Consulting Logistics
Financing a Logistics SME
At a time when jobs are scarce, and employment is hard to come by, one of the few fields that is proving to be a viable option is the logistics sector. Providing goods and materials to customers/buyers via a complicated network of supply, warehousing, transport, inventory, handling, right up to delivery are the essential elements that comprise this sector. Simple in concept, yet quite the opposite in execution, logistics is an important element of our day-to-day lives.
Good advice is essential before you decide to take the initiative into this sphere. Speaking from his own experience as advisor and former head of Logistics Companies, Arif Siddiqui’s views provide a basic insight into the problems an entrant may face when making a foray into the logistics industry. Follow these tips before setting up your own Logistics Company.
1. High Working Capital: Any logistics company requires a high working capital. More so, in the case of heavy assets, a fixed capital is needed. For example, in warehousing you need to have the infrastructure in place before you start operations.
2. Small-scale trucking companies not a viable option. Diesel costs, employee salaries, EMIs tend to pile up. Moreover, freight bills will not be cleared on a trip-to-trip basis. Owners need to invest up to a 60-day advance of these costs. A major disadvantage of operating a small number of trucks is the problem of damage, pilferage which renders the vehicle inconvenient.
3. Under-utilisation of capacity: Every Heavy Commercial Vehicle must transport goods over a minimum of 10,000-12,000 km per month. Under utilisation of capacity results in lower and unaffordable turnover.
4. Offices as co-ordination centres: Offices today are requirement-based and hence are preferred if located in an operating area. Moreover, satellite communication has simplified networking.
5. Loans: Loans are a good option when foraying into your own logistics firm, but only if they are well-negotiated.
6. Tax Benefits: Logistics companies are taxed only if their annual turnover exceeds 10 lakhs.
7. Get your company registered: It is better to ensure your company is registered if you want to add authenticity and avoid hassles later on.
Arif Siddiqui is Director of Coign Consultancy, an advisory and consultancy firm advising leading international and Indian third-party logistics
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About the Author
David Parks is a well known author and has written articles on Trade Shows Directory, B2B Portal, Bags Manufacturers, suppliers, Manufactures and many other subjects.
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