cargo may-2016 cover story

CargoConneCt - May 201616

cover story

CargoConneCt - may 201616

Roadmap foR Logistics

megatRends & oppoRtunities

May 2016 - CargoConneCt 17

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may 2016 - CargoConneCt 17

Indian Logistics Industry has witnessed an exponential growth in the last few years.

If we go by the statistics, the logistics market in India is expected to be worth US$

301.89 billion by 2020. Key initiatives like government’s ‘Make in India’ campaign,

DFC, boost in e-commerce Industry, increasing number of multi-modal logistics

players, development of inland waterways etc., have led to this significant growth.

Ritika Arora Bhola, with the help of experts jots down key megatrends and

opportunities in logistics and related sectors


Logistics Sector: Overview

Indian logistics industry has evolved in last two three decades from a basic transportation service with some value-added service provider to a truly com-petent partner at par with global supply chain standards. Oliver Bohm, CEO, Schenker India Pvt Ltd highlights few megatrends that have benefitted logis-

tics industry as a whole. 1. Make in India - This initiative is excellent news for India. India is the country

which can provide an alternative to China as a manufacturing base is India. We have abundant land, people and unutilised resources. The challenges are infrastructure and Ease of Doing Business. Fortunately the government is focused on the same and the winds of change have gradually started blowing in the right direction and all stalled infrastructure projects are being revived. The country is already witnessing a spike in investments in domestic manufacturing which will have an enormous positive impact on the logistics industry, thereby opening up endless opportunities in domestic supply chain management.

2. Dedicated Freight Corridor – Dedicated Western Freight Corridor from Mumbai to Delhi and Eastern Freight Corridor from Kolkata to Ludhiana, meeting Western Freight Corridor at Dadri, would become the backbone of India freight transportation. Apart from connecting major industrial hubs throughout India, it will make transportation more cost-effective and reduce the turnaround time for our customers. The government is trying its level best to improve railway network and increase the railway freight to reduce the burden on Indian roads which move almost 64 per cent of total freight.

3. Infrastructure Projects - The recent budget has clearly focused on large scale infrastructure development with a slew of incentives. Further improvement in infrastructure like four to six lane highways, new ports, inland waterways, Sagarmala Project etc., will reduce turnaround times and fuel consumption which would result in reducing logistics cost and bringing in efficiency.

4. IT in Logistics Sectors – Information Technology will be the deciding factor in the cutting-edge competition. Faster responses and efficient execution to the ever changing demand of customers will decide the bigger share of pie of the supply chain market in India. GST would be a game changer and industry is waiting for its implementation expecting to transform India into an uniform market.

5. Ease of Doing Business/Political environment – The Government of India has been making sincere efforts to make India business friendly. With further improvements in the Ease of Doing Business and a stable political environment; the logistics industry will certainly thrive with new initiatives.

6. Domestic and Export/Import Patterns – Improvement in the global economic scenario and continued domestic growth will be a major driver for the logistics industry in the years to come.

Agreeing with Bohm, Mark Martyn–Fisher, Managing Director, UPS India, also shares his viewpoints and reiterates, “India is well-positioned to enable and capture the opportunities presented by the following trends:1. Retail e-commerce growth: With the growing internet access and e-commerce,

retailers are reaching customers across markets and geographical boundaries. While domestic e-commerce is at its growth stage, cross-border e-commerce is also gaining momentum, creating new international markets for consumers and retailers. E-commerce is not only receiving heavy investments but also driving online retailers to compete harder on prices, logistics cycles, coverage area, and developing strong domestic as well as international markets. Many online marketplaces have devised solutions to address their last mile delivery challenges. The growth of e-commerce is creating an environment where supply

ImplementatIon of electronIc Data Interchange (eDI)

IntroDuctIon of SIngle WInDoW SyStem by cuStomS

DevelopIng InDIan major aIrportS Into InternatIonal aIr cargo hubS

make In InDIa

DeDIcateD freIght corrIDor

It In logIStIcS SectorS

eaSe of DoIng buSIneSS

retaIl e-commerce groWth

logIStIcS outSourcIng

expecteD ImplementatIon of gSt In the fIScal of 2017-18

revISeD lanD acquISItIon polIcy

globalISatIon

the automotIve mISSIon plan 2016-26

entry of global playerS

IncreaSIng number of multI-moDal logIStIcS playerS

IncreaSIng Importance of jIt & lean logIStIcS

trends & opportunities

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Megatrends and Opportunities 2020

While the logistics sector could be among the primary bottlenecks in driving economic growth, it will also act as a catalyst to realising india’s vision to be a manufacturing hub over the next decade. opportunities for realising this dream will come from a more connected global marketplace and economies around the world.

Mark Martyn–Fisher, Managing director, ups india

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chains are adapting to new models. 2. Emerging market growth: Emerging

market opportunities continue to expand. Over the next 15 years, these markets will represent nearly three quarters of global GDP growth and, thus, increasing proportion of global trade. These markets are gradually creating new hubs and trade

lanes, creating substantial opportunity for international service providers. With increased focus from the global operators, many emerging markets need to focus on building stronger infrastructure and adopting business-friendly policies in order to foster further growth.

3. Logistics outsourcing: Logistics plays a

major role in business strategy. Customers today want to depend on trustworthy expertise in solving complex supply chain challenges. Supply chain management is thus becoming more prevalent. The 2016 Logistics Market Research Report believes that the global outsourced logistics market was valued at over US $760 bn in 2015,

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having grown by almost five per cent in 2015. The growth is primarily driven by increased economic activity and the continued trend in outsourcing logistics activities to third parties.

