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“Fedex Corporation”
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There has been a rapid growth recorded in the cargo sector in the last three years .The air
cargo has galloped ahead well past the traditional favorites railways and shipping to take
the biggest bit in freight traffic. In India there are three major transportation modes
Aviation , Railways and Shipping for the 2000-07 period and found that air cargo has
grown by around 19% as against 10.3% and 9.2 % growth in shipping and railways
during the last three years. The government is emphasizing on food processing sector &
horticulture. There arises a need for greater capacity in the domestic airway facility at low
cost.In such circumstances dedicated freight aircraft on national and international routes
would provide a boost to industry.
First Flight Couriers Ltd. had announced its air cargo services not too long ago and said
that it would replace its small cargo planes with Boeing B737-300 cargo planes on lease.
The new planes would be a part of `100 investment that the company has planned in
anticipation of the air cargo boom. Company will also enter in the 3PL business by
setting up warehouses across the country. Blue Dart another Giant in the logistics sector
in the country has induced its 7th freighter a Boeing 757 into service .Another big Player
in the Industry Safexpress Pvt. Ltd. has pulled its socks up to give & face competition
and for this the company has also made strong expansion plans.
The growth prospects in this sector is attracting the Business Tycoons like Anil Ambani
who has acquired 44 % stake in courier and express company DTDC Ltd and Elder
Brother Mukesh has plans to start a dedicated freighter airline to service the retail and
perishable goods industry.
The Construction of the cargo friendly airports in Some cities has enthused most cargo
operators, the way the new operators of the country’s top gateways Delhi & Mumbai
have been addressing the needs of the air cargo sector can only help to enhance the
growth of the industry.
Analysis :
India’s spend on logistics activities - equivalent to 13 percent of its GDP is higher than that of
the developed nations. The key reason for this is the relatively higher level of inefficiencies in
the system, with lower average trucking speeds, higher turnaround time at ports and high cost of
administrative delays being just a few of the examples. These inefficiencies have arisen over the
years from a combination of a non-conducive policy
environment, extensive industry fragmentation and lack of good basic infrastructure. India's
indirect tax regime discouraged large centralized warehouses and led, over time, to
fragmentation in the warehousing sector.
In addition, the evolving business landscape and increasing competition across industries, is
creating the need for more efficient and reliable logistics services than what exist today For
example, rapid growth of organized retail and the need to reach out to the large untapped rural
markets in India are necessitating development of strong back end and front end supply
networks.
Road
The road freight industry in India is worth about INR 1.42 trillion and is growing at about 6-8
percent year on year (refer figure 6). Manpower spends amount to only about 4 percent of sales
as against the overall sector average of 8-10 percent. The industry has traditionally been
extremely fragmented - almost 75 percent of the trucking 'companies' are single truck operators
and almost 90 percent of trucking companies have a turnover of less than INR 10million. Road
network of 3.3 million km is the second largest globally and offer wide reach and easy
accessibility to even small markets.
Railway
Rail freight traffic revenues stood at around INR 350 billion in 2006 having grown at around 8
percent in the recent past with the growth in the last couple of years being around 10 percent. It
is the world's second largest rail network spread over 81,500 km and covering around 7000
stations. Manpower spends amount to about 45 percent of revenues as against the overall sector
average of 8-10 percent. Also, non-salary expenditure comprises 36 percent of overall manpower
expenditure compared to the sector average of 13-14 percent. Spread over 81,500 km, railways
carries 25% of total freight movement and has Low transportation cost as compared to roads
Water/Port
The growth in shipping has been even higher than that of the railways driven by strong growth in
foreign trade both in bulk and containerized cargo. Manpower spends amount to about 8-10
percent; non-salary expenditure varies greatly between companies ranging from 3-20 percent of
overall man power expenditure. With increasing capacity and infrastructural support, the scope
of the operations is set to increase! India now has the largest merchant shipping fleet among the
developing countries! India ranks 17th in the world in shipping tonnage. ! Indian share of
maritime transport services is 1 percent of world market.! The container traffic has registered an
impressive growth of 15 per cent over the last five years.
Air
Though the air freight segment holds a small share of India's freight market, it is growing at a
fast pace. While India accounts for meager 3 % of the global air cargo market, the Indian air
cargo industry is expected to double in size by the year 2010, as per an expert estimate. As in the
case of sea freight, the level of formalization and standardization of operations in the air freight
segment is greater than in the road sector. By virtue of the level of investments in assets, network
and relationships required to be a player in this segment, it has traditionally been relatively more
organized leading to greater regard for manpower development. The market leaders typically
have established internal structured training practices to train the
staff employed at this level. Nevertheless, there exist perceived gaps at the operational / front
line level and are primarily to do with soft skills, such as relationship management, interpersonal
and managerial, and supervisory skills.
