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Logistics and infrastructure Exploring opportunities

Contents

1. Executive summary 2. Macro-economic overview 2.1. Indian economy - Impact of global economic decline 2.2. The way ahead for Indian economy 2.3. Interlinking sustainable economic growth with logistics 2.4. The logistics cost factor 3. Logistics industry overview 3.1. Evolution of the global logistics industry 3.2. Opportunity indicators for global logistics sector 3.3. The Indian logistics sector 3.4. Signicance of SMEs in the Indian logistics industry 4. SMEs in logistics: Succeeding in the market place 4.1. Competitiveness of SMEs in logistics 4.2. Assessment of challenges internal & external 4.3. S-W-O-T Analysis 5. Transport infrastructure 5.1. Transport infrastructure performance 5.2. Railways 5.3. Roads 5.4. Ports 5.5. Airports 5.6. Infrastructure nance 5.7. The PPP approach 6. Conclusions Abbreviations Bibliography

3 6 6 10 10 12 13 13 14 16 23 24 24 31 31 33 33 34 36 38 41 44 45 46 48 49

1. Executive summary

Macro-economic outlook Contrary to the much talked about theory of decoupling hypothesis which held that emerging economies will remain relatively unaffected by the downturn due to their substantial foreign exchange reserves, improved policy framework, etc emerging economies too have been hit by the crisis and India is no exception. However the Indian economy has fared much better than most of its Asian peers in the face of the global economic recession. The real GDP grew by 6.7 per cent in 2008/09, and expects a revival in the latter part of 2009. Although domestic demand, the mainstay of the economy, has held up relatively well, there are signs that the worst might not be over yet . History has shown that export-led growth is a crucial component of sustainable economic growth. There are many enablers of export oriented economic growth including facilitating regulatory environment, establishing export oriented zones like SEZs, elimination of administrative barriers to FDI in export-oriented sectors etc. However the most important enabler is the improvement in transportation infrastructure (mainly ports, roads, airports and railways), telecommunications and power. Government incentives aimed at promoting economic growth can make areas such as infrastructure i.e., development of Greeneld ports, airports, road, and rail logistics attractive for private investment. This helps capacity augmentation and thereby encourages industrial production. In addition, logistics cost is an important factor that affects the competitiveness of nations as well as rms. The logistics cost is considerably high in India (around 13-14 per cent of GDP ) than developed world regions like U.S (9.5 per cent) & Europe (7.15 per cent). The comparatively high logistics cost can be attributed to factors such as a complicated tax regime, fragmented market structure and inadequate infrastructure. Logistics industry overview The reduction in the logistics cost can be brought about by improving the national logistics infrastructure to facilitate smooth transfer of materials and information. Simultaneously, at the micro level, the logistics service providers need to infuse better management practices, employ technology that facilitates its logistics process to reduce its service cost.

As the logistics services industry evolves, competitors are moving away from asset-based commoditized services to more strategic, information-based approaches. Customers are demanding a single point of contact for all logistics services. In one of the global logistics study conducted by Deloitte, a set of attributes was developed to identify high opportunity industries with diverse but complementary product ows for the logistics outsourcing industry. The attributes were formulated based on the requirements of the various aspects of supply chain planning and implementation including design, implementation and management of logistics services. Some of the attributes of industries researched that would offer the highest opportunity / best t for logistics service provider include -. Large logistics spend Relatively high value products Manage across multiple modes Manage complex, time sensitive supply chains Diverse supply chain footprints including their own operations, suppliers and customers Maturity in outsourcing cycle (currently managing 3PLs) Decentralized management of logistics Complementary to current base of 4PL business High cube and high weight products Competitiveness of SMEs in logistics The contribution of SMEs to the nations economic growth is by no means small. As globalization and technological change reduce the importance of economies of scale in many activities, the potential contribution of smaller rms is enhanced and logistics SMEs are no exception. Today, despite facing regional, geographical and legislative diversity, the Indian logistics SMEs reverberate sound local dynamics, assurance of a personal service and the emergence of a new genre of integrated solution providers. Since the Small & Medium Enterprises constitute a signicant percentage of the logistics service providers, it would not be inappropriate to mention that these SMEs would be acting as the catalyst in reducing the national logistics cost component.

Deloittes survey of Small & Medium logistics players aimed at bringing to the fore, developments in the Indian logistics space and more importantly the broad level challenges that the industry is currently facing, particularly from the perspective of a Logistics Service Provider (LSP). The survey covered players across a wide spectrum of logistics segments such as freight forwarding, shipping, customs booking, container freight stations, warehousing, and multi-modal transportation & thus aimed at offering them a platform to share their varied concerns. The analysis of industrys internal factors suggests that moving to higher value added services is perceived as the biggest growth opportunity by the Indian LSPs. Besides, in a situation like todays, optimizing operations is viewed as the best means of surviving in business and competing effectively. In a way, this would also assist the individual players in accumulating sufcient prots to be ploughed back in business, as a means to tide over the problem of limited access to affordable credit. The trend of consolidations by way of mergers and forging alliances with other players is fast picking up in the logistics community and would address the fragmented nature of industry. Given these opportunity areas, a focused training approach and extensive implementation of advanced technologies could boost the international competitiveness of Indian LSPs. Other logistics cost inators are variable vessel charter costs, uctuating fuel prices, exchange rates, non-availability of return loads and high haulage rates. Further, the LSPs are typically resorting to initiatives like negotiating and renegotiating contracts, load optimization, efcient route scheduling, working capital management and inventory cost control among others, to overcome the burgeoning logistics cost. While a likely boom in construction and pharmaceuticals spell opportunities for the logistics sector in terms of increased potential of multi-modal movement of raw material & manufactured products, progressive reforms such as introduction of a singular Goods and Service Tax (GST) and the Governments push to infrastructure expansion are equally encouraging. On the other hand, major threat is posed by competition

from large foreign players and price sensitive nature of Indian markets. There is yet another impediment, although short term, i.e., the impact of slowdown in terms of decline in international trade. This can be curtailed by concentrating on domestic markets, which are still quite promising. On the external front, infrastructure and regulatory bottlenecks are the prime cause of transportation delays and cost overruns, which consequently hamper the quality of logistics services. Transportation infrastructure outlook The 11th ve year plan Approach Paper calls for the investment to increase from a current level of 4.6 per cent of GDP, to between 7 & 8 per cent. The Capsule Report on Infrastructure sector performance by Ministry of Statistics and Program Implementation, the year on year rate of growth in cargo trafc has considerably declined in FY 2008-09. The freight loading for Indian railways for 2008-09 of 833 million tonne did not meet the target of 850 million tonnes. The Railway Ministry has outlined many measures to generate revenues from non-traditional sources to bolster the railways balance sheet. The Railways are also working out the details of a premium service for movement of containers with assured transit periods for time-sensitive cargo. Permission has also been provided in the recent budget to container train operators to access private sidings to help attract piecemeal trafc that are at present not being carried by railways. Further, the railways is also expected to unlock its land resources by holding an auction for private real estate developers to build malls, cineplexes and shopping arcades.

The major ports in the country handled 530.35 million tonnes of cargo during 2008 2009, which was 7.9 per cent lower than the target set for the period and around 2.1 per cent more than that the trafc of 519.31 million tonnes for the previous year. There has been a drastic decline in augmented capacities at major ports during the last four years. In addition, lack of proper facilities, deeper drafts, good connectivity and necessary equipment / technology has contributed to high logistics costs. On the positive side, with the Government encouraging private participation in port development, non-major ports have begun contributing signicantly to the economy. The new Governments ambitious agenda to award 6 concessions for ports and initiate for 20 others through PPP totaling to more than Rs. 3300 crore, within a span of 3 months, is being regarded as a welcome move. While there are a lot of new avenues in aerospace services in the coming decades, the constraints associated need to be addressed to enable the smooth growth of the sector. Some of the issues faced by the sector include mounting losses of the airlines, volatile aviation fuel prices, congestion at airports, shortage of qualied technical manpower, upgradation of security, land acquisition, high taxation, high airport charges etc. Indian aviation space offers promising opportunities in the areas of airport infrastructure, airport and ground support equipment, MRO facilities, ground handling services, trained manpower, air cargo along with tapping the potential stream of non aeronautical revenues. It has been established that spending in road sector has a multiplier effect in terms of job creation and increase in per capita income. Hence any spending, whether

by government or by a private partner, denitely helps in economic stimulus. Accordingly the government plans to invest around Rs 1,00,000 crore to build about 12,000 kms of roads for the F.Y 2009-10 mainly through the toll-based model, with options to bring in foreign investors. Infrastructure projects being capital intensive, with long gestation periods; the Financial Institutes (FIs) and the banks need to create new structures to facilitate the funding. New ways of structuring like take-out nancing, roll over nancing, put-call options, hedging / swapping of exchange / interest rate risks etc are also being offered for funding of long gestation projects. The users willingness to pay for the services availed affects the cash ow. The strength and experience of the promoters, concession framework, tax benets to the project, inputs / off-take arrangements add to the bankability of the project. Public Private Partnership (PPP) offers a distinct possibility for increasing total investments by using a limited amount of public resources to leverage a much larger amount of private investment. Given the bottlenecks and inefciencies often encountered in public infrastructural investment, such PPPs could also increase economic efciency and lower the capital requirement, provided that regulatory mechanisms are adequate. Conclusions Globalization, consolidation, technology advancements and outsourcing have only led to growth in the logistics services market and this industry will continue to evolve in the coming years. Firms can enhance their market competitiveness by reducing their logistics costs, thus lowering the total costs of goods and services. Any impetus to improve the competitiveness of the rms at the national platform would enable the nation to register a dynamic economic performance in a global environment. India has got a huge opportunity of reducing its national logistics cost by studying and beneting from other success stories. This would include upgrading the macro logistics infrastructure to world class standards and by providing a facilitative role to the SME players in the logistics sector to improve their service level competitiveness. The effect of the referred improvement would substantially provide a ripple effect in the larger canvas of the countrys logistics development thereby acting as a catalyst in reducing the national logistics cost.

2. Macro-economic overview

2.1 Indian economy - Impact of global economic decline Many investors living today have never really had to weather really tough nancial times. It is difcult to meet someone who was old enough during the Great Depression to recall how tough that was, especially on investors. Although there have been recessions since, none has been of such a disturbing magnitude as the current crisis. The current crisis is unique not only in its severity and its projected length, but in how far-reaching its effects will be felt worldwide. Contrary to the much talked about theory of decoupling hypothesis which held that emerging economies will remain relatively unaffected by the downturn due to their substantial foreign exchange reserves, improved policy framework, and robust corporate balance sheets, emerging economies too have been hit by the crisis and India is no exception. The extent to which Indian economy is affected can be assessed by gauging the magnitude of changes in the following key parameters: Trade Deficit: As the global economy shrank, so did the growth in Indias external trade. The dismal industrial growth was partly caused by a weak external demand. Further, a are up in petroleum prices in 2008 led to a sharp rise in import bill, thereby adding to the trade decit. Indias cumulative value of exports for the period 2008-09 was US $ 168.7 billion as against US $ 163.1 billion in 2007-08, thereby registering a growth of 3.4 per cent in dollar terms. On the other hand, the countrys cumulative value of imports for 2008-09 was US $ 287.8 billion

as against US $ 251.7 billion in 2007-08, registering a growth of 14.3 per cent in dollar terms. It is being increasingly felt that unless we take some fundamental steps to diversify Indias export basket, most scal incentives may only benet the protability of the few exporters in the short term and not give a big thrust to the overall export performance of the country.
Indias EXIM trade trends in billion US $ $ bn 300 250 180 120 60 0 2003-04 Export 2004-05 2005-06 Imports 2006-07 2007-08 2008-09

Source : Directorate General of Foreign Trade

A flare up in petroleum prices in 2008 led to a sharp rise in import bill, thereby adding to the amount of net imports

 Fiscal deficit: Fiscal deficit is an economic phenomenon, where the Governments total expenditure surpasses the total receipts (excluding borrowing). It signals the government about the total borrowing requirements from all sources. Indias combined scal decit of the Centre and the states at close to 9.5 per cent of GDP in 2008-09 is among the highest in the world. It has risen by almost 4 per cent points in a span of just one year (i.e., 2008-09 vis--vis 2007-08). The change in economic environment between 2007-08 and 2008-09 and corresponding scal stimulus packages by the Government during this period to deal with the economic slowdown has contributed to widening of this decit. To add to this, the Finance Minister, as expected, has announced a budget keeping the Aam Aadmi in mind.
Combined scal decit (as a % of GDP) 10% 8% 6% 4% 2% 0% 2005-06 2006-07 2007-08 2008-09

A number of social sector projects have been announced which, while beneting employment creation and infrastructure development, will further worsen the state of the scal balances. Furthermore, economists are of the view that the centres gross scal decit in 2009-10 is likely to over-shoot the budgeted estimate of 5.5 per cent on account of an increase in expenditure and slow pace of increase in tax revenue. According to some policy makers, following an aggressive disinvestment policy can help the Government mobilize enough proceeds to contain the countrys scal decit. Industrial Production: Close on the heels of global cues, Indias industrial production rose by 2.6 per cent in 2008-09, down from 8.5 per cent in 2007-08. It fell by 0.75 per cent year on year in March 2009. Manufacturing output also dropped by 1.4per cent year on year to Rs.1.25 trillion in January-March 2009, after rising by just 0.9 per cent in the fourth quarter of 2008. In contrast, the month of April witnessed a rise in industrial production by 1.4 per cent from a year earlier. This happened for the rst time after three consecutive declines over the trailing four months. The corresponding manufacturing output for April also recorded a rise of 0.7 per cent from a year earlier. This upside can be attributed to improvement in domestic demand. However, some economists relate this to election spending by way of increased construction and electricity production over recent months. If this is true, then the pick-up in growth may be just a temporary phenomenon.

