Project Report

On

A STUDY ON IMPORTANCE OF TRANSPORTATION IN

LOGISTICS
Submitted by:
Nithin M Pillai
MMS - Operations
Roll Number 68
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF MASTER
OF MANAGEMENT STUDIES
BATCH 2014-2016
UNDER THE GUIDANCE OF
Prof. Balashankar Ramdas

PILLAI INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

NEW PANVEL, NAVI MUMBAI 410206

Declaration

I declare that this project report titled A STUDY ON IMPORTANCE OF

TRANSPORTATION IN LOGISTICS is my own original work, and that all
sources that I have consulted have been duly acknowledged.

Date:

______________

Place:

Nithin M Pillai

CERTIFICATE OF APPROVAL

This is to certify that the project titled A STUDY ON IMPORTANCE OF

TRANSPORTATION IN LOGISTICS as a part of the curriculum of Master
of Management Studies, submitted by Mr. Nithin.M.Pillai , a student of Pillai Institute
of Management Studies and Research has been approved.

_____________

_______________

Prof. Balashankar Ramdas

Dr.G.Vijayaragavan

Faculty Guide

Director

ACKNOWLEDGEMENT

My sincere and utmost gratitude goes to God for the breath, health and strength he gave me
throughout the course of my studies. Im also grateful to my parents, for their financial support,
encouragement and motivation.
Words cannot express my heartfelt gratitude to my project supervisor Mr. Rabisankar and
our internal guide, Mr. Balashankar Ramdas, who were very generous in sharing their time and
knowledge with us.
I also thankful to Mrs. Swati Gosh and placement department of Management studies, who
gives me opportunity to work with Matrix Freight System Private Limited. I express my sincere
thanks to Mr. Kadam, who helped me a lot to understand the actual process in the project.
I really appreciate all others faculty members of the department of management studies for
their knowledge and shared experience which has greatly fostered this study.
Finally My deepest gratitude to all other people who have contributed in one way or the other
to make this study a success, I say a big thank you.

(Nithin M Pillai)

EXECUTIVE SUMMARY

India is being touted as the land of opportunity for logistics service providers all over the world. The
Indian logistics market represents $385 billion and is growing at a rate of 18-20 percent annually.
Transportation costs account for nearly 40% of production costs, logistics costs around 13% of GDP,
compared to 8% in the US. Growth in Indian economy is the major driving factor for the demand in
logistics industry.
Automobile and engineering goods, chemicals, FMCG, cement and textiles have been identified as
the top five contributors to logistics revenues.

India has the second highest and largest road network-3.3 million km. Road network carry nearly
65% of freight The Indian Railways boasts of being the worlds 2nd largest rail network spread over
81,511 km and covering 6896 stations. The freight segment accounts for roughly two thirds of
railways revenues. It has 12 major and 184 minor / intermediate ports spread across the vast coastline
of 7517km. The 12 major ports handle about 76 per cent of the traffic. Port traffic to grow to a level
of 950 Million tones per annum. Aviation holds a small share of Indias freight market. Air Freight is
very expensive in India in comparison to road and rail. The size of the world air cargo market is
estimated at 27 million tonnes valued at $200 billion. India accounts for meager 3% of the global air
cargo market.

TABLE OF CONTENTS
Chapter
No.

Content

Page Nos.

1.

Introduction

Objective of the study

Review of Literature

Research Methodology

11

Need of study

12

Scope of study

13

Limitations

14

Company Profile

15

Organization Service

16

Company Addresses

17

2.

3.

4.

Analysis
Interpretations

and

18

Disaggregating Indias
Logistics Spend

33

Findings
Conclusions

40

and

Conclusions

44

Recommendations and
Suggestions

45

References

46

Chapter 1:
Introduction and Outline of the Project
Logistics and supply chain practices are a set of activities undertaken to promote effective and
efficient management of supply chains. These include supplier partnership, physical movement of
goods (logistics) and information sharing throughout the supply chain in order to meet customer
requirements. Some of the key logistics and supply chain practices that impact performance are
related to estimation of customers order, efficient and effective delivery, integration and collaboration
throughout the supply chain, sharing of vision and information using formal and informal methods, as
well as use information and communication technology(ICT) and various specialist for performing
specific jobs across the supply chain. All of these practices impact logistics the supply chain
performance.

Title of the project

A study on Importance of Transportation in Logistics
It is virtually inconceivable in today's economy for a firm to function without the aid of
transportation. Transportation is an essential and a major sub-function of logistics that creates time
and place utility in goods. In fact, the backbone of the entire supply chain is the transportation
management that makes it possible to achieve the well known seven Rs- the right product in the right
quantity and the right condition, at the right place, at the right time, for the right customer at the right
cost.
The importance of transportation should also be seen by looking at the impact of transportation on a
country's economy. Studies reveal that in India the total logistics costs constitute nearly 10 percent of
the GNP out of which nearly 40 percent is because of transportation alone. The major infrastructure
required for moving goods from one place to another in India involve the active roles of Roads, Road
Freight Industry, Railways, Ports and Shipping, and Pipelines, all of which are either managed or
regulated by the government in accordance with the private.

Page 1

Transportation and Logistics:

Transportation and logistics services are generally outsourced to third parties. Transportation is
mainly by road and the lead-time of these supply chains is still as high as nine to twelve weeks. This
is quite understandable, given the size of India and the state of its infrastructural facilities.
Transportation and logistics is generally through their own fleet. In some cases, it is outsourced.
Routing and scheduling software are increasingly being used for these activities. Five out of six firms
use standard ERP software. There is high focus on tracking of customer orders and customer care and
technologies like bar codes and GPS are being employed.
In our on-site observation of 50 firms, we find that the primary focus is on quality, cost and service.
Recently, responsiveness (delivery speed, safety, volume flexibility, shipment weight and innovation)
is also catching up management attention. Correspondingly, the major concern in all these firms and
their supply chains are related to cost, clarity of demand, reliability of partners, shortening of delivery
cycle, production and logistics flexibility and innovation in supply chain practices. Sharing of
benefits within the supply chains has not yet gained much attention. Firm especially in the
automotive, retail, manufacturing and FMCG sectors are increasingly opting to outsource their
logistics requirements to specialized service providers, the positive business atmosphere and a
burgeoning consumer market are making the shipper community push the logistic service
propositions.

Page 2

Logistics

Origin and Definition of Logistics:

The term "logistics" originates from the ancient Greek "" ("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 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. Another dictionary
definition is: "The time related positioning of resources." As such, logistics is commonly seen as a
branch of engineering which creates "people systems" rather than "machine systems"....

Prospects of Growth in the Industry

In years gone by, the traditional warehousing and logistics facility was located by railroad tracks, a
water port, and/or freeways, usually in the least desirable parts of cities or large towns. 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.

Page 3

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 location.
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 thats 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. Its 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 corporations 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).

Page 4

Objectives of the Study

To know the current status of domestic transportation.

To know the problems facing by the customers (freight forwarders) with transporters, challenges
taken to overcome them.

To know the modern technology used in transportation of goods.

Page 5

Review of Literature
Article 1:

Complexity in Transportation and Logistics Systems An Integrated Approach to Modeling and

Analysis

The basis for the thesis is to assess the usefulness of describing and analyzing transportation and
logistics systems as being complex systems. The reason and assumption being that in the future more
integrated and sophisticated systems and solutions will be demanded. The requirements of the future will
also be the requirements of a sustainable society and this also requires higher sophistication in that
industry and consumers demand faster and cheaper solutions, but with less environmental impact.

The ultimate goal is to use complexity to meet the demand for more sophisticated approaches,
models and methods both to better understand these systems and to be able to manage and control them
in the most efficient way. In this thesis the concept of complexity is applied to the context of
transportation and logistics system in order to better understand the characteristics of these systems. It is
an unorthodox method within the research area of transportation and logistics, but it is argued that the
concept of complexity provides a valid and valuable model for the analysis of transportation and
logistics systems. Complexity is throughout the thesis treated as an important aspect of transportation
and logistics systems, and is as a concept used to describe, analyze and model transportation and
logistics systems and their properties.

