Lt january 2014

I

LogisticsTimes www.logisticstimes.net

PERSPECTIVE 3PL ERA

NDIA'S MOST VALUED LOGISTICS MAGAZINE

January 2014

HIGHWAY ENCOUNTERS IGNORANCE IS BLISS?

EVENTS SILENT PICTUREHOUSE

` 50 Logistics Times

Available on

Tablets & Smart Phones

Looking Back Looking Ahead

2013 was littered with serious macroeconomic flaws. Can 2014 be any different giving players in logistics & supply chain space to flourish?

MEDIA PARTNER

Logistics Times

CONTENTS

All about Transportation, Distribution & Infrastructure

Volume 4: Issue No.9 * January 2014 Editor in Chief

Raj Misra rajmisra@logisticstimes.net

Editor

Ritwik Sinha ritwik@logisticstimes.net

Sub Editor

Neha Richariya

Photographer

Mohit Malik

Designer

Kausar Syed

Circulation & Distribution

Kamruddin Saifi

Legal Advisor

Rakesh Garg

Our Bureau Mumbai

Rahul Kumar rahul@logisticstimes.net

Bangalore

B Shekhar shekhar@logisticstimes.net N Raju

Chennai

raju@logisticstimes.net Sudhir Kumar

Hyderabad

sudhir@logisticstimes.net

Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Pawanexh Kohli Principal Advisor, Cross Tree Prof. Samir Srivastava Associate Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Management Ramesh Kumar Member, National Committee on Supply Chain & Logistics, Govt. of India

Marketing & Sales Kalika Singh Ph: 011-22478538-39, 9891007542 Email: advt@logisticstimes.net Printer & Publisher Deepa Misra for

E-77, West Vinod Nagar, Delhi -110092 Tel: +91 11 22478538-39, Fax: +91 11 22471764, Mumbai: +91 9322811550 Printed at Personal Graphics & Advertiser Pvt. Ltd. Y -22, Okhla Industrial Area-II, New Delhi-110020

www.logisticstimes.net

24 COVER FEATURE

LookingBack Looking Ahead Edit Note

08

News Briefs

10

Education

49

CurtainRaiser

50

21

QUICK CHAT Vinod Asthana MD, CRWC

46

HIGHWAY ENCOUNTERS

Signage Ignorance

42

PERSPECTIVE 3PL Era

52

EVENT Silent Picturehouse

MEDIA PARTNER

EDIT NOTE

8

Hopeful, Yes! Confident?

Though most of the companies typically follow April-March business cycle, the change in calendar is no less an important point to take a stock of things. In terms of making a sense of our immediate historical base and the possibilities which may evolve over the next 365 days. All of us indulge in it subconsciously, even at the individual level.

Continuing with our tradition of indulging in some kind of crystal gazing, our first edition of the new year is once again back with its ‘Looking back, looking ahead’ feature.

About thirty senior representatives of the logistics and supply chain industry have presented their views underlining the significance of the year which has just signed off and the kind of stage it has left for the business drama of 2014. A key point which emerges from these observations is: 2013, by and large, has been a non-eventful year.

This expression is hardly surprising given the fact that in macro-economic terms, 2013 has been a troublesome year on many fronts. The GDP growth dipped to sub- 5 percent level, manufacturing output has almost witnessed a continuous slide, inflation continues to be in a high stratosphere and so is the interest rate, petroleum prices revision have been frequent (in a spiraling sense, of course) and the Indian currency tumbled almost in a free fall style against the US dollor before recovering giving some relief to policy makers and industry stakeholders alike. On the positive side, probably the only noticeable factor is a little surge in exports. You may also include the little bull dance at Dalal Street.

So the moot point is: has a non-eventful year left enough fuel for a full throttle drive in 2014 since we believe in the theory of continuity? Many noted economic pundits and senior leaders of India Inc. are of the opinion that 2014 would be better than 2013 for the simple reason that latter was a spell of lows (though some hard-nosed critics have firmly put forth this disturbing proposition that GDP growth rate between 4 to 5 percent is now a new normal) and things could only improve from there. Logistics industry representatives too are hopeful of new year offering better growth prospects.

But are they confident about it too? Its difficult to say. There aren’t straight answers to that as you would notice in the responses expressed in the cover feature section. There are conflicting voices on the proposition of the new government at the center getting into a pro-active mode on policy front soon after it takes over, nobody is sure if there would be any action on GST implementation, the big question mark still remains if relaxed FDI norm in multi-brand retail will finally bring the players on the ground, nobody is sure of any sanity returning to fuel pricing regime and to top it all, if manufacturing output would improve significantly (figure for November 2013 released on 9th January pegs the number at -2.4 percent). But then as a respondent point out, the logistics industry too has become more resilient thanks to the drubbing in recent years and is looking for ‘season agnostic’ formula to stay afloat. And probably it is this spirit which will result in many interesting stories unfolding in 2014.

I will take this opportunity to wish all our readers a great year ahead.

Waiting for your response Ritwik Sinha ritwik@logisticstimes.net LOGISTICS TIMES August 2011

NEWS BRIEFS

10

Approval of Integrated Mission for Horticulture Development In a significant development, the Cabinet Committee on Economic Affairs recently approved a Mission for Integrated Development of Horticulture (MIDH) for implementation during the 12th Plan with an outlay of Rs. 16,840 crore, a centrally sponsored scheme. Out of this, state governments will be contributing a sum of Rs. 866 crore in the states where the National Horticulture Mission (NHM) subscheme is implemented.

Implementation of MIDH is expected to achieve a growth rate of 7.2 percent in the horticulture sector during the 12th Plan, besides generating skilled and unskilled employment opportunities in rural and urban areas.

The scheme will cover all States and Union Territories (UTs) of India. While the NHM scheme will be focusing on 18 states and UTs, the Horticulture Mission for North East and Himalayan States (HMNEH) scheme will cover all States in the North East and Himalayan region of the country. While these schemes will be focusing on small and marginal farmers, National Horticulture Board (NHB) scheme will address developmental issues on commercial horticulture through entrepreneurs involving institutional financing. The National Bamboo Mission (NBM) will address developmental issues on bamboo, whereas the Coconut Development Board

(CDB) schemes will focus on development of the coconut sector.

The strategy of the MIDH will be on production of quality seeds and planting material, production enhancement through productivity improvement measures along with support for creation of infrastructure to reduce post harvest losses and improved marketing of produce with active participation of all stake holders, particularly farmer groups and farmer producer organizations.

The Mission will cover about 4.5 lakh hectares under rejuvenation of senile plantation, 0.18 lakh hectares under protected cultivation besides bringing about 11 lakh hectares under new horticultural crops along with establishment of about 19,000 post harvest management and market infrastructure.

Six laning of Vadodra-Surat section The Cabinet Committee on Economic Affairs last month gave its approval for six laning of the VadodraSurat section of NH-8 including construction of a new four lane extra dosed bridge across the Narmada River and two eight lane flyovers in Gujarat under the NHDP Phase V. The cost is estimated to be Rs. 503.16 crore including Rs.17 crore as the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities.

The total length of the road will be approximately 6.7 kms. The project is covered in the district of Bharuch.

The main objective of the project is to expedite the improvement of infrastructure in the state of Gujarat and also in reducing the time and cost of travel for traffic, particularly heavy traffic, plying between this stretch of the Vadodra-Surat section. The upgradation LOGISTICS TIMES January 2014

of this stretch to six lane standards will ensure smooth and safe traffic flow and substantial gain in terms of reduced Vehicle Operating Cost (VOC) and reduced travel time.

This stretch will also help uplift the socio-economic condition of this region of Gujarat. It will also increase employment potential to local labourers for project activities.

NEWS BRIEFS

11

LOGISTICS TIMES January 2014

NEWS BRIEFS

12

CII Business Confidence Index Indicates Turnaround In an indication of early signs of revival in business sentiments, CII Business Confidence Index (CII-BCI) rose sharply to 54.9 in the third quarter (Oct-Dec) from 45.7 for the July-September 2013 quarter. The pick-up in BCI for the current quarter comes as a major relief for the economy which has been braving the onslaught of the slowdown for the last several quarters and awaiting the return of growth. However, the survey also strikes a note of caution as the downside risks to growth have still not abated and supply side bottlenecks continue to pose a problem.

“With some positive signals emanating from the global economy, which finds a resonance in our improved export performance and is causing our Current Account Deficit to decline, we believe that the slowdown in the domestic economy may have bottomed out in the second quarter and the trend could reverse henceforth”, observed Chandrajit Banerjee, Director General, Confederation of Indian Industry.

The 85th Business Outlook Survey is based on the responses from over 174 industry members. Majority of the respondents (63 per cent) belong to large-scale firms, while 12 per cent are from medium-scale firms and 25 per cent were from small-scale. Further, 65 per cent of the respondents were from manufacturing sector while 35 per cent were from services.

Despite the fact that subsidies are likely to cross the budgeted target by a wide margin, and the impending Lok Sabha elections pose upside risk to government expenditure, as much as 53 per cent of the respondents expected fiscal deficit to remain below 5 per cent mark, broadly in line with the government’s target. While welcoming this, Banerjee cautioned that “we need to be careful about the upward risk to fiscal deficit amid the scenario of weak economic growth translating into sluggish tax collection and the growing chances of disinvestment falling well short of target”.

The survey reveals that 58 per cent of the respondents expect an increase in their sales in the third quarter of 2013-14, much higher than 45 per cent who witnessed the same during the previous quarter. As regards the input cost in the current quarter, majority of the respondents also expect it to increase. The silver lining, however, is that the percentage of respondents who expect expenses on raw materials, electricity, and wages & salaries to increase has declined significantly from the last quarter.

Against the backdrop of an expected improvement in sales growth and moderation in inputs cost, majority of the respondents (43 per cent) expect an increase in their LOGISTICS TIMES January 2014

Business Confidence Index

Expected GDP Growth in 2013-14 (% of Respondents)

Expected WPI Inflation in 2013-14 (% of Respondents)

pre-tax profit margin in the third quarter, much higher than 31 per cent in the previous quarter.

Another positive signal emerging from the survey is that an improvement in capacity utilization is expected in the current quarter. As compared to 56 per cent respondents experiencing less than 75 per capacity utilization in the second quarter, only 45 per cent respondents expect capacity utilization to fall below 75 per cent in the third quarter. Underlining the need for continuing policy intervention to step up investment, 53 per cent of firms did not expect their capacity to expand in the current quarter.

What is also encouraging is to note that the export prospects look positive in the current quarter whereas imports are seen to be restrained. 53 per cent of firms expected their exports to increase in the current quarter, up from 49 per cent in the previous quarter. Similarly, 56 per cent of the respondents didn’t expect their imports to increase during the current quarter.

There are some areas of concern emanating from the survey. Majority of the respondents (42 per cent) felt that GDP growth in the current fiscal would settle in the range of 4.5-5.0 per cent, whereas only 28 per cent expected it to be in the vicinity of 5.05.5 per cent.

High inflation is another major area of concern which is exerting a downside risk to growth,. The largest proportion (41 per cent) of respondents expected inflation to cross 7 per cent mark during the current fiscal, which is a matter of serious concern.

