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The economy of India is the twelfth largest economy in the world by nominal value and the fourth largest by purchasing power parity (PPP). In the 1990s, following economic reform from the socialist-inspired economy of post-independence India, the country began to experience rapid economic growth, as markets opened for international competition and investment. In the 21st century, India is an emerging economic power with vast human and natural resources, and a huge knowledge base. Economists predict that by 2020, India will be among the leading economies of the world. India was under social democratic-based policies from 1947 to 1991. The economy was characterized by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, continuing economic liberalization has moved the economy towards a market-based system. A revival of economic reforms and better economic policy in 2000s accelerated India's economic growth rate. By 2008, India had established itself as the world's second-fastest growing major economy. However, the year 2009 saw a significant slowdown in India's official GDP growth rate to 6.1% as well as the return of a large projected fiscal deficit of 10.3% of GDP which would be among the highest in the world. India's large service industry accounts for 62.6% of the country's GDP while the industrial and agricultural sector contribute 20% and 17.5% respectively. Agriculture is the predominant occupation in India, accounting for about 52% of employment. The service sector makes up a further 34%, and industrial sector around 14%. The labor force totals half a billion workers. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology enabled services and software. India's per capita income (nominal) is $1032, ranked 139th in the world, while its per capita (PPP) of US$2,932 is ranked 128th. Previously a closed economy, India's trade has grown fast. India currently accounts for 1.5% of World trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2006, India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade inclusive of export and
import was $143 billion. Thus, India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. India's trade has reached a still relatively moderate share 24% of GDP in 2006, up from 6% in 1985. Despite robust economic growth, India continues to face many major problems. The recent economic development has widened the economic inequality across the country. Despite sustained high economic growth rate, approximately 80% of its population lives on less than $2 a day (PPP). Even though the arrival of Green Revolution brought end to famines in India,40% of children under the age of three are underweight and a third of all men and women suffer from chronic energy deficiency. LOGISTICS MANAGEMENT – INTRODUCTION Logistics management is that part of the supply chain which plans, implements and controls the efficient, effective, forward and backward (reverse) flow and storage of goods, services and information between the point of origin and the point of consumption in order to meet customers' requirements rather to the customers’ delight. A professional working in the field of logistics management is called a logistician. Logistics, as a business concept, evolved only in the 1950s. This was mainly due to the increasing complexity of supplying one's business with materials, and shipping out products in an increasingly globalized supply chain, calling for experts in the field who are called Supply Chain Logisticians. This can be defined as having the right item in the right quantity at the right time at the right place for the right price and to the right target customers (consumer); and it is the science of process having its presence in all sectors of the industry. The goal of logistics work is to manage the fruition of project life cycles, supply chains and resultant efficiencies. Logistics is concerned with getting (or transmitting) the products and services where they are needed or when they are desired. It is difficult to accomplish any marketing or manufacturing without logistical support. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging. The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible.
Origin and Definition of Logistics:
The term "logistics" originates from the ancient Greek "λόγος" ("logos"—"ratio, word, calculation, reason, speech, oration"). Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, there were military officers with the title ‘Logistikas’ who were responsible for financial management and distribution of supplies. The Oxford English dictionary defines logistics as: “The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities.” The American Council of Logistics Management defines logistics as “the process of planning, implementing and controlling the efficient and effective flow, and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.” Objective of Logistics Management: The primary objective of logistics management is to effectively and efficiently move the supply chain so as to extend the desired level of customer service at the least cost. Thus, logistics management starts with ascertaining customers’ needs till their fulfillment supplies. However, there are some definite objectives to be achieved through a proper logistics system. These can be described as follows: 1. Improving customer service: An important objective of all marketing efforts, including the physical distribution activities, is to improve the customer service. An efficient management of physical distribution can help in improving the level of customer service by developing an effective system of warehousing, quick and economic transportation, and maintaining optimum level of inventory. 2. Rapid Response: Rapid response is concerned with a firm's ability to satisfy customer service requirements in a timely manner. Information technology has increased the capability to postpone logistical operations to the latest possible time and then accomplish rapid delivery of required inventory. 3. Reduce total distribution costs:
The cost of physical distribution consists of various elements such as transportation, warehousing and inventory maintenance, and any reduction in the cost of one element may result in an increase in the cost of the other elements. Thus, the objective of the firm should be to reduce the total cost of distribution and not just the cost incurred on any one element. 4. Generating additional sales: A firm can attract additional customers by offering better services at lowest prices. For example, by decentralizing its warehousing operations or by using economic and efficient modes of transportation, a firm can achieve larger market share. Also by avoiding the out-of stock situation, the loss of loyal customers can be arrested. 5. Creating time and place utilities: The products are physically moved from the place of their origin to the place where they are required for consumption; they do not serve any purpose to the users. Similarly, the products have to be made available at the time they are needed for consumption. 6. Price stabilization: It can be achieved by regulating the flow of the products to the market through a judicious use of available transport facilities and compatible warehouse operations. By stocking the raw material during the period of excess supply and made available during the periods of short supply, the prices can be stabilized. 7. Quality improvement: The long-term objective of the logistical system is to seek continuous quality improvement. Total quality management (TQM) has become a major commitment throughout all facets of industry. If a product becomes defective or if service promises are not kept, little, if any, value is added by the logistics. Logistical costs, once expended, cannot be reversed.
8. Movement consolidation:
Consolidation one of the most significant logistical costs is transportation. Transportation cost is directly related to the type of product, size of shipment, and distance. Many Logistical systems that feature premium service depend on high-speed, small shipment transportation. Premium transportation is typically high-cost. To reduce transportation cost. It is desirable to achieve movement consolidation. Logistics Management Function Logistics is the process of movement of goods across the supply chain of the company. This process consists of various functions, which have to be properly managed to bring effectiveness efficiency in the supply chain of organization. The major logistical function are shown in figure 1. Order processing: The starting point of physical distribution activities is the processing of customers’ orders. In order to provide quicker customer service, the orders received from customers should be processed within the least possible time. Order processing includes receiving the order, recording the order, filling the order, and assembling all such orders for transportation, etc. the company and the customers benefit when these steps are carried out quickly and accurately. The error committed at this stage at times can prove to be very costly. Order processing activity consist of the following Order checking in any deviations in agreed or negotiation terms • • • • Prices , payment and delivery terms Checking the availability in of the material stocks Production and material scheduling for storage Acknowledge the order, indicating deviation
2. Warehousing: Warehousing refers to the storing and assorting products in order to create time utility. The basic purpose of the warehousing activity is to arrange placement of goods, provide storage facility to store them, consolidate them with other similar products, divide them into smaller quantities and build up assortment of products. Generally, larger the number of warehouses a firm has the lesser would be the time taken in serving customers at different locations, but greater would be the cost of warehousing. Thus, the firm has to strike a balance between the cost of warehousing and the level of customer service. Major decision in warehousing is as follow: • Location of warehousing facility
• • • •
Number of warehousing Size of warehouse Design of the building Ownership of the warehouse
3. Inventory Management: Linked to warehousing decisions are the inventory decisions which hold the key to success of physical distribution especially where the inventory costs may be as high 15 as 30-40 per cent (e.g., steel and automobiles). No wonder, therefore, that the new concept of Just-in-Time Inventory decision is increasingly becoming popular with a number of companies. The decision regarding level of inventory involves estimate of demand for the product. A correct estimate of the demand helps to hold proper inventory level and control the inventory costs. This is not only helps the firm in terms of the cost of inventory and supply to customers in time but also to maintain production at a consistent level. The major factors determining the inventory levels are: The firm’s policy regarding the customer service level, Degree of accuracy of the sales forecasts, Responsiveness of the distribution system i.e., ability of the system to transmit inventory needs to the factory and get the products in the market. The cost inventory consists of holding cost (such as cost of warehousing, tied up capital and obsolescence) and replenishment cost (including the manufacturing cost).
4. Transportation: Transportation seeks to move goods from points of production and sale to points of consumption in the quantities required at times needed and at a reasonable cost. The transportation system adds time and place utility to the goods handled and thus, increases their economic value. To achieve these goals, transportation facilities must be adequate, regular, dependable and equitable in terms of costs and benefits of the facilities and service provided.
5. Information: The physical distribution managers continuously need up-to-date information about inventory, transportation and warehousing. For example, in respect on inventory, information about present stock position at each location, future commitment and replenishment capabilities are constantly
required. Similarly, before choosing a 16 carrier, information about the availability of various modes of transport, their costs, services and suitability for a particular product is needed. About warehousing, information with respect to space utilization, work schedules, unit load performance, etc., is required. In order to receive all the information stated above, an efficient management information system would be of immense use in controlling costs, improving services and determining the overall effectiveness of distribution. Of course, it is difficult to correctly assess the cost of physical distribution operations. But if correct information is available it can be analyzed systematically and a great deal of saving can be ensured. 6. Facilities: The Facilities logistics element is composed of a variety of planning activities, all of which are directed toward ensuring that all required permanent or semi permanent operating and support facilities (for instance, training, field and depot maintenance, storage, operational, and testing) are available concurrently with system fielding. Planning must be comprehensive and include the need for new construction as well as modifications to existing facilities. Facility construction can take from 5 to 7 years from concept formulation to user occupancy. It also includes studies to define and establish impacts on life cycle cost, funding requirements, facility locations and improvements, space requirements, environmental impacts, duration or frequency of use, safety and health standards requirements, and security restrictions. Also included are any utility requirements, for both fixed and mobile facilities, with emphasis on limiting requirements of scarce or unique resources. Relevance of Logistics in International Marketing Marketing experts have recognized that for developing a position of sustainable competitive advantage, a major source is superior logistics performance. Thus, it can be argued that instead of viewing distribution, marketing and manufacturing as largely separate activities within the business, they need to be unified, particularly at the strategic level. One might be tempted to describe such an integrated approach to strategy and planning as ‘Marketing Logistics’. Business can only compete and survive either by winning a cost advantage or by providing superior value and benefit to the customer. In recent years, numbers of companies have become aware that the market place encompasses the world, not just the India .As a practical matter, marketing managers are finding that they need to do much work in terms of conceptualizing , designing , and implementing logistics initiatives to market effective globally. Following are the reasons
behind the extension of logistics activities at global level to do business internationally. The magnitudes of global business are: • Increase in the magnitude global business. • Business is relying on foreign countries to provide a source of raw materials and markets for finished goods. • Fall of global trade barriers. • Increase in Global competition. Prospects of Growth in the Industry In years gone by, the traditional warehousing and logistics facility was located by rail, road tracks, a water port, and/or freeways, usually in the least desirable parts of cities or large towns. This stereotype then faded as gigantic, state-of-the-art facilities began to sprout in more rural areas on the outskirts of transportation and population hubs. The World started beginning to see such facilities showing up in even less "traditional" areas. Modern warehouses now are being located in carefully manicured industrial parks that are sprouting as fast as the corn and wheat once did in these open spaces-often in out-of-the-way places. Why the emphasis on such locations for logistics companies? Much of it is due to the great flux that the logistics industry has been undergoing in the first three years of the 21st century. Most of these changes are being driven by a growing trend in the manufacturing and retail sectors to form partnerships with companies to which they can outsource non-core logistics competencies-3PL providers. In turn, 3PL providers are continually looking to provide innovative supply chain solutions to customers by focusing on value-added capabilities, differentiating themselves from the competition. They focus on key objectives, such as implementing information technologies, instituting effective management processes, integrating services and technologies globally, and delivering comprehensive solutions that create value for 3PL users and their supply chains. This need to partner with customers and become more integrated into their supply chain processes has created the ancillary need to locate close to these customers. That isn't to say the need for easy access to transportation hubs and different modes of transportation won't continue to be important. But the above shift in business strategy, along with the advances in technology and enhanced
communication, has opened the door for logistics facilities to operate effortlessly in a myriad of locations. Profit warnings, share price pressures, mergers, reorganizations, relocations, disposals, painful layoffs and great geopolitical uncertainties can sweep away even the most comprehensive logistics strategies – and that’s despite outstanding management over many years. These are exceptionally difficult times and it has never been more important to connect logistics and freight planning to executive board thinking than now. It’s easy to lose sight of the bigger picture in the rush to cut infrastructure cost and conserve cash. Hopefully organization succeed in protecting the business, satisfying shareholders and analysts, but what about capacity and flexibility, morale and momentum? To be a logistics winner in the coming years organizations need to use the downturn to reshape for growth, propelled by an unshakeable conviction that the mission is still important, that more prosperous times lie ahead, and that in some way the company infrastructure is helping to build a better kind of world. Own passion for running the race matters most of all in a downturn, when people are insecure, see only savage cost savings, and loyalty is tested. The corporation’s future will be dominated by six factors, or faces of a cube, spelling F U T U R E. Logistics is inevitable in the future and essentially the management policy also has a significant role in the future of world. Generally the study is being featured with all aspects of management in Logistics and Freight areas. (Logistics include Transportation, Warehousing, Network Design, Cross docking, and Value Adding)
Introduction Oriental Carbon and Chemicals Limited (OCCL), a company belonging to Duncan J.P Goenka was incorporated in 1978 as Dharuhera Chemicals Ltd. (DCL). In 1983 Oriental Carbon Ltd. a group of manufacturing Carbon Black, was merged with DCL to form Oriental Carbon and
Chemicals Limited (OCCL). In 1994, OCCL setup a unit of manufacturing insoluble sulfur which later emerged as a flagship product of the company. In year 2000 the company re-aligned its focus to concentrate on insoluble sulfur with the aim of becoming a leading player in the world. In the process the company divested its Carbon Black unit in favor of Continental Carbon Company U.S.A. OCCL today is a debt free company. The company is involved in chemical manufacturing i.e. Insoluble Sulphur, Sulphuric Acid including Oleums. The company has installed capacity to produce 10000 MT of Insoluble Sulphur and 41250 MT of Sulphuric Acid per annum. The Sulphuric Acid unit has been in operation since 1980 and the Insoluble Sulphur unit having installed capacity of 5000 MT since 1994. The company doubled its capacity by setting up of EOU (Export Oriented Unit) plant which is operational since 2005. Management of the Company Directors Chairman: Mr. J.P. Goneka Whole Time Directors: Mr. A. Goneka Mr. S.J. Khaitan Mr. H.C. Taneja Nominees of Life Insurance Corporation of India: Mr. O.P. Dubey Mr. B.B. Tandon Mr. S.K. Roy Mr. K Raghuraman Registered Office Oriental Carbon and Chemicals Limited Duncan House, 31, Netaji Subhash Road, Kolkata - 700001 Corporate Office
Oriental Carbon and Chemicals Limited 1st Floor, Publicis House, 1-2, Aram Bagh Community Center, Panchkuian Road, New Delhi - 110055, INDIA. Plant Oriental Carbon and Chemicals Limited Plot No. 3 & 4, Industrial Complex, Phase – I Dharuhera - 122106. District: Rewari, Haryana Website : http://www.occlindia.com REWARDS OF EXCELLENCE: Quality consciousness and an understanding of the customers needs for constant product and process improvement, has contributed to the growth of OCCL's Insoluble sulfur business. An ongoing mutually rewarding relationship with it's global clients, complemented by a growing demand for Diamond Sulf, has encouraged OCCL to continuously enhance it's production levels which now stands at 4400 TPA. Today continuous improvement is the guiding corporate philosophy.
