SKILLING RURAL INDIA ADVANTAGES FOR LOGISTICS INDUSTRY

Transcription

1 SKILLING RURAL INDIA ADVANTAGES FOR LOGISTICS INDUSTRY Team Name -NewGen Leaders Members Aniket Goswami Aman Singh Nalinaksh Kashyap 1 P a g e

2 TABLE OF CONTENTS S. No. Topic Page No. 1. Introduction 3 2. Executive Summary 5 3. Research and Analysis 6 4. Challenges for skilling in rural India Skill requirement in Logistics Industry Recommendations References 16 2 P a g e

3 INTRODUCTION India is the fastest growing major economy in the world and is worth $ 2.6 trillion, as per an IMF report of This growth has been made possible by accelerated development in the industrial sector in the past few decades. Yet, an important sector that has contributed significantly to industrial growth has largely remained unnoticed the logistics sector. The logistics sector in India is currently worth $ 160 billion and is poised for huge growth in the near future. Yet, the sector has struggled for a long period of time due to untrained/undertrained workforce, non-conducive government policies, lack of proper infrastructure and high levels of inefficiency in the system. All these reasons together increase the logistics cost for India, which is currently 13-15% of GDP. With the implementation of GST and greater attention being accorded to the logistics sector after receiving infrastructure status in November 2017, the sector is expected to reach $ 215 billion by These policy changes are aimed at boosting the attractiveness of the sector; increasing globalization, rise of e-commerce and mega projects like Sagarmala (port modernization, port connectivity and port-led industrialization) and Bharatmala (83,677 km of road, 44 economic corridors and 24 multimodal logistics parks) are also key enablers of growth in this sector. While such policy changes and increased automation are expected to aid the growth of the Indian logistics sector, it is predominantly a people-oriented business. Unfortunately, the skills possessed by the blue-collar workers (drivers and warehouse operators) and administrative clerks are below-par. The recruitment, training and retention of the labour force are crucial factors that can have a direct impact on the performance of the logistics sector, yet they remain highly overlooked in the current context. Another critical issue that will impede the growth of this sector is the impending shortage of drivers. In 2016, there was a shortage of approximately 22% and going by the trend, this number can reach almost 50% by This shortage of manpower and the dismal focus on skilling the existing manpower contribute to the skill gaps that exist in this industry. 3 P a g e

4 Rural Logistics in India Rural logistics include all the transport, material handling, storage, distribution and packaging activities of goods in rural areas. The characteristics of rural logistics in India are as follows: a) A steady inbound flow of consumer products, staples, etc b) A steady outbound flow of industrial goods from the various Industrial Development Areas (SEZ) established by the state government c) Presence of small-scale unorganized logistics players d) Increased presence of warehouses e) Loading/unloading of goods in docks With increased levels of production & trade, growth in organized retail and rise of e-commerce in semi-urban and rural India, rural India has assumed significance in the logistics growth story. With almost 70% of Indian population living in rural India, skilling of rural workforce can provide significant advantages to improve efficiency and bring cost down in the logistics sector. 4 P a g e

5 EXECUTIVE SUMMARY The report assesses the current situation of logistics in India and shows the growth potential this sector possesses. Through primary research, the report highlights the various problems existing in the skillsets of labourers and initiatives being taken by some companies. Insights from the people working in various positions have also been captured along with their experiences and perspectives. It also reveals what holds the youth back from aspiring for a career in logistics. The secondary research shows how various educational institutes and government bodies are trying to address the existing skill gaps. The report further shows the various challenges in the logistics industry perception issues, lower participation in government initiatives, poorly written course curricula, etc. It also highlights the existing skill gaps across different domains in the logistics sector. Finally, the report concludes by recommending a multi-stakeholder approach involving the government, companies, educational institutions and logistics associations. An integrated program encompassing the National Apprenticeship Promotion Scheme, government bodies and a 3-month course needs to be managed by a robust IT system to perform skilling and hiring activities. The proposed recommendations are: i. Education policy/curriculum development ii. Regulatory policies iii. Collaborative framework iv. Standardized training v. Government partnerships vi. Developing coordinating bodies and ecosystem of skills vii. Recruitment and Retention strategies 5 P a g e

