Logistics in india
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This document discusses logistics and the logistics industry in India. It begins with definitions of logistics and its key components. It then discusses the interrelationship between transportation and logistics, different forms of logistics operations like supply chain management and reverse logistics. It covers outsourcing of logistics activities to third parties. The document also summarizes the growth drivers of the Indian logistics industry and key issues around the current state of logistics infrastructure in India like over-reliance on roads.
Logistics in india
- 1. Logistics Group A-02 Chirantan Banik 11P016 Sahil Modi 11P038 Susovan Ray 11P055 Syed Azharuddin 11P056 Vivek Pundlik 11P059 Vignesh S 11P060 Operations Strategy, Term VI MDI Gurgaon
- 2. Agenda Overview Inter-relationship between transportation and logistics Forms of Logistics Operations Outsourcing of Logistics Activities Indian Logistics Industry - Growth drivers Issues in Current status of logistics infrastructure in India
- 3. Overview
- 4. Council of Logistics Management (1991) defined that logistics is ‘part of the supply chain process that 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’ • Logistics: – the entire process of materials and products moving into, through, and out of firm • Supply-chain management – larger than logistics – links logistics more directly with the user’s total communications network and with the firm’s engineering staff • Logistics is Customer-oriented operation management Definitions
- 5. • 3 closely linked components: Logistics services, Information Systems and Infrastructure/Resources • Logistics services comprise physical activities and non-physical activities • Information systems provide essential data and consultation in each step • Infrastructure comprises human resources, financial resources, packaging materials, warehouses, transport and communications Components of Logistics System
- 6. Interrelation Between Transportation and Logistics
- 7. • One-third to two-thirds of the expenses of enterprises’ logistics costs are spent on transportation • National Council of Physical Distribution Management (NCPDM), estimates the cost of transportation, on average, accounted for 6.5% of market revenue and 44% of logistics costs • Components of logistics costs based on the estimation from Air Transportation Association show that transportation occupies 29.4% of logistics costs • Transport affects the results of logistics activities and influences production and sale • Improvement of higher operation costs can get better effects, therefore logistics manager must comprehend transport operation thoroughly Transport Costs and Goods Characters in Logistics
- 8. • It is more complex than carrying goods for the proprietors • Needs high quality management • With a well-handled transport system goods can be sent to the right place at the right time in order to satisfy the customer’s demands • It brings efficacy and bridges the gap between producers and consumers • A good transport system brings benefits not only to service quality but also to the company competitiveness Role of Transportation in Service Quality
- 9. Forms of Logistics Operations
- 10. • It is a concept for handling production procedures in broad sense • It can be divided into three main activities: purchase, manufacture and transport • Information flow is an important system which links the whole supply chain from supplier and manufacturer to consumer • Unimpeded information flow could lead increase operation accuracy and promote competitiveness • Product flow proceeds through the production process Supply Chain Management
- 11. • It has developed rapidly to provide industry competitiveness, promoting customer service and resources recycling • Two main reasons for rise of reverse logistics: – Globalization of markets – Policies for environment protection • It could help improve the service levels of companies and reduce the costs of producing processes • More and more companies want to build their reverse logistics systems, but limited by professional knowledge on logistics management • Thus third-party logistics service provides an option to small to mid-size companies Reverse Logistics
- 12. • It plays an important role in international freight • It is cheap and has high carrying capacity, vital for transportation of particular goods such as crude oil and grains • It takes longer time and strongly affected by weather Maritime Logistics Operation of maritime industry is of three main types Liner Shipping: The business is based on the same ships, routes, price and regular voyages Tramp Shipping: It has irregular transport prices, unsteady transport routes and schedules. Usually delivers goods like dry bulk cargo and crude oil Industry Shipping: Its main purpose is to ensure supply of raw materials. Hence, it sometimes needs specialized containers, such as high-pressure containers for natural gas
- 13. • It extends the delivery services for air and maritime from airports and seas • Main transport modes are railway transport, road freight transport and pipeline transport Land Logistics Railway transport Advantages - High carrying capacity, lower influence by weather conditions, lower energy consumption Disadvantages - High cost of essential facilities, difficult and expensive maintenance, lack of elasticity of urgent demands, and time consumption in organizing railway carriages Road transport Advantages - cheaper investment funds, high accessibility, mobility and availability Disadvantages - low capacity, lower safety, and slow speed Pipeline transport Advantages - high capacity, less effect by weather conditions, cheaper operation fee, and continuous conveyance Disadvantages - expensive infrastructures, harder supervision, goods specialization, and regular maintenance needs To improve the land transport in efficiency and reliability, a revolution of transport policies and management is required, e.g. pricing