Source : Ministry of Finance, GOI

Indias combined fiscal deficit of the Centre and the states at close to 10 per cent of GDP in 2008-09 is among the highest in the world

 Inflation: Consumer Price Index (CPI) - based ination tracks the year-on-year rise in prices paid by consumers to retailers. Typically, high liquidity injection by the RBI to tackle the effects of global turmoil, rising food prices, and the increase in oil and commodity prices have contributed to a high CPI-based ination.
Consumer price ination (average %) 10

Notwithstanding the earlier, the Indian economy has fared much better than most of its Asian peers in the face of the global economic recession.
Percentage Y-o-Y GDP change Vietnam Thailand Malaysia

Indonesia 8 India 6 China Singapore 4 Korea Hong Kong Japan 0 2004 World 2005 2006 2007 2008 India 2009 2010 -10 2010 Source : IMF, WEO database -5 0 2009 5 10

Asia (excl Japan)

Source : Economist Intelligence Unit Estimates

Consumer price ination only marginally slowed and stood at 9.6 per cent year on year in February. According to recent data, it is now ruling around 8 per cent. Although this is expected to average around 6 per cent in 2009 and 4.7 per cent in 2010, it will be signicantly above the Asian & world averages. The slowdown in Indias economy is not only due to the impact of the global recession, but also the bursting of a real estate bubble following an unprecedented economic boom between 2003/04 and 2007/08.

It grew more than expected in the quarter ended March 2009, boosting the condence of both the corporate sector and the newly formed government. This reiterates the belief that the Indian growth story remains and is still by & large domestic driven. A spending spree by the government and robust growth in agriculture and services industries helped the economy grow 5.8 per cent year-on-year in the quarter ended March 2009. The real GDP grew by 6.7 per cent in 2008/09, and expects a revival in the latter part of 2009.

Real GDP growth (% change) 10

-2

-6 2004 World 2005 2006 Asia (excl Japan) 2007 India 2008 2009 2010

Source : Economist Intelligence Unit Estimates

Quarterly estimates of GDP for 2008-09 (at 1999-2000 prices) % chg

Industry Agriculture Mining & quarrying Manufacturing Electricity Construction Trade, transport, comm. Finance, insurance Community GDP at factor cost
Source : Ministry of Finance, GoI

Q1 3.0 4.6 5.5 2.7 8.4 13.0 6.9 8.2 7.8

Q2 2.7 3.7 5.1 3.8 9.6 12.1 6.4 9.0 7.7

Q3 -0.8 4.9 0.9 3.5 4.2 5.9 8.3 22.5 5.8

Q4 2.7 1.6 1.4 3.6 6.8 6.3 9.5 12.5 5.8

The real GDP grew by 6.7 per cent in 2008/09, and expects a revival in the latter part of 2009
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2.2 The way ahead for the Indian economy Indias relatively less dependence on merchandise exports, its smooth functioning nancial system, and comfortable forex reserves are believed to aid swift recovery from the slowdown. Although domestic demand, the mainstay of the economy, has held up relatively well, there are signs that the worst might not be over yet. Forecasts by the Organization for Economic Co-operation and Development (OECD), the Asian Development Bank (ADB) and the Economist Intelligence Unit for the current year are markedly more pessimistic than the governments. The OECD projects a further deceleration in 2009 as a whole, to 5.9 per cent. The ADB also forecasts that growth will slow again this year, to 5 per cent. Neither organization expects economic activity to bounce back until mid-2010. Looking at a broader time frame, Indias economic think tank Centre for Monitoring Indian Economy (CMIE) predicts a 5.8 per cent growth in 2009-10 and expects that economy will bounce back to 9 per cent growth by 2011, when impact of poor exports demand would be overcome. World Banks recent projections of an 8 per cent growth for India in 2010, ahead of Chinas expected growth of 7.7 per cent further add to this optimism. The new government already has its task cut out. On an optimistic note, the industry anticipates a growth rate of around 6 per cent in the current scal, and with the government keen on introducing reforms in its rst few months in ofce, the situation can get even better. The challenge before the new government is to initiate measures aimed at bringing about scal consolidation within a reasonable span of time. With the revenue growth expected to decline signicantly, the only way to bring down the revenue and scal decit would be to drastically cut down the subsidies, particularly non-merit subsidies that never reach the intended target groups or the poorer sections. It will also be necessary to curtail wasteful expenditure in several areas.

The government should also induce some of the better-performing PSUs, particularly those engaged in infrastructure, such as power, transport, construction, etc., to expand and speed up their investment programmes. Finding resources for infrastructure development and speeding up investment in this sector should receive top priority, for, as the World Bank has observed, infrastructure is a key factor in improving the lifestyles of the masses and addressing the pressing issue of poverty. 2.3 Interlinking sustainable economic growth with logistics Typically, export-led growth has been a crucial component of sustainable economic growth. There are many enablers of export oriented economic growth including facilitating regulatory environment, establishing export oriented zones like SEZs, elimination of administrative barriers to FDI in export-oriented sectors etc. However the most important enabler is the improvement in transportation infrastructure, telecommunications and power. A booming economy generates higher purchasing power, which in turn accelerates domestic demand. This leads to an increase in production as well as EXIM trade, which necessitates increase in need for cargo movement both locally as well as internationally . Government incentives aimed at promoting economic growth can make areas such as infrastructure i.e., development of Greeneld ports, airports, road, and rail logistics attractive for private investment. This helps capacity augmentation and thereby encourages industrial production.

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Although several headways have been made in the infrastructure sector over the last few years, shortcomings still exist in almost all the segments, be it highways, railways, ports or airports. Infrastructure developments like the railway dedicated freight corridors, road development projects and modernization of over 37 operational airports will increase Indias handling capacities, thereby enhancing logistical performance.

A snapshot of the Eleventh Five Year Plan for the various categories of logistics infrastructure is indicated in the table below. However, with a mid-term review of the plan in face of the slowdown, there is a likelihood of these targets being softened. But again, with infrastructure being the key to sustaining the nations growth, it will be left to policymakers domain to strike a balance between review of growth targets and infrastructure development.

Transportation infrastructure Decit, eleventh plan targets, & permissible FDI

Sector Roads / highways

Decit 65,590 km of existing national highways: Comprise only 2% of network Carry 40% of traffic Of which 12% is 4-laned; 50% is 2-laned; and 38% is single laned Inadequacy of Berths Rail / road connectivity

Eleventh plan targets 6-lane 6,500 km in GQ 4-lane 6,736 km NS-EW 4-lane 20,000 km 2-lane 20,000 km 1,000 km expressway

FDI 100 % FDI under automatic route

Envisaged investment size US$ 78.5bn

Ports

New capacity: 485 million MT in major ports 345 million MT in minor ports

100 % FDI under automatic route

US$ 22 bn

Airports

Inadequacy of Runways Aircraft handling capacity Parking space and terminal buildings

Modernize 4 metro and 35 100% FDI for existing airports non-metro airports (FIPB approval for FDI beyond 3 greenfield in North Eastern 74%) Region (NER) 100% FDI under automatic 7 other greenfield airports route for greeneld airports 49% FDI is permissible in domestic airlines under the automatic route, but not by foreign airline companies 8132 km new rail 7148 km gauge conversion Modernize 22 stations Dedicated freight corridors 100% FDI permitted in railway infrastructure under automatic route

US$ 7.74 bn

Railways

Old technology Saturated routes Slow speeds (freight: avg 22kmph; passengers: avg 50kmph) Low payload to tare ratio (2.5)

US$ 65.45 bn

Source: Planning Commission, IBEF

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2.4 The logistics cost factor Logistics cost is an important factor that affects the competitiveness of nations as well as rms. However, it is considerably high in India than rst world regions like U.S. & Europe, thus affecting the cost competitiveness of Indias exports. It is estimated that transportation and warehousing costs constitute a major chunk i.e., around 60 per cent of the logistics cost. In India, the logistics cost is expected to be around 13-14 per cent of GDP as against the US (9.5 per cent) and Europe (7.15 per cent). At present, the Indian logistics sector is very fragmented. Despite being a major contributor to the nations economic development, it is still not awarded the much needed status of an independent sector so as to warrant an exclusive budgetary allocation and corresponding focus on development. The major players can be broadly categorized as pure transport providers, transporters providing certain value added services such as warehousing, and completely integrated players providing 3PL services. The major elements of logistics costs for Indian Industries include transportation, warehousing, inventory management and other valueadded services such as packaging. The comparatively high logistics cost can be attributed to factors such as a complicated tax regime, fragmented market structure and inadequate infrastructure. While several factors like these go against Indias logistics industry, there are indeed many growth factors and opportunities enumerated in the subsequent sections that suggest its steady transformation.

3. Logistics industry overview

Reduced asset intensity Increased information intensity

Logistics has always been a central and essential feature of all economic activity. Despite this importance, there is a long history of organizations paying little attention to their logistics. They traditionally concentrated their efforts into manufacturing products and considered the movement and storage of materials as an uninteresting errand that formed part of the overheads of doing business. However, over the years, the status of logistics has continued to improve, primarily due to recognition by the organizations of the following critical factors: Appreciation of high logistics cost and opportunities for major savings Increasing competition for both users and providers of logistics, who have to continually improve operations to remain competitive New types of operations, which can force changes to logistics such as just-in-time, total quality management, exible operations, time compression etc. Need for improved technology for identifying, locating and tracking materials Recession in many markets, combined with new sources of competition, has raised the consciousness of customers towards value of service delivered to them by their service providers. Accordingly, the logistics industry has consciously strived to be at the focal point of strategy formulation and operational excellence to continue in its endeavour for providing maximum contribution in value creation. 3.1 Evolution of the global logistics industry Globalization, consolidation, technology advancements and outsourcing have led to growth in the logistics services market. The capabilities of logistics service providers are growing along with the changing expectations of their clients. As the logistics services industry evolves, competitors are moving away from asset-based commoditized services to more strategic, information-based approaches.

Evolution of the logistics model

5PL (electronic co-ordination of supply-chain-information ownership) 4PL (SCM limited asset provision)

3PL (Supply chain expertise with some asset provision)

2PL (pre-dominatly asset provision)

Source : Deloitte Research

Customers are demanding a single point of contact for all logistics services and are looking for one-stop logistics shopping unable to cope with complexities across their supply chains. The models in logistics industry have accordingly evolved over time to address the changing needs of the market and vary based on scope of service offerings, degree of collaboration, levels of asset intensity and IT capabilities across the supply chain. The logistics model has been evolving from a specialized function to fourth party Logistics (4PL) and fifth Party Logistics (5PL) companies . First and Second Party Logistics handle all logistics functions, such as trucking and warehousing, which face low returns and high levels of asset intensity but low barriers to entry. With the increasing need for one-stop solutions, many 2PL have evolved into 3PL by adding new logistics capabilities and integrating their operations. They are asset light and usually tend to have high returns; they contact most of their capacity needs to 2PLs. While the 2PL puts in hard cash tangible asset, the 3PL puts in intellectual property. Fourth party logistics is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design, build and run comprehensive supply chain solutions. The figure below illustrates the gamut of services that a 4PL provider will offer.

