Tech-enabled Logistics in India

A PAPER SUBMITTED TO
RAVENSHAW UNIVERSITY
FOR THE AWARD OF THE DEGREE OF

MASTER IN COMMERCE
By:
Md. Aamir Anis
Roll: 19MCO-067
Email-id: aamiranis96@gmail.com

UNDER THE SUPERVISION OF

DR. CH. SUDIPTA KISHORE NANDA

ASSOCIATE PROFESSOR
DEPARTMENT OF COMMERCE & MANAGEMENT

RAVENSHAW UNIVERSITY
CUTTACK, ODISHA, INDIA-753003
2019-2021
“The logistics function is to ensure the availability of right product at the right place, in right
quantities and right condition at the right time and right cost for the right customer. Integration
and synchronization of material, information and financial flows across organizations, sharing
information and destiny and process orientation and coordination is needed to achieve this
objective. The logistics services are provided by the private sector and the logistics
infrastructure such as roads, ports, airports etc are provided by the Governments. The
performance of the logistics sector depends on both hard and soft infrastructure, skilled
manpower, Government policies, cluster locations and connectivity, service providers,
insurance agents, research in educational institutions, and host of other things in addition
those connected with actual goods transport and delivery.”

Keywords: Logistics, Indian Economy, Transportation sector

 Backdrop Of The Study:

The logistics services are provided by the private sector and the logistics infrastructure such
as roads, ports, airports etc are provided by the Governments. The performance of the logistics
sector depends on both hard and soft infrastructure, skilled manpower, Government policies,
cluster locations and connectivity, service providers, insurance agents, research in educational
institutions, and host of other things in addition those connected with actual goods transport
and delivery. Further, the logistics sector is undergoing disruptive changes due to advances in
technologies such as Internet of things, Mobile, Social Media and Cloud computing in the
inbound logistics, manufacturing, maintenance and repair (MRO) and retail logistics sectors.
Retail is changing face from buying at the retail mall to home delivery.

The report develops an ecosystem framework for logistics service sector that includes all the
above stake holders and new technologies and develops methods for analysing performance
and mitigating risk. The report presents ecosystem examples inbound logistics, e-retail sectors
and analyses their importance in the Indian context. The ecosystem is used for developing
supply chain innovations and also mechanisms for supply chain Governance using the concept
of logistics mall.

The developments in logistics across countries of the world differ widely. In countries like
India, most of truck logistics is in the unorganized sector and the rail logistics is with the
Government. Most of the so-called supply chain best practices such as cross docking, supply
hubs, supply chain visibility, etc are not often seen in the industry.

Logistics is defined as the broad range of activities concerned with effective and efficient
movement of semi-finished or finished goods from one business to another and from
manufacturers to the end consumers via the distributors and retailers. The Council of Logistics
Management (CLM) has formulated the following definition of logistics with a flow and process
orientation. “The process of planning, implementing, and controlling the efficient, cost-
effective flow and storage of raw materials, in-process inventory, finished goods, and related
information and financials from point of origin to point of consumption for the purpose of
conforming to customer requirements”
 Objectives Of The Study:

• To determine the various technology used in logistics and supply chain management.
• To discusses the impact of technology on logistics and supply chain management.
 Scope Of The Study:
The scope extends to two major logistical issues- identification and communication using
information technology.
 Literature Review:

Moberg et al. (2002) argue that accuracy, timeliness, and proper formatting of the information
determine the quality of the information. They suggest that supply chain members emphasize
the importance of having accurate, timely, and properly formatted information to fully realize
the value of information exchange among them. Hence, managers may not even use
information coming from their partners if the information has poor quality.

Li et al. (2005) emphasizes the importance of information sharing to SCM practice. The main
principle of SCM is sharing of information within supply chains (Moberg et al., 2002). By
sharing information with members of the supply chain, an organization can respond more
quickly to the customer’s changing needs (Li and Lin, 2006). Information sharing is defined as
the extent to which critical and proprietary information is communicated to one’s supply chain
partner (Li et al., 2005; Li and Lin, 2006. Li et al., 2005 suggest that information sharing and
being knowledgeable about each other’s business help partners maintain their relationship for
a longer time.