- 14. • It provides the delivery with speed, lower risk of damage, security, flexibility, accessibility and good frequency for regular destinations • Its disadvantage is high delivery fee • Research data show that the freight transport market keeps growing • Future pattern of air freight logistics is cooperative with other transport modes, to provide a service base on Just-In-Time, and door-to-door Air Freight Logistics Express Delivery • It involves more frequent delivery of materials, at the right time and at the right place in the production process • The characteristics of express delivery are: – door-to-door service – Efficiency – Traceability – Just-In-Time (JIT) – Growing various delivery demands
- 15. • It is the future trend of business • It brings many benefits for both companies and consumers: – It expands the market area from regional to global – It uses electronic techniques instead of traditional paper works, which promotes the industries’ efficiency and competitiveness – It will impact on transport system due to the increased trips – It might reduce the number of warehouses and the stock cost. Therefore the prices could be lowered • New concerns such as internet security, transport impacts and door-to-door services should be addressed • A healthy and successful e-commerce environment is determined by the optimal logistics operation E-Commerce
- 16. Outsourcing of Logistics Activities
- 17. • Efficiency in logistics activities indispensable to effective business operations • Globalization driving higher level of complexity in logistics network • Importance of distribution and transportation in maintaining sustainable competitive advantage • Companies seeking to concentrate on core activities Need for Outsourcing
- 18. • Advantages of 3PL operators – Greater expertise – Flexibility for wide geography – Lower operating costs – Better quality of service • Outsourcing to 3PL has followed two trends – Increasing range of services outsourced – Increasing volume of traffic outsourced • Key challenge for 3PL operators – Overcoming client’s concerns about relinquishing control • Outsourcing of logistics is expected to increase 3PL – Third Party Logistics
- 19. • Assembles and manages resources, capabilities and technologies of own organization with those of complementary service providers • “Best of breed” approach • Creates unique and comprehensive logistics solutions that cannot be achieved by any single provider • Complete solution; Centralized point of contact 4PL – Third Party Logistics
- 21. Growth Drivers • Acceleration in industrial production and consumption • Population growth; Expanding upper-middle and middle classes • Expected growth: 15-20% per annum • Heavy outsourcing by automobile/telecom etc. – Demand for focused Supply Chain services • Change in tax system (VAT to GST) – Should create national market for many goods and services • Entry of MNCs in various sectors
- 22. Logistics infrastructure lags behind global peers • Planned investment cannot support 2.5 fold expected increase in traffic by 2020 • Current freight infrastructure – Networks built before independence Railways - Over 80% of current network built before independence - 1951-2007: 10 fold growth in traffic; 1.4 fold growth in track length Roadways - 200 fold traffic growth; 8 fold increase in track length - Highways – Only 15%; Two/Four lanes – 0.5% - Paved road density – 940km/1000sq.km; Japan – 21000 km, UK – 7050 km - Highways are structurally inadequate Waterways - Limited investments after independence - Loss of key routes following partition Challenges in Indian Logistics
- 23. Logistics flows are highly concentrated • 7 corridors connect 15 high growth clusters • These 7 corridors account for 50% of freight traffic • These clusters are expected to account for 60% of GDP growth in next 10 years Challenges in Indian Logistics
- 24. India’s freight traffic relies excessively on roads • This is despite the fact that 2/3rds of freight travel being more suitable for rail and waterways • 65% is bulk; 75% transported over distances more than 400km • Roads are cheapest only for non-bulk and <400 km • Over reliance on roads leads to increased costs, high energy consumption and adversely impacts environment Reasons Railways: Oversaturation of important networks, high tariffs, poor terminal quality, less flexibility of wagons, uncertain transit times Waterways: High turnaround times at ports, inadequate depths at ports, inadequate infrastructure for Coastal Shipping - Rail/Waterways potentially cheaper than roads Challenges in Indian Logistics
- 25. Inefficiencies leading to $45 billion each year • India’s spend as percentage of GDP is 13%, higher than that of US • This is despite the fact that cost of labor is significantly lesser in India • Road transport is 30 per cent more expensive in India • Rail and Waterways are 70 per cent more expensive in India • Transit times are higher owing to lower average speeds - Causes: Waiting times at toll stations, freeze in truck traffic during day, port turnaround times, low priority accorded to freight trains, poor track infrastructure • Poor transportation equipment is also a major problem • 65% of inefficiencies are hidden Challenges in Indian Logistics
- 26. • Change in modal mix – Increase investment in railways by reallocating from roads • Building the right networks to support modal mix change • Building Rail DFCs, Expressways, Coastal corridors, last mile links • Creating enablers to maximize efficiency – Logistics parks, standardized containers, IT assets, human resource etc. • Improve rail and road maintenance and existing equipment • Formulating and implementing a national logistics policy Way forward