Meanwhile Vikas Anand, Managing Director, DHL Supply Chain presents a different viewpoint. He states, “Demographic changes and urbanisation can be considered the most influential megatrend. These trends will shape countries and businesses as well as many other industries over the next few decades. The global population is expected to increase from 6.9 billion people in 2010 to 8 billion in 2025, with growth found almost exclusively in developing countries. At the same time, the population in almost all coun-tries is aging. The average age in Germany will rise from 44 in 2010 to 48 in 2025, while the median age in China will increase from 35 to 40 during the same period (UN 2010). This megatrend will lead to rising incomes in the emerging world and rising export op-portunities for life sciences manufacturers. This will be accompanied by a growing de-mand for products and services. Apart from

population growth and aging, mankind will witness an unprecedented migration from rural to urban areas.

By 2025, the share of people living in cit-ies, globally, is expected to increase to 58 per cent from 52 per cent in 2010 (UN 2011). This shift will have direct consequences for the supply chain industry. Cities are also the place for modern lifestyles, which are at the core of the consumerism megatrend. This underlines that economic growth in the emerging world is much faster than in industrialised countries. At the same time, we will see a changing competitive landscape with India and China trying to become more influential in global trade and politics.”

Expert logistician Samik Chakraborty, Business Head East, DIESL also explains the factors which are significant to the growth of logistics Industry in India:1. The expected implementation of GST in

the fiscal of 2017-18: Due to consolidation of many direct and indirect taxes levied by state/central government, the manufacturing and trading organisations may re-look at the present structure

of state based distribution model and consolidate further. This requires an alignment of logistics infrastructure and a complete revamping of distribution network for service providers. Some strategic locations may stand-out as consolidation points for storage, to support which creation of associate infrastructure would be required.

2. Revised Land Acquisition Policy: It would facilitate industrial and commercial infrastructure development programs which will act as a catalyst for supply chain realignment post GST.

3. For consumer products, the growth rate of rural markets is higher than the saturated and competitive urban areas. So, service providers are working on creating a deep delivery network and last mile capabilities to reach larger geographies.

From a researcher’s viewpoint, J Sivan, Senior Consultant, Supply Chain & Logistics Transformation Practice, Frost & Sullivan briefly rounds up the key emerg-ing trends.• Globalisation – On one hand, global

supply chain for many companies is becoming increasingly complex due to sourcing from different regions. On the other hand, companies increasingly focus on core competencies thus opting for logistics outsourcing. As India becomes more open to trade and investment, the need for logistics services increases propor t ionate ly, prov id i ng more opportunities for service providers.

• Demography and Demand – India is expected to reap the benefits of the demographic dividend–young workforce, rapidly expanding middle income, increasing market expansion of many

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the Government of india has been making sincere efforts to make

india business friendly and with further improvements in the ease

of doing Business and a stable political environment; the logistics

industry will certainly thrive with new initiatives.

Oliver Bohm, ceo, schenker india pvt Ltd

Demographic

changes and

urbanisation

can be

considered the

most influential

megatrend.


products and services such as consumer durables, education and healthcare. Due to low penetration levels, India will remain attractive in the next ten years.

• Industr ia l isation a nd Focus on Manufacturing – Make in India opens up new market opportunities for industrial expansion in both traditional and hi-tech industries. The Government reforms are targeted towards removing restrictions on business environment to improve Ease of Doing Business which will make India more attractive for international investment.

• Digitalisation – Mobile and internet p e n e t r a t i o n h a s b e e n g r o w i n g exponentially in recent years, increasing d ig it a l l ite racy a nd ope n i ng up opportunities for mobile based business services such as e-commerce, education and healthcare. Traditional delivery

models are being transformed to meet changing expectations of consumers.

• Trade – Trade policy efforts focus on increasing exports upto $900 billion by 2020. This will have a direct impact on transportation and warehousing, as more

than 80 per cent of foreign trade is done through sea trade.

• In fra str uct u re E x pa nsion – Infrastructure constraints are a key factor determining competitiveness. To keep up with growing demand from both industrial and consumer/household dema nd ; energ y, construction and transportation sectors wi l l continue to be prioritised, providing a strong b a s e fo r l o g i s t i c s -r e l a t e d infrastructure development.

A i r C a r g o S e c t o r : K e y MegatrendsIndian air cargo industry has grown con-siderably in the last few years. With the in-creased participation and interest of foreign freight forwarders and international airlines in India, the cargo share and movement in India hasn’t seen a downfall.K S Kunwar, Director General, Air Cargo Forum India (ACFI) jots down few mega-trends and opportunities that are certainly going to benefit the air cargo sector in the coming years: 1. The implementation of Electronic

Data Interchange (EDI) supported by digital signature in the processing and documentation of EXIM trade at gateway airports by the government agencies like customs, other ancillary regulatory agencies and stakeholders of air cargo logistics trade, will assure that the required hardware shall be procured and placed in bring Ease of Doing Business with paperless transactions, processing will become faster, inconvenience due to human interference will be negligible,

and transaction cost in the processing shall become reasonable. On its full implementation, the existing bottlenecks of the users shall be minimised and it will boost the growth of air cargo.

2. Introduction of Single Window System by customs for all the stakeholders including other ancillary regulatory agencies. This will provide a facility of filing EXIM documents by importers and exporters at one point online and transmission of NOC clearance by all other regulatory agencies to customs online i.e. paperless. This will infuse total paperless processing of international cargo through one access point and help in fast clearance.

3. Developing Indian major airports into international air cargo hubs: One of the key components of any successful world-class airport is that it works as a hub in-terms of better flight connectivity, fastest transit time, simplified procedures and least interference of regulatory authorities. Such ingredient could only be achieved in a cargo village which works under free zone environment where all

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in the next few years, changes in the world of airfreight in the form of e-commerce, staff turnover, competition and belly capacity will be seen and Lsps should be prepared for these biggest disappointments because of the lack of interest that current supply chain professionals are showing for training the next generation.