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4PL Provider managed services

4PL Order to deliver supply chain services Transition & support services Provider managed services 3PL provided services Carrier services Forwarder services Brokerage services
Source : Deloitte Research

Distribution operations Transportation routing and scheduling Transportation execution Warehouse management

Claims management Freight pay and audit Trade management Others

As the orchestrator of this broad set of providers, a 4PL must comprehend broad and deep expertise and capabilities. Since the advent of the 4PL service, the international logistics industry has been researching on the development of the fth-party logistics service i.e. the realization of full-scale operation of e-procurement. A key function of the 5PL is to aggregate the demands of the 3PL into a bulky volume for negotiating more favorable rates with airlines and shipping companies regardless of which generation of logistics solution belongs to all. 3.2 Opportunity indicators for global logistics sector In one of the global logistics study conducted by Deloitte, a set of attributes was developed to identify high opportunity industries with diverse but complementary product ows for the logistics outsourcing industry. The attributes were formulated based on the requirements of the various aspects of

supply chain planning and implementation including design, implementation and management of logistics services. The set of attributes derived were to focus attention on those industries that offer greatest opportunity for logistics service providers. The attributes of industries that would offer the highest opportunity / best t for logistics service provider are provided below Large logistics spend Relatively high value products Manage across multiple modes Manage complex, time sensitive supply chains Diverse supply chain footprints including their own operations, suppliers and customers Maturity in outsourcing cycle (currently managing 3PLs) Decentralized management of logistics Complementary to current base of 4PL business High cube and high weight products

The 4PL will serve as the single point of contact for customers, managing a comprehensive set of supply chain and logistics services that are executed by other providers
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The description of the logistics requirements for each of the attributes, is mentioned below:

Large logistics spend Relatively high value products Manage across multiple modes Manage complex, time sensitive supply chains Diverse supply chain footprints, including their own operations, suppliers and customers Maturity in outsourcing cycle (currently managing 3PLs) Decentralized management of logistics Complementary to current base of 3PL / 4PL business

Industries whose logistics spend is significant relative to the value of its products naturally place a high degree of importance and priority on logistics Industries with high value products place a high degree of importance on logistics which can impact macro inventory levels Logistics functions operating multiple modes of transport face significant issues in dealing with the resulting complexity and present greater opportunities for logistics service providers The more complex a supply chain, and the more important it is to manage time across it, the more likely companies are to look to a logistics service provider for help Diverse and wide spanning supply chains are complex and difficult to manage. Companies with such supply chains are more likely to struggle with these complexities and may therefore seek help

History has shown that outsourcing is an evolutionary process and that industries that have a longer history of outsourcing are more receptive to advanced stages of outsourcing such as contracting with third and fourth party logistics providers The logistics function is difficult to manage across geographic boundaries. Companies with decentralized management tend to offer ripe opportunities for logistics service providers to add immediate value Industries whose logistics and/or product attributes are complimentary to the 3PLs/ 4PLs base of business (macro ow patterns, etc.) offer opportunities to increase efciencies of logistics resources (e.g., increased utilization of transportation equipment) and thereby reduce rates and total spend Industries with these product attributes offer greater opportunity to leverage and better utilize common transportation equipment

High cube and high weight products

Based on the detailed analysis of the above attributes, the following industries were identied as potential high priority areas of focus for marketing opportunities for logistics services. Auto OEMs & suppliers This industry offers obvious synergies, large market potential and the most immediate opportunities for 3PL / 4PL However, auto suppliers are highly fragmented with very few having large logistics spend This industry is similar to the auto industry in terms of shipment attributes However there are challenges to penetrating this industry, due to the smaller size and regional focus of most companies Logistics flow balance opportunities exist within the industry; majority shipments flow to automotive and industrial equipment manufacturing applications However, these industries are fairly vertically integrated and traditionally manage logistics operations in-house This industry is attractive in terms of majority shipment attributes including complex supply chains with short order-to-delivery cycles This industry offers tremendous opportunities from synergies in shipment attributes; large players are looking to cut logistics costs dramatically
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Heavy equipment manufacturing

Metals

Technology infrastructure

Retail

3.3 The Indian logistics sector The logistics sector in India has evolved over the past two decades from being a pure transportation / warehousing functional service to provision of more value added offerings like customs clearance, domestic / international freight forwarding, cross-docking, reverse logistics, freight consolidation, warehousing of modern standards etc. India with a GDP1 of about Rs 31,297 billion is estimated to spend 13 per cent of its GDP on logistics creating an industry size of around Rs. 4,068 billion. The sector has been witnessing double digit y-o-y growth rate since 2002 and is expected to be more than USD 120 billion (approx Rs.5,400 billion) by 2015. While there has been a growing recognition in India of logistics as a strategic tool for enterprise cost reduction and improvement of organizational efciency on the ip side however, the logistics sector is characterized by dominance of a disorganized market. Transporters with eets smaller than ve trucks account for over two-thirds of the total trucks owned and operated in India and make up 80% of revenues. The freight forwarding segment is also represented by thousands of small customs brokers and clearing & forwarding agents, who cater to local cargo requirements. In order to reduce logistics costs and focus on core competencies, Indian companies across verticals are now increasingly seeking and using the services of third-party logistics service providers. Traditionally LSPs (Logistics Service Providers) concentrated mainly on transportation and logistics as they form a major share in logistics. However, in order to keep up with rising demands and customer expectations, companies now also concentrate on value added services like packaging, custom clearance, inventory management and labeling.

3.3.1 The growth drivers The evolving business landscape and increasing competition across industries, is creating the need for more efcient and reliable logistics services than what exists today. For example, rapid growth of organized retail and the need to reach out to the large untapped rural markets in India are necessitating development of strong back end and front end supply networks. While the end user industries like auto, consumer durables, organized retail, etc are direct triggers for the growth of the logistics sector in India, some of the other drivers are described below:
Key growth drivers for the logistics sector

Streamlining of indirect tax structure

Investments in transportation infrastructure

Increased demand of 3PL services

Growth Drivers

Infusion of qualied work force

Recognition of logistics management as a strategic tool

Globalization of manufacturing systems

Rise of 3PL services - The logistics cost is a direct function of quality of the national transportation infrastructure and professionalism of the logistics services offered. In addition, the level of maturity of the logistics industry of a nation is co-related to the share of 3PL service providers vis--vis the share of rst and second party logistics service providers.

Transporters with fleets smaller than five trucks account for over two-thirds of the total trucks owned and operated in India and make up 80% of revenues
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In the developed economies like Japan, the United States, Canada and the European Union nations, business customers have very similar high expectations for logistics system performance, regardless of where in the developed economies theyre operating. The professionalism and maturity has indeed been derived from the share of the 3PL service players in the referred countries. Hence it is not surprising to note that the logistics cost of the developed countries is comparatively less than that of emerging world nations (India, China, Brazil).
National logistics cost vis--vis the share of 3PL in the logistics market

Country India China USA Europe

Source : Various

Logistics cost as a % of GDP 13.0 14.0% 18.0% 9.9% 7.1%

Share of 3PL Less than 10% Less than 10% 34% 54%

Investments in infrastructure - A well-knit and coordinated system of logistics infrastructure plays an important role in the sustained economic growth of the country. Indias infrastructure deciencies have become more visible because of high growth witnessed during the past few years. The most visible indicators of overstretched infrastructure are Indias congested highways, airports and ports. Though the current levels of efciency are much below when compared with other developed nations, the government has plans for improvement through infrastructure development. While projects like development of the dedicated rail freight corridors, port development projects under National Maritime Development Program are being envisaged and executed at the national level, it is imperative that India augments its infrastructure spending. Given the scale of work that is needed, presently it is still relatively low at 4.6% of GDP far behind Chinas which is around 10% of GDP. The Planning commission recommends a step-up in this ratio to 8% by 2011-12. Post elections it is indeed perceived that the government will demonstrate renewed vigour in implementing transportation infrastructure projects across the country. It is expected that a stable government at the centre 2009 will usher a new wave of condence globally in the Indian economy. The government has also indicated that bottlenecks and delays in implementation of infrastructure projects because of policies and procedures, especially in railways, power, highways, ports, airports will be systematically removed. It is also expected that a large number of PPP projects in different areas currently awaiting government approval would be cleared expeditiously and the regulatory and legal framework for PPPs would be made more investment friendly. The above factors signal the emergence of an efcient transport infrastructure, which will trigger the growth of advanced logistics service offerings.

The table reects that there is an inverse relationship between logistics cost of a nation and the share of 3PLs in national logistics market . The greater the share of 3PLs the lesser is the national logistics cost thus highlighting the importance of 3PLs in logistics . Many Indian companies are realizing the importance of their supply chain network and are increasingly calling upon logistics managers for their professional inputs into corporate and marketing strategies. Consequently there has been an uptrend in the requirement of specialized Third Party Logistics Service Providers to whom companies are looking to outsource their logistics requirements. As per industry estimates, it is expected that 3PL solutions in India would grow at a CAGR of more than 20% during the period 2009-15.

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 Recognition of logistics as an integral part of corporate strategy -Over the years, the importance of distribution and logistics has become much more apparent to a broad range of Indian companies. The signicance of logistics within a companys total business structure is illustrated in the table below by using the inter-relationships of logistics with other functions .
Relationship of logistics with other corporate functions

Qualified work force -For an industry to prosper, the quality of the personnel it absorbs is an essential facilitator for sustaining its long term growth. While logistics was not usually the rst career choice for many and hence quality of manpower was an issue that was felt in the industry. However with the growing recognition of the strategic role that logistics managers can provide, there has been a steady inow of some of the best talent in the logistics sector over the past few years. From the point of view of supply chain planning, the key roles for a logistics manager with a broad remit might be summarized as: To lead the design, creation, configuration and parameter setting of the entire supply chain To create the framework and the dialogue that determine the performance targets along the whole chain To drive the systems and monitor and report the entire logistics operational performance against agreed targets To review how problems can be solved and performance improved

With production Production scheduling Production control Plant warehouse design Raw material stocks

With marketing Customer service Packaging Distribution centre location Inventory levels Order processing

With nance Stock-holding Stock control Equipment nancing Distribution cost control Stock control

Source : Handbook of Logistics and Distribution Management by Alan Rushton, Phil Croucher and Peter Baker

For the formulation of any competitive strategy, knowledge of key logistics elements is essential. Any factors related to the procurement, storage and movement of goods must, of necessity, be relevant to the determination of a companys business. Accordingly there has been a growing importance of the role and contribution that the logistics / distribution manager makes to corporate strategic planning.

There is an inverse relationship between logistics cost of a nation and the share of 3PLs in national logistics market. The greater the share of 3PLs the lesser is the national logistics cost

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Educational institutes in India have also commenced designing undergraduate, post graduate, diploma and executive level courses specically catering to the logistics and supply chain management sector, for which there has been a very encouraging response. In addition, logistics companies are sincerely trying to benchmark their HR practices with the best in the industry and implementing measures to attract and retain talent. Given the steady interest in logistics as a long term career option amongst the brightest of the Indian youth, it can be safely derived that Indian logistics sector will leverage on the growth path it has witnessed over the past decade. Streamlining of the indirect tax structure - In India, distribution network is designed more by the tax consideration rather than the requirements of servicing customers at optimal cost. Most of the consumer goods companies operate with at least one distribution center or Clearing & Forwarding Agent (CFA) in each state, where they sell, to avoid inter-state Central Sales Tax (CST). Such companies operated with 25 to 50 warehouses all over India, which is a very high number compared to developed economies (less than 5) or even China (less than 10). The introduction of Value Added Tax (VAT) and the proposed introduction of a singular Goods and Services Tax (GST) are expected to signicantly reduce the number of warehouses, manufacturers are required to maintain in different states, thereby resulting in a substantial increase in the demand for integrated logistics solutions. Globalizing of manufacturing systems Globalization of manufacturing systems coupled with advancements in technology is increasingly compelling companies across verticals to concentrate on their core competencies and avail the cost saving potential of outsourcing. This is expected to contribute to an increase in the need for integrated logistics solutions, which is the niche of every third party logistics service provider.

3.3.3 Opportunities in the logistics space The Indian logistics industry is poised for a signicant growth in the coming years as companies, especially in the automotive, pharma, manufacturing, retail and FMCG sectors, are increasingly opting to outsource their logistic requirements to specialized service providers. Some of the existing and emerging growth areas in the logistics sector is enumerated in the subsequent section. Cold chain storage and related logistics Cold chains form an integral part of the supply chain for storage and distribution of perishable goods and temperature sensitive pharmaceuticals and biological preparations. Estimated size of the Indian cold-chain industry is Rs. 8,000-10,000 crore (US$ 1.80 - US$ 2.27 billion) and is expected to grow at 20 to 25 per cent annually. It is estimated that this industry will grow to over Rs. 40,0002 crore (US$ 9.09 Billion) by 2015. As per the planning commission estimates, there are presently around 4,762 cold storage units in India with a capacity of 196 lakh tonnes, with potato constituting almost 81 percent of the total capacity of cold storages being handled. India may be among one of the worlds leading producers of horticulture products but more than half the fruits and vegetable produce end up rotting as waste, even before it arrives in the market for sale. Poor post-harvest methods of warehousing, storage and unsafe transportation from point of production to point of sale are among most prominent causes of this avoidable value drain. The key issues in the Agri-logistics related to the development of the cold chain industry are of non-standard pricing, limited nancial capabilities of the transporters, opportunistic proteering, lack of scientic handling of produce and consequent high prices and limited choices for the consumers.

