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Decision (June 2016) 43(2):145165

DOI 10.1007/s40622-015-0122-0

RESEARCH PAPER

Outbound logistics management practices in the automotive


industry: an emerging economy perspective
Saurabh Chandra . Debabrata Ghosh .
Samir K. Srivastava

Published online: 18 February 2016


 Indian Institute of Management Calcutta 2016

Abstract Outbound logistics management practices, Introduction


specific to India have drawn limited attention in the
past. Recently though, this sector has garnered The automotive industry has been one of the primary
renewed attention of researchers and practitioners. drivers of global macroeconomic growth, employment
Through an exploratory study, we attempt to under- and technological advancement in many countries
stand and illustrate the outbound logistics management across geographies. Academic research on automotive
practices of automotive industry in India. Outbound industry has spanned over several decades and it has
logistics is divided into a set of interlinked functions continued to remain the focus of researchers and
based on a logistics framework and described accord- practitioners alike (Martnez and Manuela 2005; Iyer
ingly. Based on findings from the exploratory study et al. 2009; Choi and Janet 1996; Shin et al. 2000;
and extant literature in this field, a framework for the Gonzalez-Benito et al. 2013). Studies related to
development of integrated logistics management prac- automotive industry have focused on several aspects
tices in the automotive industry in India is derived and including buyersupplier practices, product design,
several research directions are proposed. manufacturing processes, warehousing and transporta-
tion and inventory management, to name a few. While
Keywords Outbound logistics  Automotive most of this body of literature has focused on the North
industry  Logistics management  Logistics Services America and Europe, studies on automotive industries
Provider, India in the context of emerging economies have assumed
significance in the recent past (Emerging-Market
S. Chandra Companies Shaking Up Global Competition in Auto-
Indian Institute of Management Indore, Prabandh Shikhar,
motive 2015; Gol and Catay 2007; Karakadlar and
Rau-Pithampur Road, Indore 453556, Madhya Pradesh,
India Bulent 2012; Scavarda et al. 2015; Zhang et al. 2007).
e-mail: saurabh@iimidr.ac.in This study attempts to understand the management
practices unique to outbound logistics of finished
D. Ghosh (&)
vehicles in India. We undertake an exploratory
Indian Institute of Management Calcutta, Diamond
Harbour Road, Joka, Calcutta 700104, West Bengal, India approach to derive a broad outline for strategic
e-mail: debabrata.ghosh@iimcal.ac.in development of this sector.
India has generated renewed interest in its automo-
S. K. Srivastava
tive sector largely owing to the focused governmental
Indian Institute of Management Lucknow, Prabandh
Nagar, IIM Road, Lucknow 226 013, India approach to support the automotive industry (Luthra
e-mail: samir@iiml.ac.in et al. 2014; Sunil et al. 2014). As per estimates, Indias

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share stood at 3.2 % of the worlds passenger car handling equipment, port facilities, warehouses, dis-
production (Vasiliauskas et al. 2010). In addition, tribution centers and so on. In contrast, though
India has gradually become a hub for study of several inbound logistics of certain components can have a
supply chain management practices, thanks largely to high cycle time, but these variations are easier to
its growth as a source of products and services. For decouple from the variations in direct customer orders
example, Sahay et al. (2006), analyze the state of through component inventory. Component inventory
supply chain management practices followed in Indian is usually cheaper and easier to hold than finished
organizations including the automotive sector. In goods inventory.
another study Sahay and Mohan (2006), study the Further, the distribution of finished vehicles
Third Party Logistics (3PL) practices employed in requires extreme damage prevention measures and
India encompassing the automotive sector. Jharkharia enhanced cargo visibility across the entire chain. The
and Shankar (2006), study sectoral dissimilarities in cost of a single unit of cargo is quite high and so are the
Indian manufacturing industry. Their results are based maintenance and holding costs. This cargo cannot be
on surveys of automotive companies among others. consolidated with other types of cargo and most of the
These studies reveal increasing focus of Indian times it is difficult to consolidate even similar goods
companies on supply chain management practices from different manufacturers. The manufacturers
and efforts to align supply chain strategies with their compete fiercely amongst each other in terms of
business strategies. While most of these studies have quality, cost, after-sales services and other aspects.
focused on supply chain practices, our approach is a When it comes to outbound logistics, they all face
further deep dive into an important aspect of automo- problems which depend mostly on their scale and type
tive supply chains called outbound logistics. of operations. These aspects increase the challenges of
By definition, the downstream chain responsible managing outbound logistics in India manifolds and
for vehicle distribution from the factory to the dealer motivate our study.
is known as outbound logistics (Miemczyk and Given the rising demand of new vehicles and
Holweg 2004). Inbound logistics in contrast, logistics resource availability, executives representing
comprises of the logistics operations between com- the automobile manufacturers, henceforth termed as
ponent suppliers and vehicle assembly plants (Hol- original equipment manufacturers (OEMs) have time
weg 2003). The inbound and outbound logistics of and again emphasized the development of a multi-
finished vehicles are managed separately worldwide modal logistics industry in India and for regional
as they offer distinct challenges. The outbound OEMs to partner for collaborative planning and
logistics accounts for a significant portion of the knowledge sharing (2011a, b). The rise of independent
total order-to-delivery lead-time in the automotive Logistics Services Providers (LSPs) in the form of 3PL
supply chain (Holweg 2003). In India, as per the companies in India is an indication that many of the
findings of this study, the cycle time for the upstream OEMs are keen on developing their core capabilities
part of the automotive supply chain from Tier-1 and outsource a major part of outbound logistics
suppliers to the automobile manufacturers factories operations (Sahay and Mohan 2006). To illustrate, the
roughly varies from 15 to 45 days; the manufacturing Indian logistics firm Transport Corporation of India
cycle time approximates to roughly 30 hours; how- (TCI) developed its Supply Chain Solutions division
ever the outbound distribution from factory to the as a medium asset based 3PL provider with supply
dealers or the final customers may vary significantly chain consulting, warehousing/distribution center
from 3 days to 3 months. In India, thus, outbound management and outbound logistics as its core
logistics forms a major component of total automo- services. The auto sector contributed to almost 70 %
tive cycle time and directly impacts the responsive- of the divisions revenue (Narayanan and Chaturvedi
ness of the automobile supply chain (Miemczyk and 2013). One of the biggest challenges faced by the
Holweg 2004). This subsequently drives the motiva- automakers in India is reducing lead-time to cus-
tion for this study. tomers. As per a report in 2011, the waiting time for
Outbound logistics also requires separate infras- certain top selling models in India was as long as
tructure in terms of transportation equipment, like 8 months, despite one of the worst slowdown in years
specially designed ships and trucks, specialized (Doval 2011). It is well established that shorter lead-

