16630780 Logistics Industry Project

8/12/2019 16630780 Logistics Industry Project

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PROJECT:-

Logistics & Supply chain industry in India:

current status

SU!ITTE" #: Chandra pra$ash Singh% ROLL O: '(

!) *+anage+ent science,.//0-.//1

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1. EXECUTIVE SUMMARY 3

2. BASIC CONCEPT OF SUPPLY CHAIN..4

3. LOGISTICS INDUSTRY STATUS IN INDIA.33

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4. 3PL SURVEY REPORT EXPLANATION...47

5. CHALLENGES OF SUPPLY CHAIN IN INDIA.52

6. WORLD BAN REPORT ON TACTS..5!

7. I.T IN LOGISTICS INDUSTRY.!"

8. REPORT I.T CRITICAL TO INDIA..!2

9. CUSTOM CLEARENCE PROCEDURE IN INDIA .!5

10. CONCLUSION!#

11. BIBLIOGRAPHY..7"

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Thank you

Basic Concepts of

Supply Chain Management

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Supply chains encompass the companies and the business activitiesneeded to design, make, deliver, and use a product or service.Businesses depend on their supply chains to provide them withwhat they need to survive and thrive. Every business fits into one ormore supply chains and has a role to play in each of them.The pace of change and the uncertainty about how markets willevolve has made it increasingly important for companies to be aware ofthe supply chains they participate in and to understand the roles thatthey play. Those companies that learn how to build and participate instrong supply chains will have a substantial competitive advantage intheir markets.CHATE! "

Nothing Entirely New. . . Just a Significant EvolutionThe practice of supply chain management is guided by some basicunderlying concepts that have not changed much over the centuries.#everal hundred years ago, $apoleon made the remark, %An armymarches on its stomach.& $apoleon was a master strategist and a skillfulgeneral and this remark shows that he clearly understood the importanceof what we would now call an efficient supply chain. 'nless thesoldiers are fed, the army cannot move.Along these same lines, there is another saying that goes,%Amateurstalk strategy and professionals talk logistics.& eople can discuss all sortsof grand strategies and dashing maneuvers but none of that will be possible

without first figuring out how to meet the day(to(day demands ofproviding an army with fuel, spare parts, food, shelter, and ammunition.)t is the seemingly mundane activities of the *uartermaster and the supplysergeants that often determine an army+s success. This has many analogiesin business.The term %supply chain management& arose in the late "-s andcame into widespread use in the "s. rior to that time, businesses usedterms such as %logistics& and %operations management& instead. #omedefinitions of a supply chain are offered below/0 %A supply chain is the alignment of firms that bring productsor services to market.&1from 2ambert, #tock, and Ellram

in their book Fundamentals of Logistics Management 32ambert,4ouglas 5., 6ames !. #tock, and 2isa 5. Ellram, "-,

Fundamentals of Logistics Management, Boston, 5A/)rwin75c8raw(Hill, Chapter "9:0 %A supply chain consists of all stages involved, directly orindirectly, in fulfilling a customer re*uest. The supply chainnot only includes the manufacturer and suppliers, but alsotransporters, warehouses, retailers, and customers themselves.&1

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from Chopra and 5eindl in their book Supply

Chain Management: Strategy, Planning, and Operations 3Chopra,

#unil, and eter 5eindl, ;", Supply Chain Management:Strategy, Planning, and Operations, 'pper #addle !iver, $6/

rentice(Hall, )nc. Chapter ":.0 %A supply chain is a network of facilities and distributionoptions that performs the functions of procurement ofmaterials, transformation of these materials into intermediateand finished products, and the distribution of these finishedproducts to customers.&1from 8aneshan and Harrison

at enn #tate 'niversity in their article An Introduction

to Supply Chain Management published athttp/77silmaril.smeal.psu.edu7supply


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There is a difference between the concept of supply chain managementand the traditional concept of logistics. 2ogistics typically refers toactivities that occur within the boundaries of a single organi?ation andsupply chains refer to networks of companies that work together andcoordinate their actions to deliver a product to market. Also traditional

logistics focuses its attention on activities such as procurement, distribution,maintenance, and inventory management. #upply chain managementacknowledges all of traditional logistics and also includes activities such asmarketing, new product development, finance, and customer service.)n the wider view of supply chain thinking, these additional activitiesare now seen as part of the work needed to fulfill customer re*uests.#upply chain management views the supply chain and the organi?ationsin it as a single entity. )t brings a systems approach to understanding andmanaging the different activities needed to coordinate the flow of productsand services to best serve the ultimate customer. This systems approachprovides the framework in which to best respond to business re*uirements

that otherwise would seem to be in conflict with each other.Taken individually, different supply chain re*uirements often haveconflicting needs. or instance, the re*uirement of maintaining high levelsof customer service calls for maintaining high levels of inventory, but thenthe re*uirement to operate efficiently calls for reducing inventory levels. )tis only when these re*uirements are seen together as parts of a larger picturethat ways can be found to effectively balance their different demands.Effective supply chain management re*uires simultaneous improvementsin both customer service levels and the internal operating efficienciesof the companies in the supply chain. Customer service at itsmost basic level means consistently high order fill rates, high on(timedelivery rates, and a very low rate of products returned by customersfor whatever reason. )nternal efficiency for organi?ations in a supplychain means that these organi?ations get an attractive rate of return ontheir investments in inventory and other assets and that they find waysto lower their operating and sales epenses.There is a basic pattern to the practice of supply chain management.Each supply chain has its own uni*ue set of market demands andoperating challenges and yet the issues remain essentially the same inevery case. Companies in any supply chain must make decisions individuallyand collectively regarding their actions in five areas/

". Production1@hat products does the market wantF How much of

which products should be produced and by whenF This activityincludes the creation of master production schedules that takeinto account plant capacities,workload balancing, *uality control,and e*uipment maintenance.

;. In"entory1@hat inventory should be stocked at each stage in a

supply chainF How much inventory should be held as raw materials,semifinished, or finished goodsF The primary purpose ofinventory is to act as a buffer against uncertainty in the supply

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chain. However, holding inventory can be epensive, so what arethe optimal inventory levels and reorder pointsF

>. Location1@here should facilities for production and inventory

storage be locatedF @here are the most cost efficient locationsfor production and for storage of inventoryF #hould eisting

facilities be used or new ones builtF Gnce these decisions aremade they determine the possible paths available for product toflow through for delivery to the final consumer.

9. #ransportation1How should inventory be moved from one supply

chain location to anotherF Air freight and truck delivery are generallyfast and reliable but they are epensive. #hipping by sea or railis much less epensive but usually involves longer transit timesand more uncertainty. This uncertainty must be compensated forby stocking higher levels of inventory. @hen is it better to usewhich mode of transportationF

=. Information1How much data should be collected and how muchinformation should be sharedF Timely and accurate informationholds the promise of better coordination and better decision making.@ith good information, people can make effective decisionsabout what to produce and how much, about where to locateinventory and how best to transport it.The sum of these decisions will define the capabilities and effectivenessof a company+s supply chain. The things a company can do andthe ways that it can compete in its markets are all very much dependenton the effectiveness of its supply chain. )f a company+s strategy is toserve a mass market and compete on the basis of price, it had better have

a supply chain that is optimi?ed for low cost. )f a company+s strategy isto serve a market segment and compete on the basis of customer serviceand convenience, it had better have a supply chain optimi?ed forresponsiveness. @ho a company is and what it can do is shaped by itssupply chain and by the markets it serves.

How the Supply Chain WorksTwo influential source books that define principles and practice of supply

chain management are #he $oal 38oldratt, Eliyahu 5., "-9, #he$oal, 8reat Barrington, 5A/ The $orth !iver ress ublishing

Corporation: and Supply Chain Management: Strategy, Planning, and

Operation by #unil Chopra and eter 5eindl. #he $oal eplores the


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=. Airplanes are a very fast mode of transport and are very responsive.

This is also the most epensive mode and it is somewhatlimited by the availability of appropriate airport facilities.

