Challenges in Indian Logistics Transportation in Logistics

1. Logistics Operations in
Indian Industry
Ankit Kumar Moonka
PGDM-IBTLG
2nd Semester,
INDIAN INSTITUTE OF TOURISM & TRAVEL MANAGEMENT

2. Agenda
Introduction
Inter-relationship between transportation and logistics
Forms of Logistics Operations
Outsourcing of Logistics Activities
Indian Logistics Industry - Growth drivers
Issues in Current status of logistics infrastructure in India

3. Introduction to Logistics
 It is the management of the flow of goods
between the point of origin and the point of
consumption in order to meet some
requirement
 It originated out of requirements of military
services and was developed to procure, maintain
and transport material, personnel and facilities
 It is the process of planning, implementing,
and controlling the effective and efficient flow
of goods and services from the point of origin to
the point of consumption
 The logistics cost of company is estimated to be
around 2% of its sales
 Types of logistics:-
 Inbound Logistics: It concentrates on
purchasing and arranging the inbound
movement of materials, parts, and/or
finished inventory from suppliers to
manufacturing or assembly plants,
warehouses, or retail stores
 Outbound Logistics: It is related to the
storage and movement of the final product
and the related information flows from the
end of the production line to the end user

4. Council of Logistics Management (1991) defined that
logistics is
‘part of the supply chain process that plans, implements, and
controls the efficient, effective forward and reverse flow and storage of
goods, services, and related information between the point of origin
and the point of consumption in order to meet customers’
requirements’
• Logistics:
• the entire process of materials and products moving into, through, and out
of firm
• Supply-chain management
• larger than logistics
• links logistics more directly with the user’s total communications network
and with the firm’s engineering staff
• Logistics is Customer-oriented operation management
Definitions

5. • 3 closely linked components:
Logistics services, Information
Systems and
Infrastructure/Resources
• Logistics services comprise physical
activities and non-physical activities
• Information systems provide
essential data and consultation in
each step
• Infrastructure comprises human
resources, financial resources,
packaging materials, warehouses,
transport and communications
Components of Logistics System

6. Business Logistics
 It is defined as “having the right item in the right quantity at
the right time at the right place for the right price in the right
condition to the right customer”
 The main functions of a qualified logistician include
inventory management, purchasing, transportation,
warehousing, consultation, and the organizing and
planning of these activities
 The nodes of a distribution network include:-
 Factories where products are manufactured or
assembled
 A depot or deposit is a standard type of warehouse
thought for storing merchandise (high level of
inventory).
 Distribution centers are thought for order
processing and order fulfilment (lower level of
inventory) and also for receiving returning items from
clients.
 Transit points are built for cross docking activities,
which consist in reassembling cargo units based on
deliveries scheduled (only moving merchandise).
 Traditional retail stores of the Mom and Pop variety,
modern supermarkets, hypermarkets, discount stores
or also voluntary chains, consumer cooperative,
groups of consumer with collective buying power.
Note that subsidiaries will be mostly owned by
another company and franchisers, although using
other company brands, actually own the point of sale

7. Forms of Logistics Operations

8. • It is a concept for handling production procedures in broad
sense
• It can be divided into three main activities: purchase,
manufacture and transport
• Information flow is an important system which links the whole
supply chain from supplier and manufacturer to consumer
• Unimpeded information flow could lead increase operation
accuracy and promote competitiveness
• Product flow proceeds through the production process
Supply Chain Management

9. • It has developed rapidly to provide industry competitiveness,
promoting customer service and resources recycling
• Two main reasons for rise of reverse logistics:
• Globalization of markets
• Policies for environment protection
• It could help improve the service levels of companies and
reduce the costs of producing processes
• More and more companies want to build their reverse logistics
systems, but limited by professional knowledge on logistics
management
• Thus third-party logistics service provides an option to small to
mid-size companies
Reverse Logistics

10. • It plays an important role in international freight
• It is cheap and has high carrying capacity, vital for transportation of
particular goods such as crude oil and grains
• It takes longer time and strongly affected by weather
Maritime Logistics
Operation of maritime industry is of three main types
Liner Shipping: The business is based on the same ships, routes, price and regular
voyages
Tramp Shipping: It has irregular transport prices, unsteady transport routes and
schedules. Usually delivers goods like dry bulk cargo and crude oil
Industry Shipping: Its main purpose is to ensure supply of raw materials. Hence, it
sometimes needs specialized containers, such as high-pressure containers for natural
gas

