Logistics in India: A Transportation Perspective

Logistics: A TransportationPerspective

Abhijit Parekh (12P090) Preetish Rao (12P094)Shubham Tomar (12P107) Gautam Hariharan (12P137)Karan Jaidka (12P141) Lucky Sharma (12P145)Nikhil Rana (12P153) Rajesh Kumar Choudhary(12P158)

Operations Strategy (OS) – Section B – Group 10PGPM 2012-2014, Management Development Institute (MDI), Gurgaon

Transportation inLogistics

Introduction to Logistics It is the management of the flow of goods

between the point of origin and the point of consumption in order to meet some requirement

It originated out of requirements of military services and was developed to procure, maintain and transport material, personnel and facilities

It is the process of planning, implementing, and controlling the effective and efficient flow of goods and services from the point of origin to the point of consumption

The logistics cost of company is estimated to be around 2% of its sales

Types of logistics:- Inbound Logistics: It concentrates on

purchasing and arranging the inbound movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores

Outbound Logistics: It is related to the storage and movement of the final product and the related information flows from the end of the production line to the end user

Business Logistics

It is defined as “having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer”

The main functions of a qualified logistician include inventory management, purchasing, transportation, warehousing, consultation, and the organizing and planning of these activities

The nodes of a distribution network include:- Factories where products are manufactured or

assembled A depot or deposit is a standard type of warehouse

thought for storing merchandise (high level of inventory).

Distribution centers are thought for order processing and order fulfilment (lower level of inventory) and also for receiving returning items from clients.

Transit points are built for cross docking activities, which consist in reassembling cargo units based on deliveries scheduled (only moving merchandise).

Traditional retail stores of the Mom and Pop variety, modern supermarkets, hypermarkets, discount stores or also voluntary chains, consumer cooperative, groups of consumer with collective buying power. Note that subsidiaries will be mostly owned by another company and franchisers, although using other company brands, actually own the point of sale

Transportation in Logistics

Cargo, i.e. merchandise being transported, can be moved through a variety of transportation means and is organized in different shipment categories

Unit loads are usually assembled into higher standardized units such as: ISO containers, swap bodies or semi-trailers

For very long distances, product transportation will likely benefit from using different transportation means: multimodal transport, intermodal transport (no handling) and combined transport (minimal road transport)

Operators involved in transportation include: all train, road vehicles, boats, airplanes companies, couriers, freight forwarders and multi-modal transport operators

Merchandise being transported internationally is usually subject to the Incoterms standards issued by the International Chamber of Commerce

Growth Drivers and Challenges

Transport in India: Game Changers (1 of 4)

Emergence of new cargo centres: Opportunities in the air cargo sector now extend to Tier-II cities as well. Tier-II hubs have witnessed a growth of 14.5% in air cargo volumes between 2006 and 2011. Rising local demand, improved international connectivity and resulting consolidation activity, and expanding cargo-handling infrastructure are the key drivers of increased freight handling at Tier-II city airports

Air: The quickest possible way!

Improving air cargo infrastructure at airports and more investments: Though India currently lags behind its global peers, increased spending in airport infrastructure through various airport projects is expected to improve air cargo infrastructure across the country. Investment in airport infrastructure has grown substantially over the last 3 Five-Year plans

Transport in India: Game Changers (2 of 4)

Growth of Non-Major Ports: With a CAGR growth of 13% from 2007-08 to 2011-12 (compared to 2% for Major Ports), Non-Major ports have captured nearly 40% of the volume of trade carried out by sea. Capacity overruns at major ports, aided by a substantial increase in the cargo traffic of fertilizers, building material and coal, have resulted in significant investments in the development of non-major ports. Mundra, Pipavav and Hazira ports are the frontrunners

Ports: The Gateways to India

Emergence of East-Coast Ports: With China’s emergence as India’s leading trade partner, India’s ‘Look East’ policy and overcapacity at west coast ports, east coast ports present significant development opportunities. Non-major ports are expected to contribute 57 % of total investments in east-coast ports

Transport in India: Game Changers (3 of 4)

