India: An Impossible
Challenge or an
Incredible Opportunity?
Editor-in-Chief
Russell Goodman
A conversation with Jim Van Leenan, CEO and president of Flash Global Logistics.
China may have grabbed the headlines of the business
press in recent years, but India isn’t far behind, either
in coverage or in the minds of company leaders looking
to break into new markets. With its burgeoning middle
class, few companies want to pass up the opportunities
that India affords. But as Jim Van Leenan, CEO and
president of Flash Global Logistics reminds us, India is
still an emerging country, with all of the challenges that
that label entails.
Almost 30 years old, Flash Global Logistics specializes in stocking, tracking and delivering critical parts
and products. Its portfolio includes FLASH TRAC, its
proprietary web-based, real-time inventory visibility
solution. The company’s client base has included Sun
Micro Systems and Cisco Systems.
Van Leenan spoke recently with SupplyChainBrain
in Boston, and his comments are based on first-hand
experience with Indian Customs, tax authorities, and
transportation infrastructure.
Q: Many U.S.-based companies find India to be a
very attractive market. But it’s probably fair to say
many of them are somewhat wary about entering it.
What do you feel are the reasons for that?
Van Leenan: First, compliance and tax regulations in India are indeed very complex, and consultants and preparation are required in order to
understand what type of approach is needed for
India in order to be successful.
Secondly, the infrastructure in India is such that
throughput—for instance, at the ports in Chennai
and Mumbai—is stagnated because of the lack of
sufficient infrastructure there.
Thirdly, the movement of goods within India
[faces] a very complex VAT tax structure within
the states.
And fourthly, the requirement of setting up an
after-sales service capability can be very challenging in India.
Q: Can you walk us through those points and
elaborate on them a bit?
Van Leenan: We found that understanding
the tax code in India, working with consultants
there, is extremely important. Not only to understand how to clear Customs but to understand how
to declare the goods in order to get the most advantageous tax brackets that are available. We have
customers where we literally have been able to
save millions of dollars in taxes based on imports.
Secondly, the infrastructure there is to a large
degree underdeveloped, especially when compared to other emerging markets, such as China.
For instance, the trucking industry is largely fragmented, mainly regional carriers. We expect here
in the United States UPS and FedEx to deliver anywhere in the U.S. within 24 hours. In India there is
only one carrier that is a full freight carrier. Every
other courier company uses the belly space of the
passenger planes. That obviously has priority
issues. In reality, in India there are 22 to 25 cities
that can be serviced with 24-hour delivery, next
business day—bearing in mind that in India next
business day means delivery until 5: 30 p.m. Outside these 22 to 25 cities, basically the delivery
takes place second and third day and is considered multimodal, using a combination of planes
into major trade lanes and then trucks in order to
get to final destination.
The challenges within India for trucking as
well as for couriers are significant. At this stage, it
is important for American companies to understand in which part of India they can provide
four-hour service, next business day service, in
order to set up the right service level agreement
structure for their clients.
Q: What about movement of goods in India? You
indicate there are significant obstacles there as well.
Van Leenan: There are 28 states in India,
and each has its own VAT structure. The federal
government is working with states in order to
move towards one federal GST system, which will
make doing business with India considerably