J. %lectronic #ransport is the fastest mode of transport and it is very

fleible and cost efficient.However, it can only be used for movementof certain types of products such as electric energy, data,and products composed of data such as music, pictures, and tet.#omeday technology that allows us to convert matter to energyand back to matter again may completely rewrite the theory and

practice of supply chain management 3%beam me up, #cotty. . .&:.8iven these different modes of transportation and the location ofthe facilities in a supply chain, managers need to design routes and networksfor moving products. A route is the path through which productsmove and networks are composed of the collection of the pathsand facilities connected by those paths. As a general rule, the higher thevalue of a product 3such as electronic components or pharmaceuticals:,the more its transport network should emphasi?e responsiveness and

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the lower the value of a product 3such as bulk commodities like grainor lumber:, the more its network should emphasi?e efficiency.)nformation)nformation is the basis upon which to make decisions regarding theother four supply chain drivers. )t is the connection between all of the

activities and operations in a supply chain. To the etent that this connectionis a strong one, 3i.e., the data is accurate, timely, and complete:,the companies in a supply chain will each be able to make good decisionsfor their own operations. This will also tend to maimi?e theprofitability of the supply chain as a whole. That is the way that stockmarkets or other free markets work and supply chains have many of thesame dynamics as markets.)nformation is used for two purposes in any supply chain/

". Coordinating daily acti"ities related to the functioning of the other

four supply chain drivers/ production inventory location andtransportation. The companies in a supply chain use available

data on product supply and demand to decide on weekly productionschedules, inventory levels, transportation routes, andstocking locations.

;. Forecasting and planning to anticipate and meet future demands.

Available information is used to make tactical forecasts to guidethe setting of monthly and *uarterly production schedules andtimetables. )nformation is also used for strategic forecasts toguide decisions about whether to build new facilities, enter anew market, or eit an eisting market.@ithin an individual company the trade(off between responsivenessand efficiency involves weighing the benefits that good information

can provide against the cost of ac*uiring that information. Abundant,accurate information can enable very efficient operating decisions andbetter forecasts but the cost of building and installing systems to deliverthis information can be very high.@ithin the supply chain as a whole, the responsiveness versus efficiencytrade(off that companies make is one of deciding how much informationto share with the other companies and how much information

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to keep private. The more information about product supply, customerdemand, market forecasts, and production schedules that companiesshare with each other, the more responsive everyone can be. Balancingthis openness however, are the concerns that each company has aboutrevealing information that could be used against it by a competitor.The

potential costs associated with increased competition can hurt the profitabilityof a company.

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The Evolving Structure of Supply ChainsThe participants in a supply chain are continuously making decisionsthat affect how they manage the five supply chain drivers. Each organi?ationtries to maimi?e its performance in dealing with these drivers

through a combination of outsourcing, partnering, and in(house epertise.)n the fast(moving markets of our present economy a company usuallywill focus on what it considers to be its core competencies in supplychain management and outsource the rest.This was not always the case though. )n the slower moving massmarkets of the industrial age it was common for successful companiesto attempt to own much of their supply chain. That was known as verticalintegration. The aim of vertical integration was to gain maimumefficiency through economies of scale 3see Ehibit ".":.)n the first half of the "s ord 5otor Company owned muchof what it needed to feed its car factories. )t owned and operated iron

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mines that etracted iron ore, steel mills that turned the ore into steelproducts, plants that made component car parts, and assembly plantsthat turned out finished cars. )n addition, they owned farms where they

grew fla to make into linen car tops and forests that they logged andsawmills where they cut the timber into lumber for making wooden carparts. ord+s famous !iver !ouge lant was a monument to verticalintegration1iron ore went in at one end and cars came out at the other

end. Henry ord in his ";J autobiography,#oday and #omorro&, boasted

that his company could take in iron ore from the mine and put out a

car -" hours later 3ord, Henry, ";J,#oday and #omorro&,ortland,G!/

roductivity ress, )nc.:.This was a profitable way of doing business in the more predictable,one(si?e(fits(all industrial economy that eisted in the early "s. ordand other businesses churned out mass amounts of basic products. But

as the markets grew and customers became more particular about thekind of products they wanted, this model began to break down. )t couldnot be responsive enough or produce the variety of products that werebeing demanded. or instance, when Henry ord was asked about thenumber of different colors a customer could re*uest, he said,%they canhave any color they want as long as it+s black.& )n the ";s ord+s marketshare was over = percent but by the "9s it had fallen to below ;percent. ocusing on efficiency at the epense of being responsive tocustomer desires was no longer a successful business model.8lobali?ation, highly competitive markets, and the rapid pace oftechnological change are now driving the development of supply chains

where multiple companies work together, each company focusing onthe activities that it does best. 5ining companies focus on mining, timbercompanies focus on logging and making lumber, and manufacturingcompanies focus on different types of manufacturing from makingcomponent parts to doing final assembly. This way people in each com(pany can keep up with rapid rates of change and keep learning the newskills needed to compete in their particular business.@here companies once routinely ran their own warehouses oroperated their own fleet of trucks, they now have to consider whetherthose operations are really a core competency or whether it is morecost effective to outsource those operations to other companies that

make logistics the center of their business. To achieve high levels ofoperating efficiency and to keep up with continuing changes in technology,companies need to focus on their core competencies. )t re*uiresthis kind of focus to stay competitive.)nstead of vertical integration, companies now practice %virtual integration.&Companies find other companies who they can work with toperform the activities called for in their supply chains. How a companydefines its core competencies and how it positions itself in the supply

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chains it serves is one of the most important decisions it can make.

Participants in the Supply Chain)n its simplest form, a supply chain is composed of a company and thesuppliers and customers of that company. This is the basic group of participants

that creates a simple supply chain. Etended supply chainscontain three additional types of participants. irst there is the supplier+ssupplier or the ultimate supplier at the beginning of an etended supplychain. Then there is the customer+s customer or ultimate customer atthe end of an etended supply chain. inally there is a whole category ofcompanies who are service providers to other companies in the supplychain. These are companies who supply services in logistics, finance,marketing, and information technology.)n any given supply chain there is some combination of companieswho perform different functions. There are companies that are producers,distributors or wholesalers, retailers, and companies or individuals who

are the customers, the final consumers of a product. #upporting thesecompanies there will be other companies that are service providers thatprovide a range of needed services.roducersroducers or manufacturers are organi?ations that make a product. Thisincludes companies that are producers of raw materials and companiesthat are producers of finished goods. roducers of raw materials areorgani?ations that mine for minerals, drill for oil and gas, and cut timber.)t also includes organi?ations that farm the land, raise animals, or catchseafood. roducers of finished goods use the raw materials and subassembliesmade by other producers to create their products.

roducers can create products that are intangible items such as music,entertainment, software, or designs. A product can also be a service suchas mowing a lawn, cleaning an office, performing surgery, or teaching askill. )n many instances the producers of tangible, industrial products aremoving to areas of the world where labor is less costly. roducers in thedeveloped world of $orth America, Europe, and parts of Asia areincreasingly producers of intangible items and services.

Distributors4istributors are companies that take inventory in bulk from producersand deliver a bundle of related product lines to customers. 4istributors

are also known as wholesalers. They typically sell to other businessesand they sell products in larger *uantities than an individual consumerwould usually buy. 4istributors buffer the producers from fluctuationsin product demand by stocking inventory and doing much of the saleswork to find and service customers. or the customer, distributors fulfillthe %Time and lace& function1they deliver products when andwhere the customer wants them.

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A distributor is typically an organi?ation that takes ownership ofsignificant inventories of products that they buy from producers and sellto consumers. )n addition to product promotion and sales, other functionsthe distributor performs are inventory management, warehouseoperations, and product transportation as well as customer support and

post(sales service. A distributor can also be an organi?ation that onlybrokers a product between the producer and the customer and nevertakes ownership of that product. This kind of distributor performsmainly the functions of product promotion and sales. )n both these cases,as the needs of customers evolve and the range of available productschanges, the distributor is the agent that continually tracks customerneeds and matches them with products available.

Retailers!etailers stock inventory and sell in smaller *uantities to the generalpublic. This organi?ation also closely tracks the preferences and demands

of the customers that it sells to. )t advertises to its customers and oftenuses some combination of price, product selection, service, and convenienceas the primary draw to attract customers for the products itsells. 4iscount department stores attract customers using price and wideproduct selection. 'pscale specialty stores offer a uni*ue line of productsand high levels of service. ast food restaurants use convenienceand low prices as their draw.

CustomersCustomers or consumers are any organi?ation that purchases and uses aproduct. A customer organi?ation may purchase a product in order to

incorporate it into another product that they in turn sell to other customers.Gr a customer may be the final end user of a product who buysthe product in order to consume it.