The concept of complexity as well as other related concepts is analyzed and a conceptual model of
transportation and logistics systems' complexity is developed. This model describes the complexity of
transportation and logistics systems as residing primarily within three core properties: the network, the
process and the stakeholder properties. These properties in their turn are influenced by other extended
properties such as variety, connectivity, cognition etc. Three different perspectives; the network, the
process and the stakeholder perspectives are used to describe and analyze the transportation and logistics
systems. The network perspective focuses primarily on the structure of the transportation and logistics
systems, while the process perspective focuses on the activities and dynamics and the stakeholder
perspective focuses on the perceptions, represented by the different stakeholders.

Page 6

Article 2:

Emerging Global Logistics Networks: Implications for Transport Systems and Policies

ABSTRACT: Logistics chains are constantly changing to facilitate increasingly global movements.
In qualitative terms, long term trends in logistics services indicate a growing degree of product
customization and an increased responsiveness in order delivery. These trends impact on the
development of technology and the growth of welfare in different world regions in different ways.
This paper drafts a research agenda which will help to improve understanding of the interrelationships
between trade, logistics, transport, and regional development at a global scale. Rather than being an
exhaustive or detailed inventory of trends, the paper provides a focus on supply chain by thinking.
The key starting point is the need for more and more efficient transportation and sophisticated
logistics processes. Three subjects are treated: First, the strategic implications of borderless supply
chain management on the choice of alternative logistics structures in supply chains are considered;
second, the possible impacts of the expected changes in supply chain processes upon regional
economic activities are examined; third, the impacts of changes in global logistic processes on the
transportation system and, in turn, on the environment are explored. This discussion leads to the
identification of some new research challenges in the field of transportation and logistics.

Article 3:
Indian freight industry poised for a revamp

By the end of this decade, the Indian freight industry should be worth over $300
billion says knowledge management company.
Page 7

According to a recent report released by the market research company Novonous, the freight
transport market in India is expected to be worth US$ 307.70 billion by 2020. With economic growth
expected to be significant in the e-commerce, FMCG, retail and manufacturing sectors, the freight
transport market is likely to grow at 13.35 percent CAGR by the end of this decade. The study says
that where most developing countries spend about 8 percent of their GDP on logistics, India spends
nearly 15 percent.

India has the potential to transform its inefficient and ill-equipped logistics network by addressing the
infrastructural challenges however daunting they may be. Narendra Modis government considers a
well-designed freight transport system a vital factor for the nation to march ahead and the dedicated
freight corridors are proof of this intent. He can get the loss-making Railways to recapture its share,
which currently stands at about 23 percent, in the freight market and compete effectively with road
transport, which dominates with a 63 percent share. Modis Make in India campaign is expected to
revive the manufacturing sector, providing much-needed impetus to core sectors such as iron and
steel, petroleum and coal.Novonous expects the rail freight market to increase at a rate of 10 percent
CAGR by 2020. The proposed dedicated eastern and western freight corridors are expected to be
game changers. If all goes to plan, by the end of 2019, these high-density corridors will reverse the
trend and increase the capacity of railways to handle freight and decongest main tracks that carry
people, thereby paving the way for faster passenger trains. The road freight sector in India is largely
unorganized with many small players, that is, transport operators who own less than five trucks. The
road freight system employs 0.6 million LCVs and 2.2 million HCVs to ferry 3000 MMT of cargo
over 18, 00,000 km of road. Novonous believes that domestic road freight transport will grow at a
CAGR of 15 percent. Despite that fact that bulk material should ideally be transported via waterways
or the rail network, India relies heavily on road transport a situation that is both economically and
environmentally not viable in the long run.

It is unfortunate that inland water transport represents less than 10 percent of the freight transport
in India despite its obvious commercial advantages. Lack of coordination between the Customs and
ports, the high turnaround time of ships, outdated infrastructure, restrictions on navigation channels,
and inadequate hinterland connectivity are the major obstacles that prevent the maximum utilisation
of Indias waterways for freight transport. Sea freight is responsible largely for imports and exports.
Indias 13 major and 200 minor ports see the movement of about 600 MMT of freight. In the next five
years, Novonous expects the sea freight market to grow at 12 percent CAGR. Air freight, a key link
between international and domestic markets, represents only about 1 percent of the total freight
market in India. Around 4 MMT of freight is transported via aeroplanes. In the recent years, there has
been better participation of local service providers and improved infrastructure at airports for
handling the increased air cargo traffic along with the appearance of new cargo centres. By the end of
the decade, Novonous predicts a growth rate of 12.5 percent CAGR as the demands of the ecommerce sector are set to rise further. Significantly tapping the immense potential offered by Indias
various modes of transport for cargo movement will entail a new vision, which will require all
relevant stakeholders to make a concerted effort to help India achieve sustainable economic growth in
the future through wise spending and resource allocation.
Page 8

Article 4:
By the end of this decade, the Indian freight industry should be worth over $300
billion.
According to a recent report released by the market research company Novonous, the freight
transport market in India is expected to be worth US$ 307.70 billion by 2020. With economic growth
expected to be significant in the e-commerce, FMCG, retail and manufacturing sectors, the freight
transport market is likely to grow at 13.35 percent CAGR by the end of this decade. The study says
that where most developing countries spend about 8 percent of their GDP on logistics, India spends
nearly 15 percent.

India has the potential to transform its inefficient and ill-equipped logistics network by addressing the
infrastructural challenges however daunting they may be. Narendra Modis government considers a
well-designed freight transport system a vital factor for the nation to march ahead and the dedicated
freight corridors are proof of this intent. He can get the loss-making Railways to recapture its share,
which currently stands at about 23 percent, in the freight market and compete effectively with road
transport, which dominates with a 63 percent share.

Modis Make in India campaign is expected to revive the manufacturing sector, providing muchneeded impetus to core sectors such as iron and steel, petroleum and coal.Novonous expects the rail
freight market to increase at a rate of 10 percent CAGR by 2020. The proposed dedicated eastern and
western freight corridors are expected to be game changers. If all goes to plan, by the end of 2019,
these high-density corridors will reverse the trend and increase the capacity of railways to handle
freight and decongest main tracks that carry people, thereby paving the way for faster passenger
trains. The road freight sector in India is largely unorganized with many small players, that is,
transport operators who own less than five trucks. The road freight system employs 0.6 million LCVs
and 2.2 million HCVs to ferry 3000 MMT of cargo over 18, 00,000 km of road. Novonous
believes that domestic road freight transport will grow at a CAGR of 15 percent. Despite that fact that
bulk material should ideally be transported via waterways or the rail network, India relies heavily on
road transport a situation that is both economically and environmentally not viable in the long run.

It is unfortunate that inland water transport represents less than 10 percent of the freight transport
in India despite its obvious commercial advantages. Lack of coordination between the Customs and
ports, the high turnaround time of ships, outdated infrastructure, restrictions on navigation channels,
and inadequate hinterland connectivity are the major obstacles that prevent the maximum utilisation
of Indias waterways for freight transport. Sea freight is responsible largely for imports and exports.
Indias 13 major and 200 minor ports see the movement of about 600 MMT of freight. In the next five
Page 9

years, Novonous expects the sea freight market to grow at 12 percent CAGR. Air freight, a key link
between international and domestic markets, represents only about 1 percent of the total freight
market in India.
Around 4 MMT of freight is transported via aeroplanes. In the recent years, there has been better
participation of local service providers and improved infrastructure at airports for handling the
increased air cargo traffic along with the appearance of new cargo centres. By the end of the decade,
Novonous predicts a growth rate of 12.5 percent CAGR as the demands of the e-commerce sector
are set to rise further. Significantly tapping the immense potential offered by Indias various modes of
transport for cargo movement will entail a new vision, which will require all relevant stakeholders to
make a concerted effort to help India achieve sustainable economic growth in the future through wise
spending and resource allocation

Page 10

Research Methodology
To make this project two approaches are used primary and secondary data.
Primary Data:
This information is collected by interviewing those who are working in for the logistics
and transportation industry.
Secondary Data:
This data is collected from various sources such as internet, different books, newspapers and
magazines on logistics and transportation industry.

Page 11

Need of Study
This study is mainly conducted to analyze the how vital the transportation process is for a successful
logistics operations and how necessary it is to improve the transportation process to better
transportation process.

