people from one organization to the other but neither do the profitability of the firms reflect the volume growth nor do people at large seemed to have grown in terms of product / market knowledge.
My personal take is that 3 critical factors stand out for this
'People join corporations but leave managers' as echoed by Narayan Murthy of Infosys fame and it holds true for most industries in India including logistics and shipping. First and foremost, this is the major reason for the lackluster HR resources in the logistics industry in India. Most of the designated managers in this industry in India are so extremely logistics focused that they have lost touch with the changing realities of the world [read stuck to glory of the past] or are so engrossed in chasing salary packages that they don't have time to groom and mentor people reporting into them.
That the executives at the top got the industry analysis wrong is also a major factor as mentioned in the previous post. This is also not surprising because a lot of hot money flows into India with the India shining story but what holds true for IT or FMCG does not hold true for the logistics industry. In the relentless hunger to fill in open positions and unrealistic excel modelling of the future, most business plans do not reflect any sense of ground realities and chunks of people including top management are confused about their own careers and where they want to take the business over a longer term horizon.
Third, the lack of meritocracy and performance measurement has been largely missing. Over the last few weeks, my interactions with people from the industry have vindicated the belief that in the Indian shipping and logistics industry, most organization structures have created the following culture
[illustrative image from images.google.com]
The most important metrics for an executive are
1] Value Created For the Organization [Be it listed or non-listed, market capitalization and tangible enterprise values are critical]
2] Value Generated / Cost To Company [How much one gives back to the organization]
Over the last decade or so, barring a few corporations in the Indian industry, there has been constant value destruction and an exponential rise in Cost To Company. When an industry is booming, there is no doubt that employee benefits should rise but people in commercial and business development positions at a minimum need to generate value equal to at least the Cost To Company [ideally 3 times or more]
The other aspect has been that in many organizations, the organization structures have continued to remain extremely complex, very executive-heavy and a there is lack of sustainable growth strategies. The need of the hour is strict elimination of non-performing talent and leaner and meaner organization structures. In this area as well, there has been a significant challenge; in many organizations, the headcount rationalization exercise has brought down headcounts but not changed the Cost to Company significantly.
The primary reason being retention of employees who fit the bill of 'Ay Ay Sir / Yes Madame' no matter what the cost to company and elimination of talented resources [which does not improve the cost side!!!]. In fact most organization restructuring has been so detrimental to long-term growth prospects of corporations that neither talented people in the lower rungs are motivated to perform nor is the organization able to generate meaningful value for shareholders [regardless of whether the entity is publicly listed or privately owned]
The longer the industry overall takes to rectify and move to the policy of meritocracy, the harder it will be to turn around the fortunes of the corporation. The other major aspect is on training and development. Due to pressures on the short-term value creation front [that is easy to manipulate with some financial engineering], many companies are pulling the plugs on training and development. This is not a healthy sign as training and development is the most crucial element, considering the developing industry trends. A major challenge here has been allocation of training budgets [the ones who receive, receive significantly whilst a major chunk is ignored]. The other area of faulty human resource management has been excessive emphasis on hiring professionals from business schools and ignoring talent from regular graduate streams.
By and large the shipping and logistics industry comes with a set of working environmental challenges; most of the action takes place not in air-conditioned corporate offices but in remote locations [industrial areas, port locations etc] and also demands a lot of physical work. In an action packed day, a logistics professional has to interact with blue collar workers taking care of loading/unloading cargo to truck drivers to logistics and sales professionals of the client. A logistics professional has to be able to swiftly juggle thinking caps, adapt to different language and communication styles. Moreover there are nuances attached to different kinds of materials handled i.e. what is best practice for automobile cargo is completely different from what is good for foodstuffs and likewise for apparel and footwear.
A good shipping and logistics professional is expected to seamlessly navigate through processes of bonded warehousing, non-bonded warehousing, surface transportation, consolidation and multimodal transportation. The last 2 decades have seen a lot of silo-based processes where the shipping professional just thinks in terms of containers whilst the bonded warehousing professional just thinks in terms of stuffing/destuffing of cargo whilst the consolidation professionals just work with the SLAs and KPIs set by their clients. Well every professional as to start with something and it takes a good 6 months to 1 year to be able to talk about one aspect of logistics with conviction before moving on to any other segment. A good shipping and logistics professional needs at least 4 to 6 years just to get familiarized with different aspects of supply chain and carve a niche for himself/herself.
It is really unfortunate that the attitude towards training and development has been well below global standards in India. Even large organizations with sizeable chunks of training budgets have ended up paying lip-service to real training and development. Now don't get me wrong that Im trying to say that money has not been invested in training and development. A lot of money has been invested in training by most organizations but sadly, the allocation of training budgets and development of subject matter expertise has been the real issue. If this emphatic statement sounds abrasive or over the top ranting, ask any person who has spent about 5 to 8 years in the industry the following 10 questions
[Assuming that the reader does not google up the answers!!!]
1] What is the average trucking cost per Metric Ton per Kilometer today and how much was it 10 years ago?