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times lead to increased responsiveness to market This study follows a two-step process to derive
changes, reduction in pipeline inventory and improved workable insights. First a comprehensive review of
customer satisfaction (Eskigun et al. 2005). Immense extant literature focusing on the outbound logistics
potential remains for outbound logistics lead-time of finished vehicles is carried out. Those studies
improvement in India as distribution related costs which do not explicitly discuss the outbound part
comprise a significant part of the final product cost of automotive logistics are not considered in the
(Abernathy et al. 2000). It has been estimated that literature review. The synthesis and interpretation
logistics costs form a high 14 % of Indian GDP which of literature review on outbound automotive logis-
is higher than that of most developed economies tics guides the development of a broad conceptual
(Sahay and Mohan 2006). In addition, service relia- framework. This type of prior development of a
bility of logistics in India is low leading to high conceptual framework guides further data collec-
indirect variable costs (Raghuram and Shah 2004). tion and analysis (Eisenhardt 1989). Our investi-
In contrast, manufacturing and inbound logistics of gation revealed scant academic literature in this
automobiles have witnessed major productivity area focusing on the emerging markets context,
improvements owing to the adoption of world-class especially India. Given the broad nature of the
practices like JIT and adoption of advanced informa- conceptual framework we argue to position our
tion and collaboration systems between the OEMs and research approach as exploratory in nature with the
component suppliers (Holweg and Miemczyk 2002). aim to develop more precise hypothesis on the
Indian automotive industry has also successfully relations between different variables (Stuart et al.
adopted some of these practices in the upstream 2002; Yin 2013). This exploratory research uses in-
supply chain. As per the findings of a study by Saranga depth semi-structured interviews with managers in
et al. (2009) in the Indian automotive sector, tier-1 the outbound logistics division of automotive
suppliers have managed to reduce component inven- manufacturers in India, to develop a framework
tories significantly with the help of TQM and lean for the strategic development of automotive out-
efforts. Despite these advancements, automotive bound logistics practices in India. We believe the
OEMs still sell majority of their finished goods based findings of this study which are founded in the
on customer demand forecasts. A typical automotive experience and background of the logistics man-
dealer in India may carry up to 40 days of finished agers would benefit researchers and practitioners
goods inventory to meet customer demand. alike. The study also seeks to advance understand-
Thus, the unique challenges involved in outbound ing of logistics management practices in an
logistics as outlined above make it a fertile area for emerging economy context and contribute to the
exploration and research. This subsequently drives our burgeoning literature in this area.
motivation for this study. In contrast to the specific The paper is organized as follows. In the next
studies that have looked at supply chain management section, we discuss the outbound logistics framework
practices in India in general, in this study we propose which is followed by the section on various aspects of
to delve into the logistics management processes outbound logistics practices. Before the concluding
specific to outbound logistics of finished vehicles, as section, we discuss our key findings. Conclusions are
practiced in India. In particular we aim to answer the detailed in the last section.
following research questions:
RQ1 What are the key inhibitors in the current The outbound automotive logistics framework
outbound logistics performance in the Indian
automotive sector? Studies on outbound logistics have spanned over
RQ2 How do the vehicle distribution and stock several decades. However, an emerging economy
management practices vary in India vis-a-vis context relating logistics components has evolved
developed economy outbound logistics only in the recent years. We survey literature related to
practices? the key outbound logistics components. A summary of
RQ3 How to improve and develop outbound relevant works is presented in Table 1. Several studies
automotive logistics performance in India? in the area of outbound logistics have focussed on

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supply chain structures and discussed outbound func- body of research that despite being the early adopters
tions as a component of it, in what follows we discuss of management practices like advanced manufactur-
such works where outbound logistics have been ing planning and control systems, and information
included. Studies with focus on outbound logistics systems for planning and information exchange,
literature can broadly be classified into three broad automobile industry still primarily relies on the build
categories: logistics organization, logistics networks to stock (BTS) supply chain. As a result, high
and logistics functions. Within these, studies have inventory carrying cost, customer dissatisfaction, etc.
focused primarily on two key objectives namely, are commonly cited as problems with the current
minimization of cost and improving responsiveness to system. Holweg (2003) takes a holistic approach
the customers. including manufacturers, component suppliers and
logistics subsystems to identify the key factors
Logistics organization inhibiting responsive order fulfillment. The root cause
is identified as strategic misalignment of the internal
Academic research on the organizational aspects of order fulfillment process to external requirements.
outbound automotive logistics, from the early 21st Four key inhibitors are identified that act as imped-
century, has given considerable focus on the adoption iments to responsive order fulfillment and these are
of built-to-order (BTO) strategy in the automotive order processing and scheduling system, demand
supply chains and structure of organizations around uncertainty and throughput unreliability throughout
this strategy. However, it can be inferred from this all subsystems, inflexible and batch driven production

Table 1 Major contributions in outbound automotive logistics


Category Research papers Research problem

Logistics organization Holweg (2003) BTO strategy inhibitors/enablers


Holweg and Miemczyk (2003) BTO strategy inhibitors/enablers
Carbone and Martino (2003) Organizational role in supply chain
Hall (2004) Organizational role in supply chain
Hall and Olivierz (2005) SCM relationships/characteristics
Zhang and Chen (2006) BTO strategy need
Jharkharia and Ravi (2006) SCM relationships/characteristics
Saad and Patel (2006) SCM performance measurement
Zhang et al. (2007) SCM relationships/characteristics under BTO
Dias et al. (2008) SCM relationships/characteristics
De Leeuw et al. (2011) SCM relationships/characteristics
Bhattacharya et al. (2014) SCM inhibitors/enablers
Katiyar et al. (2015) SCM performance measurement
Logistics network Miller et al. (1996) Distribution network design
Agbegha et al. (1998) Combined carrier loading and route planning
Eskigun et al. (2005) Distribution network design
Jin et al. (2008) Combined production and distribution planning
Lin (2014) Distribution network design
Hu et al. (2015) Combined carrier loading and route planning
Logistics functions Holweg and Miemczyk (2002) Distribution process capability for BTO
Mattfeld and Kopfer (2003) Storage yard planning and scheduling
Fischer and Gehring (2005) Storage yard planning and scheduling
Helo et al. (2010) Information system design for BTO
Volling and Spengler (2011) Decision support system for BTO
Herrmann et al. (2015) RFID based information system implementation