Bharat J Thakkar, Co-Founder & Joint Managing director, Zeus Air services pvt Ltd

Developing

Indian major

airports into

international

air cargo hubs.


the stakeholders including the regulatory and the facilitating agencies like airport operators, cargo terminal operators, airlines and freight forwarders, integrators are under one Free Zone Authority.

Meanwhile, Anand Yedery, Regional Cargo Manager–South Asia, Middle East & Africa, Cathay Pacific Airways focuses on the growing e-commerce and phar-maceutical industry and says, “E-commerce and pharma are two key segments that are growing rapidly. Use of technology and automation in logistics will play a key role in changing the face of the industry in the coming years and hence will be a space to watch out for. Oil prices are expected to stay relatively low for some time, and thus boosting some increase in air freight volumes in this region. However, yields are likely to fall further.”

Automotive Sector: Key MegatrendsSushil Rathi, Chief Operating Officer, Mahindra Logistics shares latest megatrends and opportunities that will benefit the Indian automotive sector in the coming years:

The Automotive Mission Plan 2016-26 (AMP 2026) AMP is the collective vision of Government of India

and the Indian Automotive Industry on where the vehicles, auto compo-nents, and tractor industries should reach over the next ten years in terms of size, contribution to India’s devel-opment, global footprint, technologi-cal maturity, competitiveness, and institutional capabilities. AMP 2026 also seeks to define the trajectory of evolution of the automotive ecosys-tem in India including the glide path of specific regulations and policies that govern research, design, technol-ogy, testing, manufacturing, import/ export, sale, use, repair, and recycling of automotive vehicles, components and services. With this initiative, the Indian automotive industry is expected to contribute around 13 per cent to the national GDP.

‘Make in India’ CampaignThis campaign presents a great op-portunity for the Indian automotive logistics sector. There will be a signifi-cant increase in the movement of capi-tal goods, raw materials and finished goods. It will also create a demand for domestic and international transpor-tation, warehousing and distribution. Today, the transaction costs are high in India. The ‘Make in India’ cam-paign will encourage usage of technol-ogy like latest community platforms which will enable better shipment visibility and reduce inventory costs. Administrative costs will go down as the duplication of data entry will be eliminated. Technology adoption and infrastructure development expected to be brought about by the ‘Make in

India’ campaign will make the Indian logistics industry globally competitive.

Increased focus on making India an automotive manufacturing as well as export hubThe Indian government’s focus on mak-ing India an automotive manufactur-ing as well as export hub is drawing investments and attracting the atten-tion of automakers from around the globe. Global MNCs are setting up new plants and expanding existing ones to ramp up production in anticipation of a rise in demand, both in domestic and export markets. A lot of established players have also increased their focus on the export market.

Public-private investments in transport infrastructure Transport connectivity within India is still quite poor. Multiple initiatives to strengthen the same are in the process. However, there is a need for coordination between transport cor-ridors being promoted to maximise network integration and provide a major boost to economic activities. The PPPs are also expected to improve the quality of Indian automotive logis-tics operations through better speed and connectivity.

Entry of global playersSeveral global players view the Indian automotive logistics market favourably and have announced intentions to in-crease their capacity of transporting goods from/to Indian markets. Several large global logistics companies have entered India by the way of mergers

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“We can expect a paradigm shift in the quality and scale of logistics infrastructure due to advent of e-commerce business. Gst will also change the scenario in the logistics sector, creating a huge demand for Multimodal Logistics parks and especially rail-connected Multimodal Logistics parks.

P Alli Rani, Finance director, concor


with or acquisitions of Indian logistics com-panies and joint venture agreements.

Increasing number of multi-modal lo-gistics players The demand for multi-modal transport ser-vices by the end users is increasing, because it results in the reduction of overall transpor-tation costs and quicker movement of cargo. It also requires less documentation. Several Indian 3PLs have formed joint ventures with other global and local players so as to provide multi-modal logistics services extending to air, rail, road and water.

Increasing importance of JIT & Lean LogisticsJust-In-Time is the key element in lean logis-tics. It is a philosophy and a way of work-ing involving eliminating all forms of waste (where waste is defined as anything that does not add value in the production process and supply chain). JIT is aimed at reducing waste, maximising cost efficiency, and secur-

ing a competitive advantage in the process. JIT typically involves small lot sizes, short set-up and changeover times, efficient and effective quality controls, and most impor-tantly, designing the whole production pro-cess to minimise backups and maximise the efficiency of human and machine labour.

JIT supports lean manufacturing & logis-tics by reducing the inventory holding costs and ensuring visibility and availability of goods at the right time and place.

M a r i t i m e S e c t o r : K e y MegatrendsC apt . At u ldutt Sh a r m a , He ad of Operations, Sarjak Container Lines Pvt Ltd states, “The rapidly growing industrial sector, coupled with the healthy progress of the agricultural sector, has led to the rise of extensive supply chains across the country to facilitate sourcing and distribution of pro-duction. The distribution network in India comprises of multiple level of intermediaries.

Organisations find it increasingly difficult to work in such an intricate market. This is en-couraging many LSPs, who are experienced in complex logistics operations, to enter and gain a strong foothold in the market. Moreover, the trend of outsourcing logistic activities to organised third-party logistics (3PLs) is finding favour among domestic companies, as it leaves them free to focus on their core competencies. Foreign companies doing business in India prefer to outsource all their major logistics requirements due to the unfamiliarity with the local policies, regulations and market.

He continues, “Logistics companies are taking to expanding across geographical boundaries, a trend that is expected to gain much importance in the years to come. 3PL is anticipated to increase in future as col-laborating efficiently and strengthening al-liances are two factors which are expected to be looked up in the logistics industry. It is notable that companies with specialisations have excelled to a considerable extent in the logistics sector. However, success of these companies will be determined based on how effectively these companies make use of the opportunities available to them. Studies re-veal that logistics capability is related to a firm performance in the market, and is not affected by logistics outsourcing.