Main products Insoluble Sulfur: Insoluble sulfur plant, with installed capacity of 10000 MT, is situated in Dharuhera, in the Indian State of Harayana, about 80 Km South West of New Delhi. Insoluble sulfur manufactured in this plant is marketed as "Diamond Sulf" in India and around the world. The plant, through continuous innovations over the years, can be counted among the best in the world. It adheres to total Quality norms and is ISO9001-2000 & EMS14001-2004 Certified. OCCL produces wide
range of insoluble sulfur grades, which are being widely exported to leading tyre companies around the world. OCCL's efforts in exports have earned Government of India's recognition as certified "Export House". In India OCCL is the undisputed leader with major market share. DIAMOND SULF is an amorphous form of Sulfur in Polymeric form in contrast to the natural Sulfur which is Crystalline and monomeric in nature. The polymeric chains of DIAMOND SULF consist of several thousand micro fine sulfur particles. The product is thus rendered insoluble in all known solvents and also in Rubber Compounds and does not take part in cross linking reaction like Natural Sulfur as long as it is in Polymeric form Applications Manufacture of Tyres and different types of Rubber articles like Belts, Hoses and other goods wherein long compound storage, prevention of premature vulcanization, superior adhesion and green tack and use of various reinforcements are pre-requisites for manufacturing superior quality products. High Quality Products Attributes Diamond Sulf offers a single point solution to multiple processing problems, viz, • • • • • • • It prevents bin scorching Eliminates sulfur bloom Ensures uniform dispersion Prevents sulfur migration Facilitates optimum curing every time Preserves building-tack Improves bonding between rubber to rubber as also with dissimilar reinforcement material.
Currently Diamond Sulf is being consumed mostly by the automotive tyre sector in the production of carcass, tread, cushion, beading as well as non-retreating compounds that need long storage periods. However it is also being increasingly used in the manufacture of conveyer and transmission belts, hoses and other rubber products that require green tack and adhesion, extended compound storage and prevention of premature vulcanization.
TYPICAL PHYSICO CHEMICAL DETAILS OF HIGH STABLE DIAMOND SULF
Insoluble Sulfur possessing higher level of thermal stability provides optimum resistance to reversion to the soluble form of sulfur even at elevated temperatures. Such a product would facilitate enhanced bloom protection. High stable DIAMOND SULF ensures more consistent vulcanizing properties and allows storage at relatively higher ambient temperature. QUALITYPARAMETER DS - OT - DS - OT - DS - OT - 33 Test Method S Material Sheet Physical Appearance Safety 10 (HS) 10 HS Fine Yellow Powder Elemental Sulphur % (On Total S) Oil Content % Acidity(as % Ash Content (Max)% Heat Loss (Max) % Fineness Retention on 0.2 2.0 0.2 2.0 80 0.2 2.0 80 0.05 0.5 0.05 0.5 0.05 0.5 10±1 20±1 0.05 33±1 0.05 90±1 Insoluble Sulphur (Min)% 90 20 (HS) 20 HS Fine Yellow Powder 80±1 90 67±1 90 ASTM 4578-89 ASTM 4573-95 H2SO4)(Max) 0.05 ASTM 4569-89 ASTM 4574-94 ASTM 4571-94 ASTM 4572-89 D (Wet Screen) 100 100Mesh (Max)% 200 Mesh (Max)% Thermal at 105°C for 15 min.(In Liquid Paraffin ) (Min) % Packing: D D D D D (HS) HS Fine Powder Yellow Data DS - OT - DS - OT - DS - OT - 33
Goods are packed in 20/25 kg paper / HDPE Bags which are stretch wrapped by poly film and palletized in wooden/steel/plastic pallets. The pallets are stuffed inside the factory in 20'/40' containers and dispatched through world Class Shipping Lines. PREDISPERSED DS-75 is a newly designed 'Pre dispersed Insoluble Sulphur' for applications in both natural and synthetic rubber based compounding. It enhances the dispersion of IS in rubber matrices upto the highest level to achieve more consistent vulcanizate properties in final product. The product is eco-friendly and is supposed to have acceptance in rubber industry. QUALITYPARAMETERS Physical Appearance Total Sulphur % Total S) Binder (including process aid) Physical Form 25 (±2.0)% Available both in slab & pastilles (tablets) forms MASTER BATCHES of Insoluble Sulphur with polymers in different ratio are also available. 2) Sulphuric Acid The Company manufactures both Commercial Grade and Battery Grade Sulphuric Acid and Oleums. Sulphuric Acid finds application as a dehydrating agent, catalyst, active reactant in chemical processes, solvent, and absorbent. It is used in the process industries from very dilute concentrations for pH control of saline solutions to strong fuming acids used in the dye, explosives, and pharmaceutical industries. It is produced and supplied in grades of exact purity for the storage battery, rayon, dye, acid slurry and pharmaceutical industries and in grades of less specifications for use in the steel, heavy chemical and superphosphate industries. Sulphuric Acid (%) 65.13 74.36 77.67 93.19 98.00 100.00 Specific Gravity* 1.5591 1.6667 1.7059 1.8354 1.8437 1.8391
Pre-dispersed DS-75 Bright Yellow 75 (±2.0)%
Insoluble Sulphur (Min)% (On 72 (±2.0)%
20% oleum 30% oleum 40% oleum
104.50 106.75 109.00
1.915 1.952 1.983
General information about OCCL
Financial Summary (Rs.Lakhs) 2007-08 2008-09 Production (Mt) Insoluble Sulphur Sulphuric Acid 9391 32785 10703 24932
Gross Sales Net Sales PBIDT Interest PBDT Profit Before Tax Profit After Tax Dividend %* Fob Value Of Exports Gross Fixed Assets (Including Capital Work In Progress)
9667 8964 986 298 688 249 160 5 4616 9485
12898 12183 1599 338 1261 813 763 15 6735 10105
Net Fixed Assets Net Current Assets Share Capital** Reserves &Surplus*** Net Worth Deferred Tax Provision PBIDT Margin % (Over Net Sales) PBT Margin % (Over net Sales ) Debt Equity Ratio Earning Per Share for the year (Rs./Share) Book Value Of Shares (Rs./Share)
5453 3821 1007 4927 5934 698 11.00 2.78 0.42 1.76 61.96
5721 3960 1031 5637 6668 639 13.12 6.67 0.33 7.67 66.26
*Proposed Dividend for Financial Year 2008-09 ** Includes Warrants for Rs 26.88 *** Excluding Revaluation Reserve GENERAL INFORMATION: Nature of Industry The company is involved in Chemical manufacturing i.e.Insoluble Sulphur,Sulphuric acid Including oleums. The plant of the company is situated at Dharuhera, Dist.Rewari,Haryana. The company has installed capacity to produce 10000 MT of Insoluble Sulphur and 41250 MT of sulphuric Acid per annum. 2. Date or expected date of commencement of commercial production The Sulphuric Acid unit has been in operation since 1980 and the insoluble sulphur unit having installed capacity of 5000 MT since 1994 .The company doubled its capacity by setting up of EOU plant which is operational since 2005.
3. Financial performance based on given indicators Financial Performance over the last three financial periods are set out as under:(Rs. Lacs) 2007-08 Gross Revenue Profit Before Tax Profit After Tax Gross Fixed Assets (include Revaluation Reserve) Equity Share capital Reserve & Surplus (excl. revaluation Reserves) Net worth (excl. revaluation reserves) *includes warrants for Rs. 26.88 lakhs 4.Export performance Export earnings on FOB basis over the last three accounting periods have been as under:(Rs.Lakhs) 2007-08 4615.94 5. Foreign investments or collaboration , if any The Company has no foreign collaborations. 6. Other Information -Reason of loss or inadequate profits Fluctuation in raw materials prices and all round economic slow down (in the year 2008 estimated) adversely effected the profitability of the company.