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systems decoupled from manufacturers demand sig- findings suggest that OEMs in India hold key positions
nal and large number of product variants leading to in the supply chain and develop relationships with
vehicles technical complexity. In a similar context, their partners. The authors also suggest that OEMs can
Holweg and Miemczyk (2003) focus specifically on use their strategic position in the supply chain for more
the inbound, outbound and maritime logistics aspects information sharing and upgradation of IT systems for
of automotive supply chains. The authors study improved performance. Saad and Patel (2006),
various outbound specific logistics operations and through their study of supply chain performance
organizational structures to investigate the inhibitors (SCP) measures in the Indian automotive supply
of responsive order fulfillment. Among other findings, chain, reveal that the concept of supply chain perfor-
they highlight that lack of information integration mance is not fully embraced by the Indian automobile
between different players of outbound logistics as the sector. Among other impediments in the adoption of
primary reason for order fulfillment delays. The successful supply chain management (SCM) prac-
authors also present a strategic framework for the tices, it is found that performance improvement is
future development of automotive supply chains. essentially focused on the acquisition of technical and
Parry and Jens (2013) investigate whether restructur- tangible factors. It is not seen as a common task based
ing of automotive industry, post the global financial on shared learning and joint problem solving. Bhat-
crisis, to a BTO enterprise is a sustainable strategy. tacharya et al. (2014) discuss the current status of SCM
The authors suggest that the success of an automotive as practiced in the Indian automotive sector, specif-
enterprise lies in transformation of an automotive firm ically the complexities and challenges involved.
from a BTS enterprise to a BTO enterprise to improve Consistent with earlier works, the authors suggest that
overall financial position. The authors also suggest logistics organizations can work to establish collabo-
waste reduction at all levels, innovative vehicle design rative relationships with supply chain partners, while
and integrated supply chain design to achieve the leveraging technology. In a related study, Katiyar et al.
desired transformation. (2015) identify 20 key factors of supply chain
Extending the discussion on BTO automotive performance measurement and use interpretive struc-
supply chains in the emerging markets context, Zhang tural modeling to examine the interactions among the
and Chen (2006) investigate the necessity of making key factors of supply chain performance measurement
the strategic transition to customer-order driven auto- in the Indian automotive industry. The factors-order
motive supply chain in the fast developing market of lead time and order entry method are identified as most
China. The drivers and inhibitors to mass customiza- dominant. These factors are found to have high driving
tion are explored and benefits of this strategy in the power to measure supply chain performance whereas
long term are discussed. The authors find that the the post-transaction measure of customer service and
customer-order-driven strategy enables vehicle man- customer query time are found highly dependent on
ufacturers to avoid high levels of finished products and other factors. The authors suggest top management
costly price discounts. Zhang et al. (2007) attempt to and organizational focus on the factors identified to
explore the relationship between response time, pro- improve supply chain performance.
duct variety and firm performance under BTO sce- While previous works have dealt with supply chain
nario in the Chinese automotive industry. The organizational linkages in general and discussed
empirical findings suggest that for an automotive firm, outbound logistics structure as a component of it,
order-to-delivery (OTD) times are independent of our study primarily focuses on outbound logistics
production times. The study also suggests that more within automotive industry as an area of interest. We
model variety significantly increases order processing delve further into strategic and operational compo-
time while more types of variation does not signifi- nents of outbound logistics in the Indian context which
cantly increase production time. Studies in the context previous studies have not dealt with.
of Indian automotive industry have also explored Additional studies have primarily focussed on
organizational linkages within supply chain functions global outbound logistics and discuss various organi-
including outbound logistics. Sanjay and Ravi (2006) zational linkages through such works. For example,
investigate sectoral dissimilarities in the Indian man- De Leeuw et al. (2011) investigate the effect of
ufacturing sector including automotive industry. The decentralized control on finished goods inventory

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levels in an automobile distribution system and volume at each distribution location. An integer linear
identify the factors that determine the overall inven- programming (ILP) model is developed and a
tory levels. In contrast to the common assumptions Lagrangian heuristic based solution approach sug-
that distribution outlets or dealers are homogenous and gested for the same. Lin (2014) presents a mathemat-
their behavior is uniform in response to centralized ical model and solution technique for a distribution
control, the authors show that there is significant network design problem for an automobile company
variability in inventories across each distribution in China. As an additional consideration in modeling
outlet of an automotive OEM. Another body of the problem, demand is considered dependent on lead
research deals with the role of seaports in the time. Strategic planning works on network designs
distribution of vehicles. Carbone and Martino (2003) have applied mathematical programming approaches
discuss the changing roles of ports as supply chain and various scenario analyses techniques to develop
integrators. They analyze the role of port of Le-Havre solutions. Our work in contrast explores application
in carmaker Renaults supply chain and suggest higher and adoption of scientific methodologies by automo-
integration between logistics organizations. Hall tive firms in India in outbound logistics sector.
(2004) discusses freight shippers in the context of At the operational and tactical level transportation
US seaports and automobile imports into US to argue planning, Agbegha et al. (1998) address the problem
for logistics organization centric approach towards of auto-carrier loading in the US context with the
freight transportation studies. In a similar study, Hall objective to assign finished vehicles of various sizes in
and Olivierz (2005) also carry out an initial explo- carrier slot in a configuration that does not violate the
ration of inter-industry relationships and linkages in space restrictions and minimizes the combined cost of
the context of automobile imports to the US. Dias et al. routing, unloading and reloading of vehicles from
(2008) focus primarily on outbound distribution and plants/point of import to different dealers. A loading
present a functional framework for maritime mode algorithm based on branch-and-bound is developed as
integration concerning the roll onroll off (roro) port a solution technique. A heuristic to solve the complete
terminals and short-sea shipping of finished vehicles in auto-carrier loading problem based on this algorithm
the context of Western European outbound automo- has been developed combining it with routing of
tive supply chain. They carry out a multi-case study of carriers across various dealers. In another work, using
value adding role of roro port terminals investigating analytical approach to outbound logistics problem, Jin
and emphasizing decoupling points in the automotive et al. (2008) address the combined modeling of
supply chain. The authors emphasize on the role of production and outbound logistics planning at the
logistics organizations and ability of roro port operational level. They state that although the distri-
terminals to reduce logistical delays. bution costs form a major part of total vehicle cost, yet
the production planning does not take care of these.
Logistics network They present a mixed integer-programming model for
production sequencing, logistics planning, and the
Logistics network studies primarily related to out- integrated scheme. Hu et al. (2015) present a finished
bound logistics networks of automotive industry are vehicle distribution problem, where special carriers
discussed below. At the strategic level distribution are used for delivering finished vehicles. The contri-
planning, Miller et al. (1996) discuss the problem of bution of the paper is suggested as considering three
determination of optimal long run transport mode and dimensional (3-D) shapes of both the carrier loading
rail network location strategy for an automobile space and the vehicles while considering loading
manufacturer for supply to its North American dealers. patterns in the combined loading and carrier routing
They suggest an optimization model and the solution problem. The problem is termed as finished vehicle
results analyze four different distribution scenarios. transporter routing problem (FVTRP) and is presented
Eskigun et al. (2005) describe in detail a network as an extension to 3-D vehicle routing problem. An
design model of an outbound automotive supply chain MILP formulation along with a met heuristic based
with capacitated vehicle distribution center (VDC). solution algorithm is proposed for the problem.
The problem involves decisions related to location and Clearly, outbound logistics network design has
size of VDCs, delivery route and mode selection, and received extensive quantitative treatment in solving

