W H I T E P A P E R

Market
10,000 mile check-up of Indian Logistics

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1.0 Introduction 2
10,000 mile check-up of Indian Logistics Market

Table of Contents

10,000 mile check-up of Indian Logistics Market...................... 1

1.0 Introduction ....................................................................... 3
2.0 Logistics and Supply Chain Management ............................ 3
3.0 Overview of domestic logistics market ............................... 3
3.1 Trends .................................................................................. 4
3.2 Key Drivers ........................................................................... 4
4.0 Various means & functions of logistics ............................... 4
5.0 Types of logistics service providers .................................... 6
5.1 Third Party Logistics (3PL)....................................................... 6
5.2 Fourth Party Logistics (4PL)..................................................... 6
6.0 Operations Model ................................................................... 7
7.0 Different types of Cargos .................................................... 8
7.1 Trends in Break-Bulk Cargo business ........................................ 8
7.2 Trends in Containerized Cargo business .................................... 8
9.0 Evolving theories in logistics .............................................. 9
9.1 Vendor Managed Inventory (VMI) ............................................ 9
10.0 Major players in organized sector ................................... 10
10.1 GATI LTD .......................................................................... 11
10.2 AFL................................................................................... 11
10.3 DHL.................................................................................. 12
11.0 Future Trends ................................................................. 12
Disclaimer: ............................................................................. 13
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1.0 Introduction 3
10,000 mile check-up of Indian Logistics Market

1.0 Introduction
Logistics is an important part of the business economic system and is a major global economic
activity. It is concerned with getting the products and services where they are needed and when they
are desired. It involves the integration of information, transportation, inventory, warehousing,
material handling, and packaging. The operating responsibility of logistics is the geographical
repositioning of raw materials, work in process, and finished inventories where required at the lowest
cost possible. It is difficult to accomplish any marketing or manufacturing without logistical support.
Worldwide, logistics market constitutes about $2 trillion a year.

2.0 Logistics and Supply Chain Management

Logistics Management is the internal integration of logistics functions handled by various management
functions within organization. Whereas Supply chain Management is the external integration of roles of
various players in the supply chain. The key comparisons between the two are as follows:

Particulars Logistics Management Supply Chain Management

Definition Logistics is the process of
strategically managing procurement
and storage of material, part and
finished inventory [and related
information flow] through
organization and its marketing
channels.
Origin A very old concept in military
planning.
Main Objective Logistics cost reduction by integrating
resources across the pipeline.
Management of upstream and
down stream relationships with
suppliers and customers to
deliver superior customer value at
less cost to the supply chain as a
whole.
As a logical extension of logistics
management.
Supply chain profitability by value
creation.

Focus Logistics management tries to take SCM focuses on value creation in

the product to the consumer at the supply chain. Hence this is
minimum logistical cost. Hence it is customer focused or demand
supply driven. driven.

3.0 Overview of domestic logistics market

Logistics industry in India, providing services to fulfill major logistics needs of the Indian industries is
highly fragmented. The transportation service provider segment is completely dominated by small
trucking companies and individual truckers. The freight forwarding service provider segment is also
represented by thousands of small customs brokers and clearing & forwarding agents. Similarly, there
are a huge number of participants in the warehousing service segment and MIS service segment.

Few service providers have the capability to provide more than one service and it is very rare that a
single service provider has the capability to provide all the logistics services. Such fragmentation had
lead Indian industries to outsource packets of individual logistics functions to different service
providers while retaining the overall control of logistics in-house, despite incurring heavy
administrative and infrastructural costs.
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4.0 Various means & functions of logistics 4

10,000 mile check-up of Indian Logistics Market

3.1 Trends

The logistics market in India was estimated to be Rs. 260,000 Cr. and constituted 13 per cent of
the GDP (2005).

Presently, there are about 10 million logistics related outlets in India to cater to the needs of 1000
million people.

Foreign Trade Policy (FTP), 2004-09 seeks to double India's share in world trade within five years.

About 10-15 per cent of total operating costs can be attributed to logistics, which varies across the
verticals :

Verticals Percentage of Logistics cost to operating cost

Cement 10%-15%
Automobile & Engineering 5%-10%
FMCG 3%-7%
Source: Times Shipping Journal & The Hindu

3.2 Key Drivers

Economic reforms -privatization of Government run operations.