Dedicated Freight Corridors: It is expected to mark a paradigm shift in the transportation scenario, resulting from the segregation of freight on trunk routes, improving service delivery and generating additional freight-carrying capacity. There will be a reduction in unit cost of transportation, guaranteed transit time and improved service quality for a very focussed overall approach

Rail: India’s Lifeline

Development of National Highways: To encourage private players, the Government has announced several incentives such as declaring the road sector as an industry, providing 100% tax exemptions in any consecutive 10 years out of 20 years, duty free imports of certain identified construction plants and equipment, FDI of up to 100%, and increased concession periods

Road: For Last-Mile Connectivity

Transport in India: Game Changers (4 of 4)

The desired ‘to be’ state would be an overlay of transportation networks, allowing for the efficient transportation of each commodity type as well as a natural handover point — where networks intersect and where large quantities are broken down into smaller volumes for last-mile transportation into urban centers

Transport in India: All’s Not Well!

Important rail networks are over-saturated Rail tariffs are quite high: Indian Railways

subsidizes passenger tariff at the expense of freight tariff, resulting in Indian rail freight rates being amongst the highest in the world

Long and uncertain transit times Less flexibility in carrying different types of

goods: This is due to the unavailability of specialized wagons for each type of product

Rail

Inadequate Road Network Coverage: National Highways constitute just 2% of the Indian road network, but carry 40% of the total traffic, resulting in severe congestion

Poor road quality High level of fragmentation of the trucking

industry: This leads to fierce competition, resulting in truck owners trying to overload to recover their investments

Multiple check-points result in unnecessary delays

Road

High Turnaround times: This is because of the congestion on berths and slow evacuation of cargo which are unloaded at the berths

Inadequate depth at the ports: Depth at many Indian ports is inadequate, resulting in many large vessels choosing not to dock at Indian ports

Coastal shipping is yet to take off: Inadequate port and land infrastructure and a non-favourable tax regime has inhibited the growth of this sector

Higher waiting times, high fuel costs and tariffs negatively impact the air freight sector

Ports and Air Freight

Key Company Profiles

Year of Establishment: 1988 Year of Operation: 1989 Holding Pattern: MOR – 63%,

Public FIIs 37% Listed Company: NSE and BSE Status: Schedule A Mini Ratna Network Strength: 61 ICDs/CFS• EXIM Pure: 17• Domestic Pure: 12• Combined: 32

Logistics Support to EXIM (Export/Import) and domestic traffic

Coordinate containerized railway movements across country

Provide warehousing facilities Design, construct and operate

ICDs Operates port terminals

collaborating with International Port Operators

Significant player in multi modal transport services

CONCOR Functions

Rail Freight: Container Corporation of India

Overview

Cargo Carrier

Terminal Operator

Warehouse Operator

Core Business

Regional Distribution

North India: 19 South India: 14 West India: 14 East India: 09 Central India: 05 Total: 61

CONCOR Services

Train Handling Container Stacking Customs clearance of

Import/Export cargos Warehousing of

Cargo (transit, multi-stack, air)

Value Added Services Door to Door

Solutions

Movable Asset Details

No of rakes – 240 Wagons – 10,777 Containers – 15,579 Gantry Cranes – 14 Reach Stackers - 60

Important Projects

ICD, Dadri (Noida) ICD,Tughlakabad(Delhi) ICD, Whitefield (B’lore)

Rail Freight: Container Corporation of IndiaBusiness Trends Turnover

Container Traffic Trends (MT of container traffic)

2009-10 2010-11

Carried by IR 34.36 36.86

Carried by CONCOR 26.60 27.75

%ge share of IR Traffic 77.4% 75.28%

Carried by other CTOs 7.76 9.11

%ge share of IR Traffic 22.59% 24.72%

IT Systems

VSAT based network extended over 64 locations Web Enabled Customer Feedback Facility for e-filing of documents Terminal Management Systems for• EXIM (ETMS, CCLS)• Domestic (DTMS)• ERP for Finance (Oracle Financials)• Data Warehouse for commercial applications

IT Applications

Container Repair System, Track &Trace System Online Vigilance Clearance System

Rail Freight: Container Corporation of India

Strategic Vision

Continue to be leading player in India for rail based inter-modal services

Be the leading “third party logistics” service provider of India

Integrate rail, road, sea and air cargo logistics and operate multimodal cargo hubs in India

