Central sales tax will revolutionize the industry

Central sales tax will revolutionize the industry
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First Published: Thu, Mar 19 2009. 10 52 PM IST

Revamp mode: DHL Exel’s CEO Bruce Edwards (left) with Paul Harry Graham, CEO, Asia Pacific wing.
Revamp mode: DHL Exel’s CEO Bruce Edwards (left) with Paul Harry Graham, CEO, Asia Pacific wing.
Updated: Thu, Mar 19 2009. 10 52 PM IST
Mumbai: DHL Exel Supply Chain, a division of Bonn, Germany-based logistics company DHL International GmbH, is a leading outsourced logistics firm. It has at least 126,000 employees globally, operates in 59 countries, and has 2,500 logistics centres, warehouses and terminals. The parent company is in the midst of a restructuring to consolidate its various divisions and change its name to Deutsche Post DHL. DHL Exel’s chief executive, Bruce Edwards, is in India to interact with his staff as part of the restructuring. Paul Harry Graham, chief executive officer of the company’s Asia-Pacific wing accompanied him.
Revamp mode: DHL Exel’s CEO Bruce Edwards (left) with Paul Harry Graham, CEO, Asia Pacific wing.
DHL Exel admits there is a slowdown impact but sees a bounce back of the world economy in 2010. Looking at acquisition opportunities by end-2009, DHL expects the proposed central sales tax (CST) to revolutionize the Indian industry. Edited excerpts:
What is the mood in the logistics industry, especially in India?
Edwards: It is different in different parts of the world. I cannot generalize. I guess I am a little bit influenced by the Western world. It’s quite difficult (there). But the economy is bit more buoyant in India.
In the Indian context, could you tell us where the pinch is coming from for the logistics business?
Edwards: There was pretty decent growth in consumer goods and manufacturing products. That has now dropped. There is a slowdown in the freight-forwarding business and we handle less volume in the supply chain vertical. There is no growth in the technology sector.
In automotives, people are buying fewer new cars. But we are in the after-market segment, and thus there is growth because people are repairing older cars. Globally, we have seen quite a slowdown. Especially in the trade lanes of Asia to Europe and Asia to the US. That is not for DHL, but for all.
Graham: This is happening in the export-oriented economies in Asia and in the consumer economy in the US. In the Indian context, there is growth in low-end consumer goods.
Where does DHL stand in India?
Graham: We have made significant investments. We have made investments in domestic air freight and domestic express, besides in the international side of the business. We have made huge investments in India, (as) in the Lemuir Group and Blue Dart. We had invested (in various transport infrastructure) at least €300 million, out of a €2 billion plus fund meant for Asia.
Is it a good time to buy cheaper assets, companies and real estate? Do you see any acquisitions in your radar in India?
Edwards: We will take a look (into possible acquisitions) at the end of 2009. Globally, we have decided to conserve capital. Yes, there will be potential consolidation opportunities in India, since the transportation industry is highly fragmented. But we think the timing is not right at this point. We may look at the end of 2009 or 2010.
Is there any change in the pattern of customer demand?
Edwards: Globally, we are seeing that a lot of customers are reconsidering time definite services. Earlier, a customer would always want a time definite service and a product delivered by 10am. But now he is sort of reconsidering that he can’t take the delivery in two days. You see the same shift from air freight to sea freight. Earlier, someone would want a consignment to be sent through air. That would take three days. Now, he is sending through ocean, which will take a couple of weeks. Fortunately, we are present in all these segments.
Would the customers want your services at cheaper prices?
Edwards: In the supply chain business, I would say the kind of judgement customers are making is towards outsourcing. They would tell you, ‘Look, I would like to take your services at little lower prices, but I want more services.’ For example, he would ask services from three local distribution centres from one distribution centres, at a little lower price.
Could you explain?
Graham: Companies are now outsourcing more jobs. For example, a consumer goods company would want DHL to ship in the product from a different location and put the brand of the company and deliver the product based on the order from a call centre. Companies would want DHL to handle not just finished products, but raw materials also by effectively using our vehicles. And we have got the bandwidth to offer all these.
Is this happening in India also?
Graham: Yes, we have a couple of retail customers who want us to help them in designing, selling, processing, etc. There is a demand for more value-added products.
Lastly, what is going to excite you in India?
Edwards: The one thing what is going to excite us is the central sales tax or CST. It that is going to be implemented, it is going to have significant impact on logistics. Though I cannot put a percentage of cost reduction, CST, if implemented, is going to make a significant change in logistics and trade.
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First Published: Thu, Mar 19 2009. 10 52 PM IST