Growth in Services Sector –growing back office operations

Growing MNC product proliferation, driven by consumer demand has changed buying patterns
(more purchasing & more players)

Customer is more demanding, given the higher price paid for products and seeks better sales and
after-sales service support.

Improving infrastructure –Golden Quadrilateral

Free Trade Agreements (Thailand, ASEAN)

4.0 Various means & functions of logistics

In India, different modes of transportation are used to transfer goods from one place to another. Their
use depends on the nature of goods transferred.

ROADWAYS
•Short Distance
•Packaged goods

PIPELINES WATERWAYS
•Mass movement of •Heavy & bulk goods
petroleum products Different modes •Containerized goods
of transportation •Long lead time
• Low operating cost
in logistics

AIRWAYS RAILWAYS
•High value goods •Long distance
•Low volume goods •Heavy & Bulk goods

Chart 4.0: Modes of Transportation in Logistics

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4.0 Various means & functions of logistics 5

10,000 mile check-up of Indian Logistics Market

Different means of transportation provide exploitable opportunities along with a few challenges to be
taken care of by logistics solution provider

Table 4.0 Infrastructure Opportunities Challenges

Extensive road network of
Public Private
Poor quality

Roadways 3.3 Million Km, the second Partnership to develop requiring
largest in the world. expressways continuous repairs;

National Highways
Creation of by-pass breakdown of
connecting key cities and roads to circumvent city vehicles
towns run a length of 66,590 entry restrictions
Limited 4-
Km
Special Purpose Vehicle laneHighways

The Golden Quadrilateral to (financing) for (12%)
develop 5846 Km of. development
Key routes pass

Road network carry 65%
Faster acquisition of through city centers
Freight and 80% Passenger land for road causing delays
Traffic. development

They carry more than 1
Dedicated freight
Cargo prioritization
Railways Million tons of freight and corridor
Non-dedicated
about 14 Million passengers
Improved loading with freight corridor
covering 6,856 numbers of lower rates
stations daily.

Older operating

New equipment equipment

Goods Traffic on railways tendering
Lack of track-n-
grew by 11.7% to 57.4
million tons in Jul’06. (export

Enhancing trace
computerization of
Rake availability;
& import)
operations seasonal issues

India has 125 airports
Modernizing Airport
Non-dedicated
Airways
In 2004-05 Indian airports Infrastructure with cargo handling
handled 1.3 Million Tons of separate Cargo space
cargo, growing at 21.6% handling
Shared customs for
over last year. (export &
Private Management for passenger and
import) International Airports cargo

Creation of dedicated Courier
Dedicated Customs for
Poor EDI for
terminals (New Delhi) to Cargo clearance
augment Express Air Freight
Licensing Cargo fleet
Lack of dedicated
Country operators cargo fleet
operators

There are 12 major ports and
New Ports development
Limited capacities
Waterways 187 minor/intermediate ports to manage demand
Dock unions issues
along India's 5,560-km
Private Operators
coastline.

Mechanized
allowed (Pipavav Port) handling limitations

The major ports are
Modern handling
Poor road/ rail
Kolkata/Haldia, Mumbai, equipment linkages
Chennai, Kochi,
Vishakhapatnam, Kandla,

Improved road / rail
Few private
linkages for better turn- operators
Mormugao, Paradip, New
around of containers
Mangalore, Tuticorin and
Turn-around of
Ennore Port. Empties due to

Ports handled cargo of 510 trade imbalance
Million Tons in 2004-05,
(export & import)
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5.0 Types of logistics service providers 6

10,000 mile check-up of Indian Logistics Market

The major logistics functions for the Indian industries include Transportation, Warehousing, Freight
Forwarding, Customer Clearance, Invoicing, Vendor Management, Sales Support and other Value
Added Operations including Management of Information Systems (MIS). Of these functions,
transportation and freight forwarding have been traditionally outsourced to external service providers
with relevant expertise and infrastructure as transportation is a costly affair & freight forwarding
requires large network of channel partners. Thus, enable the organization to concentrate on its core
business. The warehousing and MIS functions have been mostly managed in-house by industries for
easy management & control over inventory

5.0 Types of logistics service providers

Huge diversity in geographic conditions, consumer habits, and infrastructure conditions across the
country make it a major challenge for Indian industries to efficiently manage their supply chain to
reach all parts of the country. The highest priority of most industries in India is to achieve a consistent
presence of their products across all possible sections of business. This could be achieved through a
well knit end-to-end logistics process managed efficiently by a professional logistics service provider.