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design issues. Network design is hence, considered an scheduling system supporting terminal operations of
important component of this study. Our focus however the vehicle trans-shipment hub in the port of Bremer-
is in exploring processes and methods used in solving haven. An integral decision model for manpower
network design problems in India and consequently planning and inventory control is derived on a rolling
we explore these issues in the paper. horizon basis. The system model incorporates mid-
term capacity planning and short term scheduling. As
Logistics functions an extension to this work, Fischer and Gehring (2005)
present a multi-agent system (MAS). They focus on
Literature on outbound logistics functions has studied storage allocation and deployment scheduling. Her-
various aspects of distribution process capability, rmann et al. (2015) present a case study investigating
storage yard planning and scheduling and information the stepwise implementation and subsequent evalua-
system design and integration. Various studies related tion of a cross-company radio frequency identification
to these are subsequently discussed. Several of these (RFID) based information system in the international
components form the basis of our preliminary enquiry distribution process of a car manufacturer. Our
during the study. literature review reveals that several outbound logis-
Consistent with studies on BTO enterprises, we tics functions based works discuss integration and
examine works that consider outbound logistics func- planning techniques using information technology and
tions as a part of BTO structure. Holweg and Miemczyk this forms the basis of our preliminary investigations
(2002) assess the capability of the existing logistics in the paper.
systems for supporting the BTO approach for new So far, literature on outbound logistics has largely
vehicle supply chains in UK. They identify the vehicle focused on developed markets. Studies on emerging
distribution process as the core customer-facing process markets are gradually gaining momentum. The prac-
in this strategy. The authors also identify lack of tices differ in the context of emerging markets like
forward planning, back-loading, transport fleet profile, India where the logistics processes need to be devel-
dealer opening times and damage prevention measures oped to sustain the increasing growth rates in produc-
in the outbound supply chain as key inhibitors. tion and demand in a changing business landscape
Information integration also is a key component of (Raghuram and Shah 2004; Greenwood 2006). Hence,
several BTO studies. Helo et al. (2010) present a it becomes important to understand the current indus-
comprehensive IT system framework termed integrated try structure and practices. This provides the motiva-
vehicle configuration system (IVCS) to enable mass tion for this paper.
customization in a BTO automotive supply chain
environment. The IVCS system is designed to connect Research methodology
the customer order fulfillment system with the back-end
product configuration planning system. In another Data sources Based on the literature review above, we
work, Volling and Spengler (2011) propose a modeling conducted semi-structured interviews with manage-
framework comprising of two interlinked quantitative ment executives directly involved in the outbound
models for order processing and master production logistics management of finished vehicles in India.
scheduling. The model framework is tested using a The interview questions centered on logistics organi-
simulation study using empirical data from the auto- zation, logistics functions and logistics networks.
motive industry. The modeling and simulation frame- Logistics organization consisted of questions on role
work is employed to generate order-delivery- of manufacturer, LSP, Freight forwarder and dealer.
processing (ODP) policies for a BTO automobile Logistics functions consisted of questions on order
production setup. We consider information integration management, inventory management, material han-
as an important aspect of exploring outbound logistics dling, information management, technical services
in Indian automotive sector. and administrative functions. Logistics networks con-
Among other functions such as storage yard sisted of physical, informational and financial network
planning and operations, Mattfeld and Kopfer (2003) flows related questions. Table 2 (Appendix) highlights
report the development of an automated planning and key issues discussed in each category.

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Logistics managers who participated in this study Data analysis was conducted based on collected
belonged to leading automobile OEMs and LSPs in data, in which the researcher interprets the data using
India. Among OEMs, we interviewed logistics man- what he/she knows about a subject and the context
agers from three prominent Indian automakers. As per within which the data was gathered (Ludwig 2012). A
estimates, these three firms together accounted for list of specific issues was formulated within each of
64 % of total new production of the Indian automotive the categories identified in the outbound logistics
sector in 2010. Among LSPs, we interviewed logistics framework. During the first rounds of interviews,
managers from two largest international logistics respondents were first allowed to describe the whole
providers operating in India; these two firms manage outbound logistics management process. This was
the maritime logistics for most of the prominent followed by raising specific points for which further
automobile exporters from India. Overall, we inter- clarifications were deemed appropriate. Most of the
viewed ten managers from these five companies. respondents did not allow voice recording of the
Interviews were carried out in two rounds. In each firm interviews and direct quotation, so quick notes were
we interviewed two managers; first a mid-level prepared at the end to summarize each interview.
operations manager with minimum 5 years experi- Subsequent rounds of interviews were conducted with
ence and second a senior manager with a minimum specific pointers on which answers were solicited. To
10 years experience in managing vehicle distribution. analyze the data, interview transcripts were compiled
In addition to the interviews, direct observations to generate common insights on each point. To
regarding final vehicle flows outside the factories and triangulate our findings from the interviews, individ-
visible management processes in distribution offices ual observations of the researchers along with findings
were carried out and recorded. The scope was to from industry publications, government reports and
understand the detailed operations involved in the other sources were compared. Table 2 in the
entire outbound logistics process, understand logistics Appendix lists the key insights captured for each of
organization structures and derive specific insights the specific issues in outbound automotive logistics
from current and future outbound logistics planning management.
and operations. Subsequent interviews were carried
out in multiple sessions with the respondents to clarify
specific details. Outbound automotive logistics practices
Data collection and analysis Data collection
occurred in three phases from 2011 to early 2015. In India is the 6th largest manufacturer of finished
the first phase we requested permissions from all vehicles in the world and contributes to around 7 %
OEMs and major LSPs for data collection related to of Indias GDP and 7-8 % of Indias total employed
the research study. Requests in most cases were made population (Bhattacharya et al. 2014). It is well
through personal contacts in the firms. Four of the positioned to become a manufacturing hub for small
OEMs and two international LSPs allowed visit. In a fuel-efficient cars, owing to its sound manufacturing
period of around 1 year we visited head offices of base and engineering expertise (Kurczewski 2009).
three OEMs, two of the plants, head offices of both the Many major world auto-manufacturers have either
LSPs and one port stockyard for international delivery. already set up manufacturing bases in India or have
Data analysis was initiated after this phase was over. planned it in the near future. As per one of the 2010
In the second phase of data collection additional estimates, the major players are Maruti Suzuki India
rounds of interviews were conducted with all the Ltd. (MSIL) with a share of 34 %, followed by Tata
previous respondents and some new respondents from Motors and Hyundai Motors, with 22 and 17 % shares,
the same firms. Post this phase; data was compiled to respectively (Production statistics OICA Website
form a single transcript of findings. In the third phase 2011). The other significant players are Mahindra &
of data collection, respondents were requested to read Mahindra (M&M), Honda, GM, Ford, Toyota and
the transcript and suggest any changes. Few correc- several others. The automobile manufacturing bases
tions were made at this stage. Some respondents were have developed around three main clusters in India.
called up again for clarification related to some MSIL has its production base in Gurgaon, Haryana in
observations. the northern part of India. Honda has recently started