There has been a growing importance of the role and contribution that the logistics / distribution manager makes to corporate strategic planning
19

Volume wise perishable products share in India 3%

Container Corporation of India (CONCOR) is moving into cold chain logistics in a big way and is developing a cold supply chain business in the form of suitable logistics infrastructure as well as state-of-the art storage facilities to sell fresh fruits and vegetables in the global food market. With a view to increase share of processed food in the country to 20% from the present 6%, the government is setting up 30 food parks by 2012 under public-private partnership. These food parks will have cold warehousing, grading centers and research laboratories. These parks could also be given SEZ and other scal benets to reduce production cost and increasing competitiveness. Considering the high risks involved in the food processing sector, the government will provide a subsidy of Rs 50 crore per park to private investors. The government plans to establish 50 cold chain networks, including refrigerated vans all over the country, which will help the farmers enhance the shelf-life of their produce and retain their quality. In addition, investment-linked incentives have been introduced for setting up and operating cold chain facilities, warehousing. The Agricultural and Processed Food Products Export Development Authority (APEDA) has established six Centres for Perishable Cargo at Bangalore, New Delhi, Chennai, Thiruvananthapuram, Hyderabad, and Mumbai of varying capacities. The total handling capacity at these six CPCs is 2.16 lakh tonnes per annum. The operating and ground handling agencies have been designated for each CPC. In addition, APEDA has signed MoUs for setting up of CPCs at Cochin, Ahmedabad, Amritsar, Kolkata, Bogdogra, Lucknow, and Goa.

39%

57%

1% Milk Fresh meat and marine sector Fresh fruits and vegetable Others

Note: Others include poultry, ice creams and vaccines Source: Various

As per industry estimates, approximately 104 million tonnes of perishable product / produce is moved in the country in a year. Out of that around 100 million tonnes goes through the non-reefer mode and remaining 4 million tonnes goes through reefer transport. Out of the 100 million tonnes of perishable load 96 million tonnes directly enter in local and regional markets. Out of this volume, around 86 million tonnes is sold through the wholesale and retail outlets based in regional and local markets without warehousing and cold storage conditions and 10 million tonnes is the produce that requires cold storages even when they enter the markets. Accordingly the requirement of cold chain across the country by the stakeholders far outstrips the handling capacity of the available cold chain infrastructure in the country. Some of the industry and government initiatives for development of cold chain infrastructure include -

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Air cargo The use of air as the mode of choice for the movement of cargo has increased over the past few years. While the amount of the cargo freighted via air is growing steadily, the infrastructure related to air cargo handling and evacuation is not. The Government has acknowledged the need for development of cargo related facilities and is taking the necessary steps to address the situation. India already has an open sky policy for air cargo. An air cargo hub is being developed at Nagpur by the Ministry of Civil Aviation. The ministry also has plans to build dedicated cargo airports across the country to cater to increasing demand in air cargo trafc. At present India contributes over 1% of the world air cargo trafc. The ve major airports (Mumbai, Delhi, Kolkata, Chennai and Bangalore) account for around 88% of the total air cargo handled in India. Growth in cargo / freight volumes is an outcome of macroeconomic factors such as domestic consumption, exports and imports. Infrastructure remains a major challenge. The international and domestic cargo volumes (except for the F.Y 2008-09) have shown a steady growth despite inadequate capacity and infrastructure constrains. The blip in 2008-09 can be accounted due to the global slowdown.

Cargo volume handled at international and domestic airports in India Cargo in 000 Tonnes 2000

1600

1200

800

400

0 2004-05 International Domestic Source: Airports Authority of India 2005-06 2006-07 Total 2007-08 2008-09

The Civil Aviation Ministrys proposal to frame a policy for the development of airports exclusively for cargo operations is encouraging and on commissioning of these cargo airports in due course of time will provide a much needed trigger to the air cargo segment

The major commodities being air freighted out of India are garments, machinery components, pharmaceuticals, dyes, chemicals and perishables such as fruits, vegetables, owers, sh and meat. Due to the high time sensitivity Clientele demand, there has also been a steady patronage of air cargo services across industries including telecom, gems & jewellery, electronics, IT & ITES related equipments etc. The Civil Aviation Ministrys proposal to frame a policy for the development of airports exclusively for cargo operations is encouraging and on commissioning of these cargo airports in due course of time will provide a much needed trigger to the air cargo segment. These airports will be established in the countrys major business centres. Under the new policy on cargo, a Centre for Perishable Cargo (CPC) would be established, which would ensure movement of perishable cargo at the airports.

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Material handling equipment The Indian Material Handling Equipment (MHE) market has been estimated at about Rs 5,000 crore. The traditionally fragmented material handling Industry has been consolidating at a fairly rapid pace in the recent years. Material handling equipment used by logistics industry include forklifts, pallet trucks, stackers, reach truck, order picker, overhead travelling cranes etc. Traditionally, a lot of manual intervention was involved in the logistics business, as a result of which they were delay in deliveries; products were more prone to damage due to poor handling and transit time taken was much longer. This resulted in low speed, handling problems like scratches, chipping, breaking and difculty in monitoring the material ow. Demand for material handling equipment has been increasing in the last few years. One of the primary reasons fuelling this growth is that companies are increasingly feeling the need to lower their logistics cost. As a result of which there is a shift from manual operations to use of electric and battery operated equipments, especially in warehouses to improve efciency and save time. Some of the reasons for this shift include low maintenance requirement, one time investment, long life of equipment, no diesel requirement, etc. In addition, the foreseen increase in cargo trafc handled at the major gateways over the future, the requirement of material handling equipment will maintain its uptrend. Reverse logistics Many logistics movement of goods go beyond the conventional supply chain perspective and thereby generate add itional business transactions. These include failed components repaired to serve as spare parts, unsold stock being recovered, old products improved to meet latest standards again, reusable material returned and relled / re-developed etc. Reverse product ows may generate value on a product, component, or material level.

Some of the opportunities emerging from the growth in the air cargo segment include: Providing vendors and industry in the non-metro cities a speedy gateway to the world Investment in air cargo infrastructure would spawn related supporting infrastructure including warehousing, industrial parks, Distribution Centres etc. The efficiency and the reach of the express cargo industry will further improve Indian companies can exploit their inherent IT capabilities to develop specic application systems to enable air cargo planning, movement, management and co-ordination Domestic airlines can leverage on the development of the Hub-and-spoke model for the countrys cargo operations

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With an ever increasing breed of quality and timely delivery conscious Indian consumers, manufacturers have endeavoured to develop logistics network that would cater to the reverse logistics ow of materials. The ability of a logistics network to cater to the timely retrieval and delivery of material can be considered as a strategic tool for customer retention. A customer who enjoys a timely after sales spare part replacement would generate a positive word-of-mouth campaign. While earlier, the manufacturers tried to manage their reverse logistics system in-house, manufacturers are now also seeking the option of outsourcing of their entire reverse logistics network to third parties. However outsourcing the management of reverse logistics ow entails that the third party service provider has the mechanism to respond to the customers query, develop suitable system to collect the old product from the customer and if required possibly replace it with a new product, deliver the product to the manufacturers location. The manufacturer hence needs to have the condence that the third party interaction with the customer should be smooth considering that the replacement of a product may lead to a contentious issue. Accordingly, before outsourcing of the reverse logistics network, the manufacturer has to collaborate with the logistics service providers to chalk out and implement a robust reverse logistics system. For the logistics service provider, the reverse logistics support for a manufacturer would never be treated as a one off transaction. The logistics service provider would be required to act not only as a service provider, but would be required to treat the Client as a service partner treating the Clients business as his own. While global manufacturers are outsourcing reverse logistics operations to third parties in the developed logistics nations; the trend is steadily catching up in India. This provides a huge opportunity for the various logistics service providers to expand their bouquet of service offerings and consolidate on the opportunities that reverse logistics would offer.

The challenge however that is in India, the forward logistics chain is far from perfect and hence establishing a sustainable reverse logistics system might be a challenging task. 3.4 Signicance of SMEs in the Indian logistics industry Small and medium -sized enterprises (SMEs) are usually the mainstay of most economies, particularly in terms of employment and overall development impacts. As per the World Association for Small and Medium Enterprises (WASME), there are over 5 million SMEs in India accounting for around 80% of the industrial sector employment. It is the second largest employer of human resources after agriculture, employing around 20 million people, contributing 35% of the total export trade and accounting for nearly 40% of the total value of industrial production. The above gures reect the importance and contribution of the SME sector to the national economic growth and prosperity. It is hence not surprising to realize the importance and the signicance of the SMEs in the Indian logistics sector. The logistics sector in the country is dominated by the Small and Medium Enterprises (SMEs) of which the majorities are the road transport providers. It is estimated that more than a million transport operators are owning and running more than 4 million trucks. The reduction in the logistics cost can be brought about by improving the national logistics infrastructure to facilitate smooth transfer of materials and information. While at the macro level, the Government of India can initiate steps for improving the logistics infrastructure of the country, the logistics service providers at the micro level would need to infuse better management practices to reduce their service cost and improve their operational efciency. Since the Small & Medium Enterprises constitute a signicant percentage of the logistics service providers, it would not be inappropriate to mention that these SMEs would be acting as the catalyst in reducing the national logistics cost component.

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4. SMEs in logistics: Succeeding in the market place

The power of small is enough to bring about a revolution in the way business is done. Typically, rms that start small but do a good job of responding to market needs become larger over a period of time. To enable such new entrants with drive and good ideas to grow, it is necessary to create a conducive environment. The objective of any program for SME support, therefore, should not be to reward rms that happen to be small. Rather, it should ensure a functioning ecosystem, in which new ones can emerge, existing ones can grow, and large and small ones can collaborate and leverage their synergies. Logistics service providers having investment in equipment (excluding land and buildings) exceeding Rs.10 lakh (US$ 0.2 lakh) but less than Rs.2 crore (US$ 4.1 lakh) qualify as Small enterprises and those investing more than Rs. 2 crore but less than Rs.5 crore (US$10.3 lakh) classify as Medium enterprises3 . Today, perhaps the biggest challenge that these service providers face is coping with the regional, geographical and legislative diversity in the country. This results in a lack of standard practices, procedures, regulations as well as disparities in the level of compliance. Land transportation in particular gets signicantly exposed to these issues as the fragmented ownership of key components like warehouses and trucks makes the consolidation of services an enormous task, and the resultant offering becomes extremely inexible to suit customers needs. Users of logistics services are no longer lured by buzzwords or big names; the focus is clearly on costs and delivered value. Hence, the emergence of SMEs as strong regional or sectoral players is imminent. SME service providers are rich in local experience and have the exibility and speed to deliver according to the expectations of the principal. Most SMEs are also owner-driven, and this reassures customers that they will be dealing with a person rather than an impersonal service. As the Indian logistics sector becomes more competitive globally, multinational companies will look to outsource their entire logistics services to India. Most of the logistics companies in India now offer a complete range of services: warehousing systems, distribution, tracking of goods and separate storage facilities for wet and dry goods. This will serve as a major attraction for international companies, as they are looking for a one-stop-shop for most of their business verticals. In addition, implementation of innovative technology and the cost-effective models will help ensure better management of assets, allowing SMEs to reduce expenditure and remain competitive in the present economic slowdown. 4.1 Competitiveness of SMEs in logistics Deloitte conducted a survey of several Small & Medium logistics players to capture the developments in the Indian logistics space and more importantly the broad level challenges that the industry is currently facing, particularly from the perspective of a Logistics Service Provider (LSP). The respondent companies belonged to a wide spectrum of logistics segments such as freight forwarding, shipping, customs booking, container freight stations, warehousing, and multi-modal transportation.

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As a part of the survey, Deloitte had designed a holistic questionnaire, which was administered to the respondents during a one-to-one discussion. It attempted to seek responses on various parameters such as company background, operational performance, internal benchmarking, soft infrastructure and also views on quality of external infrastructure and its impact on logistics businesses. The individual responses thus collated, form the basis of analysis that follows. 4.1.1 Internal factors affecting competitiveness Services In the recent past, the logistics industry has witnessed a paradigm shift in scope of service offerings with the constituent players moving from typically being single service specialization companies to what are now popularly referred to as Total logistics solution providers. This has added a new dimension of service synergies, which ultimately helps the service providers to offer a whole gamut of quality services to the client at competitive rates. Furthermore, in a situation like todays it also helps diversifying the basket of offerings into a wide range of avenues so as to minimize risk faced due to unpredictable / vulnerable business segments. While managing the complete supply chain presents its own unique challenges, it also helps in optimizing costs not only for the service provider, but also for their customers wherein they can have greater control over their inventory levels to prevent stock outs. Organizations that have been able to embrace this change and expand their capabilities beyond pure play transportation certainly enjoy a competitive advantage over their peers. In India, this trend is largely seen in rms which have a strong warehousing and distribution capability, a customer centric approach and a forward thinking leadership.