11. • It extends the delivery services for air and maritime from airports and seas
• Main transport modes are railway transport, road freight transport and
pipeline transport
Land Logistics
Railway transport
Advantages - High carrying capacity,
lower influence by weather conditions,
lower energy consumption
Disadvantages - High cost of essential
facilities, difficult and expensive
maintenance, lack of elasticity of urgent
demands, and time consumption in
organizing railway carriages
Road transport
Advantages - cheaper investment funds,
high accessibility, mobility and availability
Disadvantages - low capacity, lower
safety, and slow speed
Pipeline transport
Advantages - high
capacity, less effect by weather
conditions, cheaper operation fee, and
continuous conveyance
Disadvantages - expensive
infrastructures, harder supervision,
goods specialization, and regular
maintenance needs
To improve the land transport in
efficiency and reliability, a revolution of
transport policies and management is
required, e.g. pricing

12. • It provides the delivery with speed, lower risk of damage, security,
flexibility, accessibility and good frequency for regular destinations
• Its disadvantage is high delivery fee
• Research data show that the freight transport market keeps growing
• Future pattern of air freight logistics is cooperative with other transport
modes, to provide a service base on Just-In-Time, and door-to-door
Air Freight Logistics
Express Delivery
• It involves more frequent delivery of materials, at the right time and
at the right place in the production process
• The characteristics of express delivery are:
– door-to-door service
– Efficiency
– Traceability
– Just-In-Time (JIT)
– Growing various delivery demands

13. • It is the future trend of business
• It brings many benefits for both companies and consumers:
• It expands the market area from regional to global
• It uses electronic techniques instead of traditional paper works, which
promotes the industries’ efficiency and competitiveness
• It will impact on transport system due to the increased trips
• It might reduce the number of warehouses and the stock cost. Therefore the
prices could be lowered
• New concerns such as internet security, transport impacts and
door-to-door services should be addressed
• A healthy and successful e-commerce environment is
determined by the optimal logistics operation
E-Commerce

14. Outsourcing of
Logistics Activities

15. • Efficiency in logistics activities indispensable to
effective business operations
• Globalization driving higher level of complexity in
logistics network
• Importance of distribution and transportation in
maintaining sustainable competitive advantage
• Companies seeking to concentrate on core activities
Need for Outsourcing

16. • Advantages of 3PL operators
• Greater expertise
• Flexibility for wide geography
• Lower operating costs
• Better quality of service
• Outsourcing to 3PL has followed two trends
• Increasing range of services outsourced
• Increasing volume of traffic outsourced
• Key challenge for 3PL operators – Overcoming client’s concerns
about relinquishing control
• Outsourcing of logistics is expected to increase
3PL – Third Party Logistics

17. • Assembles and manages resources, capabilities and
technologies of own organization with those of
complementary service providers
• “Best of breed” approach
• Creates unique and comprehensive logistics solutions
that cannot be achieved by any single provider
• Complete solution; Centralized point of contact
4PL – Third Party Logistics

18. Transportation in
Logistics
The Interrelation Between Transportation and Logistics

19. Transportation in Logistics
 Cargo, i.e. merchandise being transported, can
be moved through a variety of transportation
means and is organized in different shipment
categories
 Unit loads are usually assembled into higher
standardized units such as: ISO containers,
swap bodies or semi-trailers
 For very long distances, product
transportation will likely benefit from using
different transportation means: multimodal
transport, intermodal transport (no handling)
and combined transport (minimal road
transport)
 Operators involved in transportation include:
all train, road vehicles, boats, airplanes
companies, couriers, freight forwarders and
multi-modal transport operators
 Merchandise being transported internationally
is usually subject to the Incoterms standards
issued by the International Chamber of
Commerce

20. • One-third to two-thirds of the expenses of enterprises’ logistics
costs are spent on transportation
• National Council of Physical Distribution Management
(NCPDM), estimates the cost of transportation, on average,
accounted for 6.5% of market revenue and 44% of logistics
costs
• Components of logistics costs based on the estimation from Air
Transportation Association show that transportation occupies
29.4% of logistics costs
• Transport affects the results of logistics activities and
influences production and sale
• Improvement of higher operation costs can get better effects,
therefore logistics manager must comprehend transport
operation thoroughly
Transport Costs and Goods Characters in Logistics

21. • It is more complex than carrying goods for the proprietors
• Needs high quality management
• With a well-handled transport system goods can be sent to the
right place at the right time in order to satisfy the customer’s
demands
• It brings efficacy and bridges the gap between producers and
consumers
• A good transport system brings benefits not only to service
quality but also to the company competitiveness
Role of Transportation in Service Quality

