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A project report on domestic transportation in india at expeditor’s benglore

  1. 1. A study on Domestic Transportation in India at Expeditor’s EXECUTIVE SUMMARYINDUSTRY PROFILEIndia is being touted as the land of opportunity for logistics service providers all over the world.The Indian logistics market represents $ 50billion and is growing at a rate of 7 percent annually.Transportation costs account for nearly 40% of production costs, logistics costs around 13% ofGDP, compared to 8% in the US. Growth in Indian economy is the major driving factor for thedemand in logistics industry.Automobile and engineering goods, chemicals, FMCG, cement and textiles have been identifiedas the top five contributors to logistics revenues.India has the second highest largest road network-3.3 million km. Road Network carry nearly65% of freight The Indian Railways boasts of being the world’s 2nd largest rail network spreadover 81,511 km and covering 6896 stations. The freight segment accounts for roughly two thirdsof railway’s revenues. It has 12 major and 184 minor / intermediate ports spread across the vastcoastline of 7517km. The 12 major ports handle about 76 per cent of the traffic. Port traffic togrow to a level of 950 MillionTonnes per Annum by 2009- Ministry of Shipping. Aviation holdsa small share of India’s freight market. Air Freight is very expensive in India in comparison toroad and rail. The size of the world air cargo market is estimated at 27 million tonnes valued at$200 billion. India accounts for meager 3% of the global air cargo market. As per an expertestimate, Indian air cargo industry is going to be double by the year 2010.COMPANY PROFILEExpeditors international India pvt ltd is a global logistics company which was established in theyear 1979 by Peter.J.Rose and his partners in Washington. Expeditors is much more than gettinga piece of freight from one point to another. The Council of Logistics Management defineslogistics as that part of the supply chain process that plans, implements, and controls theefficient, effective flow and storage of goods, services, and related information from the point oforigin to the point of consumption in order to meet customers requirements.Babasabpatilfreepptmba.com Page 1
  2. 2. A study on Domestic Transportation in India at Expeditor’sExpeditors job is to make sure that from raw material to finished goods sitting on the retail shelf,they provide the critical services and information necessary to give their clients a competitiveadvantage in the management of their supply chains.Need for the study:To study about the domestic transportation of goods its current status, challenges andrequirements.OBJECTIVES • To know the current status of domestic transportation. • To know the problems facing by the customers with transporters, challenges taken to overcome them. • To know the modern technology used in transportation of goods.SCOPE OF THE STUDY  The study will help us to know the present status of the Indian logistics.  It helps to know the problems facing by the customers with transporters.  To know the modern technologies used in transportation of goodsMETHODOLOGYMethod of collecting primary data was through questionnaire and personnel interview andsecondary data has been collected through Internet, observation, company manual etc. For thepurpose of study logistics executives of manufacturing companies have been chosen as a samplesize of 50 through convenient random sampling. Data collected was tabulated and simplepercentage method was used to derive conclusion. Depending on this I have made my ownsuggestions & given my own idea to improve transportation of goods.Babasabpatilfreepptmba.com Page 2
  3. 3. A study on Domestic Transportation in India at Expeditor’sFINDINGS • Majority of the customers are facing the problem of shipment tracking facility in transporting vehicles. • Majority of the manufactured goods are damaged due transportation through open trucks.SUGGESTION AND RECOMMENDATIONS • Since majority of the customers are facing the problem of shipment tracking hence a tracking tool called GPRS system should be adopted to measure, record and transmit parameters like date, time, speed and location to the command centre using the local GSM/GPRS network. The system automatically switches over to SMS wherever GPRS coverage is not available. • In India major transportation is through open trucks hence there is increase in damage/loss. So closed trucks like canters and container transportation will be a better alternative.CONCLUSION • Modern technological device called GPRS should be used in transporting vehicles, so that customers can track the vehicle. • Canters and containerized transportation is adopted, so that damage/loss can be minimized.Babasabpatilfreepptmba.com Page 3
  4. 4. A study on Domestic Transportation in India at Expeditor’s INTRODUCTION OF THE STUDYLogistics and supply chain practices are a set of activities undertaken to promote effective andefficient management of supply chains. These include supplier partnership, physical movementof goods (logistics) and information sharing throughout the supply chain in order to meetcustomer requirements. Some of the key logistics and supply chain practices that impactperformance are related to estimation of customers order, efficient and effective delivery,integration and collaboration throughout the supply chain, sharing of vision and informationusing formal and informal methods, as well as use information and communicationtechnology(ICT) and various specialist for performing specific jobs across the supply chain. Allof these practices impact logistics the supply chain performance.Title of the project “A study on Domestic transportation in India”It is virtually inconceivable in todays economy for a firm to function without the aid oftransportation. Transportation is an essential and a major sub-function of logistics that createstime and place utility in goods. In fact, the backbone of the entire supply chain is thetransportation management that makes it possible to achieve the well known seven Rs- the rightproduct in the right quantity and the right condition, at the right place, at the right time, for theright customer at the right cost.The importance of transportation should also be seen by looking at the impact of transportationon a countrys economy. Studies reveal that in India the total logistics costs constitute nearly 10percent of the GNP out of which nearly 40 percent is because of transportation alone. The majorinfrastructure required for moving goods from one place to another in India involve the activeroles of Roads, Road Freight Industry, Railways, Ports and Shipping, and Pipelines, all of whichare either managed or regulated by the government in accordance with the private.Babasabpatilfreepptmba.com Page 4
  5. 5. A study on Domestic Transportation in India at Expeditor’sTransportation and logistics services are generally outsourced to third parties. Transportation ismainly by road and the lead-time of these supply chains is still as high as nine to twelve weeks.This is quite understandable, given the size of India and the state of its infrastructural facilities.Transportation and logistics is generally through their own fleet. In some cases, it is outsourced.Routing and scheduling software are increasingly being used for these activities. Five out of sixfirms use standard ERP software. There is high focus on tracking of customer orders andcustomer care and technologies like bar codes and GPS are being employed.In our on site observation of 50 firms, we find that the primary focus is on quality, cost andservice. Recently, responsiveness (delivery speed, safety, volume flexibility, shipment weightand innovation) is also catching up management attention. Correspondingly, the major concernin all these firms and their supply chains are related to cost, clarity of demand, reliability ofpartners, shortening of delivery cycle, production and logistics flexibility and innovation insupply chain practices. Sharing of benefits within the supply chains has not yet gained muchattention. Firm especially in the automotive, retail, manufacturing and FMCG sectors areincreasingly opting to outsource their logistics requirements to specialized service providers, thepositive business atmosphere and a burgeoning consumer market are making the shippercommunity push the logistic service propositions.Babasabpatilfreepptmba.com Page 5
  6. 6. A study on Domestic Transportation in India at Expeditor’s LogisticsOrigin and Definition of Logistics:The term "logistics" originates from the ancient Greek "λόγος" ("logos"—"ratio, word,calculation, reason, speech, oration"). Logistics is considered to have originated in the militarysneed to supply themselves with arms, ammunition and rations as they moved from their base to aforward position. In ancient Greek, Roman and Byzantine empires, there were military officerswith the title ‘Logistikas’ who were responsible for financial and distribution of supplies.The Oxford English dictionary defines logistics as: “The branch of military science having to dowith procuring, maintaining and transporting material, personnel and facilities”. Anotherdictionary definition is: "The time related positioning of resources." As such, logistics iscommonly seen as a branch of engineering which creates "people systems" rather than "machinesystems"....Prospects of Growth in the IndustryIn years gone by, the traditional warehousing and logistics facility was located by railroad tracks,a water port, and/or freeways, usually in the least desirable parts of cities or large towns. Thisstereotype then faded as gigantic, state-of-the-art facilities began to sprout in more rural areas onthe outskirts of transportation and population hubs. The World started beginning to see suchfacilities showing up in even less "traditional" areas. Modern warehouses now are being locatedin carefully manicured industrial parks that are sprouting as fast as the corn and wheat once didin these open spaces-often in out-of-the-way places. Why the emphasis on such locations forlogistics companies?Much of it is due to the great flux that the logistics industry has been undergoing in the first threeyears of the 21st century. Most of these changes are being driven by a growing trend in themanufacturing and retail sectors to form partnerships with companies to which they canoutsource non-core logistics competencies-3PL providers.Babasabpatilfreepptmba.com Page 6