Foreign alliances Another trend which is fast picking up, is that of LSPs forging alliances with foreign players to ensure access to untapped geographies and benet from collaborative effort. Having said that, the regional strength of domestic players is equally a compelling factor for SMEs to collaborate and leverage on. In several cases, the scope of this relationship has moved beyond the realm of geographic reach to making strategic investments and bringing specic logistics related expertise, which can be a strong competitive advantage.
Key value propositions of alliances

Reliability International presence

Value added service Market reach

Size

Key value proposition of alliances

Financial strength

Pricing Company background Cost of alliance

Technical expertise

Source: Deloitte survey

Cost The current slowdown has robbed the logistics sector of not just volumes but even margins. The businesses have witnessed varying impacts with volumes falling to the tune of anywhere between 10 per cent to 30 per cent and margins declining by as high as 70 per cent.

Users of logistics services are no longer lured by buzzwords or big names; the focus is clearly on costs and delivered value. Hence, the emergence of SMEs as strong regional or sectoral players is imminent
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While segments such as project cargo movement and domestic agency business have managed to remain aoat, others like container business and ship chartering have had to bear the brunt. eg: Booking a container from India to U.K. which used to earn around US $1000 per TEU earlier, now gives only US $300 per TEU. Unlike commercial orders which have taken a hit, personal cargo volumes are still promising and thereby ensuring reduction of adverse impact. To ensure survival, some players are charging rock bottom rates and in turn rendering the services of other players uncompetitive. This has clear implications for individual players to streamline operations. Optimizing operations together with cost cutting will therefore go a long way in helping SMEs gather strength internally and compete effectively. This can be further supplemented by company initiatives such as adopting a sales intensive approach including cross selling by different divisions and strengthening recovery. Training Although basic training is provided in most organizations, it lacks the necessary focus to tap and promote workforce talent and elevate service performance to global best standards. This is partly reected in the survey response, wherein despite having adequate workforce and low attrition, the quality of work has been lagging. Another reason could be recruitment of inexperienced / unqualied staff at lower wages, with an objective of cutting on costs, unaware of the repercussions it could have on the quality of services rendered. At certain places, the operational training is limited to technology updates, while at some other it is purely in form of on the job experience. To compete effectively in todays age, training in supply chain management practices and quality management techniques such as six sigma can help to a great extent.

Technology Globally, investment in technology is another important driver of an organizations efcacy. However, technology implemented by the respondent LSPs is more or less limited to cargo tracking in general and for agency business in particular, it is conned to systems used by the principal so as to ensure compatibility. At times, point-to-point movement of cargo is even manually tracked and updated by agents en route the nal destination. The level of familiarization and use of advanced technologies like Global Positioning System (GPS), Warehouse Management System (WMS), Radio frequency identication (RFID) amongst SMEs in India is quite low. The fear of price sensitive Indian market, not being able to bear the additional cost of technology further acts as an impediment. Again, a few setups despite being signicantly large do not employ such technologies since they cater to bulk transportation & warehousing, unlike third party logistics players which are concerned with moving numerous small parcel sizes. The chart below plots areas of growth opportunity from the perception of Logistics SMEs that were covered by the survey. The various opportunity areas were assigned weights, based on world averages sourced from survey by leading logistics player UPS, on SMEs in India. These have been compared with corresponding relative importance in per cent terms, which was an outcome of the Deloitte survey. From the analysis, it follows that moving to higher value added services is perceived as the biggest growth opportunity by Logistics SMEs today.

The fear of price sensitive Indian market, not being able to bear the additional cost of technology acts as an impediment
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Perception of growth opportunity by logistics SMEs Relative importance for logistic SMEs

35% 30% 25% 20% 15% 10% 0% 0 1 2 3 4 5 6

Forging alliances & acquisitions Optimizing operations Improving workforce quality through training IT adoption Moving higher value added services

Relative weights based on world average

Source: UPS Asia Business Monitor 2009; Deloitte Survey and Analysis

Pursuing the right mix of growth opportunities can help a player boost its market share. Notwithstanding this, the customers choice of an LSP is driven by a set of parameters, some of which are indispensable and the others desirable.
Key determinants of choice for selecting a LSP

Cost effectiveness

Service quality

Network reach

Equipment

Choice of an LSP

Specialized cargo handling

Reputation

Compliance & approvals Timely delivery

Source: Deloitte survey 27

In the earlier mentioned chart, compliance and approvals refer to the various licences and/or permits which are particularly of relevance to custom house and clearing & freight forwarding agencies. Besides the above factors, public sector organizations also typically look for past performance, nancial standing and the quantum of orders executed by the prospective LSP in a particular period. The desirable factors, on the other hand, are sophisticated IT infrastructure, door-to-door service, alliances, and brand name. Other factors that have a bearing on the competitiveness of logistics service providers are: Transactional relations: This is mostly driven by the clients requirements & degree of his satisfaction with the services of the LSP. Although on an average most deals are carried out on a deal-to-deal basis, many LSPs are trying to pitch in for longer relationships as this can ensure them a steady ow of work orders. Service level agreements: Service Level Agreements (SLAs) set out performance standards to be complied by the logistics service provider and include parameters such as delivery, quality, safety information availability, etc. Such agreements bring in efficiency and accountability in the business. SLAs are largely insisted in contract logistics wherein the service provider handles product movement up to the point of purchase and can vary as per the industry and nature of cargo. Industries like computer peripherals and hardware, automotive, perishable products are likely to demand stringent SLAs. It is understood that adherence to SLAs in India is around 80 to 85 per cent while in developed economies it is around 95 per cent. The survey responses also indicate that pure play transporters generally are not very conscious about SLAs as they are more worried about the cost, as compared to 3PLs who monitor the SLAs closely.

Benchmarking: Each player seemed to be guided by its own set of benchmarking practices. Internal benchmarking is mostly being practiced by way of achieving conformity with SOPs to ensure uniform level of performance at all operation centres, internal review, performance audit, and periodic calculation of customer satisfaction index based on customer feedback. External benchmarking, however, is not so widely undertaken by the Indian LSPs yet. Innovation: This is one such factor that can help a player differentiate its services from the rest and more importantly benet from the rst mover advantage. This could either manifest in form of exclusive service offerings such as serving the niche segment of hydrocarbon transportation, etc or thinking out of box like tting four cars in one container instead of three using a movable deck. Innovation can also sometimes take form of intensive capital investment, the rst of its kind, in equipment at a place, such that competitors nd difcult to match such huge investment and eventually tend to lose out. Unfortunately, innovation amongst the Indian logistics SMEs is still at a relatively nascent stage 4.1.2 External factors affecting competitiveness These can be broadly classied into infrastructural bottlenecks and policy constraints. Infrastructural bottlenecks relate to deciencies in physical infrastructure such as roads, railways, ports, airports, Inland Container Depots (ICDs) & Container Freight Stations (CFSs), whereas policy constraints refer to the regulatory & procedural hurdles affecting transportation.

The survey responses indicate that pure play transporters generally are not very conscious about SLAs as they are more worried about the cost, as compared to 3PLs who monitor the SLAs closely
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Nature of bottleneck

Area

Cause Inadequate capacity at major ports Untapped potential of non-major ports

Effect Heavy congestion at most major ports leading to higher vessel turnaround time Inefcient handling Long waiting time Congestion at main airports

Ports

Outdated equipment Lack of warehousing Few busy airports (Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad)

Airports

Numerous unused airstrips & relatively less used airports Lack of equipment for odd-sized packages, professional packers, etc Bad quality of roads Inefcient handling resulting in pilferage/damage High cost of alternate arrangements (prices quoted by individual loaders) Do not support the axle weight of the trucks & cause the roads to break and cave in Bad road quality leading to poor speeds, accidents and high vehicle maintenance Inconvenience due to limited access to neighbouring ports Choked rail network & resultant lower speeds of cargo trains Transportation delays & cost overruns Transportation delays Less integrated services, inefficiency & resultant inconvenience Inefcient handling Huge delays

Infrastructure Roads Inadequate lanes / lack of maintenance Inadequate hinterland connectivity Too many level crossings / minimal electronic controls / priority to passenger trains over cargo trains Railways Limited network and terminals of private players (container movement) Inadequate capacity / connectivity Unreliable infrastructure / uneconomical size Cold Chain/ CFS/ ICD Inexperienced staff Outdated customs formalities incl. documentation Erratic EDI Customs Interpretation of rules & regulations left to the discretion of Customs Commissioner Too many collectorates especially in the NCR region Corruption Border duties such as octroi Inadequate controls (esp. roads) Abolished by most states, but still applicable in Mumbai, Pune, etc. Excess loads going unchecked

Ineffective administration of customs laws

Regulation

Increases cost of transporting through that city & eventually distorts logistics network Bad road quality leading to poor speeds, accidents

Continue on next page 29

Nature of bottleneck

Area

Cause Attractive manufacturing incentives such as tax holidays for setting up units in a remote / industrially backward region Multiple taxes for shipping (Tonnage tax + 12 other taxes)

Effect Distorts logistics network as units in remote regions of Himachal Pradesh / Assam, etc may not enjoy the logistical advantage of a place with relatively better connectivity Renders Indian shipping internationally uncompetitive

Taxation

Regulation

Red tape / bureaucratic hurdles

Involvement of multiple agencies such as Cost overruns, inconvenience & delay Commerce Ministry for ICD / CFS / SEZ, rail ministry for private rail terminals, Ministry of Surface Transport for Roads, & Shipping Ministry for Ports / Shipping Applicability of multiple acts such as Railway Act, Merchant Shipping Act, Indian Ports Act, MMTG Act Subjects multi-modal operations to multiple regulations and makes compliance cumbersome

Law

At present, the congestion at ports has automatically reduced thanks to the decline in trade. But once trade volumes pick up, it could again start posing a signicant problem and have a cascading effect on related transport channels. eg: The ideal transit time for container from Ludhiana JNPT (1500kms) is approximately 2-3 days. However, in times of congestion, this can escalate to even a week or more. The LSPs have found a way to mitigate this problem by collaborating with ports, which enables them in availing preferential allotment of window. The long term solution to this, however, is development of more non-major ports. Further, alternatives like development of coastal shipping and inland water transport can be explored to help ease out the infrastructural bottlenecks and bring down the overall logistics cost. From the analysis, it follows that besides poor infrastructure & regulatory hurdles, the other logistics cost inators are: Variable vessel charter costs Fluctuating oil / fuel prices Fluctuating exchange rates Non-availability of return loads High haulage rates

To overcome the burgeoning logistics costs, the respondent LSPs are resorting to the following initiatives: Negotiating & re-negotiating contracts Negotiations with airlines would involve a minimum cargo commitment, eventually resulting in lower rates for customers. Negotiating with truckers (surface transport) would involve giving contracts to those providing competitive rates besides having a good network of pick-up. Load optimization This refers to judicious selection of cargo by going for a right combination of weight & volume cargoes so that total capacity is optimally utilized. Efficient Route scheduling This involves evaluation of available routes between the source and destination and selecting the most appropriate route which will optimise cost and delivery, proper selection of load & discharge points and deciding on what quantities to be picked up from where. The ability to provide the most cost effective distribution network is being used as a competitive advantage by the LSPs.

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 Increased adoption of IT This is being actively pursued by implementing IT infrastructure and software for managing business processes as well as operations. This will increase efciency and reduce time taken for various activities particularly in warehousing and eet management. A well designed MIS enables regular tracking of performance and nancial metrics such as sales, protability, variance analysis etc., Survey responses indicate a mix of organisations having separate IT systems and also those which have implemented a unied ERP solution. Saving on logistics related communication International communication is an integral part of logistics operations, especially that of a freight forwarder. Most work is sorted over emails. The operations team refrains from making phone calls, unless absolutely necessary. Cutting down on manpower This is being actively pursued by implementing ERP systems, which enable integration of ofce systems and provide client interface. Most of the manual work gets automated and therefore replaces the junior human resource at operations level. Other measures These include working capital management, inventory cost control and periodic reviews among other things. 4.2 Assessment of challenges: Internal & external A thorough analysis of internal and external factors affecting the logistics industry in general, together with acknowledgement of constraints specic to SME players like lack of funding can enable us identify areas of improvement for the industry, as follows:

Areas for improvement / challenges Level of improvement desired 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0 1 2 3 4 5 6 7 IT Adoption Regulatory effectiveness Innovation Quality of manpower Access to funding Transportation infrastucture

Relative weight based on world average Source: UPS Asia Business Monitor 2009; Deloitte Survey and Analysis

Transportation infrastructure is not just crucial for logistics services world over, but is also an area that needs substantial improvement in the Indian context. This is followed by inadequate access to funding, a problem particularly faced by SMEs. Regulatory effectiveness, although equally important for India, carries a lesser weightage going by the world averages, probably due to foreign countries already having an appropriate and enabling regulatory regime. 4.3 S-W-O-T Analysis Strategy formulation for any entity or a group of entities is primarily inuenced by their relative competitive position in the industry. This, in turn, is collectively determined by a set of factors such as strengths & weaknesses (internal), opportunities & threats (external).

