Firms line up to build global logistics platform4 min read . Updated: 02 Aug 2010, 12:41 AM IST
Firms line up to build global logistics platform
Firms line up to build global logistics platform
Mumbai: Leading information technology (IT) companies are lining up to bid for a chance to build an open-source software platform that will offer consumers aggregated rates across logistics firms to allow them to choose the best deals.
The platform will be similar to what online travel firms offer passengers by way of fare and route options.
Tata Consultancy Services Ltd (TCS), HCL Technologies Ltd, Accenture Ltd, International Business Machines Corp. (IBM), Kale Consultants Ltd, Oracle Corp. and Mahindra Satyam Ltd are some of the companies that are in the fray to build the platform designed for global logistics companies to facilitate low-cost transport of goods.
The IT platform, called Global Logistics System (GLS), will provide tools to manage global cargo movement by all modes of transport and ancillary services such as finance and insurance.
It will also reduce paper-based documentation by allowing information to be shared electronically.
The concept is being promoted by the Global Coalition for Efficient Logistics (GCEL), a Swiss-based non-profit public-private partnership. GCEL representatives last week met with the Reserve Bank of India (RBI) since this initiative requires the central bank’s go-ahead. The bidding will begin later this year, after the Geneva round of World Trade Organization discussions.
GLS will enable firms, primarily small and medium enterprises (SMEs), to find the cheapest options to ship cargo, as well as find financial products and insurance from a single website.
The financial institutions and insurance companies will pass on a small percentage of their transactions as commission to GCEL.
“The concept is totally new to the world and we are trying to understand the concept. We think this can be possible as GCEL is pretty serious about this initiative," said K.V. Mahidar, head of Institute of Logistics, set up by the Confederation of Indian Industry (CII), adding that some of the leading Indian IT companies are very keen to bid for the IT infrastructure.
This GLS initiative is estimated to lower trade costs by 30%, a worldwide savings of almost $700 billion (Rs32.55 trillion) annually, while reducing average operating costs by 15%, according to GCEL’s secretary general Mark R. Drabenstott, who pointed out that the Indian trade will also stand to save around 30% in costs.
According to CII’s Institute of Logistics, GLS will cut landed import and export costs, resulting in $9.1 billion of savings to India. “This will provide a $6 trillion market opportunity by 2020 for the finance, insurance and technology industries," Mahidar said.
Representatives of many IT companies that Mint spoke to indicated that the software would need an investment of $20-30 million in the first phase. However, if an IT company chooses a gateway partner with an option to share licensing royalty, the investment could go up to $100 million.
The network will initially have 28 gateways—seven each in Asia, Europe, West Asia and the US.
In each region, said GECL’s Drabenstott, it would have three technology and finance partners each, besides one insurance partner.
Bala Irulandy, operations director at HCL Technologies, said the company is exploring the opportunity to bid for building the IT platform. He admitted that the concept is novel but that he saw prospects since GCEL is gaining support from various governments and the United Nations, besides international financial and insurance companies.
“This model is workable and can act as a tool to exchange information of finance, insurance and logistics options. It can act like a Google search to small and medium enterprises," said Dattasaheb K. Kadam, principal consultant (SAP SCM, which provides enterprise business solutions) at Mahindra Satyam, which is also looking at bidding prospects.
The India spokespersons for IBM and Accenture could not immediately confirm their firms’ participation in the project.
Both spokespersons added that it may be handled by their global offices as it is not an India-specific project.
IT companies, however, are looking beyond a mere platform.
For instance, TCS is looking beyond website infrastructure to an innovation tool to enhance corporate revenue.
“GCEL is planning to have at least seven innovation centres. Our company could become an innovative partner, enabling more volumes," said Siddhartha Sen Gupta, head (complex decision support systems, corporate technology, innovative offerings) at TCS. But most representatives of logistics or shipping firms that Mint spoke to were not clear about how helpful the initiative would be.
“The idea of GCEL looks great, but we are yet to study the actual benefits and mode of operations," said a senior executive from an export firm. He did not want to be identified as he is not authorized to speak to the media.
“We are not exactly clear about our role… still are not sure about how are financial institutions positioned in this platform. However, one thing is certain, this platform will widen our clientele," said Vivek Gore, chief manager at ICICI Bank Ltd.
But if it does go live, he said, the project would help save time as it would eliminate repetitive documentation and, most importantly, would be free for end users.