22. Growth Drivers and
Challenges
The Status of logistics operations in India

23. Growth Drivers
• Acceleration in industrial production and consumption
• Population growth; Expanding upper-middle and middle classes
• Expected growth: 15-20% per annum
• Heavy outsourcing by automobile/telecom etc. – Demand for focused Supply Chain services
• Change in tax system (VAT to GST) – Should create national market for many goods and
services
• Entry of MNCs in various sectors

24. Logistics infrastructure lags behind global peers
• Planned investment cannot support 2.5 fold expected increase in traffic by 2020
• Current freight infrastructure – Networks built before independence
Railways
- Over 80% of current network built before
independence
- 1951-2007: 10 fold growth in traffic; 1.4 fold
growth in track length
Roadways
- 200 fold traffic growth; 8 fold
increase in track length
- Highways – Only 15%; Two/Four
lanes – 0.5%
- Paved road density –
940km/1000sq.km; Japan – 21000
km, UK – 7050 km
- Highways are structurally
inadequate
Waterways
- Limited investments after independence
- Loss of key routes following partition
Challenges in Indian Logistics

25. Transport in India: Game Changers (1 of 4)
 Emergence of new cargo centres:
Opportunities in the air cargo sector now
extend to Tier-II cities as well. Tier-II hubs
have witnessed a growth of 14.5% in air
cargo volumes between 2006 and 2011.
Rising local demand, improved international
connectivity and resulting consolidation
activity, and expanding cargo-handling
infrastructure are the key drivers of
increased freight handling at Tier-II city
airports
Air: The quickest possible way!
 Improving air cargo infrastructure at
airports and more investments: Though
India currently lags behind its global peers,
increased spending in airport
infrastructure through various airport
projects is expected to improve air cargo
infrastructure across the country. Investment
in airport infrastructure has grown
substantially over the last 3 Five-Year plans

26. Transport in India: Game Changers (2 of 4)
 Growth of Non-Major Ports: With a CAGR
growth of 13% from 2007-08 to 2011-12
(compared to 2% for Major Ports), Non-Major
ports have captured nearly 40% of the volume
of trade carried out by sea. Capacity overruns at
major ports, aided by a substantial increase in
the cargo traffic of fertilizers, building material
and coal, have resulted in significant
investments in the development of non-major
ports. Mundra, Pipavav and Hazira ports are the
frontrunners
Ports: The Gateways to India
 Emergence of East-Coast Ports: With
China’s emergence as India’s leading trade
partner, India’s ‘Look East’ policy and
overcapacity at west coast ports, east coast
ports present significant development
opportunities. Non-major ports are
expected to contribute 57 % of total
investments in east-coast ports
CAGR – compound annual growth rate

27. Transport in India: Game Changers (3 of 4)
 Dedicated Freight Corridors: It is expected to
mark a paradigm shift in the transportation
scenario, resulting from the segregation of freight
on trunk routes, improving service delivery and
generating additional freight-carrying capacity.
There will be a reduction in unit cost of
transportation, guaranteed transit time and
improved service quality for a very focussed
overall approach
Rail: India’s Lifeline
 Development of National Highways: To
encourage private players, the Government
has announced several incentives such as
declaring the road sector as an industry,
providing 100% tax exemptions in any
consecutive 10 years out of 20 years, duty
free imports of certain identified
construction plants and equipment, FDI of
up to 100%, and increased concession
periods
Road: For Last-Mile Connectivity

28. Transport in India: Game Changers (4 of 4)
 The desired ‘to
be’ state would
be an overlay of
transportation
networks,
allowing for the
efficient
transportation
of each
commodity type
as well as a
natural
handover
point — where
networks
intersect and
where large
quantities are
broken down
into smaller
volumes for
last-mile
transportation
into urban
centers

29. Logistics flows are highly concentrated
• 7 corridors connect 15 high growth clusters
• These 7 corridors account for 50% of freight traffic
• These clusters are expected to account for 60% of GDP growth in next 10 years
Challenges in Indian Logistics

30. India’s freight traffic relies excessively on roads
• This is despite the fact that 2/3rds of freight travel being more suitable for rail and waterways
• 65% is bulk; 75% transported over distances more than 400km
• Roads are cheapest only for non-bulk and <400 km
• Over reliance on roads leads to increased costs, high energy consumption and adversely impacts environment
Reasons
Railways: Oversaturation of important networks, high tariffs, poor terminal quality, less flexibility of wagons, uncertain
transit times
Waterways: High turnaround times at ports, inadequate depths at ports, inadequate infrastructure for Coastal Shipping
- Rail/Waterways potentially cheaper than roads
Challenges in Indian Logistics