  7. 7. A study on Domestic Transportation in India at Expeditor’sIn turn, 3PL providers are continually looking to provide innovative supply chain solutions tocustomers by focusing on value-added capabilities, differentiating themselves from thecompetition. They focus on key objectives, such as implementing information technologies,instituting effective management processes, integrating services and technologies globally, anddelivering comprehensive solutions that create value for 3PL users and their supply chains. Thisneed to partner with customers and become more integrated into their supply chain processes hascreated the ancillary need to locate close to these customers.That isnt to say the need for easy access to transportation hubs and different modes oftransportation wont continue to be important. But the above shift in business strategy, along withthe advances in technology and enhanced communication, has opened the door for logisticsfacilities to operate effortlessly in a myriad of location.Profit warnings, share price pressures, mergers, reorganizations, relocations, disposals, painfullayoffs and great geopolitical uncertainties can sweep away even the most comprehensivelogistics strategies – and that’s despite outstanding management over many years. These areexceptionally difficult times and it has never been more important to connect logistics and freightplanning to executive board thinking than now. It’s easy to lose sight of the bigger picture in therush to cut infrastructure cost and conserve cash. Hopefully organization succeed in protectingthe business, satisfying shareholders and analysts, but what about capacity and flexibility, moraleand momentum?To be a logistics winner in the coming years organizations need to use the downturn to reshapefor growth, propelled by an unshakeable conviction that the mission is still important, that moreprosperous times lie ahead, and that in some way the company infrastructure is helping to build abetter kind of world.Own passion for running the race matters most of all in a downturn, when people are insecure,see only savage cost savings, and loyalty is tested. The corporation’s future will be dominated bysix factors, or faces of a cube, spelling F U T U R E.Babasabpatilfreepptmba.com Page 7
  8. 8. A study on Domestic Transportation in India at Expeditor’sLogistics is inevitable in the future and essentially the management policy also has a significantrole in the future of world. Generally the study is being featured with all aspects of managementin Logistics and Freight areas. (Logistics include Transportation, Warehousing, Network Design,Cross docking, and Value Adding).Babasabpatilfreepptmba.com Page 8
  9. 9. A study on Domestic Transportation in India at Expeditor’s INDUSTRY PROFILELogistics can be defined as providing the right type of products and/or services at the right price,at place, time and in the right condition. A quick look back at some logistics history may provevery enlightening. Logistics can be classified as an enterprise planning framework for materialmanagement, information, service and capital flows. Logistics when seen in the context of themodern day prevalent work environment also includes information that is complex in naturebesides giving importance to all the communication and control system that are essential forefficient working of the organization.The birth of Logistics can be traced back to ancient war times of Greek and Roman empireswhen military officers titled as Logistikas were assigned the duties of providing services relatedto supply and distribution of resources. This was done to enable the soldiers to move from theirbase position to a new forward position efficiently, which could be a crucial factor indetermining the outcome of wars. This also involved inflicting damage to the supply locations ofthe enemy and safeguarding ones own supply locations. Thus, this lead to the development of asystem which can be related to the current day system of logistics management.During the Second World War (1939-1945), logistics evolved greatly. The army logistics ofUnited States and counterparts proved to be more than the German army could handle. Thesupply locations of German armed forces were inflicted with serious damages and Germany wasnot able to wreak the same havoc on its enemy. The United States military ensured that theservices and supplies were provided at the right time and at the right place. It also tried toprovide these services when and wherever required, in the most optimal and economical manner.The best available options to do the task were developed. This also gave birth to several militarylogistics techniques which are still in use, albeit in a more advanced form.Logistics has now evolved itself as an art and science. However, it cannot be termed as an exactscience. Logistics does not follow a defined set of tables nor is it based on skills inherited frombirth. A logistics manager performs his duties and responsibilities based on his educationalexperiences, skills, past experiences and intuition. These skills are nourished by a constantBabasabpatilfreepptmba.com Page 9
  10. 10. A study on Domestic Transportation in India at Expeditor’sapplication of the same by him for the betterment of his organization. The logistics managerensures that the company is benefited by an effective and efficient system of logisticalmanagement. He also needs to ensure that the right kind of products and services are provided atthe right time and for a right price, whether inside the organizations premises or delivery ofshipments outside the premises of the organization.Logistics has come to be a kind of relief for many organizations that formerly looked upon it as aburden. Companies nowadays are hiring people with the requisite knowledge to deliversustainable enhancements in the field of supply chain management. As has been the casethroughout most of logistics history, the task of a logistics manager involves a clear vision and adrive within to deliver results under strict deadlines in addition to his usual responsibilities.Logistics in IndiaLogistics in India dont differ too markedly from logistics anywhere else in the world. Its the theart and science of managing and controlling the flow of goods, products, services, energy,information and people from the origin point to the destination point. It includes the propercombination of several activities such as material handling, warehousing, and information, forthe purpose of ensuring supply of the right product, at the right time, at the right place, for a rightcost in the right condition.In the past, India has been the student rather than the expert when it comes to the field oflogistics. But with its current expertise, valuable human resources and positive plans, it surely iswalking on the path of being a service provider of class. There are several factors that benefit theIndian economy for reaching success in the field of logistics, namely:1. India is the fourth largest economy in the world.2. It is believed that about one-quarter of the youth population of the world resides in India.3. India has human resources that are high in knowledge and abilities.4. It is the second-largest English speaking workforce.Babasabpatilfreepptmba.com Page 10
  11. 11. A study on Domestic Transportation in India at Expeditor’s5. It has the 2nd largest pool of qualified technical workforce.India spends 13 percent of its Gross Domestic Product (GDP) on logistics as opposed to theusual practice of 10 percent by other developing nations. The Indian economy is striving forimprovements in the field of logistics and supply chain management to gain the competitive edgein todays worldwide economy. The Indian government has favored the logistics market of Indiaby making some helpful plans and policies to assist in its growth.There are several events organized for the promotion of logistics in India which are focused intheir approach and relevant to the business solutions besides providing a solid platform forallowing people from a wide industry spectrum to meet and provide business within them fromall over the country. This has been an emphatic source of providing business solutions and theirdevelopment.Several global third party logistics providers (3PLs) have already started developing theiroperations and service networks in India with a purpose to explore the rampant Indian economy.This has resulted in the creation of the need for a vast range of supply chain management (SCM)and logistics solutions which cover several factors such as supply chain, logistics, materialhandling, storage, Information technology (IT), warehousing and inventory management. Thishas benefited the efficiency and productivity of the complete value chain in several dimensionsof profits, speed and customer service.The Confederation of Indian Industry (CII) is the premier business organization with a knowncommitment towards the development of logistics in India. It has established the CII Institute ofLogistics which is a specialized state-of-the-art institute of excellence with its focus on SCM andlogistics. It is brought up to satisfy the latest industry needs for specialized SCM and logistics.India is being treated as the destination of the future in the field of logistical service providers allover the globe. Indian logistical market players have started to gear up and position themselvesin the global scenario. The true potential of these service providers is yet to be realized. India iskeen to offer transportation and logistical service to grow itself as an emerging marketplace. TheBabasabpatilfreepptmba.com Page 11
  12. 12. A study on Domestic Transportation in India at Expeditor’skey sectors include fashion, gems, jewelry, pharmaceuticals, precision tools and engineeringgoods, all of which need special shipping provisions.Size of the Indian logistics industryThe annual logistics cost in India is estimated to be 14% of the GDP, which translates into USD140 billion assuming the GDP of India to be slightly over USD 1 trillion. Out of this USD 140billion logistics cost, almost 99% is accounted for by the unorganized sector (such as owners ofless than 5 trucks, affiliated to a broker or a transport company, small warehouse operators,customs brokers, freight forwarders, etc.), and slightly more than 1%, i.e. approximately USD1.5 billion, is contributed by the organized sector. So, one can see that the logistics industry inIndia is in a nascent stage. However, the industry is growing at a fast pace and if India can bringdown its logistics cost from 14% to 9% of the GDP (level in the US), savings to the tune of USD50 billion will be realized at the current GDP level, making Indian goods more competitive in theglobal market. Moreover, growth in the logistics sector would imply improved service deliveryand customer satisfaction leading to growth of export of Indian goods and potential for creationof job opportunities.Logistics Management and Logistics Management SoftwareLogistics management is that part of the supply chain which plans, implements and controls theefficient, effective forward and reverse flow and storage of goods, services and relatedinformation between the point of origin and the point of consumption in order to meet customersrequirements. A professional working in the field of logistics management is called a logistician.Software is used for automating logistics activities which helps the supply chain industry inautomating the work flow as well as management of the system. Very few generalized softwareare only available in the new market in the said topology. This is because there is no commonrule to generalize the system as well as work flow even though the practice is more or less thesame. Most of the commercial companies do use one or the other custom solution. There arevarious software that are being used within the departments of logistics.The software’s that are used in these departments are,Babasabpatilfreepptmba.com Page 12
