Leanings from Oxygen Logistics
May 15, 2021
We have a government that is committed to vocal for local. Every sphere of life needs strong scrutiny in terms of local business. — Alok Singh
Logistics is at the core of the business. It is at the core of the value chain framework. The relative power of logistics has emerged to be supreme among the various divisions of modern business such as finance, technology, human resources, sales, marketing, production, or anything else. It is the successful implementation of logistics that has enabled cold drink companies such as Pepsi and Coca-Cola to make available their products in the interiors of the world; they have reached places where even today people struggle for water. Basic entities such as health care facilities, clean water, electricity, and communication towers are missing but Lays can sell their potato chips and Coke can sell their cold drinks. These are sufficient proofs that the modern business since the last few decades is heavily dependent on logistics for their survival.
The business model of high volume and low margin has pushed the relevance of logistics to newer and newer heights. If the product is really important then the role of logistics diminishes and the role of other divisions of business such as technology, production, and human resources rises. But if the product is easily substitutable and is not of high-end technology, for example, products like cold drinks and potato chips or toys then logistics is the driver of the business.
The question is whether we should have a high logistic cost or a low logistics cost. If we wish to nurture a business model where the products can be sold at any part of the country and compete with non-indigenous companies then the inland logistics has to be cheaper but if wish that non-essential products be produced locally then the high logistics cost acts as a facilitator for the local business to flourish. The best should rule the market and the domestic customers should get the best product at the cheapest price but time and again this model has failed us. It has failed us during the initial phases of nationwide lockdown in the year 2020 and it has failed us again for supplying oxygen.
Local essentials need to be locally generated, locally produced, by engaging local talents. This localization favours the environment as it reduces waste by discouraging overproduction; the factory to end-user distance is lesser, the local producer understands local demand better and hence customizes products accordingly.
Technology and management practices can provide solutions where the logistics cost between the end-user and the factory floor can be diminished by absorbing it in the high volume and economies of the scale production model. But do we really need such a model? The oxygen logistics has taught us the hard way. The verdict says that: No, we don’t need one big plant, rather we need many smaller plants spread across the country.
The culprits of the Oxygen disaster in India in general and Delhi, in particular, are those lessons and syllabus which has encouraged the entrepreneurs to run blindly for coming up with the best product at the cheapest price and be the supplier to every nook and corner of the world. This business lesson has pushed logistics to the highest level of innovation and in the whole process has killed the importance of localization. It has killed the concept of self-reliance. It has killed the philosophy of social responsibility. It has killed the organic structure of society.
Why should we have potato chips manufactured in a single large plant for consumption across the nation? Why should we have a single common salt manufacturing plant to supply the salt across the nation? Instead, we should have one semiconductor fabrication plant to fulfil the needs of the country, but no way one factory for potato chips, one factory for cold drinks, one factory for common slat, one factory for detergents.
Today the government, the media, the court, the experts are saying that oxygen generation should be an integral part of the hospital infrastructure. The union government has allotted money through PM Cares fund for setting up oxygen plants across the districts of the country. The Defence Research Development Organization is transferring technology to companies engaged in the building of new upcoming oxygen plants.
The irony is that we have the capability, we have the technology, we have resources but we are running out of time. Who failed us? The logistics failed us. We trusted railways and airways beyond their agility. We have seen oxygen express crisscrossing the length of the country. We are seeing videos of aircrafts lifting necessities for medical oxygen generation.
Missing one single ideology i.e. localization, and so many prices we had to pay and are still paying. Do we need pandemics to teach us that oxygen plants should be established locally and the generation of oxygen plants be made mandatory for big hospitals? Do we need courts to order that the oxygen generation plant be an integral part of the hospital infrastructure, the way we have fire safety and evacuation layouts? Do we want the lawmakers in parliament to sit and come up with a new act regarding hospital infrastructure? Do we wait for NITI Aayog to come up with a suggestion to have oxygen plant everywhere?
The story is not about oxygen plant. It’s about faulty business principles. The only sustainable business policy is localization, localization, and localization. The mantra for sustainability is self-reliance, self-reliance, and self-reliance. We have a government that is committed to vocal for local. Every sphere of life needs strong scrutiny in terms of local business.
We should not rest till we have local potato chips manufacturing plant, we should demand a local cold drink bottling plant, and we should expect a local salt manufacturing plant. We need more value addition in our neighbourhood. We don’t need business models which save on the manufacturing principle of economies of scales but fail the participation of locals in value addition. We should discard the model of high volume and low margin. It has failed us, it has killed us. Rise and Awake to the new business model. As a consumer, we should stick to local products and services that is the takeaway lesson from oxygen logistics.
(Alok Singh is Fellow of Indian Institute of Management Indore and currently is faculty of general management at NICMAR, Delhi-NCR Campus.)