Size of Business
Current worth is Rs. 100 bn which is expected to increase to Rs. 400 bn in next
five years
International Air Freight –0.92 Mn MT
Domestic Air Freight –4.3 Mn MT
80% of international cargo is handled at Delhi & Mumbai
Government Initiatives
Business Opportunity
Huge requirement for air cargo centers due to growth in air cargo as well as up
gradation of infrastructure at various airports
It is anticipated that air cargo activity shall expand from metro airports to mini
metro and non metro airports post development of necessary infrastructure
Assisting DDA to set up air cargo based integrated freight complex at Dwarka in
Delhi
DHL and India-based the Lemuir Group entered into a 76: 24 joint venture – DHL
Lemuir Logistics Private Ltd.
Germany-based Rhenus AG and Hyderabad based Seaways Shipping Ltd have set
up a joint venture – Seaways Rhenus Logistics Ltd.
The UAE-based Swift Freight has forayed into the Indian market.
The Future Group plans to develop 3 million square feet of warehouses by 2010.
National Bulk Handling Corporation plans to set up 200 warehouses across the
country by 2012.
The entry of large third party logistics (3PL) carriers – like Federal Express (FedEx) and DHL –
and network expansion by the existing domestic players (such as Gati and Shreyas Shipping)
have also contributed to the transformation of services and the business practices across this
sector.
The organized 3PL market in India can be categorized into three major segments – public sector,
private sector and foreign entrants. Some of the major players in each category are as illustrated.
P
These hubs offer excellent road, rail and sea port connectivity and are also witnessing significant
investments in infrastructure. High penetration of organized retail, presence of industrial clusters
and upcoming industrial projects and SEZs in and around these areas make these 'established'
hubs all the more attractive. Major ports and existing logistical hubs – like Mumbai, Kolkata and
Chennai – fall under this category.
Emerging hubs
Gurgaon, Vizag, Nagpur and Indore fall under this category since these hubs have a high
potential, but lack the supporting infrastructure as of now. These hubs however have major
infrastructure projects underway which are scheduled to be completed within the next three to
five years.
Promising hubs
Promising hubs comprise of areas such as Jamshedpur, Alwar, Ahmedabad, Bangalore and
Ambala and have considerable prospect of being developed into logistics hubs. Increase in
manufacturing activities is bringing about a change in these areas and opening up opportunities
for the logistics players.
Conclusion
Indian Logistics industry is continuously improving its performance in the global logistics
Industry by improvement of customs, trade-related infrastructure, inland transit, logistics
Services etc. Indian Logistics industry has low performance than developed countries like USA,
UK and Singapore in global logistics sectors due inefficiency in logistics services and highest
among the low-income group countries. India spend in Logistics activities equivalent to 13 % of
its GDP is higher than that of developed countries. 3PL service provider share is less in logistics
sector in India as compare to developed
countries and still at the nascent stage. Multinational companies in all industries have been
predominant users of this service as one of reason for lesser share 3PL in India. Also in India
organized sector not well established as compare to developed nation this contain cost of
inventory holding, transportation, warehousing, packaging, loss and related to administration is
higher. Air mode of transportation helps in both
domestic and international movement of goods but for international movement is more as
compare to the domestic due to the higher cost, safe and faster way as compare to others modes.
ILLUSTRATION
The air freight segment holds a small share of India's freight market, it is growing at a fast pace.
While India accounts for meager 3 percent of the global air cargo market, the Indian air cargo
industry is expected to double in size by the year 2010, as per an expert estimate.
So to encash this opportunity many big players have jumped in this mode of logistics and Fedex
is among those .
Federal Express : Moving The World and a Commitment to Indian
Businesses.
Worlds 3rd Largest Logistic Company & Ranked 2nd In the Air Cargo Operators 2010
List of Forbes.
Despite the economic crisis, Indians are most optimistic than their peers in developed
nations like Japan, France, Germany and the United Kingdom according to Worldwide
Independent Network(WIN)survey.
According to the international Monetary Fund(IMF),India and China- the only sizeable
economies likely to record growth rates of over 5% prevented the world from recording
negative growth in 2009. According to industry forecasts, the cargo segment of the airline
business will more than triple by 2025. But before industry players begin celebrating,
they should consider that the boom in air freight will not deliver an automatic “bump up”
in growth across the board. In fact, according to Accenture research, 5.5 billion US
dollars will move from the top line of air cargo carriers to their competitors over the next
five years.