“The transportation sector is evolv-ing with multimodal transportation solu-tions being set-up and the development of inter-modal transportation infrastructure facilities. Dedicated Freight Corridors by the railways and improvements in coastal shipping facilities along with the construc-tion of massive state-of-the-art logistics parks at key distribution hubs are helping

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According to a market research data, e-commerce business is expected to grow to $220 billion by 2025 with a cAGr of 12 per cent. Based on the requirement of e-commerce business, the service providers require separate set of capabilities, which is different from conventional B2B distribution model.

Samik Chakraborty, Business Head east, diesL


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AMp is the collective vision of Goi and indian Automotive industry on where the vehicles, auto components, and tractor industries should reach over the next ten years in terms of size, contribution to india’s development, global footprint, technological maturity, competitiveness, and institutional structure and capabilities.

Sushil Rathi, chief operating officer, Mahindra Logistics

to meet the specialised warehousing needs of industries. The non-major ports are driving the traffic growth, with traffic at these ports growing at a very healthy rate. This strong growth is expected to continue, with the share of the non-major ports increasing further.”

Indian Railways Sector: Key Megatrends P Alli Rani, Finance Director, CONCOR affirms, “Firstly, we anticipate a paradigm shift in the quality and scale of logistics infrastructure due to the advent of e-commerce business. Secondly, GST is round the corner and is going to change the scenario in the logistics sector, creating a huge demand for multimodal logistics parks, especially rail connected multimodal parks. Thirdly, Dedicated Freight Corridors. DFC may open completed sections for rail transportation before it is ready to flag it off in its entirety. These three mega events would roll out in such a way that two definite outcomes will happen - one, the volumes for logistics would go up as never before and two, the cost for logistics would come down. It will again be driven by large scale economies. In India, logistics has been fragmented. You

will have to go to different logistics players for different logistic services. That’s something which is going to be in the past now. Soon you will find a single window available for all kinds of services available under one roof like warehousing, distribution, packaging, transport services – rail, air, road etc.”

Cold Chain Sector: Key Megatrends Mihir Mohanta, General Manager, Supply Chain, Mother Dairy stresses on the trends in the Indian cold chain industry and he indicates a shift from single commodity uses like potato based cold store to multi-commodity uses cold stores. He says, “The distribution of fruits and frozen products are on the rise. There is also increase of imports of fruits like apple, orange, kiwi and other temperate fruits. The number of frozen peas units has also gone up to about 60. The quantum of frozen peas processed today is about 1.2 lakh mt. Similarly the frozen sweet corn production in the Pune area has gone up to about eight units which used to be only three units ten years ago. Grapes exports from India to Europe, Middle East & Russia is on the rise.” He continues, “Another trend that is catching up is small cold stores of the size 10-50MT. These are particularly utilised for short haul distribution for largely medicines or used as ripening chamber for fruits. A pattern of 200-500MT capacity of cold chambers is increasingly in demand for better capacity utilisation and savings on power cost. These facilities would im-prove the quality of the food/drugs delivered to the consumers. This would further improve the availability to rural towns.”

Current Challenges Hindering the GrowthLogistics SectorLogistics industry is currently facing various major challenges like uneven taxes across the states, poor infrastructure, logistics and transportation, high cost, lack of financial support by banks, and so on. Commenting on the same, Bohm whines, “An unorganised sector and limited availability of skilled human resource make the job much tougher. Inter-state trade is a complex and critical issue, thus one has to have a registered warehouse in each and every state. This increases the cost of doing business and brings in much inefficiency. The lack of sound inland transport infrastructure – national and state highways, port infrastructure, dedicated logistics parks and world-class warehousing facilities, have been hindering the growth of


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in india, we are already very late in the introduction of single

Window system and this is the main cause of delay. our trade

partners are not ready to accept 24x7 workings of customs and

regulatory authorities, as they think it will add up to their costs.

K S Kunwar, director General, Air cargo Forum india (AcFi)

the industry for a long time and need im-mediate attention.

According to him, “The lack of alterna-tives for inland transportation creates a lot of pressure on state and national high-ways resulting in higher cost and transit times. The industry in India is dominated by unorganised players resulting in high barriers to enter new technologies and in-novations, potential investments and global supply chain models. These components are a prerequisite for a successful supply chain model and therefore affects operational ca-pabilities. The industry is facing shortage of skilled human resource with sound opera-tional and technical knowledge of supply chain management and practices, which in-turn make it difficult to employ the lat-est technologies to benefit the customers.”

Stressing on the e-commerce market, Martyn–Fisher explains, “The e-commerce industry has disrupted the market. It has brought about its fair share of challenges into the Indian logistics industry, which re-quire immediate attention, with the critical ones being: the high cost of entry, result-ing from the soaring and differential real estate prices across country. This levitates the cost of warehousing as well, which is a critical element of the logistics industry.

“With 65 per cent of freight moving on road, transportation delays which, not just impacts the transit time, but also add on the costs. Truck delays by five to seven hours at inter-state checkpoints combined with other delays due to road blocks, tolls, stoppages etc., keep the trucks from mov-ing during 60 per cent of their transit time. Curbing just these road blocks could cut freight time by 20-30 per cent and logistics cost by approximately 30-40 per cent.

“These high cost and delays are also a result of high regional concentration of manufacturing and geographically diver-sified distribution activities and customer base. This variance and many other fac-tors create high degree of unpredictability and variability, which according to World Bank, further pushes the logistics cost by two to three times of the global benchmark.