13

LOGISTICS TIMES January 2014

NEWS BRIEFS

14

Five More Port Projects Appraised

The Public Private Partnership Appraisal Committee (PPPAC-a high level committee of the Government of India) recently appraised five proposals in the Port Sector. These projects will now be recommended for grant of final approval by the Cabinet Committee on Economic Affairs (CCEA). The Ministry of Shipping

will submit a Cabinet Note to the Cabinet Committee on Economic Affairs for the purpose. The projects include: development of 4th Container Terminal at Jawaharlal Nehru Port Trust (JNPT) on DBFOT- Design, Build, Finance, Operate and Transfer basis; development of Container Terminal at Ennore Port Limited (EPL) on DBFOT; development of Multi-purpose Cargo at Mumbai Port Trust (MPT) on DBFOT; development of Mega Container Terminal at Tuna Tekra at Kandla Port (KPT) on BOT; and development of Container Terminal at Diamond Harbour at Kolkata Port Trust (KoPT) on BOT. These projects are proposed to be awarded in the current financial year by various major ports for implementation under Public Private Partnership (PPP) mode. The proposed projects will create an additional capacity of 150 MMTPA with an investment of about Rs. 17630 Crores.

Last year, the Ministry of Shipping had conveyed approval for 16 projects against a target of 30 and the Major Ports have already awarded these projects. These awarded projects include six under PPP and 10 under non-PPP mode and they are expected to add a capacity of 89 MMTPA with an investment of about Rs.4200 Crores.

Industrial output declines The downswing in the industrial production is showing no signs of let up as the latest output figure released by Ministry of Statistics has shown a decline of 2.1 % in the month of November.

According to a government release, ten (10) out of the twenty two (22) industry groups in the manufacturingsector have shown negative growth during the month of November 2013 as compared to the corresponding month of the previous year. As per use-based classification, the growth rates in November 2013 over November 2012 are: 0.7% in basic goods, 0.3% in capital goods and 3.3% in intermediate goods. The consumer durables and consumer non-durables have recorded growth of (-) 21.5% and 2.5%r respectively, with the overall growth in consumer goods being (-) 8.7%.

Some of the important items showing high negative growth during the current month over the same LOGISTICS TIMES January 2014

month in previous year include ‘HR Sheets,’ Molasses’, ‘Sugar , ‘Boilers’, ‘Aluminium Conductor’ , ‘Telephone Instruments (incl. Mobile Phones & Accessories)’ ‘Earth Moving Machinery’ ‘Gems and Jewellery’ ‘Computers’ ‘Sugar Machinery’ and ‘Polyester Chips’ [(-) 28.0%].

Some of the other important items showing high positive growth are: ‘Ship building & repairs’ ‘Wood Furniture, Air Conditioners, Plastic Machinery (incl.

Moldings Machinery)’ and ‘Tractors.’

NEWS BRIEFS

15

LOGISTICS TIMES January 2014

NEWS BRIEFS

16

Essar Ports enters into Concession Agreement Essar Ports last month announced that its wholly owned subsidiary Essar Vizag Terminals has entered into a concession agreement with Visakhapatnam Port Trust for development and operations of three iron ore berths at Visakhapatnam Port on BOT basis over a Period of 30 years. These three berths (two outer harbor berths and one inner harbor berth) will have a combined capacity of 23 Million Metric Tons per Annum (MMTPA).

The project will be developed at a cost of Rs. 1200 Cr. over a period of three years. Essar Ports will take over the two outer harbor berths soon and the operation and upgradation of the terminal will happen simultaneously.

Vishakhapatnam port handled 12.3 million tonnes of iron ore during FY13 and this traffic is readily available for these berths from commencement.

Commenting on this, Rajiv Agarwal – Managing Director, Essar Ports said: “We will develop the terminal to create one of the most competitive, modernized, world class facilities. This project will significantly increase our third party cargo handling capacity and

also boost our presence in the east coast. Iron ore export traffic at Vizag will increase substantially due to the competitiveness of this terminal which will facilitate industrial growth in the region.”

This project will increase Essar Ports’ total capacity for iron ore export on the east coast to 39 MMTPA with four highly mechanized iron ore berths (three in Visakhapatnam Port and one in Paradip Port).

GATI-KWE shifts to e-billing

Gati Kintetsu Express (GATI-KWE), the Express Distribution and Supply Chain Solutions provider, a subsidiary of Gati, recently launched a new project ‘Green & Clean Billing’. Under this project, the company has taken up an initiative to offer its customers e-bills linked to e-POD. A socially conscious company, the aim of this initiative is to eliminate the need to physically print, deliver and maintain a hard copy of the bills and thereby help sustain the environment. Also, with the implementation of the new platform, customers can view their outstanding bills, LOGISTICS TIMES January 2014

payment history and can print the statements, invoices and POD copies at any time they require.The new e-billing is available with statements linked to POD copies by bill no.

Bills would be emailed to multiple people at the customers end. Payments can be made through RTGS to enable reverse e-utilization as well.

Commenting on the initiative, Diljeet Singh - Chief Sales and Marketing Officer at GATI-KWE said, “With internet and e-mail penetration very high now, this new offering is more convenient to our customers and gives a boost to our existing green projects.”

NEWS BRIEFS

17

LOGISTICS TIMES January 2014

NEWS BRIEFS

18

Online shopping hits record high in 2013 Factors like spiraling inflation and slower economic growth failed to dampen the online shopping trends of Indian consumers and have witnessed a significant change in 2013, recorded 85% rise in online trends over the regular shopping than last year (65%), revealed a research paper released by ASSOCHAM recently.

“The increasing internet penetration and availability of more payment options boosted the e-commerce industry in 2013. Besides electronics gadgets, categories like apparel and jewellery, home and kitchen appliances, lifestyle accessories like watches, books, beauty products and perfumes, baby products have witnessed a significant upward movement in last one year”, said D S Rawat, Secretary General ASSOCHAM. The coming year 2014, looks more promising for the online industry, Rawat added.

While releasing the ASSOCHAM paper on “Online Shopping - Review & Outlook in 2013” Rawat said, India’s e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $16 billion in 2013 and is expected to touch whopping $56 billion by 2023 which will be 6.5 per cent of the total retail market.

As per feedback received by 3,500 traders and organized retailers in Delhi, Mumbai, Chennai, Bangalore, Ahemdabad, Kolkata etc in this regard, the buying trends during 2013 have witnessed a significant upward movement due to aggressive online discounts, rising fuel price and wider and abundant choice etc.

The survey reveals Mumbaikars have left behind all other cities in India shopping online. While Delhiiets ranks second, Kolkata ranks third in their preference for online shopping in 2013, adds the survey, The reasons for online shoppers number multiplying are because of factors such as home delivery which saves time, secondly ’24×7′ hours shopping with ease and availability factors for product comparisons.The survey further adds that many small companies have also established online stores for group buying, which enable customers to obtain goods at a discount so long as a certain number of people make the purchases. The LOGISTICS TIMES January 2014

survey highlights that 35% of regular shoppers are in 18-25 age group, 55% in 26-35, 8% in 36-45 and 2% in the age group of 45-60. 65% of online shoppers are male as against 35% female.

Seeing this bold consumer behavior, more companies are collaborating with such daily deal and discount sites.

Even traditional retailers like Shoppers Stop, Westside and Pantaloons are looking at the online shopping space for growth, adds the paper.

Most products bought & sold off through online comprise Gift articles (58%), books (42%), electronic gadgets (41%), railway tickets (39%), accessories apparel (36%), apparel (36%), computer and peripherals (33%), airline tickets (29%), music (24%), movies tickets (26%), hotel rooms (20%), magazine (19%), home tools and products (16%), home appliances (16%), toys (16%), jewelry (15%), beauty products (12%), health and fitness products (12%), apparel gift certificates( 10%) and sporting goods (7%), adds the survey.

not the sole focus

❞

Central Railside Warehousing Company (CRWC), a subsidiary of public sector warehousing major Central Warehousing Corporation (CWC), recently notched a major distinction when it was awarded 'mini-ratna' status. Vinod Asthana, MD, CRWC underlines the significance of this milestone in an exclusive conversation with Ritwik Sinha. Edited excerpts: You have been granted the prestigious ‘mini-ratna’ status. How significant is this achievement?

CRWC is one of the youngest companies which has been granted the ‘mini-ratna’ status. It is barely six years old. And this has been done on the basis of our performance in past five years – its financial position, growth rate, business plan, diversification initiatives, etc.

The government must have felt that since we have done well on all parameters, this company must be given more freedom to forge new partnerships and take on more

projects under PPP route.

company.

How would you explain the physical numbers which testify that you have been performing well since your formation?

We have been increasing our warehousing capacity by more than 20 percent. Our earning growth has also been in the range of 24 percent annually. In terms of terminals, we are reaching close to 20 units throughout the country and we have crossed the capacity of over 3 lakh metric tonnes which is not a small number. And we are a profit making and dividend paying

So this ‘mini-ratna’ status is probably a vindication of the fact that you are on a right track.

Yes, absolutely. We are very much on the right track. Now we have a ten year corporate plan (2012-22). And the milestones which we intend to achieve during this period is rooted in our strategy to look at the enlarged scope of our core warehousing activities. Like logistics parks, cold chain operations, running cargo express trains with railways - these are the new domains where we plan LOGISTICS TIMES January 2014

QUICK CHAT

❞Capacity addition is

21

QUICK CHAT

22

only focus.

to have a presence. Today railways mostly carry bulk commodities.

We now plan to get into non-bulk, high value segment. Railway board is supporting this idea of running cargo express from point-to-point on a scheduled basis. We are also working on a plan to set up logistics parks on some strategic stretch of Dedicated Freight Corridor (DFC).

We are also mooting creation of cold chain hubs which should be linked both with the railways and the road network.

What is the topline you expect to touch at the end of the present fiscal?

I think, it would be in the range of Rs. 125 crore.

You spoke of a ten year corporate plan. But tell me, in next two years, how will your expansion and diversification plan pan out?

Next two years would clearly be action filled. We are taking up projects with IFFCO, some ports, Inland Waterways Authority and are also looking at locations where LOGISTICS TIMES January 2014

new freight terminals can be put up.

These projects will take twothree years to materialize.

Some of the joint ventures are being processed while some agreements have already been inked.

Recently we signed an MoU with Inland Wa t e r w a y s Authority for setting up first river port on Brahamputra in Assam. In next four-five years, we would certainly be in a position to double our capacity.

And we are specifically looking at undertaking projects which will reduce logistics cost for the end users. Capacity addition is not the

DFC is slated to get ready around 2017-18. I would like to get a sense from you, how much of your involvement is going to be there in precise terms?

DFC is the largest railways logistics project the government has ever undertaken in this country. The issue of the number of freight terminals along the line of DFC is being discussed in which we are also involved. We have identified two locations – one each in eastern and western corridors. We are in touch with DMIC and the Rajasthan government to create one big logistics park at Marwar. The land has also been identified. On eastern corridor, Mirzapur has been identified as the location where we would like to set up

another big logistics park. We are in discussion with the UP government and DFC. The Marwar project would be spread across 160 acres and the unit at Mirzapur would come up on a land parcel of 100-120 acres.

COVER FEATURE

24

LOOKING BACK

LOOKING AHEAD

In circa 2013, economy recieved serious drubbing on several paramters. But going by the verdict of noted economic pundits and leading figures of India Inc., 2014 could well offer better prospects.

In comprative terms at least if not exactly promisng a complete turnaround. Do leaders of the logistics and supply chain industry also share this guarded optimism?

Logistics Times finds out...

LOGIST LOG LOGISTICS ISTICS ICS TI TIMES MES Jan Januar January uar a y 22013 2014 01 014

Near

Malcolm Monteiro SVP & Area Director DHL Express South Asia

stagflation marked the Indian economy in 2013, and the sliding rupee added to the woes faced by industry. Industry is definitely hoping for a better 2014, with improving global macro-economic conditions which will keep driving up export growth. Exports have shown signs of recovery since 2013 due to a weaker rupee and improved conditions in key

markets.

