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Global Positioning: Expanding Into India

As a market, India is considered the next China. The opportunity there for consumer electronics alone is estimated at $20 billion. But when it comes to getting products into the hands of consumers, India carries many of the same logistical challenges as China: a huge area, a widely dispersed consumer base, and the supply/demand swings typical of these products. The GPS maker TomTom is using the supply chain solutions provider ModusLink to execute everything from custom configuration to reverse logistics in India.

Supply chain and 3PL services are a growing opportunity in India, according to a report from the research firm RCNOS:

Lucrative growth in India’s consumer electronic and durable industry has boosted the 3PL sector, generating estimated revenue of $69 million in 2010. The market is further anticipated to post a CAGR of around 36% during 2012-2014, on the back of rising demand for warehousing and transportation in consumer electronics and durable industry.

ModusLink's solutions center in Hyderabad, India, is one of 25 such centers around the world, Tom Nightingale, the company's president of sales and marketing, told us in a phone interview. “Every customer is different, so we provide everything from value-added configuration to reverse logistics, repair, and reclamation services.”

TomTom wants to download localized map software and assemble its products as close to the end-user as possible. It also uses ModusLink to package, distribute, and handle accessories such as cases, covers, device mounts, and chargers in India. “We are capable of doing everything the customer requires at the 'last mile' to get fresh content to the point of consumption,” Nightingale says.

Companies like ModusLink are getting more of their revenue from back-end supply chain services. Rather than handling returns and repairs themselves, OEMs are outsourcing those services within local markets. ModusLink handles the physical return services, stocks and manages parts for repair, tests retuned devices for defects or user error, and interfaces with the OEM if products will be returned to the shelf. In addition, Nightingale says, companies like ModusLink handle the collection and disposal of electronics products, since the relevant regulations vary widely.

According to the RCNOS report:

India’s huge geographical diversity requiring varied logistics expertise for each region presents the biggest challenge that needs to be addressed by the 3PL service providers. To overcome this problem, 3PL companies have to make huge investment to setup a logistics network.

21 comments on “Global Positioning: Expanding Into India

  1. _hm
    March 16, 2012

    This is very good information. In country like India and other similar places, customer demands are quite unique and understanding them is of paramount. TomTom and Moduslink is doing good work and will be have success. They should continue doing more detail market research.

     

  2. elctrnx_lyf
    March 17, 2012

    Third party logistics will play a very important role in a country like India where you need many local distributors, door step service providers and also handling the returns and repairs. Many other product companies will probably depend on established service proiders like Moduslink rather than setting up the complete new staff.

  3. Anand
    March 17, 2012

    Rather than handling returns and repairs themselves, OEMs are outsourcing those services within local markets.

    @Barbara, thanks for the post. This is a win-win collabration for both the parties involved. By collaborating with existing Supply chain and 3PL services, OEM's can take advantage of their experience to capture the market. 

    On a different note, I am not sure if people in India will buy TomTom devices because basic navigation facility is already available in smartphones. 

  4. Anand
    March 17, 2012

    Third party logistics will play a very important role in a country like India where you need many local distributors, door step service providers and also handling the returns and repairs

    @elctrnx_lyf, I think times are changing. Slowly people have started buying electronic goods online . New portals like ebay.in and flipkart which offer cash on delivery services have attracted many new buyers. 

  5. syedzunair
    March 17, 2012

    @anandvy:

    I tend to disagree with you on this. Even if people have started to buy online they still represent a niche market. Majority of the population still relies on the logistics network. 

  6. Anand
    March 17, 2012

    @syedzunair, thanks for your reply. My response was particulary w.r.t the point that  “we need many local distributors”. You dont need a local distributor if more and more people start purchasing online. By local I mean every part and city of the country. 

  7. syedzunair
    March 17, 2012

    @anandvy, my pleasure! 

    In that case how will we handle returns? 

    I can understand that keeping a local distributor in each city will not be cost effective. But at least keeping a distributor in the big cities will help, wouldn't it? 

  8. Anand
    March 17, 2012

    In that case how will we handle returns? 

    @ syedzunair, I guess you are referring to repair service ? You have to courier your item to the main centre. For example many of my friends couriered their Dell laptops when it stopped working. I know this model is not that user friendly but companies like Dell are getting benefited because they dont have to spend on infrastructure.

  9. t.alex
    March 18, 2012

    I have been to India a few times, and this is quite true. Engaging a third party like Moduslink can be a wise choice, given the geographical coverage.