Service ProvidersThese are organi?ations that provide services to producers, distributors,retailers, and customers. #ervice providers have developed special epertiseand skills that focus on a particular activity needed by a supply chain.Because of this, they are able to perform these services more effectivelyand at a better price than producers, distributors, retailers, or consumerscould do on their own.

#ome common service providers in any supply chain are providersof transportation services and warehousing services. These are truckingcompanies and public warehouse companies and they are known aslogistics providers. inancial service providers deliver services such asmaking loans, doing credit analysis, and collecting on past due invoices.These are banks, credit rating companies, and collection agencies.#ome service providers deliver market research and advertising, whileothers provide product design, engineering services, legal services, and

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management advice. #till other service providers offer informationtechnology and data collection services. All these service providers areintegrated to a greater or lesser degree into the ongoing operations ofthe producers, distributors, retailers, and consumers in the supply chain.#upply chains are composed of repeating sets of participants that

fall into one or more of these categories. Gver time the needs of thesupply chain as a whole remain fairly stable.@hat changes is the mi ofparticipants in the supply chain and the roles that each participant plays.)n some supply chains, there are few service providers because the otherparticipants perform these services on their own. )n other supply chainsvery efficient providers of speciali?ed services have evolved and theother participants outsource work to these service providers instead ofdoing it themselves. Eamples of supply chain structure are shown inEhibit ".;.

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Aligning the Supply Chain with Business StrategyA company+s supply chain is an integral part of its approach to the marketsit serves. The supply chain needs to respond to market re*uirementsand do so in a way that supports the company+s business strategy.The business strategy a company employs starts with the needs of the

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ESSENTIAS o! Supply Chain "ana#ementIN THE REA W$R% &C$NTIN'E%(%or manufacturers we offer them the ability to drive standardi?ationwith our customers. Through distributor rationali?ation, we partner

with a few best(in(class distributors per category, which in turn offersthem a significant increase in the business they get from our properties.And our customers now have access to a single(source, paperlessprocess for purchasing all of their 5!G products. They outsource theirpurchasing operations and benefit from better economies of scale.or each constituent in our model, we provide high levels of data onpurchasing activities, customer profiles, and seasonal patterns. @eare bringing transparency to the supply chain.&)n reflecting on the last couple of years, Charlie summari?ed themain lessons learned. %@e have to stay very focused on our coreproposition. @e do purchasing of 5!G products and services for

people who manage real estate. @e continue to build our value inthat area. @e have learned how best to roll out the technology andhow to integrate with our supplier partners. @e also have learned a lotabout how to screen suppliers for their ability to implement our technologyand how to support and assist our client to grow with us.&2ooking at the net couple of years, Charlie sees the company continuingto grow its client base. %@e know we have an ecellent procurementsolution in place now. @e will continue to grow andenhance our facility management service offerings. @e will furtherintegrate our systems with those of suppliers. @here there is realestate and a need to manage it, we have a solution and real estate

leaders are starting to reali?e that.&customers that the company serves or will serve. 4epending on theneeds of its customers, a company+s supply chain must deliver theappropriate mi of responsiveness and efficiency. A company whosesupply chain allows it to more efficiently meet the needs of its customerswill gain market share at the epense of other companies in thatmarket and also will be more profitable.or eample, let+s consider two companies and the needs that theirsupply chains must respond to. The two companies are K(Eleven and#am+s Club, which is a part of @al(5art. The customers who shop atconvenience stores like K(Eleven have a different set of needs and preferences

from those who shop at a discount warehouse like #am+s Club.The K(Eleven customer is looking for convenience and not the lowestprice. That customer is often in a hurry and prefers that the store beclose by and have enough variety of products so that they can pick upsmall amounts of common household or food items that they needimmediately. #am+s Club customers are looking for the lowest price.They are not in a hurry and are willing to drive some distance and buylarge *uantities of limited numbers of items in order to get the lowest

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price possible.Clearly the supply chain for K(Eleven needs to emphasi?e responsiveness.That group of customers epects convenience and will pay forit. Gn the other hand, the #am+s Club supply chain needs to focus tightlyon efficiency. The #am+s Club customer is very price conscious and the

supply chain needs to find every opportunity to reduce costs so that thesesavings can be passed on to the customers. Both of these companies+supply chains are well aligned with their business strategies and becauseof this they are each successful in their markets.There are three steps to use in aligning your supply chain withyour business strategy. The first step is to understand the markets thatyour company serves. The second step is to define the strengths or core

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)asic Concepts o! Supply Chain "ana#ementcompetencies of your company and the role the company can or couldplay in serving its markets. The last step is to develop the needed supply

chain capabilities to support the roles your company has chosen.

Understand the Markets Your Company Serves

Begin by asking *uestions about your customers. @hat kind of customerdoes your company serveF @hat kind of customer does yourcustomer sell toF @hat kind of supply chain is your company a part ofFThe answers to these *uestions will tell you what supply chains yourcompany serves and whether your supply chain needs to emphasi?eresponsiveness or efficiency. Chopra and 5eindl have defined the followingattributes that help to clarify re*uirements for the customers

you serve. These attributes are/0 #he 'uantity of the product needed in each lot14o your customers

want small amounts of products or will they buy large*uantitiesF A customer at a convenience store or a drug storebuys in small *uantities. A customer of a discount warehouseclub, such as #am+s Club, buys in large *uantities.

0 #he response time that customers are &illing to tolerate14oyour customers buy on short notice and epect *uick serviceor is a longer lead time acceptableF Customers of a fast foodrestaurant certainly buy on short notice and epect *uick

service. Customers buying custom machinery would plan thepurchase in advance and epect some lead time before theproduct could be delivered.

0 #he "ariety of products needed1Are customers looking for a

narrow and well(defined bundle of products or are theylooking for a wide selection of different kinds of productsFCustomers of a fashion bouti*ue epect a narrowly defined

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group of products. Customers of a %big bo& discount storelike @al(5art epect a wide variety of products to be available.

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ESSENTIAS o! Supply Chain "ana#ement

0 #he ser"ice le"el re'uired14o customers epect all products tobe available for immediate delivery or will they accept partialdeliveries of products and longer lead timesF Customers of amusic store epect to get the C4 they are looking for immediatelyor they will go elsewhere. Customers who order acustom(built new machine tool epect to wait a while beforedelivery.

0 #he price of the product1How much are customers willing to

payF #ome customers will pay more for convenience or highlevels of service and other customers look to buy based onthe lowest price they can get.

0 #he desired rate of inno"ation in the product1How fast are newproducts introduced and how long before eisting productsbecome obsoleteF )n products such as electronics and computers,customers epect a high rate of innovation. )n otherproducts, such as house paint, customers do not desire such ahigh rate of innovation.

%e!ine Core Competencies o! *our CompanyThe net step is to define the role that your company plays or wants toplay in these supply chains. @hat kind of supply chain participant isyour companyF )s your company a producer, a distributor, a retailer, or

a service providerF @hat does your company do to enable the supplychains that it is part ofF @hat are the core competencies of your companyFHow does your company make moneyF The answers to these*uestions tell you what roles in a supply chain will be the best fit foryour company.Be aware that your company can serve multiple markets and participatein multiple supply chains. A company like @.@. 8rainger servesseveral different markets. )t sells maintenance, repair, and operating35!G: supplies to large national account customers such as ord and

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)asic Concepts o! Supply Chain "ana#ement

Boeing and it also sells these supplies to small businesses and buildingcontractors. These two different markets have different re*uirements asmeasured by the above customer attributes.@hen you are serving multiple market segments, your companywill need to look for ways to leverage its core competencies. arts ofthese supply chains may be uni*ue to the market segment they servewhile other parts can be combined to achieve economies of scale. oreample, if manufacturing is a core competency for a company, it can

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build a range of different products in common production facilities.Then different inventory and transportation options can be used todeliver the products to customers in different market segments.

Develop Needed Supply Chain Capabilities

Gnce you know what kind of markets your company serves and the roleyour company does or will play in the supply chains of these markets,then you can take this last step, which is to develop the supply chain capabilitiesneeded to support the roles your company plays. This developmentis guided by the decisions made about the five supply chain drivers.Each of these drivers can be developed and managed to emphasi?eresponsiveness or efficiency depending on the business re*uirements.

