The supply chain sector needs cash flow. As such, banks have to provide funding through ways and means advances, which means that it is not linked with an asset or with any working capital related security, says R. Dinesh, managing director, TVS Supply Chain Solutions, in an interview to The Hindu. Edited excerpts:
Do you think COVID-19 will have a long-term or short-term impact?
It will have both short-term and long-term impact. Today, we are operating only about 15-20% of our normal business. We have about a thousand people working, as against 12,000 to 13,000 people under normal circumstances. Therefore, it is going to have a short-term impact on our cash flow and operations. While post-lockdown this may improve, it is going to have a significant short-term impact as we ramp up during the next couple of months. It will affect other businesses and the economy as a whole. It will be about six to nine months or even longer for the consumption side to get back to normal. Definitely the first two quarters will be significantly impacted and it will last beyond the third quarter, with some pick-up happening by the fourth.
What are the measures you feel that can kick start the economy?
The supply chain sector needs cash flow. So, the banks have to provide funding through ways and means advances, which means that it is not linked with an asset or with any working capital related security. Logistics sector can use these funds to pay salaries to employees and repay this over a period of three years. Further, the losses incurred during the first quarter can be treated as a deferred revenue loss and can be written off over a period of the next three years rather than writing off in one go, because this is an extraordinary event affecting everyone. This would also help the engines of the economy to keep running.
How to get the trucks back on the road?
Three steps are important to get the trucks back on the road. The first step is to remove fear in people’s mind. We give the truck drivers and load men protective kits, which reduces their fear of operating the trucks during this time. The second is to shift to digital mode and avoid physical handling of papers. Thirdly, truckers should get health insurance cover and supported by the government.
What kind of growth can we see during the current fiscal?
It is too early to get a sign and honestly it all depends on how long this situation will last.
As regards growth in the logistics and supply chain sector, generally, if you look at it, consumption items like food or essential services will grow, and definitely not go down. But, if you look at other areas of supply chain like automotive, or FMCD, we could see a general slowdown. Therefore, I do not see truck additions taking place and the challenge would be to increase the utilization of these vehicles.
What lessons can be learnt from these kind of disasters?
The biggest takeaway is that we have to focus on technology We have learned to deliver and interact with our customer without any physical interaction and by moving to app-based solutions. As we evolve, all physical paperwork will disappear, which is a good business practice, and actually speeds up the whole process.
Do you have any plans for the next three months or six months?
In the initial three months, there are three focus areas for us — employee safety, cash protection and business opportunity by pivoting to new customers for growth. So, obviously, we are taking all necessary actions to make sure that we as an organisation are ready whenever the lockdown gets lifted and have money left not just to run the business, but also make the necessary investments to be ready for the future.
The focus for the next six months is to invest further in our technology solutions not only to know where our vehicles are located (which we already have) but also to further connect deeply with our customers and provide even more simpler solutions through phone-apps.
Your advice to MSMEs and other companies?
To the extent possible, MSMEs need to have better cash management and choose the right partners who are ready to support them in their difficulty. Many MSMEs look at turnover and the profit and loss, but the focus on cash is something which would come out very strongly at this time.
How long will it take for your company to bounce back?
As a global organisation providing essential services, we are already fairly active. If you look at in the U.K., 80% of our business is operational because we are supporting mainly essential services, about 60-70% of our businesses are working in Asia and as mentioned earlier, 15-20% in India. Since supply chain is the lubricant of the economy, we will ramp-up our operations as the government starts opening up different sectors.
Will there be any change in your capex or any other investment plans for the current year?
Short term, yes. Obviously, we will stop all non-essential capex and investments in this year, but we will continue to focus on providing technology solutions and therefore, we will continue to spend on further strengthening our capabilities. The other focus area would be specific customer related support which will also be necessary and essential during this period.
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