  10. ITempire
    March 18, 2012

    “New portals like ebay.in and flipkart which offer cash on delivery services have attracted many new buyers.”

    @ anand

    I agree with you Anand and to add on, previously the concerns relating to online buying were higher prices, delayed deliveries and hassle of credit card payment. Now that the online sellers like ebay etc are becoming price competitive with cash on delivery services, many of the supply chain basics are being redefined. 

  11. _hm
    March 18, 2012

    Another important aspect is to have an agreement, trust and faith to build long time relationship for mutual benefits. There may be rough patch in between, but if they make long time commitment (like japanese partnerships), both party will gain lot from consumers.

    When you look for partner in India, lots of work needs to be done looking for compatible long time partner.

     

  12. stochastic excursion
    March 19, 2012

    Who are the major players in small parcel service in India?  I know UPS and DHL have a presence there.

  13. Daniel
    March 19, 2012

    Apart from that Blue dart, DTDC, First Flight, TNT etc are major players. There are also other 'n' number of local players like VRL, KRS etc.

  14. Daniel
    March 19, 2012

    I know in Dell case, they have their presence in most of the major cities. So you have either walk to the nearby service centre or ship the product to the main service centre. If your product has onsite warranty, then they may send their service peoples to the customer place for either repair or taking out for servicing.

  15. Daniel
    March 19, 2012

    Alex, you are right. India is one of the biggest countries both in population and geographical area. So the service providers have their own presents in all corners, then only they may be capable to deliver it in a prompt way. Otherwise they have to be get tie up with local players, who have significant presents across different locations.

  16. Himanshugupta
    March 19, 2012

    IMO, relationship with Indian companies would be easy due to common language and cultural flexiblity but how long the relationship ends depend totally on whom foreign companies approach. Lack of formidable players in the supply chain also pose a challenge. 

  17. Wale Bakare
    March 19, 2012

    You are right _hm. I think that is very necessary setting out in a place like India.

  18. FLYINGSCOT
    March 20, 2012

    One really needs to visit and travel in India to witness its huge potential and the logistical nightmare it poses.  I believe international companies will need to engage with experienced local companies to effect their strategy.

  19. Barbara Jorgensen
    March 20, 2012

    Today, Xilinx announced expansion into India. This is the third notice in as many days I have seen, and I only scan electronics wires (when I am pressed for time, anyway). ModusLink/TomTom, TTI and Xilinx are the ones that crossed my desktop. I am wondering if there is something specific that is going on to prompt the recent expansion?

  20. Lloyd B
    March 24, 2012

    Great question Barbara.  I'm glad someone is noticing the India 'break out' as it regards take up of advanced logistics practices and especially efficiency and visibility driving technology. 

    I've been here 4 1/2 years, specializing in the more interesting supply chain consulting projects like rolling out a pan-India Reverse Logistics operation with time-definite pick up / delivery on a collaborative ERP and tailored RL TMS.  Additional work in Critical Logistic for leading MNCs, FTWZ for forward thinking global distribution schemes and Cold Chains to help cut the estimated 35% waste in perishable products has given me valuable insight.

    India is not just a hot climate, it is definitely hot as it regards accellerating logistics solutions across a broad range of industries, namely: Electronics, Pharma, Automotive, Aviation, Perishables and most recently, E-Commerce backed by robust E-Logistics.

    I have been lucky to be here during a transition from   blase′ market acceptance of late delivery, product quality problems, no return goods policies and generally, poor customer service, to accellerating market demand for more, higher quality product, as wanted and with respect for customer pre and post sale needs. 

    Global leaders have come in helped speed this change with higher standards and overseas Indians return home with higher quality expectations.  However, the heartbeat of the transistion is unstopable economic growth.  India's economy may wane a bit with decreased exports to western trading partners, but there is a strong domestic growth factor with merchandies exports being only about 15% of total GDP, now projected at 7.0% growth for 2011/12 and up to 8.4% in FY 12/13.  Compare that with the rest of the world.

    What's under the hood? A huge middle-income population estimated at over 300 million with exponentially increasing consumer spending power demanding more, higher quality goods, two economies (one above, one below) and 70% of the population based in rural communities spending more at retail outlets and now, on-line. 

    It's an exciting ride.

    Lloyd Sanford, Applied Logistics India, Pvt. Ltd.

  21. Barbara Jorgensen
    March 26, 2012

    Lloyd–thanks for the excellent information!

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