The ability to provide the most cost effective distribution network is being used as a competitive advantage by the LSPs
31

A conscious effort to maintain an edge in the areas of strengths, improve on weaknesses, a drive to actively pursue opportunities, and take proactive measures to guard oneself in areas of threats can enable the group of rms to nd their way through adversity. The inputs obtained during the survey and subsequent analysis form the base for S-W-O-T framework for Indian Logistics SMEs, which is elaborated in the figure below:
S-W-O-T Analysis for Indian logistics SMEs

ploughing back prots (self funding) and optimizing operations so as to qualify for SME loans Lack of use of state of art technologies, if suitably addressed can boost the international competitiveness of the Indian logistics industry, as a whole Inadequate controls & cost consciousness amongst drive LSPs, particularly road transporters, often lead to low safety standards eg: instances of overloading by trucks Opportunities A likely boom in Construction and Pharmaceutical / Healthcare sectors would imply potential business opportunity for LSPs in terms of increased multimodal movement of raw material & manufactured products, both domestically as well as internationally. Progressive reforms such as introduction of single Goods and Service Tax (GST) will help rationalize the warehousing set-up in the country and enable the LSPs to trim their logistics costs Governments plan to award projects worth more than Rs. 3,300 crore (US$ 67.9 crore) for development and upgradation of container / cargo terminals during the rst three months in ofce and budget announcement of facilitating incremental infrastructural lending through takeout nancing scheme of IIFCL provide the much necessary push to infrastructure expansion and is likely to augur well for the LSPs Threats Competition from large foreign players can be guarded against by adopting advanced technologies, collaborations and leveraging on regional strengths & resultant cost advantages The deal to deal transactions and price sensitive nature of Indian markets compels the LSPs to charge lower rates, whether affordable or not, for fear of losing out customers to competition The impact of global market conditions on logistics business by way of decline in international trade can be curtailed by concentrating on domestic markets, which are still quite promising

Strengths Owner driven Adequate labour pool Regional dominance Low attrition

Weaknesses Highly fragmented Lack of affordable credit Lack of use of state of art technologies Low safety standards

Opportunities Promising sectors (construction & healthcare) Progressive reforms (GST) Infrastructure expansion

Threats Competition from large foreign players Pricing pressure Influence of global market conditions

Source: Deloitte analysis

Strengths Most enterprises, by virtue of being owner driven, tend to offer personal commitment and quality services to their clients Relative ease at filling up vacancies in operations abundantly reects availability of adequate labour With operations & agency network primarily concentrated in a particular region, they enjoy regional dominance and can provide services at economical rates compared to their counterparts Low attrition, partly aided by the current downturn, can be further exploited by focusing on training & employee friendly HR initiatives Weakness The fragmented nature, an inherent weakness of the industry, can be effectively addressed through consolidations, partnerships, and segment specic forums aimed at providing integrated services to the clientele A common problem faced by SMEs is that of limited access to affordable credit, and can be overcome by
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5. Transport infrastructure

The 11th ve year plan Approach Paper calls for the investment to increase from a current level of 4.6% of GDP, to between 7 & 8%. While the target of 8% for the 11th plan is still short of the 10% gure which India needs to achieve, there is still a need for adopting a strategy in terms of how much would the government be investing; and how much needed to be the share of the private sector, including also FDI in Infrastructure. The Capsule Report on Infrastructure sector performance by Ministry of Statistics and Program Implementation, the year on year rate of growth in cargo trafc has considerably declined in FY 2008-09. A snapshot of the performance of each of the transport infrastructure sector is indicated in the subsequent section. 5.1. Trafc performance Rail The freight trafc carried by the railways during 2008 2009 at 833.31 MT was 2.0 per cent lower than the target set for the period, and recorded a growth of 4.9 per cent over the performance during 20072008. The freight loading for 2008-09 of 833 million tonne do not meet the target of 850 million tonnes. Freight loading got impacted by the economic downturn, which in turn, has hit the railways earnings. The freight loading for the current nancial year has been estimated at 882 million tonnes
Railways freight loading in million tonne In million tonnes 1000

PortsThe major ports in the country handled 530.35 million tonnes of cargo during 2008 2009, which was 7.9 per cent lower than the target set for the period. About 80 per cent of the total volume of ports trafc handled was in the form of dry and liquid bulk, with the residual consisting of general cargo, including containerized cargo
Trafc handled at the major ports In million tonnes 600 500 400 300 200 100 0

2004-05

2005-06

2006-07

2007-08

2008-09 (Prov)

Source: Ministry of Shipping

800

600

400

200

0 2005-06 2006-07 2007-08 2008-09 (RE) 2009-10 (BE)

Ministry of Railways

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Aviation: The ve major airports (Mumbai, Delhi, Kolkatta, Chennai and Bangalore) account for around 80-85 per cent of the total air cargo handled in India. These ve International Airports handled 5,3,382 tonnes of export cargo during 2008 2009, which was 3.4 per cent higher than the previous year. The growth rate, however, was lower than 7.5 per cent in 2007-2008. Further, 4,29,527 tonnes of import cargo was handled at these airports during this period registering a negative growth of 5.7 per cent. The corresponding growth rate was 19.7 per cent during 2007-2008.
Air cargo trafc handled at Indian airports. In 000 tonnes 1200

900

600

300

0 2004-05 International Source : Airports Authority of India 2005-06 Domestic 2006-07 2007-08 2008-09

The detailed description with regards to the development needs, challenges and opportunities existing in each of the transport infrastructure sector is indicated in the subsequent sections. 5.2 Railways Indian Railways (IR) serves as the backbone of Indias transport infrastructure, and as such contributes signicantly to macroeconomic growth and global competitiveness. The premier transport organization of the country is the largest rail network in Asia and the worlds second largest under one management at a total of 63,332 route kms. Freight contributes to around 65% of its total revenue. The Railway Ministry in its
34

recent budget estimated its cash surplus (earnings net of operating expenses & pension) after dividend of Rs 5,479 crore to the Centre will be Rs 8,722 crore, 31% lower than the Rs 12,683 crore (actuals) in 2008-09. This would imply that organizations dependence on budgetary support and market borrowings heightens as the cash surplus, the amount available for capitalization (transfer to the development fund and capital fund), is down to Rs 2,642 crore from Rs 6,356 crore in the revised estimates for 2008-09. Accordingly, the Railway Ministry has outlined many measures to generate revenues from non-traditional sources. This includes laying of optic bre along railway tracks, utilizing land and airspace for other commercial purposes, etc.

5.2.1 Development needs The existing railway network is crippled by capacity constraints and is inadequate to meet the potential demand of cargo transportation. The ambitious project of railway freight corridor should address the capacity constraint. The work for the dedicated freight corridor (DFC) ( which has been renamed as Diamond Freight Corridor in the recent Rail Budget) , envisages construction of dedicated freight lines along the eastern and western sides of India covering 2,739 km . Once commissioned, the DFC along with the feeder routes will ensure the availability of sufcient capacity in the face of rising demand. It is expected to increase average speeds to over 100 kmph, reduce transit time by half and also reduce the cost of operations. The project is expected to reach completion by 2016-17.
Proposed dedicated freight corridor Ludhiana Dadri Khurja

5.2.2 Challenges The Railways are carrying the additional burden of sixth pay commission recommendations. The Railways have to pay Rs.6,600 crore in arrears alone to the employees besides the increased salary burden of about Rs. 7,000 crore in the F.Y 09-10. About 60% of the arrears on account of pay commission has to be paid in 2009-10. This has coincided with the economic slowdown which has affected earning. In two years, the Railways have to pay Rs. 28,000 crore towards salary and arrears. The two factors have led to an increased operating ratio of 92.5%. Some of the other challenges facing the Railways are professionalizing its cadre, giving up tradition of hierarchies which its departments signify, bonding the various depts. into a cohesive unit exible to cope up with the fast changing environment, cutting cost, yielding economies, reducing tariffs and benchmarking performance with comparable systems abroad. 5.2.3 Opportunities The rail container policy announced in January 2006 allows private companies to undertake container transportation by rail. As many as 16 licenses have been issued for operating container trains. In the recent budget announcement, it was indicated that the Railways were working out the details of a premium service for movement of containers with assured transit periods for time-sensitive cargo. Permission has also been provided to container train operators to access private sidings to help attract piecemeal trafc that are at present not being carried by railways.

Ahmedabad Vadodra

Son Nagar Howrah

JNPT Source: Dedicated Freight Corridor Corporation of India Limited

Implementation details of the Dedicated Freight Corridor Corporation of India Limited

Western corridor Phase I Phase II Phase III Eastern corridor Phase IA Phase IB Phase II

Stretch Rewari Vadodara (920 km) Vadodara JNPT (430 km) Rewari Dadri (140 km) Stretch Sonenagar Mughalsarai Mughalsarai Khurja (710 km) Khurja Ludhiana (Dandarikalan)

Implementation period 2009-2016 2010-2017 2010-2017 Implementation period 2009-2016 2010-2016 2011-2017

Source: Dedicated Freight Corridor Corporation of India Limited

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The railways have also chalked out plans for a freight related revamp in partnership with the private sector. The partnership involves redevelopment of dilapidated goods sheds and freight terminals into stateof-the-art logistics parks. The railways would hand over the damaged property on a long term lease to a private player for development, operation and maintenance on a revenue sharing basis. Indian Railway Catering and Tourism Corporation (IRCTC) have already been mandated to develop catering services, budget hotels and food plazas at major stations through involvement of private entrepreneurs. IRCTC intends to take up around a hundred such budget hotel projects in the next ve years with Public Private partnership. 20 such concessions have already been awarded. Some of the proposals that have been mentioned in the recent budget that offer opportunities to various private parties include: Multi-functional complexes having shopping facilities, food stalls, budget hotels to be constructed at 50 railway stations serving centres of pilgrimage, tourist and industry Private ownership of special purpose rolling stock for commodities and private operation of freight terminals will be encouraged Mega logistic hubs being planned alongside Eastern and Western Dedicated Freight Corridors 5.3. Roads A good road network constitutes the basic infrastructure that propels the development process through connectivity and opening up of backward regions to trade and investment. Roads also play a key role in inter-modal transport development, establishing links with airports, railway station and ports. India has the worlds second largest road network, aggregating over 3.34 million kilometers next only to the United States. Indian roads carry about 61 per cent of the freight and 85 per cent of the passenger trafc. All the highways and expressways together constitute about 66,000 kilometers (only 2% of all roads), whereas they carry 40% of the road trafc.

5.3.1. Development needs

Road sector breakup 2% 4%

14%

80%

National highways State highways

District road Rural roads

Source : Ministry of Road Transport and Highways

To improve and develop national highways, the government has initiated National Highways Development Programme (NHDP) in a phased manner. The National Highways Authority of India (NHAI) is implementing the NHDP programme The NHDP with its planned seven phases covering approximately 50,000 km at a massive investment of about Rs.3,000 billion has been the blueprint for national highway network development in India.

36

Phase I II III IV V VI VII

Length(km) 7,521 6,805 12,109 20,000 6,500 1,000 -

Description Comprises 5,846 km of GQ, 981 km of NSEW corridor, 380 km of port connectivity and 315 km of other national highways Comprises 6,319 km of NSEW corridor and 496 km of other national highways Four-laning of 12,109 km of national highways in two phases, Phase IIIA and IIIB, on BOT basis Two-laning with paved shoulders of 20,000 km of national highways on BOT basis Six-laning of 6,500 km of national highways on DBFO basis Construction of 1,000 km of expressways on DBFO basis Construction of ring roads, bypasses, yovers, etc. on BOT basis

Target completion date December 2009 (GQ by December 2008) December 2009 March 2012 December 2015 December 2012 December 2015 December 2015

The spending in road sector has a multiplier effect in terms of job creation and increase in per capita income. Hence any spending, whether by government or by a private partner, denitely helps in economic stimulus. Accordingly the government plans to invest around Rs 1,00,000 crore to build about 12,000 kilometres of roads for the F.Y 2009-10 mainly through the toll-based model, with options to bring in foreign investors. Inadequacy of funds is a prime reason for the demandsupply gap. Road projects in the country require around Rs 2,00,000 crore over the next three years for which, the Ministry of Road Transport and Highways are considering innovative nancing instruments that will fund road projects and attract domestic and foreign investors. Efforts are also being made to involve all possible investment channels, including pension funds, sovereign wealth funds, equity funds, besides funds from banks. The ministry has plans to boost road and highway connectivityat the rate of 20 km daily. 5.3.2 Challenges The road transport cost comprises of vehicle operating cost and road related cost. The vehicle operating cost on Highways, which is major component of the total transport cost, is entirely dependent on the condition of the roads. In order to reduce this total transport cost it is essential to maintain the roads at a good level of service. The existing NH network is under severe strain due to rapid trafc growth, overloading of vehicles and the Governments inability to provide the required funds for maintenance of National Highways.