I think a big lesson from 2013 was that despite the government trying to introduce a host of traditional and innovative measures, economic growth remained elusive.

The moral here is that sustained growth and investment in India cannot be achieved by stop-gap measures, but require comprehensive reforms on several fronts such as infrastructure, regulatory reform, and reduction in transaction costs.

The big challenge that emerged in 2013 was the management of the burgeoning Current Account Deficit (CAD), and the only sustainable solution to that is India’s competitive participation in global production networks. We in the logistics industry have a big role to play in connecting India with such global production networks, and we look forward to a positive and strong engagement with government to make this happen.

In a recent forecast, IMF lowered the growth projection to 3.75% in 2013 from 5.7% estimated earlier. The forecast for 2014 is about 5% and we expect that the boost exports have got in the second half of 2013 will lead for a faster growth. A stable government will hopefully lead to policy formulations conducive to business growth in the latter half of 2014, leading for faster growth.

The

sector witnessed slow but sustained growth in the movements of goods across sectors like auto, commercial vehicles, heavy engineering and capital goods.

Steady implementation of large infrastructure projects despite tight credit situation and fewer policy reforms also contributed to sector growth.

Vineet Agarwal The sector has benefitted from Managing Director TCI the newly formed regulatory authority to hasten road projects, creation of infrastructure debt fund for large infrastructure projects, allotment of Rs. 5000 crore to NABARD for

â?›

25

In a recent forecast, IMF lowered the growth projection to 3.75% in 2013 from 5.7% estimated earlier. The forecast for 2014 is about 5% and we expect that the boost exports have got in the second half of 2013 will lead for a faster growth. agri-storage facilities. It, however, eagerly awaits GST implementation to enable creation of the common market and permit free and unimpeded movement of goods and services across the country.

Despite slow recovery of the economy, TCI has delivered stable performance and managed to hold on to market share with improved margins. Our strategy to reduce exposure to high-credit freight business and compensate it with the Express, and SCM business benefitted us. However, low pass through of frequent hike in diesel price to customers impacted our margins .

In 2014, TCI will continue to focus on express and supply chain business and service high growth verticals like pharmaceuticals, retail, auto, etc. We expect nonconducive policy environment like indirect tax regime, widespread industry fragmentation, high credit cost and lack of adequate and robust infrastructure to remain key challenges in the coming year too. The sector will also remain dependent to a large extent on the improvement in transport infrastructure due to lack of warehousing and cold chain infrastructure.

At

the onset of 2014, the logistics industry is still reeling from a phase of low growth due to the economic situation. The strong headwinds faced by the Indian economy such as slowing GDP, spiraling WPI and CPI indexes, falling investor confidence in domestic and FII, consistently high inflation rate coupled with high Anil Kanna interest rates for commercial MD, Blue Dart borrowings, widening trade deficit, cost escalations like increase in diesel and petrol prices and minimum wages, dollar appreciation and the rupee depreciation leading to high operational costs have greatly impacted the sector.

India’s GDP that hovered around 8% in 2010-11, fell below 5% in 2013 and is expected to decrease further down to 4%. The express industry growth is largely dependent on LOGISTICS TIMES January 2014

COVER FEATURE

26

the growth of the manufacturing and services industry. For instance, when the GDP grew more than 8%, our topline growth was beyond 20%; now with the GDP growing at less than 5%, the situation seems grim. In September 2013, we also introduced the CAF (Currency Adjustment Factor) mechanism to combat the highly volatile currency fluctuations.

Despite these challenges, Blue Dart’s market share increased to 52% in the organized air express segment and 14% in the organized ground express in Q2-13, a commendable increase making us the undisputed market leader in the domestic express industry. This itself indicates that Blue Dart is doing better than the industry average.

We will continue to align our growth plans with the e-tailing industry which is showing a strong growth and consumer

❛

Majority of the larger 3 PL operators have participated in bids last year which to a large extent have just been dipsticks by SCM groups of various organizations to check if their current rates are competitive. C & F agents still seem to rule the roost with their local “jugaad” capabilities which are perceived as responsiveness by customers.

acceptability. We will continue to increase our reach into Tier II & III towns and offer a wider spectrum of services to the sector such as COD (Cash on Delivery), MPOS mechanism (Mobile Point of Sale) etc. Besides, we will continue to offer our dedicated services to various sectors like Blue Dart’s Temperature Controlled Logistics (TCL) to support the lifesciences and healthcare industry, biotechnology and CRO (Clinical Research Organisation) activities, Critical Express for sectors like Travel (Passports), Hospitality, Legal, Government etc., and Time Definite Delivery for the banking and financial services industry.

Sustainability will also see a renewed focus at Blue Dart in 2014. As part of our social responsibility that addresses various sustainability issues and supports initiatives under the pillars of GoTeach (championing equal education opportunities), GoGreen (Environment) and GoHelp (Disaster Management Response), we will continue to reach out to various communities and make a difference to many lives as well as the environment.

Blue Dart and DHL will continue to draw on each others’ strengths through collaboration and sharing of knowledge and best practices that make it a formidable unified team in the eyes of the customer. DHL’s market leadership in international air express complements Blue Dart’s established domestic strengths and unique infrastructure, to provide customers with a complete spectrum of LOGISTICS TIMES January 2014

distribution services including air express, freight forwarding supply chain solutions and customs clearance through the combined DHL group companies (DHL Express, DHL Global Forwarding & DHL Supply Chain).

The

macro economic performance YTD FY13-14 has by and large been one of gloom, tightening the purse strings and looking at every cost through the microscope.

Needless to say, 3PL service providers and logistics players at large have been at the forefront of this oncoming battering Vikram Mansukhani ram and have had to find National Operations ingenious ways of dealing with Head, DIESL spiraling input costs in terms of manpower, land, rentals and infra. Majority of the larger 3 PL operators have participated in bids last year which to a large extent have just been dipsticks by SCM groups of various organizations to check if their current rates are competitive. C & F agents still seem to rule the roost with their local “jugaad” capabilities which are perceived as responsiveness by customers. Year 2014 also does not seem to be very different from 2013 at least until the political impasse is resolved and a “change” government is in the driver’s seat. Implementation of GST seems to have been on a passing wish list of a progressive few and has been put on the back burner for now.

Industry stakeholders need to see the value that organized 3 PL operators bring their operations in terms of compliances, scalability, trained and reliable workforce and a partnership approach. It is now for the CEOs and CXOs to clearly decide if they would like 3 PL service providers to manage their supply chain or to only be a filter between their organization and the by-products of running these operations (landlords , fleet owners / operators , licensing authorities). For those who are not keen to outsource their SCM to established 3PLs it would always be a tough decision to make a switch from the C&F to a 3PL as perceived cost benefits would never be quantified till the brand is compromised in some way. In such a scenario , 3PL operators will have to showcase their effective utilization of space and manpower within the warehouse , optimize utilization of vehicles and ensure that they are not being held responsible for issues that they are not directly responsible for which customer are quite keen to pass on consequential losses. It is again going to be survival of the lean mean delivery machine.

January 2012, I had written that disquiet was being overridden with a doggedness of purpose; that we were witnessing the maturing and the growing up of India, not only in the business sphere but also in our social

In

27

landscape. We celebrated more of this in 2013 and I can see an amalgamation of moods and tempers as we head into the new year. I had then, also written that the coming XIIth Plan, the government would allocate appropriate focus on strengthening the country’s supply chain. This may have Pawanexh Kohli Chief Advisor been late in its coming but NCCD is now assured, especially in the agri-business sector. The business of agri-logistics can expect intelligent application of technologies being incentivised by the government with a mega scheme having been launched in December 2013. This centrally sponsored scheme by the Ministry of Agriculture extends till 2017, and the largest share of its budget is allocated to strengthening supply chain and market links for perishable food products.

I saw 2013 as the year when the logistics sector and its user base re-evaluate their strategic methodology and this has resulted in most of them having leaned towards the understanding that short term realisations, or lack thereof, had blinded them to the core fact – that this trade is inherent and intrinsic to any growth, or the stunting thereof! Logistics has taken a step towards partnering in growth and in wealth creation; it is no longer to be viewed merely as need fulfilment. I can only wish this consciousness rollerballs across leaderships as I sincerely believe it to be the prime logjam to our national development.

Surprisingly, all through 2013 we saw no sharpening in the insights offered by market researchers. A spate of white papers and studies were repetitive of poor perceptions with secondary outputs and tended to perpetuate fallacies – specially in the cold logistics sector. There is clear disconnect between desk top research and the primary business, though this did not really detract from various developments.

The previous three years witnessed INR 940 crores of PE investment in agri-logistics and cold-chain enterprises. This was despite high valuations ranging 15-20 time EBIDTA multiple. This is not only very leading but telling about what one can expect in coming years in this sector. The only holding back is the limited experience and human capacity in this sector. This at time makes the deployment narrow in the opportunity context.

The close of 2013 was overcome with heightened awareness on the political front, and of course the pending general elections. In this interim a few important developments in the logistics sector have gone largely unnoticed. One of these was the start of the largest Inland Waterways delivery systems for the country. NTPC’s plant at Farakka commenced receiving coal which is transhipped onto barges

at SandHeads in the Bay of Bengal. This historic initiation is a game changer in logistics development and will trigger more than is perceived today.

The coming year should see special steps to promote multi-modality and unitisation of cargoes. This has obvious implications on infrastructure and working styles and profitability. Prepare for a decade long change in this direction. The shift towards easing of regulatory bottlenecks as they exist in domestic and international movement will

❛

All through 2013 we saw no sharpening in the insights offered by market researchers. A spate of white papers and studies were repetitive of poor perceptions with secondary outputs and tended to perpetuate fallacies – specially in the cold logistics sector.

be hastened. Faster clearances, simpler tracking and ease in compliance would be the change factors to push in the coming year. Expect also the development of a national policy on cold-chain, specially related to agricultural produce.

The

supply chain and logistics industry performed reasonably well under pressure in 2013. There were numerous challenges last year, right from cost escalations and business slowdown to managing ever-increasing collection cycles. But, to the industry’s credit, it has come out of it all Vineet Kanaujia by demonstrating a remarkable VP (Marketing) amount of resilience.

Safexpress The logistics industry in India is growing at a fair pace. To support the industry further, government needs to take substantial measures which augment the current growth rate and bring about holistic development of our industry. Some of the major initiatives expected by us from the government in 2014 are infrastructure development, setting of standards & accreditation procedures for the industry and simplifying complex tax & land classification laws to give a fillip to the logistics industry. If these measures are taken by the government on priority in the coming year, then we can expect the Indian supply chain industry to achieve global standards in the near future.

LOGISTICS TIMES January 2014

COVER FEATURE

30

â?›

On the logistics and warehousing front next major revolution is expected with the implementation of GST. This initiative will remove state barriers and bring efficiency along with economy of scale.

We are planning a number of initiatives for 2014. A major initiative for Safexpress in the coming year would be to augment IT integration across all business processes of our firm. We will also concentrate upon continuing our infrastructure development drive in a big way next year, but with an enhanced focus on tier 2 & 3 cities. This will include setting-up new offices, logistics parks and transshipment hubs across the country. Also, in 2014 we intend to launch a few innovative training programs for our employees as well as industry.