2] What are the risks and costs associated with the major incoterms CIF, FOB, DDU, DDP and Ex-Works i.e. whose rights and interests are protected in each leg
3] What is the average speed of a cartainer on the national highways?
4] What is the average utilization of 1 20' Container in a year and what is the average dwell time of a 20' container in non-freight earning mode?
5] What is the rake capacity of a single-stacked container train?
6] What are the 3 crucial variables to be controlled in a refrigerated container of cargo?
7] What is the average productivity of gantry cranes in modern ports of West India [JNPT, NSICT, Pipavav, Mundra etc]
8] Identify the geographic trade hubs in India for the commodities 'footwear', 'basmati rice' and 'sugar'
9] Which is the gold standard system for airfreight settlements with carriers?
10] What is last-mile distribution optimization in a 3PL setup and why is it complicated in India?
You can compare your answers and scoring guide in the sheets below links
Answer Key: Please Click Answer Key to Download the same
Scoring Guide: Please Click Scoring Guide to Download the same
The scoring legend in the excel file is just a joke; please take it in good humor. The main point Im trying to drive here is the desperate need in Indian logistics personnel to develop LQ [Logistics Quotient] of themselves and their team members.
So to conclude a rather abrasive note for many readers and people managers in the logistics domain, the need of the hour is a strong operations strategy focus, meritocracy culture and LQ [Logistics Quotient] building time for the long-term growth strategies of the corporation serious about making it big in the logistics domain. There is one concept of employee stock options and proper incentivization that I will cover perhaps in the 2nd half of March 2013
The next article will deal with megatrends for the automotive and retail sectors from an India perspective.
As usual, questions, criticism, feedback are all welcome; comments are only moderated for decorum purposes.
In India, the shipping and logistics industry has been in a very tight spot and perhaps, in the near future will continue to do so. There is genuine lack of good educational institutes that impart holistic training in shipping and logistics. The only good one that I personally know of is NITIE School of Management that only takes in engineers and most of the talent from this business school ends up in logistics departments of FMCG and Automotive companies. A couple of reputed business schools did try to bring in specializations in Supply Chain Management either in the Indian campuses or their branches in Middle East or Singapore, but based on my interactions with people in the industry, there is no formal institute as of now that imparts holistic shipping and logistics training at bachelors and masters level.
The reasons for this come from the fact that there is genuine apathy to the logistics industry in India overall and lack of industry experienced faculty in educational institutes [Finance, HR, Marketing segments don't face this challenge usually] In fact, even in the crowded 'head-hunting' space, you will find executive search consultants not knowing the difference between shipping, contract logistics, freight forwarding, 3PL/$PL and many still consider supply chain management to be different from logistics!!!
As mentioned in the earlier post, the shipping and airline [both asset heavy industries] are in bad shape and this trend is expected to continue for at least 3 more years before some meaningful turnaround takes place. So there won't be much recruitment in 'carrier' firms and there will be a lot of focus on operations strategies to drive value in corporations' operations and thereby balance sheets.
On the logistics front, be it contract logistics or freight-forwarding firms, there is ample entry and exit of players including private equity firms and this trend is expected to continue over the next decade or so. Over a period of time, there will be consolidation in this space as well but this front has a lot of potential to grow and add value to an organization.
The most disturbing trends in the human resources side has been the lack of culture of meritocracy. Over the last 5 to 8 years, so much activity has taken place that there has been a lot of movement of people from one organization to the other but neither do the profitability of the firms reflect the volume growth nor do people at large seemed to have grown in terms of product / market knowledge.
My personal take is that 3 critical factors stand out for this
'People join corporations but leave managers' as echoed by Narayan Murthy of Infosys fame and it holds true for most industries in India including logistics and shipping. First and foremost, this is the major reason for the lackluster HR resources in the logistics industry in India. Most of the designated managers in this industry in India are so extremely logistics focused that they have lost touch with the changing realities of the world [read stuck to glory of the past] or are so engrossed in chasing salary packages that they don't have time to groom and mentor people reporting into them.
That the executives at the top got the industry analysis wrong is also a major factor as mentioned in the previous post. This is also not surprising because a lot of hot money flows into India with the India shining story but what holds true for IT or FMCG does not hold true for the logistics industry. In the relentless hunger to fill in open positions and unrealistic excel modelling of the future, most business plans do not reflect any sense of ground realities and chunks of people including top management are confused about their own careers and where they want to take the business over a longer term horizon.
Third, the lack of meritocracy and performance measurement has been largely missing. Over the last few weeks, my interactions with people from the industry have vindicated the belief that in the Indian shipping and logistics industry, most organization structures have created the following culture
The most important metrics for an executive are
1] Value Created For the Organization [Be it listed or non-listed, market capitalization and tangible enterprise values are critical]
2] Value Generated / Cost To Company [How much one gives back to the organization]
Over the last decade or so, barring a few corporations in the Indian industry, there has been constant value destruction and an exponential rise in Cost To Company. When an industry is booming, there is no doubt that employee benefits should rise but people in commercial and business development positions at a minimum need to generate value equal to at least the Cost To Company [ideally 3 times or more]
The other aspect has been that in many organizations, the organization structures have continued to remain extremely complex, very executive-heavy and a there is lack of sustainable growth strategies. The need of the hour is strict elimination of non-performing talent and leaner and meaner organization structures. In this area as well, there has been a significant challenge; in many organizations, the headcount rationalization exercise has brought down headcounts but not changed the Cost to Company significantly.