  13. 13. A study on Domestic Transportation in India at Expeditor’sConventional Department: CVT software / CTMS softwareContainer Trucking: CTMS softwareBusiness LogisticsLogistics as a business concept evolved only in the 1950s. This was mainly due to the increasingcomplexity of supplying ones business with materials and shipping out products in anincreasingly globalize supply chain, calling for experts in the field who are called Supply ChainLogisticians. This can be defined as having the right item in the right quantity at the right time atthe right place for the right price and it is the science of process having its presence in all sectorsof the industry. The goal of logistics work is to manage the fruition of project life cycles, supplychains and resultant efficiencies.In business, logistics may have either internal focus (inbound logistics), or external focus(outbound logistics) covering the flow and storage of materials from point of origin to point ofconsumption. The main functions of a qualified logistician include inventory management,purchasing, transportation, warehousing, consultation and the organizing and planning of theseactivities. Logisticians combine the professional knowledge of each of these functions so thatthere is a coordination of resources in an organization.There are two fundamentally different forms of logistics. One optimizes a steady flow ofmaterial through a network of transport links and storage nodes. The other coordinates asequence of resources to carry out some project.b. Production LogisticsThe term is used for describing logistic processes within an industry. The purpose of productionlogistics is to ensure that each machine and workstation is being fed with the right product in theright quantity and quality at the right point in time.The issue is not the transportation itself, but to streamline and control the flow through the valueadding processes and eliminates non-value adding ones. Production logistics can be applied inexisting as well as new plants. Manufacturing in an existing plant is a constantly changingBabasabpatilfreepptmba.com Page 13
  14. 14. A study on Domestic Transportation in India at Expeditor’sprocess. Machines are exchanged and new ones added, which gives the opportunity to improvethe production logistics system accordingly. Production logistics provides the means to achievecustomer response and capital efficiency. Production logistics is getting more and moreimportant with the decreasing batch sizes. Even a single customer demand can be fulfilled in anefficient way. Track and tracing, which is an essential part of production logistics - due toproduct safety and product reliability issues - is also gaining importance especially in theautomotive and the medical industry.Features of Indian Logistics Industry•A number of small-integrated players.•Transportation costs account for nearly 40% of production costs.•Logistics costs around 13% of GDP, compared to 8% in the US.•Growth in Indian economy is the major driving factor for the demand in logistics industry.•Chemicals, metals, FMCG, cement and textiles have been identified as the top five contributorsto logistics revenues.Babasabpatilfreepptmba.com Page 14
  15. 15. A study on Domestic Transportation in India at Expeditor’sGrowth Drivers for Logistics in India •General growth of the Indian economy. •Manufacturing boom-for exports as well as for domestic market. •Expected rise in International trade from India. •MNC’s setting up manufacturing in India-Nokia, Flextronics. •Government’s thrust on Infrastructure --US$17 billion to upgrade highway networks. •Implementation of VAT will lead to growth in warehousing business.Babasabpatilfreepptmba.com Page 15
  16. 16. A study on Domestic Transportation in India at Expeditor’s •Opening of organized retail sector -attracting retail chains like Wal-Mart and Carrefour into Indian players like Pantaloon and Reliance.Government SupportThe Indian government is making great efforts by •Privatizing ports and airports. •Increasing the number of gateway ports •Investing in highway projects •Streamlining customs and excise procedures •Implementing EDI systems •Improving the rail network . •The government plans to invest $17 billion in transport infrastructure between 2006-2010. Some of the projects are • Amend in the National Highway Act to expedite land acquisition, permit private financing and allow tolling. • Improvement in rural access by launch of the Prime Minister’s Rural Roads Program. • Reduction of congestion on rail corridors and improvement of port connectivity by launch of National Railway Development Program. • Upgradation of infrastructure and connectivity in the countrys twelve major ports by initiating the National Maritime Development Program. • Establishment of Tariff Authority for Major Ports to regulate tariffs.Babasabpatilfreepptmba.com Page 16
  17. 17. A study on Domestic Transportation in India at Expeditor’s • • On a per-annum basis, United States invests 5 percent of its annual logistics spend on infrastructure, India is investing 23 percent or over four times as much. Industry Growth=Logistics Growth • “Engineering goods, chemicals and gems & jewelry are the fastest-growing sectors; manufacturing in India is expected to grow by 9.4 percent in coming years.” says Jacques Green, Managing Director FedEx-India, Middle East &Africa.Auto • Outsourcing in Auto sector could be worth $375 billion by 2015 and India could capture up to $25 billion of this amount. [source:McKinsey]Chemicals • India’s chemical exports could reach $15 billion by 2015. [Source: McKinsey]. Electrical and Electronic Products • India’s export in electrical and electronic products could reach upto $18 billion a year by 2015[source: McKinsey]. Retail • Opening up of the organized retail sector is attracting big retail chains like Wal-Mart and Carrefour in addition to big Indian retailers like Pantaloon and Reliance. • All this would require the presence of professional logistics players in the market to carry out supply chain activities. Thus demand for logistics services would be largely driven by the growth of the Indian economy. Babasabpatilfreepptmba.com Page 17
  18. 18. A study on Domestic Transportation in India at Expeditor’sLogistics is a mixture of several professional disciplines, such as:1. Planning2. Controlling3. Directing4. Coordination5. Forecasting6. Warehousing and transportation7. Facility location8. Inventory managementAll activities that are involved in the movement of goods and services from the point of origin tothe point of final consumption are grouped under the term logistics. The art of managing orsupervising all these activities when grouped together as a collective unit, are placed underlogistics management. People who are authorized or given the task of managing the aspect oflogistics management are referred to as distribution managers or logistics managers.Importance of logistics1. Logistics is the bed rock of trade and business. • Without selling and or buying there can be no trade and business. Buying and or selling takes place only when goods are physically moved into and or away from the market. • Take away logistical support trade and business will collapse2. Leads to customer satisfaction through superior customer service. • Organizational objectives of P [Productivity],Q [Quality],C [Cost],D [Delivery],E [Employee Morale],F [Flexibility],S [Safety],H [Health],E [Environment] are set to meet customer expectations of Q,C,D,Q, C, S, H, E are parts of must be quality that aBabasabpatilfreepptmba.com Page 18
  19. 19. A study on Domestic Transportation in India at Expeditor’s customer expects. Logistics addresses D, F objectives which lead to customer satisfaction through superior customer service3.Integrates logistical activities • In conventional management environment, various activities of logistics work in isolation under different management functions. Each pocket trying to sub optimize its objectives at the cost of overall organizational objectives. Purchasing trying to purchase at minimum price at the cost of what is needed by operations. Operations produce large quantities at minimum production cost ignoring demand leading to doom inventory. Logistics function of management brings all such functions under one umbrella pulling down inter departmental barriers.4.Competitive edge • In the fiercely competitive environment logistics provides the edge. Due to technological revolution most of the products are moving into commodity markets. In a commodity market where price is controlled by competition, where there is no product differentiation in terms of quality parameters like performance & reliability, where brands are almost irrelevant, competitive edge is that of availability of product and service in terms of time, place and quantity.5.Logistics wins or loses wars • British lost American war of independence due to poor logistics • Rommel was beaten in the desert by superior logistics of Allies6.Supports critical functions like operations and marketing Strong logistics support enables a company to move towards JUST IN TIME production system for survival in a highly competitive marketBabasabpatilfreepptmba.com Page 19