Frazier et al. (1988) suggest that organizations should share and exchange information with
their suppliers regarding production plans, core product, process design, schedules, and product
development to create synergies between the organization and its suppliers. This synergy will
increase the ability of supply chains to react effectively to sudden changes and uncertainties in
the market (Lee, 2000)

Porter and Millar (1985) argue that every value activity in the value chain requires usage of
information in some way that differs from other activities. For example, a logistic activity
utilizes IT for scheduling promises, transportation rates, and production plans to ensure timely
and cost-effective delivery. On the other hand, a company could use IT to enhance its ability
to exploit internal activities as well as external activities i.e., coordinate their activities closely
with suppliers and customers.

Kyobe (2004) argues that IT resources such as hardware and software can be strategically
utilized to achieve competitive advantage. Companies might focus on utilizing IT for internal
operations or for external relationships i.e., improving customer services and links with
suppliers by sharing useful information and obtaining reductions in cost. Information quality
is defined as the extent to which information exchange is accurate, timely, complete, relevant,
and credible. Inaccurate and missing data will add costs to the supply chain and can drive poor
performance.
 Research Methodology

The present study highly descriptive with little exploratory in nature. Convenience sampling
was used to collect data from local business owners/micro businesses regarding their wage
practices and to gather insight on the feelings of employees towards the wage system. The
above hypothesized relationships were tested using data collected through self-administered,
structured questionnaires containing essentially close-ended questions.
 Sources Of Study

Sources of study are primary and secondary. Secondary data is reviewed in the form of previous
research papers, articles in research journals, newspapers, website related to study while
primary data has collected by interviewing local small businesses in the locality by simple
questions asked impromptu and casual conversations with the employees.
 The Importance Of Logistics In Indian Economy
A substantial portion of business costs in developing countries can be traced to inefficiencies
in their supply chains, limitations created by logistics bottlenecks and the lack of streamlined
administrative procedures for goods transfer. According to the World Bank, logistics-related
expenses comprise between 15% and 30% of GDP and between 20% and 60% of the final price
of food products in the region. The Inter-American Development Bank (IDB) estimates that
transport costs account for up to two-thirds of the total costs of logistics operations, which in
turn constitute approximately 15% of the final value of goods. Logistics facilitation will play
a significant role in supporting higher rates of economic growth worldwide.

The Internet has fuelled the growth of E-commerce and has revolutionized the so-called front-
end systems of order placement, sales, and marketing. Fast and easy ordering of customized
goods over the web raised the expectations of fast, reliable and convenient delivery among
consumers. The Internet and e-commerce have matured, from the early days of pure on-line
selling focus to a more stable multi-channel network with logistics capabilities for back-end
fulfilment.

Companies in the future must not only be able to design and market products, they also must
be able to globally source the components, build, move and store the final product and deliver
to the market — on time and at a competitive price and collect the cash. Furthermore, they
should guarantee to their customers of durable goods competitive after sales service levels to
ensure the return of the customers for their next purchase. Thus, logistics becomes an integral
and critical part of businesses. It needs to be embedded in all phases of the product life cycle
from product design (design for logistics) to order fulfilment and installation (design for
delivery) and after sales service (design for serviceability). The developments in logistics
across countries of the world differ widely.

In countries like India, most of truck logistics is in the unorganized sector and the rail logistics
is with the Government. Most of the so-called supply chain best practices such as cross
docking, supply hubs, supply chain visibility, etc are not often seen in the industry. This report
is about logistics in India. In sections 2-4, we define logistics and bring to focus its relevance
in all three sectors of the economy and identify various types of logistics. The logistics services
are provided by the private sector and the logistics infrastructure such as roads, ports, airports
etc are provided by the Governments. Indian logistics has millions of small players and one of
the issues is coordinating their functions in providing efficient delivery. From these
discussions, it is clear that the performance of the logistics sector depends on both hard and
soft infrastructure, skilled manpower, Government policies, cluster locations and connectivity,
service providers, insurance agents, research in educational institutions, and host of other things
very remotely connected with actual goods transport and delivery. This can be used for
identifying risks in logistics network and methods of mitigating them, possible innovations due
to policies, creation of new resources, technologies and delivery modes and finally the
Governing mechanism for selecting the partners, coordinating and monitoring the end-to-end
process delivery.
 Automatic Identification Technology:

