Logistics cost affects overall competitiveness

The comparatively high logistics cost in India can be attributed to factors such as a complicated tax regime, fragmented market structure and inadequate infrastructure.

 KNR Constructions Ltd. is an ISO 9001:2000 certified company. It is a multi-domain infrastructure project development company providing EPC services across various fast growing sectors namely roads and highways, irrigation and urban water infrastructure management. The company has now developed a significant and diversified presence across the construction and infrastructure domains in India. Naresh Nagubandi talks about the need to improve the current picture in procurement sector.

Need to improve
The country’s strategic procurement for infrastructure projects, remains largely insufficient and ill-adapted to the needs of the economy. As per global ranking, India will get around 50th rank in strategic procurement.

“An effective procurement methodology is essential for the success of any project delivery process. Major infrastructure projects require detailed planning and robust value for money assessment of each procurement option available,” says Mr Nagubandi. “Several critical challenges are there in project procurement such as securing quality products or finding right supplier for some particular requirement.”

No particular platform    
Mr Nagubandi observes, “There is no particular platform for sourcing of construction equipment, building materials and power solutions. Though there are some mini players in the market, they are not up to the standard market level. However, there is a need of establishment of such specific platform for all these solutions.”

Logistics cost
Logistics cost is an important factor that affects the competitiveness of nations as well as firms. However, this cost is considerably high in India and there are some factors responsible for the same.

“The comparatively high logistics cost in India can be attributed to factors such as a complicated tax regime, fragmented market structure and inadequate infrastructure,” says Mr Nagubandi. “We are spending 40 per cent of the total project cost on logistics supply chain. However, still we are not using any software for procurement operations.”

Procurement and supply management play important role for any business or organisation. More than 2/3rd of revenue can be spent on buying the company’s products or services, meaning the procurement can make a real difference in cost saving and profit.

Growth objectives
Client satisfaction would continue to be the guiding principle of the company’s strategy for growth. The company intends to achieve its growth objectives by adopting the following strategies:
• Maintain performance and competitiveness of existing business to capitalise on huge investments expected to be made in infrastructure development especially in segments where we presently operate
• Focus on EPC projects in the infrastructure sector
• Focus on projects involving higher degree of engineering skills
• Leverage our business growth by identifying and forming strategic joint venture relationships for mutual benefit through sharing of resources and business skills.

– Naresh Nagubandi, Procurement Head,
KNR Constructions Ltd.