The air imports from Europe to the subcontinent will average 6.6 per cent growth per
year, growing from around two lakh tonnes in 2005 to six lakh tonnes by 2025. Exports
between the two regions would continue to expand approximately 6 per cent annually till
2025. Foreign Direct Investment also has stimulated international air trade in the region.
This growth coincides with a jump in air cargo traffic with North America and Asia.
FedEx Express, a subsidiary of FedEx Corp and the worlds largest express transportation
company, has announced new service expansions in India that will connect more of India
to more of the world by providing customers with enhanced transit and cut-off times,
increased cargo capacity and faster and more flexible access to the global marketplace.
"FedEx was the first air express company to establish direct international air routes in
India and commitment is to provide customers with a superior international express
service, with maximum connectivity by air. The package of service enhancements
announced today will help do this--no matter where a small, medium or multi-national
company is located in the country."
Air Cargo : Commitment to Indian Businesses
FedEx Corp. has launched a new flight from Bengaluru establishing direct connections to
Europe and the Middle East and the U.S. With this, Bengaluru becomes the third Indian
gateway for FedEx joining Delhi and Mumbai and enhancing FedEx customers’ access to
the global marketplace. The launch of the new flight from Bengaluru, coupled with the
domestic service expansion, broadens market opportunities for customers doing business
locally as well as internationally by leveraging the reach of the FedEx worldwide
network. With the share of Europe and America in India’s exports at 23.8 per cent and
16.5 per cent respectively between 2008 and 2009, the new flight from Bengaluru opens
up immense possibilities for South Indian companies trading with Europe, the Middle
East and the US. Key enhancements offered by the new flight include Later pick-up times
for customers by up to 90 minutes in Bengaluru. Some of the services offered by either
FedEx that include air freight, small package and courier services are less than any other
mode.
Strength of Fedex :
FedEx Express, a subsidiary of FedEx Corp., connects areas that generate 90% of the
world's gross domestic product in one to three business days with door-to-door, customs-
cleared service and a money-back guarantee. The company's unmatched air route
authorities and infrastructure make it the world's largest express transportation company,
providing fast, reliable and time-definite transportation of approximately 3.1 million
packages to 215 countries each working day. FedEx Express employs more than 137,000
employees and has approximately 50,000 drop-off locations, 649 aircraft and
approximately 42,000 motorized vehicles in its integrated global network.
FEDEX will start operating a domestic express service in India by offering deliveries
from 14 cities to 50 others.. This will place it in direct competition with DHL’s BlueDart,
Deccan 360 and the soon-to-be-launched Quick Jet. Currently FedEx only provides a
domestic service in three other countries: China, Mexico and the UK.
Rank Top 10 Air Cargo Operators Globally Top 10 Logistic Companies
Globally
1 South West Airlines DHL
2 Federal Express UPS
3 Emirates Sky Cargo FedEx Corporation
4 Virgin Atlantic Deutsche Bahn AG
5 Nippon Cargo Airlines Kuehne + Nagel
International AG
6 Japan Airlines TNT
7 Continental Airlines CEVA Group
8 Lufthansa Cargo C.H. Robinson Worldwide
Inc
9 Singapore Airlines Panalpina World Transport
(Holding) Ltd
10 Cathay Pacific Agility Logistics Co.
Neither Go Cargo nor Kingfisher Xpress are pure cargo offerings; their business model is
built around delivering cargo that is carried on the same planes on which they ferry
passengers. Another Delhi-based low-fare carrier Spice Jet Ltd has similar cargo
operations and carries 120 tonnes of cargo a day. Jet Airways (India) Ltd, which runs
India’s largest airline, is in initial discussions with FedEx Corp. for a dedicated cargo
airline that it wishes to set up either as a joint venture or in alliance with the multinational
logistics firm. G.R. Gopinath, founder of India’s first low-fare carrier Air Deccan, has
launched Deccan Cargo and Express Logistics Pvt. Ltd, that flies cargo airlines in India
and international destinations under the brand name Deccan 360.
Conclusion
There is a promising future for the air freight industry, with business continuing to grow
faster than the passenger sector's. Shipments to, from and within Asia, especially China
and India, will be the main drivers of this growth but African business will develop
firmly too. These factors are encouraging the huge investment by the New & Existing
Global Players in this rapidly growing Sector .