  20. 20. A study on Domestic Transportation in India at Expeditor’s a) Interface with marketing These days marketing a product is increasingly on the strength of availability and flexibility as we discussed earlier. Stronger emphasis is on the last of four Ps of marketing [product, price, promotion and place]. Logistics provides the interface between production function and marketing function. Marketing is trying to sell the product in the market place. Logistics makes the product accessible to marketing by acting as interface between the function that produces it and the function that makes the consumer buy it. This interface is gaining importance due to following changes that are sweeping the market making many companies adopt JUST IN TIME production system.a. Change in the customer: demanding, knowledgeable, conscious of rights, lacking in brand loyalty, changes preferences very fast, expects very high degree of serviceb. Many products are moving towards commodities market: product differentiation in terms of quality of performance is vanishing and brands are losing their magic.As a result of above we find that availability is an important determinant of purchasing decision.7. Logistical costs: For individual businesses logistics expenditures are 5% to 35% of salesdepending on type of business, geographical areas of operation, weight/value ratios of productsand materials. This is an expensive operation. Improvement in the efficiency of logistics functionyields savings as well as customer satisfaction Importance of logistics management in India I. Liberalization and opening our door to competition II. Global business has long supply & distribution lines III. Changing Indian customer, aware, demanding and less brand loyal IV. Competition ensures that product differentiation in terms of quality is difficult V. Product life cycles are shrinking VI. Our markets are shifting from sellers’ to buyers’ VII. Many consumer products are moving into commodities marketBabasabpatilfreepptmba.com Page 20
  21. 21. A study on Domestic Transportation in India at Expeditor’s VIII. India is a large country. Large distances separate production and consumption centers. Essential commodities have to travel from Food Corporation warehouses to consumers through PDS. IX. Logistics performance has not been impressive.OPERATIONAL OBJECTIVES OF LOGISTICS1. Rapid response F-flexibility objective of an organization: Some companies measure this as response time to customer’s order. On an average how much time do we need to fulfill one particular type of customer’s order in a year? This is a measure of Rapid response. Logistics should ensure that the supplier is able to respond to the change in the demand very fast. Entire production should change from traditional push system to pull system to facilitate rapid response. Instead of stocking the goods and supplying on demand, orders are executed on shipment-to-shipment basis. Information Technology plays an important role here as an enabler. IT helps management in producing and delivering goods when the consumer needs them. This results into reduction of inventory and exposes all operational deficiencies. Now the management resolves these deficiencies and slashes down costs. [Concept of SMED and KANBAN as practiced by JIT companies in Japan or elsewhere]2. Minimum variance D-delivery objective of an organization, this can be measured as ‘On Time Delivery’ or OTD. If 100 deliveries are made in a month/quarter/year how many reached as per the commitment made to the customer? This percentage is OTD. Any event that disrupts a system is variance. Logistics operations are disrupted by events like delays due to obstacles in information flow, traffic snarls, acts of god, wrong dispatches, damage in transit. Traditional approach is to keep safety stocks and transport the goods by high cost mode. The cost of this approach is huge. Logistics is expected to minimize these events, thereby minimize and improve on OTD3. Minimum inventoryBabasabpatilfreepptmba.com Page 21
  22. 22. A study on Domestic Transportation in India at Expeditor’s This is component of cost objective of a company. Inventory is associated with a huge baggage of costs. It is termed as a necessary evil. Objective of minimum inventory is measured as Inventory Turns or Inventory Turnover Ratio. Americans call this measure as turn velocity. Logistics management increases these turns without sacrificing customer satisfaction. Higher turns ensure effective utilization of assets devoted to stock. [Concept of single piece flow as practiced by JIT companies in Japan or elsewhere]. Logistical management should keep the overall well being of a company in view and fix a minimum inventory level without trying to minimize the inventory level as an isolated objective4. Movement consolidation Transportation is the biggest contributor to logistics cost. Transportation cost depends on product type, size, weight, distance to be transported etc. for transporting small shipments just in time [reduction in inventory costs] expensive transport modes are used which again tend to hike the costs. Movement consolidation is planning several such small shipments together [of different types of shipments] by integrating interests of several players in the supply chain. Generally, large shipment size and long distances reduce transportation cost per unit. Movement consolidation shall result into reduction in transportation costs.5. Quality If the quality of product fails logistics will have to ship the product out of customer’s premises and repeat the logistics operation again. This adds to costs and customer dissatisfaction. Hence logistics should contribute to TQM initiative of management. In fact, commitment to TQM has made the management’s world over wake up to the significance of logistics function. Logistics can play a significant role in total quality improvement by improving the quality of logistics performance continuously and continually.6. Life cycle support [cradle to cradle logistical support- produce, pack (cradle) and repack (cradle)] Logistics function is expected to provide life cycle support to the product after sale. This includesBabasabpatilfreepptmba.com Page 22
  23. 23. A study on Domestic Transportation in India at Expeditor’sa. After sales service: the service support needed by the product once it is sold during its life cycleb. Reverse logistics [concept Oct’03] or Product recall as a result of -Rigid quality standards [critical in case of contaminated products which can cause environmental hazard] -Transit damage [leaking containers containing hazardous material] -Product expiration dating -Rigid laws prohibiting unscientific disposal of items associated with product [packaging] -Rigid laws making recycling mandatory -Erroneous order processing by supplier -Reverse logistics is an important component of logistics planning. Logistics functions1. Information management Management is appreciating importance of information as an element of logistics of late, now. The role of information is vital in order processing. Quality of information is critical as error in composition of information requirement creates potential disturbance in the supply chain. Incorrect order processing due to erroneous information will result into product recall and reshipment if the sales opportunity still exists. Faster and quality information flow from customer to processor results into cost effective logistics. Forecasting and order management are two areas of logistical work dependent on information. Forecasting is an effort to estimate future requirements to position inventory or assets devoted to inventory. As forecasting becomes unreliable in a fast changing environment, control strategies like JIT, Quick Response and Continuous Replenishment came into being. Now it is the task of the logistics function to use information technology to strengthen operation control and forecasting to the best advantage of the organization. Leading firms typically have information systems capable of monitoring logistical performance on a real time basis giving them the capability to identify potential operationalBabasabpatilfreepptmba.com Page 23
  24. 24. A study on Domestic Transportation in India at Expeditor’s breakdowns and take corrective actions prior to customer service failure. In situations where timely corrective action is not possible, customers can be notified in advance and thereby taking the surprise out of forthcoming service failures2. Inventory control Keeping the stock levels in such a position, so that neither stock out nor stock piling takes place is Inventory control. While formulating inventory policies find out 20% of the products marketed that account for 80% of the profit.3. Transportation Transportation is the most visible of all elements of logistics and high contributor to logistics expenditure. Costs of transportation are mainly as follows a. Movement costs: money paid for moving material across geographical terrain b. Preservation costs: money spent on preserving the material during transit c. Cost of idle asset: inventory is unavailable for conversion during transit. This results into costs for organization d. Administration costs: money spent on administrationTransportation is accomplished in three waysa. One’s own fleet – private carriageb. Contract with specialists on long term basis – contract carriagec. Contract on individual shipment basis – common carriageExpectations from transportation service area. Minimum cost – transportation costs are explained earlierb. Speed: speed of transport means the speed with which goods reach the destination.c. Consistency: consistency in speed is achieving the same speed over a long period of time. Consistency reflects on the reliability of carrier. Any unexpected variance can play havoc with logistics. Modern information technology has made continuous tracking of consignments possible. This takes the element of surprise out. IT has helped logistics managers to seek outBabasabpatilfreepptmba.com Page 24
  25. 25. A study on Domestic Transportation in India at Expeditor’s ways and means to improve speed and consistency. What is becoming important is a combination of speed and consistency. Requirement of speed depends on type of industry. In some situations speed may not be important. Then transportation service offering high speed increases cost. So logistics managers have to strike a balance between service and cost. Three important aspects of transportation are facility location, transportation cost and consistency. Design of logistics system should consider total costs rather than elemental cost of transportation4. Warehousing Warehousing is holding material before dispatch after it is produced. Although warehousing is conventionally considered to be a storage facility, it plays a much higher role from logistics viewpoint. It is perceived to be a switching facility rather than a storage facility. Warehouse ownership can be private, public or third party contract. Warehouse provides economic and service benefits to the logistical system. Economic benefits are Movement Consolidation, Break-bulk, Cross-dock, Processing/Postponement & stock piling. Service benefits are spot stocking, assortment, mixing & production support5. Material handling Material handling covers receiving, moving, storing, dispatching activities. It has an impact on cost [capital as well as running], quality and safety. One of the principles of material handling is minimum movement. Commonly used material handling equipment are forklifts, EOT Cranes, hoists, pulley blocks, trolleys, railroad cars, Conveyors, ropes and slings etc.6. Packaging Packaging is done to make handling and transporting cost effective. It protects the product in transit and handling. Packing is expected to facilitate lifting and moving by providing easy access to forks or hooks. Packing is also expected to display universal symbols and other instructions for handling.E.g. Pallets and containers, wooden boxes, wrapping etc.Babasabpatilfreepptmba.com Page 25