2008-09 12897.97 813.34 762.93 10105.20
9667.31 248.71 160.27 9484.78
1006.93* 1031.13 4926.55 5933.48 5636.79 6667.92
-Steps taken or proposed to be taken for improvement In order to meet the demand of the product, existing capacity is being increased through debottlenecking of the Insoluble sulphur plant by 15% The company has also decided to put up a new plant for manufacturing of Insoluble Sulphur in SEZ to cater to overseas customers. -Expected increase in productivity and profits in measurable terms Production of insoluble Sulphur is expected to increase on account of debottlenecking / expansion with consequent impact on profitability. 7. Dividends Dividend is given 15 % on 10296062 Equity Shares (year 2008-09) (Rs.1.50 per share of Rs.10 each). The dividend will absorb Rs.1,80.69 Lacs (Inclusive of Dividend Tax of Rs.26.25 Lacs). 8. Pollution Control Company’s Plant has all the requisite Pollution Control Equipments and meets all the desired and statutory norms in this regard .The Insoluble Sulphur Units of the company enjoys ISO 14001-2004 Certification. 9. Public Deposits Fixed deposits from public, outstanding with your company at the end of the financial year, stood at Rs. 1,37,13,000/-. Deposits aggregating Rs. 19,87,000/- due for repayment on or before 31 st March,2009 were not claimed by the depositors .Out of these, deposits totaling Rs. 1,15,000/- have since been claimed and settled. Besides this, deposits amounting to Rs. 12,95,000/- though fallen due for payment, could not be sold as there is dispute between the concerned joint depositors. 10.Share Capital During the year, 5,10,750 warrants have been converted into 5,10,750 Equity Shares Of Rs. 10/ each. 11. Operations Insoluble Sulphur During the year company achieved 14 %growth in production to 10703 MT as Compared to 9391 MT last year .The domestic sale was down 11% and exports 5% over previous year in quantity term resulting in total sale of 9882 MT.
Sulphuric Acid & Oleums Sales of Sulphuric Acid was down by 23% at 24769 MT and Oleum was higher by 37 % at 6947 MT. Production of Sulphuric Acid (Eqvt) was 14% lower than last year. Selling Price of Acid\ has gone down to its historic low due to decrease in price of raw materials and sluggish demand. 12. Performance of the Company During the year company achieved a profit before tax of Rs. 8,13 lakhs and of Rs.15.99 lakhs before provision of Depreciation and interest. Production of Insoluble Sulphur increased 14% to 10703 MT from 9391 MT last year. The sales of the company (net excise) increased 36% to Rs. 1,21,83 lakhs. FOB value of exports grew 46% over previous year to Rs 6735 lakhs. Situational Analysis: OCCL has a vast knowledge of its diversified customer base. Its products and different grades have been well received, both in domestic and international market. The marketing is the key to development of brand and product awareness as well as the growth of customer base
CHAPTER 2 LITERATURE REVIEW
CONCEPT OF INTERNATIONAL LOGISTICS Word, ’Logistics’ is derived from French word ‘loger’, which means art of war pertaining to movement and supply of armies. Basically a military concept, it is now commonly applied to marketing management. Fighting a war requires the setting of an object, and to achieve this objective meticulous planning is needed so that the troops are properly deployed and the supply line consisting, interalia, weaponary, food, medical assistance, etc. is maintained. Similarly, the plan should be each that there is a minimum loss of men and material while, at the same time, it is capable of being altered if the need arises. As in the case of fighting a war in the battle-field, the marketing managers also need a suitable logistics plan that is capable of satisfying the company objective of meeting profitably the demand of the targeted customers. From the point of view of management, marketing logistics or physical distribution has been described as ‘planning, implementing and controlling the process of physical flows of materials and final products from the point of origin to the point of use in order to meet customer’s needs at a profit. As a concept it means the art of managing the flow of raw materials and finished goods from the source of supply to their users. In other words, primarily it involves efficient management of goods from the end of product line to the consumers and in some cases, include the movement of raw materials from the source of supply to the beginning of the production line. These activities include transportation warehousing, inventory control, order processing and information monitoring. These activities are considered primary to the effective management of logistics because they either contribute most to the total cost of logistics or they are essential to effective completion of the logistics task. However, the firms must carry out these activities as essential part of providing customer with the goods and services they desire. SIGNIFIGANCE OF LOGISTICS
The importance of the logistics systems lies in the fact that it leads to ultimate consummation of the sales contract. The buyer is not interested in the promises of the seller that he can supply goods at competitive price but that he actually does so. Delivery according to the contract is essential to fulfilling the commercial and legal requirements. In the event of failure to comply with the stipulated supply of period, the seller may not only get his sale amount back, but may also be legally penalized, if the sales contract so specifies. There is no doubt that better delivery schedule is a good promotional strategy when buyers are reluctant to invest in warehousing and keeping higher level of inventories. Similarly, better and/or timely delivery helps in getting repeat orders through creation of goodwill for the supplier. Thus, as effective logistics system contributes immensely to the achievements of the business and marketing objectives of a firm. It creates time and place utilities in the products and thereby helps in maximizing the value satisfaction to consumers. By ensuring quick deliveries in minimum time and cost, it relieves the customers of holding excess inventories. It also brings down the cost of carrying inventory, material handling, transportation and other related activities of distribution. In nutshell, an efficient system of physical distribution/logistics has a great potential for improving customer service and reducing costs. Logistics has gained importance due to the following trends • Rise in transportation cost. • Production efficiency is reaching a peak • Fundamental change in inventory philosophy • Product line proliferated • Computer technology • Increased use or computers • Increased public concern of products Growth of several new, large retail chains or mass merchandise with large demands & very sophisticated logistics services, by pass traditional channel & distribution.
• Reduction in economic regulation • Growing power of retailers • Globalization As a result of these developments, the decision maker has a number of choices to work out the most ideal marketing logistics system. Essentially, this system implies that people at all levels of management think and act in terms of integrated capabilities and adoption of a total approach to achieve pre-determined logistics objectives. Logistics is also important on the global scale. Efficient logistics systems throughout the world economy are a basis for trade and a high standard of living for all of us. Lands, as well as the people who occupy them, are not equally productive. That is, one region often has an advantage over all others in some production specialty. An efficient logistics system allows a geographical region to exploit its inherent advantage by specializing its productive efforts in those products in which it has been an advantage by specializing its productive to other regions. The system allows the products’ landed cost (production plus logistics cost) and quality to be competitive with those form any other region. Common examples of this specialization have been Japan’s electronics industry, the agricultural, computer and aircrafts industries of United States and various countries dominance in supplying raw materials such as oil, gold, bauxite, and chromium. Further more Logistics has gained importance in the international marketing with the following reasons: 1. Transform in the customers attitude towards the total cost approach rather than direct cost approach . 2. Technological advancement in the fields of information processing and communication. 3. Technological development in transportation and material handling. 4. Companies are centralizing production to gain economies of scale. 5. Most of the MNC organizations are restructuring their production facilities on a global basis.
6. In many industries, the value added by manufacturing is declining as the cost of materials and distribution climbs. 7. High volume data processing and transmission is revolutionizing logistics control systems. 8. With the advancement of new technologies, managers can now update sales and inventory planning faster and more frequently, and factories can respond with more flexibility to volatile market conditions. 9. Product life cycles are contracting. Companies that have gone all out to slash costs by turning to large scale batch production regularly find themselves saddled with obsolete stocks and are unable to keep pace with competitors’ new-product introductions. 10. Product lines are proliferating. More and more product line variety is needed to satisfy the growing range of customer tastes and requirements, and stock levels in both field and factory inevitably rise. 11. The balance of power in distribution chain is shifting from the manufacturers to the trader. LOGISTICS AND SUPPLY CHAIN MANAGEMENT One of the main functions of logistics is to make the goods and services available to the place where there is demand for the product. Supply chain is the process that is involved from the procurement of raw materials till the outcome as finished products. The logistics and the supply chain management is the two sides of a coin. They are interrelated and they function on their own simultaneously. Some experts distinguish supply chain management and logistics while others consider the terms to be interchangeable. From the point of view of an enterprise, the scope of supply chain management is usually bounded on the supply side by your supplier's suppliers and on the customer side by your customer's customers. The logistics plays an important role between sources of demand and sources of supply. The supply chain management is the planning and management of all activities involved in sourcing and procurement, conversions, and logistics management activities, including coordination and collaboration with suppliers, intermediaries, third party service providers and customers to facilitate integration of supply and demand management within and across companies. Supply chain management is
used in filling the gaps and the logistics is used in closing the gaps. Thus we can say that the supply chain management and logistics are part and parcel of a solution to the same purpose. Overall productivity of the organization increases if the supply chain management and logistics goes hand in hand. NEED FOR SUPPLY CHAIN MANAGEMENT The need of supply chain management has been identified as follows: • Improve operations • Increasing levels of outsourcing • Increasing transportation costs • Competitive pressures • Increasing globalization • Increasing importance of e-commerce • Manage inventories Major module of international supply chain management has two major components: 1. International movement of products and raw materials, title transformation, payments, controlling risk factors 2. In parallel with the above activities, an information network is hard at work. Information sharing and collecting is very important to run an effective global supply chain management system ELEMENTS OF INTERNATIONAL SUPPLY CHAIN MANAGEMENT TYPICAL ISSUES Customers Determining what customers want Forecasting Predicting quantity and timing of demand Design Incorporating customer wants, mfg., and time
Processing Controlling quality, scheduling work Inventory Meeting demand while managing inventory costs Purchasing Evaluating suppliers and supporting operations Suppliers Monitoring supplier quality, delivery, and relations Location Determining location of facilities Logistics Deciding how to best move and store materials The efficiency of the global supply chain management of any company can make everything look easy. However in order to attain those efficiencies your employees need to understand the fundamentals. The most basic fundamental is that supply chain management is not just domestic anymore nor is it just for large corporations. Small and midsize companies have to be global supply chain management savvy if they wish to survive. The growth and development of a company is largely dependent on the global supply chain management system and its most important asset – employees. SIMILARITIES AND DIFFERENCES BETWEEN DOMESTIC AND GLOBAL SUPPLY CHAIN MANAGEMENT Though the concept of supply chain management is same at the domestic and international level, when it comes to practice few similarities and differences are there. The are: Similarities: • Conceptual framework • Involve the movement and storage of products • Role of information • Quality monitoring • economic and safety regulations Differences:
• Distance • Language • Cultural differences • Currency • Political stability • Infrastructure OBJECTIVES OF SUPPLY CHAIN MANAGEMENT The following are the major objectives of supply chain management and which are implemented by various organization to enhance their competitiveness. 1. Logistics: “Keeping the cost of transporting materials as low as possible consistent with safe and reliable delivery.” Here the supply chain management system enables a company to have constant contact with its distribution team, which could consist of trucks, trains, ships, or any other mode of transportation. The system can allow the company to track where the required materials are at all times. As well, it may be cost effective to share transportation costs with a partner company if shipments are not large enough to fill a whole truck and this again, allows the company to make good decision 2. Fulfillment: Ensuring the right quantity of parts for production or products for sale arrive at the right time. This is enabled through efficient communication, ensuring that orders are placed with the appropriate amount of time available to be filled. The supply chain management system also allows a company to constantly see what is on stock and making sure that the right quantities are ordered to replace stock. 3. Production: Ensuring production lines function smoothly because high-quality parts are available when needed.”. Production can run smoothly as a result of fulfillment and logistics being implemented
correctly. If the correct quantity is not ordered and delivered at the requested time, production will be halted, but having an effective supply chain management system in place will ensure that production can always run smoothly without delays due to ordering and transportation.