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production in its Greater Noida plant in the northern plants, ports of operation, dealers, and sales OEMs,
state of Uttar Pradesh. Another major cluster has come maintaining the required service level is a chal-
up in Chennai, Tamil Nadu with Hyundai Motors, lenge. The customers have witnessed long waiting
Ford, Nissan, BMW, Mercedes Benz, etc. setting up times ranging from a month up to 8 months for
their manufacturing units. The third major cluster has some of the car models (Doval 2011; 2010). This
emerged in the western part of India with Tata Motors, has been partly attributed to sudden surge in
M&M, Volvo, Volkswagen, etc. running their manu- demand for new models and secondly it has been
facturing operations in the states of Maharashtra and used as a cost saving mechanism (Omkar 2012;
Gujarat. Hyundai Motors is the leading exporter of Thakkar 2013). In India, consumers often have a
finished vehicles from India, followed by MSIL, Tata tendency to prefer particular brands (Mishra and
Motors and M&M. To export the finished vehicles Rai 2009). The finding was further substantiated
MSIL uses the Mundra port in Gujarat. OEMs based in where a senior logistics manager from a leading
and around Chennai use the port of Chennai, and the OEM confirmed that Indian customers find more
western cluster uses the port of Mumbai as their major value in some of the specific models and are ready
outbound transportation node for intercontinental to wait for months for the same (Doval 2011). Long
trade. lead time for delivering finished vehicles coupled
The current state of logistics infrastructure in India with demand and supply mismatch owing to
is comparatively underdeveloped. According to a inaccurate forecasts at the variant levels leads to
comparative analysis on cost structure of Indian large inventory stocks in the outbound supply chain
automotive sector and that of Malaysia, Thailand for some models and long waiting times for others.
and China, the deficiencies in logistics and infrastruc- Thus, to improve customer satisfaction in the long
ture adds about 1.12 % in the total cost structure run and boost sales, the response time needs
(EXIM Bank 2008). Semi-structured interviews with improvement both in terms of speed and accuracy.
logistics managers reveal the following business Quality control and damage prevention: minimiz-
objectives of the outbound Indian automotive supply ing damage to the cargo is of utmost importance in
chain: outbound automobile logistics. A small damage
can render a new unit of cargo unsellable or the
Minimizing logistics costs: transportation, inven-
associated repair costs can be very high. Some
tory carrying, cargo handling, order processing and
examples to cargo damage include dents on the
other costs.
automobile body, damaged tires, cracked wind-
Improving response time: a major percentage of
shields, etc. Due to poor infrastructure and com-
finished vehicles are delivered under build-to-
paratively underdeveloped logistics sector in
stock (BTS) strategy and a small percentage is
India, the damage rates tend to be marginally
delivered under BTO strategy. Most of the pas-
higher than the developed and comparable econo-
senger vehicles are manufactured under BTS,
mies (2011; Ludwig 2011).
while BTO manufacturing is mostly carried out
Minimizing environmental damage: with increas-
for group orders in commercial vehicle market.
ing emphasis on environmental friendly opera-
Our previous discussion on international automo-
tions, reducing carbon footprints, scrap
tive logistics literature also revealed that most of
minimization, recycling are other objectives (Ga-
the finished vehicles are delivered under BTS
janand and Narendran 2013; Mangla et al. 2014;
strategy, with a small percentage manufactured
Ravi and Shankar 2014; Luthra et al. 2014).
under BTO strategy (Holweg 2003; Holweg and
Miemczyk 2002). Under the BTO strategy, the
average order-to-delivery time has been found to Logistics organization
be 40.1 days in UK (Holweg 2003), while BTS
vehicles can be purchased on the very day. In Our exploratory study reveals that the major OEMs in
contrast, in India even while following the BTS India have in-house logistics division that manages the
strategy, due to the large number of varieties on outbound logistics of their finished vehicles. This
offer and geographically dispersed locations of division is usually based at the corporate headquarters,

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with offices located at each plant site. They receive logistics network. The vehicles meant for domestic
production and demand information from the corpo- market are mostly sent through specialized trucks to
rate headquarters and coordinate with the external dealers, either directly or through a regional distribu-
service providers at various levels to plan, organize tion center (DC). The vehicles meant for export are
and execute the distribution of vehicles. While shipped mostly using ocean transportation, with
outsourcing logistics functions is the key trend in vehicles from the factories delivered to seaports
most economies (Holweg and Miemczyk 2002; Byrne through car-carrier trucks/trailers or railways
1993), the lack of complete logistics solutions (Fig. 2). From these ports the vehicles are transported
providers in India is the major factor for most OEMs to vehicle processing centers (VPCs), which prepare
to spend significant time and effort in resolving vehicles for final delivery through their value added
logistics issues (Bhattacharya et al. 2014). OEMs services like pre delivery inspection (PDI) and late
internalize logistics functions and management pri- configuration of parts. Finally the vehicles are
marily due to lack of external expertise on outbound despatched to dealers across the country via one or
logistics practices. more distribution centers. For most of the new
Our findings also reveal that there are several LSPs vehicles, dealers are used as inventory buffer as also
in India which consist of independent transportation found in other countries (Holweg 2003).
and warehousing services providers with smaller asset In developed markets outbound logistics is mostly
bases. They are often hired by OEMs for their services outsourced to individual LSPs, which generally man-
directly. However, very few LSPs have the potential to age a hub and spoke distribution network for outbound
become logistics integrators in the outbound logistics distribution of finished vehicles from the OEMs
sector. The findings reveal that the outbound logistics factories to the vehicle dealers or final customers. A
sector also has presence of few international distrib- national or regional stockyard is used to consolidate
utors of finished vehicles like Wallenius Wilhelmsen the cargoes from different manufacturers. Further at
Lines (WWL) of Norway and Nippon Yusen Kaisha these facilities re-grouping of vehicles is carried out as
(NYK) of Japan [Adani group signs pact to develop per dealer locations, PDI, cleaning and other value
auto hub at Mundra port (2008; NYK Auto Logistics added activities are carried out before final delivery to
India to Operate Finished-car Logistics Terminal In respective dealers. Advanced information systems
West Coast of India (2014)]. These players offer along with well-trained labor force are utilized at these
comprehensive logistics solutions to OEMs in India facilities to enhance work efficiency and speed
with a primary focus on exports. However, their (Miemczyk and Holweg 2004; Fischer and Gehring
presence remains limited in the outbound logistics 2005).
sector. In summary, the outbound logistics organiza- In contrast, in India, use of a centralized hub is
tion is limited to within firm focus because of lack of restrictive and is often not economically viable
major end-to-end outbound logistics solutions provi- given the regime of differential taxation structures
ders in India. owing to inter-state sales tax levied on every cross-
border transfer of goods in India (Avittathur et al.
Logistics network 2005). With the implementation of goods and
services tax (GST) however, cross border transfer
The outbound logistics networks of OEMs in India are issues are expected to improve. In addition, lack of
fairly complex owing to the multitude of taxation logistics integrators in form of strong LSPs, low
structures, infrastructure issues and lack of full time level of information and communication technology
service providers. From outbound logistics network (ICT) implementation, lack of skilled labor force
perspective, the study reveals that outbound vehicles also impede implementation of scientific models of
broadly follow two paths namely, domestic market distribution. It was also found that due to the nature
logistics and export oriented logistics. The design and of the cargo and probable damage rate in transit
structure of these networks may vary according to especially in modal changes, mostly one-to-one
manufacturer and location. The design networks are deliveries from the factory to the dealer is practiced.
illustrated in Figs. 1 and 2. It is interesting to note the This leaves little room for provision of consolidation
presence of distribution center and dealer in the and redistribution to save logistics costs and value