  26. 26. A study on Domestic Transportation in India at Expeditor’sFuture prospectsDespite problems, The Indian logistics industry is growing at 20% vis-à-vis the average worldlogistics industry growth of 10%. Since the organized sector accounts for merely 1% of theannual logistics cost, there is immense potential for growth of the sector. The major opportunitiesare highlighted below. • Many large Indian corporate such as Tata and Reliance Industries have been attracted by the potential of this sector and have established logistics divisions. They started providing in-house logistics services, and soon sensing the growth of the market, have started providing services to other corporate as well. • Large express cargo and courier companies such as Transport Corporation of India (TCI) and Blue Dart have also started logistics operations. These companies enjoy the advantage of already having a large asset base and an all-India distribution network. Some large distributors have also forayed into the logistics business for their clients. • Since logistics service can be provided without assets, there is growing interest among entrepreneurs to venture into this business. • Indian shippers are gradually becoming more aware of the benefits of logistics outsourcing. They are now realizing that customer service and delivery performance are equally important as cost to remain competitive in this global economy. • The Indian economy is growing at over 9% for the last couple of years (compared to the world GDP growth rate of 3%), which implies more outputs and more demand for specialized logistics services. • The Indian government has focused on infrastructure development. Examples include the golden quadrilateral project, east-west and north-south corridors (connecting four major metros), Free Trade and Warehousing Zones (FTWZ) in line with Special Economic Zones (SEZ) with 100% Foreign Direct Investment (FDI) limit and public-private partnerships (PPP) in infrastructure development. It is expected that infrastructure development would boost investments in the logistics sector. • In India, 100% FDI is allowed in logistics whereas in China, until recently, foreign investment was not allowed in domestic logistics. Almost all large global logisticsBabasabpatilfreepptmba.com Page 26
  27. 27. A study on Domestic Transportation in India at Expeditor’s companies have their presence in India, mainly involved in freight forwarding. For domestic transportation and warehousing, they have tie-ups with Indian companies. As the Indian logistics scenario looks promising, these MNCs are expected to play a bigger role, probably forming wholly-owned subsidiaries or taking the acquisition route. The latter may be the preferred route of investment since the target company is readily acquired with its asset base and distribution network, and the need for building everything from scratch can thus be avoided. The benefits for the acquired company include the patronage of an MNC and access to the MNC’s global network. As an Example, DHL Danzas, the biggest logistics company in the world, has taken over Blue Dart.Managerial ImplicationsStudies on logistics indicate that in this highly competitive and high-cost, low-margin business,logistics managers have to not only focus on differentiating the services rendered by theircompanies, but market the differentiating factors of their services appropriately to the clients.They also need to make their cost structures transparent, and convince clients to foot the billtowards investments in quality assets and new technologies such as RFID and GPS (GlobalPositioning System) leading to improved, and differentiated, delivery of service. Since clientsusually prefer a single-point solution to all their logistical problems, managers need to broadenthe range of their service offerings, internationalize operations and cover as many industryverticals as possible. They may focus on key customer accounts gradually moving away fromaccounts generating low, even negative, profitability. However, small-to-medium-sizedcompanies that seem to have high growth potential should not be ignored in the process. In orderto become a single point of contact for clients, logistics companies may pursue acquisitions oralliances, which, however, pose the challenge of integration of diverse cultures. Attracting,recruiting, training, motivating and retaining management talent are also a great challenge thatlogistics managers need to take on (Lieb and Butner, 2007).A survey of North American LSPs (Bagchi and Mitra, 2006) found that logistics managersperceived internationalization of operations, industry focus or specialization, investment inBabasabpatilfreepptmba.com Page 27
  28. 28. A study on Domestic Transportation in India at Expeditor’sinformation systems, availability of skilled logistics professionals, integration of supply chains,customer focus and breadth of service offerings as the most important factors for success as aLSP. However, the survey identified significant gaps between expectations and actualachievements of LSPs with respect to internationalization of operations, skilled logisticsprofessionals and integration of supply chains, which should be seriously looked into bymanagers. The survey also established relationships among a set of performance metrics and keysuccess factors to identify significant predictor and criterion variables. One of the most importantobservations was that collaborative relationships with clients and investments in assets arenecessary but not sufficient conditions for success in logistics. The findings of the survey mayprovide a useful guideline to logistics managers for allocation of scarce resources.As far as the Indian logistics industry is concerned, logistics managers of user firms need torealize that, with supply chains getting more and more complex, outsourcing part or all of theirlogistical activities to experienced LSPs will help reduce their overheads, streamline supplychains, reduce costs and improve service delivery. The organizational interests should be putabove vested interests, if any. They need to realize that organized LSPs are professionals, whowill maintain confidentiality of sensitive client information.The Indian government should also focus on developing infrastructure and encourage public-private partnerships in investments in infrastructure. Highway projects such as goldenquadrilateral and east-west, north-south corridors connecting all four metros are alreadyunderway. Private investments in inland containerized transportation by railroad, which was amonopoly of Container Corporation of India Limited (CONCOR), a subsidiary of IndianRailways, until recently, have been allowed. 100% FDI is also allowed in Free Trade andWarehousing Zones (FTWZ) to create necessary trade-related infrastructure to facilitate importand export of goods and services. The government may create logistics SEZs (Special EconomicZones) or logistics hubs with concessions in land and tax rates. Incentive schemes may also beextended for construction of modern automated warehouses and cold chains. Access to cheapcapital should be made available to LSPs for investments in infrastructure, enabling them toextend longer credit periods to their clients and supplementing their working capital. TheBabasabpatilfreepptmba.com Page 28
  29. 29. A study on Domestic Transportation in India at Expeditor’sgovernment may create a uniform tax structure and do away with multiple check points anddocumentation requirements, which would lead to speedier delivery of cargo. To generateawareness, the government may organize seminars, workshops, exhibitions and meetings tobring in representatives of logistics users, service providers and government under one roof, andalso sponsor courses in leading Indian institutes to attract talent. Growth of the logistics industryin India will not only contribute to the GDP, but also generate employment (Mitra, 2006).Road freight industry: The industry is highly fragmented and largely unorganized. Theunorganized sector accounts for nearly 80% of the market share. However, changing policieswith regards to tax structure are likely to give a competitive edge to the organized sector. Roadtransport comprises of freight and passenger traffic. It accounts for over 60% of goods traffic andover 80% of passenger traffic.Railways sector:Indian Railways has one of the largest and busiest rail networks in the world, transporting over18 million passengers and more than 2 million tonnes of freight daily. It is the worlds largestcommercial or utility employer, with more than 1.4 million employees. The railways traverse thelength and breadth of the country, covering 6,909 stations over a total route length of more than63,327 kilometers (39,350 mi). As to rolling stock, IR owns over 200,000 (freight) wagons,50,000 coaches and 8,000 locomotives. IR carries a huge variety of goods ranging from mineralores, fertilizers and petrochemicals, agricultural produce, iron & steel, multimodal traffic andothers. Ports and major urban areas have their own dedicated freight lines and yards. IndianRailways makes 70% of its revenues and most of its profits from the freight sector, and usesthese profits to cross-subsidies the loss-making passenger sector. However, competition fromtrucks which offer cheaper rates has seen a decrease in freight traffic in recent years. Since the1990s, Indian Railways has switched from small consignments to larger container movementwhich has helped speed up its operations. Most of its freight earnings come from such rakescarrying bulk goods such as coal, cement, food grains and iron ore.Babasabpatilfreepptmba.com Page 29
  30. 30. A study on Domestic Transportation in India at Expeditor’sWater TransportationWater transport can be broadly divided into two groups - Inland water transport and Shipping.Shipping, in turn, can again be divided into two categories Coastal shipping and Overseasshipping.Inland Water Transportation: Inland water transport includes natural modes as navigable rivers and artificial modes such as canals. The Inland waterways have played an important role in the Indian transport system since ancient times. However, in recent times the importance of this mode of transport has declined considerably with the expansion of road and rail transport. In addition, diversion of river water for irrigation has also reduced the importance of inland water transport. The decline is also due to deforestation of hill ranges leading to erosion, accumulation of silt in rivers and failure to modernize the fleet to suit local conditions. The transportation of goods in an organized form is confined to West Bengal, Assam, parts of North Eastern region and Goa. Development of inland water transport commenced from the Second Five Year Plan and up to the end of Fifth Plan the total expenditure on this sector was Rs. 34 crores. It was only in the Sixth Plan that this sector was given priority and specific schemes of inter-State and national importance for development of inland water transport were taken up. The Seventh Plan was an important landmark in the development of inland water transport. The expenditure on this sector in the Plan (at Rs. 131.85 crores) was more than the expenditure incurred right up to the end of the Sixth Plan. Three objectives were laid down in the Seventh Plan for the development of inland water transport Development of inland water transport in the regions where it enjoys natural advantage.Babasabpatilfreepptmba.com Page 30