To study about the domestic transportation of goods, its current status, challenges and requirements.

Page 12

Scope of study

The study will help us to know the present status of the Indian logistics.
It helps to know the problems facing by the customers with transporters.
To know the modern technologies used in transportation of goods

Page 13

Limitations of Study
The study was only on roadways and waterways
Unavailability of staff.
The report is on a broader concept.
Lack of time available for the research.

Page 14

Chapter 2:
Company Profile
INTRODUCTION OF THE ORGANIZATION
Matrix Freight Systems Private Limited as an International Freight Forwarder born in India
out of the experience and an urge to change and attain better standards to suit customer needs with
respect logistic services supply chain and be a partner to your survival and growth.
Matrix Freight aim to deliver quality service for a competitive price and be flexible enough to
meet customer special needs through personalized service. It consists of a dedicated team of officials
backed up with decade long experience and is also well-known to the industry. Its primary aim is to
render service to the standards expected and also try to deliver your intrinsic needs going beyond your
said expectation. All our systems are fully automated and centrally controlled giving our clients added
advantage one window operation for all their needs.
It associated with multiple Shipping and Airlines and a worldwide Network of Partners to
service your needs and requirements for any destination either for your Imports or Exports either by
Sea or Air. We are licensed by Ministry of Shipping, Govt. of India as a Multi Modal Transport
Operator and Federal Maritime Commission (FMC), Govt. of United States for OTI License. Matrix
is an active Member of WCA, FFFAI, FIATA and Indian Merchants Chamber (IMC).
We are happy to promote and represent personalized services for and on behalf of our
Esteemed Overseas Partners worldwide for your shipping and logistics requirements worldwide and
offer a host of services including Sea Freight, Air Freight, Cargo Consolidated and Buyers Console,
special equipment and door deliveries We are happy to promote and represent personalized services
for and on behalf of our Esteemed Partner worldwide for their shipping and logistics requirements for
Import and Export to and from the Indian Sub-Continent.

Page 15

Matrix Services

US East Coat and West Coast

South America
Europe/N. Continent and Med Ports
Far East/China
Gulf

Express Service
Door pick-up and delivery
Freighter and Chartered Services
Garments on Hangers

Specialized
Services

LCL Consolidation
Commodity Shipment
Heavy Cargo and Machinery
Garment on Hangers
Buyer/Seller Consolidation

Peripheral
Services

Warehousing & Distribution

Door to Door
Customs
PO Management
Self AMS and ISF Filer

SEA
FREIGHT
FCL

Air Freight

Matrix Management
(M.D.)
JAYANTA KR. RAY

A
Masters
in
Commerce,
Calcutta
University

More than10 years

experience
in
operations

Director

Graduate from Delhi

University

more than 14 years

in
the
Freight
forwarding Industry

An Associate Member
of the Institute of Cost
Accountants of India

Overall experience
of 24 years in
freight forwarding

A resident of United

40

SUDHIR DEY
INVESTOR and
ADVISOR:
ARUNAVA
CHAKRABORTY
INVESTOR

and

Page 16

years

of

ADVISOR

States of America

REINHARD
SCHLENDER

experience
in
logistics and freight
forwarding

OUR BRANCHES/ASSOCIATES
Corporate Office and Delhi Branch
MATRIX FREIGHT SYSTEMS PRIVATE LIMITED
F-1210, LGF, CHITTARANJAN PARK,
NEW DELHI 110019 (INDIA)
PH: +91 11 47262222 FAX: +91 11 47262200
EMAIL: info@matrix-freight.com
Mumbai Branch and Regional Office
MATRIX FREIGHT SYSTEMS PRIVATE LIMITED
307, V-TIMES SQUARE, PLOT No.3, SECTOR No.15
NAVI MUMBAI, MAHARASHTRA, PIN-40061
PH:+912227574004/4020/4021/4027/4037/4050/4061/4071
Kolkata Office:
MATRIX FREIGHT SYSTEMS PRIVATE LIMITED
60, SHAKESPEARE SARANI,
KOLKATA 700017
PH:+91 33 40031023/24 FAX : +91 33 40031025
Tuticorin & Chennai Office:
MATRIX FREIGHT SYSTEMS PRIVATE LIMITED
19-IST FLOOR, INDIRA NAGAR, IST STREET,
NEAR AEPC BUILDING, AVINASHI ROAD,
TIRUPUR - 641 602 (TAMILNADU/INDIA)
TEL: 0421 4320926 / FAX: 0421 4320927

CHAPTER 3:
ANALYSIS AND INTERPRETATION
Page 17

Logistics in India
Logistics in India don't differ too markedly from logistics anywhere else in the world. It's the the art
and science of managing and controlling the flow of goods, products, services, energy, information
and people from the origin point to the destination point. It includes the proper combination of several
activities such as material handling, warehousing, and information, for the purpose of ensuring supply
of the right product, at the right time, at the right place, for a right cost in the right condition.
In the past, India has been the student rather than the expert when it comes to the field of logistics.
But with its current expertise, valuable human resources and positive plans, it surely is walking on the
path of being a service provider of class. There are several factors that benefit the Indian economy for
reaching success in the field of logistics, namely:

1. India is the fourth largest economy in the world.

2. It is believed that about one-quarter of the youth population of the world resides in India.
3. India has human resources that are high in knowledge and abilities.
4. It is the second-largest English speaking workforce.
5. It has the 2nd largest pool of qualified technical workforce.
India spends 13 percent of its Gross Domestic Product (GDP) on logistics as opposed to the usual
practice of 10 percent by other developing nations. The Indian economy is striving for improvements
in the field of logistics and supply chain management to gain the competitive edge in today's
worldwide economy. The Indian government has favored the logistics market of India by making
some helpful plans and policies to assist in its growth.
There are several events organized for the promotion of logistics in India which are focused in their
approach and relevant to the business solutions besides providing a solid platform for allowing people
from a wide industry spectrum to meet and provide business within them from all over the country.
This has been an emphatic source of providing business solutions and their development.
Several global third party logistics providers (3PLs) have already started developing their operations
and service networks in India with a purpose to explore the rampant Indian economy.
Page 18

This has resulted in the creation of the need for a vast range of supply chain management (SCM) and
logistics solutions which cover several factors such as supply chain, logistics, material handling,
storage, Information technology (IT), warehousing and inventory management. This has benefited the
efficiency and productivity of the complete value chain in several dimensions of profits, speed and
customer service.
The Confederation of Indian Industry (CII) is the premier business organization with a known
commitment towards the development of logistics in India. It has established the CII Institute of
Logistics which is a specialized state-of-the-art institute of excellence with its focus on SCM and
logistics. It is brought up to satisfy the latest industry needs for specialized SCM and logistics.
India is being treated as the destination of the future in the field of logistical service providers all over
the globe. Indian logistical market players have started to gear up and position themselves in the
global scenario. The true potential of these service providers is yet to be realized. India is keen to
offer transportation and logistical service to grow itself as an emerging marketplace. The key sectors
include fashion, gems, jewelry, pharmaceuticals, precision tools and engineering goods, all of which
need special shipping provisions.

Size of the Indian logistics industry

The annual logistics cost in India is estimated to be 14% of the GDP, which translates into USD 140
billion assuming the GDP of India to be slightly over USD 1 trillion. Out of this USD 140 billion
logistics cost, almost 99% is accounted for by the unorganized sector (such as owners of less than 5
trucks, affiliated to a broker or a transport company, small warehouse operators, customs brokers,
freight forwarders, etc.), and slightly more than 1%, i.e. approximately USD 1.5 billion, is
contributed by the organized sector. So, one can see that the logistics industry in India is in a nascent
stage. However, the industry is growing at a fast pace and if India can bring down its logistics cost
from 14% to 9% of the GDP (level in the US), savings to the tune of USD 50 billion will be realized
at the current GDP level, making Indian goods more competitive in the global market. Moreover,
growth in the logistics sector would imply improved service delivery and customer satisfaction
leading to growth of export of Indian goods and potential for creation of job opportunities.