Automatic Identification (Auto ID) is the term used to describe the direct entry of data or
information in the computer system, programmable logic controllers or any microprocessor-
controlled device without operating a keyboard. These technologies include Bar Coding, Radio
Frequency Identification (RFID) and Voice Recognition. Auto ID can be used for tracking the
containers, packages, cartons or a truck carrying the goods on time bound dispatches to the
customers. The benefits of Auto ID include

• accuracy
• cost saving
• speed
• convenience of data storage & processing of information

The significant Automatic Identification technologies in use are –

Bar coding –

Bar coding is a sequence of parallel lines of different thickness with spaces in between. These
bars are nothing but the items of information in the codified form, which can be read with the
help of a scanner. Historically bar codes was first used in a supermarkets in USA in 1952.The
information printed in bar code include, country code, manufacturer name, product details, date
of manufacture, material content etc. These details are required at user end for inventory
management. The bar codes are used in diverse industries such as retail, pharmaceutical,
consumer goods, electronics, automobiles etc. The bar coding offers the following advantages.

❖ Ease in identification of inventory items during storage, retrieval, pickup, inspection &
dispatch.
❖ Reduce paper work and processing time leading
❖ Reduce human error
❖ Increases logistics system productivity through speed, accuracy and reliability.

Impact of Bar code technology on operations of logistics and supply chain management

Procurement operation – The parts and components brought from suppliers are assigned bar
codes, which contain information on item name, batch number, date of manufacture, order no,
serial no etc. The information in bar code helps in identifying and tracking the component. In
the warehouse, when the goods enter through a conveyor, they are further scanned by the hand-
held scanner or scanner fixed alongside the conveyor. The information decoded by the scanner
is immediately logged in the central computer which helps real time update of inventory
records.

Processing – During the order processing the bar code will help in keeping identification of
items based on their date of entry into the warehouse or store. This will ease material storage,
retrieval and dispatch in FIFO (First in First out) inventory management system.

Production operation – During the production process the identification of in-process and
finished items become easier due to bar coding. The various batches at different stages of
production can be easily tracked.

Distribution operation – During distribution, barcode helps in identifying and tracking the
transit of finished goods to the customers.

Radio Frequency Identification (RFID) –

RFID is an Automatic Identification and Data Capture (AIDC) technology. RFID first appeared
in tracking and access applications during 1980. RFID-based systems allow for non-contact
reading and are effective in manufacturing and other hostile environment where bar codes
could not survive. These are used as an alternative to Barcodes to communicate the inventory
data to the reader via radio waves. RFID wirelessly exchanges information between a tagged
object and a reader. Before – Assembly-line workers running low on parts would have to pick
up a phone and call the replenishment department to get more parts and then wait for parts.
After – Ford puts RFID tags on each parts bin. Warehouse operators now know in seconds,
when supplies run low, and automatically deliver parts as needed to workers on the assembly
line.
 Communication Technology
Electronic Data Interchange (EDI) –

EDI technology is used for transfer of business documents from one computer to another
computer. With EDI the business documents such as invoices, cheques, and challans are sent
electronically from one organization to another. In fact, EDI is a drive towards paperless
document transfer or transactions. The difference between the email message and EDI message
is that, Email is composed and interpreted manually, while EDI message is composed using
one software and interpreted by other software. E-mail data is not structured while EDI data or
message is structured. EDI message has legal standing in the court of law.

The benefits of using EDI technology in logistics and supply chain management involves

Faster transactions- real time document transfer in the supply chain.

Just-in-Time manufacturing technique can be adopted.

Reduction in transaction cost due to paperless operations

Reduction in order cycle time and inventory that will help to improve the competitiveness
of the customers.