4. Costs: “Keeping the cost of purchased parts and products at acceptable levels.” Supply chain management reduces costs by increasing inventory turnover on the shop floor and in the warehouse controlling the quality of goods thus reducing internal and external failure costs and working with suppliers to produce the most cost efficient means of manufacturing a product. 5. Revenue & profit: “Ensuring no sales are lost because shelves are empty. Managing the supply chain improves a company’s flexibility to respond to unforeseen changes in demand and supply. Because of this, a company has the ability to produce goods at lower prices and distribute them to consumers quicker than companies without supply chain management thus increasing the overall profit. 6. Cooperation: “Among supply chain partners ensures 'mutual success.'”. Collaborative planning, forecasting and replenishment (CPFR) is a “longer-term commitment, joint work on quality, and support by the buyer of the supplier’s managerial, technological, and capacity development.” This relationship allows a company to have access to current, reliable information, obtain lower inventory levels, cut lead times, enhance product quality, improve forecasting accuracy and ultimately improve customer service and overall profits. The suppliers also benefit from the cooperative relationship through increased buyer input from suggestions on improving the quality and costs and though shared savings. Consumers can benefit as well through the higher quality goods provided at a lower cost. THE INDIAN LOGISTICS SECTOR :
Wars have been won or lost on the strength of logistics capability or lack of it. Although quite an old concept, logistics has been becoming efficient only since the globalization wave of the early
1990s and hence, the businesses supported by it, worldwide, have been pushed for competitive balance-sheets, providing consumers a better product/service and yet adding value to its investors. Triggering intense competition, globalization, coupled with liberalization, forced both private and public firms to commit themselves to making available to their customers the right material of right condition, at the right time and place at the lowest cost — be it a product or a service. The World Bank, in a recent survey Connecting to Compete: Trade Logistics in the Global Economy, has developed a Logistics Performance Index (LPI) that can serve as a benchmarking tool for measuring performance of businesses along a country’s logistics supply chain. The Bank study asserts that countries that are able to connect to the global logistics web would not only have access to vast new markets but also remain a part of the global trade growth. The report avers that it is not the income of nations but their undergoing trade expansion that determines their logistics efficiency, as the survey shows that nations with increasing trade (imports and exports) to GDP emerged as the out-performers on the LPI scale relative to their income levels. It also warns that those countries whose links with the global logistics chain are weak are bound to face large and growing costs of exclusion from international trade. India trails behind China on important indices such as customs procedures, overall infrastructure quality, international shipment, logistics competence and tracking of shipments, but is ahead of the latter on the domestic logistics efficiency front. Healthy economic growth in India is increasingly supported by robust industrial growth. One of the relatively lesser known but significant sectors that support almost all industrial activity .the logistics sector - is also witnessing this growth as a follow through. However, not withstanding its importance and size (INR 4 trillion), it has traditionally not been accorded the attention it deserves as a separate sector in itself. Country LPI Score
The level of inefficiency in logistics activities in the country has been very high across all modes. With the evolving business environment creating a strong demand pull for quality and efficient logistics services, core issues around enabling infrastructure, regulatory environment and the fragmented nature of the industry are being overcome gradually. The required pace of efficiency and quality improvement will demand rapid development of capabilities of logistics service providers. And with logistics being a service oriented sector, skill development will emerge as a key capability while skill issues exist in varying degrees in all segments of logistics; those segments where the gaps are not only wide but also widening at a relatively fast pace. The most severe and immediate requirement for skill development is found to be in the road freight and warehousing segments. India’s spend on logistics activities - equivalent to 13 percent of its GDP is higher than that of the developed nations. The key reason for this is the relatively higher level of inefficiencies in the system, with lower average trucking speeds, higher turnaround time at ports and high cost of administrative delays being just a few of the examples. These inefficiencies have arisen over the years from a combination of a non-conducive policy environment, extensive industry fragmentation and lack of good basic infrastructure. India's indirect tax regime discouraged large centralized warehouses and led, over time, to fragmentation in the warehousing sector. At the same time, the absence of a single logistics 'champion' (whether in form of a ministry or otherwise) in the government (or industry) led to a disintegrated approach to development of the sector. Country Logistics Cost/GDP
Extensive fragmentation meant the incapacity of industry players to develop the industry as a whole and poor support infrastructure, such as roads, ports and telecom, led to a situation where the opportunity to create value is limited. However, much of this is changing with the government now demonstrating a strong commitment towards providing an enabling infrastructure and creating conducive regulations. There is significant current and planned investment in infrastructure to the tune of (INR 15 trillion) over the next few years and an increased emphasis on public-private partnership. At the same time, regulations around rationalization of tax structures and prevention of overloading for example are creating an environment of positive change. Players now have the opportunity to leverage economies of scale, complemented with better infrastructure, to provide integrated logistics solutions which are cost effective. In addition, the evolving business landscape and increasing competition across industries, is creating the need for more efficient and reliable logistics services than what exist 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. Fundamentally, a fragmented industry with low average scale - and consequent limited investment and market development capability - is worst placed to serve these needs. It is not surprising therefore that there is a frantic pace of consolidation and organic growth that the industry is witnessing (refer box and figure 4). While logistics service providers are struggling to keep pace with the growth, logistics service users with limited or no outsourcing are finding it increasingly difficult and / or undesirable to manage this non-core activity in house. The result is a wide need gap that is seemingly widening much faster than it is being filled. It is in this context that capability development of logistics service providers assumes critical importance. While rapid development across all dimensions of organizational capability will be required to achieve and sustain demand growth, logistics being a service industry, manpower capabilities assume
utmost 5 importance. The sector currently employs about 40 million people, a number that will rise rapidly with exponential growth expectations in the sector. 6 A look at the financials of a set of 80 logistics companies in India across sectors reveals that manpower spends comprise 8-10 percent of overall sales of the sector. This roughly translates to about an INR 500 billion spend on logistics manpower in the country annually. Only about 13 -14 percent of the overall manpower costs are spent on non salary, manpower development items (welfare, training etc.). This share for the unorganized companies would expectedly be much less. As against this leading global logistics companies spend around 20 percent of their employee expenditure on non-salary items. This lack of focus on developing manpower and skills for the logistics sector has resulted in a significant gap in the numbers and quality of manpower in the sector. This gap, unless addressed urgently, is likely to be a key impediment in the growth of the logistics sector in India, and in consequence, could impact growth in industry and manufacturing sectors as well. This underscores the need for identifying areas where such manpower and skill gaps are critical, and developing focused action plans to improve the situation. In the next section, we analyze each segment of the Logistics sector in India to identify the skill gaps that exist in each. These gaps are then prioritized to identify key focus areas, and the action that needs to be taken to bridge the gaps. EMERGING TRENDS IN INDIAN LOGISTICS INDUSTRY Growth within the organized sector The logistics and warehousing sector in India, till now, has been highly fragmented and characterized by the presence of numerous unorganized players. A large number of players have been providing services in individual segments like transportation, warehousing, packaging etc. In 2007, organized players accounted for only 6 per cent of the total US$ 100 billion Indian logistics industry However, changing business dynamics and the entry of global third party logistics players (3PL) has led to the remodeling of the logistics services in India. From a mere combination of transportation and storage services, logistics is fast emerging as a strategic function that involves end-to-end solutions that improve efficiencies. Logistics players that provided limited logistics services, are also planning to broaden their areas of operation. Besides expansion of distribution network by both national and regional players, the sector is also witnessing considerable M&A (merger & acquisition) activity. For instance, DHL acquired Blue Dart, TNT acquired Speedage Express Cargo Service and Fedex bought over Pafex.
Consolidation within the industry will lead to economies of scale for the existing organized players, thereby lowering costs and improving efficiencies. Global logistics companies – like Gazeley Broekmen (Wal-Mart's logistics partner), CH Robinson and Kerry logistics – have also forayed into the Indian market in order to capitalize on the vast emerging opportunities within this industry. Many of them are planning to develop their own logistics parks across the country. Entry and expansion plans of logistics firms • DHL and India-based the Lemuir Group entered into a 76: 24 joint venture – DHL Lemuir • • • • Logistics Private Ltd. Germany-based Rhenus AG and Hyderabad based Seaways Shipping Ltd have set up a joint venture – Seaways Rhenus Logistics Ltd. The UAE-based Swift Freight has forayed into the Indian market. Blue Dart Express is planning to add 1 million square feet of warehousing space to develop 58 warehouses across the country by 2010. The Future Group plans to develop 3 million square feet of warehouses by 2010.
Competitive dynamics and other issues The following problems existing in the Indian logistics industry make it unattractive for investments and also create entry barriers. ➢ Logistics is a high-cost, low-margin business. The problem of organized players is compounded by unfair competition with unorganized players, who can get away without paying taxes and following operating norms stipulated in the Motor Vehicles Act such as quality of drivers and vehicles, volume and weight restrictions, etc. ➢ Economies of scale are absent in the Indian logistics industry. Even the organized sector that contributes slightly more than 1% of the logistics cost, is highly fragmented. Existence of the differential sales tax structure also brought in diseconomies of scale. Though VAT (Value Added Tax) has been implemented since April 1, 2005, failure in implementation of a uniform VAT structure across different states has let the problem persist even today. ➢ Apart from the non-uniform tax structure, Indian LSPs have to pay numerous other taxes, octeris, and face multiple check posts and police harassment. High costs of operation and delays involved in compliance with varying documentation requirements of different states make the business unattractive. On an average, a vehicle on Indian roads loses 24-48 hours in complying with paperwork and formalities at different check posts en route to a destination. Fuel worth
USD 2.5 billion is spent on waiting at check posts annually. A vehicle that costs USD 30,000 pays USD 7,500 per annum in the form of various taxes, which include the excise duty on fuel. This is why freight cost is a major component of the cost of a product in India. ➢ There is lack of trust and awareness among Indian shippers with regard to outsourcing logistics. The volume of outsourcing by Indian shippers is presently very low (~ 10%) compared to the same for the developed countries (> 50%, sometimes as high as 80%). The unwillingness to outsource logistics on part of Indian shippers may be attributed to skepticism about the possible benefits, perceived risk, and losing control, of sensitive organizational information, and vested interests in keeping logistics activities in-house. ➢ Indian shippers expect LSPs to own quality assets, provide more value-added services and act as an integrated service provider, and institute world-class information systems for more visibility and real-time tracking of shipments. However, they are unwilling to match the same with increased billings; even pay little attention to timely payments that leave LSPs short of adequate working capital. ➢ Indian freight forwarders face stiff competition from multi-national freight forwarders for international freight movement. MNCs, because of their size and operations in many countries, are able to offer low freight rates and extend credit for long periods. Indian freight forwarders, on the other hand, because of their smaller size and lack of access to cheap capital, are not able to match the same. Moreover, clients of MNCs often want to deal with a single service provider and especially for FOB (Free on Board) shipments specify the freight forwarders, which most of the time happen to be the multi-national freight forwarders. This is sort of a non-tariff barrier imposed on Indian freight forwarders. ➢ Poor physical and communications infrastructure is another deterrent to attracting investments in the logistics sector. Road transportation accounts for more than 60% of inland transportation of goods, and highways that constitute 1.4% of the total road network, carry 40% of the freight movement by roadways. Slow movement of cargo due to bad road conditions, multiple check posts and documentation requirements, congestion at seaports due to inadequate infrastructure, bureaucracy, red-tapeism and delay in government clearances, coupled with unreliable power supply and slow banking transactions, make it difficult for exporters to meet the deadlines for their international customers. To expedite shipments, they have to book as airfreight, rather than
seafreight, which adds to the costs of shipments making them uncompetitive in international markets. Moreover, many large shipping liners avoid Indian ports for long turnaround times due to delays in loading/unloading and hence Indian exporters have to resort to transshipments at ports such as Singapore, Dubai and Colombo, which adds to the costs of shipments and also delays delivery. ➢ Low penetration of IT and lack of proper communications infrastructure also result in delays, and lack of visibility and real-time tracking ability. Unavailability and absence of a seamless flow of information among the constituents of LSPs creates a lot of uncertainty, unnecessary paperwork and delays, and lack of transparency in terms of cost structures and service delivery. For example, a shipper has to pay a higher freight rate if it cannot ensure return load. At present, there is no real time process by which a shipper may know about the availability of trucks and going rates at the destination market. Therefore, it has to pay more. Had the market information been available to both the shipper and the service provider, the service provider’s cost structure would have been transparent to the shipper and it would have ended paying the actual market
➢ Rate. Another example would be that LTL (Less than Truckload) shipments cost more
than FTL (Full Truckload) shipments. Now, when a shipper books a LTL shipment, it has no idea about the status of its shipment after it leaves the warehouse at the origin and before it reaches the warehouse at the destination. The service provider may still convert this LTL shipment into a FTL shipment at its own warehouse before delivering at the destination. So, the shipper ends up paying LTL rates for a FTL shipment. Had there been visibility during delivery, this problem would not have occurred. ➢ Since most of the LSPs are of relatively small size, they cannot provide the entire range of services. However, shippers would like service providers to offer more value-added services and a single-stop solution to all their logistical problems. The inability of service providers to go beyond basic services and provide value-added services such as small repair work, kitting/de- kitting, packaging/labeling, order processing, distribution, customer support, etc. has not been able to motivate shippers to go for outsourcing in a big way. ➢ Service tax levied on logistics service fees (currently 12.36% with educational cess) may make outsourcing costly and outweigh the possible benefits. ➢ There is lack of skilled and knowledgeable manpower in the logistics sector. Management graduates do not consider logistics as a prime job. To improve the status of
the industry, service providers have to move beyond the level of brokers and truckers to attract and retain talent. FUTURE PROSPECTS
➢ Despite problems, The Indian logistics industry is growing at 20% vis-a-vis the average
world logistics industry growth of 10%. Since the organized sector accounts for merely 1% of the annual logistics cost, there is immense potential for growth of the sector. The major opportunities are highlighted below. Many large Indian corporate such as Tata and Reliance Industries have been attracted by the potential of this sector and have established logistics divisions. They started providing in-house logistics services, and soon sensing the growth of the market, have started providing services to other corporate as well. Large express cargo and courier companies such as Transport Corporation of India (TCI) and Blue Dart have also started logistics operations. These companies enjoy the advantage of already having a large asset base and an all-India distribution network. Some large distributors have also forayed into the logistics business for their clients. Since logistics service can be provided without assets, there is growing interest among entrepreneurs to venture into this business. Indian shippers are gradually becoming more aware of the benefits of logistics outsourcing. They are now realizing that customer service and delivery performance are equally important as cost to remain competitive in this global economy. The Indian economy is growing at over 9% for the last couple of years (compared to the world GDP growth rate of 3%), which implies more outputs and more demand for specialized logistics services. The Indian government has focused on infrastructure development. Examples include the golden quadrilateral project, east-west and north-south corridors (connecting four major metros), Free Trade and Warehousing Zones (FTWZ) in line with Special Economic Zones (SEZ) with 100% Foreign Direct Investment (FDI) limit and public-private partnerships (PPP) in infrastructure development. It is expected that infrastructure development would boost investments in the logistics sector. In India, 100% FDI is allowed in logistics whereas in China, until recently, foreign investment was not allowed in domestic logistics. Almost all large global logistics companies have their presence in India, mainly involved in freight forwarding. For domestic transportation and warehousing, they have tie-ups with Indian companies. As the Indian logistics scenario looks promising, these MNCs are expected to play a bigger role, probably forming wholly-owned subsidiaries or taking the acquisition route. The latter may be the preferred route of investment since the target company is readily acquired with its asset base and distribution network, and the need for building everything from scratch can thus be avoided. The benefits for the acquired company include the patronage of an MNC and access to the MNC’s global network. As an example, DHL Danzas, the biggest logistics company in the world, has taken over Blue Dart.
