Succeeding in India’s supply chain
For almost 10 years, Drive India Enterprise Solutions Limited (DIESL), a Tata enterprise, has helped company decision makers answer tough questions about operating in India. In guiding clients who are grappling with infrastructure, planning, and their organizations as a whole, DIESL leaders have learned lessons of their own. Here, DIESL Chief Financial Officer Behram Sabawala, a chartered accountant with a passion for positive thinking, personal development, team building, and leadership, talks about quality and strategic success with Jennifer Proctor, APICS magazine editor in chief.
PROCTOR: How did DIESL get its start?
SABAWALA: DIESL was set up in 2003 when Tata Teleservices—which is the telecom of the Tata Group—was looking for a vehicle to import and distribute handsets in India. The initial running was made only by what we call the trading vertical. But when we look at the balance sheet of DIESL today, we find that there is a trading vertical and a service vertical—and the service vertical was established only in 2007 to handle warehousing and transportation for Tata and non-Tata companies.
If you talk about the core mission, it would be to make our customers’ supply chains more efficient by offering customized logistics solutions with the help of technological and resource optimization. Now it sounds very grandiose, and I think we're only a part of the way there. In India, the logistics space is largely unorganized. There are very few organized players. And India is a growing market, so there is a huge opportunity for profitable, sustainable growth in this space, which we are seeking to occupy.
PROCTOR: What are the challenges DIESL has faced?
SABAWALA: We’ve been all over the place, and probably because customers have been easy to come by. We have not focused very efficiently on our existing customer population, with the result that we have lost many customers along the way. This was not noticed in the past for the reason that new customers were very easy to obtain. The highway that we’ve traveled over the past eight years is littered with the corpses of the customers that we have left bereft.
Now we have new management in place as of early 2012, and our mandate from the board is to, first, clean up our act and make sure that we are delivering value to both current and future customers. Next, we must [continue to] grow the company aggressively.
I think by the end of this current calendar year, 2013, we’ll have cleaned up the mess of the past and we will have struck forward in the direction that we have already set for the company—return to the black as quickly as possible. We had a loss last year, and we will have a loss this year, as well, chiefly caused by provisioning.
PROCTOR: You talked about legacy customers and maintaining your customer base. How must your business change if you want to maintain that relationship with current customers?
SABAWALA: Well, actually, the answer will be very simple. We have to engage better with our customers. We haven’t shown much customer focus. There have been very few meetings. There have been very few reviews. Many of the reviews that have been done were not documented. There were no action plans to follow up on these reviews. And a lot of the customers that we have met have not paid us in the past simply because no one asked for the money. It’s as basic as that.
PROCTOR: So, there’s a strong market for DIESL services, but more attention needs to be paid to service delivery?
SABAWALA: Yes. So the cash-to-cash cycle has to be closed much faster than they’ve managed in the past.
There are a few of us who were brought on for our professional management input, which sadly has been missing from DIESL in the past. Once we have everything in place—we’ve worked pretty hard to achieve that—then, with the right-sizing that we’ve already done and the cost management efforts that have already born fruit, we should be in a much better position next year. The business is there.
Young companies, because their growth is exponential and because they are being compared to a very small denominator, sometimes become complacent. Just to give you an example, a couple of years ago the board did not approve a budget for the fiscal year April to March until almost September of that same year because they felt the revenue budgets were completely unachievable. Unfortunately, the management then chose to build resources, both in terms of manpower and information technology, that were engineered to reach that huge revenue target. DIESL ended up only one-third of the way there, but the costs were three times as much as top line.
That was the year I came on board. What we had to do immediately was right-size. Thankfully, there were a lot of people as a part of the earlier team who were not used to being questioned. With these stringent reviews that we implemented almost from day zero, a lot of them left just because the heat was too much for them to handle.
PROCTOR: As a chartered accountant, good business and financial practices must be at the heart of your core business values. Have you been working to implement these good business practices your whole career?
SABAWALA: Yep. I had a similar situation in my earlier company, Voltas, the leading air conditioner brand in India today. Voltas was also going through several years of losses; the company had built up losses of almost 1.3 billion rupees. When we were looking at Voltas to determine how to get the company out of the mess it was in, we chanced upon a niche segment, energy efficient air conditioners. Today you have three-star, four-star, and five-star air conditioner models, which are priced at a premium because they consume less electricity.
PROCTOR: It sounds like one of your specialties is going in and fixing messes. Is that what you like to do?
SABAWALA: I’m not sure that’s a compliment, but I guess I enjoy it, yes. It gives you a felling of huge fulfillment because the advantage is that many people don’t even expect you to succeed when you actually get in. Many people feel that I can “go in and close it down” … When you actually turn it around, and you see the faces of the people who were resurrected, it gives you such a huge amount of satisfaction. I can’t even describe it in words.
Today, Voltas is the number-one air conditioner brand in India. Voltas has displaced LG from that position. Yes, it is a success story that the team there is still benefitting from. But it was important for me to move on for the reason that there are so many opportunities in such a large group now.
PROCTOR: What’s in store for DIESL? Where do you see it in the future?
SABAWALA: The future is limitless, and the big advantage for us is that Tata has identified logistics as one of five or six pillars on which to base the next 10 years’ vision. Logistics, along with certain other areas such as education, health care, and aerospace and defense, is one of the pillars that we will base huge growth on. So the group is very focused on the area.
India, as I said, is at the very nascent stage in terms of its development as an organized logistics market. There are many companies seeking to outsource logistics; and, therefore, there is a huge population of prospective customers. The biggest advantage we have is the Tata brand.
However, having this brand is also a huge responsibility. It places on us a huge onus to ensure that we operate the way we need to. No shortcuts. Nothing that isn’t absolutely squeaky clean and on the straight and narrow … There’s a team here, and we work to focus all the employees [on this goal].
PROCTOR: APICS had its annual Asia Supply Chain & Operations Conference in Mumbai, India, in April. What can APICS bring to companies like DIESL and other growing businesses in India?
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