Improve the corporate trading relationships between parties in the supply chain and creating
barriers for competitors.

Geographical positioning System (GPS) –

The GPS is more accurate system used in developed countries wherein a vehicle could be traced
accurately with the help of Geo Stationary Satellites to the accuracy of one meter in terms of
latitude and longitude. Once the position of the vehicle is known, it can be transmitted to
consigner or consignee through the transmission network i.e. mobile phones or internet.
 Impact Of IT On Functions Of Logistics And Supply Chain Management Are As
Follows

Planning –In the initial period before the advent of IT, production and distribution planning
was done based on historical data. There was not much linkage with business planning and
production changed with varying demand. However, with the advent of IT planning approach
include collaborative planning, forecasting and replenishment (CPRF). It involves long term
commitment to information sharing for collaborative planning purposes like joint business
planning (SKUs, brands) and financial planning (sales, inventory, safety stock, pricing, fill
rate).

Web-based collaboration- The web-based collaboration application enables to share and

collaborate with supply chain partners on forecasts, replenishment and promotions plans to
deliver the highest level of customer service and profitability.

Scheduling –In the initial period the scheduling was done to improve asset utilization and
reduce manufacturing costs. However, with the advent of IT strong linkage is established
between supply chain partners and customers. As such scheduling is done to serve the customer
at the right time.

Inventory management –In the initial period every department tried to minimize the
inventory by transferring it to the next level of the supply chain. Thus, the total inventory cost
in the supply chain was high as there was no transparency of the inventory held in the supply
chain. However, with the advent of IT, techniques such as collaborative replenishment and
vendor managed inventory were followed where manufacturer takes the responsibility to
replenish the distributor inventory, resulting in inventory control and access to demand
information.

Logistics and warehouse management – In the initial period logistics was more manual
intensive and there was no visibility of the movement of goods. However due to the advent of
IT and technologies like RFID and GPS complete visibility in movement of goods is assured
resulting into efficient logistic and warehouse management.
 Conclusion

“Technology” is vehicle to enhance supply chain competitiveness and performance by

enhancing the overall effectiveness and efficiency of logistics system. Hence choosing the right
technology for various logistics activities or sub-processes is very crucial to any business to
gain competitive advantage in today’s competitive market.

Example – A cycle manufacturer must see how it can integrate the smallest component
provider- namely, a brake shoe supplier and also the dealer at the rural centre, in order to
optimize production run and retain the customer instead of losing to the competitor. Today
integration in the supply chain is possible due to available technology leading to efficiency in
the supply chain only if the supply chain partners adopt the right strategy.
 Suggestions

Infrastructure is the backbone of every country’s growth and prosperity. The same is true for
the logistics industry. Emphasis should be laid on building world-class road networks,
integrated rail corridors, modern cargo facilities at airports. Logistics parks should be set up
and accorded a status equivalent to Special Economic Zones. It is necessary to realize that the
logistics industry can best be benefitted if companies establish training institutions to improve
the service quality of the sector. Good storage and warehouse facilities are important for the
growth of the industry. With increase in the transportation of perishable products, the logistics
agencies need to give a lot of importance to enhancing the warehouse facilities. Emphasis on
research and development is potent because it encourages the use of indigenous technology,
which can make the industry cost-effective and can also bring about improvement in services.
 References:

[1]. Chirstopher Martin, Logistics And Supply Chain Management, Pitman Publishing Co
London, 2001.

[2]. Coye J.J, Bardi E.J, Langgley C.J, “The Management of Business Logistics”, Thomson
Asia 2003.

[3]. David Simchi Levi, Philip Kamisky and Edith Simchi Levi, Designing and Managing the
Supply Chain, Irwin Mc Graw Hill, New York, 2000.

[4]. Mohanty R.P and Deshmukh S.G, Advanced Operation Management, Pearson Education
2003.

[5]. Michel Quayle & Bryan Jones, Logistics- An Integrated Approach, Tudor Disiness
Publishing, UK, 1999.

[6]. Raghuram G & N Nagaraj- Logistics And Supply Chain Management, Mc Millan India
Ltd- 2001.