". Production1This driver can be made very responsive by building

factories that have a lot of ecess capacity and that use fleiblemanufacturing techni*ues to produce a wide range of items. Tobe even more responsive, a company could do their production

in many smaller plants that are close to maLor groups of customersso that delivery times would be shorter. )f efficiency is desirable,then a company can build factories with very little ecess capacityand have the factories optimi?ed for producing a limited range ofitems. urther efficiency could be gained by centrali?ing productionin large central plants to get better economies of scale.

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ESSENTIAS o! Supply Chain "ana#ement

;. In"entory1!esponsiveness here can be had by stocking highlevels of inventory for a wide range of products. Additional

responsiveness can be gained by stocking products at many locationsso as to have the inventory close to customers and availableto them immediately. Efficiency in inventory management wouldcall for reducing inventory levels of all items and especially ofitems that do not sell as fre*uently. Also, economies of scale andcost savings could be gotten by stocking inventory in only a fewcentral locations.

>. Location1A location approach that emphasi?es responsiveness

would be one where a company opens up many locations to bephysically close to its customer base. or eample, 5c4onald+shas used location to be very responsive to its customers by opening

up lots of stores in its high volume markets. Efficiency canbe achieved by operating from only a few locations and centrali?ingactivities in common locations. An eample of this is theway 4ell serves large geographical markets from only a few centrallocations that perform a wide range of activities.

9. #ransportation1!esponsiveness can be achieved by a transportation

mode that is fast and fleible. 5any companies that sell

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products through catalogs or over the )nternet are able to providehigh levels of responsiveness by using transportation todeliver their products, often within ;9 hours. edE and '# aretwo companies who can provide very responsive transportationservices. Efficiency can be emphasi?ed by transporting products

in larger batches and doing it less often. The use of transportationmodes such as ship, rail, and pipelines can be very efficient.Transportation can be made more efficient if it is originated outof a central hub facility instead of from many branch locations.

35

Basic Concepts of Supply Chain Management

=. Information1The power of this driver grows stronger each yearas the technology for collecting and sharing information becomesmore widespread, easier to use, and less epensive. )nformation,much like money, is a very useful commodity because it can beapplied directly to enhance the performance of the other foursupply chain drivers. High levels of responsiveness can beachieved when companies collect and share accurate and timelydata generated by the operations of the other four drivers. Thesupply chains that serve the electronics markets are some of themost responsive in the world. Companies in these supply chainsfrom manufacturers, to distributors, to the big retail stores collectand share data about customer demand, production schedules,and inventory levels.@here efficiency is more the focus, less information aboutfewer activities can be collected. Companies may also elect toshare less information among themselves so as not to risk havingthat information used against them. lease note, however, thatthese information efficiencies are only efficiencies in the shortterm and they become less efficient over time because the cost ofinformation continues to drop and the cost of the other fourdrivers usually continues to rise. Gver the longer term, thosecompanies and supply chains that learn how to maimi?e the useof information to get optimal performance from the other driverswill gain the most market share and be the most profitable.

+,ESSENTIAS o! Supply Chain "ana#ement

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A supply chain is composed of all the companies involved in the design,production, and delivery of a product to market. #upply chain managementis the coordination of production, inventory, location, andtransportation among the participants in a supply chain to achieve the

best mi of responsiveness and efficiency for the market being served.The goal of supply chain management is to increase sales of goods andservices to the final, end use customer while at the same time reducingboth inventory and operating epenses.The business model of vertical integration that came out of theindustrial economy has given way to %virtual integration& of companiesin a supply chain. Each company now focuses on its core competenciesand partners with other companies that have complementary capabilitiesfor the design and delivery of products to market. Companies must focuson improvements in their core competencies in order to keep up withthe fast pace of market and technological change in today+s economy.

To succeed in the competitive markets that make up today+s economy,companies must learn to align their supply chains with thedemands of the markets they serve. #upply chain performance is now adistinct competitive advantage for companies who ecel in this area.Gne of the largest companies in $orth America is a testament to thepower of effective supply chain management. @al(5art has grownsteadily over the last ; years and much, if not most, of its success isdirectly related to its evolving capabilities to continually improve itssupply chain.

L)%&-%,& I/&-(6@,((+/- &--&%/ I/%

India is being touted as the land of opportunity for logistics serviceproviders all over the world.

I/%/& )%&-%,& %/&-(6 %& 0&- ,)%/ %/-) %-& )/: ')%&+ -) -),$ 125=%%)/ %/ 2"1".F() #" =%%)/ - '(+&+/-

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Environment #can

)ndia

Logistics in India

4espite its favorable location between Asia and Europe and a population of more than "billion people, )ndia has hardly been able to position itself on the economic market. )t has

only been in recent years that the country has been able to increasingly fle its economicmuscle. But, )ndia has much catching(up to do in logistics terms before it can reach thesame level as the world+sleading industrial nations.

Geographic challenges in India

I"I)LO2ISTICS

I"USTR#

ROAD R)IL3)#S SE) )IR

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for )ndia is bordered on the north by the Himalaya 5ountains. or this reason, creatingroad and rail connections from this direction is a maLor undertaking. )n the south, though,the )ndian peninsula is well suited for sea harbors. )ndia is indeed the country with theworld+s second(largest population. But the population is une*ually distributed, creating amaLor challenge logistics service providers.

Core countries for trade

The most important eport countries for )ndian products are the 'nited #tates, the 'nitedArab Emirates, China, #ingapore and 8reat Britain. The biggest import trading partnersare China, the 'nited #tates, #wit?erland, the 'nited Arab Emirates and Belgium .

Indian infrastructure

A vital step in )ndia+s further development is epanding the road and rail networks, andmoderni?ing harbors and airports. )n the process of globali?ation , which is epanding)ndia+s position in world trade, transport volume has climbed rapidly in recent years. Theepansion of the logistics infrastructure has been unable to keep up with this pace. orthis reason, transport capacities have already reached their limits.The transshipping timesfor ships in )ndian harbors are three to four times longer than the average time in the@est. 2ogistics costs are also very high in international comparison because of the poorinfrastructure. or this reason, )ndia will have difficulties positioning itself as a globallogistics hub in years ahead.!oad transport is especially important for )ndia+s transport system. After all, Transporthubs in )ndia

)ndia has one of the world+s largest road networks, with a total length of >.> millionkilometers. But much of this network does not meet @estern standards.or instance, atruck takes five to si days to cover the ;,J"(kilometer(long route between Bangaloreand 4elhi. The government is indeed trying to introduce counter(measures and shiftfreight transports from the roads to the rails. But, first, the rail infrastructure must beepanded and the connections toharbors and airports improved. 5any sub(areas of the J>,(kilometer(long rail networkstill use the technology of "9K, the year that British colonialists left. Gnly aboutone*uarter of the routes are electrified. Gne other challenge is the four gaugewidths used in the rail network .

Logistics requirements and service areas

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!oad transports are characteri?ed by small forwarders who fre*uently use anti*uatedtechnology. )n addition, the splintered political structure re*uires an ecellentunderstanding of local conditions .As national highways in )ndia are built and road transports are increasingly liberali?ed,the productivity of road shipping will rise in years ahead. The network business with 2T2

in )ndia has ecellent potential. The )ndian roadtransport market is forecast to rise to M9billion by ;"; ( it is currently M;- billion .The CE market on the subcontinent is growing rapidly. )n the last five years, revenuehas eperienced double(digit growth, climbing to about MJ= million. )ts share of theentire logistics market totals only about > percent. )nternational service providers areworking to set up or ac*uire domestic networks in )ndia.2ogistics service providers have been focusing more etensively on traditional storagefunctions and distribution. But the number of high(bay warehouses that meet Europeanstandards is etremely small. Typical added(value services that meet @estern standardsalso are hardly offered. or this reason, the contract logistics market in )ndia has a share

of only about J percent of the entire logistics market .

Logistics centers in India

)n terms of logistics, )ndia remains a developing country in many areas. or instance, ithas hardly any multimodal logistics centers. 4espite its good geographic position, )ndiahas also been unable to evolve into a hub for international freight transports, like 4ubai.)n regional terms, )ndia lags behind logistics centers like #ingapore, Thailand and Hongong. Currently, )ndia is moving forward with a plan to turn the country+s "; mainharbors into integrated freight hubs. 5any of these harbors do not have the rail and roadconnections needed to handle the transport volume of ships. Containers fre*uently sit for

weeks in the harbor before they can be transported .

