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INTEGRATED SUPPLY CHAIN NETWORKS
The Indian Logistics Industry
Center For Global Logistics & Manufacturing Strategies
The Logistics Way
Center for Global Logistics and Manufacturing Strategies
Indian School of Business Hyderabad 500032, India
The Indian Geography
Achieving Global Competitiveness
The Logistics Way
Achieving Global Competitiveness
The Logistics Way
Offers A Rich logistics Variety
Achieving Global Competitiveness
The Logistics Way
Logistics- Global scenario Advantage India State of Logistics in India Opportunities In India
– Manufacturing – Agriculture – Service Health care Infrastructure building
Achieving Global Competitiveness The Logistics Way Logistics: Global Scenario 100106 N. Global Markets and e-Commerce Global Reach/Global Impact 100106 N.Viswanadham 3 .Viswanadham Manufacturing : Past and Future Achieving Global Competitiveness The Logistics Way Technology has been at the root of the Industry revolution over the last century.
Cell TMS Factory Controllers Machine B2B Controllers Controllers Controllers Control & Supervision Automation The Logistics Way Material Flow Automation GMN Factory Airport. SRM Software-based Relationship Management Agents Assembly Automation WMS. Automation Distribution Centre Automation. Marketing Department CRM.Viswanadham 4 . LAN.Viswanadham Convergence to Global Manufacturing Networks Relationship Automation Paper-based. Human Interface Achieving Global Competitiveness Purchasing. Electronic Marketplaces. ERP CAD/CAM/CAE 100106 Information Automation N. ASRS Marketplace Embedded SC Collaborative SCP Internet.Global Manufacturing Network Information Network Enterprise System or Web-site Achieving Global Competitiveness Supply Network Manufacturer Demand Network The Logistics Way Supplier Logistics Network Distributor Logistics Hub Supplier Retailer Service Network Service Provider Financial Network Banks 100106 N. E-mail. Floor Seaport.
7% (PPP 21.Viswanadham The Logistics Way The Three Circles Shares of World GDP.Achieving Global Competitiveness The Global Business Scenario Global Customer Global Manufacturing: No Product produced in one country or by one company Outsourcing to LCC’s gained pace Vertical Integration to Network of Companies Material.5%) Western Europe 28.9%) 100106 N.2% (PPP 26. Information and Funds need to moved across continents Competition is defined by efficiency. and competencies in the network 100106 N.Viswanadham 5 .7%) The Logistics Way North America 31. synchronization. 2004 Achieving Global Competitiveness Asia Pacific 28.9% (PPP 34.
EU.Viswanadham Achieving Global Competitiveness The Logistics Way Advantage India 100106 N.Viswanadham 6 . EU) 100106 N. Asia) IT (India)-Finance (US.Global Value Chains Achieving Global Competitiveness The Logistics Way Information Flows Material Flows R&D (US) Raw Materials (Australia) Manufacturing (China) Distribution (US.
1 4 3.4 1.8 10 8 6 5.India the 4th largest economy in the world PPP adjusted GDP of US$3trillion Achieving Global Competitiveness The Logistics Way 12 (US$ tn) 9.4 1.Viswanadham Germany Kingdom United France States 7 .Viswanadham Advantage India Achieving Global Competitiveness One quarter of the world’s youth live in India 54% of the Indian population is less than 25 yrs of age 2nd Largest English speaking workforce Focus on Higher Education. Supportive government policies Second largest pool of technically qualified knowledge workers IPR laws in place Developing Industry base The Logistics Way MNC R&D centers in India 100106 N.2 2.1 1.9 Source: World Bank 2.4 2 China Japan India 0 United Italy 100106 N.
Motorola . Microsoft. to a $57 billion annual employing 4 million.IT and R &D are India's Star industries Achieving Global Competitiveness There are more IT engineers in Bangalore (150.Viswanadham 8 . predicts that IT services and back-office work in India. McKinsey. – Reliance Life Sciences is recognised by the US National Institutes of Health for stem cell research. – The best-known Indian pharma R&D companies— Ranbaxy. Texas Instruments have R&D centres Biotechnology is a new hot spot. Intel.Viswanadham Achieving Global Competitiveness The Logistics Way The Logistics Way The State of Indian Logistics 100106 N. General Electric. IBM. Astra Zeneca. Cisco. will swell fivefold. Revolution spread from Computer software to designintensive manufacturing to R&D 100106 N. General Motors. Dr Reddy’s Labs.000) than in Silicon Valley (120.000). Sun Pharma et al.