Logistics Management and Logistics Management Software

Logistics management is that part of the supply chain which plans, implements and controls the
efficient, effective forward and reverse flow and storage of goods, services and related information
between the point of origin and the point of consumption in order to meet customers' requirements. A
professional working in the field of logistics management is called a logistician.
Page 19

Software is used for automating logistics activities which helps the supply chain industry in
automating the work flow as well as management of the system. Very few generalized software are
only available in the new market in the said topology. This is because there is no common rule to
generalize the system as well as work flow even though the practice is more or less the same. Most of
the commercial companies do use one or the other custom solution. There are various software that
are being used within the departments of logistics.

The softwares that are used in these departments are,

Conventional Department: CVT software / CTMS software
Container Trucking: CTMS software

a. Business Logistics
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
globalize 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 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.
In business, logistics may have either internal focus (inbound logistics), or external focus (outbound
logistics) covering the flow and storage of materials from point of origin to point of consumption.
The main functions of a qualified logistician include inventory management, purchasing,
transportation, warehousing, consultation and the organizing and planning of these activities.
Logisticians combine the professional knowledge of each of these functions so that there is a
coordination of resources in an organization.
There are two fundamentally different forms of logistics. One optimizes a steady flow of material
through a network of transport links and storage nodes. The other coordinates a sequence of resources
to carry out some project.

b. Production Logistics
The term is used for describing logistic processes within an industry. The purpose of production
logistics is to ensure that each machine and workstation is being fed with the right product in the right
quantity and quality at the right point in time.

Page 20

The issue is not the transportation itself, but to streamline and control the flow through the value
adding processes and eliminates non-value adding ones. Production logistics can be applied in
existing as well as new plants. Manufacturing in an existing plant is a constantly changing

process. Machines are exchanged and new ones added, which gives the opportunity to improve the
production logistics system accordingly. Production logistics provides the means to achieve customer
response and capital efficiency. Production logistics is getting more and more important with the
decreasing batch sizes. Even a single customer demand can be fulfilled in an efficient way. Track and
tracing, which is an essential part of production logistics - due to product safety and product
reliability issues - is also gaining importance especially in the automotive and the medical industry.

Features of Indian Logistics Industry

A number of small-integrated players.
Transportation costs account for nearly 40% of production costs.
Logistics costs around 13% of GDP, compared to 8% in the US.
Growth in Indian economy is the major driving factor for the demand in logistics industry.
Chemicals, metals, FMCG, cement and textiles have been identified as the top five contributors to
logistics revenues.

Page 21

Growth Drivers for Logistics in India

General growth of the Indian economy.
Manufacturing boom-for exports as well as for domestic market.
Expected rise in International trade from India.
MNCs setting up manufacturing in India-Nokia, Flextronics.
Governments thrust on Infrastructure --US$17 billion to upgrade highway networks.
Implementation of VAT will lead to growth in warehousing business.
Opening of organized retail sector -attracting retail chains like Wal-Mart and Carrefour
into Indian players like Pantaloon and Reliance.

Page 22

Government Support
The Indian government is making great efforts by
Privatizing ports and airports.
Increasing the number of gateway ports
Investing in highway projects
Streamlining customs and excise procedures
Implementing EDI systems
Improving the rail network

The government plans to invest $17 billion in transport infrastructure between 2006-2010.
Thus demand for logistics services would be largely driven by the growth of the Indian economy.

Logistics is a mixture of several professional disciplines, such as:

1. Planning
Page 23

2. Controlling
3. Directing
4. Coordination
5. Forecasting
6. Warehousing and transportation
7. Facility location
8. Inventory management
All activities that are involved in the movement of goods and services from the point of origin to the
point of final consumption are grouped under the term 'logistics'. The art of managing or supervising
all these activities when grouped together as a collective unit, are placed under 'logistics
management'. People who are authorized or given the task of managing the aspect of logistics
management are referred to as 'distribution managers' or 'logistics managers'.

Importance of logistics
a. Logistics is the bed rock of trade and business.
b. Without selling and or buying there can be no trade and business. Buying and or selling takes
place only when goods are physically moved into and or away from the market.
c. Take away logistical support trade and business will collapse
2. Integrates logistical activities
a. In conventional management environment, various activities of logistics work in isolation under
different management functions. Each pocket trying to sub optimize its objectives at the cost of
overall organizational objectives. Purchasing trying to purchase at minimum price at the cost of what
is needed by operations. Operations produce large quantities at minimum production cost ignoring
demand leading to doom inventory. Logistics function of management brings all such functions under
one umbrella pulling down inter departmental barriers.
3.Competitive edge
a. In the fiercely competitive environment logistics provides the edge. Due to technological
revolution most of the products are moving into commodity markets. In a commodity market where
price is controlled by competition, where there is no product differentiation in terms of quality
parameters like performance & reliability, where brands are almost irrelevant, competitive edge is
that of availability of product and service in terms of time, place and quantity.
4.Logistics wins or loses wars
a. British lost American war of independence due to poor logistics
b. Rommel was beaten in the desert by superior logistics of Allies
5.Supports critical functions like operations and marketing

Strong logistics support enables a company to move towards JUST IN TIME production system for
survival in a highly competitive market
Page 24

a) Interface with marketing

These days marketing a product is increasingly on the strength of availability and flexibility as we
discussed earlier. Stronger emphasis is on the last of four Ps of marketing [product, price, promotion
and place]. Logistics provides the interface between production function and marketing function.
Marketing is trying to sell the product in the market place. Logistics makes the product accessible to
marketing by acting as interface between the function that produces it and the function that makes the
consumer buy it.
This interface is gaining importance due to following changes that are sweeping the market making
many companies adopt JUST IN TIME production system.
d. Change in the customer: demanding, knowledgeable, conscious of rights, lacking in brand loyalty,
changes preferences very fast, expects very high degree of service
e. Many products are moving towards commodities market: product differentiation in terms of
quality of performance is vanishing and brands are losing their magic.
As a result of above we find that availability is an important determinant of purchasing decision.
7. Logistical costs: For individual businesses logistics expenditures are 5% to 35% of sales depending

on type of business, geographical areas of operation, weight/value ratios of products and materials.
This is an expensive operation. Improvement in the efficiency of logistics function yields savings as
well as customer satisfaction

Importance of logistics management in India

Page 25

1. Liberalization and opening our door to competition

2. Global business has long supply & distribution lines
3. Changing Indian customer, aware, demanding and less brand loyal
4. Competition ensures that product differentiation in terms of quality is difficult
5. Product life cycles are shrinking
6. Our markets are shifting from sellers to buyers
7. Many consumer products are moving into commodities market
8. India is a large country. Large distances separate production and consumption centers. Essential
commodities have to travel from Food Corporation warehouses to consumers through PDS.
9. Logistics performance has not been impressive.

OPERATIONAL OBJECTIVES OF LOGISTICS

1. Rapid response
F-flexibility objective of an organization: Some companies measure this as response time to
customers order. On an average how much time do we need to fulfill one particular type of
customers order in a year? This is a measure of Rapid response.
Logistics should ensure that the supplier is able to respond to the change in the demand very fast.
Entire production should change from traditional push system to pull system to facilitate rapid
response. Instead of stocking the goods and supplying on demand, orders are executed on shipmentto-shipment basis. Information Technology plays an important role here as an enabler. IT helps
management in producing and delivering goods when the consumer needs them. This results into
reduction of inventory and exposes all operational deficiencies. Now the management resolves these
deficiencies and slashes down costs. [Concept of SMED and KANBAN as practiced by JIT
companies in Japan or elsewhere]
2. Minimum variance
D-delivery objective of an organization, this can be measured as On Time Delivery or OTD. If 100
deliveries are made in a month/quarter/year how many reached as per the commitment made to the
customer? This percentage is OTD.
Any event that disrupts a system is variance. Logistics operations are disrupted by events like delays
due to obstacles in information flow, traffic snarls, acts of god, wrong dispatches, damage in transit.
Traditional approach is to keep safety stocks and transport the goods by high cost mode. The cost of
this approach is huge. Logistics is expected to minimize these events, thereby minimize and improve
on OTD
3. Minimum inventory
This is component of cost objective of a company. Inventory is associated with a huge baggage of
costs. It is termed as a necessary evil. Objective of minimum inventory is measured as Inventory
Turns or Inventory Turnover Ratio. Americans call this measure as turn velocity. Logistics
management increases these turns without sacrificing customer satisfaction. Higher turns ensure
effective utilization of assets devoted to stock. [Concept of
single piece flow as practiced by JIT companies in Japan or elsewhere]. Logistical management
should keep the overall well being of a company in view and fix a minimum inventory level without
trying to minimize the inventory level as an isolated objective
Page 26

