Source of strength

Mumbai, Sept. 20: Mukesh Ambani’s retailing venture has decided to outsource a part of its logistics requirements to third party providers as it knuckles down to launch its operations later this month.

The exact numbers are not known at this stage, but if industry circles are to be believed, Reliance Retail, which is spearheading Ambani’s “revolution” in this front, has already initiated discussions with some of India’s leading logistics providers.

“The deal size could be worth hundreds of crores of rupees. Reliance Retail is already getting a good response and a few outfits have already made a pitch to bag the prestigious order. Negotiations are now in progress,” said a source in the industry who did not wish to be identified.

Some of the names that are doing the rounds include DHL and Gati. This, however, could not be independently confirmed.

Reliance Retail plans to have a pan-India presence in over 1,500 cities and towns and it plans to invest Rs 25,000 crore over the next few years to bring competitive offerings across a host of formats ranging from neighbourhood convenience stores, supermarkets, speciality stores to hypermarkets.

The retail initiatives would also have an array of domestic and international brands catering to both mass market and luxury segments.

It is the sheer magnitude of this retailing foray that had led Reliance to look at third party logistics providers to take over a part of the function that would also include supply chain management.

It is learnt that Reliance Logistics Ltd (RLL), a group company, which is now engaged in the process of ramping up its operations in the country, will also take this responsibility, though on a much smaller scale.

RLL provides third party logistics and it has created more than 50 distribution centres in 33 locations across the country.

Sources say an outsourcing order from Reliance could only be the beginning of a trend for the industry.

Logistics companies in India have lately been pretty gung-ho about business prospects with the economy growing at a fast clip and many companies outsourcing this function. In such a scenario, the booming retail sector is fast turning out to be a source for some big bucks.

“Several players are pumping huge sums of money into the retail sphere. Over a period of time, large foreign players will also be allowed to set up operations in the country. There is, therefore, a lot of potential for logistics companies as retailers will choose to concentrate on their core operations while functions like supply chain management and warehousing will be farmed out,” said an official in the logistics industry.

Attracted by such an opportunity, foreign logistics providers like the Panalpina group, based in Basel, Switzerland, has already commenced its operations here in the country. On the other hand, domestic companies like Gati are also in an expansion mode.