BPO firms innovate to slash transport expense

“It was so complex it could easily qualify as a question on a GMAT exam,” says the company’s logistics director Gaurav Kalra, who was part of a team deputed to automate Convergys’ transportation programme and bring it under control. Since many employees had a new schedule every five days, he says, someone was spending half the week just converting timetables into routes.

Transportation carries an average cost of 8-9% of a firm’s operating budget

Kalra and Convergys are far from alone in facing and trying to cut spiralling transportation budgets. And in the wake of rising petrol prices, efforts are intensifying among companies that pick up commuting costs for workers.

Transportation carries an average cost of 8-9% of a company’s operating budget in India—a larger expense than even real estate for some companies not sitting on prime land. With fuel costs set to increase, logistics directors are turning to a mix of technology and planning to keep the expense as low as possible.

“What’s good today is not good tomorrow,” says Yash Kapila, who heads the facilities management group in West Asia for the real estate consulting firm Jones Lang LaSalle Meghraj and consults on transportation projects. “You look at the need, and you challenge the requirements.”

The firm recently did that for an international financial services company that clocks 17 million km each year in employee transport, according to Kapila, and helped the company cut its annual transport budget by Rs1 crore. He declined to name the company citing a confidentiality clause in the client’s contract.

Part of the savings came from rationalizing the way people were picked up, and trying to pick up as many people as possible in the same area, he says, but the bulk of the savings came from something even morebasic.

“What would traditionally happen: the car picks you up at 7am, and you ride back at 8 pm,” says Kapila, “but you would have that car for 13 hours and the customer is paying for idle time.” In part by telling its vendors it would no longer pay for idle time, the company brought its costs per employee down from around Rs300 per day it was paying last January to Rs170 per day this April.

Other approaches to cutting transportation costs involve less wholesale options and more fine-tuning. The Hinduja Group’s back office services unit HTMT Global Solutions Ltd, which spends more on transport than its office rentals in Bangalore and Mumbai, tried to squeeze costs out through combining pick up and drop locations, according to Narashima Murthy, who led the company’s India operations, and just moved to the North Americadivision.
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