5.1 Third Party Logistics (3PL)

Third Party Logistics (3PL), the concept of a single professional logistics service provider managing the
entire logistics functions of a company, is to relieve industries from huge logistics costs apart from the
hassles of dealing with multiple in-coherent logistics service providers. In the initial stages, 3PL
providers offered only basic logistics services such as warehousing and transportation. But with
growing logistics needs of organizations to remain competitive in globalized economies, 3PL providers
have evolved to offer several other value added services ranging from packaging to supply chain
planning.

Indian 3PL industry is experiencing a rapid growth after year 2000. The number of participants in this
industry had grown to be more than 400 by year 2006.

The services provided by 3PL are:

Pick and pack: This entails processing small to large quantities of product, picking the relevant
product for each destination and re-packaging.

Marking, tagging, and labeling

Product returns and reverse distribution

Packaging and repackaging: Packing bulk goods to enable easy & safe transportation & later
repacking them as required for individual distribution.

Salvage and scrap disposal

Telemarketing: Help in sales promotion & city-wise marketing of goods.

5.2 Fourth Party Logistics (4PL)

4PL providers do not own assets for transportation or warehousing, but rather leverage the solutions
created by 3PL providers, in order to identify and provide ‘best in class’ services to their clients. 4PL is
the complete outsourcing of the logistics function including procurement of service providers. 4PL
companies are suppliers which have the expertise to manage resources, value delivery processes and
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5.0 Types of logistics service providers 7

10,000 mile check-up of Indian Logistics Market

technology for their clients in order to allow their clients to totally outsource their logistics
management activity. The 4PLs do not compete with 3PLs as they have superior expertise in their
respective fields by virtue of their investment and specialization.

The services provided by a 4PL provider are:

Freight Negotiations with 3PLs

Freight Contract Management: Undertaking freight contracts with 3PL providers & manufacturer.

Transport Billing: Maintaining the invoice & tracking of payments.

Continuous Improvement Programs: Help in reducing cost & turn around time.

Management of Service Providers: Managing the performing & non-performing 3PL providers.

IT Solutions: Providing software tools to enable smooth functioning & better management.

Risk Management and Insurance: Contract to bear all the risk & provide insurance for the cargo.

6.0 Operations Model

In order to perform various functions of logistics in coordinated fashion, bringing all functions of
logistics under one operational command is important. Performance of these functions in an isolated
fashion is detrimental to the objectives organization. Performance in isolation loses sight of overall
picture. It is like trying to solve a jigsaw puzzle without complete picture before you. Information flow,
inventory flow, procurement, operations support and physical distribution need to be well integrated.

A chart explaining the present Operations model used in the logistics industry is depicted below:

Multiple Vendors

Receiving Store PROCUREMENT

INFORMATION

INVENTORY

Inbound
Logistics
Operation Outbound
OPERATION
Logistics

Finished Goods Store DISTRIBUTION

Multiple Warehouse

Multiple Retailers

Chart 6.0: Operations Model

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7.0 Different types of Cargos 8

10,000 mile check-up of Indian Logistics Market

6.1 Inbound Logistics:

Creation of value in a conversion process heavily depends on availability of inputs on time. Making
available these inputs on time at point of use at minimum cost is the essence of Inbound Logistics. All
the activities of a procurement performance cycle come under the scope of Inbound Logistics.

6.2 Outbound Logistics:

Finished goods are to be distributed through the network of warehouses and supply lines to reach the
consumer through retailers’ shops in the market. During conversion, value is added to the raw
materials and as a result the value of the inventory in this case is very high unlike inputs. Now the
size of shipment, modes of transport and delivery time are different as compared to inputs. Activities
of distribution performance cycle come under the scope of Outbound Logistics. They are order
management, transportation, warehousing, packaging, handling etc.