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Decision (June 2016) 43(2):145165 155

added services to ease the burden on the factory the firms divide the market into various zones which
under an LSP. are further divided into regions and cities. There is
The study reveals the need for researchers and coordination between the production planning, logis-
practitioners to consider scientific models for effective tics teams and zonal sales offices to undertake
design of outbound logistics networks. In addition, the important operational and tactical decisions like
imperative lies with public institutions to ease the quantity of vehicles to be transported, make of
complex network flows through better taxation vehicles, network allocation decisions, etc. It is
regime, proper infrastructure and governance. interesting to note that the primary mode of trans-
portation in India is through the roadways, with
Logistics functions railways carrying roughly 3.8 % of finished vehicles
(2011) and coastal shipping usage in the nascent stage.
One of the primary focus areas of outbound logistics MSIL initiated trial runs to transport its cars through
managers in automotive supply chains is on logistics coastal route using the services of a third party
functions. Tactical issues in outbound logistics man- shipping liner (2011). Dependence on roadways is
agement have been discussed in (Miemczyk and partly due to the lack of better, effective railroads for
Holweg 2004; Herrmann et al. 2015). However, in cargo movement. However, road transportation has
the emerging economy context, logistics functions implications in terms of higher costs and environmen-
assume importance in the light of complex distribution tal damage (Holweg and Miemczyk 2003; Aperte and
systems and infrastructure issues. Our study reveals Baird 2013). In contrast, railways as a means of
distinct areas of focus for outbound logistics managers transporting finished vehicles are used extensively in
of automotive supply chains. the USA and Continental Europe (Holweg and
Order management for automotive firms closely Miemczyk 2003). European Union introduced the
follows the broad logistics network structure described policy of Motorways of the Sea (MoS) to develop
earlier. For domestic distribution the distribution plan and promote short-sea shipping in Europe, one of the
is based on a combination of point of sale (POS) data prime objectives being to minimize environmental
and forecasted demand data. In case of export damage (Aperte and Baird 2013). With increasing
vehicles, large auto-manufacturers operating from focus on ports and rail road infrastructure improve-
India have their own subsidiaries in the importing ment, automotive firms may consider better transport
country, to co-ordinate with dealers. Other OEMs designs.
collaborate with local distribution agencies, which Road transportation in most cases occurs through
receive imported vehicles from different OEMs over- collaborations with transportation companies, which
seas. The periodic demand data is supplied to the OEM own trucks or trailers. India however, is plagued with
by their distribution agency operating in that country. underdeveloped trucking industry and the sector has
The findings are in tune with the expected order not yet matured (Raghuram and Shah 2004). OEMs
management processes of firms. In a complex distri- maintain contracts with external suppliers offering
bution environment in India, dealers play an important trucking services for finished vehicles. In some cases
role in the outbound logistics service completion. As a OEMs work through long term contracts, where the
result, automotive firms depend on dealers for esti- transporters are evaluated on several criteria, the most
mating market demand and coordinating with the important being adherence to transit times and quality
planning teams. of transported vehicles along with standards of driver
The second area of focus is transportation manage- safety, packing density, etc. Service conditions are
ment in distribution of vehicles. The study reveals that monitored closely for a brief period of time before
transportation management is a complex activity in contracts are extended. Firms with larger scale employ
India owing to the varied business terrain and infras- advance analytics and tracking and tracing systems to
tructure issues. Various strategies are deployed by evaluate performance on a regular basis. Some
automotive firms to navigate the challenges. Closely truckers are engaged on a short term basis based on
following the network structure, transportation plan- transportation demand. Reliance on trucking industry
ning and execution is divided to cater to the domestic for inland transportation is the common strategy for
and export oriented markets. In the domestic market, most automotive firms as other sources of

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transportation are less developed. In some cases, the Clearly, information exchange between the OEMs and
lack of scientific trucking, loading and unloading overseas service providers is of prime importance in
mechanisms also tend to cause delays (Holweg and order to coordinate transport services. Long term
Miemczyk 2003; 2011). OEMs ensure minimal level contracts often develop trust between the negotiating
of cargo damage by utilizing fully enclosed, specially parties (Ullah 2014; Sahay 2003). Further, overseas
designed car carrier trucks. Finished vehicles are transportation services are marked by reasonably long
securely fastened to the truck body to avoid damage lead times and quality services for delivery (Ander-
while transit. Cargo handlers at the intermediate points sson et al. 2015). Under these circumstances, auto-
are appropriately trained to ensure damage free motive firms in India prefer large, quality service
operations. It is imperative that for development of providers. With increased focus on building better port
outbound logistics systems, various modes of trans- infrastructures and decreasing turnaround times at
portation are leveraged in India. With increasing focus ports in India, automotive firms in India stand to gain
on sustainable modes of transportation and firms in the future (Ludwig 2015).
looking for ways to cut costs, leveraging railways and Another important functional area is distribution
waterways could be the next way forward for center, stockyard and inventory management.
outbound logistics. Inventory management in India has conventionally
In the international transport mode, our study been an area of prime concern (Bhattacharya et al.
reveals that deep-sea ocean route is mostly favored 2014). Several automotive firms in India are often
for intercontinental trade of finished vehicles. Mar- plagued with unwanted inventory in their supply
itime transportation reduces logistics costs and pro- chains and lack rigorous analytical techniques to
vides large transportation capacity for international restructure their supply chains and inventory loca-
distribution leading to economies of scale in intercon- tion. Our study though reveals interesting insights
tinental transportation of finished vehicles (Chandra around few well designed practices that firms have
et al. 2013). The OEMs collaborate with the shipping developed to manage inventory in the outbound
companies to transport the appropriate number of logistics context.
vehicles at regular intervals to overseas locations. The plant yard management process involves
Shipping companies operate roro ships called pure retrieval of finished vehicles from the production
car carrier/pure car and truck carrier (PCC/PCTC) to line, storage into the yard and final loading into trucks
provide shipping transportation services. At locations or rail for further transportation. Some 3PL companies
where transportation demand is not high enough to have started offering logistics services to the manu-
make roro service feasible or the port infrastructure facturing facilities directly. Critical to such a coordi-
does not support roro operations, vehicles are trans- nated effort is production and demand information
ported using containers. The OEMs tend to choose the sharing between the OEM and LSP which our study
port near to their major manufacturing location that reveals, is being increasingly adopted by firms in
has adequate connectivity with rail and road networks, India. Information sharing substantially helps in
offers suitable port charges and has a favorable inventory management (Sanjay and Ravi 2004) and
working environment, for exporting cargo. increasing adoption of such practices by automotive
Long term contracts are often the norms for firms in India should help reduce inventory chal-
overseas transportation services. In case of long-term lenges. Our study further reveals that in a stocking
contracts, the capacity requirements and sailing yard, where challenges of limited space are frequent,
frequencies are decided between the two parties. firms resort to integration of information regarding
Further, the OEMs provide yearly, 6 monthly, 3 incoming and outgoing vehicles with yard processes.
monthly and monthly forecasts to the shipping lines Further, the yards typically have limited manpower in
for capacity adjustments. Planning modifications may terms of drivers and supervisors, hence the overall
be carried out from both ends on a monthly basis. In planning and execution is carried out in a way that
case of short-term contracts, OEMs share their minimizes operation time, damage rate and opera-
projected volumes to be exported in the coming tional costs.
months. The OEM and shipping line negotiate the Similarly, in the case of seaports, stockyard man-
freight rates and timeframe for delivery of vehicles. agement is closely integrated with the arrival of ships.