Adhoc taxes levied at the central and state level have contributed largely in the costs surging on the warehousing and lo-gistics. Unorganised activities in the sec-tor are growing mainly due to the taxes. A unified tax structure is one of the solution to reducing warehousing prices, logistics costs and unorganised activities in this sec-tor; exactly why Goods and Services Tax reform is critical for India”

On the other hand, Anand insists that poor quality of warehousing activities, lack of trained manpower and higher dwell time are the main challenges. He continues, “The main challenge is the quality of warehous-ing, which is the most significant aspect of a distribution system, is of very low stan-dard. The overall design and smaller sizes also add up to the inventory cost. This is the reason why we are investing in large Multi-Client Site (MCS) warehouses. The other challenge is transportation. Most of the long-haul transport vehicles in India have very low carrying capacities. This is why we are investing in large capacity long-haul vehicles. On an average, the waiting time at state borders is six to seven hours and then there are waiting at toll gates as well. Compared to western countries, where cargo carriers move at an average speed of 60-70 kmph, in India they move at 30-40 kmph, which delays delivery of

• Online selling of cars and two-wheel-ers – This will necessitate expertise in ecommerce logistics along with automotive logistics.

• Electric/Hybrid cars – With the increasing awareness about sustain-ability, environment-friendly alterna-tives like electric / hybrid cars are gaining popularity and hence, LSPs need to gear up for handling them.

• Adherence to CMVR (Central Motor Vehicles Rules) – CMVR has laid down rules related to safety and size of car carriers which will be mandatory for automobile logistics users and provid-ers to follow. Once fully implemented, these rules will require new capacity to be created which are CMVR compli-ant. In the short term, there might be a huge gap in the supply of such car-riers. Hence, OEMs and LSPs need to planjointly to address this issue and bridge the deficit.

• Liberalisation of import of CBUs (Com-pletely Built Units)

Trends & OppOrTuniTies in AuTOmOTive LOgisTics mArkeT


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e-commerce and pharma are two key segments that are growing

rapidly. use of technology and automation in logistics will play a

key role in changing the face of the industry in the coming years

and hence will be a space to watch out for.

Anand Yedery, regional cargo Manager–south Asia, Middle east & Africa, cathay pacific Airways

cargo. All this adds up to the overall logistics cost. The recently launched e-toll collection system is one positive step towards bring-ing down average transportation time in the country.”

Anand further adds on, “Moreover, there is a scarcity of quality manpower in the sec-tor. Most of the companies in India hire qual-ity manpower for manufacturing, however, when it comes to logistics and warehouse management they don’t care about quality since they consider this to be non-core to the overall production cycle. This is the rea-son why we are putting in a lot of effort on manpower training. Another challenge for the sector is application of information tech-nology (IT). In India, the use of IT for inven-tory and warehousing management is still very low and things are managed manually, which means the efficiency level remains low and a lot of time is wasted. Despite the slow progress in terms of infrastructure develop-ment, we ensure that we continue investing in setting up our facilities.”

In the meantime, Chakraborty suggests solutions and says leveraging the railway net-work and creation of more freight corridors are required along with encouragement to PPP projects.

He explains by citing figures, “The 65,000 km long railway network of India is one of the largest in the world, but other than bulk cargo (majorly coal), commercial usage of railway is limited. Improving the capacity of the major ports is also an area of improve-ment. India’s 7,500 kms long coastline and inland waterways are definitely areas from which the logistics industry could benefit. Waterways are the cheapest mode of trans-portation but as the minor ports are not well-equipped the 12 major ports of India stay

congested handling traffic beyond the limit and face higher turnaround time of vessels. Government recently announced an invest-ment of `1 lakh crore to increase the port ca-pacity from the current 1,400 million tonnes to 3,000 million tonnes by 2025. Road trans-portation may not be the cheapest is still its most acceptable mode of transportation in India. The national highways constitute only 1.7 per cent of the Indian road network but carry 40 per cent of the national traffic. The speed of highway expansion has to be faster with simpler interstate documentation and regulations.”

Gathering important facts and figures

from what experts have mentioned above, Sivan underlines some of the key challenges:1. High Logistics Costs – Logistics costs is

estimated at 14 per cent of GDP, compared to other countries, this is high and affects the competitiveness of India. For sectors like automotive, logistics cost can be as high as 30 per cent and could have significant impact on competitiveness.

2. Tax Structure – Lack of uniform taxes across states complicates movement of freight across the borders, thus increasing costs and frequent delays in freight deliveries.

3. Lack of Single Window Clearance – Indian ports perform poorly in terms of customs clearance and other administrative procedures associated with loading and unloading in ports causing significant delays in freight movement across states.

4. Logistics Infrastructure – Lack of cold storage and warehousing, increasing congestion in ports adding to cost.

5. Regulatory environment is complex and lacks transparency resulting in administrative delays in approvals and clearance.

6. E-Commerce Logistics – With the evolving nature of e-commerce, last mile delivery remains a key challenge for many e-commerce companies.

Air Cargo SectorThough air cargo sector is fast adopting lat-est technologies and welcoming whopping investments from Indian and foreign players, it is still struggling with few issues which need immediate government attention. Kunwar underlines: 1. Our regulations, policies and procedures

Govt

announced an

investment of

`1 lakh crore

to increase the

port capacity.


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Megatrends will shape countries and businesses as well as many

other industries over the next few decades. the global population

is expected to increase from 6.9 billion people in 2010 to 8 billion in

2025, with growth found almost exclusively in developing countries.

Vikas Anand, Managing director, dHL supply chain

are framed with a mindset which is cumbersome, complicated and protective.

2. Government policies are outdated like Customs Act 1962 need sea changes keeping in mind the requirements of the modern world.

3. In this electronic age, EDI, e- trade and e- freight are common tools in the international trade and commerce and the world believes in paperless transactions saving lots of time. However, we still believe in hard copies in spite of our IT Act 2000.

4. Dwell Time of import and export cargo is high at Indian airports which is ranging from 4-5 days for imports and 36-48 hours for export against maximum 12 to 18 hours for both import and export cargo worldwide.

5. Main causes are free period of 72 hours given to both import and export cargo by the government, delay in clearance, late filing of papers by importers/agencies and late payment of customs duties.