CHAPTER 3 OBJECTIVE OF STUDY
OBJECTIVE OF STUDY: •
To identify the role of Logistics in supply chain management at OCCL To know about network of logistics and transportation industry. To study the role of global 3PL service providers in India
CHAPTER 4 RESEARCH METHODOLOGY
RESEARCH METHODOLOGY The objective of the present study can be accomplished by conducting a systematic market research. Market research is the systematic design, collection, analysis and reporting of data and findings that are relevant to different marketing situations facing the company. The marketing research process that is adopted in the present study consists of the following stages: Collection and Sources of data: Market research requires two kinds of data, i.e., primary data and secondary data. Secondary data was collected from various books and web sites. Secondary data is use to complete this project report from various sources like World Bank (website), CII (website) and other consultant firms. Primary data is collected from OCCL (Personal interview). a) Reducing logistics costs The logistics cost in India – which includes inventory holding, transportation, warehousing, packaging, losses and related administration costs – is estimated at approximately 13 per cent of GDP and is high when compared to the corresponding figures for major economies India's multilayered tax regime, infrastructure bottlenecks and other inefficiencies have been the primary reasons in keeping logistics costs high in India. Under the existing tax structure, 2 per cent Central Sales Tax (CST) is levied on inter-state sales. As a result, companies have had to maintain small warehouses and depots in every state in order to avoid paying CST on Inter-state sales. These multiple warehouses have resulted in high inventory costs, increased working capital and other overheads. A simplified tax regime will help logistics players service multiple markets and offer end-to-end solutions far more efficiently and at much lower costs. As per the World Bank's report on the Logistics Performance Index, a 0.5 per cent decrease in logistics cost leads to 2 per cent growth in trade and a 40 per cent increase in the range of products that get exported out of the country. From multiple taxes to a simplified tax regime:
Union Budget 2008-09 has proposed the phasing out of Central Sales Tax (CST) 2010-11. Once implemented, this measure will promote outsourcing of logistics operations and encourage the creation of large warehouses at key strategic locations that could operate on the 'hub-and-spoke' model. The implementation of Value Added Tax (VAT) in 2006 has played a role in reducing logistics costs. The proposed implementation of Goods and Service Tax (GST) could lower logistics costs further. According to the Confederation of Indian Industry (CII), improvement of logistics and warehousing industry can make Indian industries more cost-competitive, thereby enabling a GDP growth of 11 to 12 per cent, from the existing 7 to 8 per cent. b) Improvement in infrastructure Transportation in India accounts for nearly 40 per cent of the total cost of production. One of the major barriers faced by the Indian logistics industry has been the lack of quality physical infrastructure. However, India's core sectors are witnessing a significant change. The country is expected to increase its infrastructure development spend from 4.7 per cent of GDP in 2007 to 8 per cent of GDP by 2012. This increased spend will help boost the logistics industry. However, delays in critical projects may lead to a failure of this measure to provide the much needed impetus to the growth of this sector. Better connectivity to small towns and cities is another area planners need to work upon. Road transportation is currently the most dominant form of transportation with more than half of the goods in the country being moved by road. Almost every mode of transportation in India is fraught with inefficiencies. For instance, ports – that are vital for foreign trade—have very high turnaround times when compared with statistics for other countries. Similarly, the railways, which were a popular mode for freight transportation (especially the movement of bulk goods), have lost ground to road transportation due to limited access to smaller towns. Air, on the other hand, is a costly mode and its use is restricted to courier shipments. It is rarely used for bulk transportation. Emerging concept of third party logistics Third party logistics or 3PL is a concept where a single logistics service provider manages the entire logistics function for a company. Although still at a nascent stage, the Indian 3PL industry is growing at a rapid pace. Global sourcing activity and fierce competition amongst manufacturers to cut costs have made movement of materials rather complex, giving rise to the emergence of several third party logistics players. Fuelled by the increasing trend of outsourcing, coupled with the rapid growth in the Indian manufacturing sector, 3PL is estimated to grow at about 30 per cent annually and become a US$ 30 billion industry by 2010
Investment Details/ Plans (2007-08) (in US $ mn)
Shreyas Shipping and Logistics
The entry of large third party logistics (3PL) carriers – like Federal Express (FedEx) and DHL – and network expansion by the existing domestic players (such as Gati and Shreyas Shipping) have also contributed to the transformation of services and the business practices across this sector .Value added services like inventory management, warehousing, packaging, labelling, tracking of shipments etc have witnessed huge demand from the corporate sector. The end-users of 3PL services include major players from the retail, auto components and the electronics industry. The organized 3PL market in India can be categorized into three major segments – public sector, private sector and foreign entrants. Some of the major players in each category are as illustrated. Public Sector Companies Foreign Entrants Private Sector
Transport Corporation of India
U Container Corporation of India
Food Corporation of India
Reliance Corporation Logistics
Central Warehouse Corporation
P Rapid growth of the warehousing sector The role of a warehouse has also transformed from a conventional storehouse to an inventory management set-up with a greater emphasis on value added services. Warehouses now provide additional services like consolidation and breaking up of cargo, packaging, labeling, bar coding, reverse logistics etc. It has emerged as a critical growth driver, leading to large investments by logistics companies for the development of warehouses and logistics parks. Warehousing and related activities currently account for about 20 per cent of the total logistics industry. However, it is estimated that by 2010, this proportion would increase to approximately. The traditional concept of establishing warehouses in the proximity of manufacturing facilities and raw material sourcing centre is also undergoing a transformation. Today, there is an increased trend of relocating warehouses near consumer markets. Currently, the organized warehousing industry in India has a capacity of approximately 80 million metric tones (MT) and is growing at 35 to 40 per cent per annum. An investment of approximately US$ 500 million is being planned by various logistics companies for the development of about 45 million square feet of warehouse space by 2012. Logistics parks – One-stop shop for logistics needs The concept of a consolidated logistics centre can be traced back to the Foreign Trade Policy of 2004, which led to the development of Free Trade Warehouse Zones (FTWZ). While FTWZ were aimed at facilitating import and export of goods, the need for a one-stop shop that could additionally cater to the domestic market led to the development of logistics parks as a part of the infrastructure industry in 2005-6. A logistics park is a notified area that facilitates domestic and foreign trade by providing services like warehousing, cold storage, multimodal transport facility, container freight stations etc. This area also acts as a place where a company can unload cargo
for distribution, redistribution, packaging and repackaging. Majority of these logistics parks will be developed in the proximity of established and emerging industrial hubs in the country in order to tap their logistics needs. By 2012, around 110 logistics parks, spread over approximately 3,500 acres, are expected to come up across India at an estimated cost of US$ 1 billion. Majority of the upcoming logistics parks are being planned in close proximity to state capitals. However, availability of large land parcels at relatively low cost, connectivity to multiple markets across states and proximity to industrial clusters has led to the emergence of some tier-2 and tier-3 cities as favoured destinations for the development of logistics parks and warehouses. VALUE ADDED AND EMERGING SERVICES Besides the core transportation and warehousing services, the business of logistics is evolving to encompass services that either enhance the effectiveness of existing transportation and warehousing services or cater to associated value chain elements. All such services that do not directly involve transportation and warehousing have been classified as value added and emerging services. Express services by both road and air are fast growing. While the Air Express and Courier segment is reasonably organized, the Road Express segment is relatively less developed. Sophistication and competition along with scale building among the industry players is expected to drive the need for deeper skills at the operational level and a broader range of skills at the middle and senior management levels in future. Track and trace as a technology finds limited acceptance currently but is inevitably going tobecome an indispensable part of transportation. Manpower that is capable of operating and maintaining the systems would be increasingly in demand. Cold chain services are likely to gain significance as organized food retail takes off. This would particularly give rise to the need for technically competent manpower capable of understanding the temperature and humidity control requirements of various perishables and operating sophisticated controlled atmosphere equipment Value Added services associated with warehousing, such as packaging, inventory management etc. would create a corresponding demand for personnel with matching skill sets. The third party logistics (3PL) market in India is still in a relatively nascent stage While multinational companies in all industries have been predominant users of these services, domestic majors in leading industrial sectors have also begun to follow the footsteps of their multinational counterparts, starting with outsourcing their basic logistics functions. Realizing the significant cost reductions and several other benefits gained by these companies, a large number of small to medium companies in all the industries are gearing up to use 3PL services for their logistic functions, resulting in tremendous potential for 3PL market in India. As far as skills go, the 3PL business being an amalgamation of all other logistics services combined, necessitates the all round development of skills in each sub sector as far as operational and front line skills
are concerned; on the middle and senior management levels, while soft skills around customer relationship management would need to be developed and enhanced on the one hand, breadth of management skills across various segments of logistics would also need to be developed. We will now look at selected specific profiles in each of these segments the development of which would be critical for achieving and sustaining the projected growth. RECENT TRENDS IN INDIAN LOGISTIC S INDUTRY : The global logistics industry was valued at US$3.5 trillion in 2007, whereas US logistics industry size was around US$900 billion, 25% of the global logistics industry. Logistics costs in India are estimated to be around 13% of the GDP, which comes to around US$94 billion in 2006-07. However, India’s spending on logistics industry is much higher than the developed economies like the US (9.5%) and Japan (10.5%). To know about network of logistics and transportation industry. AIR CARGO :
Air transport sector contributes over 0.2% to the country’s GDP at constant prices (1999- 2000 Prices). Transport sector’s contribution to the GDP has been firming up over the last couple of years, mostly because of the growing economic activities in the country. Domestic air cargo traffic has been growing at CAGR of 12.80% from 2001-02 to 2006-07, whereas international air cargo traffic has been moving at CAGR of 13% during the same period. During 2006-07, total air cargo traffic is estimated to be over 1.56m tones against 1.4m tones during 2005-06, registering a growth rate of 14.65%. According to the Planning Commission, India’s air cargo movements would grow at over CAGR of 11.5% from 2007-08 to 2011-12. Riding high on export of gems and jewellery, special chemicals and high-value pharmaceuticals, international air cargo traffic at all Indian airports have been growing rapidly. MARINE: Marine transport sector contributes over 0.2% to the country’s GDP at constant prices (1999 2000 prices). Transport sector’s contribution to the GDP has been firming up over the last couple of years, mostly because of the growing economic activities in the country. Shipping industry plays a significant role in the Indian economy. India has 12 major and 187 minor/intermediate ports along its coastline of around 7,517km. The fleet strength at the end of December 2006 was 774 vessels with 8.42m Gross Registered Tonnage (GRT). Ports serve as the gateways to the international trade in India. Major ports in India together have handled 463.84m tones of cargo in 2006-07, a growth of 9.51% against the same period of the previous year. The petroleum-oillubricants (POL) accounted for 33.38% of the total traffic at major ports during April-March 2007, while iron ore constituted 17.37%, coal 12.98%, container traffic 15.84%, fertilizer 3.04%, and others 17.49%. According to the Planning Commission, India’s shipping fleet strength will be increased up to 15m GRT (as per the 3rd target) by the end of 2011-12, with an estimated
investment of US$17.7 billion. The port throughput will increase up to 1,008m tones, growing at a CAGR of 10.96% from 2007-08 to 2011-12. RAIL: The plan by the Indian Railways to develop Logistics Parks [‘hubs’ in supply chain parlance is a good one. It has the potential to streamline and optimize the supply chain and reduce the supply 8 chain costs. The service concept, service delivery and infrastructure have to be designed very well for the Railways Logistics Parks to add value to the supply chain. For the Railways Logistics Park to add value to the supply chain, at least one part of the transportation, either the incoming or outgoing, has to be by rail. The Indian Railways would have to introduce innovative train services, so that customers shift to rail from road and use trains for either the incoming or outgoing from the hub. Currently about 80% of the products in India move by road. One simple innovation could be to introduce time-tabled container trains, time-tabled parcel trains etc. It is essential to have a few time-tabled freight trains, because reliability in a supply chain is a big cost saver [reduces inventory levels, improves customer service] If the transportation, incoming and outgoing, is by road, then the Logistics Park adds no value to the supply chain. It makes more sense, from a supply chain standpoint, to have the hub on the highway, close to the city bypass, outside the city limits, outside the octroi limits and outside any ‘No Entry’ zone. It then makes more sense for the Railways to act as a landlord and build a Mall or Hypermarket. A Mall or Hypermarket would give much better rentals and higher returns on the land that the Railways own.