  31. 31. A study on Domestic Transportation in India at Expeditor’s Modernizations of vessels and country crafts to suit local conditions- and Improvement in the productivity of assets. The Inland Waterway Authority has been set up which is a big step forward and should help in the accelerated development of inland water transport.Coastal Shipping: India has a long coastline of 7,516.6 kms, a number of ports (11 major and 139 minor working ports) and a vast hinterland. Therefore coastal shipping holds a great promise more so because it is the most energy efficient and cheapest mode of transport for carriage of bulky goods like iron and steel, iron ore, coal, timber, etc. over long distances. However, despite this fact (and despite the fact that coastal shipping was reserved exclusively for Indian ships after Independence), there has been a sharp decline in coastal shipping operations. For instance, the number of ships fell from 97 in 1961 to only 56 in 1980 while Gross Registered Tonnage (GRT) fell from 3.1 lakhs to 2.5 lakhs over the same period. However, at the end of 1994 the fleet strength was 438 vessels of 6.3 million GRT. The main factors affecting the growth of coastal shipping adversely have been “High transportation costs especially for movement other than those between a pair of water front locations, port delays, poor turnaround time of coastal ships on account of overaged vessels, lack of mechanical handling, facilities etc.” The coastal fleet is ageing fast; about 52 per cent of the tonnage is already overdue for replacement. Also, there is imbalance in coastal traffic movement as traffic is not equally available in both directions. This makes it necessary for coastal ships to sail in ballast, at times, on return journey. Moreover, slow handling of the cargo at port and undue port delays inflict heavy losses on shipping, companies. It is estimated that at present 70 per cent of ship time is spent at ports and only 30 per cent on voyage.Babasabpatilfreepptmba.com Page 31
  32. 32. A study on Domestic Transportation in India at Expeditor’s Overseas Shipping: Because of the importance of overseas shipping in international trade, considerable attention has been paid to increase the shipping tonnage in the planning period. As a result, the share of Indian shipping in the transportation of Indias overseas trade has slowly and consistently increased in the planning period. From around 5 per cent in the first Plan, it increased to around 34.0 per cent at the end of 1993-94. as compared to 1.92 lakh GRT (Gross Registered Tonnage) at the time of Independence, shipping tonnage increased to 6.30 lakhs GRT in 1994. In the First Plan Rs. 18.7 crores were spent on shipping while the expenditure in Second Plan stood at Rs. 52.7 crores. An important step taken during the Second Plan was the establishment of a non-lapsing shipping development fund for grant of loans to shipping companies for the acquisition of tonnage. The Third Plan made a provision of Rs. 55 crores for shipping which rose to Rs. 135 crores in the Fourth Plan. The Sixth Plan envisaged the augmentation of shipping tonnage for meeting increased requirements of India’s foreign trade and also to replace the overaged tonnage especially the coastal vehicles. ‘The outlay in this plan was kept at Rs. 720 crores while actual expenditure was only Rs. 432.94 crores. The resources constraint had forced the Seventh Plan to keep the outlay at Rs. 693.42 crores and the actual expenditure was only Rs. 670.05 crores. The broad objectives for development of shipping in this plan were kept as follows: Modernization of fleet on the basis of improved ship designed and fuel efficiency in engines. Replacement of over aged fleet on a selective basis. Drivers fixation of fleet by acquisition of cellular container ships and specialized product carriers.Babasabpatilfreepptmba.com Page 32
  33. 33. A study on Domestic Transportation in India at Expeditor’s Addition to fleet on a selective basis, keeping in view the long-term objective of achieving- self-sufficiency in tanker fleet. Ports India’s coastline of about 6,000 km is dotted with 11 major, 11 intermediate and 168 minor ports. Nearly 95 per cent of the country’s foreign cargo (by volume) moves by sea and, therefore, ports/and their development assume an important place in policy making. Development and maintenance of India’s major ports are the responsibility of the Central Government, while Other Ports are in the Concurrent list. Major Ports: India’s major ports are governed by the Indian ports Act 1908 and the Major Port Trusts Act 1963. The former allow the Statutory to declare any port a major port, define port limit, levy charges etc. while the formation of Port trust Boards and vests the administration control and management of major ports in these Boards. At the time of independence, India had five major Ports, viz. Mumbai, Calcutta, Vishakhapatnam, Chennai, and Cochin. With the Karachi Port going to Pakistan after Partition, there were four major ports on the western coast. A new port was developed at Kandla, which was declared a major port in 1955. The Marmugao Port, developed by the Portuguese, joined the ranks of major ports in 1964 after the liberation of Goa in 1962. Para deep, on the eastern coast, was declared a major port in 1966. Eight years later, New Mangalore and Tuticoin were added to the list of major ports. The inclusion of the Jawaharlal Nehru Port at Nhava Sheva on the western coast took the number of major ports to Development of port after the independence, the development of major ports was taken up in a planned manner. Mechanization and modernizations of cargo-handling facilities at Ports have been a thrust area in recent years, with emphasis on development of dedicatedBabasabpatilfreepptmba.com Page 33
  34. 34. A study on Domestic Transportation in India at Expeditor’s infrastructure. Deepening of ports to receive lager vessels has been another priority area. Vishakhapatnam and Chennai ports have already been deepened. Minor and intermediate ports: Minor and intermediate ports fall in the Concurrent list and their administration is the responsibility of the respective coastal states. Their number as well as their categorization into minor or intermediate Ports has varied from time to time, depending upon the volume of cargo and the number of passenger they handle. There were 11 intermediate and 168 minor ports and state wise distribution was: Orissa-2, AndhraPradesh-12, TamilNadu-10, Pondicherry-1, Andaman and Nicobar-22, Lakshadweep-10, Kerala-13, Karnataka-9, Goa-5, Maharashtra-53,Daman and Diu-2 and Gujarat-40. Name of the 11 major ports, Calcutta, Haidia, Paradeep, Mumbai, Chennai Cochin, Tuticorin, JNPR, Kandla Vishakhapatnam, New Mangalore and Marmugao.Aviation SectorIndias rapid economic expansion, commerce and the fast growing food processing sector hasled to a strong and secular growth in air cargo traffic. Domestic cargo movement of airlineshas shot up by about 34 per cent in 2008, while international cargo movement has grown by 15per cent.Cargo growth in aviation over the last three years has overtaken the railways and shipping, and isset to grab part of their share of freight traffic, says the Associated Chambers of Commerce andIndustry of India (ASSOCHAM), which sponsored the ASSOCHAM-Eco Pulse (AEP) study.The AEP study on Changing Pattern of Cargo Traffic in India from 2000 to 2008 analyzed threemajor modes of transportation - aviation, railways and shipping. It found that cargo business inBabasabpatilfreepptmba.com Page 34
  35. 35. A study on Domestic Transportation in India at Expeditor’sthe aviation sector grew by around 19 per cent, against 10.3 per cent and 9.2 per cent in shippingand railways during the last three years.The burgeoning domestic traffic has reduced the proportion of international airfreight to inlandtraffic from 200 per cent in 2000 to 164 per cent in 2008, mainly because of the rise of low-costdomestic airlines.Along with logistic companies and retail majors, domestic airlines are launching dedicatedfreight aircraft to boost goods traffic within the country.The government is laying emphasis on the food-processing sector and horticulture, giving rise toand need for greater capacity in low-cost domestic airfreight. Dedicated freight aircraft flyingnational and international routes would give a boost to industry, ASSOCHAM PresidentVenugopal Dhoot said.In spite of a reduction in freight rates, railways goods traffic saw a downward trend. Revenuegenerated from freight has declined to 8.7 per cent in 2008 from 11 per cent in 2007. Theproposed dedicated freight corridor (DFC) is likely to sharply increase railways goods traffic, butthe extreme long-term nature of the project gives air cargo the advantage, the report says.Ports and shipping saw a gradual decline in annual growth rates from 11.3 per cent in 2005-06 to10.4 per cent in 2006-07 to 9.5 per cent in 2007-08. In contrast, total air cargo traffic hasincreased from 15.6 per cent in 2005-06 to 21.5 per cent in 2006-07, clocking a compoundannual growth rate (CAGR) of 9.5 per cent for the last six years.International air cargo traffic increased from 9.75 lakh tonnes in 2006-07 to 11.20 lakh tonnes in2007-08. Domestic air cargo traffic swelled from 14.81 tonnes to 17.99 tonnes in the sameperiod, registering a CAGR of 12 per cent for the past six years, compared to 7.7 per cent forinternational cargo traffic.Babasabpatilfreepptmba.com Page 35