31. Inefficiencies leading to $45 billion each year
• India’s spend as percentage of GDP is 13%, higher than that
of US
• This is despite the fact that cost of labor is significantly
lesser in India
• Road transport is 30 per cent more expensive in India
• Rail and Waterways are 70 per cent more expensive in
India
• Transit times are higher owing to lower average speeds
- Causes: Waiting times at toll stations, freeze in truck traffic
during day, port turnaround times, low priority accorded to
freight trains, poor track infrastructure
• Poor transportation equipment is also a major problem
• 65% of inefficiencies are hidden
Challenges in Indian Logistics

32. Transport in India: All’s Not Well!
 Important rail networks are over-saturated
 Rail tariffs are quite high: Indian Railways
subsidizes passenger tariff at the expense of
freight tariff, resulting in Indian rail freight rates
being amongst the highest in the world
 Long and uncertain transit times
 Less flexibility in carrying different types of
goods: This is due to the unavailability of
specialized wagons for each type of product
Rail
 Inadequate Road Network Coverage: National
Highways constitute just 2% of the Indian road
network, but carry 40% of the total traffic, resulting
in severe congestion
 Poor road quality
 High level of fragmentation of the trucking
industry: This leads to fierce competition, resulting
in truck owners trying to overload to recover their
investments
 Multiple check-points result in unnecessary
delays
Road
 High Turnaround times: This is because of the
congestion on berths and slow evacuation of
cargo which are unloaded at the berths
 Inadequate depth at the ports: Depth at many
Indian ports is inadequate, resulting in many
large vessels choosing not to dock at Indian ports
 Coastal shipping is yet to take off: Inadequate
port and land infrastructure and a non-favourable
tax regime has inhibited the growth of this sector
 Higher waiting times, high fuel costs and
tariffs negatively impact the air freight sector
Ports and Air Freight

33. Key Company Profiles

34.  Year of Establishment: 1988
 Year of Operation: 1989
 Holding Pattern: MOR – 63%,
Public FIIs 37%
 Listed Company: NSE and BSE
 Status: Schedule A Mini Ratna
 Network Strength: 61 ICDs/CFS
• EXIM Pure: 17
• Domestic Pure: 12
• Combined: 32
 Logistics Support to EXIM
(Export/Import) and domestic
traffic
 Coordinate containerized
railway movements across
country
 Provide warehousing facilities
 Design, construct and operate
ICDs
 Operates port terminals
collaborating with
International Port Operators
 Significant player in multi
modal transport services
CONCOR Functions
Rail Freight: Container Corporation of India
Overview
Cargo
Carrier
Terminal
Operator
Warehouse
Operator
Core Business
Regional Distribution
 North India: 19
 South India: 14
 West India: 14
 East India: 09
 Central India: 05
 Total: 61
CONCOR Services
 Train Handling
 Container Stacking
 Customs clearance of
Import/Export cargos
 Warehousing of
Cargo (transit, multi-
stack, air)
 Value Added Services
 Door to Door
Solutions
Movable Asset Details
 No of rakes – 240
 Wagons – 10,777
 Containers – 15,579
 Gantry Cranes – 14
 Reach Stackers - 60
Important Projects
 ICD, Dadri (Noida)
 ICD,Tughlakabad(Delhi)
 ICD, Whitefield (B’lore)

35. Rail Freight: Container Corporation of India
Business Trends Turnover
Container Traffic Trends
(MT of container traffic)
2009-10 2010-11
Carried by IR 34.36 36.86
Carried by CONCOR 26.60 27.75
%ge share of IR Traffic 77.4% 75.28%
Carried by other CTOs 7.76 9.11
%ge share of IR Traffic 22.59% 24.72%
IT Systems
 VSAT based network extended over 64 locations
 Web Enabled Customer Feedback
 Facility for e-filing of documents
 Terminal Management Systems for
• EXIM (ETMS, CCLS)
• Domestic (DTMS)
• ERP for Finance (Oracle Financials)
• Data Warehouse for commercial applications
IT Applications
 Container Repair System, Track &Trace System
 Online Vigilance Clearance System

36. Rail Freight: Container Corporation of India
Strategic Vision
 Continue to be leading player in India for rail
based inter-modal services
 Be the leading “third party logistics” service
provider of India
 Integrate rail, road, sea and air cargo logistics
and operate multimodal cargo hubs in India
 Extend operations in foreign countries and
emerge in league of international operators
Future Roadmap
Certifications and Awards
 ISO 9000 Quality System Certification
 MOU Excellence Awards from FY’05 to
FY’09
 Dun and Bradstreet Corporate Award –
2008, 2009, 2010
 Accredited with “AAA” rating by CARE –
Best Credit Quality, Highest Safety for
Timely Debt Service Obligation
Ranking
Turnover Net
Profit
Overall 161 85
Transport and
Logistics Sector
3 1
(source: Economic Times, 2011)