Requirement of funds for maintenance of Highways as per the norms and funds provided

Year 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Requirement as per norms 2200.00 2200.00 2480.00 2100.00 2012.00

Amount provided 800.00 731.74 745.56 868.10 814.38*

Shortfall 1400.00 1468.26 1734.44 1231.90 1197.62

% Shortfall 63.64 66.74 69.94 58.66 59.52

Source: Report of the working group on Roads ( 2007-12) for the 11th ve year plan

Apart from funds, other factors as cited in the report of the working group include outmoded system of gang labour, weak planning, scheduling and monitoring of maintenance operations, inherent deciencies in structural thickness, lack of attention of drainage and poor enforcement of legal axle load limits which have hastened the process of decay of the NH network. Hence there is a need to deploy proper management for maintenance of National Highways. Some other challenges include land acquisition, encroachment on highways, environmental and forest clearances, shifting of utilities, railway approvals for rail overbridges, local law and order problems, poor performance by some contractors, etc. This translates in form of slower speeds of vehicular trafc. On an average, the kilometer range per Commercial Vehicle per day in India is 240-280, as against 680-700 in the developed countries.
37

5.3.3 Opportunities The Delhi-Mumbai Industrial Corridor Industrial corridors are considered an efcient way of integration between industry and Infrastructure leading to economic development. One of Indias most ambitious projects in recent years, the Delhi-Mumbai Industrial Corridor (DMIC) is a massive project envisaged across nearly 1,500 km of land and linking the two metros of N. Delhi and Mumbai. It aims to boost the countrys industrial and economic development by creating supporting logistics infrastructure. Japan is committed to a huge investment for the project, planned on the lines of the Tokyo-Osaka industrial corridor. DMIC would be benecial to both the countries in terms of development of ports, business parks and infrastructure. The $ 90 billion project is likely to be executed in seven years.

The industrial corridor will emerge within 150 km each side of the proposed 1,483 km long dedicated railway freight corridor. In the rst phase it will cover six Indian states of Delhi (22 km), Haryana (148 km), Uttar Pradesh (22 km), Rajasthan (578 km), Gujarat (565 km) and Maharashtra (148 km). The industrial corridor will have three ports, six airports and a 4,000 MW power plant to serve it apart from connectivity with existing sea ports It would also link 10 cities with a population exceeding a million each Delhi, Faridabad, Meerut, Jaipur, Ahmedabad, Vadodara, Surat, Nashik, Pune and Greater Mumbai. The government also hopes to formulate a policy relating to manufacturing investment regions (MIRs), to attract foreign investments for the DMIC. 5.4 Ports Ports provide an interface between the ocean transport and land-based transport. Indias port infrastructure constitutes of 12 major ports (Kandla, Mumbai, Jawaharlal Nehru, Mormugoa, New Mangalore, Cochin, Tuticorin, Chennai, Ennore, Vishakhapatnam (Vizag), Paradip and Kolkata including Haldia and around 187 non-major ports. Of the non-major ports, only around 48 are operational; rest are only shing harbors. 5.4.1 Development needs Indias port infrastructure constitutes 11 major ports, 1 corporate port &187 non-major ports. Of the non-major ports, only around 48 are operational; rest are only shing harbours. Around 7 of the 12 major Indian ports are operating at more than 100 per cent capacity, as against an optimum range of 70-80 per cent utilization.

Stretch covered by DFC and DMIC Haryana Rajasthan Dadri

Uttar Pradesh

India

Gujarat

India Madhya Pradesh

Arabian Sea

Maharashtra Jn port

Dedicated freight Corridor (DFC) Delhi-Mumbai Industrial Corridor (DMIC) Source : Dedicated Freight Corridor Corporation of India Limited

Road projects in the country require around Rs 2,00,000 crore over the next three years for which, the Ministry of Road Transport and Highways are considering innovative financing instruments
38

Capacity utilization at the major ports ( 2007-08) Million tonnes 70 % Capacity utilization 140

60

120

50

100

40

80

30

60

20

40

10

20

0 Kolkata 13.74 14.56 94 Trafc Source: Indian Ports Association Haldia 43.58 46.70 93 Paradip 42.43 56.00 76 Vizag 64.59 61.15 106 Capacity Ennore 57.15 53.35 107 Chennai 11.56 13.00 89 Tuticorin 21.48 20.75 104 Utilization (%) Cochin 15.81 28.37 56 NMPT 36.01 43.50 83 MGPT 35.12 33.05 106 MPT 57.03 44.70 128 JNPT 55.83 54.34 103 Kandla 64.92 62.60 104

Further, available data show a drastic decline in augmented capacities at major ports during the last four years. While there was a 14.8 per cent increase to 456.2 Million MT in major port capacity during 2005-06, the year 2006-07 saw capacity additions decline to 10.6 per cent. During 2007-08, new capacity additions were limited to 5.4 per cent and they are projected to further decline to 4.4 per cent in 2008-09.

39

Aggregate capacity & capacity additions at major ports (2005-2009)

Year

Capacity in million tonnes 397.50 456.20 504.75 532.07 555.67

Additional capacity in million tonnes 58.70 48.55 27.32 23.60*

% Increase

As on 31-03-2005 As on 31-03-2006 As on 31-03-2007 As on 31-03-2008 As on 31-03-2009

Source: Ministry of Shipping

14.8 10.6 5.4 4.4

non-major ports. Also, port projects typically suffer from delay in environmental clearances, which on an average take approximately a year and a half for each project. Going forward, these issues will need to be addressed on a proactive basis. Further, due to global meltdown reduction in trade has resulted in decline in cargo trafc. As a consequence, recently awarded port projects may nd it difcult to achieve nancial closure. While publicly funded port projects will stay relatively unaffected, private sector port projects would face difculty in raising funds. 5.4.3 Opportunities On the positive side, with the Government encouraging private participation in port development, non-major ports have begun contributing signicantly to the economy. The relative share of non-major ports has grown from 26 per cent to 28 per cent in the four years since 2004-05. While the total capacity of non-major ports in 2008-09 is estimated at 228.3 Million MT, the corresponding total cargo handled was 220 Million MT. The new Governments ambitious agenda to award 6 concessions for ports and initiate for 20 others through PPP totalling to more than Rs. 3300 crore, within a span of 3 months, is being regarded as a welcome move. Players with ports as their core business can now invest in strengthening their back-end and soft infrastructure such as connectivity linkages and alliances as well as initiatives for productivity improvements, service augmentation and customer development. Foreign and private equity investments in Indian ports in recent times reect a strong faith in Indias port sector and suggest the inow of more such funds in the forthcoming period.
Container TEUs handled by foreign operators at various Indian ports (2008)

5.4.2 Challenges Lack of proper facilities, deeper drafts, good connectivity and necessary equipment / technology has contributed to high logistics costs. At present, a lot of time is wasted because of pre-berthing delays. The average turnaround time of vessels at major Indian ports ranges from 1.77 days to 4.82 days. Dwell time for EXIM containers at Indian ports is between 1-3 days compared to less than a day at Singapore. Larger vessels, having the potential to cut substantial cost, are unable to call at Indian ports due to limited draft. The draft available at international ports ranges from 12 m to 23 m whereas, in India except for a handful of ports like Kandla, Mundra, Ennore, Gangavaram & Krishnapatnam, other ports have an average draft ranging from 8m to 12m This issue will be partly addressed with the commencement of operations at the much awaited International Container Transshipment Terminal at Vallarpadam, Cochin Port. Port development is further bogged down by the need for getting multiple clearances. Multiple agencies are involved in granting approvals to port projects. These involve project appraisal by the Planning Commission, Law Ministry, and Ministry of Finance. This preliminary process of consultation among inter-ministerial groups, prior to Cabinet approval is inherently time consuming. To add to the concern, the National Maritime Development Programme (NMDP) is progressing at a slow pace with many project delays and cost escalations. So far, only 41 of the total 253 port projects and 5 of the 111 shipping projects have been completed. Other issues facing Indian ports relate to port security, and land acquisition particularly for

Foreign operator Maersk Dubai World PSA Singapore

Million TEUs 1.48 2.85 0.45

Ports JNPT, Pipavav JNPT, Chennai, Kochi, Visakhapatnam, Mundra Tuticorin, Chennai

Source: Business India issue dated May 31, 2009

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PSA also has a stake in ABG Kandla Container Terminal, which is the concessionaire for Kandla Port. Dragados & Gammon collaborating to develop the Mumbai Offshore Container Terminal is yet another case of foreign investment
Private Equity investments in non-major ports

Company Gujarat Pipavav Port SICAL Mundra Chennai Container Terminal Dighi Port Krishnapatnam Port Gangavaram Port

PE Investor IDFC PE IDFC PE Port GIC, 3i Global Infrastructure Partners IL&FS 3i Warburg Pincus

Amount (Rs. crore) 192 116 450 25% stake 20% stake 994 150 (30% stake)

5.5.1 Development needs The rapid growth in air trafc over the last few years exposed the deciencies of airport infrastructure across the country. After decades of neglect, many of Indias airports were forced to operate well above design capacity. The resulting congestion in the terminals and on the runways delivered a poor experience for the passenger and a costly, inefcient operating environment for the airlines. However, although a weakness today, it would gradually cease to be so, as the airport modernization program starts to deliver results, with new airports in Bangalore and Hyderabad, and improvement in facilities at Delhi and Mumbai. There are 454 airports / airstrips in the country which include operational, non operational and abandoned airports, whose ownership pattern is illustrated in the gure below:
Ownership pattern of the airports/ airstrips (operational / non-operational) in the country (2008)

Source : Business India issue dated May 31, 2009 21%

The concept of port-based SEZs is fast catching up amongst Indian investors ever since the successful launch of Mundra Port SEZ. It establishes that credible port infrastructure is no more value-adding, but imperative for development of globally competitive hubs of economic activity and thereby promoting international trade. 5.5 Aviation Civil Aviation plays a pivotal role in economic growth of a nation. Airline industry not only brings efciencies in transportation of both people and cargo, but for a country like India, it can create a large number of jobs too. It is estimated that every $100 spent on air transport yields benets to the tune of $325 to the economy and 100 additional jobs in aviation result in 610 other new jobs. Having recognized its strategic importance, Indian aviation has transformed from an over regulated and an under managed sector to a more open, liberal and investment friendly sector since 2004. Compliance with global standards has also made air transport, the safest mode of transportation.

30%

14%

35% AAI Private owners State government Defence department

Source: 11th Five Year Planning Commissions working group report on Civil Aviation

41

The Government has acknowledged the infrastructure deciency and has wisely sought private sector participation to facilitate infrastructure improvements (modernization of Delhi and Mumbai airports, commissioning of Greeneld projects at Hyderabad and Bengaluru, modernization of 35 non metro airports). The estimated investments at Delhi airport are in the order of Rs. 7,531 crores; while that at Mumbai airport is estimated to be in the region of Rs. 11,553 crores. Greeneld airport projects have also been proposed at Goa, Navi Mumbai, Pune, Greater Noida and Kannur. The objective is to develop facilities conforming to international standards and try to encourage the domestic operators to shift base, so as to decongest the major airports. AAI is in the process of carrying out feasibility studies for this purpose. The Civil Aviation Ministry has set a target of getting around 500 airports operational in the country by 2020. This will include renovation of used airports, developing Greeneld airports, establishing merchant and low cost airports and airports dedicated to movement of cargo and logistics. 5.5.2 Challenges Despite the high growth rates witnessed in the last ve years, certain pressing issues need to be resolved to realize the full potential of the sector. These include: High waiting time and congestion in airports causing huge wastage of fuel Airlines incurring losses Taxation issues Aviation security Shortage of skilled technical manpower High airport and security charges Inadequate night parking facilities Less number of gates and counters Inadequate security machines and shortage of security personnel Requirement of good baggage system Lack of maintenance facilities at airports

In addition, while there are a lot of new avenues in aerospace services in the coming decades, the constraints associated needs to be addressed to enable the smooth growth of the sector. 5.5.3 Opportunities Maintenance and repairs overhaul MRO as an aviation segment represents a relatively untapped opportunity. They include engine overhaul, airframe maintenance, heavy checks and line maintenance, component overhaul and major airframe modications. At present, major part of the MRO work for the Indian aircrafts is outsourced to the service providers in Europe and Singapore. While airlines are increasing and strengthening their in-house MRO facilities, dedicated MRO players are also entering the Indian aviation space. The Indian MRO market is growing at about 15 per cent annually. The entire Asia Pacic aircrafts and engine MRO market is estimated to touch US$ 12.9 billion in 2011. Major components of MRO services in India include engine overhaul and components. Together, these account for around 60 per cent of MRO services business in terms of value.