In 2014, supply chain & logistics would be in focus more than ever due to the industrial shift that India is witnessing. Rapidly changing business dynamics coupled with the entry of big international firms would lead to further re-structuring of the supply chain industry. Also, 2014 will witness significant expansion of industries like pharmaceuticals, retail and manufacturing in India. This would give rise to more integrated supply chains having better services, automated technology alongside efficient storage & handling systems. So, the coming year will bring in plenty of challenges as well as opportunities for the industry, and it could prove to be an interesting year for those who are willing to innovate.

The

year 2013 witnessed a tremendous surge in the e-commerce space with a marked increase in online purchasing by the Indian consumer. This is a tremendous opportunity for e-commerce supply chain providers and distributors in the coming years.

The current e-commerce market in India is at a very nascent Vikas Anand, COO stage and is miniscule in size DHL Supply Chain compared to USA and China which are the largest e-commerce markets worldwide.

As far as the future is concerned, I envisage disruptive technologies such as 3D printing to play a key role in changing the logistics landscape globally. This technology is, however, still in its infancy, but those supply chain companies that venture early into this space, will definitely LOGISTICS TIMES January 2014

reap enormous benefits.

From a specific India point of view, the implementation of GST will have a significant and far reaching impact on the logistics industry. It will move India into an integrated market place where large organizations, both local and MNCs, will ensure supply chain decisions are based on relevant factors such as supply and demand considerations, and not tax requirements.

I can also foresee an increased use of technology, such as voice picking, put to light, coupled with efficient Warehouse Management Systems being adopted, leading to further improvement in productivity. The eventual integration of Transport Management Systems and Warehouse Management Systems will provide efficient end to end visibility and will be increasingly demanded by most customers in India.

In

spite of economic slowdown, logistics and warehousing business registered growth (although at a slower rate) during the first half of 2013.

The Indian logistics market for the first two quarter of the year 2013 continued to see automobile, FMCG and retail as the prime occupiers of Chitra Sinde warehousing industry.

President The recent relaxation of FDI Gati Kinstetsu Express regulations in the single brand and multi brand retail is also expected to create substantial demand for logistics and warehousing services across the country.

With a future that is seemingly bright, the Indian logistics industry is certainly on the edge of change. Much of its success will depend on various aspects that directly influence it. Currently, the industry may be viewed as one that is defined by dynamic trends, sustained by rapid industrial and economic growth.

The Indian transportation and logistics is driven by strong fundamentals and consistent demand, the strong Indian economy in general and the logistics sector in particular, are seemingly well-positioned to sail through turbulent global waters.

Infrastructure is back bone of industry and rising investment, rapidly evolving regulatory policies, mega infrastructure projects and several other developments in recent times have driven the Indian logistics market, simultaneously gradually overcoming infrastructure-related constraints and logistics-centric inefficiency.

On the logistics and warehousing front next major revolution is expected with the implementation of GST. This initiative will remove state barriers and bring efficiency along with economy of scale.

31

❛

India will go in for general elections with the process starting in mid-March.

It means that we are not going to see any significant policy changes in the 1st half of the year.

During the year 2013 Gati achieved growth in its revenue and amalgamated five wholly owned subsidiaries of the company to strengthen the balance sheet and also brought in operational and cost efficient initiatives through better synergy in the business. Gati strengthened its infrastructure during the year and also invested in expanding the current facilities. Gati-kwe retained its market leadership in the road express segment, despite the economic challenges of rising fuel cost leading to rise in operational costs. The e-commerce solutions business of Gati has grown two fold establishing its own delivery network spread across 4000 remote locations catering to Tier 2 and Tier 3 cities. Gati’s Cold Chain division – Gati Kausar has invested in adding new refrigerated vehicles to the existing fleet.

Going forward we are bullish on growth from retail and e-commerce industry. Supply chain will remain key area of focus for our EDSC business. Gati Kausar is also entering the cold storage business and is in the process of setting up chain of cold storage units across major metros.

Looking at way forward - promotion of fleet exchanges, creation of an efficient market place to bring together customers, consolidators and fleet owners from the largely unorganized transport sector could bring in some waste reduction and better utilisation of assets

At

the dawn of a new year, the world is in the midst of several epic transitions. Economic growth patterns, the geopolitical landscape, the social contract that binds people together, and our planet’s ecosystem are all undergoing radical, simultaneous transformations, Sameer Khatri generating anxiety and, in MD (India) many places, turmoil. From an UTi economic standpoint, we are entering an era of diminished expectations and increased uncertainty. In terms of growth, the world will have to live with less. To understand the implications of this, consider the following: If the global economy grew at its pre-crisis pace (more than 5% per year) for the foreseeable future,

its size would double in less than 15 years; at 3%, doubling world GDP would take about 25 years As for uncertainty, the world’s four largest economies are currently undergoing major transitions. The US is striving to boost growth in a fractured political environment. China is moving from a growth model based on investment and exports to one led by internal demand. Europe is struggling to preserve the integrity of its common currency while resolving a multitude of complex institutional issues. And Japan is trying to combat two decades of deflation with aggressive and unconventional monetary policies In the midst of all this, India will go in for general elections with the process starting in mid-March. It means that we are not going to see any significant policy changes in the 1st half of the year. Were we to give between 3-5 months for the new government to settle down, it would mean we would probably see the 2014 go by without any significant economic impact from the new govt.

Having said that, the Indian economy entered 2014 in a better condition than what it was six months back. Inflation is down, and so is the trade deficit. The deficit ending March 2013 stood at USD 88.2 billion or 4.8% of the country’s GDP. This is expected to come down to USD 40 billion ending March 2014 or 2.2% of the GDP. On the export front, even though exports declined for the first six months, for the eight month period of Apr-Nov, exports grew 6.27%, from USD 191.95 billion to USD 203 billion.

It is estimated that we are likely to hit our export goal of USD 325 billion for this fiscal.

To summarise, India would need to be watchful of the tapering off of the easy money policy in the US. Vice Chairman Janet Yellen is likely to take up the position of Fed Chairman from 1st February and has already said that she would want to wind down the USD 85 billion bondbuying program which the US has used to keep inflation at all time lows. Last time the US had signaled that it was tapering down its QE policy, the rupee had fallen to its all time lows of nearly 69 to the dollar. To this add the possibility of East Asia’s declining share of world output.

Washington’s strategic pivot to Asia seems to have fizzled – but has the world’s economic pivot as well? In 2013, East Asia’s share of global output was expected to drop, relative to those of the United States and the European Union. For years, investors have been borrowing cheaply in the United States and elsewhere to capture high rates of return in East Asia. But a midyear signal from the Federal Reserve that the days of easy money are numbered has sent the East Asia’s emerging markets tumbling, while manufacturing looks to be returning to Western shores. With China possibly cooling as well during its process of economic and financial reform, is this the opportunity that India has been waiting for and finally decide to take the lead?

Only time will tell!

LOGISTICS TIMES January 2014

COVER FEATURE

32

2013

had all the ingredient of not being such a good year for the logistics industry. GDP was down to 4-5%, IIP was falling quarter on quarter, inflation was just not getting tamed and the rupee was nose diving resulting in a sharp rise in fuel cost.

But, there was one silver lining.

Sanjiv Kathuria The e-commerce industry or to CEO, DotZot be more precise the e-retailing companies were growing at a phenomenal pace. 2013 was the first year when e-retail made a dent in the fortunes of the courier companies.

The volumes being generated by e-retailers were now large enough for this space to become very interesting and the logistics industry woke up to its immense future potential.

The realisation also dawned on the courier companies that the e-retailers had a set of unique needs and requirements which were different from what the traditional courier processes and IT systems could fulfill. And thus 2013 saw the advent of specialist logistics companies like DotZot, focused exclusively on E-retail.

And the best part is that this story has just begun. The current market size in merchandise value of e-retail in India is estimated to be $2 bn which is a miniscule 0.25% of the total retail market in India. Comparative figure for China is 6% and the US 9%. Thus the potential for e-retail to grow in India is huge. Making this potential a credible reality is the availability of all the right elements- 100 million net users growing to 300 million by 2015 and 14 million on-line buyers increasing to 38 million. Add to that the huge 15-44 years population of India which is the key target segment for e-commerce.

So what does e-retail have in store in 2014 from the perspective of Logistics? (a.) While e-retail will continue its high growth trajectory, the tier 2 and tier 3 towns will contribute to this growth much more than the top 20 cities. (b.) Drop shipping will increase as more and more e-retailers move to the market place model. This means there will be a shift from inventory based model to a seller led model. This would require logistics companies to invest in technology and resources. (c.) New models of delivery and pick up will start emerging.

PUDO ( Pick-up and Drop-off points) which is quite prevalent in the matured markets is likely to see its advent in India.

Looking

behind, some of the challenges faced in the Year 2013 includes: Taxation Challenges- Complex Tax structure is the reason why manufacturers and distributors implement

LOGISTICS TIMES January 2014

â?›

The current market size in merchandise value of e-retail in India is estimated to be $2 bn which is a miniscule 0.25% of the total retail market in India.

the most economical options in warehouse and logistics, ignoring the Quality and Efficiency. Currently, companies handling manufacturing and distribution, design their supply chains to reduce operational cost, based on the prevailing tax structure. Companies set up factories in excise free zones Suunil Dabral to avoid paying CENVAT. At Country Head times this strategy increase the SSI SCHAEFER transportation cost of goods.

Increased transportation and hence the lead time of delivery, negatively affects the agility of the supply chain. India’s tax structure is very complex, with products typically being taxed twice: once by central government and then by respective state governments.

Transaction taxes (import, manufacture and sale of goods, services) have a direct, tangible impact on the cost of goods or services.

Cold Storage Industry- India, on an average, produces 85 million tonnes of vegetables and 45 million tonnes of fruits annually. But India's overall contribution in world trade has been quite dull as the country loses about 30 to 40 per cent of its fruits and vegetables due to improper cold storage facilities. On the positive note, the introduction of certain direct tax benefits related to warehousing/ supply chain management were provided in the past budget, which facilitated reduction in the duties and taxes related to the goods/machinery used in the cold stores.

Looking ahead warehouse Automation is an upcoming technology in India. Due to considerable investment, implementation of automation is limited only to the large players. SME’s in India should make use of the tax benefits given to them and introduce at least some degree of automation into the warehouse processes. Concessional import duty on installation of mechanised handling systems and pallet racking systems in warehouse would promote mechanisation.

Anticipation on the implementation of GST would definitely reduce tax burden by bringing all the current taxes on goods and services under one roof encouraging

the manufacturers to focus on matters like facelift of the warehouse, upgradation in technology and automation in material handling. It is desirable that the year 2014 upturns the investment in the infrastructure of the country through infrastructure debt funds and various credit enhancement schemes. Liberal and investor friendly foreign direct investment policy should be implemented.

Exactly

52 week ago, I was writing for “looking back & looking ahead” for year 2013. So how was the year 2013? In the last year, while we may not have achieved any significant milestone but we have certainly travelled quite a bit ; our industry and colleagues have braved slowdown, cost Amit Kumar (Head Logistics) cutting, job losses and volatility Indo Arya in economy and still stayed contextual which is remarkable.

Last fiscal, undoubtedly, was tough but that made us more matured and resilient. It also laid a strong foundation to achieve many milestones in the current year.

I am super excited for year 2014, I can list down 2-3 defining factors that we will see taking shape in this year.

We will witness supply chains graduating from being WMS focused to TMS focused (Transport Management System) which has been already delayed in Indian context and us, professionals, know that the kind of value it will unlock to our value chain in terms of vendor selection, capacity control, carrier selection, load planning, hyper-connectivity and this will certainly lead to improved bottom lines and connecting silos in supply chain from suppliers, factories, warehouse, distribution centre, retailers into one thread.