37. 3. Network
1. Market Position
 Started as ‘One Man, One
Office, One Truck’ company
in 1958
 Leading integrated supply
chain and logistics solution
provider
 Listed on both NSE and BSE
Road Freight: Transport Corporation of India
2. Operations
 Fleet of 7000 trucks/
trailers/ reefer vehicles
 Fleet of 4 cargo ships
 9.75 mn sq ft of warehousing
space
 Skilled workforce of 6500
with 20,000 outsourced
positions
 Own offices in 6 countries
5. IT
 In-house ERP: EDI Capable
 Web based Track and Trace
through GPS
 Pan India Network
 1400 company owned
branches nationwide,
covering 99.45% of GDP
 Covers 17,000 locations
within India and abroad
 Transporting 2.5% by
value of India’s GDP
4. Divisions
 TCI Freight
 TCI XPS
 TCI Suply Chain Solutions
 TCI Seaways
 TCI Global
4.1 TCI Freight
 Largest Division
 2400 trucks and trailers
4.2 TCI XPS
 Express door to door service
for time sensitive and high
value items
4.3 TCI SCS
 Logistics solutions provider
 Customized fleet of 1100 own
trucks including 38
refrigerated trucks
 Auto sector -70% revenue
 JV with Mitsui, Japan
4.4 TCI Seaways
 Coastal shipping services
 Net Capacity: 15634 DWT
4.5 TCI Global
 Establish subsidiaries globally
 Indonesia, Brazil and Nigeria

38.  Year of commencement: 1983
 Territories Serviced: 220+
 Domestic Locations Serviced:
32,000+
 Air Support: 7
 Air Network Stations: 7
 2011 Annual Shipments (mn):
100
 2011 Annual Tonnage (‘000):
423
 Workforce: 8,000+
 Retail Outlets: 486
 Proprietary Aviation
Network: First scheduled
cargo airline with dedicated
fleet of freighters and
infrastructure support
 Market Leading Transit
Times: Fastest deliveries
across B2B, B2C, C2B and C2C
channels
 Innovator: 28+ years and
numerous industry firsts
Airport-to-Airport
Interline Services
Charter Services
Co-Load
India Post
Air Freight Services Delivering Leadership
Advanced Technology
 Weight Dimension Labeling
(WDL)
 Hand Held Device (OTM)
 Ground Technical Support (GPS)
 Smart Truck
 RFID
Air Freight: BlueDart Aviation Ltd.

39.  Established on 2nd October, 1961
 Fleet includes Bulk carriers, Crude oil tankers,
Product tankers, Container vessels, Passenger-
cum-Cargo vessels, Chemical carriers and
Offshore Supply Vessels
 Operates 1/3rd of the Indian tonnage
 Services Provided: Break-bulk services,
international container services, liquid/dry
bulk services, offshore & passenger services
Total Ships: 74
Major Clients
 Indian Oil Corporation Ltd.
 Bharat Heavy Electricals Ltd.
 Steel Authority of India Ltd.
 Oil & Natural Gas Corporation Ltd.
 Reliance Industries Ltd.
 Bharat Petroleum Corporation Limited
 Hindustan Petroleum Corporation Ltd.
 British Petroleum
 British Gas
Dry Bulk
•Growing
at 6.4%
Crude Oil
•Growing
at 3.8%
Products
•Growing
at 2.3%
3 Segments of SCI: Growth Rate
Sea: Shipping Corporation of India

40.  Increase investment in railways by reallocating
from roads
 Creating enablers to maximize efficiency,
logistics parks, standardized containers etc.
 Improve rail and road maintenance and
existing equipment
 If current trends prevail, inefficiencies
associated with poor logistics infrastructure
will increase from $45 billion today to $140
billion in 2020. However, a well-planned
infrastructure program could help India cut
this waste by half and transportation fuel
requirements by 15 to 20 percent.
Projections
The Way Forward

41. • Change in modal mix
• Increase investment in railways by reallocating from roads
• Building the right networks to support modal mix change
• Building Rail DFCs, Expressways, Coastal corridors, last mile links
• Creating enablers to maximize efficiency – Logistics parks, standardized containers, IT
assets, human resource etc.
• Improve rail and road maintenance and existing equipment
• Formulating and implementing a national logistics policy
The Way Forward (Contd.)

42. Thank You!
Logistics Operations in
Indian Industry
INDIAN INSTITUTE OF TOURISM & TRAVEL MANAGEMENT