Important logistics service providers

The largest )ndian logistics service providers are #hipping Corporation of )ndia,Container Corporation of )ndia, 8reat Eastern #hipping, !eliance orts 7 Terminals,Essar #hipping, Transport Corporation of )ndia, !eliance 2ogistics,Blue 4art Epress, Darun #hipping Company and B2! )ndia. )nternational serviceproviders are #chenker, 4H2, Arvato, Nhne O $agel and T$T .

Features of Indian Logistics Industry

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0A number of small(integrated players

0Transportation costs account for nearly 9P of production costs

02ogistics costs around ">P of 84, compared to -P in the '#.

08rowth in )ndian economy is the maLor driving factor for the demand in logisticsindustry.

0Chemicals, metals, 5C8, cement and tetiles have been identified as the top fivecontributors to logistics revenues

R$A%S

Indian Road Network

0)ndia has the second highest largest road network(>.> million km.

0'# has the largest road network with J.9 million km O China(".-million km

-$ational highway ;P of total road length.

.But carry 9P of goods traffic of )ndia.

Features of Indian Road Transport

0!oad $etwork carry nearly J=P of freight and -=P of passenger traffic.

0Dehicle ownership is firmly in the hands of individual truck owners

0JKP of vehicle owners have fleets of less than five vehicles.0Traffic on roads is growing at a rate of K to "P per annum08overnment spends("; per cent of capital and > per cent of total ependiture on roads.

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a!or Roads "ro!ects

0The 8olden Quadrilateral 38Q =,-9J km: connecting the four maLor cities of 4elhi,5umbai, Chennai and olkata

0The $orth(#outh and East(@est Corridors 3$#(E@ K,> km: connecting #rinagar inthe north to anyakumari in the south and #ilchar in the east to orbandar in the west

0ort connectivity and other proLects

.uture Road Pro/ects

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The Golden #uadrilateral

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RAIWA*S

41

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Indian Rail Logistics

0The )ndian !ailways boasts of being the world+s ;ndlargest rail network spread over

-",="" km and covering J-J stations

0The freight segment accounts for roughly two thirds of railway+s revenues.

0The tonne7kilometre costs for )ndian rail freight at three times that of China. RTata )ronO#teelS.

42

0

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30000

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rs crore

2002-03 2003-04 2004-05 2005-06 2006-07

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railway freight revenue

0100200300400500600700800

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India0s Sea o#istics0)ndia now has the largest merchant shipping fleet among the developing countries.

-)ndia ranks "Kthin the world in shipping tonnage

0)ndian share of maritime transport services is "P of world market

0The container traffic has registered an impressive growth of "= per cent over the last fiveyears.

Port Privati1ation

0ort traffic to grow to a level of J= 5illion Tonnes er Annum by ;-(5inistry of#hipping0ort rivati?ation is picking up momentum(('#4".> billion worth proLects approved.

0layers (((OG, #A, 5aersk, 8ammon )ndia, C@C and the 4ubai ort Authority.

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Indian Ports

India0s Aviation o#istics Sector

0Aviation holds a small share of )ndia+ s freight market

0Air reight is very epensive in )ndia in comparison to road andrail.

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0The si?e of the world air cargo market is estimated at ;K million tonnes valued at M;billion.

0)ndia accounts for meager >P of the global air cargo market

0As per an epert estimate, )ndian air cargo industry is going to be double by the year;".

0Cargo(garments, machinery, components, pharmaceuticals, dyes, chemicals andperishables Rfruit, vegetables, flowers, fish and meatS.

05aLor )nternational cargo airports(5umbai, Chennai, Bangalore, Trichy, Hyderabad,4elhi, Coimbatore, Cochin.

.5aLor domestic cargo airports Ahmedabad, 8oa, 2ucknow, Disakhapatnam,5adurai inaddition to the above.

45

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India0s Aviation 2rowth Plans0)nvestments of '#4 =.K billion over net = years in )ndian Airport )nfrastructure0Blue(4art, the only dedicated freight carrierin domestic sector.0Air )ndia plans to increase cargo revenue from current "P to "=(;P in >yrs.06et Air, 8oAir, ingfisher Airlines charting out plans to play bigger role in )ndiandomestic air cargo

0)nternational Airlines(Cathay acific and BA increasing cargo capacity to and from)ndia.

4!

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Third Party o#istics3+P

+ P0>rdarty 2ogistics imply that one company acts as an agent to lookafter the logisticsaspect of another company or group of companies.

0>!4 party logistics entails a study of the customer+s business, supply chain anddistribution network, in order to formulate a comprehensive integrated logistics strategy,which will help render all supply(related services from a single window

0)ndiaUs >2 sector represents > percent of the countryUs total logistics spend

0The )ndian >2 market is epected to grow at around ; percent per annum in the net>(= years.

0The practice in )ndia reveals that warehousing and outbound transportation, customclearing and forwarding are the most fre*uent outsourced activities.

0Activities such as packaging, fleet management and consolidationhave started gaining

attention for outsourcing.

$"L %urvey in India

A survey by the Transport Corporationof )ndia 3TC): and the 5anagement4evelopment)nstitute 354): shows 0less than ==P of )ndian companiessubscribe to >2, compared to more than K=Pglobally.0about =KP of the companies planto outsource reverse logistics within the net five

years.

0=9P plan to outsource inventory management.0=>P order processing.

0more than =P of the companies have outsourced activities like transportation,warehousing Ocustoms clearing7forwarding.

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!easons for 2ogistics Gutsourcing

#ource/ TC) O 54) #urvey

Growth &rivers for Logistics in India

08eneral growth of the )ndian economy.

05anufacturing boom(for eports as well as for domestic market.

0Epected rise in )nternational trade from )ndia.

05$C+s setting up manufacturing in )ndia($okia, letronics.

08overnment+s thrust on )nfrastructure (('#M"K billion to upgrade highway networks.

0)mplementation of DAT will lead to growth in warehousing business.

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0Gpening of organi?ed retail sector (attracting retail chains like @al(5art and Carrefourin addition to )ndian players like antaloon and !eliance.

Government %upport

The )ndian government is making great efforts by

0rivati?ing ports and airports.

0)ncreasing the number of gateway ports

0)nvesting in highway proLects

0#treamlining customs and ecise procedures.

0)mplementing E4) systems

0)mproving the rail network.

0The government plans to invest M"K billion in transport infrastructure between ;J(

;"

#ome of the proLects are/

0Amend in the $ational Highway Act to epedite land ac*uisition, permit privatefinancing and allow tolling.

0)mprovement in rural access by launch of the rime 5inister+s !ural !oads rogram.

-!eduction of congestion on rail corridors and improvement of port connectivity by

launch of $ational !ailway 4evelopment rogram.

0'pgradation of infrastructure and connectivity in the countryUstwelve maLor ports byinitiating the $ational 5aritime 4evelopment rogram.

0Establishment of Tariff Authority for 5aLor orts to regulate tariffs.

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Gn a per(annum basis, 'nited #tates invests = percent of its annuallogistics spend on

infrastructure, )ndia is investing ;> percent or over four times as much.

)ndustry 8rowthV2ogistics 8rowth

0%Engineering goods, chemicals and gems O Lewelry are the fastest(growing sectorsmanufacturing in )ndia is epected to grow by .9 percent in coming years.& says 6ac*ues

8reen, 5anaging 4irector edE()ndia, 5iddle East O Africa.

Auto

0Gutsourcing in Auto sector could be worth M>K= billion by ;"= and )ndia could captureup to M;= billion of this amount. Rsource/5cinseyS

Chemicals0)ndia +s chemical eports could reach M"= billion by ;"=. Rsource / 5cinsey

Electrical and Electronic Products

0)ndia+s eport in electrical and electronic products could reachup to M"- billion a year by;"=.Rsource / 5cinseyS.

)ndustry 8rowthV2ogistics 8rowth

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Retail

0Gpening up of the organi?ed retail sector is attracting big retail chains like @al(5art andCarrefour in addition to big )ndian retailers like antaloon and !eliance.

0All this would re*uire the presence of professional logistics players in the market tocarry out supply chain activities.Thus demand for logistics services would be largely driven by the growth of the )ndianeconomy.