6. Single Window system is yet to happen and is the main cause of delay.

7. Our trade partners are not ready to accept 24x7 workings of customs and regulatory authorities as they think it will add up to their cost.

Yedery shares, “Complicated and incon-sistent regulatory processes and proce-dures, high taxes raising operating costs, sub-standard infrastructure and unavail-ability of trained resources are the basic challenges faced by the air cargo industry in India and the same have been raised on various forums.”

Veteran freight forwarder, Bharat J Thakkar, Co-Founder & Joint Managing Director, Zeus Air Services Pvt Ltd, who has been significantly contributing to the air freight industry since last 43 years talks about the boost in e-commerce industry and its progress. He opines, “It is amazing the way globally retail high street shops that are closing due to e-commerce boom, for ex-ample Radio Shack in the USA, Mexx fash-ion, Target Stores in Canada, Jacob clothing closed over 200 retail outlets and will offer via e commerce only. E-commerce companies like Ali Baba invest billions in logistics; La Poste in France certifies itself as an IATA freight forwarder. This scenario is no dif-ferent in India. It is matter of time before the post offices take over, the lower part of supply chain completely and the integrators the higher part. This will cause more threat and grief to forwarders and scheduled air-lines. In the logistics chain, the new reality will be Shipper - post office or Integrators - consignee and the scheduled airlines and forwarders will lose out.

“In the next few years, there will be changes in the world of airfreight in the form of e-commerce, staff turnover, competi-tion and belly capacity, this may be coming

faster than shippers, forwarders, carriers and airports are prepared for the biggest disap-pointment because of their lack of interest, current supply chain professionals are show-ing for training the next generation. One of the most important innovations for which we are largely unprepared is e-commerce business, most of which is going to the inte-grators. While forwarders and airlines keep blaming each other and refuse to change, the logistics and transportation space is going to be taken over by the likes of Amazon, Google, Uber etc., as my pears warn ‘watch it is mat-ter of time.’

Those who control the last mile delivery will be the winners of the future. In some places, such as Shanghai, e-commerce facili-ties are located next to airport with a sched-uled airline in the working in tandem, others airports will follow the model soon. The effect of e-commerce will affect our operations.”

Thakkar continues and stresses, “Excess capacity is another long-term problem that must be addressed. Totaling up the back-log of production of freighters, we find 230 wide-body freighters coming on stream in the next three years, using a modest market growth of less than three per cent. It looks as if there will be excess main-deck capacity in the market during 2016. Passenger growth has increased steadily since 2008, due to ris-ing travel by middle class in Asian countries, which has added to the demand for more air-crafts with belly space. It is estimated that the wide body aircraft ordered will add belly space equivalent to 450 777Fs. Over 3rd E U carriers would not have benefitted without cargo revenues. The ultimate effect of these trends appears to be the inevitable exit of all-cargo carriers. Belly capacity will determine the future.”

With the

evolving

nature of

e-commerce,

lMD remains a

key challenge.


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the trend of outsourcing logistics activities to 3pLs is finding favour among domestic companies, as it leaves them free to focus on their core competencies. Foreign companies doing business in india prefer to outsource all their major logistics requirements due to unfamiliarity with the local policies, regulations and market.

Capt. Atuldutt Sharma, Head of operations, sarjak container Lines pvt Ltd

Automotive SectorRathi says the key challenges faced by the automotive industry are in its fragmented and unorganised nature, insufficient and inefficient transport infrastructure, trade regulations and bureaucratic policies, lack of adequate skilled manpower and training institutions, poor warehousing and storage facilities, reluctance to adopt technology, etc.

Rathi states, “Factors that are affecting the truck transport in India include low capacity utilisation, poor road quality, ve-hicle overloading, high transit times, and issues like road safety and obstacles to free movement. Truck accidents and fatalities are dangerously common and frequent. Enforcement of overloading and licensing regulations are not being sufficiently done and there are no incentives for using multi-axle trucks. Fluctuating fuel prices and high toll charges increase the running costs of the trucks. Tyre maintenance is also major factor in deciding operator profit.

“Over-dependence on roadways as a mode of transport is another problem faced by the Indian automotive logistics industry. Lack of suitable rail infrastructure is also driv-ing the growth of road freight. Sub-optimal rail capacity, difficulty in last-mile reach and commodity-dependent cost economics have been pushing the share of road from around 60 per cent in 2005–06 (in BTKM units) to more than 64 per cent in 2009-2010. For in-stance, when a customer outsources their transportation requirements to 3PLs like us, even if we were to look at including railways as one of the modes of travel, we would end up using road for point-to-point connectiv-ity, reducing overall cost efficiency. The first mile and last mile connectivity, and the in-

frastructure available with railways inclu-sive of customised wagons etc., are the key constraint which is why we are not able to use railways effectively.”

Indian Maritime SectorTalking about the Indian maritime sector, Sharma says the key challenges are lack of human resources followed by infrastructure in terms of logistics, power, and water.He reiterates, “Infrastructure is one of the biggest challenges faced by the Indian lo-gistics sector and has been a major deter-rent to its growth. Infrastructural problems like bad road conditions, poor connectivity, inadequate air and sea port capacities and lack of development of modes of transport like railways and alternates like inland water transport and domestic aviation have been constant irritants. Due to the infrastructural

bottlenecks, costs per transaction in Indian logistics sector, is very high as compared to those in the developed markets. Less econo-my of scale due to high fragmentation of in-dustry, lack of skilled labor and manpower are also one of the major challenges for the lo-gistics sector. Indian subcontinent faces dif-ferent challenges vis-a-vis developed nations. In foreign countries the problem is demand; in India, demand management has been a great challenge. India still has a long way to go in terms of best practices. Maturity level of most of the companies on demand driven value network is low.”