9% 10% 11.Economic Sectors Snapshot Achieving Global Competitiveness GDP US $ 692 billion [PPP 3. India The Logistics Way Logistics Cost/GDP Logistics activities performed by 3rd party /Logistics activities 16-20% 9.37% <10% 57% 30%-40% 80% US Europe Japan • Potential Savings with Improved Logistics: 10% of GDP • This requires growth of 3PLs and 4PLs and use of IT 100106 N.1 Trillion] – 10th largest economy and 4th in PPP terms Contribution to GDP Agriculture Manufacturing Service Work Force Employment The Logistics Way 21% 28% 51% 60% 17% 23% Logistics costs are 10-20% of GDP – In US it has come down from 15% .9.8% – Very high in developing countries (20% in China) 100106 N.Viswanadham 9 .India .Viswanadham Cross-Country Logistics Cost Comparison Achieving Global Competitiveness Country China.
Viswanadham 10 .Viswanadham Logistics In Asia Pacific Achieving Global Competitiveness The Logistics Way Poor Facilities and Infrastructure Low IT penetration Industry partners limited Excellent Infrastructure Sophisticated capabilities and technology Easier to attract quality labor Supply chain partners Traditional channels Moderate Infrastructure Medium IT penetration With no integration Processes and infrastructure that support collaboration Accenture: Supply Chains in Asia: Challenges and Opportunities 100106 N.Elements of Logistics cost Achieving Global Competitiveness • • The Logistics Way • • • • Transportation Inventories Losses Packaging Handling and Warehousing Customers' shopping 35% 25% 14% 11% 9% 6% 100106 N.
US $13 billion. Calcutta and Madras – North-South and East-West corridors (NS-EW). high wear and tear of vehicles are some of the problems 100106 N. 1998-2007 . Slow speeds. traffic congestion. Internet and other related facilities Indian Infrastructure is poor as compared to developed and developing countries and is rated 54th among the 59 countries • Road : 56/59. information and funds from country to country Requires excellent state of the art country infrastructure airports.Viswanadham The Logistics Way 11 . Airport: 40/59 The Logistics Way The underlying institutional problems – Fragmentation and overlapping of responsibilities among various – – – – 100106 government agencies Complexity of international trade documentation process and lack of IT infrastructure Complex tax laws Lack of professionally competent logisticians Industry readiness: weak asset or system management skills N.Viswanadham Roadways Achieving Global Competitiveness National Highway Development Project (NHDP). Rail: 25/59.Logistics Infrastructure in India Achieving Global Competitiveness Logistics involves global movement of materials. sea ports. and loading and unloading facilities automation. – Kashmir to Kanyakumari and Silchar to Porbandar. Seaport: 51/59. The end to end transport process to be optimized by controlling loading densities through packaging and palletizing standards. Delhi. – Four/six laning of the highway connecting Bombay.
food grain.305 crores ( 69%) – 89% of its freight is commodities like coal. – 4. petroleum products.833 million passengers.Air Achieving Global Competitiveness The air cargo consists of express mail. precision instruments and perishable foodstuffs. iron ore and raw material to steel plants. Calcutta and Madras – Carries 65% of the total rail freight traffic and 55% of passenger traffic. chips. the IR carried – 473.Viswanadham 12 . electronics and optical equipment. finished steel. The Logistics Way The six major airports carry 88% of the total air cargo Privatization the major airports.5 million tones of freight Rs23. Rs 10.Viswanadham Indian Railways Achieving Global Competitiveness During 2000-01.515 crores (31%) The Logistics Way High Density Network (HDN) connecting Bombay. cement. computers. Concur is the Flag ship route Freight is moving away from IR although cheaper 100106 N. Delhi. airlines is a popular headline Calcut t a 12% Bangalore 16% Madras 11% Triva nd rum 1% Bombay 30% Bangalore 7% Madras 17% Calcut t a 4% Trivand rum 4% Bombay 36% Delhi 30% Delhi 32% International air cargo traffic Domestic air cargo traffic 100106 N. fertilizers.
93 23.30 13.Viswanadham Traffic handled (million tonnes) 2002-03 46.Viswanadham 13 .55 26.Seaports Achieving Global Competitiveness Vast coastline of 7. cultural differences Poor warehousing and transportation infrastructure Foreign logistics competitors are Exel.00 40.63 33. TNT.43 13.83 26.48 7. tax rates differ between provinces.00 8.517 kms handles 95% of foreign trade 12 major ports and 184 other (minor and intermediate) ports Traffic in major ports : 2002-03 .20 Calcutta Third Party logistics players in India Achieving Global Competitiveness Market is highly fragmented with large number of small players Rail is state run while truckers are often family-run Complex business environment. Indian Logistics Industry. Bax Global. Panalpina – main revenue from freight forwarding The Logistics Way Logistics market is expected to grow by more than 20% over the next 3 years as against the present rate of 12-15% Source : Scope. January 2002 100106 N.53 23.65 21.313 million tonnes Private sector participation is talke about The Logistics Way Major Port Visakhapatnam Kandla Madras Haldia JNPT* Bombay Paradip Mormugao New Mangalore Tuticorin Cochin Ennore 100106 N.70 28. eg. Danzas.