4. Movement consolidation
Transportation is the biggest contributor to logistics cost. Transportation cost depends on product
type, size, weight, distance to be transported etc. for transporting small shipments just in time
[reduction in inventory costs] expensive transport modes are used which again tend to hike the costs.
Movement consolidation is planning several such small shipments together [of different types of
shipments] by integrating interests of several players in the supply chain. Generally, large shipment
size and long distances reduce transportation cost per unit. Movement consolidation shall result into
reduction in transportation costs.
5. Quality
If the quality of product fails logistics will have to ship the product out of customers premises and
repeat the logistics operation again. This adds to costs and customer dissatisfaction. Hence logistics
should contribute to TQM initiative of management. In fact, commitment to TQM has made the
managements world over wake up to the significance of logistics function. Logistics can play a
significant role in total quality improvement by improving the quality of logistics performance
continuously and continually.
6. Life cycle support [cradle to cradle logistical support- produce, pack (cradle) and repack (cradle)]
Logistics function is expected to provide life cycle support to the product after sale. This includes
a. After sales service: the service support needed by the product once it is sold during its life cycle
b. Reverse logistics [concept Oct03] or Product recall as a result of
-Rigid quality standards [critical in case of contaminated products which can cause environmental
hazard]
-Transit damage [leaking containers containing hazardous material]
-Product expiration dating
-Rigid laws prohibiting unscientific disposal of items associated with product [packaging]
-Rigid laws making recycling mandatory
-Erroneous order processing by supplier
-Reverse logistics is an important component of logistics planning.

Logistics functions
Page 27

1. Information management
Management is appreciating importance of information as an element of logistics of late, now. The
role of information is vital in order processing. Quality of information is critical as error in
composition of information requirement creates potential disturbance in the supply chain. Incorrect
order processing due to erroneous information will result into product recall and reshipment if the
sales opportunity still exists.
Faster and quality information flow from customer to processor results into cost effective logistics.
Forecasting and order management are two areas of logistical work dependent on information.
Forecasting is an effort to estimate future requirements to position inventory or assets devoted to
inventory. As forecasting becomes unreliable in a fast changing environment, control strategies like
JIT, Quick Response and Continuous Replenishment came into being. Now it is the task of the
logistics function to use information technology to strengthen operation control and forecasting to the
best advantage of the organization.
Leading firms typically have information systems capable of monitoring logistical performance on a
real time basis giving them the capability to identify potential operational breakdowns and take
corrective actions prior to customer service failure. In situations where timely corrective action is not
possible, customers can be notified in advance and thereby taking the surprise out of forthcoming
service failures
2. Inventory control
Keeping the stock levels in such a position, so that neither stock out nor stock piling takes place is
Inventory control. While formulating inventory policies find out 20% of the products marketed that
account for 80% of the profit.
3. Transportation
Transportation is the most visible of all elements of logistics and high contributor to logistics
expenditure. Costs of transportation are mainly as follows
a. Movement costs: money paid for moving material across geographical terrain
b. Preservation costs: money spent on preserving the material during transit
c. Cost of idle asset: inventory is unavailable for conversion during transit. This results into costs for
organization
d. Administration costs: money spent on administration
Transportation is accomplished in three ways
i.
Ones own fleet private carriage
ii. Contract with specialists on long term basis contract carriage
iii.
Contract on individual shipment basis common carriage

Expectations from transportation service are

1. Minimum cost transportation costs are explained earlier
2. Speed: speed of transport means the speed with which goods reach the destination.
Page 28

3. Consistency: consistency in speed is achieving the same speed over a long period of time.
Consistency reflects on the reliability of carrier. Any unexpected variance can play havoc with
logistics. Modern information technology has made continuous tracking of consignments possible.
This takes the element of surprise out. IT has helped logistics managers to seek out ways and means
to improve speed and consistency. What is becoming important is a combination of speed and
consistency.
Requirement of speed depends on type of industry. In some situations speed may not be important.
Then transportation service offering high speed increases cost. So logistics managers have to strike a
balance between service and cost. Three important aspects of transportation are facility location,
transportation cost and consistency.
Design of logistics system should consider total costs rather than elemental cost of transportation
4. Warehousing
Warehousing is holding material before dispatch after it is produced. Although warehousing is
conventionally considered to be a storage facility, it plays a much higher role from logistics
viewpoint. It is perceived to be a switching facility rather than a storage facility. Warehouse
ownership can be private, public or third party contract. Warehouse provides economic and service
benefits to the logistical system.
Economic benefits are Movement Consolidation, Break-bulk, Cross-dock, Processing/Postponement
& stock piling.
Service benefits are spot stocking, assortment, mixing & production support
5. Material handling
Material handling covers receiving, moving, storing, dispatching activities. It has an impact on
cost [capital as well as running], quality and safety. One of the principles of material handling is
minimum movement. Commonly used material handling equipment are forklifts, EOT
Cranes,
hoists, pulley blocks, trolleys, railroad cars,
Conveyors, ropes and slings etc.
.
6.Packaging
Packaging is done to make handling and transporting cost effective. It protects the product in transit
and handling. Packing is expected to facilitate lifting and moving by providing easy access to forks or
hooks. Packing is also expected to display universal symbols and other instructions for handling.E.g.
Pallets and containers, wooden boxes, wrapping etc.

Despite problems, The Indian logistics industry is growing at 20% vis--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.
1. 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.
Page 29

2. 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.
3. Since logistics service can be provided without assets, there is growing interest among
entrepreneurs to venture into this business.
4. 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.
5. 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.
6. 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.
7. 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 MNCs global network. As an example, DHL Danzas, the biggest logistics
company in the world, has taken over Blue Dart.

Managerial Implications
Studies on logistics indicate that in this highly competitive and high-cost, low-margin business,
logistics managers have to not only focus on differentiating the services rendered by their companies,
but market the differentiating factors of their services appropriately to the clients. They also need to
make their cost structures transparent, and convince clients to foot the bill towards investments in
quality assets and new technologies such as RFID and GPS (Global Positioning System) leading to
improved, and differentiated, delivery of service. Since clients usually prefer a single-point solution
to all their logistical problems, managers need to broaden the range of their service offerings,
internationalize operations and cover as many industry verticals as possible. They may focus on key
Page 30

customer accounts gradually moving away from accounts generating low, even negative, profitability.
However, small-to-medium-sized companies that seem to have high growth potential should not be
ignored in the process. In order to become a single point of contact for clients, logistics companies
may pursue acquisitions or alliances, which, however, pose the challenge of integration of diverse
cultures. Attracting, recruiting, training, motivating and retaining management talent are also a great
challenge that logistics managers need to take on

A survey of North American LSPs found that logistics managers perceived internationalization of
operations, industry focus or specialization, investment in information systems, availability of skilled
logistics professionals, integration of supply chains, customer focus and breadth of service offerings
as the most important factors for success as a LSP. However, the survey identified significant gaps
between expectations and actual achievements of LSPs with respect to internationalization of
operations, skilled logistics professionals and integration of supply chains, which should be seriously
looked into by managers. The survey also established relationships among a set of performance
metrics and key success factors to identify significant predictor and criterion variables. One of the
most important observations was that collaborative relationships with clients and investments in
assets are necessary but not sufficient conditions for success in logistics. The findings of the survey
may provide a useful guideline to logistics managers for allocation of scarce resources.

As far as the Indian logistics industry is concerned, logistics managers of user firms need to realize
that, with supply chains getting more and more complex, outsourcing part or all of their logistical
activities to experienced LSPs will help reduce their overheads, streamline supply chains, reduce
costs and improve service delivery. The organizational interests should be put above vested interests,
if any. They need to realize that organized LSPs are professionals, who will maintain confidentiality
of sensitive client information.