Challenges Faced by Cold Chain SectorMohanta adds, “The distribution of cold stores in India is skewed. These are largely concentrated in UP, West Bengal and Punjab.


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Make in india opens up new market opportunities for industrial expansion in both traditional and hi-tech industries. the Government reforms are targeted towards removing restrictions on business environment to improve ease of doing Business which will make india more attractive for international investment.

J Sivan, senior consultant, supply chain & Logistics transformation practice, Frost & sullivan

Around 65 per cent of India’s cold chain stor-age capacity is contributed by the states of Uttar Pradesh and West Bengal. Further, if you analyse the commodity wise storage ca-pacity, you will find that major cold storages have been set up to cater to single commodi-ties and this creates a bottleneck for other perishables. With the rising real estate price, the cost of setting up a cold storage units is also rising. In India, the agri-supply chain is poorly integrated, posing challenges at each step. There are huge gaps in the system, both in terms of capacity and integration. Critical linkages like reefer transport and on farm in-frastructure are almost non-existent.”

Experts Opine: Solutions & Way OutIndian logistics industry definitely has a long way to go. Be it air cargo sector, maritime sector, railways or road, significant develop-ment has been witnessed by the industry as a whole in the last few years. Though, there’s progress happening, there are certain issues

as well which hinder the growth of indus-try like inadequate infrastructure, lack of trained manpower, GST implementation, under-utilisation of resources to name a few however, experts from varied walks of life suggest some apt solutions to improve the current situation.

Logistics Sector: SolutionsBohm figures out, “First, GST implemen-tation within earliest possible time frame should address the uneven tax structure challenge as it will bring the entire country under a common tax umbrella to enable the free flow of goods across India. Also, this will reduce the paperwork and waiting periods for operators, and will make India a single market which is easy to access and operate. Second, from an infrastructure standpoint, development of roads, state and national highways will increase the average speed and reduce fuel consumption, thus saving the cost of logistics. Port infrastructure should be upgraded to handle more capacity and reduce the turnaround time as per global standards. New dedicated logistics parks, SEZs and warehousing zones near the tran-sit area will significantly improve efficiency and coupled with GST implementation, will bring huge cost benefits to the logistics in-dustry and end users.”

Appreciating the recent budget session, Bohm says, “The recent budget has done a remarkable job in providing a large scale boost to infrastructure projects which will certainly address the above mentioned chal-lenges and spur growth. Granting indus-try status to logistics companies will solve the problem of an unorganised sector since there will be lot more benefits in terms of FDI, more favorable policies and incentives

from the governments. Skilled human re-source problems can be addressed with the industry-government collaborative efforts by introducing in-house training centers and supporting the skill development centers for logistics.”

On a positive note, Martyn-Fisher says, “At a macro level, policy reforms, improved infrastructure, technological advancements with integrated and enhanced warehouse and transportation management systems for more agility and predictability are key to improve cost effectiveness and develop an efficient logistical environment. The logistics industry is in the state of positive transition with such reforms and changes already in pipeline. However, such changes are gradual and long term. Few of them are:• I nte r n a l ly d eve loped i nte g rated

technologies;• Leveraging our multimodal and global

network for express, air and ocean transportation options

• Supporting the customers through a solution-oriented approach.”

Meanwhile, Anand affirms, “It is important that private companies take the mantle to in-vest and change things to make a difference. In fact, the government has announced several measures in developing ports, roads and also in setting up a dedicated rail freight corridor. This, we believe, will strengthen the scope for logistics players to further invest in making India a strong trading hub. A little regulatory boost would go a long way in helping build world-class supply chains in India. Delays which increase cost and lead to the wastage need to be addressed even more aggressively by the industry and the regulatory authorities. Tax breaks, encouragement of FTZs, added focus on the sector to make it even more or-

GST will bring the

entire country

under a common

tax umbrella to

enable the free

flow of goods

across India.


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small cold stores of the size 10-50Mt are new in india. these are utilised for short-haul distribution of medicines or used as ripening chamber for fruits. these facilities would improve the quality of food/drugs delivered to the consumers. this would further improve the availability to rural towns.

Mihir Mohanta, General Manager, supply chain, Mother dairy

ganised, development of world class ports, expressways, e-tolls, single window clearance etc., are all steps in the right direction. Apart from the above, developing industry-ready tal-ent and making logistics an attractive sector for graduates should be the top agenda of every logistics player in India. Above all; a workable GST that could be implemented at the earliest would provide a solid boost to the logistics in-dustry and the economy of India.”C h a k r a b o r t y a l s o s u g g e s t s s o m e imperative solutions:• More Dedicated Freight Corridors

(DFCs) and coastal corridors could be created which can be supported by cargo handling capacity and operations. This can be achieved by higher level of privatisation. The road to rail balance in logistics can help the industry to optimise the cost. Presently, almost 60 per cent of the cargo is shipped through road which should ideally be evenly shared with rail in next few years.

• The highway expansion plan should be consolidated and executed faster. The highways should be well connected with all the DFC’s.

• Development of state highways and

district roads are important for last mile deliveries. The road maintenance contracts should be made for longer stretches. Again, more private investments should be encouraged to enable this.

• Backing the service providers with policies and rebates to create logistics parks with multimodal transportation facilities.

Observing the same, Sivan, lists down some solutions for the logistics industry which may help to bring a change in the coming years:1. Allocate more funds and encourage

alternate funding options: Lack of funds is one of the factors affecting the transportation in frastr ucture development which requires huge investment to improve and modernise e x i st i n g i n f r a st r uct u r e . P ubl ic-private partnerships for logistics and infrastructure development are an important source through which the government can fast track project clearance and implementation. For this to be successful, transparent regulatory environment and easing of administrative bottlenecks are critical.

2. Reduce Administrative Burden: 24*7

availability of services and facilities including customs clearance is important for quick processing and clearance of export and import cargo. Process simplification needs to be addressed to reduce transaction costs. Greater accountability and transparency by the regulating agencies and paperless clearance process is expected to reduce the speed of customs clearance.