Extend operations in foreign countries and emerge in league of international operators

Future Roadmap

Certifications and Awards

ISO 9000 Quality System Certification MOU Excellence Awards from FY’05 to

FY’09 Dun and Bradstreet Corporate Award –

2008, 2009, 2010 Accredited with “AAA” rating by CARE –

Best Credit Quality, Highest Safety for Timely Debt Service Obligation

Ranking

Turnover Net Profit

Overall 161 85

Transport and Logistics Sector

3 1

(source: Economic Times, 2011)

3. Network

1. Market Position

Started as ‘One Man, One Office, One Truck’ company in 1958

Leading integrated supply chain and logistics solution provider

Listed on both NSE and BSE

Road Freight: Transport Corporation of India

2. Operations

Fleet of 7000 trucks/ trailers/ reefer vehicles

Fleet of 4 cargo ships 9.75 mn sq ft of warehousing

space Skilled workforce of 6500

with 20,000 outsourced positions

Own offices in 6 countries

5. IT

In-house ERP: EDI Capable Web based Track and Trace

through GPS

Pan India Network 1400 company owned

branches nationwide, covering 99.45% of GDP

Covers 17,000 locations within India and abroad

Transporting 2.5% by value of India’s GDP

4. Divisions

TCI Freight TCI XPS TCI Suply Chain Solutions TCI Seaways TCI Global

4.1 TCI Freight

Largest Division 2400 trucks and trailers

4.2 TCI XPS

Express door to door service for time sensitive and high value items

4.3 TCI SCS

Logistics solutions provider Customized fleet of 1100 own

trucks including 38 refrigerated trucks

Auto sector -70% revenue JV with Mitsui, Japan

4.4 TCI Seaways

Coastal shipping services Net Capacity: 15634 DWT

4.5 TCI Global

Establish subsidiaries globally Indonesia, Brazil and Nigeria

Year of commencement: 1983 Territories Serviced: 220+ Domestic Locations Serviced:

32,000+ Air Support: 7 Air Network Stations: 7 2011 Annual Shipments (mn):

100 2011 Annual Tonnage (‘000):

423 Workforce: 8,000+ Retail Outlets: 486

Proprietary Aviation Network: First scheduled cargo airline with dedicated fleet of freighters and infrastructure support

Market Leading Transit Times: Fastest deliveries across B2B, B2C, C2B and C2C channels

Innovator: 28+ years and numerous industry firsts

Airport-to-Airport

Interline Services

Charter Services

Co-Load

India Post

Air Freight Services Delivering Leadership

Advanced Technology

Weight Dimension Labeling (WDL)

Hand Held Device (OTM) Ground Technical Support (GPS) Smart Truck RFID

Air Freight: BlueDart Aviation Ltd.

Established on 2nd October, 1961 Fleet includes Bulk carriers, Crude oil tankers,

Product tankers, Container vessels, Passenger-cum-Cargo vessels, Chemical carriers and Offshore Supply Vessels

Operates 1/3rd of the Indian tonnage Services Provided: Break-bulk services,

international container services, liquid/dry bulk services, offshore & passenger services

Total Ships: 74

Major Clients

Indian Oil Corporation Ltd. Bharat Heavy Electricals Ltd. Steel Authority of India Ltd. Oil & Natural Gas Corporation Ltd. Reliance Industries Ltd. Bharat Petroleum Corporation Limited Hindustan Petroleum Corporation Ltd. British Petroleum British Gas

Dry Bulk

• Growing at 6.4%

Crude Oil

• Growing at 3.8%

Products

• Growing at 2.3%

3 Segments of SCI: Growth Rate

Sea: Shipping Corporation of India

Increase investment in railways by reallocating from roads

Creating enablers to maximize efficiency, logistics parks, standardized containers etc.

Improve rail and road maintenance and existing equipment

If current trends prevail, inefficiencies associated with poor logistics infrastructure will increase from $45 billion today to $140 billion in 2020. However, a well-planned infrastructure program could help India cut this waste by half and transportation fuel requirements by 15 to 20 percent.

Projections

The Way Forward

Logistics: A TransportationPerspective

Thank You!