The Indian government should also focus on developing infrastructure and encourage public-private
partnerships in investments in infrastructure. Highway projects such as golden quadrilateral and eastwest, north-south corridors connecting all four metros are already underway. Private investments in
inland containerized transportation by railroad, which was a monopoly of Container Corporation of
India Limited (CONCOR), a subsidiary of Indian Railways, until recently, have been allowed. 100%
FDI is also allowed in Free Trade and Warehousing Zones (FTWZ) to create necessary trade-related
infrastructure to facilitate import and export of goods and services. The government may create
logistics SEZs (Special Economic Zones) or logistics hubs with concessions in land and tax rates.
Incentive schemes may also be extended for construction of modern automated warehouses and cold
chains. Access to cheap capital should be made available to LSPs for investments in infrastructure,
enabling them to extend longer credit periods to their clients and supplementing their working capital.
The government may create a uniform tax structure and do away with multiple check points and
documentation requirements, which would lead to speedier delivery of cargo. To generate awareness,
the government may organize seminars, workshops, exhibitions and meetings to bring in
representatives of logistics users, service providers and government under one roof, and also sponsor
courses in leading Indian institutes to attract talent. Growth of the logistics industry in India will not
only contribute to the GDP, but also generate employment (Mitra, 2006).

Page 31

Page 32

Although it is well known that a well-developed logistics infrastructure can lead to significant savings
in terms of service levels, inventory costs and processing time, India continues to spend relatively
more on logistics due to inadequate infrastructure.
Logistics costs are estimated to be as high as 13-14 per cent of the GDP compared with seven-eight
per cent in the developed countries. And at a GDP of over $1 trillion, this represents a cost
disadvantage of over $50 billion in logistics in the country. Development of extensive road network
along with hinterland connectivity, rapid implementation of the dedicated rail freight corridors,
capacity expansion beyond the major ports sector and establishment of modern cargo handling
facilities at airports are some of the challenges before the growth of the domestic logistics industry.

Road freight: India has a fairly widespread road network totaling to 2.7 million kms of road length
(1996-97), the third largest road network in the world. According to estimates Page | 11 of the
Planning Commission, the roads carried just 11 per cent of goods and 28 per cent of passengers
during 1950-51. The proportions stood at 60 per cent for goods and 80 per cent for passengers during
1995. Express and National highways constitute only 1.4 per cent of the total road length but carry
nearly 40 per cent of all freight moved through the road sector. Reach in the interiors of the mainland
is limited with only 48% of the 0.55 million villages being connected with roads.
Page 33

The road freight is expected to rise from about 3,000 million tonnes (mt) in 2009-10 to about 3,700
mt in 2012-13. However, despite the several roadblocks, India has amongst the most competitive and
low-cost freight transport industry. Even trucking costs have come down significantly in the last few
years. Unorganised trucking industry, high taxation, inadequate road infrastructure (which makes a
truck cover only 250-400 km a day compared with 700-800 km a day in developed countries such as
the US and Europe), limited investments are some of the challenges identified in this sector. Also, the
pace of road building has to increase from the present two km a day to the target of 20 km a day.
Therefore, analysts feel that it is imperative that the Government fast-track implementation of all
key infrastructure projects, a majority of which are either delayed or suffering from cost over-runs
this can pave the way for better logistics management in the country.
Road freight industry: The industry is highly fragmented and largely unorganized. The unorganized
sector accounts for nearly 80% of the market share. However, changing policies with regards to tax
structure are likely to give a competitive edge to the organized sector. Road transport comprises of
freight and passenger traffic. It accounts for over 60% of goods traffic and over 80% of passenger
traffic.

Page 34

Railways sector:
Since 1950-51, route-km has increased by 18 per cent and track km by 41 per cent, even though
freight output has burgeoned 12 times.Today, freight earnings account for over 66 per cent of the total
earnings of the Indian Railways, with the freight rates being comparatively higher in India than many
other countries. The adjusted average freight revenue per tonne-km in India was about Rs 3.50
against about 90 paise in the US and less than Rs 2 in China and Japan.
Experts feel that rapid implementation of the dedicated freight corridor can significantly help in
improving the logistics landscape in India. According to the Indian Railways, the lines that connect
the four major cities of Delhi, Mumbai, Chennai and Kolkata known as the golden quadrilateral and
the Delhi-Chennai and Mumbai-Kolkata routes, covering a total of more than 10,000 km, accounts
for more than 55 per cent of its freight earnings. And, the existing trunk routes of Kolkata-Delhi and
Mumbai-Delhi are highly saturated. It is in the light of this that the Government has proposed two
dedicated freight corridors, which should be rapidly executed. However, the system of variable
freight rates depending on class of commodities has discouraged some of the industries from using
rail transport.
Indian Railways has one of the largest and busiest rail networks in the world, transporting over 18
million passengers and more than 2 million tonnes of freight daily. It is the world's largest
commercial or utility employer, with more than 1.4 million employees. Ports and major urban areas
have their own dedicated freight lines and yards. Indian Railways makes 70% of its revenues and
most of its profits from the freight sector, and uses these profits to cross-subsidies the loss-making
passenger sector. However, competition from trucks which offer cheaper rates has seen a decrease in
freight traffic in recent years. Since the 1990s, Indian Railways has switched from small
consignments to larger container movement which has helped speed up its operations. Most of its
freight earnings come from such rakes carrying bulk goods such as coal, cement, food grains and iron
ore.

Page 35

WaterTransport
Water transport can be broadly divided into two groups - Inland water transport and Shipping.
Shipping, in turn, can again be divided into two categories Coastal shipping and Overseas shipping.
Inland Water Transportation:
Inland water transport includes natural modes as navigable rivers and artificial modes such as canals.
The Inland waterways have played an important role in the Indian transport system since ancient
times. However, in recent times the importance of this mode of transport has declined considerably
with the expansion of road and rail transport. In addition, diversion of river water for irrigation has
also reduced the importance of inland water transport. The decline is also due to deforestation of hill
ranges leading to erosion, accumulation of silt in rivers and failure to modernize the fleet to suit local
conditions. The transportation of goods in an organized form is confined to West Bengal, Assam,
parts
of
North
Eastern
region
and
Goa.
Development of inland water transport commenced from the Second Five Year Plan and up to the end
of Fifth Plan the total expenditure on this sector was Rs. 34 crores. It was only in the Sixth Plan that
this sector was given priority and specific schemes of inter-State and national importance for
development of inland water transport were taken up. The Seventh Plan was an important landmark in
the development of inland water transport. The expenditure on this sector in the Plan (at Rs. 131.85
crores) was more than the expenditure incurred right up to the end of the Sixth Plan. Three objectives
were laid down in the Seventh Plan for the development of inland water transport
Development of inland water transport in the regions where it enjoys natural advantage.
Improvement in the productivity of assets. The Inland Waterway Authority has been set up which is a
big step forward and should help in the accelerated development of inland water transport.

Page 36

Coastal Shipping:
India has a long coastline of 7,516.6 kms, a number of ports (11 major and 139 minor working ports)
and a vast hinterland. Therefore coastal shipping holds a great promise more so because it is the most
energy efficient and cheapest mode of transport for carriage of bulky goods like iron and steel, iron
ore, coal, timber, etc. over long distances. However, despite this fact (and despite the fact that coastal
shipping was reserved exclusively for Indian ships after Independence), there has been a sharp
decline in coastal shipping operations. For instance, the number of ships fell from 97 in 1961 to only
56 in 1980 while Gross Registered Tonnage (GRT) fell from 3.1 lakhs to 2.5 lakhs over the same
period. However, at the end of 1994 the fleet strength was 438 vessels of 6.3 million GRT. The main
factors affecting the growth of coastal shipping adversely have been High transportation costs
especially for movement other than those between a pair of water front locations, port delays, poor
turnaround time of coastal ships on account of overaged vessels, lack of mechanical handling,
facilities etc. The coastal fleet is ageing fast; about 52 per cent of the tonnage is already overdue for
replacement. Also, there is imbalance in coastal traffic movement as traffic is not equally available in
both directions. This makes it necessary for coastal ships to sail in ballast, at times, on return journey.
Moreover, slow handling of the cargo at port and undue port delays inflict heavy losses on shipping,
companies. It is estimated that at present 70 per cent of ship time is spent at ports and only 30 per cent
on voyage.