Compliances have always been constraint for our industry and I am sure administration will do necessary to evolve compliances to support our business. While I am sceptical for GST but I hope there will be some advancement - may be at state level to address issues related to compliances.

During

Pradeep Panicker CCO, DIAL

the last calendar year 2013, cargo witnessed a turn around after almost two years of stagnancy. This revival started somewhere around June 2013 and it has been steady thereafter. Delhi has witnessed a growth of 6.5% tonnage compared to calendar year 2012.

The growth has been primarily driven by stabilization of the US

❛

33

Delhi has witnessed a growth of 6.5% tonnage compared to calendar year 2012. The growth has been primarily driven by stabilization of the US and European economies and growth in domestic cargo during the last four months.

and European economies and growth in domestic cargo during the last four months.

In the year 2014, there is a possibility of sustained moderate growth. Post national election if India does get a stable government we might see a bit of further acceleration in the cargo growth in the second half of 2014.

Air

cargo segment displayed some signs of turnaround in Oct /Nov 13 with a growth of 3.5 percent.

Yet the over all performance has not been satisfactory if we consider last five years growth pattern. Yet looking at the brighter side of the coin, pharma was clearly the air cargo commodity of the year.

Bharat Thakkar Former President 'Pharma' has made the largest ACAAI differential between actual and chargeable weight: 18% vs 9% for other cargo, and its USD-yield was on average 49% higher than the general cargo yield in the relevant markets.

Europe is still by far the most important pharmaceuticals outbound market, generating almost 60% of the worldwide traffic with a 9% growth over 2012. Europe strengthened its position in the segment, as its shipments also showed a characteristic we seldom see these days, viz. a stable yield year-over-year! The second biggest region in this segment is now South Asia. However, whilst that area’s volume increased with a healthy 12%, its yield (-5.5%) trailed the worldwide trend. Asia Pacific as an origin showed most growth, albeit from a very small basis still. Of the 10 largest intraregional markets, MESA-Africa grew 7% revenuewise. Consumers in the Asia Pacific region absorbed 22% of all pharmaceuticals shipped by air worldwide, directly followed by North America, which swallowed 21%. Asia Pacific buys its 'Pharma-by-air' almost exclusively from Europe, whilst North America buys 2/3 from Europe and 1/3 from MESA. India's pharmaceutical exports grew at less than half the pace it did in 2012, hurt by delays in drug approvals and LOGISTICS TIMES January 2014

COVER FEATURE

34

products recalls in some of its key markets. In dollar terms, pharmaceutical exports rose 9.9% in fiscal 2013, compared with 23% a year earlier.But a weaker Indian currency — which fell about 18% over the last year — meant that pharma exports grew 25% in rupee terms and first time has seen single digit growth . MOC target to achieve USD 25 nillon by 2014 has been shifted to 2015 India has become the pharmaceutical manufacturing hub of the world. Pharmaceutical product or health care product will thus be a significant chunk of air cargo in 2014 and beyond ,as due to slow down expected recovery will be slow during the year and expected overall improvements could come during the third quarter and after.

Like

I wrote in this column last year: looking back, I think we've been struggling to come of age, to find our place in the sun.

We've seen our 'developing' economy moving steadily ahead while the great 'developed' western economies faced the grim prospects of shrinking.

Perhaps we are seeing a natural Sanjay Aggarwal correction in the order of CMD, Dev Bhoomi things as economies based on hegemonies yield way to those with natural resources and surging demographic advantages.

Here in our country we've seen the discontent with political systems, which will become worse if the political system doesn't quickly evolve to facilitate this natural surge for independent growth. No quarters will be given for pandering to vested interests in the international scheme of things; those old models are fast becoming obsolete.

Specific to our own field of cold-chain, we saw the great debate on FDI in retail, and its conclusion with uncertainty still wrapped in its tail. Looking back we see the political feelings vindicated by the AAP phenomenon. Old political systems are now being forced to take note and make course corrections.

Looking ahead, I see a strong confident India that is going to put its house in order and claim its pre-eminent position as contender for the leading economy of the world. In concord with the story of growth, business trends will embrace liberality. We will move away from the 'socialist' burdens and become more and more of an open economy with enlightened views on labour and business in general.

All this will come from the economy's demand for better politics that does not pander to any vested interests and clarifies the way ahead rather than obfuscate. I see an independence growing in the country’s business domains like organized retail, where FDI is losing practical importance as domestic chains try their hand and continue to strengthen LOGISTICS TIMES January 2014

❛

The business environment in India is truly dynamic. In the last two decades the Indian economy has undergone massive transformation and as it stands today it is one of the most talked about economic set up in the global context. their positions. A new found confidence is dawning that we can do it ! The burgeoning mind-boggling scale of the emerging Indian Market promises to find many-an indigenous fortunes and world-class companies. The tables are turned ! It is the Indian companies that will decide how much opportunity they would share with companies from the ‘developed’ countries. We are experiencing the meteoric rise of a super-power by means of intrinsic strength alone.

Our political systems will have to race to come to par with the country’s aspirations and self-evolving objectives.

It

will not be unfair to say that the year that just went by was definitely a tough year in terms of doing business as companies across geographies struggled to keep pace with the growth targets that they had envisaged at the start of 2013. The consumer sentiment was at an all-time low thereby affecting demand for products Lars Sorensen and services and thus having CEO-Damco, SA a negative influence on many organizations’ sales volumes. The global economy, however, continues to remain sluggish even though governments and their financial institutions are taking up measures to control unemployment and generate local demand. Having said that, we still believe that global growth is expected to improve modestly in 2014 primarily supported by a slow recovery in the U.S. and Euro Zone and continued growth coming from emerging markets.

As far as the Indian story is concerned we believe that the business environment in India is truly dynamic. In the last two decades the Indian economy has undergone massive transformation and as it stands today it is one of the most talked about economic set up in the global context. High level of service led exports, low cost manufacturing, sourcing clusters, huge domestic demand for almost every product be it fast moving consumer goods (FMCG), consumer durables, cars, high end luxury accessories, & convenience food chains have contributed to Indian economy becoming what it is today.

❛

2014 will not see much growth in the freight volumes (air / ocean) but contract logistics will continue to grow on a rate of 10 – 15%.

The country continues to present unique and robust opportunities for future growth. But having the potential and actually achieving it are two different things. And this is where the biggest challenges lie for India. India's constraints in infrastructure are obvious. Incremental demand for infrastructure will continue to increase due to economic growth and urbanization. The success stories of the past few years need to be replicated. India has significantly increased highway connectivity as part of the Golden Quadrilateral Highway project; the New Delhi metro was completed earlier than planned. These success stories demonstrate India’s ability to overcome challenges and the ability to continue to do so will be critical for the growth of the economy.

Being a supply chain partner to some of the leading players in the industry, Damco’s business growth is closely linked to how our customers are performing and how the demand for their products is playing out in the market both domestic and international. So while we always try to grow ourselves with our customers, the current downturn poses its own set of challenges in terms of weakening of demand for logistics services by customers. However, logistics players which provide flexibility, visibility and cost effective solutions will deliver in the end. We believe that service providers such as Damco who stay close to their customers and have over a period of time built a strong understanding of their business will be able to provide value to customers even in more difficult times.

The growth in the Indian economy in the coming decade will most likely have major contribution from sectors such as manufacturing and retail. To enable these sectors to contribute effectively to India’s growth the logistics sector will have to offer solutions which provide value to these sectors and help achieve the last mile connectivity.

For example, understanding the rural supply chain and making sure that goods are available in the hinterland areas is becoming increasingly important for most retail players.

With such trends the customers/users of logistics services are becoming more demanding and want customized supply chain solutions which are eventually aligned to their end business objective. This in turn is leading to a gradual transformation in the way the Indian Logistics industry works.

35

Year

2013 was a mixed bag of cheers and tears, but Year 2014 may be considered as the year for the logistics companies. The upcoming year looks to be a decent one for the local logistics industry. As the economy continues to recover from the Great Recession, the transportation industry Reiner A Allgeier will continue to feed off the MD, Schenker India slow but steadily recovering manufacturing and retail markets. Specifically, the trucking and rail companies can expect more moderate growth than the air cargo and water cargo.

As we look to forecast what 2014 will hold for the transportation industry, it’s is equally important to consider what the year will hold for our city and country economically. It is important to remember that the transportation industry is driven directly by the success of retail and manufacturing. This being considered, taking a look at the global, national, and local economy becomes an imperative step in forecasting our transportation will fare in the coming year”.

The outsourcing trends will continue by the companies to focus on their key business and giving the warehousing and distribution activity to a service provider like Schenker because there is a continued demand for value added services.

Development in supply chain are influenced by what customers need and want and the major concerns are associated with short-term availability, cost, and assuring the continued flow of goods and services. 2014 will not see much growth in the freight volumes (air / ocean) but contract logistics will continue to grow on a rate of 10 – 15%.

Consumers

have

unprecedented access to products and services’ information. They are also much more interconnected (networking sites), and have started to play an instrumental role in new product designs.

The new age consumers are very demanding, seeking recognition Shammi Dua and urging to create the lifestyle Head, Logistics they desire – and they want it all AkzoNobel India now.

In 2014, companies will need their supply chains to be consumer driven to be able to sense consumer demand realLOGISTICS TIMES January 2014

COVER FEATURE

36

time and respond quickly. New products and promotions would need to be speedily introduced to market at every opportunity.

‘Freshness’ as an elimination parameter in consumer buying behavior will evidently get extended from perishables to CPG & durables purchases. This will put increased emphasis for right sizing system inventory, and thus will require smaller size batches for production, storage and movement.

Risk management will be high on the agenda too.

Companies would need to have clear (documented) business continuity plans to ensure supplies to consumers without any disruption. Increased use of IT and automation would make our supply chains more visible and responsive.

Also, with rapidly rising input costs, there will be a special focus on creating value by driving out inefficiencies.To achieve above objectives, we would collaborate both within the company, and externally with key vendor partners. This will entail higher shared visibility and aligned performance measures. The more we integrate internally, the more we will be able to differentiate in marketplace.

Excellence in execution of strategies will be essential for success. The champions of winning supply chains in 2014 will be the supply chain officers at the warehouse and production floor level. Many a discerning Logistics leaders would have already prepared plans (and allocated resources) for capability building programs for this workforce.

I

would like to start with a quote from Winston Churchill, “The farther backward you can look the farther forward you can see”.

2013 was one more moderate year from automotive industry standpoint. General inflation, oil prices, downward economic fundamentals and Kalpesh Pathak overall negative sentiments VP (Supply Chain) kept the entire industry on FIAT India toes throughout the year.

Nevertheless looking back farther to Lehman brothers’ crisis onwards, I think Indian automotive industry has

❛

Whosoever gets to form the government, their first priority would be to bring the wheels of economy back on track. So called policy paralysis has to end and new government needs to end era of uncertainty.

LOGISTICS TIMES January 2014

come a long way. What we learnt in this period is: how to sustain in troubled times. Period from 2010 onwards has taught all of us to think different and how to swim against the tides. In my opinion this is a great period which has helped all of us to acquire new skills which will help us to bring new strategies to be better players in the market place. The year started with a tiny optimism that industry will grow at least single digit. When we ended, we realized that it was negative single digit. So overall the year was less than the expectations from business results standpoint.

However certainly we all have learnt a lot and if we look back farther (last 3-4 yrs), I am sure now we all can foresee farther forward that next 3-4 yrs will bring cheer for each one of us.

Right now no one wants to talk about economy knowing that we are going for general election somewhere around the end of first quarter. We don’t know the outcome.