6 Primary Research RESEARCH & ANALYSIS Technology helps streamline processes and even low skilled employees can do an effective job. Apart from skill gap, discipline is also lacking in the industry Lot of warehouses have started opening in tier 2 and 3 cities to meet growing demand and want to hire local people for the same Apart from technical skills, other important skills required for logistics industry are ethics, safety training, software knowledge, oral communication and written skills, professional conduct New generation people don t want to work as drivers because the sector is quite unorganized Due to large cases of abuses in the logistics industry, there is a low-esteem in the blue-collar workers Internal training processes are strong but finding the right talent is a big challenge Pilot skill training projects for employees are useful - Vipin Aggarwal, Business Development, Rivigo Most of our workers at our plant are from local regional areas and hence they haven t undergone any specific skill training for any production or logistics activities As they are unskilled, we hire them on a contractual basis and these directly impact our productivity rate, as there are new sets of contractual workers coming every month However, keeping this in mind, we have started hiring from the local ITI and Diploma colleges under apprenticeship scheme of the local state government - Anubhav Jain, GKPL, Sarigam Even the operators which are hired from Diploma and ITI courses are not technically skilled, these shows there is need for change in curriculum for these courses As the sector is unorganized, it leads to lower wages to the people who are working currently in logistics - Rajesh Thool, Production Manager, GKPL Current logistics workforce at our plant lacks a decision making, problem solving ability on the shop floor; they require frequent supervision from high level operator and managers - Umesh, Manager, Lalji Mulji, Vapi We are working under the Pradhan Mantri Kaushal Vikas Yojana to train drivers and sensitize them about the importance of safe driving. These workshops are followed by an evaluative test with a cut-off of 70% and the drivers are also presented with rewards (cash and kind) Our plant at Chakan, has converted the Mahindra KUV shop floor into an all-women workforce to provide them employment and pride - Seema Bhaskar, Mahindra & Mahindra 6 P a g e

7 Few major insights from the interviews of fleet operators are as follows: 1. The majority of players in transportation sector in India are small scale organizations running as family owned businesses. 2. The workforce in rural areas are comparatively more unskilled compared to the urban areas; hence they work at lower wages. 3. SEZ provides a major opportunity for Government and private players to effectively hire workforce from ITI and students under apprenticeship programs. 4. Incentives and subsidy provided by government could boost the private players participation in skill programs and hiring directly from these courses. 5. Majority of the SMSE in semi-urban part of the country, hired the major part of logistics workforce on contractual basis. 6. Biggest barrier to the enrolment into government skill programs (MSDE) is their inability to link the program to employment generation opportunities. Through our interviews of drivers, forklift operators and warehouse executives, we tried to identify their major grievances with the logistics sector: 7 P a g e

8 Secondary Research 1. Industrial Parks in Rural Areas Industrial Parks are mostly located in the rural or semi-rural parts of India. These Industrial Parks under SEZ are already doing tie-ups for apprenticeship and hiring from ITI, engineering and technical universities. (Source India Stat, Parliamentary Operations, 2018) 2. a. Key Institutions and Enablers for Skill Development Program (Source FCCI Report) 8 P a g e

9 b. Spread of Industrial Training Institutes (Source - Labour Bureau, Ministry of Labour and Employment, 2014 Data) c. Rising number of Educational universities in India Private manufacturing and logistics players can collaborate with educational universities located in rural areas for hiring and training purposes. Every ITI will be allocated a nearby company for mentoring the students who are enrolled there. (Source - UGC, PWC, AISHE ) 9 P a g e