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Decision (June 2016) 43(2):145165 157

Fig. 1 Inland logistics


network in India

Fig. 2 Export logistics network

Additionally, logistics service providers are increas- India has a complex regulatory framework (Srivastava
ingly investing in highly skilled manpower for port and Chandra 2013). The export vehicles need to go
operations. Skilled manpower is also leveraged to through myriad of customs administrative procedures
provide additional services like pre-delivery inspec- before delivery overseas. OEMs generally rely on
tion (PDI) during transport activities. This interesting freight forwarders for this job. International LSPs
result points to the case of increasing adoption of operating in India, like WWL also offer these services
information sharing techniques between OEMs and to the OEMs in India for export vehicles (Manoj
service providers. Closely knit outbound logistics 2009). However, inefficiencies in transactions, cost
operations through advanced information manage- overruns and delays are a result of complex admin-
ment techniques should reap significant benefits for istrative procedures (Seth 2014; Manoj 2014). This
logistics players and OEMs in the future. partly results in OEMs and LSPs increasing their focus
Lastly, we discuss administrative functions. Our on administrative functions.
study reveals that several OEMs and LSPs in India In the domestic front, the inter-state transit in India
have a significant focus on administrative functions. too involves documentary procedures with the local

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158 Decision (June 2016) 43(2):145165

authorities as India has multiple taxation structures in Fig. 3). We believe that these issues raise several
different states in addition to inter-state taxation interesting research questions which hold potential for
(Srivastava and Chandra 2013). Our study reveals researchers and practitioners in the automotive out-
that due to this inefficient regulatory framework, bound logistics area in an emerging economy context.
automotive sector in India has not been able to develop The insights from this study are fairly distinct from
an integrated logistics framework across the country. similar attempts in the past which are based on
The study illustrates the need for a simplified regula- developed economies.
tory framework which would enable OEMs and LSPs
to develop a closely knit logistics framework. The Logistics organization: role of third party logistics
result is in contrast to state of logistics in developed service providers
economies where OEMs work with uniform regula-
tions and efficient logistics systems. The export and import of automobile distribution
channels has gradually witnessed the rise of 3PL
service providers in India. The overseas shipping and
Discussions customs requirements make part of this logistics chain
very complex for OEMs to manage alone. The ability
Several key findings can be derived from this study. of a LSP to provide integrated logistics services to
The role of LSPs in Indian automotive outbound OEMs is one of the key factors in resolving issues in
logistics is still limited in its scope and has significant Indian automotive outbound logistics service. It can be
potential for integration of activities. The lack of hypothesized that increased role of third party logistics
several LSPs in the outbound logistics sector and service providers should improve performance of
infrastructure issues have led OEMs to act as logistics automotive firms outbound logistics in terms of
integrators for their products distribution chains. A reduced costs and lower delivery times.
3PL company is termed as logistics integrator when it In India and across the globe, many companies like
takes over a major portion of the management of NYK and WWL are now offering outbound logistics
logistics operations from its customer. This involves services for export vehicles (2008). In India their
high level of integration with the customers while services are currently limited to maritime logistics
sharing risks and rewards associated with logistics with few attempts to manage a part of the inland chain.
management (Hertz and Alfredsson 2003). The out- These firms were gradually evolving to emerge as one-
bound logistics distribution network is inefficient due stop solution for logistics management of export
to poor infrastructure and restrictive regulatory frame- vehicles (Semeijn and Vellenga 1995), although
work having multiple taxation schemes across differ- currently most of these firms offer integrated services
ent regions. The transit points like ports and in partnership mode with other LSPs (2008; Special
stockyards have high turnaround time due to ineffi- 2014). In this case a single 3PL company manages the
cient operations and poor planning. The usage of entire logistics of finished vehicles, from the factory to
efficient transportation modes like railways and the dealer. The role of 3PL firms in domestic
coastal waterways for long hauls is limited. Informa- distribution of vehicles in developing countries like
tion technology systems and decision support systems India is still very limited. They mostly act as
are used in fragmented way across different functions transportation providers or provide warehousing facil-
in the distribution chain. However, it has increasingly ities. It can be argued that the advantage of 3PL
started playing an important role in integrating various companies can be attained only when they are able to
players in the outbound logistics systems. Information co-ordinate the logistics of several OEMs together to
integration and management has significant role to achieve economies of scale in operations (Bhat-
play in the improvement of Indian automotive out- tacharya et al. 2014). This is not realized presently
bound logistics systems. due to infrastructure issues, mistrust among the firms,
Based on the understanding of the logistics systems complex regulatory frameworks and varying taxation
practiced in India through expert interviews and schemes across the country. These provide various
literature review, the key issues outlined previously challenges to logistics planners to carry out integrated
could be classified under three categories (also refer planning in an efficient way.

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Decision (June 2016) 43(2):145165 159

Logistics function: outbound logistics integration design. Models developed and practiced in developed
through information management economies like hub and spoke model, efficient stock-
ing systems, etc. if implemented in emerging economy
To minimize uncertainty in lead-times and conse- context can provide significant time and cost savings.
quently, buffer stocks at each point, proper visibility of This should enable OEMs, LSPs and automotive
cargo at each point of logistics chain is very important. dealers to increase focus on customer service rather
Holweg (2003) suggests that reduction in lead times than stocking and transfers (Kiff 1997). Network
can only be achieved by better integration of logistics redesign can further enable consolidation of cargo and
operators along with common access to reliable make the use of cheap transportation means like
planning information. A number of advanced infor- railways and coastal shipping for long hauls more
mation technology solutions are available for out- lucrative (Vasiliauskas et al. 2010). However the
bound automotive logistics. There are systems for development of efficient networks can only be
transportation management, which help in decision successful through intermediation by Government
support for planning car-carrier loading, optimize and public institutions in terms of improved infras-
delivery routes, and help in tracking vehicles through tructure and supportive regulatory framework across
installed GPS systems. All these systems may be the country in terms of standard taxation scheme, easy
integrated with the overall ERP systems for integrated transit across borders, etc. Governments role in
control (MacLeod 2011). development of outbound logistics sector, specifically,
It can be hypothesized that the general shortcom- logistics network is critical to the future success of
ings in integrated logistics that have been identified in automotive outbound logistics practices in an emerg-
the Indian scenario can be overcome through infor- ing economy like India (refer Fig. 3).
mation management and integration. In a country like
India where vehicle distribution largely remains
unorganized, these methods may yield the expected Conclusions
benefits vis-a-vis the costs incurred, for many of the
OEMs. This would include data sharing for better Outbound logistics management of finished vehicles
planning and co-operation for capacity adjustments, in an emerging economy such as India is garnering
supplier contracting, etc. It is expected that the new attention due to the changing business landscape.
logistics integrators would develop systems and The sector provides increasing opportunities for
processes for integrated logistics planning from man- improvement in terms of minimization of cost and
ufacturing plants on one end to dealers and customers lead-time to improve customer satisfaction. Literature
at the other end. Advanced decision support systems on automotive supply chains has focussed mainly on
often provide various solutions for synchronous plan- developed markets with a major impetus given to
ning between different firms. It can be hypothesized customer responsiveness and cost reduction through
that such an implementation would resolve several adoption of BTO strategy. The structure of outbound
shortcomings in the current state of outbound auto- logistics of finished vehicles follows a centralized
motive logistics systems. These automatic systems for distribution system in the developed markets and also
data exchange ensure timely exchange of reliable data. emerging markets like China. The studies suggest a
OEMs would be able to share demand forecasts with strong presence of integrated LSPs managing multi-
the 3PL providers, who in-turn would be able to carry brand products for distribution to final dealers and
out capacity adjustments promptly. consumers.
In contrast, outbound logistics in an emerging
Logistics network: network redesign context has received limited attention in the past. The
present work combines understanding of previous
It is hypothesized that with the enhanced role of LSPs works and semi-structured interviews with manage-
as able logistics integrators in form of 3PL parties ment executives directly involved in the outbound
along with advanced IT systems in place, firms can logistics management in India. Synthesizing these, we
develop optimal strategies for logistics network propose a framework with testable hypotheses for