CHAPTER 5 DATA ANALYSIS AND FINDINGS Data Analysis:
DISTRIBUTION LOGISTICS FOR EXPORTS IN OCCL Once the goods are packed and their pre-shipment inspection has been completed, the exporter should draw up a logistics plan for the distribution of the goods to the importer to ensure their timely delivery. This involves planning for transportation of the goods. The decision as regards the mode of transport to be used is thus, the essence of distribution logistics. The logistics plan should be drawn up considering the factors such as one, the alternative modes of transport and two, the mode which is optimal from the point of view of the transportation cost. It may sometimes so happen that there is no direct shipping link between the exporting and the importing country. In such a case transport of the goods would involve transshipment of goods from an intermediate port in other country. The mode of transport as to whether the shipment would be sent by air or by sea or by road is a matter of negotiation between the exporter and the importer and specified in the export contract. The exporter has to plan the transport logistics to insure timely dispatch of the goods. In this significant area Clearing and forwarding agent are a link between the owners of the goods and owners of means of the transport. They are experts and knowledgeable in laws and regulations governing shipment of goods through the customs authorities TYPES OF CONTAINERS There are primarily two types of containers used for the shipment of products from OCCL:
1) 20 ft (for 15 to 16 MT) 2) 40 ft (standard container) CONTAINERISATION Containerization is the technique of stowing freight in reusable containers of uniform size & shape for transportation. The use of containers has revolutionized the carriage of goods through shipment. The containers are carried by train or road to the sea ports where they are loaded on the ships for the onward transportation to the destination. The exporters do not need to carry the cargo to the seaports any longer rather they can approach the container freight station or the inland container depot(ICD) to book the cargo there for the transportation to the destination. The custom clearance of the cargo is provided at ICDs and in the process, the exporters are able to save lot of time. The packing of the cargo in a container can be done either in the container depot or in the factory of the exporter. The type of container used in OCCL is General Purpose containers which are closed and are suitable for the carriage of all types general cargo both solids and liquid. Access for loading and unloading is through full width doors. The dimensions of general purpose container are as follows: Based on the length of the container, the container is generally known as 20ft container or 40ft container,20ft containers are specifically used in OCCL although some times in rare cases 40ft containers are used at some discrepancy. 1) What are you engaged into export-import or both? • OCCL is engaged into export but it imports only raw material . 2) • What is your basic product/ commodity? OCCL produces Insoluble sulphur it is mainly used in tyre industry. The growth in Indian market for Insoluble sulphur is currently twice the growth rate for the tyre industry due to increasing share of radial tyres which consume more Insoluble sulphur. What are your main destination ports?
• • •
The Port of Hamburg for Germany. The Port of Jakarta for Indonesia. Port Elizabeth for South Africa Santiago for USA Felixstowe for U.K.
4) What mode of transportation is used basically (air/sea)?
Basically OCCL uses sea mode of transportation because it is cheapest than air. For dry port Rail mode is used and sometime Volvo trucks are also used .
5) What types of containers are used for your product?
Standard containers are used by OCCL. Size of containers used are 20ft and 40ft ( std).
6) What is loadability for container for your product?
20ft containers are used for 15 to 16 MT weights of cargo and 40ft for more than 16Mts.
7) Who handle/look after your logistics part?
GMH PVT Limited, Nehru Place, New Delhi.
8) Does GMH look after clearance part also? • Yes.
9) What are the Inco terms which are used by the company for export shipments?
C&F (cost and freight) CIF (cost, insurance and freight) DDU (delivered duty unpaid) DDP (delivered duty paid) MSC APL Hyundai OOCL
10) Which shipping lines are used by the OCCL? • • • •
To know about network of logistics and transportation industry. ROAD : The road freight industry in India is worth about INR 1.42 trillion and is growing at about 6-8 percent year on year (refer figure 6). Manpower spends amount to only about 4 percent of sales as against the overall sector average of 8-10 percent. The industry has traditionally been extremely fragmented - almost 75 percent of the trucking 'companies' are single truck operators and almost 90 percent of trucking companies have a turnover of less than INR 10 million A majority of players in this industry have been small entrepreneurs running family owned businesses. Given their small scale and limited investment capability, most of their investments have been focused on short term gains - direct and immediate impact on the top line / bottom line of the business being the key decision criterion. As a result, investments that pay off in the longer term, such as those in manpower development, have been minimal historically. Also, these businesses are typically tightly controlled by the proprietor and his / her family and as such, making it unattractive for professionals. Poor working conditions, low pay scales relative
to alternate careers, poor or non-existent manpower policies and prevalence of unscrupulous practices have added to the segment's woes creating the image of a segment that holds few attractions for those seeking employment. While industry players have been incapable of investing in manpower development, the government has also not focused sufficiently on the same. There exist very few formal training institutions for driver training and practically none for operational training on associated areas like loading / unloading supervisory, proper handling practices etc. The result has been that in the current scenario, there exist gaps in core technical skills of the existing set of personnel. For example, the backbone of the trucking industry truck drivers lack knowledge of good driving practices and areas associated with driving like understanding of VAT. Taking a level-wise view of the skill issues, it is seen that in the road sector, skill issues are widespread across the board with the situation being most severe at the operational level Advantages: ➢ Road network of 3.3 million km is the second largest globally ➢ 55% of total freight movement is via roadways ➢ Roads offer wide reach and easy accessibility to even small markets Disadvantages: ➢ High cost of transportation ➢ National Highways account for only 2% of the total network but carries 40% of total freight Key Developments: ➢ National Highway Development Project to upgrade and modernize highways ➢ 24,000 km of National Highways are to be upgraded to four/six lanes. Connectivity to ports is also being improved Railway Rail freight traffic revenues stood at around INR 350 billion in 2006 having grown at around 8 percent in the recent past with the growth in the last couple of years being around 10 percent. It is the world's second largest rail network spread over 81,500 km and covering around 7000 stations. Manpower spends amount to about 45 percent of revenues as against the overall sector average of 8-10 percent. Also, non-salary expenditure comprises 36 percent of overall manpower expenditure compared to the sector average of 13-14 percent. With the government being the only employer, recruitment systems in the railways segment are formalized and there exists an institutionalized training infrastructure and policy. Though the employee numbers are high (around 1.4 million) there are no significant skill gaps owing to this traditionally strong in-house training infrastructure. With technological up gradation, certain jobs are made redundant every year with the people on these jobs being absorbed in newer areas through training. However, the rapid introduction of modern technology that is creating gaps even in technical areas such as
signalling and telecom. Also, the Railways is facing increase in attrition levels due to gradual opening of the sector. To counter the emerging gaps, the Railways is overhauling the curriculum and infrastructure and rolling out training to the lowest levels (Grade D) to increase productivity. With competition from road and air, the Railways is focusing on making its large manpower more customer friendly. In the overall assessment, therefore, the skill gaps situation in the railways segment does not seem to be alarming. The host of new players entering into the rail container services segment (15 licenses have been awarded for the same) will however require skills that hitherto were only residing with the Indian Railways. While the quantum of requirement at this stage would be small and the need would likely be filled by the buffer created by the Railways, this could become a gap area going forward Advantages: ➢ Spread over 81,500 km, railways carries 25% of total freight movement ➢ Low transportation cost as compared to roads Disadvantages: ➢ Bulk commodities account for 90% of total freight revenues ➢ Inflexibility to reach deep interiors Key Developments: ➢ Phase 1 of dedicated freight corridor along Golden Quadrilateral to be initiated in 2008-09 Water/Port The growth in shipping has been even higher than that of the railways driven by strong growth in foreign trade both in bulk and containerized cargo. Manpower spends amount to about 8-10 percent; non-salary expenditure varies greatly between companies ranging from 3- 20 percent of overall man power expenditure. The nature of liner shipping services to and from India has undergone a sea change in the last few years as a result of the growth in break-bulk and conventional cargoes. With the nature of goods being shipped changing, the potential and opportunities for container transport and logistics companies are enormous. Over the past few years the size and the number of vessels that are being deployed by India has increased. With increasing capacity and infrastructural support, the scope of the operations is set to increase. India now has the largest merchant shipping fleet among the developing countries. India is being ranked 17th in the world in shipping tonnage. Indian share of maritime transport services is 1 percent of world market. The container traffic has registered an impressive growth of 15 per cent over the last five years. The Government is responsible for creation of the trained manpower required for the country's merchant navy fleet and also facilitation of training and employment of seafarers in foreign flag vessels. . In addition to the above, there are about 124 training institutes in the private sector approved by the Director General of Shipping, imparting pre-sea and post sea training in various disciplines. The Directorate General of Shipping maintains a system of inspections to ensure the quality of training. India is globally recognized as a very important
source of mercantile manpower. Accentuating the situation is the inherent disadvantage to the Indian ship owners as employers arising by virtue of extra burden of income tax on Indian seafarers' income. This makes the employment on a foreign flag the first choice of any Indian seafarer, and thereby denies the best talent to the local shipping industry. Thus, in the core shipping industry, while the manpower situation in terms of quality fares much better than the other segments of logistics, the issue here is that of quantity with an increasing number of qualified people being attracted towards working on foreign vessels as they offer better salaries and perks. However, if one were to look at the ports side, there is an increasing lack of trained manpower for pilotage functions and equipment operators Advantages: ➢ Cheapest mode of transportation Disadvantages: ➢ Poor state of inland waterways in the country ➢ High turnover time Key Developments: ➢ Cargo handling capacity of ports to be increased from 600 million tones in 2007 to 1500 million tones by 2015 AIR : Though the air freight segment holds a small share of India's freight market, it is growing at a fast pace. While India accounts for meager 3 percent of the global air cargo market, the Indian air cargo industry is expected to double in size by the year 2010, as per an expert estimate. As in the case of sea freight, the level of formalization and standardization of operations in the air freight segment is greater than in the road sector. By virtue of the level of investments in assets, network and relationships required to be a player in this segment, it has traditionally been relatively more organized leading to greater regard for manpower development. The market leaders typically have established internal structured training practices to train the staff employed at this level. Nevertheless, there exist perceived gaps at the operational / front line level and are primarily to do with soft skills, such as relationship management, interpersonal and managerial, and supervisory skills. Advantages: ➢ Fastest mode of transportation Disadvantages: ➢ Low freight movement