3. Land Transport: The government expects the freight tons per kilometre to grow 6.5 times between 2012 and 2032. To meet this target, road transport congestions and modernisation related projects should be given priority to increase efficiency, reduce cost, and upgrade tolling stations. Rail freight has been losing share in land transportation. By offering competitive freight rates and providing supportive infrastructure, share of rail in freight transportation can be increased.

4. Port Congestion: Steps need to be taken to improve dwell time, policy changes should be oriented towards making free movement of goods through any port, traffic restrictions need to be relaxed for prioritised consignments, technologies need to be upgraded and aligned with international ports.

5. Air Transport: Increase in dedicated cargo terminals in major airports, increased number of air freight stations, adoption and implementation of the IATA initiative of paperless for the air cargo supply chain etc., to reduce delays.

Air cargo sector: Solutions Kunwar shares some significant solutions for the air cargo sector: a) Remove free period of 72 hours for both

May 2016 - CargoConneCt 43

import and export cargo and give maximum 12 hours.

b) Bring drastic changes in the Customs Act 1962 as per the requirement of the time.

c) Make the AEO policy attractive and beneficial to the trade.

d) Make customs RMS more attractive. The withdrawal/suspension of RMS to be affected only when the violations/defaults are proved and penal actions are initiated.

e) Trained staff of customs and other regulatory authorities to be posted for 24x7 operations for both imports and exports.

f) Amendment procedures in import for part-shipment/short landing to be made online with decentralised delegation of powers so that advance filing of Bills of Entry is encouraged.

g) Known shipper and regulated agents’ policy of BCAS to be made more simplified and attractive so that there are takers for this concept and the movement of export cargo becomes faster and cost effective.

Focusing on the air cargo sector being award-ed ‘Industry Status’ Yedery insists, “Air Cargo being accorded ‘Infrastructure’ status as per the Draft National Civil Aviation Policy 2015 means a positive step forward once the policy is formally passed and implemented. A lot of investment in the form of time, expertise, au-tomation and money along with patience will be the key to overcome the challenges.”

Railways Sector: SolutionsRani avows, “We are one of the front runners here as we have already acquired adequate land where we are setting up large scale Multimodal Logistics Parks to provide a one stop solution for all kinds of logistics ser-vices. The first stage is getting the land and setting up infrastructure. The state govern-ments have been very supportive. Firstly, we have to create suitable state-of-art infrastruc-ture which involves huge investment. We have taken major steps and completed few LPs. Now we are in talks with our custom-ers to ensure what we are making ultimately suits the requirements of customers. We have to tailor our infrastructure according to the needs and requirements of the custom-ers like specialised processing, packaging, warehousing etc.”

Automotive Sector: SolutionsRathi highlights some solutions: 1. 3PLs who provide end-to-end integrated

supply chain solutions can change the fragmented and unorganised nature of the Indian logistics industry.

2. G o v e r n m e n t i n i t i a t i v e s fo r t r a d e liberalisation and logistics infrastructure development as mentioned earlier are also

expected to resolve the issues related to trade bureaucracy and infrastructural bottlenecks.

3. Ph a s i n g out o f old c om me r c i a l vehicles will not only reduce pollution but a lso smoothen out transport operations in India.

4. Focus on development of transporters and drivers are another important solution which will go a long way in ensuring the real growth of the Indian automotive industry.

Maritime Sector: SolutionsSharma suggests few imperative solu-tions for the problems faced by Indian Shipping industry:

He says, “The transportation market in India is expected to continue offering signif-icant opportunities to all concerned stake-holders. However, for the sector to reach its full potential, the timing and economics would depend on how the various drivers and inhibitors evolve in future. While the qual-ity of road infrastructure is certainly likely to improve, the pace of infrastructure devel-opment is critical to minimise losses, both economic and environmental. In particular, delays in meeting project timelines should be minimised, given that only around 52 per cent (10.39 km as against the target 20 km in 2011–12) of the daily target of average road length to be constructed has been met. However, not only has the demand for road connectivity been rising, but focus on improving basic road infrastructure as well as technology adoption has also increased in recent years. The number of expressways and highways has increased; many roads have been widened; electronic toll collection is becoming increasingly common; the ‘green channel’ concept is gaining ground, and inter-state check posts are becoming au-tomated, with Gujarat serving as an example.”

Cold Chain Sector: SolutionsMohanta suggests, “Stringent implementa-tion of Food Safety (FSSAI) regulations is indirectly forcing food companies to rede-fine their cold supply chain strategy. What India needs is the spread of the cold chain facilities, cold chain/ transport linkages and retail level cold chain dispensing mechanism. Smaller units with low capital intensive and energy efficient storage would be more ap-propriate. These would improve capacity utilisation and can become viable. Use of so-lar energy is another area which could play a big role in promoting low cost cold chain.”

1. High Logistics Costs – Logistics costs is estimated at 14 per cent of GDP, compared to other countries, this is high and affects the competitiveness of India. For sectors like automotive, logistics cost can be as high as 30 percent and could have significant impact on competitiveness

2. Tax structure – Lack of uniform taxes across states complicates movement of freight across the borders, thus increasing costs and frequent delays in freight deliveries

3. Lack of Single Window Clearance – Indian ports perform poorly in terms of customs clearance and other administrative procedures associated with loading and unloading in ports causing significant delays in freight movement across states

4. Logistics Infrastructure – Lack of cold storage and warehousing , increasing congestion in ports adding to cost

5. Regulatory environment is complex and lacks transparency resulting in administrative delays in approvals and clearance

6. E-Commerce Logistics – With the evolving nature of e-commerce, last mile delivery remains a key challenge for many e-commerce companies

chALLenges in LOgisTics indusTry

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