Industry Updates

India’s need for infrastructure creation in the logistics sector is striking. In just a decade India has seen its economic size more than double to $ 1.37 trillion(2012) and total foreign merchandise trade multiply from 20% of GDP (2000) to 42% of GDP (2012).

This growth has been accompanied with a phenomenal rise in the volume of freight traffic movement over the period. However, logistics infrastructure and services in the country have arguably not developed at the same pace to support and further this growth. Going by global standards, the Indian logistics sector is characterized by concerns around higher costs, lower profitability, lack of adequate availability of trained manpower resources and lower adoption of technology in its processes.

As per a McKinsey study, inefficiencies in logistics infrastructure cost the Indian economy an extra $45 billion, about 4.3% of the GDP, every year. It warns that a 2.5 times growth in freight traffic demand by 2020 (compared with 2010 levels) will put further stress on India’s infrastructure. However, such high demand prospects also present an opportunity for logistics industry players in India.

The Emerging Market Survey, 2013, conducted by Transport Intelligence (Ti) ranks India as the second most attractive logistics market in the future after China, and its position has not changed over the past four years. As a fast growing economy with one of the largest consumer markets, industries such as automobile, parmaceuticals, FMCG and retail will drive the demand for logistics in India in the future. Further impetus will come from the increasing emphasis on enhancing manufacturing and exports.

The Indian Logistics Industry is expected to grow annually at the rate of 15- 20 per cent, reaching revenues of approximately US $ 385bn by 2015 and US $ 750 by 2020. At present , Indian logistics sector is receiving special attention by the government and private sectors for growth and development. Indian Logistic Industries have potential for  sustainable growth and global development.

Several factors helped the growth of logistics industry in India over the decade that includes changing tax system, rapid growth in industries such as automobile, pharmaceuticals, FMCG and retail. However, major sectors that are investing huge amounts in logistics industry are aviation, metal & mining and consumer durables. With increasing competition and cost, focus on outsourcing, entry of foreign players is having positive impact on the industry. Three major contributors for the growth of the logistic industry are: emergence of organized retail, increase in foreign trade and India becoming soon the manufacturing hub.

To improve infrastructure facilities and in turn the logistics industry government implemented several projects such as golden quadrilateral project, east-west and north-south corridors (connecting four major metros), Free Trade and Warehousing Zones (FTWZ) and private participation in the sector.

The logistics cost in India – which includes inventory holding, transportation, warehousing, packaging, losses and related administration costs – is estimated at approximately 13 per cent of GDP and is high when compared to the corresponding figures for major economies. India's multi-layered tax regime, infrastructure bottlenecks and other inefficiencies have been the primary reasons in keeping logistics costs high in India.

Logistics cost in India is in double digits, 13-14%. It will become within single digit within the next 3 years which will happen because of modernization of the industry, advent of more organized logistics players, better infrastructure, better skilled manpower, etc. 

Market wise, Indian logistics can double in the next 3 years. In terms of organized market of that market, it is going to triple. By 2015, organized logistics may have close to 20% share of the entire market. 

On the skill side, today Indian logistics is very cost focused so much so that at times it comes at the expense of service.  It is expected within the next 2-3 years, at least some section of the industry would move to high cost and high value and at that point of time there would be huge scope for  professional companies who can provide high service values at a marginally higher cost, to their clients. 

Today lot of infrastructure - ports, terminals, railways, transport hubs - is being developed at various places at the same time and it is good for the country. In two years time, all of this would be ready and it would give tremendous potential to the logistics industry. Multimodal transportation could really happen. 

Many of the academic institutions are looking at providing logistics programmes, which will also address lack of skilled manpower resulting in sufficient skilled personnel for the industry in 2-3 years' time. 

 Temperature Controlled Logistics :

 The Temperature Controlled Logistics (TCL) market in India recorded revenues of USD 3.83 billion in FY 2013. The TCL industry structure in India comprises a few organized service providers and a large number of unorganized service providers. Within organized providers too, there are very few with national coverage that can offer both temperature controlled transportation and temperature controlled warehousing services.

Transportation in India is an  important part of the nation's economy. Since the economic liberalisation of the 1990s, development of infrastructure within the country has progressed at a rapid pace, and today there is a wide variety of modes of transport by land, water and air. However, India's relatively low GNP per capita has meant that access to these modes of transport has not been uniform.

In the interim, public transport remains the primary mode of transport for most of the population, and India's public transport systems are among the most heavily used in the world. India's rail network is the 4th longest and the most heavily used system in the world, transporting 8224 million passengers and over 969 million tonnes of freight annually, as of 2012. The automobile industry in India is currently rapidly growing with an annual production of over 4.6 million vehicles, and vehicle volume is expected to rise greatly in the future. According to recent estimates by Goldman Sachs, India will need to spend US$1.7 trillion on infrastructure projects over the next decade to boost economic growth, of which US$500 billion is budgeted to be spent during the Eleventh Five-Year Plan

Achieving speed in delivery of critical Spare Parts to Customer site is complicated due to few Central / State Govt. regulations, which requires Professional and  stringent compliance Management in regard to Customs, VAT and Service Tax. RMA Management including Reverse Logistics of retrieving defective parts of  high value and having repair capabilities helps e-waste management , improves TAT and  reduces cost  by RRR – Repair, Re-use, Re-cycle to Spare Parts / Assemblies and has gained momentum  with leading MNCs.  

State of Art warehousing and distribution aided by high end ERP with built-in intelligence , tracking and auto e-mail alerts, scientific storing methods have added value to the Logistics Industry in India.





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