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The Economic Times, 20 - 26 December, 2000
By Vikram Doctor

Think 'overnight delivery' and you're likely to think FedEx. Ever since Fred Smith, Federal Express' founder, first created the system of planes flying their cargo of packages to a central hub for sorting, and then flying back out for a next day delivery, the concept has become almost synonymous with the company: just FedEx it, you say, when it absolutely, definitely has to be there the next day.

But Smith may not have been as path breaking as he thought. According to US-based transportation consultant Satish Jindel, a system for overnight delivery was put in place over 50 years ago, and not in the US, but right here in India. "Before Independence, the British had set up a system where planes from across the country would fly to Nagpur at night where the mail would be sorted and then flown back to the respective centers," he says.

The service was stopped around 1956- 57, but there's a story that Fred Smith heard about this. And it gave him the germ of an idea that he first explored in a business school paper, and then in real life.

Whether or not this is where Smith took the idea from, Jindel's point is that countries like India need to look at what transportation solutions they already have, or can develop themselves, rather than blindly aping the West. To underline this, he points in exasperation outside the first floor window of the restaurant where we're meeting, to the morning traffic jam on the road: "That's what you get when a city like Mumbai goes in for individual cars for people, rather than developing public transportation. India is just taking all the bad habits of the West, rather than developing suitable solutions for itself."

Jindel has spent nearly all his career in the US, first doing a Ph.D. in transportation, then running a parcels company, and now as principal in SJ Consulting, the Pittsburgh-based transportation and logistics consultancy he started. He's consulted with a wide range of companies around the world, including GATI in India, though he says he's not particularly looking for Indian clients. It's difficult coming all the way to India for just one client, and besides, he says frankly, "I don't think most of them would be willing to pay our sort of fees."

But practical problems apart, he's also depressed at the retarded rate of growth of the country's transportation infrastructure. "I just don't see much will on the part of the government to make investments that are needed in infrastructure. It's happening in other developing world countries like China and Mexico. They are setting up excellent road transport systems, and China has some of the best ports. But none of this seems to be happening in India."

Yet India still has advantages, he feels. Cheap labor is one of the main ones, since labor costs are among the biggest problems with transportation in the West. He also feels that there's untapped potential in existing institutions like the railways and Post Office. "The railways could be a very efficient delivery system for many more people if they were to tie up with transport companies in different cities to do the actual door- to-door delivery. And the Post Office has the advantage of already having a door-to- door system that could be developed. Other countries have managed to be very successful with their postal systems."

As is happening across the world, all these systems will be tested by e-commerce, an area that offers both huge opportunities and challenges. With the most common e-commerce model, like amazon.com's, depending on external transportation companies for delivery, the business potential is obviously huge. The last Christmas season in particular, when delayed shipments caused a backlash against e-commerce companies, has made everyone realize that a good logistics system is absolutely critical. As a result Jindel estimates that parcel delivery companies stand to gain as much as $25 billion in annual revenue from the Internet.

But he cautions that it's going to require some fundamental shifts in the way the industry does business. For example, the current system in most countries is essentially set up to handle commercial deliveries (i.e. to offices) whereas a lot of e- commerce deliveries will be residential. In the past, parcel companies have either avoided residential deliveries, or charged big premiums, justifying these by pointing to problems like the lower likelihood of having several parcels for the same area that can be consolidated to spread costs.

Residential deliveries do mean greater problems and lower revenues for parcel companies. But given the potential of e-commerce this is an issue they have to solve - particularly given the reluctance of consumers to pay a premium for most products bought online. They will also have to deal with accepting returns that have not been a problem so far, but will be with e-commerce.

But whatever the solutions logistics companies come up with, Jindel believes both e-commerce companies and customers should be realistic in what they promise or expect. "The basic realities of transport aren't going to change just because it's e-commerce," he says. Companies need to work to develop models with sustainable long-term revenue flows. "You aren't a business just because you own a website name."

Consumers, on the other hand, need to realize that the Internet is not necessarily a cheaper medium. If one wants to make full use of the convenience it undeniably offers, one must be willing to pay a premium. "Do you remember getting milk at home as a child? At fixed times in the week, the milkman would come and sell you milk. But if you suddenly need milk, you go to a 7-11 and don't mind paying a bit more just for having a convenience store that stays open later. That's the way it's going to be with e-commerce. You can place your orders over the Internet and get regular deliveries at fixed times. Or you order it separately and get it fast - but you'll have to pay for that."