  36. 36. A study on Domestic Transportation in India at Expeditor’sThe total cargo traffic of all major ports increased from 4.23 lakh tonnes in 2005-06 to 4.64 lakhtonnes in 2007-08, registering a CAGR of 7 per cent. But this lagged behind overall goodstraffic, which grew by an average 10.3 per cent during the same period.Cargo growth in the railways was the lowest of the three, with a CAGR of 6.6 per cent over thelast six years. Railways freight traffic has increased from 6.68 lakh tonnes in 2006-07 to 7.26lakh tonnes in 2007-08, but the growth rate has declined from 10.9 per cent to 8.68 per cent overthe same period. Company profileExpeditors is much more than getting a piece of freight from one point to another. The Councilof Logistics Management defines logistics as that part of the supply chain process that plans,implements, and controls the efficient, effective flow and storage of goods, services, and relatedinformation from the point of origin to the point of consumption in order to meet customersrequirements.Our job is to make sure that from raw material to finished goods sitting on the retail shelf, weprovide the critical services and information necessary to give our clients a competitiveadvantage in the management of their supply chains1979 -- 1 locationWe register as a single office ocean forwarder in Seattle, Washington as Expeditors Internationalof Washington, Inc.1981 -- 9 locationsBabasabpatilfreepptmba.com Page 36
  37. 37. A study on Domestic Transportation in India at Expeditor’sExpeditors become a global logistics company in July, when Peter J. Rose, James L.K. Wangand Glenn M. Alger join the company and open seven offices around the world. The initial focusis on U.S. inbound freight from the Far East, primarily Taiwan, Singapore, and Hong Kong. Ourcombination of transportation services and customhouse brokerage quickly makes us one of thelargest U.S.-based air freight forwarder of goods from the Far East.1983 -- 11 locationsWe expand our U.S. export market by hiring senior export executives to lead branch offices inthe U.S. and key foreign markets. We add export capabilities to Chicago, Seattle, New York, SanFrancisco and Los Angeles Offices, and we open our Atlanta office.1984 -- 12 locationsExpeditors become a public corporation with stock traded over the counter on NASDAQ(symbol: EXPD). During our first year as a public company, we report more than $50 million ingross revenues and $2.1 million in net earnings. We open our Toronto office this year, and wenow have 161 employees.1985 -- 13 locationsOur first move into the ocean business with the acquisition of Pac Bridge, a major non-vesselocean common carrier (NVOCC) and expansion of less than container load (LCL) and fullcontainer ocean services. We also open a new office in Boston this year.1986 -- 16 locationsWe top $100 million in gross revenues ($108,774,000). We enter the European market byacquiring a small export company and opening our London office.1987 -- 17 locationsBabasabpatilfreepptmba.com Page 37
  38. 38. A study on Domestic Transportation in India at Expeditor’sWe open our first office in Malaysia.1988 -- 24 locationsWe substantially expand export volume through a series of planned expansion in the Far East,Europe, Australia, and the U.S. Peter J. Rose, one of the founders, assumes the title of Presidentand CEO.1989 -- 27 locationsWe complete the development of a computerized air export program.1990 -- 32 locationsOur Brussels office becomes our first in continental Europe. We also open offices in KualaLumpur, Jakarta and Cleveland (U.S.).1991 -- 37 locationsOur net earnings top $10 million ($10,196,000). We formalize an internal quality program calledEXCEL (Expeditors Commitment to Excellence and Leadership), built on a goal of 100%customer satisfaction 100% of the time.1992 -- 51 locationsThe number of worldwide employees tops 1,000 (1,100). We open five offices in Germany andour first Middle East office in Saudi Arabia, bringing our number of offices worldwide to 48.1993 -- 56 locationsBabasabpatilfreepptmba.com Page 38
  39. 39. A study on Domestic Transportation in India at Expeditor’sWe establish a new division called Expeditors Cargo Management Systems (e.cms), an oceanconsolidation program with an automated electronic data interface. We open our first office inChina and Beijing grants Expeditors a rare class "A" license.1994 -- 80 locationsThe number of our employees doubles in two years to 2,000. We open distribution centers inSeattle, Chicago, Los Angeles, Miami, Newark, London, Rotterdam, Brussels, Hong Kong,Taipei, and Singapore.1995 -- 96 locationsThis is the first year with more than $500 million in gross revenues ($584,691,000). We enterCentral and South America with six offices and 10 agents, and expand in the Middle East.Expeditor launches a Cargo Insurance division. We also gain a new address, on the internet:http://www.expeditors.com.1996 -- 114 locationsExpeditors name a Director of Quality and formalize its global pursuit of ISO 9002 certification.A total of 27 offices are ISO 9002-certified as five more offices achieve the accreditation in Asiaand Europe. The number of employees tops 3,000 (3,250). We open our first offices in India,Pakistan, and Bangladesh. The class "A" license we hold in Beijing is extended to four moremajor Chinese trading points, bringing our total offices in China to eight. While its employeesare recognized as the best trained in the industry, Expeditors raises its minimum annual trainingrequirement for employees from 30 hours to 52 hours, in recognition of the increasinglysophisticated needs of its customers.1997 -- 138 locationsBabasabpatilfreepptmba.com Page 39
  40. 40. A study on Domestic Transportation in India at Expeditor’sWe add more than 1,000 employees in one year, for a total of 4,500. We continue networkingoffices on the northern and southern borders of the United States. The arrangement of offices onboth sides of the U.S. - Mexico border is unique among customs brokers, and this offersunprecedented efficiency and speed in processing customs entries. The four new offices inFrance will soon be joined by other new locations in Europe, as Expeditors continues toselectively expand its global network.1998 -- 149 locationsISO 9002 certification is achieved in 38 offices throughout the United States, Canada andMexico, bringing the total number of Expeditors offices certified in this standard to 65 in 17countries. Gross revenues top $1 billion for the first time ($1,189,044,000) and the number ofemployees tops 5,000 (5,300).1999 -- 163 locationsWe celebrate our 20th year, continuing our reputation as a full service global logistics provider.The number of employees grows to 6,480. Expeditors services include Air and Ocean FreightForwarding, Vendor Consolidation, NVOCC, Customs Clearance, Marine Insurance,Distribution, and other value added global logistics services. Recognition from our customers(Cisco Systems and British Airways Catering name us as Supplier of the Year) helps reinforcethe mission at Expeditors.2000 -- 177 locationsThis year the number of employees tops 7,000 (7,611), and offices are opened in Phnom Penhand Saigon. Expeditors places emphasis on reducing employee turnover and increasingproductivity. Improvements are made on a globally consistent Management Trainee Program andDocument Imaging.Babasabpatilfreepptmba.com Page 40
  41. 41. A study on Domestic Transportation in India at Expeditor’sHolding strongly to the belief that you cant buy excellence but have to create and nurture it hasresulted in continued success for our company. It was confirmed when Expeditors attained thegoal of excellence and was given the "Best Companies to Work For" award by Washington CEOMagazine. But the greatest vote of confidence Expeditors can receive is to have good customerswilling to trust Expeditors with their important business.2001 -- 191 locationsThis year Expeditors was ranked third by Fortune for Americas Most Admired companies in theFreight Delivery industry, and the Journal of Commerce awarded Expeditors with the BestIntermediary award. Forbes named the company to the list of Americas top 400 companies. Ouremployees made all of this possible by servicing our customers, one shipment at a time.2002 -- 195 locationsFirst year with more than $2 billion in gross revenues ($2,296,903,000). First year with morethan $100 million in net earnings ($112,529,000). Number of employees tops 8,000. Named tothe NASDAQ 100.Expeditors views its role in the future of international trade as the preferred global logisticssolutions company. The company will continue to satisfy its customers needs through aresponsive, highly-trained work force, integrated information systems and a global network.2003 -- 206 locationsExpeditors continues to thrive in a competitive and challenging industry and world economy.While other logistics companies fail to control costs and stay afloat, Expeditors continues togrow the number of offices, employees and total revenue, all while staying profitable. Air CargoBabasabpatilfreepptmba.com Page 41
  42. 42. A study on Domestic Transportation in India at Expeditor’sWorld ranks the company as the second overall freight forwarder and second in the trans-Atlantic region. In 2003, Expeditors adds full service offices to San Jose (Costa Rica), Orlando(Florida), Austin (Texas) and Tampa (Florida). Our first year with more than $1 billion in assets($1,044,078,000).2004 -- 211 locationsA number of milestones mark our 25th year: its the first year with more than $3 billion in grossrevenues ($3,317,499,000); the number of employees tops 9,000 (9,445); and net earnings of$156,126,000.$1,000 invested in Expeditors at the IPO price of $9.00 a unit (share and a warrant) is worth$233,600 on December 31, 2004, (assuming warrant exercise) for a compound annual rate ofreturn of 28%.2005 -- 226 locationsIn a year of more mergers among other logistics providers and carriers, Expeditors stays true toits vision of organic growth, with five new locations in Asia, six in Europe, two in LatinAmerica, and one each in North America and the Middle East.The number of employees worldwide now exceeds 10,000 and total revenues approach fourbillion ($3.9 billion). Expeditor is noted by Forbes as the Best Managed TransportationCompany and receives two Quests for Quality awards by the Logistics Management publication.The Wall Street Journal lists Expeditors as #1 in their shareholder scorecard for DeliveryServices, above both UPS and FedEx.2006 -- 233 locationsBabasabpatilfreepptmba.com Page 42
  43. 43. A study on Domestic Transportation in India at Expeditor’sMeeting key strategic goals in Asia, EMAIR, South Pacific and the Americas, Expeditorsfocused on delivering a consistent level of customer service and productivity around the world.Entering onto the Fortune 500 list for the first time with $4.6 billion in revenue, Expeditors alsostood out as Fortunes #1 Most Admired Company in its industry.2007 -- 247 locationsExpeditors continued to focus on delivering a consistent level of customer service andproductivity around the world. New as a Fortune 500 company with $5.2 billion in revenue,Expeditors stood out as one of Fortunes Most Admired companies in their industry for 2007.2008 -- 253 locationsGood consistent customer service has always been our goal here at Expeditors and 2008 was nodifferent. Expeditors continued to open new offices and made capital expenditures for twobeautiful new offices in Hong Kong and Shanghai. Peter Rose was named one of Barron’s top 30CEOs for 2008 and Business Week ranked Expeditors No. 32 on their Top 50 Best PerformingCompanies. 2009 is our 30th anniversary and we look forward to the coming year and to all thesurprises it will bring.Awards 1993 • Licensed Class "A" Freight Forwarder o Beijing approved a rare Class "A" license for Expeditors.Awards 1999 • Dutch Association of General Cargo Sales Agents o Received award for reservation integrity, communication, know-how and handling • South Africa Logistics CouncilBabasabpatilfreepptmba.com Page 43