This could be through attracting MNCs to India or through Indian companies becoming MNCs and raising funds through NASDAQ or large number of small companies raising capital from international venture sources The Logistics Way 100106 N.Viswanadham Opportunities In India Leverage the IT & R &D advantage Achieving Global Competitiveness It is essential for India to increase its proportion of Global GDP through growth in all the three sectors of the economy Planned or wild. growth is essential and important.Achieving Global Competitiveness The Logistics Way Opportunities In India 100106 N.Viswanadham 14 .
America. the Tiger economies.India’s Share of Industry is Very Low Achieving Global Competitiveness Vision 2020 The Logistics Way 100106 N. and now China shows that Wealth creation is possible only through International trade oriented manufacturing In China manufacturing sector. constitutes nearly 40% of the GDP.Viswanadham 15 . 100106 N. Japan.Viswanadham Global Competitiveness in Manufacturing is a National Imperative Achieving Global Competitiveness 75% of India ’s working population (600m) has education middle school or below The Logistics Way – Only Labor intensive manufacturing can generate employment in adequate numbers Experience of Europe.
Viswanadham Future Trends in Manufacturing Industry Achieving Global Competitiveness Indian component manufacturers will move up the value chain as contract manufacturers – Frost & Sullivan has estimated that the revenue of the logistics The Logistics Way industry from the manufacturing sector alone was $13.73 billion in 2002-03 and to US$ 3. except for defence.5 0 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 The Logistics Way B nU $ illio S 100106 Year (April-March) N.46 billion in 2003.2% during the next five years Strategic location of industries and B2B connectivity to marketplaces The increasing online sales will force e-companies to forge strategic alliance with logistics service providers – India can expect a shift in the retail logistics.5 2 1.57 billion in 2003-2004 Amount of FDI Inflows into India (1997-2004) 5 4.Viswanadham 16 . and the market is likely to grow at a rate of 6. B2B procurement practices and the way the distributions are handled Adoption of new technologies such as GPS and RFID will take place rapidly 100106 N.5 3 2.Foreign Direct Investment (FDI) in India Achieving Global Competitiveness FDI is welcome in all the sectors.5 4 3. railways and atomic energy FDI inflows : US$ 3.5 1 0.
develop automated trade systems such as Trade Net and Digital Trade Transportation Network for trade documentation and customs permit applications. Develop Real-time control & Event Management using Radio Frequency Identification Tags (RFID) and WebServices The Logistics Way 100106 N.Industry Supply Chain Achieving Global Competitiveness Customer Configured Order Website Estimated Time of Delivery Order Processing System The Logistics Way Warehouse Suppliers Global Transportation & Logistics Logistics Service Providers Assembler 100106 N.Viswanadham 17 .Viswanadham Leverage IT In Logistics software Development Achieving Global Competitiveness Indian companies can exploit this strength to develop specific capabilities in IT-enabled Logistics – – – – development and management of logistics planning and coordination systems. develop in to 4PL s for global manufacturing and service industries with logistics domain knowledge.
Viswanadham Consumer Spending Habits Achieving Global Competitiveness Indian Retail Industry The Logistics Way Rent .5% per annum in the next three years Ot hers 23% 100106 N.5% per year India ranks 5th amongst 30 emerging retail markets in DCs Top cities for retail growth : Bombay. consumer durables and home products are promising sector The organized apparel segment is expected to grow at 9. F&B. Indore.Viswanadham 18 . Fuel & P ower 11% T ransport & Communicat ion 13% Clot hing & Foot wear 5% Food & Beverage 48% Restriction on FDI Accounts for 8% employment and 13% of GDP Consumer spending has grown at 11. Chandigarh. groceries. smaller cities : Nagpur. Banglore andPune. Delhi. Coordination and Overall Responsibility KBLP The Logistics Way Orders Customer Payment Plans Operational Status Supplier Material Flow Execution 100106 2 & 3 PLs Contract Manufacturer Service N.KBLP Business Model Achieving Global Competitiveness Planning. Jaipur.