Overseas Shipping:
Because of the importance of overseas shipping in international trade, considerable attention has been
paid to increase the shipping tonnage in the planning period. As a result, the share of Indian shipping
in the transportation of India's overseas trade has slowly and consistently increased in the planning
period. From around 5 per cent in the first Plan, it increased to around 34.0 per cent at the end of
1993-94 as compared to 1.92 lakh GRT (Gross Registered Tonnage) at the time of Independence,
shipping
tonnage
increased
to
6.30
lakhs
GRT
in
1994.
In the First Plan Rs. 18.7 crores were spent on shipping while the expenditure in Second Plan stood at
Rs. 52.7 crores. An important step taken during the Second Plan was the establishment of a nonlapsing shipping development fund for grant of loans to shipping companies for the acquisition of
tonnage. The Third Plan made a provision of Rs. 55 crores for shipping which rose to Rs. 135 crores
in the Fourth Plan. The Sixth Plan envisaged the augmentation of shipping tonnage for meeting
increased requirements of Indias foreign trade and also to replace the overaged tonnage especially
the coastal vehicles. The outlay in this plan was kept at Rs. 720 crores while actual expenditure was
only Rs. 432.94 crores. The resources constraint had forced the Seventh Plan to keep the outlay at Rs.
693.42 crores and the actual expenditure was only Rs. 670.05 crores. The broad objectives for
development
of
shipping
in
this
plan
were
kept
as
follows:

Page 37

Ports
Indias coastline of about 6,000 km is dotted with 11 major, 11 intermediate and 168 minor ports.
Nearly 95 per cent of the countrys foreign cargo (by volume) moves by sea and, therefore, ports/and
their development assume an important place in policy making.
Development and maintenance of Indias major ports are the responsibility of the Central
Government, while Other Ports are in the Concurrent list.
Major Ports:
Indias major ports are governed by the Indian ports Act 1908 and the Major Port Trusts Act 1963.
The former allow the Statutory to declare any port a major port, define port limit, levy charges etc.
while the formation of Port trust Boards and vests the administration control and management of
major
ports
in
these
Boards.
At the time of independence, India had five major Ports, viz. Mumbai, Calcutta, Vishakhapatnam,
Chennai, and Cochin. With the Karachi Port going to Pakistan after Partition, there were four major
ports on the western coast. A new port was developed at Kandla, which was declared a major port in
1955. The Marmugao Port, developed by the Portuguese, joined the ranks of major ports in 1964 after
the liberation of Goa in 1962. Para deep, on the eastern coast, was declared a major port in 1966.
Eight years later, New Mangalore and Tuticoin were added to the list of major ports. The inclusion of
the Jawaharlal Nehru Port at Nhava Sheva on the western coast took the number of major ports to
Development of port after the independence; the development of major ports was taken up in a
planned manner. Mechanization and modernizations of cargo-handling facilities at Ports have been a
thrust area in recent years, with emphasis on development of dedicated infrastructure. Deepening of
ports to receive lager vessels has been another priority area. Vishakhapatnam and Chennai ports have
already been deepened.

Minor and intermediate ports:

Minor and intermediate ports fall in the Concurrent list and their administration is the responsibility
of the respective coastal states. Their number as well as their categorization into minor or
intermediate Ports has varied from time to time, depending upon the volume of cargo and the number
of passenger they handle. There were 11 intermediate and 168 minor ports and state wise distribution
was: Orissa-2, AndhraPradesh-12, TamilNadu-10, Pondicherry-1, Andaman and Nicobar-22,
Lakshadweep-10, Kerala-13, Karnataka-9, Goa-5, Maharashtra-53,Daman and Diu-2 and Gujarat-40.
Name of the 11 major ports, Calcutta, Haidia, Paradeep, Mumbai, Chennai Cochin, Tuticorin, JNPR,
Kandla Vishakhapatnam, New Mangalore and Marmugao.

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Aviation Sector
Air cargo: In regard to air cargo, Indian airports registered a healthy growth in air cargo in 2009-10,
with the domestic cargo expected to increase at a rate of 10 per cent and international cargo 12 per
cent year-on-year till 2011-12. According to Airport Authority of India estimates, the total air cargo
traffic is expected to cross the 2.6-million mark by 2012 end.The challenges in this segment include
high airport charges. It has recommended uniformity in taxes on ATF fuel, usage of old airports and
lowering of airport charges to give a boost to air cargo in India.
The six international and 87 domestic airports handle 0.22 million metric tonnes of domestic cargo
and 0.468 million metric tonnes of international cargo which is extremely poor in terms of world
standards. This is because the air cargo is used only when sea trade could not be used either due to
time or space constraint. This poses a serious limitation in procurement, especially when companies
are looking at adopting global sourcing strategies to reduce costs and enhance product quality. To
make air cargo more attractive and efficient, the Indian government has initiated some major steps
which include introduction of open sky policy, introduction of integrated cargo management
system at four metro airports, provision of centers for perishable cargo and synchronization of
working hours for city side operation for export and import activities.
The government is laying emphasis on the food-processing sector and horticulture, giving rise to and
need for greater capacity in low-cost domestic airfreight. Dedicated freight aircraft flying national and
international routes would give a boost to industry, ASSOCHAM President Venugopal Dhoot said.
In spite of a reduction in freight rates, railways goods traffic saw a downward trend. Revenue
generated from freight has declined to 8.7 per cent in 2008 from 11 per cent in 2007. The proposed
dedicated freight corridor (DFC) is likely to sharply increase railways goods traffic, but the extreme
long-term nature of the project gives air cargo the advantage, the report says.
The total cargo traffic of all major ports increased from 4.23 lakh tonnes in 2005-06 to 4.64 lakh
tonnes in 2007-08, registering a CAGR of 7 per cent. But this lagged behind overall goods traffic,
which grew by an average 10.3 per cent during the same period.
Cargo growth in the railways was the lowest of the three, with a CAGR of 6.6 per cent over the last
six years. Railways freight traffic has increased from 6.68 lakh tonnes in 2006-07 to 7.26 lakh tonnes
in 2007-08, but the growth rate has declined from 10.9 per cent to 8.68 per cent over the same period.

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Chapter 4
Findings and Conclusions
The infrastructural bottlenecks:

Infrastructure is one of the biggest challenges faced by the Indian logistics sector and has been a
major deterrent to its growth. Infrastructural problems like bad road conditions, poor connectivity,
inadequate air and sea port capacities and lack of development of modes of transports like railways
and alternates like inland water transport and domestic aviation have been constant irritants. Due to
the infrastructural bottlenecks costs per transaction in Indian logistics sector is very much high
compared to those in the developed markets.
Transport of freight by road forms an important component of freight movements within India, with a
large chunk of goods, over 65 percent, being moved by road. The poor infrastructure has severely
crippled the smooth functioning of logistics operations. With narrow and congested highways, poor
surface quality of roads and 40 percent of villages not having access to all-weather roads, the
efficiency of the transport system is severely affected.
Pathetic road conditions combined with the fact that India is perhaps one of the least connected
regions in the world constitute a major impediment. Poor connectivity via roads and railways to ports,
warehouses and logistics hubs is major infrastructural bottleneck. Movement of goods within the
country is fraught with delays and risks. The bulk of Indian trade is carried by sea routes and the
existing port infrastructure is insufficient to handle trade flows effectively. The current capacity at
major ports is overstretched and their infrastructural upgrades are being made at very slowly pace.
While Shanghais ports can turnaround a container ship in 8 hours, the same ship in Mumbai takes 3
days. Air cargo handling facilities at mini metros and towns are negligible as to be non-existent.
The failure in augmenting the freight carrying capacity and efficiency of the railways has denied the
logistics sector cheaper and efficient mode of transport. Comprehensive inland waterway systems,
which India has in plenty and can act as auxiliary mode of transport, has been neglected. There is a
huge requirement for air cargo centers due to growth in air cargo as well as upgradation of
infrastructure at various airports.
The Indian government has started paying attention to the problems being faced by the logistics
sector and has initiated several infrastructural projects to mitigate their woes. Projects like rail freight
corridors and development of the inland waterways as a means of developing alternative modes of
transport are being planned. Some important steps are being taken in augmenting the rural
infrastructure like connecting majority of the habitations with all weather roads, construction of new
roads and upgrading of existing ones etc. New port and a large container handling facilities are on the
cards. But all these are still not sufficient to cater to the growing needs of the economy.

