Logistics

Operations Strategy, Term VI

MDI Gurgaon

Group A-02
Chirantan Banik
Sahil Modi
Susovan Ray
Syed Azharuddin
Vivek Pundlik
Vignesh S

11P016
11P038
11P055
11P056
11P059
11P060

Agenda
Overview
Inter-relationship between transportation
and logistics
Forms of Logistics Operations
Outsourcing of Logistics Activities
Indian Logistics Industry - Growth drivers
Issues in Current status of logistics
infrastructure in India

Overview

Definitions
Council of Logistics Management (1991) defined that
logistics is
part of the supply chain process that plans, implements,
and controls the efficient, effective forward and reverse flow
and storage of goods, services, and related information
between the point of origin and the point of consumption in
order to meet customers requirements
Logistics:
the entire process of materials and products moving into, through,
and out of firm

Supply-chain management
larger than logistics
links logistics more directly with the users total communications
network and with the firms engineering staf

Logistics is Customer-oriented operation management

Components of Logistics System

3 closely linked
components: Logistics
services, Information
Systems and
Infrastructure/Resources

Logistics services comprise

physical activities and nonphysical activities

Information systems provide

essential data and
consultation in each step

Infrastructure comprises
human resources, financial
resources, packaging
materials, warehouses,

Interrelation Between
Transportation and Logistics

Transport Costs and Goods Characters in

Logistics
One-third to two-thirds of the expenses of enterprises
logistics costs are spent on transportation
National Council of Physical Distribution Management
(NCPDM), estimates the cost of transportation, on
average, accounted for 6.5% of market revenue and
44% of logistics costs
Components of logistics costs based on the estimation
from Air Transportation Association show that
transportation occupies 29.4% of logistics costs
Transport afects the results of logistics activities and
influences production and sale
Improvement of higher operation costs can get better
efects, therefore logistics manager must comprehend
transport operation thoroughly

Role of Transportation in Service Quality

It is more complex than carrying goods for the
proprietors
Needs high quality management
With a well-handled transport system goods can be sent
to the right place at the right time in order to satisfy the
customers demands
It brings efficacy and bridges the gap between producers
and consumers
A good transport system brings benefits not only to
service quality but also to the company competitiveness

Forms of Logistics
Operations

Supply Chain Management

It is a concept for handling production procedures in
broad sense
It can be divided into three main activities: purchase,
manufacture and transport
Information flow is an important system which links
the whole supply chain from supplier and
manufacturer to consumer
Unimpeded information flow could lead increase
operation accuracy and promote competitiveness
Product flow proceeds through the production process

Reverse Logistics
It has developed rapidly to provide industry
competitiveness, promoting customer service and
resources recycling
Two main reasons for rise of reverse logistics:
Globalization of markets
Policies for environment protection

It could help improve the service levels of companies

and reduce the costs of producing processes
More and more companies want to build their
reverse logistics systems, but limited by professional
knowledge on logistics management
Thus third-party logistics service provides an option
to small to mid-size companies

Maritime Logistics
It plays an important role in international freight
It is cheap and has high carrying capacity, vital for
transportation of particular goods such as crude oil and grains
It takes longer time and strongly afected by weather

Operation of maritime industry is of three main types

Liner Shipping: The business is based on the same ships, routes,
price and regular voyages
Tramp Shipping: It has irregular transport prices, unsteady
transport routes and schedules. Usually delivers goods like dry bulk
cargo and crude oil
Industry Shipping: Its main purpose is to ensure supply of raw
materials. Hence, it sometimes needs specialized containers, such as
high-pressure containers for natural gas

Land Logistics

It extends the delivery services for air and maritime from airports
and seas
Main transport modes are railway transport, road freight transport
and pipeline transport

Railway transport
Advantages - High carrying
capacity, lower influence by
weather conditions, lower energy
consumption

Pipeline transport
Advantages - high
capacity, less efect by weather
conditions, cheaper operation
fee, and continuous conveyance

Disadvantages - High cost of

essential facilities, difficult and
expensive maintenance, lack of
elasticity of urgent demands, and
time consumption in organizing
Road
railwaytransport
carriages
Advantages - cheaper
investment funds, high
accessibility, mobility and
availability

Disadvantages - expensive
infrastructures, harder
supervision, goods
specialization, and regular
maintenance needs
To improve the land transport in
efficiency and reliability, a
revolution of transport policies
and management is required, e.g.
pricing