However, one thing is crystal clear: whosoever gets to form the government, their first priority would be to bring the wheels of economy back on track. So called policy paralysis has to end and new government needs to end era of uncertainty. A good US economy sending positive sentiments across the world will help us sustain/grow export in the coming year. Decisions taken by incumbent government to reduce the subsidy bill will certainly help us reduce fiscal deficit provided new government is not under coalition compulsions for populist measures.

In spite of all the challenges even in 2013 the automotive industry has worked optimistically by offering new products and services for Indian customers and in coming year too they will not only continue but enhance this momentum.

The customers would be able to see the action very soon early next month in Auto-Expo.

2013

Ramesh Krishnan

Head (Supply Chain)

Sahara Q Shop

was again a very uneventful year.

The lackadaisical governance had its impact on our industry as well. While there was slight volume growth in domestic business, the contribution and realization remained a big issue.

Great hope was pinned on MNC retail giants coming into India but while the big names are still toying with the idea of entering in India, the divorce of Walmart and Bharti did not leave a buoyant note for logistic

industry.

Western market still has not picked up and Dollar to Rupee conversion continued to a big dampener for import thus impacting logistics industry as well. The initial advantage of high dollar realization in export was mitigated because

39

of tight negotiation by western world to pass that benefit to kick start their slogging economy.

However, looking back e-commerce segment did provide some reasons for cheers. The funding tap opened further with Flipkart leading the pack and astonishing the industry with their ability to draw investor.

However, looking ahead we still hope for GST to be introduced this year. With some decisive government intervention, a few MNC retail giant like IKEA can also commence their inning on the Indian turf which will provide a big boost the logistics industry. Mumbai Airport would probably do us proud and coupled with a possible removal of airport tax could well boost air freight.

From

the supply chain industry point of view, while the past year started with lots of utopian aspirations, it ended with a laundry list of unfulfilled desires due to lackluster liquidity, policy paralysis, unprecedented rupee depreciation and to top it all the political uncertainty in the country. While the plans had Vineet Mehrotra been drawn by companies, and MD, Fonty SCS refined over time for setting a true Hub and Spoke distribution model, it still is a semi-realized / unfulfilled dream for most! Even the forward looking companies, which had gone ahead in procuring the land or building the mother warehouses in anticipation of GST (as one example), held back the final bit of investments required to rack their big boxes and the ones who had racked decided to postpone their MHE procurement. Thus, the work still goes on in more than 80% cases in a manual fashion.

In 2014, I foresee the industry maturing and becoming ‘uncertainty agnostic’. I feel that the companies (who are already partially or heavily invested) would muster the courage to take the final step and bring their plans to fruition. Thus, we will see warehouses-which are more automated; supply chains- which are more integrated, and the erstwhile competitors-more collaborative. Given the view that the supply chain is still a sunrise sector, I expect more individuals and companies to invest and enter the 3PL and allied services. It would be very interesting to see how the resultant market dynamics of this trend would pan out.

Years

come and go but every year teaches us something new. Year 2013 was a very challenging period for entire industry and hence impacted logistics industry as well. In India some interesting trends

observed were: telecom sector was in a sluggish mode and IT & automobile sectors just chugged along. However health, education, retail & food items did well as the buyer’s awareness and life style in metros and Class A & B cities has changed at a very rapid pace.

A big change in buying pattern Sanjay K Nigam of Indian consumer was also Head (Supply Chain) observed from traditional Maraison Technology “touch & feel buying” strategy to “on-line buying”. It is booming since last year and trends indicate its growth will get more robust in the near run. Products ranging from electronic gadgets, consumer electronics ,white goods ,garments, gifts, flowers, grocery items ,medicines, on line education courses, books & professional trainings, holiday packages etc are being sold on line more now as very good hassle free deals and flexible payment terms are being offered by merchants to consumers.

Hence as a logical conclusion, typical supply chain management models have also seen a major change.

Delivery from source of production to door steps of consumers as per the consumer order has taken a dramatic change. Supply chain are being redesigned to meet the requirement of minimum delivery lead time, no minimum order value /quantity ( MOQ),flexible payment options like Cash on delivery (COD),on line payment through credit/ debit cards/net banking etc.

Direct ship to model from source to customer is a key to success along with regional distribution centres. Every logistics service provider has to offer the multiple location and small packet deliveries with cash on delivery option to the customers.

Another key factor is “Return Management” – from picking up wrong/faulty product from customer premises to delivered back to nearest distribution centre and redeliver the replacement unit to customer in the committed lead time by merchant.

Year 2014 appears out to be a very promising year for

❛

In 2014, I foresee the industry maturing and becoming ‘uncertainty agnostic’. I feel that the companies (who are already partially or heavily invested) would muster the courage to take the final step and bring their plans to fruition.

LOGISTICS TIMES January 2014

COVER FEATURE

40

Indian market as lot of government initiatives are being taken on Infrastructure development, encouraging FDI in insurance, health, education & retail sector. Time has clearly come to pull up the socks for logistics industry in investing technology, shared warehousing facilities, micro distribution network to reach farthest part of the country at a very cheap cost and minimum lead time by adopting a robust multi-modal model and engaging local payers ,who understands the local market realities better.

Few

good signals and trends were observed in the logistics sector during 2013. There have been investments in roads, railways, ports and highways and implementation of ICT, many of which have started showing good results. There has been sufficient investment in cold chains, specially related Samir K Srivastava to processed food. A few firms Professor, IIM, Lucknow in integrated logistics business have set up container freight stations and inland container depots. ASSOCHAM has projected value of India's cold chain segment to increase to INR 64 thousand crores by 2017 with a CAGR of around 25 percent. Besides cold chains, logistics parks and air and port cargo complexes, the fields of e-tailing and reverse logistics too have hogged limelight. Investments by the logistics industry are expected to grow 3-4 times in the next five years in the form of technology, office space, people, fleet, warehouses and new processes. Revenues for logistics companies from e-tailing alone are estimated to grow to INR 18 thousand billion by 2020. The Ministry of Road Transport expects the sector to grow by 10-12 percent over the next three years.

It was announced in November 2013 to unveil a risk management system for exports in select ports enabling Indian exporters to access a new green channel customs facility allowing expeditious and hassle-free clearance as well as bringing down transaction costs. The third services conclave in November had special focus on internal reforms and other actions required for enhancing exports in logistic services from India. The Ministry of Railways signed an MoU with CWC and CRWC for developing railside warehouse complexes with provision for direct loading/unloading of wagons. Dedicated Freight Corridor Corporation of India Limited (DFCCIL) completed the acquisition of 82% of land required, spread across nine states and 61 districts. Further, it has complied with social impact assessments as required by the funding agencies and has also awarded its first few major contracts on PPP basis.

LOGISTICS TIMES January 2014

However, the warehousing sector did not grow as rapidly as expected. The intra-state tax regime has been a significant issue for logistics operators and FDI in retail continues to be a contentious issue. The structural and policy issues, low level of application and penetration of ICT, and insufficient skills and infrastructure remain causes of concern. India needs improvements in the legislative framework, changes in the administrative set up and probably an institutional mechanism to develop the logistics sector.

2014 offers opportunities to LSPs in India for developing technology solutions and infrastructure (Mega logistics parks and integrated and modern logistics cum transport centers in PPP format as in Karnataka), as well as providing quick and cost-effective multimodal transportation.

Warehousing, Cold Chain / Cold Storage, Custom Bonded Warehousing and Project Cargo continue to offer strategic growth opportunities. Port containerization, e-tailing and rail based logistics seem to be other major strategic growth areas. India being strategically placed in a thriving trade zone connecting South East Asia and Oceania to Middle East, Africa and Europe has an opportunity to develop itself as a logistics hub. It can develop its RoRo (Roll on Roll off) terminals into regional consolidation and distribution centers for automobiles, container trade and liquid cargo.

The government needs a paradigm shift to move from a regulator’s role to a facilitator’s role. The first and the foremost action could be granting an industry status to the logistics sector. State level regulations related to warehousing, agriculture logistics, and labour laws need harmonization. Focus should be given on increasing the market share of cheaper modes of freight carriage like railways, inland and costal waterways. A unified tariff structure could be formulated to reduce complexities in multi-modal transactions. Focus should be on simplification, standardization, transparency and end-user convenience.

These should be assessed on parameters like ease of registration of business, assets and properties; safety of assets and personnel; management of resources and the number of documents required in different clearances.

Logistics

Aman Khanna

Associate Director Ernst & Young

i n India is at the threshold of a period of strong growth and improved performance. At the same time, it is also exposed to several formidable challenges which can limit achievement of this strong growth. The factors pulling the sector out of its current state of low performance, fragmentation, poor quality of services are increasingly more potent than the structural, systemic issues

41

that have kept it back. Demand from customers of organized integrated third party logistics services is rising very sharply; while demand for such services has been growing for the last several years, the good news is that over the last few years, the service provider landscape is being able to respond by developing cost effective, scaled and integrated solutions that were missing in the past.

The year 2013 was significant in this transition of the Indian logistics landscape from being unorganized, fragmented and underperforming to organized, integrated and efficient.

Large service providers like Allcargo, Gateway Distriparks, JM Baxi, Gati have leveraged organic and inorganic methods to catch up with the fast growing, unmet demand for organized yet affordable services. However, the sector is unique in the fact that what drives growth is subject to relatively short / medium term (yearly / quarterly) realities while what limits growth is more structural and systemic spreading over multiple years. This leads to a situation where only those players who are patient, understand their customers' specific requirements not just as a vendor but a partner (which means being willing to co-invest, share resources etc.) and are able to scale rapidly will survive and thrive in the long run.

The year 2014 is expected to be a bright and prosperous one for logistics sector in India - with the expected improvement in the global economic situation driving demand and the (hopefully positive) change in the political scenario (expected to ease out policy and infrastructure bottlenecks) driving improvement in the supply side, the coming year should accelerate the transformation of the sector into a more evolved state.

Logistics

industry in year 2013 had to tackle lot of challenges like slow pace of improvement in logistics infrastructure, sliding rupee against dollar, and subdued approach of retail multinationals to enter India in spite of opening of FDI in retail and above all global Prof. Akhil Chandra recession touching Europe and Consultant, Logistics U.S majorly. The manufacturing sector showed negative growth adding to current account deficit like never before. On the positive side, logistics demand was sustained by industries like automobiles. aviation, consumer packaged goods, hi-tech, telecom and defence.

Hopefully year 2014 which is election year should bring a stable government ending the policy paralysis and put the logistics industry back to its growth trajectory. The recessionary trends in U.S. and Europe are vanishing and

this shall definitely affect India too changing the gloomy scenario of the past year. FIIs are responding positively to the Indian stock market and the trend shall continue hopefully in year 2014 too improving the market sentiments.

It must be pointed out that warehousing storage, third party logistics (3PL) and logistics parks are the three fastest emerging segments which shall take the Indian logistics industry to new horizons in time to come. With the proposed introduction of a singular Goods and Services Tax (GST), the entire logistics industry in year 2014 and beyond can be assured of a unified tax structure that helps bring down overall costs considerably. Finally, with the passage of the National Food Security Bill, storage transportation and delivery of food grains in large quantities will receive a big boost. Also, with the Pradhan Mantri Gram Sadak Yojana which provides good, allweather road connectivity to unconnected villages, the Indian logistics industry is set to spread its wings wide post year 2014.

