Release of “Transforming Indian Defence LogisticsSystem” a compilation by CII and Q-Tech Synergy by Defence Minister Sh. Manohar Parrikar at Def Expo-2016
L to R Mr BimalSareen, Director, OIS-AT; Mr Sukaran Singh, Co-Chairman CII National Committee on Defence and MD & CEO, Tata Advanced Systems Limited; Mr Phil Shaw Chairman, Defence International Cooperation Committee, CII & Chief Executive, Lockheed Martin India; Mr Baba N Kalyani, Chairman CII National Committee on Defence & Chairman Bharat Forge; Maj Gen (Dr) Bhupinder Yadav (Retd), CEO Q-Tech Synergy; Mr Manohar Parrikar, Hon’ble Defence Mantri, Ministry of Defence; Mr Sukaran SinghCo-Chairman CII National Committee on Defence and MD & CEO, Tata Advanced Systems Limited; Mr Pratyush Kumar, Co-Chairman CII Defence Offset Committee & President, Boeing India Ltd and; Mr Nitin Gokhale, National Security Analyst & Founder: BharatShakti.in
TRANSFORMING INDIAN DEFENCE LOGISTICS SYSTEM
India's desire for a modern, self-reliant and leading edge defence sector is a key tenet for the transformation of its armed forces. Government endeavor to building blocks to incentivize the growth of a domestic defence industry, which is poised at an inflection point in its expansion cycle driven by the modernization plans and the growing domestic market offers opportunities both to foreign and Indian players with a shift from Buyer-Seller relationship to one of partnership. The impact of the prioritisation of acquisition categories and series of measures introduced by the MoD recently to kick start defence equipment manufacturing in India aims to benefit the Indigenous base and will enable Indian industries to acquire technology, foster joint venture and collaboration with foreign OEMs and manufacture the product in India. The process of internationalization and competitiveness has brought a discernible shift in the defence acquisition and production with emergence of joint ventures and conglomerates with networked dual use production. In such environment the Indian Defence Industry and the defence procurement has to become increasingly collaborative with the private sector in order to enhance the capabilities and core competencies in the emerging military technology sectors.
Defence logistics is an end-to-end lifecycle of functions and processes operating within a complex technology based network to enable command & control, response and adaptability and ultimately effectiveness. Defence Logistics sector spend is about 35 percent of Defence Revenue budget YoY. This ready reckoner for the stakeholders on “Transforming Indian Defence Logistics System” taking into perspective the growth of the Indian economy and current market dynamics. The compilation provides brief background, present and likely projections of the Indian defence services requirements from both Capital and Revenue procurements, highlighting the indigenous production infrastructure, equipment sustainment need and how these gaps can be bridged. The compilation deals with the existing practices on logistics, the market size and way forward with the incorporation of Private sector as a stakeholder. These have been elucidated with the help of Charts, Figures and Tables drawn from primary and secondary sources and interpolated carefully.
Key Highlights Are:
• The Indian defence services inherited logistic organizational structures and procedures and by and large continued with minor changes. These are neither cost effective nor in tune with present requirements.
• The unified logistics organization, harmonizing the logistics systems of the three Services and developing a common approach in supporting the defence forces would give value addition and achieve economy of effort and resources.
• The economy, efficiency, and effectiveness of the supply chain within which defense logistics operates are to be enabled by collaboration, communication and integration.
• Would over there is an increasing acceptance of the concept of defence outsourcing of non-core logistic functions, as it frees the commanders to focus on their primary task and saves resources
• Supply Chain Management (SCM) needs to be customer-driven system involving the sharing of information, risks and assets among partners (industry) to achieve an integrated, seamless, responsive distribution system.
• Most of the procurement in the past is based on acquisition cost which represents only a small portion of the total cost of ownership. Leveraging sustainment through acquisition by adopting a Life Cycle Costing (LCC) approach coupled with Performance Based Logistics (PBL) will not only ensure cost effectiveness but also conserve capability.
• Indigenization of Capital equipment for new induction and indigenization for maintenance and sustenance of existing inventory is the area where the private sector can contribute significantly.
• In about decade time frame, The Private Sector participation in defence industry will increase significantly and will be at par with Government sector, raising the level of self reliance, reducing import, giving lift to economy and employment.
• The operational and cost-efficiency over 10 percent can be achieved through service-oriented architecture; enhanced asset visibility; integration of core and non-core logistics functions; predictive MRO operations; through cost effective out sourcing of non-core functions to third party, in the Indian Defence Services.
• Indian SMEs with high productivity, cost advantage in basic design and engineering services, components and assemblies manufacturing, coupled with competitive labor rates will be the beneficiary in the endeavor.
• The intended progression by Private sector from Component or subsystem provider to becoming sub-system integrators would improve the percentage share of indigenous sources to over 50 % from about 40 % at present in next 5 years and import contents may come down to 30 % by 2027.
• Considering the country's domestic market and cost edge, we can expect a saving in the range of about 20 % on major defence procurement, once the equipment is produced in India with or without ToT/JV. The country is likely to save over Rs. 300000 Crores during 2015-27 for outsourcing non-core activities, translating into an average yearly saving of Rs. 18000 Crores approximately.