7.0 Different types of Cargos

Freight movement is an increasingly important determinant of warehouse/distribution space demand.
Usually goods are transported either using special containers or in bulk form, depending on the size &
the nature of good. Break bulk cargo is loose cargo, such as cartons, stowed directly in a vessel's hold
as opposed to containerized or bulk cargo. It means general goods, commodities or wares which are
customarily shipped in boxed, bagged, crated or unitized form. Whereas containerized Cargo is the
cargo shipped in large containers (up to 45 feet long) that can be lifted by crane onto and off trucks,
trains and ships.

7.1 Trends in Break-Bulk Cargo business

Break-bulk cargo, so named for non-palletized items that could later be consolidated on a pallet or in
a container, commonly consists of lightweight manufactured components, individual packages and
small parcels.

India expects agricultural-products, including rice, wheat and oil cake, to be a potential cargo for
movement in the bulk mode. Also, as movement of steel products cannot be fully containerized, this
cargo would continue to be shipped in break-bulk form. While 80 per cent of the general cargo the
world over is now being moved in containers, in India only 45 per cent of the general cargo is
containerized. Hence analy9sts believe that for the next 10 years, there will be enough potential in
India in the break and break-bulk segment.

7.2 Trends in Containerized Cargo business

The main containerized cargoes are garments, electronic goods, agro products, cotton yarn,
machinery/parts, granite products, coir products, leather products and jute products.

Container traffic at Indian Ports is growing rapidly and has increased by 102% in the last five years.
The railways policies have been, with the Indian government ending Containers Corporation of India's
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10,000 mile check-up of Indian Logistics Market

monopoly on moving containers by rail in 2005. Hence, analysts expect a tremendous growth in this
sector as well.

8.0 Regulatory Trend

OPPORTUNITIES CHALLENGES

Removal of Octroi/local levies Non-dedicated customs clearance for

Removal of Individual Sales / Entry tax
forms
Uniform VAT across all states
Facilitating Return-To-Origin
Dedicated freight link roads
Dedicated Customs for cargo, with high
level of automation and linking to WCO
cargo
Overloading ban enforcement
Entry ban (time) on city roads
Multiple tax / toll check barriers
Multiple levels for customs approvals;
dependant on human interface, leading
to manipulation

Regulatory

9.0 Evolving theories in logistics

Until recently, growth in warehouse management markets (WMS) stemmed from large companies in
retail and manufacturing industries. But low demands have forced logistics providers to explore new
applications and provide value added services as a part of WMS. New theories have evolved so as to
be cost effective & provide the OEM’s (original equipment manufacturer) with maximum control.

9.1 Vendor Managed Inventory (VMI)

It is a means of optimizing Supply Chain performance in which the manufacturer is responsible for
maintaining the distributor’s inventory levels. The manufacturer has access to the distributor’s
inventory data and is responsible for generating purchase orders. The manufacturer receives
electronic data (usually EDI or via the internet) that tells him the distributors sales and stock levels.
The manufacturer can view every item that the distributor carriers as well as true point of sale data.
The manufacturer is responsible for creating and maintaining the inventory plan. Under VMI, the
manufacturer generates the order, not the distributor.
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10.0 Major players in organized sector 10

10,000 mile check-up of Indian Logistics Market

The Benefits of VMI are numerous for both Manufacturer & Distributor.

Manufacturer Distributor

Visibility to the Distributors Point of Planning and ordering cost will

Sale data makes forecasting easier. decrease due to the responsibility
being shifted to the Manufacturer.

Promotions can be more easily The overall service level is

incorporated into the inventory plan. improved by having the right
product at the right time.

Dual Benefits
• Decreased stock-outs and a decrease in • Having the correct item in stock when
inventory levels. the end customer needs it, benefits all
• Stability in the timing of Purchase Orders parties involved.
as PO's is generated on a predefined • Data entry errors are reduced due to
basis. computer to computer communications,
thus increasing the processing speed.

10.0 Major players in organized sector

The Indian 3PL industry can be divided into three distinct tiers - National Major 3PL companies with
nationwide presence, Regional 3PL companies with strong presence in one or two regions, and Small
Remote 3PL companies.

