Post Date : August 31, 2020
In a major move that came as a shocker for India Inc., Reliance Group announced a big bang acquisition of Future Group in Indian retail industry. With this acquisition, Reliance Retail will get access to approximately 1800 retail stores spread across the length and breadth of country. It will make Reliance the undisputed leader in the retail space.
This deal also includes the acquisition of Future Supply Chain Solution Ltd. Future Supply Chain (Erstwhile name: Future Logistics Solution Limited) was incorporated in 2006 as a 3PL service provider and initially business started with catering captive requirement of the Future Group. In subsequent years, Future Supply Chain expanded offering its services to other clients and expanded service offering in express distribution and warehousing.
In its growth journey, Future Supply Chain created a mega fulfillment facility in Nagpur. Around 2016, FSC ventured in cold transportation business and in 2018 Future Supply Chain acquired Vulcan Express, an e-commerce and high-value business-to-business logistics company, from Jasper Infotech (Snapdeal). These efforts were to become an end to end focused integrated logistics service provider.
But the journey of Future Supply Chain always remained on bumpy rides. Except contract logistics business, none of the product of FSC registered significant presence in logistics market. Its express distribution expanded to 14 hubs and 129 branches across India across 29 states and 5 union territories. But in a later phase, its reach started declining.
In express distribution competitive landscape, Future Supply Chain became a marginalized player and similarly remained an insignificant player in cold chain space. However, its initial transportation business revolved around contract logistics customers and Future Group only.
Acquisition of Future Supply Chain by Reliance Retail may add substantial value to mammoth plan of Jiomart. On one hand, Reliance has become the largest offline retailer with this deal and on the other hand, the company has mega plans in online space. Online and offline retail business will need strong backend supply chain infrastructure. In such a scenario, Reliance Retail can leverage on competencies of FSC for captive requirements and may build it further to next level.
Under new management, FSC may prune some of its contract logistics businesses of external customers and align its expertise of managing fulfillment center and transportation of Reliance Group. But in next 2-3 years, once the captive business establishes, supply chain vertical may enter as a challenger to established logistics players. Strong captive volumes will give competitive edge to company in managing overall network.
In years to come, supply chain entity under new management may become the market leader in certain segments like contract logistics, fulfilment centre, express distribution, cold chain and last-mile delivery.
This article has been written by Vikash Khatri, Founder of Aviral Consulting. He is a management consultant and entrepreneur with an experience of over 17 years in Strategy, Business Transformation, Operations and Supply Chain.