In

Ganesh Rewanwar

CEO, Warehouse Bazaar

2013, overall business growth was slow which was reflected in low expansion of business operations into new regions. However, what we saw was a robust demand for companies looking for new warehousing space in the small to medium sizes. This demand was due to reasons such as cost reduction, consolidation and requirement of quality warehouses. We also noticed that many firms are willing to relocate to city outskirts to

reduce cost.

Built up of better connectivity infrastructure will continue to enable this trend in the coming year. Many companies are focusing on expansion in rural markets, which continue to drive Indian economy. There have been significant interests shown for warehousing requirements in non-traditional markets such as Tier III & Tier IV cities or emerging states in India.

On the supply side, we saw good number of entrepreneurs and suppliers interested in setting up new warehouses. We believe that specialized warehouses such as cold storage facilities and warehouses upgraded with automation and Warehouse Management Services (WMS) will continue to be in demand in the coming year. Another trend we foresee in the distribution space is that of vertical integration by existing 3PL players. This will allow businesses to outsource larger chunk of their supply chain operations without incurring significant overhead in terms of vendor management.

LOGISTICS TIMES January 2014

PERSPECTIVE

42

The arrival of 3PL era new normal Third Party Logistics, as the name suggests is outsourcing the logistics & supply chain activities to a different agency/channel/company.

Globally as well as in India among the companies, the earlier trend was to manage the entire supply chain on their own through dedicated resources.But over the years, companies have started outsourcing logistics and supply chain function (which was a non core activity for them) to 3 PL players focussing more on their core area.

Third party logistics (3PL) is obtaining significance all over the world as increasing number of organizations, unable to manage their logistics operations, are outsourcing them to 3PLs. Looking at the Indian scenario, 3PL market is now growing very rapidly with different national and multinational organizations trying to establish themselves. There are three major issues – current extent of usage of 3PL services, major reasons for outsourcing and impact of using 3PL services on business objectives.

Introduction Third-party logistics (3PL) is defined as the warehousing,outsourcing transportation and other logistics related operations to an externa agency/company that were previously performed in-house.

Third Party Logistics is the concept of a single professional logistics service provider managing the complete logistics functions of a company. The concept came into existence from US and other developed economies with the primary objective of bringing down the logistics cost reduction. 3PL proved to be extremely successful in improving logistics efficiency of majority of organizations and quickly gained popularity, spreading all over the world.

A large number of organizations are outsourcing their logistics operations LOGISTICS TIMES January 2014

Divya Prabhat Director, 3SC Solutions

due to different reasons; few of them are listed below: Logistics may not come under the core activities of a corporation.

So, lack of efficiency may occur if it is viewed as a secondary activity. By outsourcing logistics, organizations can concentrate on their core competencies.

Logistics outsourcing can also decrease costs of operations as the 3PL providers derive benefits from the economies of scale and by virtue of running operations and providing utilities on shared cost basis which otherwise may not be available to industries or corporations.

By taking outsourcing route, corporations can decrease their asset, and deploy the capital released for other beneficial usage.

Logistics outsourcing causes better cycle time and delivery

performance which leads to increase in customer satisfaction.

These days, 3PL providers are offering a number of valueadded services like import/ export management,reverse logistics,customs clearance,post sales support, freight forwarding, distribution and so on.

In modern scenario specially in E – COM business as the growth in electronic retailing is taking place at rapid rate, many firms which do not have distribution system rely heavily on the 3PL services for dispatch of the merchandise to the customers.

The Indian Environment

Transportation

The Indian logistics structure consists of road transport industries, railways, air freight industries, intermodal transport providers, ports and shipping industries, as well as 3PL service provider. Their performance is dependent on the state of infrastructure – roads, railways, ports and airports.

Roads & Trucking: The Indian Roadways play an important role in joining the various parts of India. The road network of India is one of the largest networks in the world which is about 3.314 million kilometre. India's road network mainly includes village roads, district roads, state highways,

43

and national highways. National Highways are found everywhere in the country. According to an estimate of the Planning Commission, the roads carried only 11 per cent of goods and 28 per cent of passengers during 1950-51. The proportions increased at 60 per cent for goods and 80 per cent for passengers during 1995.It further went up during 2000 to 20005 and with improved road conditions now share of road transport has increased significatntly.

Express and National highways constitute only 1.4 per cent of the complete road length but carry nearly 40 per cent of all freight moved through the road sector. Reach in the interiors of the mainland is limited with only 48% of the 0.55 million villages being connected with roads.

Rail Transport: The Indian Railway network is a government monopoly and is fraught with hidden inefficiencies. It is the second largest railroad systems in the world covering a route length of 64,015 Kms (200910). This facilitates 6 billions of passengers and over 1 billion tonne of freight movement every year. Using the rail transportation is expensive due to handling requirements and the time and cost involved in pick-up and drop of consignment to and from railway facilities. Currently,

the Indian Railways is improving its services by introducing special freight trains, which provide much quicker transportation time, and giving multi-modal facilities to cut down time required in handling.Now even private operators are allowed to run container trains and manage railway terminals.

Seaports & Shipping: There are 11 major ports that handle the total foreign trade of the country amounting to 545 million tonnes (2012-13). On global standards the facility and infrastructure of Indian ports have got low rating because of lack of warehousing facilities and obsolete handling equipment.

Because of lower draft, the average size of the Indian ports is much smaller than international sea hubs.

Also, most of the Indian sea ports are not efficient in loading and unloading operations which results in longer turaround time of ships which multiples the cost for the shipper by as much as 10-20 percent.

All the factors related to transport infrastructure stated above have adversely affected the logistics network in the country - both in terms of lead-time and costs.

3rd Party Logistics market

At present, the logistics cost around the globe is around $2 trillion. The logistics cost is estimated between 9% and 20% of GDP for any country. The figure is about 13% for India.

The development of 3rd party logistics is growing very rapidly in India but it is still far off from a matured and efficient state.

Moreover, the market is fragmented and there are very few ss service providers who have a revenue base exceeding Rs. 50 crore. According to a survey conducted by Frost & Sullivan, the logistics market in India will be at $120.42 billion by 2014.

India has a huge potential for cost savings if it can reduce its logistics costs from the present level of 13% of GDP to 8.7% (which is also the level in the U.S.). A Logistics Institute Asia-Pacific study estimates that the savings would be about $20 billion resulting in a propective 4.3% reduction in prices of Indian goods globally thereby making them more competitive.

Challenges in the development 3PL market: The main challenge before 3PL service providers is to face the geographic diversity of India which needs varied logistics expertise for each region. The geographic scenario in India is quite diverse along with a varying consumer habit scenario in 28 states. The model required by logistics operation in each state should be such that it helps in the proper storage and transportation of goods mostly sold in that particular state, so it becomes very difficult to have a uniform logistics model.

The 3rd Party Logistics services provider interested in a particular company would have to offer all kind of solutions to meet nationwide requirements of that company.

Another problem faced by 3PL service providers is that proper warehousing and specialized storage facilities are available only in certain part of the country i.e. only in major cities which result in limiting them from offering services across India.

The complex tax structure, corruption rooted to the depth and high bureaucratic control are some other problem faced by 3PL service providers in rendering the best of LOGISTICS TIMES January 2014

PERSPECTIVE

44

logistics solutions for their clients.

The sales tax policy of the Indian government is another issue to be dealt by 3PL service providers in India. At present, the 3PL providers have to build warehousing plants in a number of states to abstain double taxation which results in losing the benefit of the economies of scale.

Getting logistics services from outside will add service tax which had been hiked from 8 % to 10 % in the last budget. Rise in the outlay in service taxes in outsourcing logistics operations is an important factor in deciding outsourcing services. In the changed scenario, it is possible that the firm may go for in-house logistics operations for cost efficiency.

Outsourcing, third party logistics services (3PL) and contract logistics is one and the same thing. It involves the use of external companies to perform logistics functions, which have traditionally been performed inside an organization. A key rationale for outsourcing of logistics functions is the intensified globalization of businesses.

During the last two decades globalisation has led to corporations across the world to progressively source, manufacture and distribute globally making their supply chains very complicated for them to manage. Hence organizations have to outsource their logistics activities to 3rd Party Logistics service providers, who have global operations. 3PL of today provides with their advanced IT capabilities and material handling equipment and transportation service and warehousing facilities provide complete supply chain solutions.

A recent research performed on supply chain management practices in India shows that the opening of Indian economy and globalization of businesses has caused the Indian industry to line up supply chain strategy with business strategy. Usage of supply chain strategies for logistics improvements is increasing in Indian industry – to enhance sales revenue, LOGISTICS TIMES January 2014

to earn more profits, decrease order to delivery cycle time and minimize inventories.

Logistics is therefore emerging as a main driver of competition. Good logistics performance requires a trade off between the need to reduce overall lead times and supply chain inventory, while at the same time capturing economies of scale and improving customer service for enhanced business performance.

Usage of third party logistics services is a strategic decision and hence it is essential to observe and quantify the impact it has on business performance. The goal of involving third party relations is not only cost reduction, but a combination of service improvements and efficient operations.

Results show that the usage of services of 3rd Party Logistics providers has had a strong positive impact on all the three dimensions. The three dimensions were logistics system performance, customer satisfaction and employee morale. About 50 percent of the organizations found that the impact has been positive or very positive in all the three areas of organizational impact. However, 4.5 percent of the respondents showed that 3PL services had a negative effect on employee morale. 3.2 percent of the respondents identified a negative effect on performance of logistics.

These results show that people issues are an important factor to be kept in mind in outsourcing of logistics functions.

Organizations using services of 3PL logistics provider have cited that there is also improvement in financial indicators. – improvement in sale revenues, improvement in working capital, capital asset reduction, production cost reduction, labor cost reduction, return on asset improvement, logistics cost reduction – because of the usage of 3PL services.

User organizations also indicated

that they have been able to improve focus on their core competencies and reduce operational costs at or above expectations. Lastly the use of the logistics service has also helped corporations to bring in more strategic/operational flexibility and differentiation from the competitors.

Conclusion

Evolving business environment has forced corporations in India to focus on their core activities and transfer logistics functions to logistics operations experts.

Globally, the domain of efficient logistics outsourcing consists of freight bill payments, auditing, contract manufacturing and assembly operations, packaging and labelling freight consolidation to name a few, apart from transportation, warehousing and custom clearance. The practices in Indian industry show that the most frequently outsourced activities are warehousing, custom clearing and forwarding, transportation.

Activities such as packaging, fleet management and consolidation are acquiring attention and gaining popularity.

More and more companies are planning to use 3PL services in the future as an integrated set of services rather than for just movement of material.

Advantages of logistics cost reduction, ability to concentrate on the core business, and improving supply chain efficiency are the reason for doing so.

It is clear that usage of 3PL services can help corporations achieve desired results, both in terms of customer satisfaction and logistics cost reduction. Positive results will work as foundation for rise in outsourcing of logistics operations in the short and long-term by current and potential users for improved business results and supply chain efficiencies.

HIGHWAY ENCOUNTERS

46

Ignorance is bliss? No, not at all!

Ramesh Kumar

LOGISTICS TIMES January 2014

'On the contrary, it is fatal. For the vehicle. For the consignment.

Above all, for the truck drivers.

It never occurred to me that they were so ‘ignorant’. Why not, I don’t know.

But bunch after bunch of truck drivers whom I was buttonholing on the highways at dhabas or Indian Oil retail outlets to get a sense out of them whether they can ‘figure out’ what each of the highways/ road signages I was displaying to them were letting me down.

I was disappointed, no doubt.