Farmers.Viswanadham e-Choupal Achieving Global Competitiveness The Logistics Way 100106 N. less middlemen Farmers exposed to Achieving Global Competitiveness – ITC processing facilities – Specifications for international – E-Choupals The Logistics Way – – – markets International quality certification processes Shipment requirements for exports.Viswanadham 19 . grading.increased income. processing. The documentation and other requirements at the farm level Use of moisture meters and portable electronic weighing machines ITC trained farmers (Vendor Development) in specific harvesting. and quality standards and provided guidance on export protocols 100106 N.
Orders of magnitude gains are possible if you apply the Industry supply chain ideas here 100106 N. millers.Viswanadham Regional Warehouse 20 .The Agri Supply Chain Achieving Global Competitiveness The Logistics Way Agriculture provides 30% of GDP and 60% of employment The chain is long and slow – A supply chain study for rice would involve farmers. etc. warehouses.Viswanadham The Agri-Supply Chain -Fertilizers Achieving Global Competitiveness Country Warehouse The Logistics Way Factory • Location of Facilities • Inventories • Multi-modal Transport Local Warehouse 100106 N. truck transport companies. fair price shops. seed producers. fertilizer factories. retail shops. financial institutions. railways. government.
Viswanadham Service Chains Provide Immense Opportunities Achieving Global Competitiveness Arise in different contexts The Logistics Way – – – – – – – Food processing Health Care Construction Finance Defense Distribution and retail Manufacturing Returns handling Spare parts and MRO Product Life Cycle Management – Closed loop supply chains Window of Opportunity Reverse Logistics – Transportation – Containers 100106 N.Viswanadham 21 .India Achieving Global Competitiveness The Indian foodservice industry grew by 4. – Restaurants are constructed using local architects contractors. labor and with maximum local content in materials.4% in 2004 to reach a value of $4.Indian Food Service Industry McDonalds.8 billion. Mcdonalds is one of the successful MNCs in this area – Indianised on several fronts – products: Mac Maharaja – purchases more than 96% of its supplies from Indian The Logistics Way suppliers. 100106 N.
only 4% add time Owner enters long-lead sup 100106 Supply Chain Efforts Cut Lead Time 70% ply chain.Viswanadham Construction SCM Headlines Achieving Global Competitiveness In the case studies we observed… 8 months observed… 1 36 to from savings ry ruction b Constates $30MM invento Fa el Cuts roach indic Int ative Conserv app The Logistics Way r Mapping Helps Uncove SC Inefficiencies ional Mapping across organizat pipe supports. industrial parks and national highways. boundaries for of elapsed contractor discovers 96% is value time is wait time.Viswanadham 22 . seaports. holds inventory N. Business strategy to develop infrastructure and Industry simultaneously 100106 N.Logistics for Large Infrastructure and Engineering Projects Achieving Global Competitiveness India is focusing on infrastructure – The Logistics Way – a wave of projects such as the construction of airports. These can be completed in time and budget through proper logistics management and coordination of various activities.
Viswanadham The Logistics Way Coordinate Disease Management Achieving Global Competitiveness •Networking and Coordination of different players Patients Government Agencies Voluntary Organizations •Multi-lingual Call Centers •Counseling •Information •Diagnosis and Monitoring of Patients The Logistics Way Hospitals the s ? re ayer •RFID tags. hospitals. drugs and patient samples are exchanged between multiple patients and research institutes. For example. etc. These interactions and processes are logistics-based. medical equipment manufacturers. pharmacists. 100106 N. In clinical trials.Health Care Logistics Achieving Global Competitiveness Healthcare services involve coordination between multiple parties of doctors. Internet e a Research Pl AIDS Management r he ticsInstitutes •IT support W is g •Clinical Trials Lo Philanthropists like Microsoft Pharmaceutical Companies World Health Organization 100106 N.Viswanadham 23 .
some times new product development. Development of selected Logistics Sectors – Global – Interstate – Retail Think Radical: 80% of the products are made for 20% of people – Produce goods for the 80% of population: requires some times packaging solutions. – Fast Moving Consumer Goods Cluster. etc.Viswanadham Some Recommendations Achieving Global Competitiveness Balanced Investment between IT and Physical Infrastructure Development of selected Vertical Industry Clusters The Logistics Way – Agriculture/Food Cluster – Manufacturing Clusters such as Automotive and Pharmaceuticals.Health Care Achieving Global Competitiveness The Logistics Way 100106 N. 100106 N.Project .Viswanadham 24 .
Viswanadham 25 .Achieving Global Competitiveness Thank you The Logistics Way Center For Global Logistics & Manufacturing Strategies 100106 N.
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