  44. 44. A study on Domestic Transportation in India at Expeditor’s o Recipient of the annual Logistics achiever award for providing the best integrated logistics serviceAwards 2000 • Kent, Washington Chamber of Commerce o Ranked #1 for the In Pursuit of Excellence award program • Hong Kong Labour Department o Recipient of the Good People Management Award for outstanding performance in people management • Industry Association of Sao Paulo o Ranked #3 for best international cargo agent based on customer satisfaction • International Freighting Weekly o Best International Logistics Company of the Year • U.S. Customs Broker National Permit o Affords greater flexibility in structuring import operations to allow the conduct of certain customs business that is otherwise restricted. • Washington CEO Magazine o One of the best places to work in Washington • Logistics Management & Distribution Report o Chosen as recipient for the Quest for Quality award • Shipping Digest o One of the most e-capable carriersBabasabpatilfreepptmba.com Page 44
  45. 45. A study on Domestic Transportation in India at Expeditor’s • Journal of Commerce o Leader in International Trade and awarded best intermediary of the yearAwards 2001 • Forbes o One of Americas top 400 companies • Fortune o Ranked #3 in the transport industryAwards 2002 • Trofeu Fenix of Efficiency Award o In Brazil awarded third place as best Cargo Agent of the year • The NASDAQ-100 Index o Expeditors is added to the NASDAQ 100 • Selling Power o Expeditors awarded #1 Best Service Company to Sell ForAwards 2003 • Logistics Management & Distribution Report o Chosen as recipient for the Quest for Quality award • Air Cargo World o o Named the second overall freight forwarder and second in the trans-atlantic regionBabasabpatilfreepptmba.com Page 45
  46. 46. A study on Domestic Transportation in India at Expeditor’s • Transportes & Negócios o Portuguese newspaper names Expeditors best in class for both Air and Ocean Freight Forwarding • Forbes Platinum List o Fifth straight year on the best big companies listAwards 2004 • Global Logistics & Supply Chain Strategies Magazine o Includes Expeditors in its global top 25 third party logistics providers ranking. • Fortune o Ranked #2 Most Admired company in Transportation and Logistics. • Wall Street Journal o Expeditors ranked #1 in the air freight category for the shareholder scorecard. • Puget Sound Business Journal o Peter J. Rose, CEO, is named Executive of the Year. • British Airways o Awards Expeditors for outstanding service. • Philips o Carrier Recognition Award for Global Airfreight for the third year in a row. • Samsung o Logistics Supplier of the Year Award. • International RectifierBabasabpatilfreepptmba.com Page 46
  47. 47. A study on Domestic Transportation in India at Expeditor’s o Service Provider of the Year Award.Awards 2005 • Forbes o Named Best Managed Transportation Company • Institutional Investor o Names Peter Rose as one of the top CEOs for the Airfreight & Surface Transportation Industry • Logistics Management o Expeditors receives a Quest for Quality award in both the Freight Forwarders and Third-Party Logistics categories. • The Wall Street Journal o Expeditors ranked #1 in the air freight category for the shareholder scorecard for second straight year. • Samsung o Expeditors China receives the Samsung Best Partner awards for the second year in a row.Awards 2006 • Global Logistics and Supply Chain Strategies o Ranked #9 in the Third Party Logistics Industry o Ranked #8 in Global Ocean TEU Volume, #1 in the Asia to US lanes and #2 in the China to US lanes • Logistics ManagementBabasabpatilfreepptmba.com Page 47
  48. 48. A study on Domestic Transportation in India at Expeditor’s o Lists Expeditors at #3 company in their 3PL Report, by North American Revenue o Best Fast Moving Consumer Logistics Service Provider in Thailand • Johnson & Johnson o Awarded Expeditors, Campinas, Brazil for excellency in innovative logistics services • Eaton Corporation o CIESP Award: Best run supply chain, Campinas, Brazil • Trofeu Fenix o Third place in freight forwarder category, Campinas, Brazil • Fortunes Most Admired Companies o Ranked #1 in the Transportation and Logistics Category • Visteon o Named Expeditors as one of the 15 outstanding suppliers • Pfizer o Awarded Expeditors, Indianapolis, Broker of the QuarterAwards 2007 • Global Logistics and Supply Chain Strategies o Named Top Supply Chain Partner o Ranked #9 on the Top 25 Global Third-Party Logistics Providers in their May 2007 Issue • Logistics ManagementBabasabpatilfreepptmba.com Page 48
  49. 49. A study on Domestic Transportation in India at Expeditor’s o Earned #1 in both Freight Forwarding and Third-Party Logistics categories for the Logistics Management 2007 Quest for Quality Awards • Forbes o Included on the Best Managed Companies List for Transportation Industry • Eaton Corporation o Recipient of the "Premier Supplier" award • Fortunes Most Admired Companies o One of the top ranked companies in the Transportation and Logistics Category • Barrons Online o Peter Rose was named to the top 30 Global CEOs list. • British Airways o Recognized with the annual award for "Best Support to Commercial Planning," Istanbul, Turkey • LAN Cargo o Awarded Expeditors, Argentina, as one of their top five freight forwarders • Samsung o Expeditors, China, received the third party logistics provider "Best Partner Award" for 2007 • Wal-Mart o Awarded the Global Air Freight Forwarder of the Year AwardBabasabpatilfreepptmba.com Page 49
  50. 50. A study on Domestic Transportation in India at Expeditor’sAwards 2008 • Transporte & Negocios o Best Ocean Freight Forwarder • Fenix Award of Efficiency o Best Logistic Provider • Covidien o Customs Broker of the Year • Logistics Management o Quest for Quality Award in both Third Party Logistics and Freight Forwarding categories • GE Healthcare o Productivity Award • Hewlett Packard o Outstanding Achievement Award • Samsung o Best Partner AwardMission StatementTo set the standard for excellence in global logistics through total commitment to quality inpeople and customer service, with superior financial results.Babasabpatilfreepptmba.com Page 50
  51. 51. A study on Domestic Transportation in India at Expeditor’sGoalsTo be the recognized industry leader, through total commitment to customer service, bymaintaining our uncompromising integrity, in the support and development of our People,Communications and Systems in sustained growth and profitability.StrategyAs a non-asset based company, we are able to give our clients several options for freightmanagement. Our investments are made in people and systems. Through organic growth, notacquisition, we give our clients and employees’ peace of mind knowing their day to day businesswont be disrupted by merger pains; our systems integrity is kept intact, not disrupted bycompanies whose business was founded on a different platform. Our customers are mostinterested in the quality and consistency of service we provide regardless of the country in whichwere doing business.CultureAppearance • Professionalism is at the core of our identity.Attitude • A passionate, caring and winning attitude is focused on the basics of teamwork.Confidence • We must believe to achieve, not only in ourselves, but also in our co-workers.Curiosity • Be the type of person who wants to learn more about something.Babasabpatilfreepptmba.com Page 51
  52. 52. A study on Domestic Transportation in India at Expeditor’sExcellence • Doing not just whats expected, but doing the best thats physically possible.Integrity • Fairness, honesty, and dignity.Pride • Its the personal commitment we make.Resolute • Say what you do and do what you say!Sense of Humor • Lifes too short not to enjoy the work we do and the people we work with.Visionary • A perceptive insight to the changing needs of our clients, vendors and organization. LITERATURE REVIEWBabasabpatilfreepptmba.com Page 52
  53. 53. A study on Domestic Transportation in India at Expeditor’sLiterature portrays logistics and supply chain practices from a variety of different perspectiveswith a common goal of ultimately improving performance and competitiveness. Studies showthat modern manufacturing practices such as Just-in-Time (Green and Inman, 2005), QualityManagement (Flynn and Flynn, 2005) and Information Technology (Dyapur and Patnaik, 2005)affect overall supply chain performance. While there is plenty of published literature thatexplains or espouses Supply Chain Management (SCM), there is a dearth of empirical studiesexamining logistics and SCM practices. How widely are these concepts implemented in practice?What are some of the major issues and concerns?Galt and Dale (1991) study ten organizations in UK and find that these are working to reducetheir supplier base and to improve their communications with the suppliers. Fernie (1995) carriesout an international comparison of SCM in the grocery retailing industry He finds significantdifferences in inventory held in the supply chain by the US and European grocery retailers,which could be explained by difference in degrees of their SCM adoption. Tan and Wisner(2000) compare SCM in the US and Europe. Tan (2002) relates SCM practices and concerns tofirm’s performance based on data from US companies. He lists nine important supply chainconcerns such as lack of sophisticated ICT infrastructure, insufficient integration due to lack oftrust and collaboration among the supply chain stakeholders and thereby lack of supply chaineffectiveness and efficiencies. Basnet et. al., (2003) report the current status of SCM in NewZealand, while Sahay et. al., (2003) discuss supply chain strategies and structures in India. Thesesurveys rank the perceived importance of some SCM activities, types of hindrances andmanagement tools on the success of SCM using representative samples, mostly frommanufacturing. Quayle (2003) surveys SCM practices in UK industrial SMEs (SmallManufacturing Enterprises) while Kemppainen and Vepsalainen (2003) probe current SCMpractices in Finnish industrial supply chains through interviews of managers in six supply chains.They analyze the change of SCM both in terms of operational practices and organizationalcapabilities. Chin et. al., (2004) conduct a survey that examines the success factors in developingBabasabpatilfreepptmba.com Page 53