Almost 40 highways signages that Hena Kausar of Maruti Suzuki graciously parcelled out to me when I requested them as part of my Dhaba Dialogue Initiative before embarking on my 1,000 km Nagpur-Gadchiroli-ChandrapurNagpur highways trip over four days in early December elicited poor response. Out of 200 odd truck drivers I bumped into, hardly 22 of them responded positively.

They could not recognise all, but some, surely.

Why this sudden love for highways signages? Good question.

Sometime in October-November last year (2013), during one of my visits to the office of Automotive Skill Development Council (ASDC) in New Delhi, CEO Sunil Chaturvedi threw a bombshell.

Their dipstick survey of a few hundred truck drivers across India revealed that a majority of them do not have any ‘knowledge’ of highways signages.

“It’s true. No exaggeration,” asserted Chaturvedi and that is when we decided to explore ways and means to find a solution to this challenge.

Since I have not given up crisscrossing the length and breadth of Indian highways even after 21,000 km and continued the driver

connect under the banner of KRK Foundation, I volunteered to shoulder the responsibility of educating them.

I felt that halts at highways dhabas and petrol pumps are my regular touchpoints for my truck driver interaction, carrying 40 signages should not be a big problem.

I believe in collaborative initiative.

Besides Maruti Suzuki, I roped in the services of Rinku Commercial Carriers to ‘sponsor’ the NagpurGadchiroli-Chandrapur-Nagpur highways trip; Indian Oil Corporation stepped in to link me with its retail outlets in this leg where I can halt for interaction with truck drivers who go there for fuel filling. Siddhi Vinayak Logistics big heartedly unzipped their purse strings to give ‘gifts’ in the form of high value and expensive chocolates to the winners among truck drivers who give correct answers.

Significantly, one leading HCV OEM wanting to be seen ‘collaborating’ in this initiative ‘offered’ to give pamphlets containing signages without realizing that a majority of truck drivers can’t read and write. What usage of these ‘pamphlets’? By and large, there seems to be no seriousness. Things are done, just for the heck of it. Sad. This assessment perfectly tallied with what a senior bureaucrat in the Ministry of Road Transport and Highways told me two summers ago. According to him, many business houses showing interest in setting driver training institutes are more interested in ‘grabbing government land’ for some other reasons and not for creating training tracks. ASDC CEO Chaturvedi is also fully in agreement with this perception. “Where is the need for tracks? During my recent visit to the Netherlands, I noticed that

HIGHWAY ENCOUNTERS

47

they train their drivers on regular roads. If they can, why not us?” he asked rhetorically.

Signage Locations

What about the highways signages location and maintenance?

While adequate attention is being paid to ensure the presence of high visibility of road signs, the same cannot be assured of on the state highways. Majority of signages on the road to Gadchiroli stretch (see below) were unrecognisable or unreadable. If so, what purpose these signages serve?

This two lane state highway is situated in the most backward district of Gadchiroli in the state of Maharashtra and the state does not lack funds to pay attention to this critical issue. Not that there is no movement of heavy commercial vehicles (HCVs) on this stretch. There is decent traffic. We, in India, may not be taking these road signages seriously.

But nations desirous of combating highway accidents pays lot of attention. “Standards for maintenance of signs are given in the maintenance standards for the Norwegian Public Roads Administration.

Each year, thousands of traffic signs are replaced along public roads in Norway as part of the maintenance procedure. The signs are washed several times a year, at least along the roads where traffic is the heaviest. ‘’ writes Alena Hoye in “The Handbook of Road Safety Measures”.

Significantly, truck drivers

conveniently say that these signages mean nothing to them. “We know our routes well. Blindfolded we can drive,” is how they put it.

I don’t agree with them. Road/ Highway safety is of paramount importance. Budget allocation at the state or federal level is just not adequate. Monitoring at the lowest level – particularly at the state level because state highways outdistance national highways – is vital. Perhaps panchayat level monitoring/participation will be

worth considering. This will also be a move towards ‘deepening of democracy’ in India.

The writer is the author of 10,000 KM on Indian Highways, Naked Banana! and An Affair With Indian Highways.

He also runs KRK Foundation, a registered Trust, focused on improving the working and living conditions of truck drivers and their families living in remote villages of India. He is reachable at ramesh@krkfoundation.org LOGISTICS TIMES January 2014

TMC Training The two key words in today’s logistics parlance are – Cost Effectiveness and Responsiveness, i.e., flexibility to be able to change/adjust to customer needs. Both the goals are achievable with the application of IT in logistics processes; whether it is transportation, inventory management or warehousing.

There are many such solutions available which can be tweaked to meet individual needs. Just applying or purchasing these sophisticated solutions is not really going to bring about a change; what needs to be done is – Proper Training of Manpower to understand and fully utilize the benefits of these IT applications.

One such application is the Transport Management System – TMS. This software helps in monitoring Activity Based Costing (ABC) and at the same time automate the information flow from Pick to Delivery. It helps to improve transparency of the entire process. Transportation involves picking up the cargo from the point of origin and then carrying through to be delivered to the final customer at its destination point.

The pick- up is generally a manual process; where the customer either calls the transporting company to pick up the cargo or the transport company sends vehicles for pick up on a regular basis. This is a loose loop; TMS helps to register Pick-up Request (PR) into the system, which then fills the details of –

Dr. Veni Mathur Ex-faculty, IIT, Delhi Dean, Million Minds

Location – route planning Time – picking time/schedule Weight – helps decide the vehicle type This captures the Pickup Cost, which is generally difficult to calculate and many a times gets ignored due to lack of training and awareness.

Once the load is picked up it is brought to the HUB, wherein all the pieces collected are provided with PCN stickers generated by the system; enabling full accountability of the load. The inbound operations begin at the Hub, where the TMS decides route, vehcilemanagement and cost management.

The route gets fixed depending upon the destination point of the cargo in question. The type and weight of the cargo will decide the type of the vehicle on which it will be loaded.

A full truck load (FTL) is simple to plan but when the cargo is less than full truck load (LTL); it needs careful planning to adjust it with other loads

also keeping in mind the destination points. In vehicle management loading sheet is also generated.

Along the route touch points are also identified.

The TMS does the Cost Management for the entire route calculating not just Line Haul Costs but also Local Pick-up & Delivery (LPD) costs as well. The LPD costs include loading/ unloading costs, HR/administration costs and transit warehousing costs.

Vehicle costs include running costs, cost of consumables, driver costs, etc. Besides, loss and damage costs are also accounted for in the system along with other hold up costs or cost due to time delays. The system does vendor management and helps to pick out the most cost effective vendor for the purpose of transportation of cargo.

The system captures the entire process up to the point of delivery because Proof of Delivery (POD) and Delivery Run Sheet (DRS) are also logged into the system.

Such state-of-the-art systems are readily available for use. However, to use them effectively a training program is vital to use the system to bring about the much needed cost reduction for any company.

To stay ahead in this competitive environment, the logistics firms need to invest in modern technology and intensive training of their employees.

By doing this the logistics firms can be looking ahead to a bright future.

LOGISTICS TIMES January 2014

EDUCATION & TRAINING

49

CURTAIN RAISER

50

India Aviation 2014 Civil Aviation Industry experts and policy-makers from across the globe will meet again at the 4th edition of the India Aviation Conference on 13 March 2014 at Hyderabad during the India Aviation 2014 Show. It is a biennial event which is jointly organized by Ministry of Civil Aviation, Government of India and Federation of Indian Chambers of Commerce and Industry (FICCI) at Begumpet Airport, Hyderabad to highlight the growing opportunities in Indian civil aviation sector and to provide a platform for deliberating upon the strategies to exploit the sector’s enormous potential.

The conference provides an unmatched platform for the aviation players, all over the world, to debate on diverse topics relating to policy & regulatory regime, emerging challenges & opportunities, international best practices, etc.

It enables the stakeholders to gain practical insights and discuss the challenges during interactive sessions, panel discussions and roundtable debates among policymakers, key government officials and industry experts.

Being firmly established as a key event on the international aerospace calendar, India Aviation Conference provides immense networking opportunities with influential Government officials, key policymakers, leading airport developers, major investors & financial institutions, global experts, corporate leaders, potential customers/business partners, etc. It enables the participants to forge new partnerships & gain competitive advantage during special networking events / gala dinner.

The theme for the upcoming edition is ‘Enhancing Air LOGISTICS TIMES January 2014

Shots from India Aviation Conference 2012 Connectivity’ as the second phase of growth in Indian aviation is expected to come from Tier-II and Tier-III cities (first phase being experienced on account of opening up of airport infrastructure to private sector participation) in the coming years. As per estimates, the non-metro airports presently account for about 30% of the total air traffic, which is expected to rise to 45% in the next few years, representing vast untapped future market potential.

The last edition, India Aviation Conference 2012, received tremendous response from international as well as national aviation industry and was a resounding success. It turned out to be the most stimulating forum for all segments in the civil aviation industry to remove the roadblocks in the path of developing India as a Civil Aviation Hub. With

attendance of over 500 delegates, the conference was instrumental in bringing the world’s leading companies to India, which is increasingly becoming the global base for business negotiations in the civil aviation sector.

The distinguished speakers in the Conference which was held on 15 March 2012 include Ajit Singh, the then Hon’ble Minister for Civil Aviation, Government of India; Tony Tyler, Director General & CEO, IATA; Albert Peter Burleigh, the then U.S. Charge d’Affaires; Yap Ong Heng, Director General, Civil Aviation Authority of Singapore; Dr Nasim Zaidi, the then Secretary, Ministry of Civil Aviation, GoI; Dr Dinesh A Keskar, Senior Vice President – Sales, Boeing Commercial Airplanes; V P Agrawal, Chairman, Airports Authority of India, etc.

EVENTS

52

ICE 2013

The 2013 edition of India’s first cold chain focused show which was organized last month in Agra attracted more than 2000 trade visitors.

The show recorded strong growth in visitor numbers from countries like The Netherlands, the USA, Italy, Denmark, France and Nepal. Delegations and visitors from Maharashtra, Gujarat, Punjab and West Bengal were part of the show.

The partner country for the show was the Kingdom of Netherlands and the event was sponsored by Carrier (Platinum), National Horticulture Board (Gold) while NCCD was the conference Sponsor for Day 1.

WIN INDIA 2013

World’s leading material handling and intralogistics trade fair CeMAT INDIA 2013 was organised at Pragati Maidan, New Delhi last month. The show witnessed participation from over 150 globally renowned brands like Godrej and Boyce, Voltas Material Handling, Maini Material Movement, Kelley Material Handling, Jungheinrich, Silver Lining Storage Solutions, Gandhi Automation, SSI Schaefer, Electromech Material Handling, Exide.

The main attraction of the event was the CeMAT Application Park, a live demo space which was organized as a part of the CeMAT Forum. The idea was to re-create a static warehouse on show floor with certain vital applications/machines used inside a warehouse at the show floor.

EVENTS

54

Silent Picturehouse

Bollywood stars, movie lovers and film enthusiasts walked down the red carpet as British Airways launched the much awaited film extravaganza, ‘Silent Picturehouse’ to celebrate 100 glorious years of Indian cinema. The three day event, which promised its guests to travel the world from their seats, was hosted at Four Seasons Hotel, Mumbai from 16th of December to 18th of December. The event witnessed presence of some of the most prominent names in the film fraternity, including Karan Johar, hosting the gala night! Amongst other luminaries, sizzling Bollywood celebrities, Arjun Rampal, Malaika Arora Khan, Arbaaz Khan, Arjun Kapoor, Mandira Bedi, Chitrangda Singh and Minissha Lamba graced the occasion with their presence.

RNI No. DELENG/2011/39329

Regd No.: DL(E)-20/5380/2014-16