The primary reason being retention of employees who fit the bill of 'Ay Ay Sir / Yes Madame' no matter what the cost to company and elimination of talented resources [which does not improve the cost side!!!]. In fact most organization restructuring has been so detrimental to long-term growth prospects of corporations that neither talented people in the lower rungs are motivated to perform nor is the organization able to generate meaningful value for shareholders [regardless of whether the entity is publicly listed or privately owned]
The longer the industry overall takes to rectify and move to the policy of meritocracy, the harder it will be to turn around the fortunes of the corporation. The other major aspect is on training and development. Due to pressures on the short-term value creation front [that is easy to manipulate with some financial engineering], many companies are pulling the plugs on training and development. This is not a healthy sign as training and development is the most crucial element, considering the developing industry trends. A major challenge here has been allocation of training budgets [the ones who receive, receive significantly whilst a major chunk is ignored]. The other area of faulty human resource management has been excessive emphasis on hiring professionals from business schools and ignoring talent from regular graduate streams.
By and large the shipping and logistics industry comes with a set of working environmental challenges; most of the action takes place not in air-conditioned corporate offices but in remote locations [industrial areas, port locations etc] and also demands a lot of physical work. In an action packed day, a logistics professional has to interact with blue collar workers taking care of loading/unloading cargo to truck drivers to logistics and sales professionals of the client. A logistics professional has to be able to swiftly juggle thinking caps, adapt to different language and communication styles. Moreover there are nuances attached to different kinds of materials handled i.e. what is best practice for automobile cargo is completely different from what is good for foodstuffs and likewise for apparel and footwear.
A good shipping and logistics professional is expected to seamlessly navigate through processes of bonded warehousing, non-bonded warehousing, surface transportation, consolidation and multimodal transportation. The last 2 decades have seen a lot of silo-based processes where the shipping professional just thinks in terms of containers whilst the bonded warehousing professional just thinks in terms of stuffing/destuffing of cargo whilst the consolidation professionals just work with the SLAs and KPIs set by their clients. Well every professional as to start with something and it takes a good 6 months to 1 year to be able to talk about one aspect of logistics with conviction before moving on to any other segment. A good shipping and logistics professional needs at least 4 to 6 years just to get familiarized with different aspects of supply chain and carve a niche for himself/herself.
It is really unfortunate that the attitude towards training and development has been well below global standards in India. Even large organizations with sizeable chunks of training budgets have ended up paying lip-service to real training and development. Now don't get me wrong that Im trying to say that money has not been invested in training and development. A lot of money has been invested in training by most organizations but sadly, the allocation of training budgets and development of subject matter expertise has been the real issue. If this emphatic statement sounds abrasive or over the top ranting, ask any person who has spent about 5 to 8 years in the industry the following 10 questions
[Assuming that the reader does not google up the answers!!!]
1] What is the average trucking cost per Metric Ton per Kilometer today and how much was it 10 years ago?
2] What are the risks and costs associated with the major incoterms CIF, FOB, DDU, DDP and Ex-Works i.e. whose rights and interests are protected in each leg
3] What is the average speed of a cartainer on the national highways?
4] What is the average utilization of 1 20' Container in a year and what is the average dwell time of a 20' container in non-freight earning mode?
5] What is the rake capacity of a single-stacked container train?
6] What are the 3 crucial variables to be controlled in a refrigerated container of cargo?
7] What is the average productivity of gantry cranes in modern ports of West India [JNPT, NSICT, Pipavav, Mundra etc]
8] Identify the geographic trade hubs in India for the commodities 'footwear', 'basmati rice' and 'sugar'
9] Which is the gold standard system for airfreight settlements with carriers?
10] What is last-mile distribution optimization in a 3PL setup and why is it complicated in India?
You can compare your answers and scoring guide in the sheets below links
Answer Key: Please Click Answer Key to Download the same
Scoring Guide: Please Click Scoring Guide to Download the same
The scoring legend in the excel file is just a joke; please take it in good humor. The main point Im trying to drive here is the desperate need in Indian logistics personnel to develop LQ [Logistics Quotient] of themselves and their team members.
So to conclude a rather abrasive note for many readers and people managers in the logistics domain, the need of the hour is a strong operations strategy focus, meritocracy culture and LQ [Logistics Quotient] building time for the long-term growth strategies of the corporation serious about making it big in the logistics domain. There is one concept of employee stock options and proper incentivization that I will cover perhaps in the 2nd half of March 2013
The next article will deal with megatrends for the automotive and retail sectors from an India perspective.
As usual, questions, criticism, feedback are all welcome; comments are only moderated for decorum purposes.