)ndian O oreign 2ogistics layers

0)nvesting to upgrade and move into >2 arena8ati, #afepress, atel 2ogistics, Blue4art.

0!ecent )G(AllCargo 8lobal 2ogistics.

0Container reight stations and )nland Container depots(Container Corporation of )ndia,8ateway 4istriparksand Balmer 2awrie O Company.

0Bharti, Taco 5obiApps, atni Computersand !elianceare focusing on telematics atechnology based on telecommunications plus computing.

0Alliances O Ac*uisitions (4H2 ac*uired Blue 4art, edE has a tieup with rakashAirfreight,!henus A8 has tied up with #eaways #hipping 2td.

0!edwood Cityepanding its )ndia presence by nearly =P.

0#trong Base in )ndia(A2 2ogistics, T$T Epress, '# and 5aersk 2ogistics

0)n the port terminal business, 5aerskand OG ortsare consolidating their position byac*uiring controlling stakes in private container terminals..

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Challen#es !or Indian o#isticsCompanies

0Competition from )ndian and oreign logistics companies.

0Technology to keep pace with demand for real time information.

0Corporati?ation and lack of skill sets.

0#hedding local mindset and move to a global mindset.

0)ntegration of services and value added services.

0unds to fuel epansion O growth.

0)nade*uate infrastructure and comple ta laws.

.uture Pro/ected Trends

0The )ndian logistics market is likely to grow at a CA8! of KP during the net fiveyears.

0The unorgani?ed sector may find it difficult to eist at national level due to its inabilityto keep pace with technology O customer demand.

0Transportation costs are bound to come down in future with improvement ininfrastructure and growth in cargo movement.

09tharty 2ogistics to take root in )ndia.

R)n 92, logistics is controlled by a service provider that doesnot own assetsto carry out

logistics activities but outsources to sub(contractors, the >2S.

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Top Nine Supply Chain Challen#es !or4556

)etter make sure risk mana#ement is at the top o! your to3do list thisyearW

As if a shattered economy isnUt bad enough, the prospects of supply chain

disruptions on a global scale have manufacturers taking a closer look at theirrisk management strategies. According to Bernie Hart, global producteecutive, logistics management, with financial services firm 6.. 5organUs8lobal Trade #ervices group, while ; will have plenty of challenges formanufacturers, a number of promising opportunities will emerge as well.Hart lists the following nine trends that will characteri?e global supplychains throughout the year

7- Supply chain risk miti#ation in an economic downturn

#upply chain risk mitigation will receive increased focus in ; versus past

downturns due to the following factors/ supplier financial risk,

volatility in energy, commodity, labor rates and currency echange,

unpredictable economic recoveries.

4- Searchin# !or workin# capital

WThis trend will bring increased scrutiny to the supply chain as companieslook to reduce inventory and lower operating or carrying costs,W Hart says.W)n addition, buyers will look to etend payment terms, while suppliers will

drive to collect receivables more *uickly, creating the need for a li*uiditybuffer (( such as supply chain financing (( to mitigate this brewingpayables7receivables conflict. The current credit environment is pushingbuyer7supplier partnerships to look to their trade flows to drive the creationof additional li*uidity.W

+- A resur#ence in letters o! credit

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Hart reports that his firm, financial giant 6.. 5organ, has seen a resurgencein the use of letters of credit to facilitate the financing of international trade.@ith credit getting tighter in all sectors, the supply of letters of credit havebeen declining while the cost has risen dramatically, Hart notes. Wor theright borrower and the right transaction there are still deals to be done, butthe market will remain tight for the near future.W

8- Shortenin# the supply chain

'.#. manufacturers will continue to reconfigure their supply chains, Hartsays, by moving plant operations and sourcing vendors closer to home andaway from Asia. W2imited free trade agreements, high energy costs, andrising labor and production costs in Asia all contribute to companies re(evaluating etended supply chains.W 5eico in particular has become anincreasingly popular source for manufactured goods, Hart notes, citing a

'.#. Commerce 4epartment report that indicates a K.;P increase from year(to(date imports through 5eico compared to the year before

9- Improved speed and savin#s in "e:ico

5eico is piloting a new customs regime called the !egimen de !ecintoiscali?ado EstratXgico 3!E:. WA customs regime,W as Hart eplains, Wis acountryUs specific set of trade regulations, processes and practices thatregulate the actions of importers and eporters.W The 5eican governmentUshope is that the !E will decrease logistics cost in terms of dollars percontainer and numbers of days in transit which, in turn, will help attract

additional production to 5eico. The program could save an importerbetween '#M; to MJ per shipment, according to 5eico Customsestimates. The !E is epected to go live in early ;, Hart says.

,- "ore !ree3trade a#reements and more scrutiny

@hile the 'nited #tates is epected to finali?e three new free(tradeagreements 3TAs: in ; with Colombia, anama and #outh orea, itremains an open *uestion as to whether the Gbama administration will viewTAs as a priority. WThe compleity associated with understanding andleveraging TAs is beyond the scope of many companies because they either

lack the epertise, resources, technology, or all of the above to do itefficiently and cost(effectively,W Hart says. W5any companies eventuallycome to a decision point/ either invest internally or outsource to a globaltrade epert.W

;- China clamps down on oversi#ht

WChinese officials have vowed to clamp down on product safety failures by

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launching national investigations and ordering local officials to report allpossible product safety issues,W Hart says. WThe regulatory environment isepected to become stricter in China with the introduction of a control list orcatalogue of commercial encryption products developed and made overseas.)mpacting high(tech manufacturers outside of China, this new control listcalls for tighter regulatory oversight of firms that use encryption technologywithin their products.W


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World )ank report on lo#istics>Strate#ies and tactics !or a challen#in#

market-

The Phenomenal 2rowth o! 2lo=al Trade$ver the past hal! century the =usiness worldchan#ed dramatically throu#h #lo=ali1ation

8rowth in world trade has eceeded the rate ofdomestic output every year since "="K> ( "/ @orld trade grew at an annual ratenearly three times higher than world 8ross4omestic roduct 384:

Trade to 84 !atio/0 '.#./ tripled since "K0 @orld/ doubled since "K

In 4556 this #rowth is pro/ected to stall

4556 ? The %i!!erence a *ear "akes; is forecast to eperience the first year over year decline in globalinternational trade volumes since "-;.

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Competin# in 4556 ? New Issues at the .ore!ront)n the challenging ; market three trends will be the most impactful. Howwell a business addresses these will determine supply chain success/

Cash .low and Trade Terms0 Gver P of merchandise trade is funded by finance instruments

0 Approimately JK, small and mid(si?ed suppliers have folded.

Security and Re#ulatory Compliance0 5ore than ;J new transportation security regulations in past J years0 $early "P of international shipments already have compliance errors

.luctuatin# .rei#ht Costs and Capacity

5P increase in sales.

!etail Business )mprovement Through End(to(End #upply 5anagement!educed #tock(Guts ;P(-P improvement2ower )nventory 2evels "P(9P improvement )ncreased #ales =P(;Pimprovement "> 5anufacturing Business )mprovement Through End(to(End#upply 5gmt 2ower )nventory 2evels "P(9P improvement aster!eplenishment Cycles ";P(>P improvementHigher #ales ;P("P improvementBetter Customer #ervice =P("P improvement

In!ormation technolo#y in lo#istics

industry

)n a report entitled, FTechnology #urvey for the )ndian 2ogistics )ndustry F ;-Fconducted by ale Consultants 2td in partnership with eedback Business Consulting#ervices vt. 2td, reveals that new investments of )$! ;-=.;= billion 3'#M=.K billion:are epected at airports in the net four years to boost their )T re*uirements, according toaleFs head of logistics,#umeet $adkar.

FThis is one of the segments where )T utilisation is maimum compared to othersegments in the logistics space,Fhe notes.

A !ra#mented industryThe )ndian logistics industry, comprising many disorganised enterprises, transporters,epress cargo movers, courier companies, freight forwarders, container companies andshipping agents, is highly fragmented. irms are facing competitive pressures to focus on

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core operations and to lower costs which is leading to a growing demand for outsourcedlogistics services.

The )ndian logistics industryFs si?e is estimated at )$!;.== trillion for Y ;-, and itssi?e is epected to grow to )$!9." trillion by ;">. Although road freight constitutes J

per cent of the overall industry, the sector is entirely vested in the hands of small privateplayers. The top(end of the market is controlled by a handful of multinationals and largedomestic players.