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For cost effective movement of goods it is essential to have quality infrastructure in place. The
challenge is to meld the different modes of transport together into seamless network such that the cost
is at the lowest. The development of world class infrastructure like modern integrated logistics cum
transport hubs and freight corridors at major locations across the country will facilitate more efficient
logistics operations. To help Indian logistics sector overcome the challenge and make them globally
competitive it is imperative to remove the infrastructural bottlenecks and plan new projects taking
into consideration the future growth requirements.

Rail Transport shortcomings:

Rail is a highly reliable, environmental friendly, safe and secure mode of transport. Indian Railways
boast of the second largest rail network in the world, yet its share in goods transportation is much less
compared to the share of roadways. In comparison with countries like USA, Russia and China, the
cost of transport per tonne per kilometer in India is very high almost three times that of China. The
railways has the potential to bring down the freight cost to greater extent with favorable commercial
characteristics, dense and long-distance freight lines and strong flows of bulk products.

The slow pace of progress in network expansion and modernization of existing facilities in the rail
segment coupled with poor customer service has resulted diversion of freight traffic even bulk
items such as steel and cement to the road sector. The market share of Indian Railways in total
freight traffic has been falling consistently. While there has been some effort on the part of
government to augment the Rolling Stock, there also has been significant emphasis on better
utilization of the existing ones. It is commonly known that IT can be leveraged to improve the
utilization of existing stock. This has failed to happen in India. A pilot project is being carried out to
improve the Central and Zonal computer systems the implementation of the project however is still to
see light. Freight trains travel on the same tracks as passenger trains at an average speed of 25
kilometers per hour causing considerable delays in transportation. Of course there are many other
challenges like wagon utilization, multi-modal transport, etc. Also, the public private partnership
(PPP) model has been working better but is restricted to a few biggies owing to high entry barrier.
However, the government has been active in taking steps to expand connectivity and regain the
market share of freight business. Just by improving wagon utilization, the Railways have achieved a
significant reduction of freight cost. Dedicated Freight Corridor Corporation of India (DFCCIL) has
been established as a Special Purpose Vehicle under the Ministry of Railways to set up Dedicated
Freight Corridors. In the first phase, DFCCIL will be undertaking construction two such corridors
Western and Eastern DFCs - across a total 2800 route km. This is likely to drive the establishment of
industrial corridors as well as logistic parks along its route. With the proposed dedicated East-West
corridor, goods trains are expected to ply at speeds of around 100 km/h. The logistic sector would be
greatly benefitted and achieve higher efficiency if the Indian Railways is successful in implementing
its plans for improved speed of freight trains, upgradation of rolling stock, improved signaling and
communication, setting up additional container depots and rationalization of the freight rates to
remove distortions. Restructuring and corporatization of the railways will go a long way in meeting
the formidable challenges of the future.

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Clipped Aviation Logistics:

Indian aviation industry is one of fastest growing in the world and has seen rapid transformation over
the years. Private airlines account for around 75 percent share of the domestic aviation market and
dominate the industry with their full service airlines and low cost carriers. The air cargo segment of
the aviation industry, one the important links in the countrys economic growth, is also growing at a
fast pace. A strong and dynamic aviation logistics network will provide a tremendous fillip to trade
and the economy as a whole. Aviation holds a small share of Indias freight market with air freight
being very expensive in comparison to road and rail. There are not many cargo airlines, few attempts
on this front have failed to take off.

The demand for services, especially air cargo, is growing with the domestic air cargo traffic
registering a 25-per cent increase in 2009-10. However India still accounts for meager 3% of the size
of the world air cargo market which is estimated at 27 million tons valued at $200 billion. The
aviation logistics in the country is beset with numerous bottlenecks. Inadequate infrastructure is one
of the major problems faced by the sector. India's air traffic is highly concentrated at a few airports
with most of the second tier cities being ignored or having negligible facilities. Another major issue is
the poor cargo handling facilities at airports across the country. Other issues like constrictions in
inter-State movement of goods, the impeded movement of air cargo between second tier cities and
gateway airports and scale of operations add to the woes, leading to lower cost efficiencies.

The driver for growth in air cargo will be the demand and the enabler will be infrastructure.
Infrastructure development and planning and distribution can prevent many of the bottlenecks faced
by domestic air cargo industry. A growth in the volume would attract larger investments. The
government can help by increasing the capacity of the airports in tier-II and tier-III cities and
simplifying the processes with electronic data interchange (EDI), which would ease the paper work
and speed up the transactions. Steps need to be taken to improve cargo handling facilities at all
airports. Many interesting trends are taking place like the construction of an air cargo hub in tier II
city of Nagpur in Maharashtra, rise in budget airlines and cargo carriers with the relaxation in
regulations. The cost of airfreight is expected to drop in the coming years which will open up new
economic opportunities in Indias second tier cities which are now being added to the air network.

There are plans by many airlines to create full-fledged cargo operations and it is expected that these
cargo carriers will also move to tier-II and tier-III cities. Even logistics companies are planning to
acquire their own aircrafts. All these augur well for aviation logistics and as the demand for air cargo
continue to grow steadily, it will attracting many more new players facilitating faster growth.

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Majority of the customers are facing the problem of shipment tracking facility in transporting vehicles.
Majority of the manufactured goods are damaged due transportation through open trucks.

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CONCLUSIONS

After the study, we can come to a conclusion that, domestic transportation has to improve
in all the aspects of Indian logistics industry, the logistics industry can still strengthen its position by
looking into the following.
1. Many customers are facing the problem of delivery service because; the transporters are not
delivering the goods on time. Hence timely delivery services with accuracy and reliability in both
domestic and cross-border deliveries should be the main task of transporters and persistent effort
should be made to make the consignment available on the committed date and time, at a
reasonable cost and with due consideration to safety.
2. Majority of customers are facing the problem of shipment tracking facility in transporting
vehicles so a tracking tool called GPRS system should be adapted to measure, record and transmit
parameters like date, time, speed and location to the command centre using the local GSM/GPRS
network. The system automatically switches over to SMS wherever GPRS coverage is not
available.
3. In India major transportation is through open trucks hence there is increase in damage/loss when
the goods exposed to atmosphere. So closed trucks like canters and container transportation will
be a better alternative.
4. Many of the goods are damaged due to improper loading/unloading, stuffing and lashing hence
proper material handling equipments like fork lift and belt conveyors.

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Recommendations and Suggestions

After the study, it can be interpreted that domestic transportation has to improve in all the aspects of
this logistics industry. However as a continues improvement exercise, the following points
highlighted may be looked into.

1. Since much of domestic transportation is done through road, the transporters should offer
customer-specific transportation and Ready solutions to part load or full truck load transportation.
The availability of the right equipment, at the right place and at the right time, is what defines
their uniqueness and it results in shorter lead-times and more reliable flow of goods.
2. Timely delivery services with accuracy and reliability in both domestic and cross-border
deliveries should be the main task of transporters and persistent effort should be made to make
the consignment available on the committed date and time, at a reasonable cost and with due
consideration to safety.
3. Custom clearance forms a major part in the Logistics Industry. Customer can avail the latest and
the fastest means of clearing their consignments Export & Import, through customs systemized
channels unless otherwise subject to custom rules & regulations. Hence it will be useful if the
decision on transportation is taken by custom house agent (CHA).
4. Since majority of the customers are facing the problem of shipment tracking hence a tracking tool
called GPRS system should be adapted to measure, record and transmit parameters like date, time,
speed and location to the command centre using the local GSM/GPRS network. The system
automatically switches over to SMS wherever GPRS coverage is not available.
5. In India major transportation is through open trucks hence there is increase in damage/loss. So
closed trucks like canters and container transportation will be a better alternative.
6. While loading/unloading of goods, proper material handling equipments like fork lift and belt
conveyors should be used.

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References
www.expeditors.com
www.indiatransportportal.com
www.logisticsmgmt.com
www.onlinelibrary.wiley.com

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