10 CHALLENGES FOR SKILLING IN RURAL INDIA 1. According to the MSDE, there will be a requirement of additional 8.2 million skilled workers in logistics sector in between year Sector Human Resources Requirement Estimates (in millions) Logistics Incremental Requirement 2. E-commerce penetration is currently lower due to the major logistics challenge faced by the companies in such regions. 3. The literacy rate in rural areas is still lower compared to the other counterparts. Hence, it poses a major challenge for the industry while setting educational criteria for job positions. Overall Difference India Rural Urban Source - (Literacy Rate Census) 4. Lower enrollment to reskilling schemes due to perception issues - vocational skilling is an option for the people who had opted out from formal academic system. 5. Unavailability of proper trainers at the institutes, inability to attract people from industry with relevant work experience 6. Lower coverage of apprenticeship programs for the people residing in remote areas. Companies and the government can increase stipends to cover the expenses for the same. 7. Very less participation of women in core sectors of logistics, production and supply chain as there is a general perception that this industry is male-dominated. 8. Current Skill Curricula is outdated and it needs to be re-designed by considering the personality, language and cultural profile of that specific region. Logistics Skill Council can design these courses based on the sector and above demographic traits. 9. Government spending is lower compared to other countries (16 times lower than China) Country Actual Expenditure Budget Estimate India 1488 Crores 3126 Crores China Crores NA 10 P a g e

11 SKILL REQUIREMENT IN LOGISTICS INDUSTRY The skills requirement in Logistics Industry can be divided into three components: 1. Generic Skills 1. Writing Skills 2. Reading Skills 3. Oral Communication 2. Professional Skills 1. Decision Making 2. Plan and Organize 3. Problem Solving 4. Customer Centricity 5. Analytical Skills 6. Critical Thinking Skills 3. Logistics Sector Skills (Major Points) 11 P a g e

12 Training and Skill Development RECOMMENDATIONS As per World Bank classification of countries, India lies in the intermediate logistics competence maturity level with a score of approx. 3 on a scale of Alleviating the skills problem in the logistics industry will require a multi-stakeholder approach. This could be part of a 10-year plan, to strengthen the institutional support through inter-ministry and agency coordination in the planning, implementation and monitoring of policies and measures affecting the industry. The main stakeholders in this plan could be: Government Companies Educational Institutions Logistics Associations 1. Government Initiatives a) Education Policy/Curriculum Development: Government can encourage educational governing bodies to make more reference to logistics in their curricula especially at secondary school level. Various logistics projects and case studies can be introduced into the lesson plans. Industrial field excursions can be planned to hubs, ports and warehouses. b) Regulatory Policy: Regulatory policies could be designed to stress upon safety and remove exploitative practices in the industry so that employment in the sector becomes more attractive. Level of skill development & training, esp. to the workforce from rural areas could be used as a criterion for selection while awarding contracts to logistics companies, thereby helping them incentivize the training process. c) New Collaborative Framework: Higher focus on collaborating with private logistics players and industry located in Special Economic Zones for Hiring and apprenticeship opportunities. The government can track the whole progress of the students with online portal which will provide the real time evaluation and progress of the students. Government can also leverage the existing skills data to promote new SEZs in those regions. 12 P a g e

13 2. Company in-house Training Initiatives a) Standardized training process: The onus lies with the companies in designing standardized training programs with the help of external inputs and tie-ups with other companies and training agencies. b) Proactively tap rural as a resource pool: Rural India is a source of cheap, abundant labour and investment and procurement of labour from the villages will be a strategic step. For this, adequate plans and skill development workshops would be required and other stakeholders have a role to play. But as far as the private companies are concerned, strategic and financial push is needed. c) Partner with the government: Companies could partner with the govt. in areas such as awareness building, capacity creation, loan financing, and assessment leading to certification, employment generation, CSR and competitions. 3. Participation of Educational Institutions a) Facilitate collaboration: Educational institutions should look to partner and collaborate with their local and international counterparts and facilitate free flow of technical knowhow, skills, and expertise. b) Design of curricula: The existing courses need to be redesigned and educational institutions must come up with up-to-date and contemporary logistics curricula. Vocationalisation of courses through specific training programs could be done. Also, skilling with the objective of providing employment would go a long way in encouraging employment in rural India. 13 P a g e