Logistics service providers are largely divided into International and Domestic Operators, with little
overlap

Air Express – DHL, FedEx, TNT, UPS, Aramex

Freight Forwarders – DHL/Danzas/Exel, Schenkers/BAX, UTI, Kuehne-Nagel, Panalpina, EGL,

Expeditors

Domestic Express – India Post (EMS), Blue Dart Express, AFL Wiz, DTDC, Overnight
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10.0 Major players in organized sector 11

10,000 mile check-up of Indian Logistics Market

Domestic Air Cargo – Indian, Jet Airways, Sahara, Blue Dart

Domestic Surface Express –Safexpress, GATI, XPS, Speedage, OMX

Domestic Surface Cargo –Transport Corporation of India (TCI), Patel Roadways, ABC India,
Associated Road Carriers (ARC), South Eastern Roadways Corporation Limited (SERL), Om Logistics,
Chetak Logistics

Rail Road Transportation – Container Corporation of India Ltd. (CONCOR)

Warehousing/Distribution – DHL Exel Supply Chain, TVS Logistics Services, OM Logistics,

Safexpress, GATI, Dynamic Logistics

Some of the large nationwide 3PL players are as follows:

10.1 GATI LTD

Gati is a leader in express cargo delivery and a pioneer in distribution and supply chain management
solutions in India since 1989. They are headquartered in Secundrabad, AP and also set base in
Singapore. They have a team of around 6400 professionals and a turnover of Rs 4577 million. They
have over 2000 vehicles on road.

Their service offerings are divided into:

Distribution Solutions

Gati Express: Cargo movement facilities via land for textile and apparel, white goods, electronic
goods industries.

Gati Priority: Alliance with Indian Airlines for air transport for fast transit of goods.

Gati Coast to Coast: Provides services for shipment of all sea bound cargo in the Bay of Bengal,
Andaman Islands and Malacca Straits.

Zipp: Offers courier services

Gati Saver: Packaging services

Logistics Solutions

Warehousing: Consists of Modern warehousing & material handling equipment facilities.

Supply Chain Management: Gati provides customized solutions by integrating all the four stages
of your business — procurement, production, distribution, after sales service and reverse logistics.

10.2 AFL
AFL was incorporated in 1945 and they pioneered airfreight forwarding in India. They provide services
such as Supply and Distribution Chain Management, Domestic and International courier, Air, Sea and
Multi-modal Freight Forwarding and Corporate Travel Management.

The company is structured into 3 business divisions:

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11.0 Future Trends 12

10,000 mile check-up of Indian Logistics Market

Domestic Logistics Division

Package Express (door-to-door) Services

Warehousing Services

Distribution Services

Value-added Services Product repair / Return Services: Reverse Logistics, Kitting / Pick and Pack,
Sales Tax & Octroi Management, Sales promotion Management, Collections & Banking Services,
Quality assurance & control Services, Insurance Services, MIS & Reporting.

International Logistics Division

This division of AFL offers:

International Freight Forwarding Services - (Air, Multi-modal) across 45 countries

Customs Clearance Services

AFL WIZ (Domestic Courier Services)

Express Services for documents

Small Business - commercial & non-commercial packages.

10.3 DHL
DHL is a Deutsche Post World Net company. They were incorporated in the year 1969 & are
headquartered in Bonn, Germany, Plantation, Florida. They have a total fleet of 420 cargo aircrafts
and 76,200 ground duty vehicles.

DHL Express: Enables shipments across globe with domestic and international door-to-door
coverage.

DHL Global Forwarding: Providing comprehensive freight solutions.

DHL Solutions: Provides supply-chain design, warehousing, distribution logistics and order
management services with the help of state-of-the-art technologies.

11.0 Future Trends

The Indian logistics and transport industry has huge potential growth prospects for local and foreign
operators alike. A liberalizing market, massive investment in infrastructure, increasing levels of
disposable income and dynamic manufacturing and retail sectors are combining to produce a market
environment which could one day rival the fast moving Chinese economy.

Logistics is one of the areas of the supply chain management and is growing at a tremendous rate.
The Internet and E-Commerce is drastically changing the range, delivery time and the speed of
information as well as ordering and payment process. Due to the big boon of information technology,
greatly influencing and enhancing the effectiveness of logistics, the time is not far when 5 PLs and 6
PLs may emerge which will provide more enhancement in the services provided.
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Disclaimer: 13
10,000 mile check-up of Indian Logistics Market

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