Air Freight Logistics

It provides the delivery with speed, lower risk of damage, security,

flexibility, accessibility and good frequency for regular destinations
Its disadvantage is high delivery fee
Research data show that the freight transport market keeps growing
Future pattern of air freight logistics is cooperative with other
transport modes, to provide a service base on Just-In-Time, and doorto-door

Express Delivery
It involves more frequent delivery of materials, at the right
time and at the right place in the production process
The characteristics of express delivery are:

door-to-door service
Efficiency
Traceability
Just-In-Time (JIT)
Growing various delivery demands

E-Commerce
It is the future trend of business
It brings many benefits for both companies and
consumers:
It expands the market area from regional to global
It uses electronic techniques instead of traditional paper works,
which promotes the industries efficiency and competitiveness
It will impact on transport system due to the increased trips
It might reduce the number of warehouses and the stock cost.
Therefore the prices could be lowered

New concerns such as internet security, transport

impacts and door-to-door services should be
addressed
A healthy and successful e-commerce
environment is determined by the optimal
logistics operation

Outsourcing of Logistics
Activities

Need for Outsourcing

Efficiency in logistics activities indispensable to
efective business operations
Globalization driving higher level of complexity in
logistics network
Importance of distribution and transportation in
maintaining sustainable competitive advantage
Companies seeking to concentrate on core
activities

3PL Third Party Logistics

Advantages of 3PL operators
Greater expertise
Flexibility for wide geography
Lower operating costs
Better quality of service

Outsourcing to 3PL has followed two trends

Increasing range of services outsourced
Increasing volume of traffic outsourced

Key challenge for 3PL operators Overcoming clients concerns

about relinquishing control
Outsourcing of logistics is expected to increase

4PL Third Party Logistics

Assembles and manages resources, capabilities
and technologies of own organization with those of
complementary service providers
Best of breed approach
Creates unique and comprehensive logistics
solutions that cannot be achieved by any single
provider
Complete solution; Centralized point of contact

Logistics in India

Growth Drivers

Acceleration in industrial production and consumption

Population growth; Expanding upper-middle and middle classes
Expected growth: 15-20% per annum
Heavy outsourcing by automobile/telecom etc. Demand for focused
Supply Chain services
Change in tax system (VAT to GST) Should create national market for
many goods and services
Entry of MNCs in various sectors

Challenges in Indian Logistics

Logistics infrastructure lags behind global peers
Planned investment cannot support 2.5 fold expected increase in
traffic by 2020
Current freight infrastructure Networks built before independence
Railways
- Over 80% of current network built
before independence
- 1951-2007: 10 fold growth in traffic;
1.4 fold growth in track length
Roadways
- 200 fold traffic growth; 8 fold
increase in track length
- Highways Only 15%;
Two/Four lanes 0.5%
- Paved road density
940km/1000sq.km; Japan
21000 km, UK 7050 km
- Highways are structurally
inadequate

Waterways
- Limited investments after
independence
- Loss of key routes following partition

Challenges in Indian Logistics

Logistics flows are highly concentrated
7 corridors connect 15 high growth clusters
These 7 corridors account for 50% of freight traffic
These clusters are expected to account for 60% of GDP growth in next
10 years

Challenges in Indian Logistics

Indias freight traffic relies excessively on roads

This is despite the fact that 2/3rds of freight travel being more suitable for rail and waterways
65% is bulk; 75% transported over distances more than 400km
Roads are cheapest only for non-bulk and <400 km
Over reliance on roads leads to increased costs, high energy consumption and adversely
impacts environment
Reasons
Railways: Oversaturation of important networks, high tarifs, poor terminal quality, less flexibility
of wagons, uncertain transit times
Waterways: High turnaround times at ports, inadequate depths at ports, inadequate infrastructure
for Coastal Shipping
- Rail/Waterways potentially cheaper than
roads

Challenges in Indian Logistics

Inefficiencies leading to $45 billion each year

Indias spend as percentage of GDP is 13%,

higher than that of US
This is despite the fact that cost of labor is
significantly lesser in India
Road transport is 30 per cent more expensive in
India
Rail and Waterways are 70 per cent more
expensive in India
Transit times are higher owing to lower average
speeds
- Causes: Waiting times at toll stations, freeze in
truck traffic during day, port turnaround times,
low priority accorded to freight trains, poor

Way forward

Change in modal mix

Increase investment in railways by reallocating from roads

Building the right networks to support modal mix change

Building Rail DFCs, Expressways, Coastal corridors, last mile links
Creating enablers to maximize efficiency Logistics parks,
standardized containers, IT assets, human resource etc.
Improve rail and road maintenance and existing equipment
Formulating and implementing a national logistics policy

THANK YOU