$adkar says )ndia spends around "> per cent of its 84 on logistics, higher than in the'# 3" per cent:, Europe 3"" per cent: and 6apan 3" per cent:, and this translates toaround )$!".= trillion in etra operating costs for the economy and therefore a loss incapitalformation.

A #rowin# air sectorAccording to Cygnus !esearch, the air transport sector contributes over .; percentagepoints to the countryFs 84 at constant "(; prices.

The Technology #urvey shows that the )ndian logistics industryFs )T ependiture willmore than double to about )$!" billion from the eisting )$!9 billion within the net =years ( a compound annual growth rate 3CA8!: of about ;F;; per cent.

According to the @orld Air Cargo orecast ;J(;K, the market from )ndia and itsneighbouring countries constituted about >. per cent of the worldFs air cargo traffic intonnage and 9.; per cent in tonne(kilometres in ;=(J.

)ndia is now among the top > global freight markets, both in terms of total andinternational freight operations. According to industry forecasts, the airlineFs cargobusiness segment will more than triple by ;;=. Gverall, the growth rate of the aviationsector in the net " years is epected to be not less than ;= per cent.

According to the lanning Commission, )ndiaFs air cargo movements would grow at overa CA8! of "".= per cent from ;K(- to ;""(";. Air cargo handling warehouses willneed an estimated "=, s*m of space in thenet =F" year

'r#ent need to invest$adkar says )ndia risks missing out on " to ; per cent 84 growth unless significantstrides are made to bridge the )T gap and improve supply chain efficiencies by effectivelyusing technology.

FAirfreight is often the neglected cousin of an airline, as well as an airportFs passengerbusiness. Air cargo complees in )ndia are congested not only because of lack of capacitybut also due to lack efficiency and planning,F he said.

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FTechnology can help )ndian airports overcome some of the space related constraints andutilise the eisting resources in a better way. or eample, the airports can makeprovisions for the agent to pay all his airport charges, re*uest for carting orders, receiveadvice of arrival and delivery order, all from his office rather than *ueuing up at theairport counters,F he says.

#imilarly, an advance notification from the agent for bringing in cargo can help theairport operator plan his resources accordingly. This will stop the airport terminal gatesfrom being choked with trucks which have to wait endlessly to load7unload cargo.

$adkar says barcode and !)4 usage can help track cargo through its life cycle. Thisalso helps faster location of shipments at the cargo warehouse.

He points to the epress delivery industry F which is made up of 8AT), #afepress, T$T3#peedage:, TC), Blue 4art and #afe Epress F as the leaders in technology usage. Theseplayers will continue to remain the highesttechnology buyers constituting to >> per cent

of the technology ependiture by;"> from the present ; per cent.

The key growth driver in this sector is the opening of banking, insurance, retail, aviationand telecom sectors and their penetration in smaller cities due to an increase in global anddomestic trade.

$adkar says )ndia is emerging as a global outsourcing hub for )T, )Te#, pharma, tetilesetc., and is set to become one of the largest trading partners in Asia.

!egarding )ndiaFs courier sector, he says there was an increased usage of epress andcourier services by all key segments in the industry. The key players include Blue 4art,

irst light, A2, 4T4C, Gvernite and rofessional Couriers.

Commenting on the freight forwarding industry made up of A2, Alpha Cargo Epress,Gm 2ogistics, Total 2ogistic, @orldwide and All Cargo, $adkar says technologyependiture in freight forwarding is epected to grow by "J per cent.

This industry, which presently constitutes "9 per cent of the )T demand, is epected torise to about )$!".K billion, comprising "K per cent of overall )T spend by Y ;">. Th ecurrent )T market si?e is about )$!"" billion 3'#M;.> billion: and is epected to reach)$!;"" billion 3'#M9.9 billion: by Y ;">.

$adkar says there are an estimated ; to ;," freight forwarders in the country,including about J involved in airfreight. This includes key players like, Total 2ogistics,8AT), Ecel, Ba 8lobal, 8eologistics, 4ynamic 2ogistics and TD# 2ogistics.

Sumeet Nadkar

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Report IT Critical

To India The )T spends in the )ndian logistics industrythrough reightorwarding, Airports, @arehousing, Epress O Courier #ervices and!)4 3!adio re*uency )dentification:1will grow in the net fiveyears to approimately two(and(a(half times the '#4M-> millionnow.

This was the result of a survey, UTechnology #urvey for the )ndian2ogistics )ndustry ( ;-U conducted by ale Consultants 2td.

'ir Cargo News FlyingTyperscaught up with #umeet $adkar,Head(2ogistics #pecial Business 'nit of ale Consultants to find outthe reasons of growth in a market that has been afflicted by thedownturn worldwide.

#umeet pointed out that with the current uncertainties in theworld economy Wit is tough to make predictions. %However, one fact remains that goods will have to move, asopposed to travel. %Travel can be replaced by video conferencing orteleconferencing, air cargo has to roll.

%#o our view is that five years from now, globally the logisticsindustry will continue to grow at a steady rate of J(K percent.W%)n )ndia, he said, %the industry could continue to grow at about

";("> percent to satiate the demand of growing young populationacross the country. %Air Cargo will also continue to grow at about "" percent.& $adkar also pointed out that Wthe tough economic climate willnecessitate the focus on efficiency and productivity more than ever.& Citing )ndiaUs eample, he said, Wthe lack of automation in the)ndian logistics industry has given rise to the inefficiencies,

duplication of processes. %@e believe with the global slowdown and tough competition,the logistics companies will be keen to embrace technology toincrease operational efficiencies as well as create competitivedifferentiators.& As far as domestic air cargo is concerned, the sector does not lookto be doing very well.

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4id he feel that the countryUs air cargo business will make stridesbig enough for )T to flourishF

$adkar was confident that air cargo would do well. He said/ WThis is a classical chicken and egg situation andcompounded by the fact that the air cargo industry is in the throes ofchange. %To attract more cargo to the air mode, costs will have to be bothcontrolled and competitive. %)n order to ensure that the air cargo handling processes must besuper(efficient, there has to be complete understanding of the marketand its profitability and )T can accelerate fact(based solutions allaround. %@ith the moderni?ation of the airports, and creation ofintermodal hubs like the one in $agpur, the untapped domestic

demand for safe and reliable transport is wide open to air cargo. %@hilst other modes such as roads and rail continue to languish.air cargo here needs to embrace various solutions such as )T in asignificant manner to rationali?e processes and attract morecustomers. W)ndia,W he said, Wspends around "> percent of its 84 onlogistics, higher than '.#. 3" percent:, Europe 3"" percent: and6apan 3" percent:. This translates to around M>" bn in operating costs for theeconomy and therefore loss in capital formation.

%)ndia risks missing out on " to ; percent 84 unless significantstrides are made to bridge this gap and improve supply chainefficiencies by effectively using technology.W Among the ale #urvey key findings/ 0 Technology spends in freight forwarding in )ndia are epectedto grow by "J percent. 0 Technology spends for warehousing are epected to Lump fromthe current M" mn to about M;= mn by ;">. @arehousing, ale says, is fast emerging as a strategic function,

due to the rapid growth in retail and epansion by domestic andinternational players. Elsewhere ale reports, the epress and courier business in )ndiawill continue to remain the largest single group adding technology inthe future constituting up to >> percent of technology growth here by;">, up from the present ; percent.