➢ 87% of total freight traffic being handled by airports in metro cities Key Developments: ➢ Modernization of 37 operational airports and development of new airports will increase air cargo handling capacity WAREHOUSE: The warehousing segment consists of storage warehousing related to distribution whether inbound or outbound trans shipment warehouses or 'terminals' used for bulking / de-bulking, stuffing / de-stuffing cross docking and temporary storage (including CFS and ICD) The warehousing segment is perhaps where the greatest growth potential exists. Like road transportation, this segment has traditionally been extremely fragmented, small scale and scattered geographically. A key reason for this has been India's indirect tax structure, with tax paid on cross border (state border) sales not being fully set off against local tax liabilities. As a result, most players resorted to setting up small warehouses across different states, rather than large, centralized set-ups. This has led to the prevalence of small scale, fragmented warehouses, with corresponding inefficiencies. This cause and effect cycle is depicted in Increasingly, warehouses are being used to serve several important functions, beyond mere storage of products Customer service Increasingly, warehouse are being used as the customer service and repair centers. This ensures quick availability of spare parts and offers low turnaround time Distribution The goods are dispatched to the dealers/distributors from the warehouse. The warehouse, thus, performs functions like invoicing and order processing. Value Addition Increasingly, warehouses are also being used to do higher end tasks associated with production till now. These include MRP tagging, promotion bundling, repackaging , quality checking etc. Product mixing A warehouse may be used as a place where material from different factories of an organization is mixed and dispatched to common set of distributors. Stockpiling A warehouse is often used as a stockpiling location to manage demand-supply gaps over a longer term. While no organized players have evolved in this segment, several trends are driving the need for a more professional and organized approach to warehousing. Figure outlines the several
additional functions that warehouses perform today, apart from being physical storage points such as Stockpiling, Product Mixing, Value addition, Distribution and Customer Service. These functions require different skill sets and hence, warehouse service providers today need to develop proficiencies in a diverse set of both core and non-core activities The size of the warehousing segment is estimated to be INR 1.2 trillion in 2006; while the overall sector growth may be estimated to be around the GDP growth rate of 8-9 percent, the organized portion of this market is estimated to be growing at over 20 percent. A majority of players in this industry are small / medium entrepreneurs running the warehouse as a CFA for one or more companies. As mentioned earlier, the scale of these warehouses was never large enough to tap scale economies or justify investments in higher standards. However, going forward, while implementation of the VAT regime is expected to drive consolidation and hence larger scale warehouses, the rapid growth of organized retail is expected to drive sophistication and efficiency in warehousing practices. These developments would drive the need for specialized warehousing skills like picking and packing, inventory management, proper handling practices including usage of warehousing equipment like stackers, pallet trucks etc. and ability to understand and use warehouse management systems (WMS) The growth in the proportion of containerized cargo in addition to the opening up of container rail transport is giving a boost to the development of Container Freight Stations (CFS) and Inland Container Depots (ICD). These 'warehouses', being used more for transshipment than storage per se, require basic skills around loading / unloading, stuffing / de-stuffing etc. at the operational level Newly developed electronic commodity markets, such as Multi Commodity Exchange of India Ltd. (MCX) have played an instrumental role in the logistics. Creation and development of warehouses followed the emergence of these markets or exchanges. MCX’s collateral management arm National Bulk Handling Corporation Ltd (NBHC), a national-level end-to-end solutions provider in warehousing, bulk handling, grading and inspection, commodity care, pest management and collateral management of commodities, is playing a key role in taking logistics and, hence, markets closer to the producers. Sticking to their mandate, commodity derivatives markets have proved to be extremely beneficial to farmers. Logistics Companies of India The land which opens up wide array of opportunities for the logistics service providers across the world is India. The high demand for the logistics services is due to the significant growth of economy. A few years back the value of the India logistics market was is $14 billion and will grow at a rate of 7-8 per cent. The logistics companies in India cater to millions of retailers and meet the requirements of about a billion people. The list below gives the name of the best logistics companies in India.
LIST OF TOP LOGISTICS COMPANIES IN INDIA :
TNT Express: This company is a key leader in the international market in the sector of global express services. The company ensures safe and on time delivery of your documents, freight and parcels. The company offers time and day definite delivery in about 200 nations across the world. It operates 47 jet freighter aircraft and 26,000 road vehicles and has a network of 2,300 companies. American President Lines Ltd (APL) APL is the world's fifth-largest container transportation and shipping company, providing services to more than 140 countries through a network combining intermodal freight transport operations with IT and e-commerce. It is a wholly owned subsidiary of Neptune Orient Lines (NOL), based in Singapore, a global transportation and logistics company engaged in shipping and related businesses. APL has offices in almost 100 countries worldwide. AFL : One among the acknowledged leaders among the logistics companies in India is AFL. Through its domain of logistics services, the company has delivered world class service in India. In 1979,the company introduced the first ever courier service by forming an alliance with DHL World Wide Express. The company offers services like Logistics and warehousing, Courier Company and Custom Consultant. DHL : This company is one among the major logistics companies in India. It is a market leader globally in overland transport, air freight and international express. The company ranks No.1 in the world in contract logistics and ocean freight. The biggest logistics and express network in the world has a network in about 220 territories and countries,72,000 vehicles,350 Aircrafts,36 hubs and 4,700 bases. Blue Dart : This logistics company is South Asia's top integrated express package Distribution and Courier Company. The domestic network of the company covers about 21,340 locations and provides service to 220 countries by the company's sales alliance with DHL. It provides the best service like Free Pick up from Your location, Regulatory Clearances, Real Time Tracking, Free Computerized Proof of Delivery etc. Gati : The company is a key leader in then arena of express cargo delivery and a significant one in the supply chain management solutions and distribution in India since the year 1989.The company provides services like the Ware Housing, Express Cargo etc. Logistics Solutions of the company are Warehousing, Supply chain Management. The Distribution Solutions of the company are Gati Surface Express, Gati coast to coast and Gati Air Express etc. Safe express : It is one of the largest express company in India. The company offers the best and integrated logistics solutions. In 2002 the Limca Book of Records declared the company as the Largest
Logistics service Provider in India. The company has a network over 550 locations in 28 states and 7 countries. It has 3000 weather proof ISO-9002 vehicles. Ashok Leyland : The leading provider of logistic vehicles for the India Army is this company. It is a key leader in the tractor-trailers and multi axle trucks. The company manufactures buses, trucks, engines and special application vehicles in India. It is promoting a new company called Ashley Transport Services Ltd. for exchange of information and integrated services related to logistics in order to tackle the business of freight contractors. Mediterranean Shipping Company S.A. (MSC) MSC is currently the second-largest container shipping line in the world. The line operates 376 vessels and has a capacity of 1,250,000 twenty-foot equivalent units (TEU). Services are operated to all major ports of the world. DTDC : The biggest Domestic Delivery Network Company is DTDC. The company offers high class delivery service in about 3700 Indian locations and 240 international places. The company dispatches about 10 million parcels in a month. It also offers low cost for bigger parcels to US, UK, India, Nepal, Dubai and other places across the world. First Flight: This logistics company in India specializes in courier services worldwide. The multi-tracking programs of the company are Domestic, International, First Wheels, First Wings and many others. The overseas offices of the company are in Malaysia, Singapore, UK, US, UAE, Quatar, Oman. THE INDIAN SITUATION: India is being touted as the land of opportunity for logistics service providers all over the world. The demand for logistics services in India has been largely driven by the remarkable growth of the economy, projected to grow at 9-10 per cent in next few years. The Indian logistics market, valued at $14 billion a couple of years ago, is expected to grow at a CAGR (compounded annual growth rate) of 7-8 per cent. It is felt that the growth will continue, and might even scale newer heights, as the economy is experiencing a retail boom with Western companies such as Metro, Wal-Mart planning to start operation in this country, and large local retailers such as Shoppers Stop, Pantaloon, RPG and Big Bazaar planning to expand their operations in smaller cities. But, then, logistics management in India is too complex, with millions and millions retailers catering to the requirements of more than one billion people and the infrastructure yet to develop to cater properly to a growing economy. The poor condition of roads translates directly to higher vehicle turnover, which in turn pushes up the operating costs and reduces efficiency. The reduced efficiency is passed on the logistics service providers, with transportation costs accounting for nearly 40 per cent of the total logistics cost. The National Highways are being upgraded but these highways account for a meager two per cent of the total road network in the country. There
are other problems such as complex tax laws and insufficient technological aids. The fragmented market increases costs due to huge paperwork and the individual truck owners, dominating the market, are unable to contract directly with customers, with the result freight consolidators and brokers take a commission to generate business for the truck owners. Only about a few thousand vehicles out of a total of several millions have tracking system. The use of IT, thus, is limited. Despite these challenges, the country's logistics industry is set to grow. Industries such as chemicals and pharmaceuticals, metals, FMCG, cement, textiles and capping it all the retail segment have been identified as the top contributors to the projected growth of the economy and therefore to logistics revenues. The new generation corporate are looking to outsource nontraditional logistics requirements such as reverse logistics, inventory management, order processing, distribution, and labeling and packaging. Comparison of Indian Logistics industry with other countries: USA Europe Japan Chin a India
LPI Rank Logistics contribution From GDP
57% Share of 3PL in overall Industries
Logistics activity by Organized sector
1. The logistics performance index shows the performance of country in the global logistics industry, customs, trade-related infrastructure, inland transit, logistics services, information systems, and port efficiency are all critical to whether countries can trade goods and services on time and at low cost. Here India LPI score is 3.07 and secure 39th position in the global logistics industry. As the share of Indian Logistics Industry is more than the Mexico and less than the USA, UK and Singapore witness that Indian Logistics industry is one of the growth drivers for Indian economy. 2. In the global logistics sector India at the top position among the all the low income group countries, that show that Indian Logistics sectors perform better among all the low income countries or developing countries. 3. Logistics cost contribution of India in GDP is 13 % which shows the high logistics cost of the Indian Logistics industry and also higher than the developed countries. Due to the poor infrastructure and other logistics service is not better than the developed countries like USA and Japan. 4. 3PL service providers share is less in overall industry of India as compare to Japan, USA and Europe. The third party logistics (3PL) market in India is still in a relatively nascent stage. While multinational companies in all industries have been predominant users of these services but the Indian companies are not. Also significant cost reduction and several other benefits provided by these companies. This is also one of reason of high cost in India. 5. Organized sector include the cost of inventory holding, transportation, warehousing, packaging, losses and related administration which shows the high logistics cost in India due to less organized sectors. But organized sectors are well established in Japan, USA and Europe also one of the reasons to low logistics cost. 6. Major sectors investment in Indian Logistics industries are Aviation, Metal & Mining and consumer durable. Among these sectors share of Aviation sector is higher due to increasing international business in India also cost of transportation is higher, fast and safe for overseas movement of goods. 7. Now 3PL service providers are start investment in India to reduce the logistics cost which include both domestic and international companies. Shreyas Shipping and Logistics is investing high as compare to the DHL, TNT and Gati. This shows that trend of 3PL providers is increased in India. 8. Revenue generated from 3PL providers increase the Indian economy and also the percentage growth the revenue increased continuously from 2005 to 2008. According to Planning Commission India this is growth continuous and it reached to $3556 million till 2012 is estimated. 9. Logistics industry also improves the performance of other industries in India as these are auto, IT and pharmaceutical industries that shows high growth rate. Logistics grow with 8–10 % rate between 2002- 2007 implies that improvement in the supply chain of the other industries in India.