14 4. Initiatives by Logistics Associations (Logistics Sector Council) a) Set up supervising & coordinating bodies: Organizations like the NSDC should be used to monitor & provide a thrust to the skilling initiatives. India has a demographic advantage with the average age of its population estimated to be within 29 years of age for the next 6 years. Also, by 2022, India would have the maximum number of working age population in the world. The Logistics Skill Council can look into utilizing the rural workforce, given India s demographic dividend, towards maximizing the economic output of India. b) Develop an ecosystem of skills: Collaboration with the government in setting up multiskilling centres & training schools for commercial vehicle drivers in rural areas will pave the way for them to pick up jobs in small and medium enterprises. E-commerce has the most demand in tier 2/3 towns and is the employment of choice for the rural youth. Developing the market in rural areas should also be a goal of these associations to facilitate back and front-end supply networks. 5. Recruitment and Retention A key challenge for the government and companies is getting blue collar workers on board to be a part of such training programs. The major hurdle in this regard is a lack of clear incentive and inertia among the workers to enrol themselves in such programs. Hence, in order to promote these programs, the following steps can be taken: 1. Getting all industry players together to create a standard grading/certification system which can be used for recruitment processes and for making decisions related to remuneration. 2. Linking promotions with such certifications, which implies that attaining a certain designation is dependent on completion of a particular certification/course and clearing the relevant exams. Recruiting talented young professionals is also a major challenge because of multiple reasons. As our primary survey revealed, the biggest deterrent is the low esteem associated with the logistics sector, where most jobs are considered blue collar. Some other hurdles are poor remuneration and inadequate work-life balance. The process of recruitment itself acts as a major obstacle to the entry of young and talented people. Most recruitment happens through referrals and word-of-mouth; often mechanics and helpers also take up the role of drivers on an as-needed basis, even though they do not possess the necessary formal training. To ensure that the rural youth feels attracted to the jobs being offered by the logistics sector, the following steps can be taken: 1. Improve the image of the logistics sector: Awareness regarding the importance of this sector to the Indian economy should be highlighted so that the employees feel proud about the work they are doing. 2. Formalize the recruitment process: This is required in order to give it a status equivalent to that of white-collar jobs. Instead of depending on personal contacts for getting new 14 P a g e

15 employees, job portals should be created for interested candidates from where they can directly apply for jobs. 3. Improve salaries and wages: Remuneration needs to be improved and brought at par with similar industries so that the youth do not choose other options over logistics. 4. Provide non-monetary benefits: Blue collar workers should be provided with personal leaves, medical benefits etc. which can help them juggle work and family with ease. Retention of talented employees is also an equally important task for companies, where getting talented employees is a challenge. Based on the insights gained from our primary research, the following strategies are being recommended to retain talented manpower by the companies: 1. Employees should be shown a clear career progression path so that they can understand how their career is going to shape in their respective vertical. 2. Continuous training should be provided to the blue-collar workers so that their skills do not become obsolete. 3. An appealing working environment is necessary to boost the morale of the workers. This can be done through providing air-conditioned shop floors, providing soothing music arrangements, adorning walls with motivational quotes, etc. 4. Simple initiatives like most efficient driver or employee of the month, coupled with awards and certifications can also go a long way in retaining employees. 15 P a g e

16 REFERENCES 1. (Deloitte, 2018) 2. (Economic Times, 2018) 3. (World Bank, 2017) d_training_a_global_overview.pdf 4. (Economic Times, 2017) 5. (The Hindu, 2017) 6. (Business Today, 2016) (Ministry of Skill Development & Entrepreneurship) 8. (KPMG, 2007) 16 P a g e