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160 Decision (June 2016) 43(2):145165

Outbound Logiscs

Logiscs Organizaon + + Logiscs Networks Logiscs Funcons +

+
Government policy and
infrastructure support
Role of Third party logiscs Informaon Management
service providers and Integraon

Network Redesign

Fig. 3 Strategic framework for outbound automotive logistics development in India

development of outbound logistics in the Indian find it very difficult to reengineer and redesign their
automotive industry. outbound supply chains for achieving efficiency and
Our exploratory study reveals that the industry responsiveness of international standards.
practices lack technological sophistication in India as This study being exploratory in nature has
compared to advanced logistics systems in developed certain limitations. A limited sample size and
economies. The logistics management process is geographical focus may limit the generalizability
fragmented across the distribution chain. There is a of some of the findings. There is significant scope
need for integrated logistics management across the for empirical analysis to understand the relationship
complete distribution chain. Integrated logistics can be between OEMs and LSPs in the outbound logistics
developed through certain primary tools namely, the sector in an emerging economy context. Future
emergence of able, integrative LSPs in this sector studies can also focus on outbound logistics
offering complete end-to-end logistics services to management practices of markets like China and
different OEMs. As an enabling mechanism OEMs Brazil and draw a comparative analysis of various
need to focus on collaborative partnerships with LSPs logistics management practices deployed. Addition-
and also competing OEMs to create a suitable envi- ally, a detailed survey of IT and communications
ronment. Integration of logistics functions through the based tools and implementation strategies of vari-
development of advanced ICT systems and mutual ous firms can be carried out to enhance under-
relationships through partners needs to be addressed to standing in this field.
reach the desired level of efficiency and responsive-
ness in the automotive supply chain. Given that the Acknowledgments The authors sincerely thank the industry
respondents for their valuable responses. Suggestions received
poor level of infrastructure, regulatory policies and
from the Editors also helped significantly improve the paper.
taxation structure in India are major factors in
constraining development of the automotive distribu-
tion process, the Government needs to take an active, Appendix
developmental approach to formulate business
friendly policies and develop an enabling infrastruc- See Table 2.
ture. Without state support the OEMs and LSPs would

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Decision (June 2016) 43(2):145165 161

Table 2 Summary of data sources and analysis


Outbound Point discussed Data sources Key insights
logistics
components

Logistics Contracts with Logistics Interviews with OEMs Lack of complete logistics solution providers in India
organization Services Providers managers Long term contracts
(LSP) Interviews with LSPs managers Mostly applicable to export logistics
Industry publications
Development of LSP Interviews with OEMs LSPs in India mostly consist of independent
capabilities managers transportation and warehousing services
Interviews with LSPs managers Small scale of operations and asset bases
Contract terms mandate standard practices in terms
of safety and efficiency
Focus on in-house coordination; lack of joint efforts
to develop strong LSPs
Complaints about timely information sharing
In-house capabilities for Interviews with OEMs Complete planning, coordination and execution of
outbound logistics managers outbound logistics functions
Monitoring of LSP Interviews with OEMs Key Performance Indicators (KPI) are personnel
performance managers safety, vehicle safety, logistics cost, transit time,
etc.
KPIs measured and evaluated for LSPs
Contracts with truckers Interviews with OEMs A mix of long-term and short term contracts.
and warehousing managers Contracts terms renegotiated periodically
facilities
Administration of Observations on personal visit to Separate outbound logistics division; head office and
outbound logistics OEMs offices; in-factory and in-plant
main offices. Managers associated with the division continuously
Interviews with OEMs interact with sales, production, & external service
managers providers
Logistics Current taxation Government reports Lack of centralized taxation
network structures and resulting Interviews with OEMs Inter-state taxes result in regional distribution
implications managers planning in every state
Industry publications A number of toll booths and collection units at state
borders leads to large transit time and logistics cost
Governments role in Government report Law enforcement to ensure safe and timely transit of
domestic and export Interviews with OEMs vehicles through roads
market support managers Infrastructure development
Lengthy customs inspection and clearance processes
for export/import vehicles
In-factory customs documentation for export
vehicles
Proposed GST (Goods and Services Tax) bill
expected to improve scenario
Restructuring supply Interviews with OEMs Centralized taxation structure may lead to national
chains for cost managers level planning
effectiveness Increased usage of cheaper modes of transportation
like rail, coastal and inland waterways.
Process innovations Interviews with OEMs Improvements in alterative shipping routes
managers Development of rail infrastructure
Industry publications Development of waterways, ports and vessels

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162 Decision (June 2016) 43(2):145165

Table 2 continued
Outbound Point discussed Data sources Key insights
logistics
components

Logistics Outbound transportation Interviews with OEMs Increased focus on administrative functions due to
functions and administration managers complex regulatory framework
Interviews with LSPs managers Lack of integrated logistics framework across the
country
Separate planning for domestic and export vehicles
Market segmentation for distribution
Roadways are the primary mode of transportation
Underdeveloped trucking industry in India
Fully enclosed car- carriers used for shipping
finished vehicles
Commercial vehicles mostly transported directly
Potential for leveraging railways and waterways to
cut costs
Maintaining transit times challenging
Long term collaborations with established roro
shipping companies for export shipments
Warehousing and Interviews with OEMs Excess inventory and delays common, esp. during
inventory management managers high selling seasons
Interviews with LSPs managers Lack of scientific inventory management
Industry publications
Port and yard Interviews with OEMs Integration of yard planning with incoming and
management managers outgoing transportation flows
Interviews with LSPs managers
Industry publications
Information flow and Interviews with OEMs A combination of POS data and demand forecasts
order management managers used for planning order management
Usage of advanced information systems dependent of
scale of operations
Coordination between Interviews with OEMs Timely information exchange about asset availability
OEMs and LSPs managers and transportation demand
Interviews with LSPs managers
Communications Interviews with OEMs Mostly dependent on personnel communication, lack
between OEMs and managers of advanced, real-time information exchange
LSPs Interviews with LSPs managers
Documentation Interviews with OEMs Customs documentation for export vehicles
requirement managers Documentary procedure for inter-state transit
Process monitoring and Interviews with OEMs Advanced tracking systems based on GPS employed
control managers by most OEMs; extent of tracking is dependent on
scale of operations
Direct telephonic conversation with drivers widely
practiced for transit management

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