The Civil Aviation Ministry has set a target of getting around 500 airports operational in the country by 2020

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Ownership pattern of the airports/ airstrips (operational / (2008) 4% 17%

security concerns and up-gradation of navigational aids, trafc control services and adoption of trafc management technology will further strengthen the demand. The systems for which demand is expected to rise include Dedicated Satellite Communication Network (DSCN), Automatic Message Handling System (AMHS), Flight Information Display System (FID), Aeronautical Telecommunication Network (ATN), Voice Communication and Control System (VCCS) among others. India imports more than 60% of airport and ground handling equipments currently. The AAI alone has an annual budget of US$ 60 million for equipments purchase. This represents a lucrative opportunity for suppliers of ground support equipments based on latest technology which increases efciency and are cost effective in operations. Global manufacturers, by setting up manufacturing plants in India, can take advantage of lower input costs, lower labour rates and liberalized aviation policies and manufacture high technology equipment at relatively lower costs in India. Indiaas an air cargo hub India has a great potential for becoming a possible cargo hub for SAARC and ASEAN countries and its strategic location as a transit destination connecting the eastern- western global corridors. The Civil Aviation ministry has identied Nagpur as Indias national cargo hub and has promised an aviation policy for providing signicant concessions for air freighter operations out of Nagpur. There are also plans of creating a national grid for cargo hubs at various airports in India with cold storage and warehousing facilities. The Government has chalked out various policies and plans for development of the air cargo infrastructure thereby providing opportunities to the various entities involved in the value chain. Civil aviation ministry proposal to set up dedicated cargo airports and Governments plan to allow cargo airports within 150 kms radius of existing airports through automatic routes are major steps taken to the cause of developing India as a cargo hub.

20%

40%

7% 12% Line Maintenance Components Modications Source : www.reserachwikis.com Airframe (Heavy) Engine Overhaul Others

Recently, three different joint ventures between Indian companies and foreign companies like Airbus, Boeing and SIA Engineering have embarked upon setting up of MROs. A satellite MRO centre is planned at Chennai Aero Park. Gujarat government is examining the prospects for developing MRO business and making Gujarat, a MRO hub in the region. Airport and ground support equipment Airport and ground support equipment segment presents another opportunity with estimated market size of US$ 359 million in India for 2008 and expected to cross US $ 400 million over next three years. With up-gradation and modernization in place, demand for technology driven ground support equipments is set to grow. Needless to say, modernization of airports to world class standards in the country will make it imperative to equip airports with the best airport and ground support equipments. Increased safety and

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5.6 Infrastructure nance Infrastructure projects being capital intensive, with long gestation periods; the Financial Institutes (FIs) and the banks need to create new structures to facilitate the funding. Most infrastructure projects are nanced at a debt: equity ration of 70: 30. The following agencies usually nance the debt portion: Multi lateral agencies like World Bank, International Finance Corporation (IFC), Asian Development Bank (ADB). Development Financial Institutions like Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), Small Industries Development Bank of India (SIDBI), Infrastructure Development Finance Corporation (IDFC), Power Finance Corporation (PFC) etc. India Infrastructure Finance Co Ltd (IIFCL), a 100 per cent government owned infrastructure nancing SPV formed in January, 2006. Foreign Commercial Banks Domestic Banks Domestic banks have traditionally been reluctant to nance infrastructure projects due to long gestation period, low commercial viability and unpredictable revenue stream. However with several positive developments in policy and legislation, banks are slowly evolving appropriate nancing structures for funding infrastructure projects. Project nancing remains the basic form of infrastructure development. The lenders are also developing innovative structures depending on the extent of government participation, loan tenor and risk associated with the project. Avenues like corporate bond market; securitisation of receivables etc is slowly

Civil aviation ministry proposal to set up dedicated cargo airports and Governments plan to allow cargo airports within 150 kms radius of existing airports through automatic routes are major steps taken to the cause of developing India as a cargo hub
becoming a fairly acceptable form of nancing. Other typical ways of funding are rupee term loan, extending of foreign currency loans, providing non fund based credit facilities such as opening of project letter of credit, issuing of bank guarantee for the project. New ways of structuring like take-out nancing, roll over nancing, put-call options, hedging / swapping of exchange / interest rate risks etc are also being offered for funding of long gestation projects. The projects are funded on their viability, projected cash ow and their ability to service the debt. The users willingness to pay for the services availed affects the cash ow. Sectors such as power, roads, ports, airports and telecom have been able to raise funds due to level of clarity of govt policies, historical performance of the sector and the users willingness to pay. The strength and experience of the promoters, concession framework, tax benets to the project, inputs / off-take arrangements add to the bankability of the project.

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5.7 The PPP approach Sustaining and accelerating Indias economic growth would require substantial investments in infrastructure development. Infrastructure development in India would require a massive investment of US$492 billion during the 11th Plan Period, according to an estimate by the Planning Commission. Since such massive investments cannot be undertaken by public nancing alone, the government has identied and is encouraging public private partnership (PPP) in infrastructure development. PPP offers a distinct possibility for increasing total investments by using a limited amount of public resources to leverage a much larger amount of private investment. Given the bottlenecks and inefciencies often encountered in public infrastructural investment, such PPPs could also increase economic efciency and lower the capital requirement, provided that regulatory mechanisms are adequate. In India, due to policy changes and reforms, Public Private Partnerships (PPPs) have increasingly become slowly the preferred mode for construction and operation of infrastructure services such as highways, airports & ports. PPPs can be undertaken through a range of alternatives such as BOT, BOOT etc, with the

Model Concession Agreement (MCA) being used to provide a stable regulatory and policy framework. The MCA regulates the PPP contracts by dening the rights and obligation of all parties concerned. In case a project is not viable due to either long-gestation periods or inadequate returns, the government is committed to provide up to 40% funding by way of grants in some cases, called viability gap funding. There are four major areas that needs to be addressed for the PPP model to be successful: A stronger policy and regulatory framework both at the centre and states Appropriate market instruments and capacity to raise long term equity and debt Credible and bankable infrastructure projects Strengthening of government capacity to manage PPP projects. PPPs present an opportunity to meet Indias investments needs that can be translated into a win-win situation for all.

Infrastructure development in India would require a massive investment of US$492 billion during the 11th Plan Period, according to an estimate by the Planning Commission

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6. Conclusions

The logistics industry will continue to be the focal point of strategy formulation, operational excellence and information technology to make maximum contribution in value creation for customers. Globalization, consolidation, technology advancements and outsourcing have only led to growth in the logistics services market and this industry will continue to evolve in the coming years. Industry research suggests that the following interdependent factors will shape the Global Logistics Industry over the next 5-10 years: Globalization and consolidation - Mergers and acquisitions of rms are leading to formation of entities having capability to provide a single point of contact to manage global supply chains for their clients. Globalization of traditional businesses is driving the logistics industry to address considerations like market expansion, new sources of supply, international trade, etc. Increased outsourcing - Companies are utilizing logistics outsourcing more and more in order to increase exibility and responsiveness in their supply chain. Global supply chains are getting increasingly complex to manage and companies are focusing more on core competencies. Security and risk management - Supply Chain Security and Risk Management will be a key area to prevent disruptions due to factors like weather, labor issues, strikes, diseases like SARS, or terrorist attacks. Technological advancements - Rapid advancements in supply chain technology enablers (like RFID) will lead to increased functionality and greater potential to improve performance of supply chains.

Increased customer expectations - Customers will be moving away from tactical transactional based service outsourcing to solutions that are more strategic in nature and supported by leading edge technology and systems. Firms can enhance their market competitiveness by reducing their logistics costs, thus lowering the total costs of goods and services. Any impetus to improve the competitiveness of the rms at the national platform would enable the nation to register a dynamic economic performance in a global environment. USA has successfully reduced its logistics cost as a percentage of GDP from 17% in 1980 to its present level of 9.5 % by incorporating macro level reforms in the transportation infrastructure coupled with micro level upgradation of logistics facility in individual rms. India has therefore got a huge opportunity of reducing its national logistics cost by studying and beneting from other success stories. Indian logistics rms will have a major role in achieving this cost reduction. This may include upgrading the macro logistics infrastructure to world class standards and by providing a facilitative role to the SME players in the logistics sector to improve their service level competitiveness. Government initiatives like development of SEZs, logistics parks, infrastructure building, privatization of transport operations, implementing PPP models etc., will encourage private sector investment and lead to greater demand for logistics services. Moreover, growth of user industries like retail, telecom, consumer goods, automotive, pharmaceuticals, foods and beverages etc. notwithstanding the current economic slowdown will provide further impetus to logistics services across sectors.

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Drivers like these and the push / pull pressures created by the market forces will not only trigger structural changes in the logistics industry resulting in specialization, consolidation, outsourcing, service migration, new markets, new services but will also create challenges around service, delivery, quality and cost as customer needs become more demanding and complex. SMEs, forming the core of the logistics industry, will be impacted by this transition in a major way and will have to focus on improvement of its internal operations, processes, technology upgradation, resource utilization, service quality, customer relationships, market intelligence, and nancial strengthening, in a nutshell in overall capability enhancement - in order to respond to and gain from the changing environment.

India has got a huge opportunity of reducing its national logistics cost by studying and benefiting from other success stories

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Abbreviations

2pl 3pl 4pl Aai Adb Amhs Apeda Asean Atn Bot Cfa Cfs Cmie Concor Cpc Cpi Cst Dbfo Dmic Dscn Edi Erp Exim Fdi Fids Fy Gdp Gps Gq Gst Hr Icd Idbi IDFC

Second party logistics Third party logistics Fourth party logistics Airports authority of india Asian development bank Automatic message handling system Agricultural and processed food products export development authority Association of southeast asian nations Aeronautical telecommunication network Build, operate and transfer Clearing & forwarding agent Container freight station Centre for monitoring indian economy Container corporation of india Centre for perishable cargo Consumer price index Central states tax Design, build, nance and operate Delhi mumbai industrial corridor Dedicated satellite communication network Electronic data interchange Enterprise resource planning Export import Foreign direct investment Flight information display system Financial year Gross domestic product Global positioning system Golden quadrilateral Goods and service tax Human resource Inland container depot Industrial development bank of india Infrastructure Development Finance Corporation

IFCI Industrial Finance Corporation of India IIFCL India Infrastructure Finance Company Limited IRCTC Indian Railway Catering and Tourism Corporation ITES Information Technology Enabled Services JNPT Jawaharlal Nehru Port Trust LSP Logistics Service Provider MHE Material Handling Equipment MIR Manufacturing Investment Region MRO Maintenance and Repairs Overhaul MT Metric Tonne MW Mega Watt NH National Highway NHAI National Highways Authority of India NHDP National Highways Development Programme NMDP National Maritime Development Programme NSEW North South East West OECD Organization for Economic Co-operation PFC Power Finance Corporation PPP Public Private Partnership RBI Reserve Bank of India RFID Radio Frequency Identication SAARC South Asian Association for Regional Cooperation SCM Supply Chain Management SEZ Special Economic Zone SIDBI Small Industries Development Bank of India SME Small and Medium Enterprise SOP Standard Operating Procedure SWOT Strength-Weakness-Opportunities-Threats TEU Twenty feet Equivalent Unit VAT Value Added Tax VCCS Voice Communication and Control System WMS Warehouse Management System

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Bibliography

Websites www.airportsindia.org.in www.businessworld.in www.business-standard.com www.commerce.nic.in www.dfccil.org www.dgft.gov.in www.economictimes.com www.eiu.com www.expressindia.com www.nancialexpress.com www.nmin.nic.in www.ibef.org www.imf.org www.indiainbusiness.nic.in www.indianrailways.gov.in www.livemint.com www.morth.nic.in www.nhai.org www.planningcommission.gov.in www.researchwikis.com www.shipping.gov.in www.thehindubusinessline.com Others Capsule Report on Infrastructure sector performance 2008-09, Ministry of Statistics And Programme Implementation Cygnus Research Transportation and Logistics Economic Survey 2008-09

Global Logistics & Distribution Planning: Strategies for Management by Donald Waters Handbook of Logistics and Distribution Management by Alan Rushton, Phil Croucher and Peter Baker UPS Asia Business Monitor 2009 11th Five Year Plan Working Commission Report on Aviation Sector / Road Transport / Agricultural marketing infrastructure India Infrastructure Business India Private Ports Survey The Global Competitiveness Report 2008-09, World Economic Forum Deloitte ATS Regional overview APAC logistics End Notes
1

GDP at factor cost :1999-00 Findings of SCS Agribusiness Consultants (South Asia ofce of the International Association of Refrigerated Warehouses (IARM)) USD / INR = 48.63 as on 16th July 2009

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Contacts

Mr. Hemant Bhattbhatt Senior Director Deloitte Touche Tohmatsu India Pvt. Ltd. 31, Nutan Bharat Society, Alkapuri Baroda-390 007 Tel.: +91 (265) 2333 776 Mobile: +91 98240 14075 Fax: +91 (265) 2339 729 Email: hbhattbhatt@deloitte.com

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