10. Logistics cost play an important role for the growth of industry. Logistics cost contribute to sale indicate importance of logistics in different industries. As logistics cost share in sale of cement industry higher than other industries shows it play an important role in sale. 1. Logistics performance of Index of India with other countries : Country LPI Score
USA UK Singapore India China Mexico
3.85 3.84 4.19 3.07 3.64 2.64
Interpretation: The Logistics Performance Index (LPI) and its indicators provide the first in depth cross-country assessment of the logistics gap among countries. As the above graph shows that LPI score of USA, UK, Singapore, India and Mexico, indicates the performance of logistics in global transport and logistics hubs. Also as the performance of developed countries in logistics are high as compare to the developing nation. Singapore has high performance in global logistics as compare to other countries also gain rank 1st among all by World Bank. USA, UK, Mexico and China are ranked in logistics performance in global market at 9th, 14th, 56th and 30th respectively. India is ranked 39th in the Global market show the high logistics performance than in the global market. 2. LPI top 10 countries of low income group : Country LPI score
India Vietnam Sao Tome and Principle Guinea Sudan Mauritania Pakisthan Kenya
3.07 2.89 2.87 2.71 2.71 2.63 2.62 2.52
Interpretation: This table shows that India had performed well among all the low-income countries. India has scored 3.07 LPI score and ranked 1st among all other low income countries. This shows the among the low income countries India’s performance in global transportation and logistics hubs is better.
3. Logistics cost contributed from GDP in different countries : Country Logistics Cost/GDP
India U.S. Europe Japan
13% 9.9% 10% 11.4%
Interpretation: Above table show that in India logistics cost high than developed countries and contribution in GDP is 13 %. High logistics cost is due to the incomplete and under developed infrastructure, non conductive policy, environment, indirect tax regime and extensive industry fragmentation. 4. Share of 3PL in overall industry : Country Share of 3PL in overall Logistics
India U.S. Europe Japan
10% 57% 30% 80%
Interpretation: Above table shows that in Japan share of 3PL in overall industry high as compare other developed countries is 80 %. In India share of 3PL is 10 % show that in India 3PL service provider are less.
5. Logistics Activity by Organized Sector : Country
%age of Logistics activity by organized sectors
USA Japan Europe India China
57% 80% 40% 6% 10%
Interpretation: The above table shows that cost of logistics include the inventory holding, transportation, warehousing, packaging, losses and related administration are high in India as compare to the China , Europe, USA and Japan. 6. Major Sectors investment in Indian Logistics Industry : Sector Investment in Cr.
8500 Metal & Mining Consumer Durable 6000
Interpretation: Above table shows that as different sectors invest in Logistics industry there are major sectors those invest are Aviation, Metal & Mining and Consumer Durable. Aviation sector investment is highest than the Metal & Mining and Consumer Durable. 7. Global 3PL service providers invest in India : Firms Investment Details/ Plans (2007-08) in $mn
Gati Shreyas Shipping and Logistics
Interpretation: Global 3PL providers investment in India by four major player are DHL, TNT, Gati and Shreyas shipping & Logistics. Among all these SS & Logistics invest more as compare to other three. 8. Revenue generated from 3PL : Year Revenue (mn USD)
2005 2008 2012E
890 1622 3556
Interpretation: The above table shows that 3pl share in the logistics industry increased with the increased in revenue of the 3PL in the logistics industry in India. 9. Impact on Logistics industry on growth with the performance of other industry : Year Revenue (USD Percentage growth billion)
2002 2003 2004 2005 2006 2007
65 70.2 76.3 84 9172 100 8% 8.7% 10.1% 9.2% 9.1%
Interpretation: The above table shows that in Indian logistics industry the revenue is increased by 8 – 10 % annually from 2002 to 2007. The maximum growth in the revenue in the year 2005 and minimum in 2003.
10.Share of Logistics cost in total sale for various industries: Name of Industry Percentage share of Logistic cost in Total sale
Interpretation: Above table shows that logistics cost contribute to sale of different industries. Maximum share in Cement industry (15%) and Steel industry (6%) sale as compare to the other industries like Food & Beverage, FMCG, Consumer Durable, Apparel and Auto. 11. Transportation Growth with different modes in India (in million tones): Year Road Railway Sea Air
Interpretation: Above table shows that out of the different modes of transportation Road
transportation is used maximum in Indian Logistics industry as compare to other modes of transportation and railway is used minimum among all others modes of transportation this is due to lesser area coverage by the rail lines and the poor infrastructure as compare to the other modes of transportation. The above graph shows that increase in the modes of transportation annually and the maximum growth shown by the railway and sea as compare to other two modes of transportation. 12. Road Freight in India (INR billion) : Year Road Freight ( INR billion) 1995 2000 2005 610 840 1430
Interpretation: The table shows that movement of goods is continuously increased due to the improvement of infrastructure and more area coverage. The road freight is increased continuously with 6-8 % annually. 13. Rail freight in India Year 2002 2003 2004 2005 2006 Rail Freight (million tones) 493 519 557 602 667
Interpretation: The above table shows that the increase in the movement of goods by railway. But the movement of goods by railway is almost domestically. 14. Sea Freight in India: Year Sea Freight ( million Tones)
2003 2004 2005 2006
422 464 519 578
Interpretation: Above table shows that the movement of goods by the sea. This tells that the movement of the goods by sea is increased as the increase in the international market.
15. Air Freight in India : Year
Domestic (million tones)
International (million tones) 575 650 700 810 900
2002 2003 2004 2005 2006
300 340 375 480 510
Interpretation: The above table shows that movement of goods by air is increased continuously due it is fast and safe way. Also air mode of transportation is preferred better for the international market as compare to the domestic market. 16. Preferred mode of cargo movement : Mode of Transportation Percentage of total cargo movement Air Sea Railway Road 2.5% 20% 23% 54.5%
Interpretation: Table shows that the preferred mode of cargo movement in India is Road as compare to the Rail, Air and Sea. Because roads are almost covers all the areas in India as compare to the other mode of transportation. Due to underdeveloped infrastructure and other service to choose best mode of transportation is road. As road covers almost all the rural, urban and hilly area as compare to railway. In India cargo movement by air is least among the other three modes this due to high cost involved in this mode of transportation. 17. Growth of container volume in India (mn TEU) Year Container volume (mn TEU) 2002 2003 2004 2005 2006 2.9 3.4 4 4.5 5.1
Interpretation: The above table shows that container volume grows continuously with the increase in the export and import in India. The maximum growth in the container volume in the year 2004 and 2006 as compare to other years. 18. Economic Zonal attractiveness for logistics : Zone SEZ’s Retail Warehouse Logistics Development Capacity Parks South West North East 40% 55% 5% 0 20% 50% 20% 10% 20% 60% 15% 5% 30% 50% 10% 10%
Interpretation: The above table shows that zonal attractiveness in India. Out of the four zones West zone is better develop as compare to the other zones and the least develop zone is East zone. South and North are shows the 2nd and 3rdposition for the development of the zones respectively.
CHAPTER 6 SUGGESTIONS & RECOMMENDATIONS FOR OCCL
SUGGESTIONS & RECOMMODATIONS 1) Distribution & dispatching process must be minimizing to reduce the processing cost.
2) Company should work on fundamental of JIT (just in time) where demand of customer is fulfilled taking very less time. 3) Maintain the route management to decrease the time of the transportation. 4) Use the new technology to maintain the Competitive Advantage. 5) Manage proper warehousing. 6) Increase its office network within India and abroad. 7) Scheduling of service time point of arrival and departure of rails, ships and plane has great scope for improvement. They never run on time and require national discipline. 8) Legal system is not in keeping with the modern outlook of life and business. The laws are out mode and require comprehensive amendments. The laws are infect remnant of British Rule and provision contained therein do not meet the requirements of modern and complex international trade. 9) It augurs well observing development of national and selected state highways for faster movement of traffic. It is response to free trade regime being speedily established under the compulsive auspicious of WTO in the interest of humanity. It is hoped that the implementation of the gargantuan project would be on schedule or at least without much time cost overrun. 10) In this connection the UPA-1 government initiated the greatest ever emphasis on infrastructure development, general and specific ; UPA-2 has lent first priority and invited convergence of all ministries agenda to bear upon this infrastructure subject of international standard to facilitate movement of foreign capital with promise of high profitability as the country cannot moved resources of the required dimension. 11) Logistics development is absolutely necessary. In the absence of flow less and latest logistics, the MNCs shy away from doing business in India. There is need to increase FDI in logistics sphere and relaxing of norms relating to entry, taxation, import of material handling and movement of equipment etc. 12) At present agriculture contribute nearly 25 % to Indian economy (GDP) and also require development of warehouse sector. This service sector has good prospects of equipping top place in services of diverse types.
CHAPTER 7 LIMITATIONS OF THE STUDY
LIMITATION OF STUDY
1) To get primary data from company employees is a time consuming task as they do not have time to tell. 2) Some time company people do not pay attention on other’s work. 3) The study is based on the secondary data published in newspapers, books and journals of the researchers. Sometimes data which is published by the researchers cannot analyze fresh situation means old data and wrong data is collected by inherent error. 4) The time & cost plan an important role when one goes for a particular study. Due to the time & cost constrains the large sample was not taken. Hence extra picture cannot be received and the finding cannot be generalized.
CHAPTER 8 CONCLUSION
Logistics is one the most important and integral part of any organizations strategy and function. When the logistical process is carried out accurately then not only the company reduces the production cost but also improves the efficiency and customer satisfaction. Overall logistics management is very important for today’s highly competitive and cut- throat corporate world. Indian Logistics industry is continuously improving its performance in the global logistics industry by improvement of customs, trade-related infrastructure, inland transit, logistics
services, information systems, and port efficiency help to provide trade goods and services on time and at low cost. The World Bank's 2007th Global Logistics Report ranks India 39 amongst 150 countries in terms of logistics performance during the year as well as its future potential. Indian Logistics industry has low performance than developed countries like USA, UK and Singapore in global logistics sectors due inefficiency in logistics services and highest among the low-income group countries. India spend in Logistics activities equivalent to 13 % of its GDP is higher than that of developed countries. The key reason is the relatively high level of inefficiency in the system with lower average trucking speeds, higher turnaround time at ports and high cost of administrative delays. 3PL service provider share is less in logistics sector in India as compare to developed countries and still at the nascent stage. Multinational companies in all industries have been predominant users of this service as one of reason for lesser share 3PL in India. Also in India organized sector not well established as compare to developed nation this contain cost of inventory holding, transportation, warehousing, packaging, loss and related to administration is higher. In Indian logistics sector major sector investors are Aviation, Metal & Mining and Consumer Durable. Also logistics industry in India improves the performance of other industries year to year and share of logistics cost in sale also important which is maximum in cement sector. Transportation modes grow with of domestic and international market and in India road better mode of transportation because of well infrastructure of roads in India as compare to other mode like water, rail and sea. Road freight in India grows with increase of domestic and international trade also large area coverage. Railway freight also increases due low freight as compare to road but cover some of area and better for long distance movement of goods. Sea freight also increase better for overseas movement of goods at low cost as compare to air but consume more time as compare to air. Air mode of transportation is also helps in both domestic and international movement of goods but for international movement is more as compare to the domestic due to the higher cost, safe and faster way as compare to others modes.
BIBLIOGRAPHY Websites : 1. www.scribd.com 2. www.financialexpress.com 3.www.worldbank.org.com
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