On the world’s economic map, India is the fourth largest economy. Healthy economic growth in India is increasingly supported by robust industrial growth. One of the relatively lesser known but significant sectors that support almost all industrial activity - the logistics sector – is also witnessing this growth as a fallout. However, traditionally logistics sector has not been accorded attention as an independent sector in itself.

An estimate of the quantum of logistics spends (INR 90 trillion globally; INR 4 trillion in India), however indicates the importance of this sector and justifies a deeper look at its unique characteristics a very important one being its manpower intensity. The rapid evolution of this industry in India both in terms of scale and scope of services is creating the need for a whole new set of skills along with an ever increasing requirement of skilled and trained manpower. While the cross section of industry players recognizes the critical need for manpower development in this sector, precious little has been done to investigate the core issues and identify initiatives to address this situation.

To highlight this gap, KPMG in association with CII released a whitepaper titled ‘Skills Gaps in the Indian Logistics Sector’. The whitepaper was released at the CII organized Logistics Summit 2007 seminar held in Chennai today.

While skill issues exist in varying degrees in all segments of logistics, this paper focuses on those segments where the gaps are not only wide but also widening at a relatively fast pace. The most severe and immediate requirement for skill development is found to be in the road freight and warehousing segments. Taking a deeper look at the work profile in these segments, it is seen that the specific profiles which need to be developed most both in terms of quality and quantity are truck drivers, loading supervisors, warehouse managers and seafarers.

At the release of the paper, Yezdi Nagporewalla, National Industry Director, Industrial Markets, KPMG in India, said, “India’s spend on logistics activities is equivalent to 13% of its GDP. It is higher than that of the developed nations. The key reason for this is the relatively higher level of inefficiencies in the system, with lower average trucking speeds, higher turnaround time at ports and high cost of administrative delays. The required pace of efficiency and quality improvement will demand rapid development of capabilities of logistics service providers. And with logistics being a service oriented sector, skill development will emerge as a key capability”.

According to the report, truck drivers constitute the profile with the most critical skill gaps in the road freight segment. The profession attracts largely illiterate people with no formal training for the job. The report estimates that while there are around 3 million truck drivers for M & HCV in the country currently, this number is likely to swell to nearly 51 million by 2015. Even if 50 percent of all drivers in India were to be trained, almost 125 institutes of the size and scale of the existing one in Namakkal would be required to be set up in the next 7-8 years.

The warehouse managers' (including supervisors) position is one of the most affected by the changes in the logistics sector. From the current situation where warehouse managers are typically the administrative in charge of small scale go downs multi-tasking as commercial managers, the organized portion of the market will require managers with training and experience in warehousing specific operations. Some areas where existing skills are lacking include familiarity with warehousing formats (WA and VNA compared to the prevalent ground storage), with modern equipments (reach stackers, pallet trucks etc.), with IT systems (WMS, handhelds, RFID), industry specific stocking and handling practices (FMCG, perishables, textiles etc), practices around safety and security of stock etc. At present, the number of warehouse managers required in the organized sector is estimated to be around 14000 which will grow up to around 35000 by 2015. This will require supplying around 8000 new warehouse managers by 2015.

According to the report, the core issues leading to the existing skill gaps in the sector are:

• Poor image / lack of attractiveness for new recruits arising from poor working conditions and relatively lesser attractive pay and progression incentives - in turn arising from the fragmented and unorganized nature of the industry
• Rapid evolution in the logistics management processes and operations with technological change and changing customer requirements
• Absence of an institutionalized skill development environment
• Emergence of attractive alternate career options leading to attrition (especially in sectors where logistics skills come in handy like organized retail)

The report suggests the following initiatives are required to be undertaken to contain the widening skill gaps:

• Creation of a robust institutional framework for creating logistics manpower
• Creation of incentives for development of skills for logistics employees
• Undertaking of initiatives to uplift the image of the industry
• Acceleration of the drivers of consolidation, integration and organization in the industry

A look at the required initiatives for manpower development in the sector makes it clear that sustainable development of the sector's manpower requires a collaborative public private effort. The level of commitment demonstrated by each stakeholder would largely determine the direction that the sector heads towards. Market leaders would need to pull together their clout and resources to push for establishment of an institutionalized training infrastructure and create incentives for training by creating and mandating certification levels for recruits. The government would need to support industry players in their initiatives and provide for a more conducive enabling environment by continuing to upgrade infrastructure, accelerate drivers for organization and consolidation of the industry and providing recognition by granting industry status.

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