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Whats the status o! the lo#istics industry in IndiaB and whats your !uture #oal

2ogistics plays a vital role in bridging producers and customers1both in the domesticand international sectors. or economic growth the development of infrastructure 3ports,roads, rail, inland waterways, coastal shipping: ought to be improved. Also,communication and multimodal transportation, coupled with sophisticated handling,

warehousing and )T systems, hold the key. There is need for implementation of nationaland state plans in this regard with an appropriate fiscal policy befitting public(privatepartnership. olicies should facilitate implementation of proLects with minimumpaperwork and *uicker resolution of proposals to ensure their *uick eecution.The logistics industry in )ndia is highly fragmented with about "= established > arty2ogistics 32: players. Transparency in commercial matters and business ethics shouldbe ensured by streamlining documentary re*uirements which govern the entire gamut ofsupply chain management.2esser state control and facile ta, fiscal and legal system would be of much assistance.These measures would not only help the industry, but also result in some manufacturersentrusting all their logistics services1 right from the point of dispatch to customer

delivery. Thus giving birth to 9th arty 2ogistics, involving a separate specialisedagency, as is the case in developed nations. Both the manufacturers and customers gain insuch a situation which ensures competitive pricing and Uon timeU delivery.T5)22 visualises itself to become a 92 player in the near future and set up standardsand benchmarks in the industry.T"I is investin# Rs +95 crore !or acDuirin# =erths and warehouses- At whichports would the new =erths =e constructed

The investments will be for ac*uisition of panama and handyma vessles, up(gradationof handling facilities and augmentation of warehousing facilities over the net few years.Haldia and aradip port(based services will be strengthened, apart from epansion oflogistics activities in 5umbai and development of minor ports on the west coast.2ocation of minor ports for development is under feasibility study.Whats your plan to develop a C.S at Haldia

@e have been operating at Haldia 4ocks #ystem for over two decades, and the port hasalready allotted us the land. )nitially, the area of land which has been developed and usedas a stack yard may be converted into a C#.How will you !und your planned pro/ects

!egarding funds, we have not yet formalised the matter. )t depends on the si?e of theproLect which we wish to develop.)Q 5artrade is well entrenched in terminal operations in Europe and '#. They are vesselowners and charterers who are well(versed in logistics services. Therefore, epertisealready eists within the organisation. )f re*uired, we will not have reservation for astrategic alliance with a reliable and an established organisation.What tar#et have you set !or revenue in the ne:t two years4uring the first three years of operation, since the formation of the organi?ation, ourrevenue has increased threefold and BT >.= times. @e epect this trend to continue aswe have set for ourselves a target of !s ", crore turnover by ;-(, and beingconsistently EDA(plus.

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Customs rocedures and unctioning of

Container reight #tations and orts". )n accordance with international practice, all cargo goods imported into the country oreported out of the country by sea, air, land or rail routes are governed by theprovisionsof the Customs Act, "J; and other laws of thecountry related to entry7 eit from the country.Customs ensures that the import and eportofgoods are in compliance with the Customs Act and other laws in force. Accordingly,customs procedures are intended to provide definite, predictable methods by which thegoods can enter the country and get cleared on payment of applicable import duties,fulfilling the

re*uirements of the law of the land.

;. To regulate and to eercise effective control over import and eport activities, goodsare allowed for import7eport at notified places under section K of the Customs Act, "J;.Custodians are appointed under section 9= of the Customs Act, "J; for safe storage ofgoods till they are cleared for home consumption or warehoused. Clearance of goodsinvolves classification, assessment, eamination and payment of Customs duty onimported cargo on the basis of Bill of Entry presented by the importer or his authori?edagent. The Central Board of Ecise and Customs 3CBEC: has prescribed the proceduresthrough notifications, rules, regulations and circulars which are implemented by fieldformations. These are updated and modified according to the need, demands of trade andto improve the efficiency of the system.

The role of Container reight #tations3C#:/(>.". C# is a place where containers are stuffed, de(stuffed and aggregation7 segregationof eport7import cargo takes place. @ith the growing volume of international trade, theneed for epeditious clearance of goods at the port within the minimum possible time hasbeen gaining importance. This is more so when the ports are facing congestion at theirpremises. urther, for optimal utili?ation of eisting infrastructure, space, e*uipment,goods that are landed at ports need to be evacuated straight away without any loss oftime. Accordingly the concept of Container reight #tations 3C#: has grown inimportance along with the development and growth of ports.

>.;. A C# is an etended arm of ort7 )C47Aircargo Comple, where import7 eportgoods are kept till completion of their eaminationand clearance. The imported goods can be immediately shifted from the port to C#which also helps in the reduction of port congestion. All the activities related to clearanceof goods for home consumption, warehousing, temporary admissions, re(eport,temporary storage for onward transit and outright eport and transshipments take place

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from such stations. Therefore, clearance of goods from C# is an important point ofconsideration for trade in respect of eport7 import Cargo as it is the final Customscontact point.Customs

resent rocedure of clearance of goodsat orts/(9." The #hipping lines7steamer Agents7carriers7 Consol Gperators file the)mport 8eneral 5anifest 3)85: in accordance with #ection > of the Customs Act, "J;.After filing the )85 and on arrival of thegoods, Custom House Agent7)mporter files Bill of Entry 3cargo declaration: in terms of#ection 9J of Customs Act, "J;. The first stage forprocessing a Bill of Entry is noting7registration of Bill of Entry 3B7E:. The B7E is thenforwarded to the concerned Appraising group inthe Custom House dealing with the commodity sought to be cleared. The assessingofficer in the appraising group assesses the duty liability,

taking due note of any eemption or benefits claimed by the importer. $ecessary checksregarding any restriction or prohibition on thegoods imported are followed. )n case of doubt, the officer may give an eamination orderin advance of finali?ation of assessment.Gtherwise, the B7E is finally assessed and the importer deposits the duty calculated withthe nominated banks.

9.; After assessment the B7E is passed on to the #hed Appraiser7#uperintendent foreamination of goods along with the B7E.The #hed )nspector7eaminers eamine the goods and enter their report on the B7E withsignature of the importer7CHA in token of eamination in his presence. After completingthe eamination of the goods, the shed Appraiser7#uperintendent would give order for%Gut of Charge&. However, in rare cases, if some discrepancy is found between thedeclaration and the result of eamination of cargo, the Assistant Commissioner74eputyCommissioner 3AC74C: revises the assessment on the basis of eamination report. Afterissuance of Gut of Charge order on the B7E, the importer presents the same to theCustodian who in turn issues the 8ate ass after verification of correctness of Bill of2ading and number of packages. The importer7CHA presents importer+s copy of the B7Eand the Custodian 8ate ass to the Customs Gfficer at the gate while taking the goods outof the Customs area.

=. As regards eports, #hipping Bills are re*uired to be filed along with other documentssuch as invoice, Application for !emoval 3A!E:, packing list etc. The Assessing Gfficerin the eport department checks the value of the goods, classification, rate of duty andothers with regards to different provisions and the oreign Trade olicy and relateddocuments. After the #hipping Bill is passed by eport department, the eporter presentsthe goods to the #hed Appraiser 3Eport: for eamination. The eamination is carried outunder supervision of #hed Appraiser7 #uperintendent 3Eport: and after eamination,officer gives a %2et Eport& order, after which eporter may load the goods intovessel7aircraft under

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supervision of Customs Gfficer.

Present procedure o! Clearance o! #oods

at C#/(J. The 5ain function of C# is receipt, dispatch and clearance of Containeri?ed Cargo,

up(to(date inventory control and tracking system to locate containers7cargo.

K. The goods received at ports are brought to C# and stacked in C# after verification ofthe seal by Customs Gfficers. )n respect of import consignment, the #teamerAgents7liners7 )mporters desiring to take the consignment to C#, file )mport 8eneral5anifests in the port. After obtaining the permission from the AC74C, the Containermoves to C# under Customs escort or under bond and bank guarantee. TheC# allow de(stuffing of the goods. The CHA 7 importer files the Bill of Entry atCustoms House and then Customs formalities of assessment, eamination and payment ofduty are completed. Thereafter, Customs gives

%Gut of Charge& and the Custodian releases the goods from C# by issuing a 8ate(ass.-. )n respect of eports, the goods are brought directly to C# under a #hipping Bill. Theeport cargo in 2ess than Container 2oad 32C2:7 ull container 2oad 3C2: is receivedby the Custodian of C# for safe custody.After stuffing of the goods, Container7 Customs Bonded Truck 3CBT: is sealed by theCustom Gfficer and the same is removed from C# for eport through the desired ort.

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CONCLUSION

If infrastructure is improved across the country, it will bringdown the logistics costs and enhance the services required

by everyone seeking to invest in India. This will encouragemore investments which will boost overall performance andbring out Indias real potential. Growth in express industry ishighly correlated to G! this sector has grown "# to $%percent annually for past three years in line but now Indianeconomy is bearing the brunt of recession adopting rightstrategies can pull it through and bring back the hay dayswith Indian and world economy stabili&ing in future logistics'cenario in India is only going to improve and grow at rapid

rate.

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16630780 Logistics Industry Project

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