Q&A: Michael Drake, Regional MD, TNT Asia Pacific

The logistics market in India is difficult to crack — it is small and fragmented. Making things worse are complex taxation and regulations. But analysts say it’s going to be the next big growth driver for the country. At the recent launch of its dedicated freighter service between India and Europe, Michael Drake, regional managing director, TNT Asia Pacific, noted how the global express delivery company was optimistic about India, one of its key markets in Asia Pacific. The launch of the India-Europe service is part of TNT’s plan to bolster its presence on the Asia-Europe routes. The new service will run five times a week between New Delhi and TNT’s European air hub in Belgium, with a stopover in Dubai on its way back to the country. In this interview to Ruchika Chitravanshi, Drake talks about the company’s growth strategy in India and the challenges ahead. Edited excerpts:

 

The logistics market in India is nascent and is beset with complex taxation and regulations. What do you think is the biggest challenge for the industry as a whole and what are you going to do to overcome it?
The logistics market in India is indeed fragmented with a large portion of the market addressed by small and unorganised players. Complex taxation and regulation are a key concern. There is duplication of taxes — between the state and the centre. Each state has its own tax regime and this adds up to the cost while managing multiple warehouses and distribution networks to cater to the local markets. This has over the years resulted in a largely fragmented market.

We believe that the introduction of GST (Goods and Service Tax) will be a game changer for both customers and logistics service providers as they will be in a position to offer very robust logistics and distribution solutions. At the same time, we are focusing on process efficiencies and investing in technology to help our customers serve better.

How has your overall India strategy shaped up?
Our aim has been to be a high quality integrated distribution company. It means, providing both domestic services with complementary international services and delivering them in a customer-oriented and focused way. That allows us to benefit from growing domestic consumption as well as take advantage of export and import opportunities by linking key markets with India.

What are the key markets you are going to link with India?
The number one market that we are linking to India is Europe. There are a few reasons for doing so. Europe is the largest trading partner with India. It also happens to be TNT’s home market. We have linked two very strong delivery networks. That is what we meant by integration. You need that pick-up and delivery network to offer value to the customer. And it has to be seamless. Customers get this with TNT which they may not get from others as companies chop up, sub-contract. India-Europe will be the key for us for the next few years. We are discussing more opportunities in the world. One that is quite exciting is the China-India traffic line and there are a few others. We are continuously looking out to improve that business. 

Are you planning to get into any strategic tie ups in the Indian market as a platform to grow your business?
We did when we made an acquisition in the domestic market (Speedage) which we later integrated and took to a different market position. Investment into things like the freighter service B767 we have launched for India-Europe gives us a platform to grow. Going forward we will invest in key infrastructure and people.

How is the Indian logistics market different from any other market in the region? In other words, did you have to do anything differently for?
Our core business processes are standardised. Having said that, every market is somewhat different. Our expertise is integrated door-to-door distribution. India does that very much the same way. We have expertise in road transport for domestic business. India has components of what we have around the world. We have certain processes that may be different because your laws are different, the administrative environment is different. But what we do is very well aligned. It is important from the customer point of view also.

What are the other attractive markets in the Asia region?
We have a great and motivated workforce here. I have only good things in my mind when think of our future in India. But there are some other attractive markets in Asia as well, such as, Indonesia, which is growing fast. China clearly is the biggest market. We have linked China with Europe, now we are linking India with Europe. We may also link China with India and complete the triangle which could become the biggest triangle in the world. All three areas have fantastic distribution network. 

What is the kind of arrangement you have with airlines? Is there any plan of exploring the sea routes as well?
We have a dual strategy for airlines. Some are owned; others commercial carriers. Our industry is cyclical, so we need that variability in our make-up to handle the good times and the bad times. That is why we go with a two-pronged attack. There is no plan for the sea route. We chose to put our resources into air and roads which is a huge part of the transportation industry. Of course, a big part goes through the sea but it is a totally different business. I believe you cannot be all things to everybody. We have an “express” mentality; which means we offer speedy service. Sea doesn’t give us that.

What would be your biggest competitive advantage in this market?
We have got our sweet spots just like other companies do. The Europe network is our sweet spot. We don’t really focus on the US. Our uniqueness is integrated domestic and international business. Our international market share is 18 per cent and domestic is 13 per cent. The key is that we have quality in both — domestic and international. Many companies here use both of our services and that gives us our unique advantage. Some companies have their focus on the domestic market and are trying to take it international. Some only do international. Our competitors in the domestic market don’t have an international footprint. We stand at an advantage in that sense.

You say you have a unique advantage in this market. But surely there would be challenges….
Consistency in services. That’s the biggest one. Because the environment here is not very easy to work in. As the processes that we have to follow become easier, our work will become easier. For example, customs have made their processes more automated from manual. This makes things easier. But challenges exist in quite a few areas. The more you grow the more complex the business gets. You need more people and different kinds of people. A key challenge for us is to attract the right talent. At the heart of any business — especially so in the service industry — it is the people who make all the difference. We want to have the right attitude and not be complacent. Second, we have to be able to handle growth and maintain that momentum.

Which are the segments you get bulk of your business from?
The spectrum is very broad — local companies, blue chips, multinationals. From very big to medium to small companies. It is quite diverse and protects you against downturns. We mainly do business around four sectors — pharma, electronics, automotive and electronics. We are keeping an eye on newcomers. Of these, electronics is a bit of a newcomer and the smallest, but growing fast. We have a rich history in electronics around the world and we have very good relationships with our customers. As they come to India to develop their business we will also develop. India becoming a manufacturing hub is good news for us. A big portion of what is manufactured here will end up in Europe.

What, according to you, would be the areas that require improvement?
We can improve our facilities for our people and our customers. It means that we have to become bigger than we are today.